Woods Petroleum Corp. v. Department of Interior

HENRY, Circuit Judge,

dissenting, with whom SEYMOUR, Chief Circuit Judge, joins:

Acknowledging the Secretary of the Interi- or’s fiduciary obligations, the majority overturns a decision that resulted in the negotiation of more lucrative leases on behalf of Indian mineral owners. I find the majority’s reasoning inconsistent with both the paramount obligation of trust that our government owes to its indigenous peoples and with the great deference that we generally afford to agency decisions. By imposing requirements on the Secretary that we have not *1042required of other agencies, the majority undermines the generally established standard of review for administrative decisions. The majority opinion also does not resolve the conflict in our prior cases regarding the Secretary’s evaluation of communization agreements. Therefore, I must respectfully dissent.

As the majority notes, we may overturn an agency’s decision only if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). The Supreme Court has explained this narrow standard of review as follows:

Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2867, 77 L.Ed.2d 443 (1983).

In my judgment, in disapproving the Woods communization agreement, the Assistant Secretary made a reasoned decision to which we should defer. I base this conclusion on an examination of the Secretary’s fiduciary obligations to Indian mineral owners, our prior decisions regarding the evaluation of communization agreements governing tribal and allotted lands, and the record of the Interior Department proceedings, which reflects extensive efforts by the Assistant Secretary to obtain and review relevant facts and law.

A. The Secretary’s Fiduciary Obligations

In its dealings with Indian peoples, the federal government “has charged itself with moral obligations of the highest responsibility and trust.” Seminole Nation v. United States, 316 U.S. 286, 297, 62 S.Ct. 1049, 1055, 86 L.Ed. 1480 (1942). As a result, the relationship between the Indians and the federal government “is marked by peculiar and cardinal distinctions which exist nowhere else” and “resembles that of a ward to his guardian.” Cherokee Nation v. Georgia, 30 U.S. (5 Pet.) 1, 16-17, 8 L.Ed. 25 (1831). See generally Jicarilla Apache Tribe v. Supron Energy Corp., 728 F.2d 1555, 1563 (10th Cir.1984) (Seymour, J., dissenting) (discussing Secretary of the Interior’s fiduciary obligations to Indian mineral owners), dissenting opinion adopted as majority opinion as modified, 782 F.2d 855 (10th Cir.) (en banc), cert. denied, 479 U.S. 970, 107 S.Ct. 471, 93 L.Ed.2d 416 (1986); Stephen L. Pevar, The Rights of Indians and Tribes 26-36 (2d ed. 1992).

In addition to this general trust relationship, there are “other, context-specific trust relationships of varying depth and responsibility” that arise in particular areas of federal government regulation involving Indian people. Jicarilla, 728 F.2d at 1563. One scholar has observed that “the more specific the obligation, the higher the duty of care.” Pevar, supra, at 28.

In Jicarilla, we examined the federal government’s role in the leasing of minerals located on land owned by an Indian tribe. After considering the provisions of the Indian Mineral Leasing Act, 25 U.S.C. §§ 396a-396g, accompanying regulations, and the Act’s legislative history, we concluded that Congress intended for the Secretary of the Interior to act as a fiduciary for Indian mineral owners. We found that “[t]he evident purpose of the statute is to ensure that Indian tribes receive the maximum benefit from mineral deposits on their lands through leasing.” Jicarilla, 728 F.2d at 1565. We further noted that the regulations enacted pursuant to the Indian Mineral Leasing Act repeatedly stress that the Secretary “must act in the best interests of the tribes.” Id. We deemed it significant that the Act was passed because, “ ‘it [was] not believed that the present law [was] adequate to give the Indians the greatest return from their property.’ ” Id. (quoting Senate Report No. 985, at 2 (1937); House Report No. 1872, at 2 (1938)).

The fiduciary obligation we outlined in Ji-carilla informs courts’ assessments of particular statutes and regulations. As a result, whenever doubt or ambiguity exists in the *1043applicable statutory and regulatory provisions, “such doubt is resolved in favor of the tribes.” Jicarilla, 728 F.2d at 1563 (citing Bryan v. Itasca County, 426 U.S. 373, 392, 96 S.Ct. 2102, 2112, 48 L.Ed.2d 710 (1976)). The Secretary’s fiduciary responsibilities also limit the range of regulatory decisions that he or she may make:

When the Secretary is acting in his fiduciary role rather than solely as a regulator and is faced with a decision for which there is more than one “reasonable” choice as that term is used in administrative law, he must choose the alternative that is in the best interests of the Indian tribe. In short, he cannot escape his role as trustee by donning the mantle of administrator. ...

