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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Marathon Oil Co. v. State, Depart. of Natural Resources (6/10/2011) sp-6568
Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts, 303
K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
MARATHON OIL COMPANY, )
) Supreme Court No. S-13771
Appellant, )
) Superior Court No. 3AN-08-08544 CI
v. )
) O P I N I O N
STATE OF ALASKA, )
DEPARTMENT OF NATURAL ) No. 6568 - June 10, 2011
RESOURCES, )
)
Appellee. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, John Suddock, Judge.
Appearances: Rebecca S. Copeland, Kyle W. Parker, and
David J. Mayberry, Crowell & Moring LLP, Anchorage, for
Appellant. Martin T. Schultz, Assistant Attorney General,
Anchorage, and Daniel S. Sullivan, Attorney General, Juneau,
for Appellee.
Before: Carpeneti, Chief Justice, Fabe, Winfree, and
Stowers, Justices. [Christen, Justice, not participating.]
FABE, Justice.
I. INTRODUCTION
Gas producers that lease land from the State of Alaska must pay royalties
calculated on the value of the gas produced from the leased area. This royalty payment
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can be calculated under one of two methods: (1) "higher of" pricing or (2) contract
pricing. "Higher of" pricing is the default. Computing the royalty owed under "higher
of" pricing involves sophisticated calculations using market data and the prices of other
producers. The Department of Natural Resources (DNR) usually does not calculate the
royalty payment under "higher of" pricing until years after the time of production, once
an audit can be completed. In order to pay royalties under contract pricing, the lessee
must first request that form of payment calculation from DNR. Under contract pricing,
the lessee's price at which it sells gas is used to determine the lessee's royalty payment.
Marathon Oil Corporation (Marathon) began production in the Ninilchik
gas field in 2003. In 2008, before completion of the audit to determine the "higher of"
royalty payment for 2003-2008, Marathon requested contract pricing from DNR.
Marathon requested contract pricing for the period of 2008 onward and sought
retroactive application of contract pricing to the 2003-2008 period. DNR approved
Marathon's request for contract pricing from 2008 onward but denied the request to
apply contract pricing to production prior to 2008. Marathon appealed to the superior
court, which affirmed DNR's ruling. Marathon appeals.
Marathon has three arguments. First, Marathon argues that the statute that
governs contract pricing - AS 38.05.180(aa) - permits retroactive application of
contract pricing and that DNR was wrong to deny Marathon's request. We conclude that
the statute is ambiguous, and because DNR's interpretation is longstanding and has a
reasonable basis in the statute, we defer to its interpretation. Second, Marathon argues
in the alternative that even if DNR's interpretation of the statute is valid, DNR was
obliged to promulgate its interpretation as a regulation before applying it to any party.
We conclude that DNR's interpretation is a rule of internal agency procedure and
therefore did not have to be issued as a regulation. Third, Marathon argues that DNR's
treatment of Marathon violated due process. We conclude that Marathon's due process
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rights were not violated. We therefore affirm the superior court's decision upholding
DNR's order.
II. FACTS AND PROCEEDINGS
Marathon leases land from the State of Alaska for the purpose of producing
natural gas. Marathon has many natural gas leases on the Kenai Peninsula, including one
at Ninilchik.
Gas lessees must pay a royalty to the State in the amount of 12.5% of the
value of the gas produced in the leased area. Determining the value of the gas produced
for the purpose of calculating this royalty is usually done through "higher of" pricing.
