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Honorable Donald P. Hodel, Secretary page 2

December 20, 1988

It was for this reason that Subcommittee Chairman Rahall in an August 6, 1987, letter to Assistant Secretary Steve Griles suggested the Department make what it termed at the time its "preferred options" on the discovery and assessment work standards the subject of a rulemaking. A copy of this letter is enclosed.

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On February 26, 1988, in response to several written questions submitted to the BLM as part of the Subcommittee on Mining and Natural Resources budget oversight hearing, Chairman Rahall was advised by BLM Director Robert Burford that the agency was in fact "in the process of drafting rules for two major elements regarding oil shale mining claim validity." Director Burford's written response went

on to state: "We anticipate a proposed rulemaking will be published this Spring for public comment. This is made necessary by the August 12, 1987, Tenth circuit Court order vacating the Tosco Y. Hodel decision, followed by Judge Finesilver's order for the Department to likewise vacate its rulings which led to that litigation."

Moreover, would point out that Director Burford concluded with this statement: "Lacking further Congressional directives after the expiration of the patenting moratorium, BLM does not anticipate taking further action unpatented oil shale mining claims until the discovery and substantial compliance issues are resolved."

These responses certainly would lead one to believe that the Department: 1) Plans to undertake a rulemaking on oil shale claim validity standards, and, 2) Did not plan to process any oil shale claim patent applications until this rulemaking was completed.

In light of the fact that the Committee received no further communication on this matter until Mr. Cason's letter of December 7, 1988, by now proposing to proceed with the processing of these patent applications without a final rule we are witnessing what amounts to a complete contradiction of Director Burford's statements to the Subcommittee.

We would further note that validity standards beyond the scope of both the oil shale bill passed by the House of Representatives and the version considered by the Senate Committee on Energy and Natural Resources during the last Congress. In addition, the Congressionally mandated moratorium on the issuance of patents for oil shale claims

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Honorable Donald P. Hodel, Secretary page 3 - December 20, 1988

expired last March did not affect the Department's ability to conduct a rulemaking on validity standards. As such, no legislative restraints have been placed on the Department's stated intent, as expressed last February by Director Burford, to promulgate å rule.

For the reasons stated in this letter, and since it is our understanding the BLM still intends to proceed with this rulemaking, we can find no justification for the Department to process oil shale patent applications until such time as the discovery and assessment work standards have been the subject of public comment and published in the form of final rule. It will only be through such a rulemaking can the Department hope to have any public confidence in its actions in this matter.

Your consideration of this request would be greatly appreciated.

Sincerely,

a

Withhell

Mo ledall

NICK J. RAHALL, II
Chairman, Subcommittee on
Mining and Natural Resources

MORRIS K. UDALL
Chairman, committee on
Committee on Interior and
Insular Affairs

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Thank you for your letter of December 20, 1988, concerning the Department of the Interior's intention to process oil shale mining claim patent applications. You and Chairman Udall have questioned this decision, citing various statements which you interpret as a commitment to complete a rulemaking to resolve the 188ues of the proper discovery standard and the effect of the resumption principle of the Mining Law before taking further action on these patent applications.

I have asked the Bureau of Land Management (BLM) Director to review your letter and advise me regarding the issues you have raised. His memorandum to De 18 enclosed for your information. In brief, there may have been a misunderstanding of our intent regarding these pending applications. Although we continue to believe that neither new legislation nor rules are required to enable this Department to finally conclude these cases, we agree that promulgation of rules is important to clarify the extensive and confusing case law.

Proposed regulations have been drafted and are under review now. These rules define the standard of discovery for oil shale mining claims, and propose to clarify that the resumption principle of the Mining Law operates to bar Goverument contest of mining claims for failure to substantially comply with assessment work requirements if labor has been resumed prior to initiation of the challenge. We emphasize that these two standards would implement the United States Supreme Court rulings on oil shale matters. We now anticipate that publication for public comment will be in the near future.