Id., at 1567 (emphasis added).

These principles of fiduciary responsibility apply to the instant case. Like the statutes and regulations that we analyzed in Jicarilla, the statute that quite specifically governs the leasing of allotted Indian lands, 25 U.S.C. § 396, vests broad discretion in the Secretary of the Interior. Enacted in 1909, the statute authorizes the Secretary to execute mining leases for any term of years that he deems advisable. It states that the Secretary may “perform any and all acts and make such rules and regulations as may be necessary for the purpose of carrying the provisions of this section into full force and effect.” 25 U.S.C. § 396. In addition, the statute expressly grants the Secretary the right to “reject all bids whenever in his judgment the interests of the Indians will be served by so doing, and to readvertise such lease for sale.” Id.

The legislative history of 25 U.S.C. § 396 is instructive. As originally drafted, the statute authorized the leasing of allotted lands without restrictions. However, the Secretary of the Interior objected to the absence of restrictions, observing that “[ejxperienee has shown that this is unjust to the Indians, as the inrush of prospective miners is always prejudicial to the Indians’ interests, and, in justice to them, the Department should not recommend favorable action on any bill that would render them insecure in their homes.” H.R.Rep. No. 1225, 60th Cong., 1st Sess. 2 (1908). The bill was then amended to address the Secretary’s concerns. Id. The Federal Circuit has concluded that, in enacting 25 U.S.C. § 396, “Congress was much interested in having [the] Interior [Department] oversee the leasing of the Indian lands so as to prevent exploitation of and prejudice to the Indians’ interest, or injustice to them.” Pawnee v. United States, 830 F.2d 187, 189 n. 2 (Fed.Cir.1987), cert. denied, 486 U.S. 1032, 108 S.Ct. 2014, 100 L.Ed.2d 602 (1988) (citing H.R.Rep. No. 1225, 60th Cong., 1st Sess. 1-2 (1908)).

The statute authorizing the Secretary to approve communization agreements on allotted and tribal lands, 25 U.S.C. § 396d, was enacted with a similar purpose. Section 396d is part of the Indian Mineral Leasing Act, which we examined in Jicarilla and which Congress passed in order “to achieve uniformity in tribal leasing matters; to increase Indian authority in granting leases; and to protect the Indians’ economic return on their property.” Assiniboine & Sioux Tribes v. Board of Oil & Gas Conservation, 792 F.2d 782, 796 (9th Cir.1986). Section 396d gives the Secretary and his or her delegates broad discretion to approve or disapprove commun-ization agreements governing leases of Indian land. Kenai Oil & Gas, Inc. v. Department of the Interior, 671 F.2d 383, 386 (10th Cir.1982). An accompanying regulation, 25 C.F.R. § 212.24(c), provides that leases of allotted lands “shall be subject to a cooperative unit or development plan affecting the leased lands if and when required by the Secretary of the Interior.” Like 25 U.S.C. § 396d, Section 212.24(c) places no limits on the Secretary’s discretion in assessing com-munization agreements. However, it is part of the general regulatory framework governing the leasing of Indian lands that requires the Secretary and his or her delegates to act in the best interests of Indian mineral owners. See Jicarilla, 728 F.2d at 1565.

Accordingly, in deciding whether to approve or disapprove communization agreements governing allotted lands such as those at issue here, the Secretary must act as a fiduciary for Indian mineral owners, guided by the same exacting standards that we outlined in Jicarilla. See Pawnee, 830 F.2d at *1044190. In exercising this duty to the Indian owners, “[n]ot honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.” Seminole Nation, 316 U.S. at 297 n. 12, 62 S.Ct. at 1055 n. 12 (quoting Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545 (1928) (Cardozo, J.)). That fiduciary duty of utter loyalty, combined with our narrow standard of review, should guide our analysis of the Assistant Secretary’s decision to disapprove the Woods communization agreement.

