Woods Petroleum Corp. v. U.S. Department of the Interior

Woods Petroleum Corporation (Woods) (plaintiff) was the lessee of oil and gas rights under a lease issued by Native Americans. Woods and other working-interest owners signed a communitization agreement, pooling their mineral interests. A well was drilled on a tract in the pooled unit, but not on Woods’s tract. Shortly before Woods’s lease was set to expire, Woods filed the communitization agreement for approval with the United States Department of the Interior (DOI) (defendant). The Bureau of Indian Affairs (BIA) approved the agreement. The Native American lessors appealed to the DOI’s assistant secretary. The assistant secretary reversed the BIA and rejected the communitization agreement. The assistant secretary issued the rejection solely because the Native American lessors sought expiration of the Woods lease so that they could sign a new lease with Tomlinson Properties, Inc. (Tomlinson) (defendant), which had committed to paying the lessors a $400,000 bonus. As a result of the DOI’s rejection of the communitization agreement, the production on the other tract in the unit did not serve to extend Woods’s lease, and Woods’s lease expired. The DOI rejection order confirmed this expiration. The lessors then signed a lease with Tomlinson, and the DOI subsequently approved an identical communitization agreement, with the only difference being Tomlinson as the lessee. Woods appealed. The district court affirmed the DOI order. A panel of the United States Court of Appeals for the Tenth Circuit reversed. The court of appeals granted the DOI’s petition for rehearing en banc.