The BLM will inquire into the validity of the oil shale claims pending patent using the proposed standards prior to final rulemaking. However, no oil shale patents will be 188 ued or claims contested for alleged lack of discovery prior to the effective date of final rulemaking on these 188ues. In the interim, by completing field work necessary to verify physical exposures of oil shale sufficient to satisfy the proposed test of discovery, and to verify the resumption of annual assessment work that may have lapsed in the past, the De partment will be in a position to take further action on the applications pursuant to our mandate under the Mining Law and consistent with the final regulations.

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Subject: Processing of 011 Shale Patent Applications Pending Final Rulemaking

on the Discovery and Assessment Work Standards

We have reviewed the December 20, 1988, comments of Chairmen Udall and Rahall concerning the decision of the Department and the Bureau to begin the final processing of oil shale patent applications. In the absence of rulenaking regarding the proper standard of discovery to be applied to the claims and the proper interpretation to be given the "substantial compliance“ requirement for assessment work performance, the chairmen question the justification for the action outlined in Deputy Ass18tant Secretary James E. Cason's letter of December 7, 1988.

We believe that the decision to end our self-imposed delay in the further processing of oil shale patent applications is justified by inability of the Congress to enact legislation resolving the status of the approximately 1,600 unpatented oil shale placer mining claims remaining of record in the database Dandated by Section 314 of the Federal Land Policy and Management Act (FLPMA). Department and Bureau officials testified before both House and Senate authorizing committees of the 100th Congress reviewing oil shale patenting 18sues brought to the fore by the negotiated settlerent of the TOSCC v. Hodel litigation. Therein, the Director and Deputy Assistant Secretary Cason made overtures to Congress to work together to reach a concensus on these issues.

The Subcommittee on Mining and Natural Resources of the House Interior and Insular Affairs Committee passed a bill (H.R. 1039) out of Committee to which the Department was unalterably opposed. After passage of H.R. 1039 by the full House on June 2, 1987, the Department's efforts to reach a concensus with Congress on the rights of the unpatented oil shale claimants shifted to the Senate.

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At hearings held by the Subcommittee on Mineral Resources and Production of the Senate Committee on Energy and Natural Resources, Deputy Assistant Secretary Cason continued to press for recognition of the Department's firmly held views that both H.R. 1039 and S. 2089 would potentially confiscate the claimants' possessory rights without just compensation. Our resolution of this 188ue was presented in the draft bill attached to the testimony of April 22, 1988. The 100th Congress ad journed in mid-October 1988 without further action on oil shale claims.

It is unlikely that the 101st Congress will promptly enact legislation which addresses the 188 ues involving the oil shale mining claims. Therefore, absent an affirmative showing of invalidity of one's clain, the Bureau should not delay further the processing of mineral patent applications under applicable lav. We note that even the short-lived moratoria on oil shale patents issuance imposed upon the Department by the 100th Congress contained exception clauses for the most senior oil shale applications pending in Colorado. Despite the clearly legal opportunity to patent those claims, we did not do so because of our desire to reach a consensus with Congress regarding oil shale related issues.

However, we agree that publication of rulebaking lo the Federal Register for public comment is a good idea, if only to serve aotice to the oil shale mining community of our validity standards. We have drafted proposed regulations dealing with our interpretation of the Supreme Court sanctioned (Andrus v. Shell 011 Co.) test of discovery for oil shale claims, and also the requirement that the Government is bound by the resumption principle of the Mining Law. The latter standard clarifies that if the Government is to contest claims for failure to substantially comply with assessment work obligations then the Supreme Court precedents dictate that such challenge must occur while the work is in default. That is, just as a resumption of annual labor protects a claim from relocation by a rival claimant, so does it protect against a subsequent Government contest on this basis (Wilbur v. Krushnic (1930), and Ickes v. Virginia-Colorado Development Corp. (1935)).

While we recognize that our rulemaking is not yet final, the case law on oil shale severely constrains the interpretations available to the Department in rulemaking. Hence, we do not expect that a substantive modification of our rules as currently drafted will be necessary or even possible. Please note that because the conflicting precedents of the Interior Board of Land Appeals (Bohme I & II, We ber 011, and Energy Resources Technology Land, Inc., la particular) were

vacated as a result of the order issued by the U.S. Court of Appeals following the negotiated settlement of TOSCO v. Hodel, we understand that the re is no legal requirement to promulgate rules that define these standards.

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