B. Kenai, Cheyenne-Arapaho, and Cotton Petroleum

We have discussed the Secretary’s obligation in evaluating communization agreements affecting leases of tribal and allotted lands in several prior cases: Cheyenne-Arapaho Tribes v. United States, 966 F.2d 583 (10th Cir.1992), cert. denied, — U.S. -, 113 S.Ct. 1642, 123 L.Ed.2d 265 and — U.S. -, 113 S.Ct. 1643, 123 L.Ed.2d 265 (1993); Cotton Petroleum Corp. v. Department of the Interior, 870 F.2d 1515 (10th Cir.1989); and Kenai, supra, 671 F.2d 383. The majority reads those decisions as establishing a uniform body of law that provides that, in assessing a communization agreement, the Secretary must consider all the relevant factors and may not treat one factor as determinative. I agree that we have consistently directed the Secretary to consider all the relevant factors. However, I believe that our cases are in conflict as to whether particular factors may be determinative. An examination of our prior decisions illustrates this conflict.

In Kenai, we held that the Secretary’s designate, the Superintendent of the Bureau of Indian Affairs (BIA), did not abuse his discretion when he refused to approve a com-munization agreement that, if approved, would have extended the terms of several mineral leases of restricted Indian land. We reviewed testimony from the Superintendent, who had stated that he reached his decision because he had determined that the subject tracts could be re-leased for higher royalty payments and bonuses if the original leases were not extended by the proposed communi-zation agreement. Noting that the Secretary and his delegates had a duty to maximize lease revenues for the Indian mineral owners, we found that Interior Department officials had no obligation to approve a plan that did not serve the best interests of the Indian owners and that they acted within their discretion “in refusing to approve an economically unsatisfactory plan.” Kenai, 671 F.2d at 387.

In Cheyenne-Arapaho, we applied Kenai and found that the Secretary and his delegates breached their fiduciary obligation by approving a communization agreement governing mineral leases in Custer County, Oklahoma. In arguing that the Interior Department had satisfied its obligations to the Cheyenne-Arapaho Tribe by approving the subject agreement, the Secretary maintained that disapproval would create a risk that new leases could not be negotiated and that retaliatory litigation might be brought by lessees whose interests were terminated by disapproval of the agreement. We rejected that explanation, characterizing it as an argument for “across-the-board” approval of communi-zation agreements that was inconsistent with the required policy of maximizing tribal revenues. Cheyenne-Arapaho, 966 F.2d at 590-91. Because the market for oil and gas leases in Custer County, Oklahoma in the early 1980s was extremely favorable for mineral owners, we held that the Secretary and his delegates abused their discretion by declining to consider the market value and marketability of leases that could have been negotiated for the tribe if the subject com-munization agreement had been disapproved so that more profitable leases could have been negotiated.

In Cotton Petroleum, decided after Kenai but before Cheyenne-Arapaho, we described the Secretary’s obligations in evaluating com-munization agreements somewhat differently. We reversed an Interior Department decision regarding a proposed communization agreement finding that, “[o]n the totality of the record before us,” the decision constituted an abuse of discretion. Cotton Petroleum, 870 F.2d at 1529. The decision in Cotton Petroleum concerned a proposed communization agreement that was submitted shortly before a mineral lease of a restricted Indian *1045allotment was scheduled to expire. Just as in Kenai and Cheyenne-Arapaho, one effect of the proposed agreement was to extend the terms of underlying leases. An Area Director of the BIA approved the agreement, but an Assistant Secretary (rendering a final decision for the Interior Department) reversed the Area Director’s decision and disapproved the agreement.

In particular, the Assistant Secretary found that approval of the agreement was not in the best interests of an Indian mineral owner. However, after disapproving the subject agreement, the Assistant Secretary proceeded to include the subject tract within the unit established by the eommunization agreement and to rule that the Indian mineral owner was entitled to royalties under the terms of the very communization agreement that he had disapproved. Id. at 1520-21, 1527.

In reversing the Assistant Secretary’s decision, we noted the inconsistency of disapproving the communization agreement for purposes of allowing the subject lease to terminate so that a new, more lucrative lease could be negotiated, and then including the subject tract in a unit and awarding royalties under the same partially rejected agreement. See id. at 1527 (“To reject the communization agreement and then immediately to affirm it and to award the ... appellees retroactive benefits under it exposes the arbitrary and capricious nature of the Secretary’s action.”). We also observed that the Assistant Secretary’s decision was inconsistent with the Department’s treatment of other Indian lessors in the same unit area. Specifically, the Area Director of the BIA had unequivocally approved the same eommunization agreement as to other Indian leases within the same proposed unit. We found no adequate and reasoned explanation in the record of the differing treatment afforded similarly situated Indian lessors. Id.