The value of the gas produced is deemed to be the highest of four possible prices.1
Lessees must deliver royalty payments on or before "the last day of the
calendar month following the month in which the oil, gas, or associated substances are
produced." But the four values needed to calculate the royalty under "higher of" pricing
1 The four prices are: (1) "the field price received by the lessee for the oil,
gas, or associated substances"; (2) "the volume-weighted average of the three highest
field prices by other producers in the same field or area for oil of like grade and gravity,
gas of like kind and quality, or associated substances of like kind and quality at the time
the oil, gas, or associated substances are sold or removed from the leased or unit area or
the gas is delivered to an extraction plant if that plant is located on the leased or unit area;
if there are less than three prices reported by other producers, the volume-weighted
average will be calculated using the lesser number of prices received by other producers
in the field or area"; (3) "the lessee's posted price in the field or area for the oil, gas, or
associated substances"; or (4) "the volume-weighted average of the three highest posted
prices in the same field or area of the other producers in the same field or area for oil of
like grade and gravity, gas of like kind and quality, or associated substances of like kind
and quality at the time the oil, gas, or associated substances are sold or removed from the
leased or unit area or the gas is delivered to an extraction plant if that plant is located on
the leased land or unit area; if there are less than three prices posted by other producers,
the volume-weighted average will be calculated using the lesser number of prices posted
by other producers in the field or area." STATE OF ALASKA, DEP'T OF NATURAL RES.,
COMPETITIVE OIL AND GAS LEASE (ADL No. 384372), ¶ 38 (1995).
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are usually not determined until several years after the time of production, after DNR
performs an audit. After the audit, a lessee's royalty liability is often "re-adjusted
upward."
In 1986 the legislature amended the royalty statute.2 The amendments,
codified in AS 38.05.180(aa) and AS 38.05.180(bb), allowed lessees to request contract
pricing rather than the default "higher of" pricing. Contract pricing permits lessees to use
the price at which they sell gas to Alaska utilities as the price on which royalties will be
calculated. The stated purpose of the 1986 amendments was to benefit utility
3
consumers. The contracts between gas producers like Marathon and gas-purchasing
utilities had historically allocated the risk of higher royalty payments to the utilities. That
is, producers sold gas to utilities under a long-term contract with a fixed price for gas.
If the market price of gas rose above the contract price, producers had to pay higher
royalties. Under the terms of their contracts with utilities, they could pass on this added
expense to utilities. Utilities would then pass the expense along to their consumers. The
1986 amendments allowed lessee-producers to use their contract price as the royalty
price, thus avoiding this possible increase in consumers' utility bills.
In 1995 DNR leased lands in the Ninilchik Unit on the Kenai Peninsula to
Marathon for the purposes of gas production. Marathon began production on this land
in 2003. In 2008 Marathon requested contract pricing from DNR, both for future
production and for past production between 2003 and 2008. DNR approved Marathon's
request for contract pricing from 2008 forward but rejected the request for the 2003-2008
period. The commissioner stated that he "decline[d] to grant retroactive approval under
the terms of the statute." Marathon requested reconsideration, arguing that
2 Ch. 55, SLA 1986.
3 Letter from Esther C. Wunnicke, Comm'r, Dep't of Natural Res., to Rep.
Richard Schultz (Apr. 22, 1986).
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AS 38.05.180(aa) permitted retroactive approval. DNR affirmed its earlier decision,
reasoning that "AS [3]8.05.180(aa) does not authorize the Department of Natural
Resources to grant retroactive approval." Marathon appealed, and the superior court
affirmed DNR's order. Marathon appeals.
III. STANDARD OF REVIEW
We interpret statutes "according to reason, practicality, and common sense,
taking into account the plain meaning and purpose of the law as well as the intent of the
drafters."4 We decide questions of statutory interpretation on a sliding scale: "[T]he
plainer the language of the statute, the more convincing contrary legislative history must
be."5 We use one of two standards to review agency interpretations of statutes.6 We
apply the reasonable basis standard, under which we give deference to the agency's
interpretation so long as it is reasonable, when the interpretation at issue implicates
agency expertise or the determination of fundamental policies within the scope of the
agency's statutory functions.7 We apply the independent judgment standard, under
which "the court makes its own interpretation of the statute at issue, . . . where the
agency's specialized knowledge and experience would not be particularly probative on
4 Native Village of Elim v. State, 990 P.2d 1, 5 (Alaska 1999).
5 Alaskans For Efficient Gov't, Inc. v. Knowles, 91 P.3d 273, 275 (Alaska
2004) (quoting Ganz v. Alaska Airlines, Inc., 963 P.2d 1015, 1019 (Alaska 1998)).
