shares ratably in the proceeds from the sale of gas and condensate produced from the communitized formation.

Wheless contends the demand by Geological Survey for payment of additional royalty based on the reimbursement of severance tax will result in unjust enrichment in the value of the federal gas through a net loss to the gas producer.

The oil and gas operating regulations, in discussing the "Value basis for computing royalties" at 30 CFR 221.47, use the expressions "estimated reasonable value" and "gross proceeds" as parameters in establishing the "value of production" for the purpose of computing royalty. The regulations direct that consideration be given to the highest price paid for production of like quality in the same field, to the price received by the lessee, and to the posted price, as well as to other relevant matters.

We recognize that authority to set field prices for natural gas sold in interstate commerce is vested in the Federal Power Commission, by the Natural Gas Act, 15 U.S.C. §§ 717 et seq. (1970). We recognize also that the field price established by FPC is not necessarily the "value of production" as that term is used in the oil and gas operating regulations, 30 CFR 221.47, especially when the additional factor of "gross proceeds" is considered.

Proceeds and fair market value may not be interchangeable. Proceeds of a sale, unless there is something in the context showing to the

contrary, means

contrary, means total proceeds. United States v. Stanolind Crude Oil Purchasing Company, 113 F.2d 194, 198 (10th Cir. 1940).

The gas purchase contract involving the subject lease, entered

into between Arkansas Louisiana Gas, the buyer, and Wheless, the seller, contains a provision in sec. 9 whereby the buyer will reimburse to the seller a specified percentage of any increase in the state severance

tax above that in effect on the date of the agreement. The record shows that an increase in the state severance tax was imposed after the date of the contract, effective December 1, 1958, and that the buyer has reimbursed the seller the amounts specified in the sale agreement since that date.

It seems obvious to us that the

buyer thus is paying to the seller an amount greater than the established field price for the natural gas it purchases from the #1 T. L. James well. It follows, therefore, that it is reasonable to compute the Federal royalty of the natural gas taken from this well on a unit value consisting of the field price established by FPC plus the amount of the severance tax reimbursed by the buyer. Within the context of 30 CFR 221.47, "gross proceeds" means the established field price for the natural gas plus any additional sums paid by the purchaser of the gas to the unit operator as consideration for the purchase of gas from the unit of which the federal lease is a part. In the present case, the unit value for purposes of com

puting the Federal royalty is $0.132700 plus 63/64 of $0.013333 [$0.013125] or a total of $0.145825 per Mcf. Wheless must comply with the demand by the Oil and Gas Supervisor for payment of additional royalty to the United States on the reimbursed severance tax by the buyer.

California Company v. Udall, 296 F.2d 384 (D.C. Cir. 1961), affirms the right of the Secretary of the Interior to establish "reasonable price" for royalty purposes. Kerr-McGee Oil Industries, Inc., 70 I.D. 464 (1963), held that the Secretary of the Interior in computing the basic royalty due to the United States under a lease may properly look to the actual consideration to be received by its lessee-seller under gas sales contracts with a buyer in order to determine the proper value basis for the royalty, and a determination by the Geological Survey that a reimbursement to the seller constitutes part of the contract sales price and should be included in the total value basis for the basic royalty computation is proper. We have applied these principles to the case at bar.

For the reasons set forth above we reject the contentions by Wheless that the federal royalties should be computed solely on the basis of the sale price of % of the gas produced from the #1 T. L. James well, the government-owned land being 1% of the communitized area. Absent any payments for reimbursement of severance tax or any other supple

mental consideration, the FPC fig

ure would probably be a proper base for computation of the royalty.

Likewise, we do not assent to the proposition that the computation of federal royalty on the gross proceeds, consisting of the gas purchase price plus the reimbursed severance tax, creates unjust enrichment of the Government's royalty interest. The Government is entitled to its royalty on the "reasonable value" of the gas as set by the Secretary, which by regulation may not be less than the highest gross price received for similar gas. We have determined that the base value for computation of the federal royalty in this case must include both the gas purchase price and the reimbursed severance tax.

Therefore, pursuant to the authority delegated to the Board of Land Appeals by the Secretary of the Interior, 43 CFR 4.1, the decision appealed from is affirmed.