However, in addition to these factors, we based our reversal of the Assistant Secretary’s decision in Cotton Petroleum on reasoning that I find inconsistent with Kenai and Cheyenne-Arapaho. In particular, we criticized the Assistant Secretary for failing to evaluate the communization agreement “on its merits” and for using his decision partially disapproving the proposed agreement as “a triggering event to cause the termination of a separate instrument, the lease.” Id. at 1528. Compare Kenai, 671 F.2d at 386 (affirming disapproval of com-munization agreement on the basis of its effect on the underlying leases).

Finally, in Cotton Petroleum, as the majority notes, we found that the Assistant Secretary had failed to consider the following relevant factors in reaching his decision: (1) whether the long-term economic effects of the proposed communization agreement served the best interests of the Indian lessors; (2) whether the geological and engineering aspects of the agreement furthered those interests; and (3) whether the lessee had complied with the terms of the lease, including commencing drilling operations within the proposed unit prior to the expiration of the Indian leases. Cotton Petroleum, 870 F.2d at 1518, 1525. These factors, we explained, were set forth in the BIA guidelines (promulgated in response to our Kenai decision) regarding the evaluation of com-munization agreements. We focused on the Assistant Secretary’s final written decision, observing that he did not discuss the guideline factors and made no effort to explain his failure to do so. Id. at 1526.

C. Communization Agreements and Underlying Leases

In light of these prior decisions, we are presented with contrasting principles to apply. Kenai holds that the Secretary may disapprove a particular communization agreement in order to allow underlying leases to expire and new, more profitable leases to be negotiated. Cheyenne-Arapaho finds that the Secretary breached his fiduciary obligation to Indian mineral interest owners by failing to consider the economic benefit that they would obtain through the disapproval of a particular communization agreement. Our conclusion in Cheyenne-Arapaho that the Secretary breached his fiduciary duty is based on the principle that the Secretary could have properly decided to disapprove the communization agreement for the specific purpose of allowing new, more profit*1046able leases to be negotiated. In contrast, Cotton Petroleum declares that it is improper for the Secretary to base a decision regarding a eommunization agreement on its effect on an underlying lease.

Finding this case analogous to Cotton Petroleum, the majority concludes that, in a particular circumstance, it is improper for the Secretary to disapprove a eommunization agreement on the basis of the agreement’s effect on underlying leases. According to the majority, the Secretary acts arbitrarily and capriciously and abuses his or her discretion when he or she disapproves a specific agreement in order to allow Indian mineral owners to negotiate more profitable leases and then subsequently approves a second eommunization agreement that establishes the same unit area as the agreement that he has previously rejected. In so holding, I believe that the majority reads Cotton Petroleum too expansively and implicitly rejects important principles set forth in Kenai and Cheyenne-Arapaho, thereby transforming the Secretary into something less than a fiduciary for the Indian mineral owners and our review of Interior Department decisions into something more than a search for arbitrary and capricious action. For several reasons, I find the reasoning of Kenai and Cheyenne-Arapaho more convincing on this issue, and I think it should apply.

First, nothing in the applicable statutes and regulations prevents the Secretary from considering the manner in which a proposed eommunization agreement impacts upon underlying leases. A plain reading of 25 U.S.C § 396 gives the Secretary broad discretion to perform “any and all acts” and to make all such rules and regulations that are necessary to carrying out its provisions. Similarly, the terms of 25 U.S.C. § 396d and 25 C.F.R. § 212.24(c) place no constraints on the Secretary’s discretion.