6 Matanuska-Susitna Borough v. Hammond, 726 P.2d 166, 175 (Alaska
1986).
7 Id.
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the meaning of the statute."8 We give more deference to agency interpretations that are
"longstanding and continuous."9
It is DNR's job to manage the state's resources and to collect royalties from
gas lessees.10 We have explained that the reasonable basis standard is appropriate when
an agency's adjudication of a regulated party's claim "requires resolution of policy
questions which lie within the agency's area of expertise and are inseparable from the
facts underlying the agency's decision."11 The question whether to allow retroactivity
lies within DNR's expertise. Allowing retroactivity could have important consequences
for how royalties are assessed and paid. The state royalty and audit system is
complicated, and DNR has expertise in deciding when retroactive application makes
sense within that system.12 In Alaska International Construction v. Earth Movers of
Fairbanks, we explained that " 'the comparative qualification of court and agency to
decide the particular issue' [is] the most important factor for whether a court should
substitute its judgment for that of an agency's."13 Here, where the question implicates
8 Id.
9 Premera Blue Cross v. State, Dep't of Commerce, Cmty. & Econ. Dev., Div.
of Ins., 171 P.3d 1110, 1119 (Alaska 2007).
10 AS 38.05.020, .180.
11 Earth Res. Co. v. State, Dep't of Revenue, 665 P.2d 960, 964 (Alaska 1983).
12 See Kelly v. Zamarello, 486 P.2d 906, 917 (Alaska 1971) (holding that
reasonable basis deference is appropriate in areas with "complex subject matter").
13 697 P.2d 626, 633 (Alaska 1985) (quoting 4 KENNETH CULP DAVIS,
ADMINISTRATIVE LAW TREATISE § 30.14, at 269 (1958)).
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"special agency expertise" and is not "merely . . . a question of statutory interpretation,"
we use the reasonable basis standard.14
IV. DISCUSSION
A. DNR's Interpretation Of AS 38.05.180(aa) Is Reasonable.
In 1959, shortly after statehood, the legislature passed the Alaska Land Act
and gave DNR the responsibility for managing state-owned land.15 The Alaska Land Act
provided that state lands were open to oil and gas development and gave DNR the power
to lease state lands for that purpose.16 The Alaska Land Act required that DNR, when it
leased state land, collect a royalty of at least 12.5% of the value of all oil and gas
produced.17 To determine a lessee's royalty obligation, DNR must calculate the value
of the oil and gas produced by the lessee. To determine the value of the oil and gas
produced by a lessee, DNR historically has not used the price at which the lessee actually
sold its oil or gas. Rather, DNR has used an approximation of market price. In its lease
agreements, DNR has obligated lessees to pay 12.5% of the "higher of" four different
values.18 These four values are designed to estimate the market price of oil and gas. The
goal of "higher of" pricing is to ensure the state's royalty is not based on a below-market
sales price.
The 1986 amendments to the Alaska Land Act allowed lessees to calculate
their royalty obligations using a different, potentially more favorable method. The
amendments permitted lessees to use the price at which they contracted to sell gas to
14 Union Oil Co. of California v. State, 804 P.2d 62, 64 (Alaska 1990).
15 Ch. 169, SLA 1959.
16 Ch. 169, Art. VIII, § 3, SLA 1959; Ch. 169, Art. II, § 4, SLA 1959.
17 Ch. 169, Art. VIII, § 3, SLA 1959.
18 See supra note 1.
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Alaska utilities as the basis for calculating the state's royalty.19 To use this "contract"
price, the lessee must apply and receive permission from DNR.20
The question presented is whether a lessee must apply for contract pricing
before production actually occurs. For at least ten years, DNR has interpreted the 1986
amendments as permitting DNR to approve contract pricing only for future production.