DOUGLAS E. HENRIQUES, Member. WE CONCUR:

MARTIN RITVO, Member.
EDWARD W. STUEBING, Member.

IN THE MATTER OF RANGER FUEL CORPORATION (MINE A, MINE B, AND MINE D)

2 IBMA 186

Decided September 5, 1973 Certification of Interlocutory Ruling. Federal Coal Mine Health and Safety Act of 1969: Hearings: Procedure

Upon service on the operator of a petition for assessment of a civil penalty founded upon a request for hearing, the

jurisdiction of the Office of Hearings and Appeals (OHA) vests and the request for hearing, not being a pleading, cannot be withdrawn.

MEMORANDUM OPINION AND ORDER UPON RECONSIDERATION

INTERIOR BOARD OF MINE OPERATIONS APPEALS

On July 17, 1973, the Board of Mine Operations Appeals issued a Memorandum Opinion and Order, 2 IBMA 163, CCH Employment Safety & Health Guide par. 16,287, accepting certification and reversing an interlocutory ruling by Administrative Law Judge (Judge) Paul Merlin, dated June 14, 1973, which denied Ranger Fuel Corporation's (Ranger) motion to withdraw its request for hearing, dated April 24, 1973, in the above-listed proceedings. The Board reversed the order and granted the motion, holding that the right of Ranger to withdraw was unaffected by the amendment of 43 CFR 4.512 on May 30, 1973. Subsequently, the Mining Enforcement and Safety Administration (MESA) peti

tioned the Board to reconsider its decision. Having concluded that further exploration of the issues here involved was warranted, the Board stayed the outstanding orders, called for fresh briefs, and set the case down for oral argument on

1 The moving party in this case was the Bureau of Mines. Effective July 16, 1973, the MESA was substituted for the Bureau in this proceeding. See 38 F.R. 18695 (1973).

August 20, 1973. Upon renewed examination of all the aspects of this case, it is the decision of the Board that the Memorandum Opinion and Order of July 17, 1973, be set aside and that the certified interlocutory ruling be affirmed.

Procedural Background

This case was filed under the procedures announced by the Department which became effective January 16, 1971. 30 CFR 100.4, 36 F.R. 780. On July 15, 1971, in conformity with the existing procedure, the Secretary's Assessment Officer in the Bureau of Mines (Bureau) proposed a civil penalty in the amount of four thousand two hundred dol

lars ($4,200) for seven alleged violations. On August 2, 1971, Ranger filed a timely protest and a demand for hearing with the Assessment Officer. The protest was rejected on August 11, 1971, and, on August 24, 1971, Ranger reiterated its desire for public hearing. Ten days later, by letter dated September 3, 1971, the Assessment Officer notified Ranger that the matter had been forwarded to the Department's Associate Solicitor for institution of formal adjudication and stated:

You may at any time prior to hearing waive your right to a formal adjudication by notifying the Office of Hearings and Appeals of your desire to accept the Proposed Order of Assessment as final.

On March 8, 1972, the Bureau filed a Petition for the Assessment of Civil Penalty and served it upon Ranger by certified mail. Respond

ent answered on March 23, 1972. A year later, on March 27, 1973, the case was referred to Administrative Law Judge Merlin 2 who set the case for hearing on May 1, 1973.

During the interim between the Respondent's Answer and the assignment of Judge Merlin, the informal assessment procedures of 30 CFR Part 100 were challenged in the United States District Court for the District of Columbia in National Independent Coal Operators' Association v. Morton (NICOA), CCH Employment Safety & Health Guide par. 15,504.3 In that case, the court held invalid a proposed order of assessment which had become final by operation of law, 30 CFR 100.4 (e), there having been no timely protest and request for hearing by the operator. The court, in its opinion of March 9, 1973, concluded that the order failed to comply with section 109 (a)(3) of the Federal Coal Mine Health and Safety Act of 1969, 83 Stat. 742806, 30 U.S.C. $$ 801-960 (1969), which requires case-by-case findings of fact and which cannot be satisfied by a form where the Assessment Officer merely fills in the Respondent's name, the violations, and the assessments proposed. On March 15, 1973, the court issued an order declaring the procedures for assessment unlawful and enjoining their

The change of title of the hearing officer from "Hearing Examiner" was effectuated pursuant to the order of the Civil Service Commission. 37 F.R. 16787 (1972).