In the absence of specific statutory or regulatory limitations, the Secretary’s discretion is controlled by the fiduciary obligation that governs the leasing of Indian mineral interests. It cannot be disputed that this fiduciary obligation has an economic component. See Jicarilla, 728 F.2d at 1568 (“[T]he purpose of the Indian Mineral Leasing Act is to ensure that Indian tribes receive the maximum benefit from mineral deposits on their lands, ... and we should construe regulations enacted under this Act in light of this purpose.”) (emphasis added); Kenai, 671 F.2d at 386 (“As a fiduciary for the Indians, the Secretary is responsible for overseeing the economic interests of Indian lessors, and has a duty to maximize lease revenues.") (emphasis added) (citation omitted). Indeed, a damages remedy is available to Indian owners when the federal government breaches its fiduciary obligations. See United States v. Mitchell, 463 U.S. 206, 228, 103 S.Ct. 2961, 2973-74, 77 L.Ed.2d 580 (1983). The Supreme Court has stated that “[i]t would be anomalous to conclude that these enactments [establishing a fiduciary relationship] create a right to the value of certain resources when the Secretary lives up to his duties, but no right to the value of the resources if the Secretary’s duties are not performed.” Id. at 227, 103 S.Ct. at 2973. Of course, the economic exploitation of the land and resources of Indian peoples has permeated our history, making the need for exacting fiduciary standards all the more urgent. See generally United States v. Michigan, 471 F.Supp. 192 (W.D.Mich.1979) (discussing Indian removal policy), remanded on other grounds, 623 F.2d 448 (6th Cir.1980). Chronicling the history of Indians in Oklahoma, Dr. Angie Debo has described an “orgy of exploitation” that is “almost beyond belief.” Angie Debo, And Still the Waters Run vii (1st ed. 1940). Dr. Debo notes, “Within a generation, these Indians, who had owned and governed a region greater in area and potential wealth than many an American state, were almost stripped of their holdings and were rescued from starvation only through public charity.” Id. Over the last twenty-five years, partly in response to the work of Dr. Debo and other scholars, the President and Congress have repeatedly recognized this exploitation and have taken laudable steps to prevent it. See Pevar, supra, at 8-11.

In light of the broad authority granted by 25 U.S.C. § 396, 25 U.S.C. § 396d, and 25 C.F.R. § 212.24(c), and in light of the Secretary’s overriding fiduciary obligation, I see *1047no reason why the Secretary should be prevented from considering the effect of a com-munization agreement on underlying leases. As this case illustrates, the economic effect of the continuation or expiration of a lease is often substantial. Lessees such as Woods and Tomlinson no doubt seek communization in part because of the effect that it will have on underlying leases. To bar the Secretary from considering this effect on behalf of the Indian lessors prevents him from assessing an important factor that directly impacts on the economic welfare of those whom he has the highest duty to protect.

Contrary to the majority’s suggestion that it is “duplicitous” for the Secretary to base a decision regarding a particular agreement on the manner in which it affects an underlying lease, maj. op. at 1039, I view that effect as one of several consequences of this kind of agreement that the Secretary ought to consider. Agreements such as the ones proposed by Woods and Tomlinson extend the terms of leases that contain “commence drilling” clauses by stipulating that:

the actual drilling, completion, continued operation or production of a well or wells for communitized substances on the com-munitized area shall be construed and considered as the actual drilling, completing, continued operation or production from each and all of the lands within and comprising said communitized area.

Applts.App. at 3 — 4. I do not understand why this kind of clause (which often has tremendous economic consequences for all the parties) should be insulated from the Secretary’s fiduciary scrutiny when he reviews an agreement.

Nor do I see any contractual impediments to the Secretary’s consideration of how a communization agreement affects an underlying lease. The leases at issue contain a clause that states that the parties “agree to subscribe to and abide by any agreement for the cooperative or unit development of the field or area, affecting the leased lands, or any pool thereof, if and when collectively adopted by a majority operating interest therein and approved by the Secretary of the Interior.” Applts.App. at 79, 83. (emphasis added). Thus, the leases in no way establish a right to communization or to the continuation of their primary terms through the approval of a communization agreement. They expressly commit the decision regarding approval of a particular agreement to the discretion of the Secretary, and they do not purport to limit his exercise of discretion.