Thus, a lessee can apply to have contract pricing used to calculate its royalties for future
production, but not for gas production that has already occurred. Marathon disputes this
interpretation, arguing that the statute permits DNR to use contract pricing for past
production. Marathon offers alternative statutory interpretations, proposing several
cutoff points after which a lessee would no longer be permitted to apply for contract
pricing. Marathon even suggests that a lessee could apply for contract pricing after the
completion of the audit to determine its "higher of" royalty liability so long as the lessee
applied "before the statute of limitations ran."
To establish the meaning of a statute, we examine both its text and its
21
purpose. We will give the appropriate deference to DNR, deferring to its interpretation
"so long as it has a reasonable basis in the law."22
19 AS 38.05.180(aa), (bb).
20 AS 38.05.180(aa).
21 Borg-Warner Corp. v. Avco Corp., 850 P.2d 628, 633 n.12 (Alaska 1993)
("Statutory construction begins with an analysis of the language of the statute construed
in view of its purpose.").
22 Wilber v. State, Commercial Fisheries Entry Comm'n, 187 P.3d 460, 465
(Alaska 2008).
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1. The text of the statute
a. The meaning of "prospective"
Alaska Statute 38.05.180(aa)(2)(B) provides that DNR should not approve
a request for contract pricing if "theprospective reduction in royalty receipts would not
be balanced by increased benefits to in-state gas and electric consumers." (Emphasis
added.) DNR notes that Black's Law Dictionary defines "prospective" as meaning "[i]n
the future."23 According to DNR, "prospective" refers to the "future period after the
application is approved" and therefore AS 38.05.180(aa) only allows contract pricing for
future production. DNR maintains that AS 38.05.180(aa) does not permit application of
contract pricing to past production.
Marathon argues that the word "prospective" has a different meaning within
the context of the statute. In Marathon's view, the legislature's reference to "prospective
reduction in royalty receipts" is "not the same as requiring that a request be made in
advance of or commensurate in time with first gas production." Marathon instead argues
that the word refers to the future effects of DNR's decision to approve or deny a request
for contract pricing. According to Marathon, DNR can decide to approve contract
pricing for any period, past or future, but DNR must consider the "prospective" effects
of that decision. Marathon contends that "DNR may still consider the 'prospective
reduction in royalty receipts' resulting from use of the contract price even if the royalty
would [correlate] with gas deliveries and production occurring in the past."
The term "prospective" could plausibly have either meaning. The use of
the word could signify that the legislature only intended contract pricing to be available
for future gas production; or the use of the word could be incidental "and the timing of
23 BLACK'S LAW DICTIONARY 1222 (6th ed. 1990).
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the [application] . . . immaterial." We agree with the superior court that "the phrase
'prospective reduction in royalty receipts' is ambiguous."
b. The scope of AS 38.05.180(aa)(2)
Marathon argues that AS 38.05.180(aa)(2)provides an exhaustive list of the
reasons that DNR may reject a request for contract pricing. Alaska
Statute 38.05.180(aa)(2) provides that DNR should reject a lessee's request for contract
pricing if the commissioner makes a finding that
(A) the contract price or transfer price is unreasonably low;
(B) the prospective reduction in royalty receipts would not
be balanced by increased benefits to in-state gas and electric
consumers;
(C) the lessee and the utility are related in management,
ownership, or other aspect and, in the case of a transfer price,
that relationship is not regulated under AS 42.05; and
(D) the contract price or transfer price is not in the best
interest of the state.
Marathon contends that because retroactivity is not among the listed reasons for
rejection, DNR had no right to refuse Marathon's request for retroactive application.
Marathon claims that AS 38.05.180(aa) creates a presumption in favor of approval and
that DNR did not respect this presumption. But AS 38.05.180(aa)(2)'s core scope is
more limited than Marathon contends. Alaska Statute 38.05.180(aa)(2) provides an
exhaustive list of theprice-related reasons DNR can reject requests for contract pricing,
but the statute does not address other grounds for rejection. The legislative history of the
1986 amendments indicates that AS 38.05.180(aa)(2) is exclusively concerned with
objections to the price a lessee submits as its contract price.24 Other non-price related
24 Letter from Esther C. Wunnicke, Comm'r, Dep't of Natural Res., to
Rep. Drue Pearce (Apr. 28, 1986).