3 This decision has been followed in Morton v. G. M. W. Coal Co., Inc., CCH Employment Safety & Health Guide par. 16.253 (W.D. Pa. 1973).

utilization until modifications in accord with the opinion of March 9 were made. By order of the same date, the court stayed its injunction for thirty days. No. 397-72.

In his opinion, District Judge Robinson expressly limited his holding. He stated that the Secretary was not precluded from using informal assessment procedures provided the fatal lack of genuine findings of fact was remedied. On April 24, 1973, the Department suspended part 100 of 30 CFR, pending appeal, and modified existing procedures untouched by Judge Robinson's injunction. 43 CFR 4.540 et seq., 38 F.R. 10086-7. In part, the new regulations provided for informal assessment under a new formula and the institution of formal adjudication in every case.

Coincidentally, on that same date, Judge Merlin received a telegram from Ranger which he construed to be a motion to withdraw its request for hearing. Judge Merlin denied the motion on June 14, 1973, relying on 43 CFR 4.512, 38 F.R. 14170, as amended, effective May 30, 1973, which reads as follows:

(a) Except as provided in paragraph (b) of this section, a party may withdraw a pleading at any stage of a proceeding without prejudice.

(b) A petition for civil penalty assessment filed by the Bureau under section 109 (a) of the act may be withdrawn only upon motion of the Bureau or in the case of an operator-filed petition for hearing and formal adjudication with the Bu

reau's concurrence.

The Judge then certified his ruling to the Board for interlocutory determination.

Discussion

Prior to the NICOA case, there was virtually no dispute over operator requests to withdraw from formal adjudication because the policy of granting withdrawal suited the interests of everyone involved. The operator could request formal adjudication, within the short fifteen working day period allowable under the regulations, confident in the knowledge that it had preserved its due process rights and could now decide, without time pressure, whether to accept the amount of the proposed assessment, to litigate administratively, or to defend a section 109 enforcement suit in federal court. The Bureau and the Administrative Law Judges in the Office of Hearings and Appeals were satisfied because the policy decreased the crowded hearings docket and facilitated expeditious and inexpensive final administrative determina

forts or of imposing the administrative burden of reassessment under a new procedure.

The Administrative Law Judges reacted to the changed legal framework and the development of dispute in varying ways. One Judge who dealt with the problem of withdrawals of requests for hearing by operators concluded that the regulation, 43 CFR 4.512, upon which the Judges had relied in order to permit withdrawals, was not mandatory, but rather conferred. discretion upon the Judges to permit dismissals. He assumed that the unilateral act of filing a withdrawal motion did not result in an immediate loss of jurisdiction. After weighing the undesirable results to be anticipated from withdrawal, the Judge denied the motion. See decision of Administrative Law Judge George A. Koutras in Snap Creek Coal Company, Docket No. HOPE 72-301-P (May 24, 1973).

posed assessment.*

In the aftermath of the NICOA decision, the situation changed radically. Formerly, withdrawal or dismissal, in the absence of settlement, resulted in the finalization of the proposed order of assessment by operation of law. After NICOA, it was clear that such a conclusion was legally precluded and that withdrawal could have the effect of vitiating some Bureau enforcement ef

The portion of the Assessment Officer's letter of September 3, 1971 explaining the operator's option to waive the right to formal adjudication prior to hearing is evidence of this policy.

Judges, like Judge Merlin in the case at hand, denied withdrawal on the theory that 43 CFR 4.512, as amended, required Bureau concurrence as a condition precedent to withdrawal. See decision of Administrative Law Judge Edmund M. Sweeney in Perry County Coal Corporation, Docket No. BARB 72-160-P (June 20, 1973).

The Board has not had the occasion prior to the instant case to deal squarely with a withdrawal of a request for hearing or to construe 43 CFR 4.512. Ranger has argued