ADMINISTRATIVE LAW
Supreme Court of Alaska (2023)
Cara Shanahan
In AVCG, LLC v. State, 527 P.3d 272 (Alaska 2023), the supreme court held that an agency engages in rulemaking if its interpretation of an existing regulation adds requirements of substance, is unforeseeable, or changes the agency’s approach. (Id. at 281). The Alaska Venture Capital Group, LLC (AVCG) owned interests in oil and gas leases on State-owned lands. (Id. at 276). AVCG sought the State’s approval to create overriding royalty interests (ORRI) on the leases, thus entitling it to a percentage of royalties. (Id. at 275). The State may deny ORRIs that would adversely affect the public interest. (Id. at 277). Accordingly, the Alaska Department of Natural Resources (DNR) denied AVCG’s request on the basis that the proposed royalty burdens jeopardized the State’s interest in sustained oil and gas development. (Id. at 275–276). AVCG brought suit, arguing that the DNR effectively adopted a new regulation because its decision relied on factors that were not present in the existing regulation—specifically, the fact that the proposed ORRIs would create a total royalty burden of over 20% on the leases (Id. at 276).The supreme court refuted this argument, reasoning that the DNR was merely identifying the reasons for its decision (Id. at 280–281). The court further stated that an agency is not adding requirements to an existing rule by simply discussing relevant factors that contributed to a particular decision. (Id.). The supreme court noted that DNR’s focus on these particular factors was commonsense, foreseeable, and came from past adjudications. (Id.). It affirmed the superior court, holding that an agency interpreting an existing regulation will only amount to rulemaking if it adds substance, is unforeseeable, or changes the agency’s prior approach. (Id. at 281).