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reasons for rejecting a request may still exist. If DNR is correct that the statute does not
authorize retroactive contract pricing, then DNR is justified in rejecting such a request
even though the statute does not specifically list that reason for rejection. Therefore,
AS 38.05.180(aa) would not preclude DNR from rejecting Marathon's request. As we
will discuss below, agencies are generally given discretion to manage such procedural
matters.
2. The purpose of the statute
a. The pro-consumer purpose of the 1986 amendments
Both parties agree that the purpose of the 1986 amendments was to benefit
consumers: The statute lowers the amount of royalties paid by gas producers, and the
savings are passed on to consumers. Marathon points to this pro-consumer purpose of
the 1986 amendments and argues that allowing retroactivity would further this legislative
purpose. Marathon argues that (1) the purpose of the statute is to benefit consumers by
using contract pricing; (2) retroactivity results in more contract pricing; and (3) therefore,
retroactivity is consistent with the purpose of the statute. Marathon cites extensive
legislative history to support its argument, but while this legislative history generally
recognizes the benefits of contract pricing, it does not answer the question whether the
statute permits retroactivity.
Although it is true that the stated purpose of the 1986 amendments was to
benefit consumers, the 1986 amendments exist within the larger goals of the Alaska Land
Act. Alaska Statute 38.05.180(a) recites the goals of the Alaska Land Act:
(a) The legislature finds that
(1) the people of Alaska have an interest in the
development of the state's oil and gas resources to
(A) maximize the economic and physical
recovery of the resources;
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(B) maximize competition among parties
seeking to explore and develop the resources;
[and]
(C) maximize use of Alaska's human
resources in the development of the resources.
As we have recognized, the overall purpose of the Alaska Land Act is to maximize
revenue for the state: In Chevron v. LeResche we pointed out that the purpose of the
Alaska Land Act was "to provide for orderly oil and gas leasing that maximizes state
return on its oil and gas resources," and that this fact should influence the statute's
construction.25 And as Marathon acknowledges, AS 38.05.180(aa) is "an exception to
the goal of maximum royalty recovery."
Though the 1986 amendments' purpose of benefiting a smaller subset of
Alaska's utility consumers would arguably support Marathon's interpretation, the Alaska
Land Act's overall purpose of maximizing revenue for all Alaskan citizens would support
DNR's interpretation. The 1986 amendments and their legislative history do not provide
guidance as to which purpose should predominate in this case.
b. The legislative tolerance for retroactivity
Marathon points to the retroactivity that exists elsewhere in the statute and
the fact that audits and royalty calculations occur well after the time of production.
Royalty calculations involve amounts, such as "tax reimbursement amounts," that cannot
be known until some time after production.26 Marathon argues that the 1986 amendments
reflect a tolerance for retroactivity and that, therefore, the statute allows retroactive
requests for contract pricing. But Marathon ignores a crucial distinction between the
type of retroactivity it seeks and the retroactivity built into the statute's structure. The
25 663 P.2d 923, 931 (Alaska 1983).
26 AS 38.05.180(bb).
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statute recognizes that royalties will be calculated retroactively, but that is different than
allowing the method used to calculate royalties to be applied retroactively. Royalties are
necessarily calculated after the fact because the amount of gas production and other
inputs will not be known until after production has occurred. Selecting which royalty
calculation method to apply, however, can be accomplished before production has
occurred.27
3. We defer to DNR's longstanding interpretation.
The key to our decision is the standard of review. We conclude that the
statute is ambiguous and provides no direct answer whether retroactive contract pricing
is permitted. We have recognized that "an agency's interpretation of a law within its area
of jurisdiction can help resolve lingering ambiguity."28 We therefore defer to DNR's
interpretation that both the 1986 amendments' use of the word "prospective" and the
Alaska Land Act's purpose of maximizing revenue prohibit it from approving retroactive
contract pricing and we therefore conclude that it has a reasonable basis in the statute.
