Rocky Mountain Helium, LLC (“Rocky Mountain”) filed legal action against the U.S. government for breach of a Settlement Agreement. The dispute involved requirements in the Settlement Agreement between the Bureau of Land Management (“BLM”) and Rocky Mountain. The United States Court of Federal Claims granted summary judgment in favor of Rocky Mountain.
In 1994, Rocky Mountain began BLM contracting work for the right to extract helium gas from federal lands in Colorado and Utah. The contract required Rocky Mountain to pay the United States the greater of two options: rent of one dollar per acre, or royalties based on the volume of helium that Rocky Mountain extracted. Pursuant to the BLM contract, Rocky Mountain had access to 21,500 acres of federal land that was leased between the U.S. and oil and gas lessees ("O&G lessees").
In 2004, BLM canceled the contract with Rocky Mountain because it never paid BLM rent after the first year, nor did it extract any helium. Rocky Mountain filed an administrative appeal with the Civil Board of Contract Appeals. The two parties settled and entered into an agreement to facilitate the “recovery of helium.” The agreement allowed Rocky Mountain to install facilities for helium extraction at the Badger Wash Gas Plant on leased lands where gas was already being processed. However, Rocky Mountain was hesitant to invest millions of dollars to install the helium recovery facilities without a confirmation of a return on investment. Rocky Mountain’s hesitation led to BLM agreeing to provide Rocky Mountain data that would help it make an informed decision within 60 days. Rocky Mountain found the date inadequate to determine the likelihood of helium recovery and failed to “satisfy the Settlement Agreement’s data requirements.” It claimed that 50% of the gas volumes processed by the Badger Wash Gas Plant could not be identified. BLM disagreed, stating it provided additional gas analysis, but refused to provide records or estimates “of monthly wellhead or vent stream gases, asserting that this “information is unavailable and cannot be provided.” On April 21, 2009, BLM notified Rocky Mountain that it intended to invoke the provision of nonpayment and regarded the helium contract “fully, finally, and permanently terminated.”
Rocky Mountain filed suit against the U.S. government in 2015 for breaching the settlement agreement. A remand by the Federal Circuit instructed the court to address “Rocky Mountain’s claim that BLM did not properly implement its responsibilities under the Settlement Agreement.” Both parties filed motions for summary judgment.
The contract dispute returned to the United States Court of Federal Claims after it was remanded from the U.S. Court of Appeals for the Federal Circuit. Rocky Mountain alleged that BLM breached the terms of a contract to extract helium from natural gas wells on federal lands and breached a settlement agreement made by the two parties to resolve their contract dispute. In 2015, the U.S. Court of Federal Claims dismissed the case on the merits and for lack of subject-matter jurisdiction. Rocky Mountain appealed, and the U.S. Court of Appeals reversed the dismissal of the case based upon subject-matter jurisdiction and remanded the case to the U.S. Court of Federal Claims, which entered its decision on October 8, 2019.
BLM’s Obligations Under the Settlement Agreement
The U.S. government stated its responsibilities under the Agreement would be satisfied by providing Rocky Mountain with the data supplied by the O&G lessees. The court noted its holding depended on whether the government interpretation of the Agreement is consistent with its plain meaning terms and structure. It stated the government preferred to interpret “the Data” to mean whatever data “the O&G lessees provide.” The court disagreed with the government’s interpretation. It found “the Data” to include enough information for Rocky Mountain to determine the feasibility of extracting helium gas from the land leased.
BLM’s Performance Under the Settlement Agreement
The U.S. Court of Federal Claims concluded the U.S. did not satisfy its obligation to supply Rocky Mountain with all the data required. BLM, however, argued it provided all the data required “to the full extent it existed.” However, the agreement required BLM to provide Rocky Mountain statements covering the last two years “prepared consistently with industry standards and practices and verified by a qualified petroleum engineer and/or geologist.” BLM argued no data was available from the Badger Wash Gas Plant. The court, however, stated there was no attempt by BLM to obtain at least partial vent stream volumes and provide greater detailed information to Rocky Mountain. The court stated BLM’s limited data provided to Rocky Mountain hindered its ability to perform an accurate analysis of helium recovery.
The Court of Federal Claims denied the government’s motion for summary judgment and granted Rocky Mountain’s cross-motion for summary judgment based upon the government’s breach of the Settlement Agreement. If you find yourself in a contract dispute with the U.S. government, make the same decision Rocky Mountain did and seek legal representation, the sooner the better. Whitcomb Selinsky can help you resolve government-contract issues, and typically such issues are easier to resolve while you are still performing the contract. We can also represent you if you have not been able to resolve an issue with the contracting officer and need to file a lawsuit.