We are especially inclined to defer when an agency's statutory
interpretation is longstanding. DNR has been applying its interpretation for at least a
decade. In multiple cases, we have recognized the special deference that is due to
longstanding agency statutory interpretations. In Bullock v. State, we afforded a
27 Moreover, the 1986 amendments provide that contract pricing can only be
applied to gas sales made after the legislation's passage. The 1986 session law adopting
AS 38.05.180(aa) includes a note stating that the statute is only to be applied
prospectively: "The legislature finds that this authorization should apply prospectively
and does not intend the authorization to apply to the valuation for royalty purposes of gas
sold by a lessee under a gas sales contract entered into before the effective date of this
Act." Ch. 55, § 1, SLA 1986.
28 Wilson v. State, Dep't of Corr., 127 P.3d 826, 829 (Alaska 2006) (quoting
Bartley v. State, Dep't of Admin., Teacher's Ret. Bd., 110 P.3d 1254, 1261 (Alaska
2005)).
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Department of Revenue interpretation "great weight" because it was "long-standing" and
"continuous."29 In Bartley v. State, we also emphasized how deference was due "when
the agency's interpretation is longstanding."30 In Premera v. State, we explained that we
"apply a more deferential standard of review where an agency action is longstanding and
continuous."31 Since DNR's interpretation has been "longstanding and continuous," we
apply this deferential standard of review and conclude that DNR's interpretation is
reasonable.
B. DNR Was Not Required To Promulgate Its Interpretation In A
Regulation.
Marathon argues that DNR's interpretation of the statute, even if valid, must
be promulgated through a regulation before being applied to Marathon or any other
party.32 We use our independent judgment in deciding whether an agency action is a
29 19 P.3d 1209, 1210, 1215 (Alaska 2001).
30 110 P.3d at 1261.
31 171 P.3d 1110, 1119 (Alaska 2007).
32 The Administrative Procedure Act defines a "regulation."
AS 44.62.640(a)(3) (" 'regulation' means every rule, regulation, order, or standard of
general application or the amendment, supplement, or revision of a rule, regulation,
order, or standard adopted by a state agency to implement, interpret, or make specific the
law enforced or administered by it, or to govern its procedure, except one that relates
only to the internal management of a state agency; 'regulation' does not include a form
prescribed by a state agency or instructions relating to the use of the form, but this
provision is not a limitation upon a requirement that a regulation be adopted under this
chapter when one is needed to implement the law under which the form is issued;
'regulation' includes 'manuals,' 'policies,' 'instructions,' 'guides to enforcement,'
'interpretative bulletins,' 'interpretations,' and the like, that have the effect of rules,
orders, regulations, or standards of general application, and this and similar phraseology
may not be used to avoid or circumvent this chapter; whether a regulation, regardless of
name, is covered by this chapter depends in part on whether it affects the public or is
(continued...)
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regulation.33 Alaska Statute 38.05.020 provides that DNR may "establish reasonable
procedures and adopt reasonable regulations necessary to carry out this chapter." Alaska
Statute 38.05.020 requires that regulations so adopted must comply with Alaska's
Administrative Procedure Act (APA).34
We have been hesitant to force agencies to promulgate all statutory
interpretations as regulations.35 Other courts have been similarly reluctant to require
agencies to convert statutory interpretations into regulations, especially in matters that
the agency would have had difficulty foreseeing. The United States Supreme Court in
SEC v. Chenery explained this limitation: "[P]roblems may arise in a case which the
administrative agency could not reasonably foresee, problems which must be solved
despite the absence of a relevant general rule."36 We stated in Alyeska Pipeline Service
Co. v. State that a "requirement that each [agency] interpretation be preceded by
rulemaking would result in complete ossification of the regulatory state."37 It would be
counterproductive to require DNR to devote its resources to promulgating regulations on
32(...continued)
used by the agency in dealing with the public").
33 Alaska Ctr. for the Env't v. State, 80 P.3d 231, 243 (Alaska 2003)
("Whether the agency action is a regulation is a question of law that does not involve
agency expertise, so we apply our independent judgment.").
34 AS 38.05.020(b)(1).
35 See Burke v. Houston NANA, 222 P.3d 851, 867 (Alaska 2010); see also
RICHARD J. PIERCE, JR., 1 ADMINISTRATIVE LAW TREATISE § 6.9, at 504 (5th ed. 2010)
("Courts cannot require agencies to make 'rules' only through rulemaking because
sometimes an agency is justified in eschewing rulemaking in favor of gradual
development of 'rules' through adjudication of cases . . . .").
36 332 U.S. 194, 202-03 (1947).
37 145 P.3d 561, 573 (Alaska 2006).
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every possible eventuality. We have previously explained that "absent statutory
restrictions and due process limitations, administrative agencies have the discretion to
set policy by adjudication instead of rulemaking."38 Here, DNR made its statutory
interpretation in the context of adjudicating applications for contract pricing. Because
we permit agencies to make new statutory interpretations in adjudications and because
DNR's interpretation does not impose "any new substantive requirements,"39 we hold
that DNR was not required to promulgate its interpretation in a regulation.
C. Due Process
Marathon claims that "[d]ue process considerations are triggered by DNR's
refusal to consider Marathon's request under the legislative criteria." But, as the State
notes, it is somewhat difficult to discern what due process violation Marathon is alleging.
The Alaska Constitution provides that "[n]o person shall be deprived of life, liberty, or
property, without due process of law."40 The Fourteenth Amendment to the United States
Constitution provides that no state shall "deprive any person of life, liberty, or property,
without due process of law." We have held that the "crux of due process is the
opportunity to be heard and the right to adequately represent one's interests."41
Marathon did have sufficient notice and the opportunity to represent its
interests. Marathon argues that DNR did not adequately "apprise" Marathon of the
grounds on which DNR would make its decision. Marathon argues that because it did
38 Amerada Hess Pipeline Corp. v. Alaska Pub. Utils. Comm'n, 711 P.2d
1170, 1178 (Alaska 1986).
39 Smart v. State, Dep't of Health & Soc. Servs., 237 P.3d 1010, 1017 (Alaska
2010).
40 Alaska Const. art. I, § 7.
41 Groom v. State, Dep't of Transp., 169 P.3d 626, 635 (Alaska 2007).
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not have adequate notice of DNR's earlier interpretation of the statute, Marathon was
therefore denied the "opportunity to defend its request and have its merits judged."
But DNR has relied on its interpretation of AS 38.05.180(aa) for over a
decade. As we explained in Alyeska Pipeline Service Co. v. State, a statute itself can
provide constructive notice of an agency's interpretation.42 The statute in Alyeska
Pipeline, like AS 38.05.180(aa), was silent on the issue in question. Nevertheless, we
explained that, since the agency's interpretation was reasonable, a "careful reading" of
that statute "should have alerted Alyeska to the possibility" that the agency could
interpret the statute the way it did.43 The fact that AS 38.05.180(aa) does not expressly
prohibit retroactive requests does not mean that Marathon can assume that the statute
allows retroactivity. Accordingly, we conclude that Marathon did have adequate notice
that DNR could interpret AS 38.05.180(aa) as not allowing retroactive contract pricing.
Moreover, DNR did provide Marathon with notice of its decision on
Marathon's request, and Marathon had the opportunity to present its arguments to DNR.
After Marathon submitted its request, DNR rejected the request because it was
retroactive. Marathon requested reconsideration and argued that AS 38.05.180(aa) does
permit retroactivity. DNR affirmed its earlier decision and explained its interpretation
that "AS [3]8.05.180(aa) does not authorize the Department of Natural Resources to
grant retroactive approval." Because Marathon had both adequate notice and a fair
opportunity to present its claims, we conclude that its due process rights were not
violated.
V. CONCLUSION
For the foregoing reasons, we AFFIRM the superior court's decision.
42 145 P.3d at 571.
43 Id.
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| Case Law Statutes, Regs & Rules Constitutions Miscellaneous |
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