Moreover, in this ease, contrary to the panel opinion’s suggestion, neither the Assistant Secretary nor the Indian mineral owners sought to “rescind or escape a contract.” Woods Petroleum Corp. v. Department of the Interior, 18 F.3d 854, 859 (10th Cir.1994). The leases here at issue had primary terms of five years. During that time, Woods and the other lessees had the right to drill on the subject allotted tracts or submit a communi-zation agreement to the Secretary. Nothing in the record indicates the Secretary or the Indian mineral owners sought to prevent the lessees from exercising their contractual right to drill for minerals. The fact that Woods never drilled a well on the subject tracts, only began to drill a well on an adjacent tract some six weeks prior to the end of the primary terms of the leases, and did not tender a completely executed communization agreement to the BIA until eight days before the end of those primary terms cannot be attributed to any contractual breach by Interior Department officials or the Indian mineral owners. See maj. op. at 1035; Applts. App. at 77, 80-81, 84 (primary terms expired on February 25, 1982). In such a situation, disapproval of the Woods agreement on the basis of its effect on the underlying leases was a decision that the leases permitted; there was no escape or rescission of a contractual obligation by either the Assistant Secretary or the Indian mineral owners.

In addition, in my opinion, the requirement that the Secretary consider all the relevant factors in assessing communization agreements does not prevent her or him from basing a decision on the effect that a particular agreement has on underlying leases. To be sure, in reversing the Secretary’s decisions, both Cotton Petroleum and the majority rely on the BIA’s post-Kenai guidelines concerning the evaluation of communization agreements. However, although those guidelines direct BIA directors and superin*1048tendents to consider certain factors and to issue written explanations of their conclusions, they do not purport to suggest what weight must given to each factor. Thus, if a particular agreement is determined to be geologically and technically warranted but not in the best economic interests of the Indian lessors, the guidelines are silent as to whether the Secretary and his or her delegates should rely on the factors that support approval of the agreement or the factors that suggest that it should be disapproved. The weighing of the factors is a matter that the guidelines leave to the discretion of Interior Department officials, who must act in accordance with their fiduciary obligation to Indian mineral owners. In my judgment, as long as the record of Interior Department proceedings indicates that the Secretary and his or her delegates considered the guideline factors, they may certainly determine that one of those factors (such as the economic benefits that the Indian owners would obtain from the negotiation of new leases) outweighs the others and should be dispositive as to whether a particular agreement is approved or disapproved.

Finally, I am unconvinced by the majority’s conclusion that the Secretary’s approval of a second communization agreement establishing the same unit area as a previously rejected agreement signifies that it was improper for the Secretary to have based the disapproval of the first agreement on its effect on underlying leases. In so holding, the majority essentially concludes that although the Secretary should consider the economic effects of communization generally, see maj. op. at 1039, he or she is barred from considering the substantial economic effect of a decision to approve or disapprove a specific agreement at a particular time I discern nothing in the Indian Mineral Leasing Act, accompanying regulations, or federal law concerning the Secretary’s fiduciary duties that so limits his or her discretion.

D. The Assistant Secretary’s Consideration of the Relevant Factors in this Case

In addition to concluding that it was improper for the Assistant Secretary to base his decision regarding the approval or disapproval of the subject communization agreement on the effect of that agreement on underlying leases, the majority finds that the Assistant Secretary did not consider the relevant factors. I disagree with that conclusion as well.

As the majority notes, after the Indian lessors appealed the BIA Area Director’s initial approval of the Woods communization agreement to the Office of the Secretary, the Deputy Assistant Secretary requested a “best-interest assessment” from the Department’s Branch of Energy and Minerals Assistance. Applts.App. at 112-14. In its written report, the Energy and Minerals Branch analyzed the various consequences that might result from the approval or disapproval of the Woods communization agreement. The report favored approval of the agreement, concluding that if the agreement was approved, the Indian lessors would “immediately receive” $384,675.74 in accrued royalties and interest from production from the unit well. Id. at 114. Contrary to the majority’s characterization, the report did not find that, if the Woods communization agreement was disapproved, the Indian mineral owners would “forfeit” these royalties. Maj. op. at 1036. Instead, the report noted that there might be some question as to who was entitled to the escrowed funds. See Applts. App. at 114 (noting that, if the Woods agreement was disapproved, “[t]he Indian mineral interests will no longer be considered under lease to Woods” and that “[tjhis raises the issue of who should receive the royalties currently in escrow”). The report also stated that if the Woods agreement was not approved, the prospect of re-leasing the Indian tracts was “not very good” and “even if a large bonus were received, the prospect of receiving future royalties from production is not guaranteed.” Applts.App. at 117.

The Deputy Assistant Secretary then appropriately, and in my view necessarily, invited the Indian mineral owners and Woods to respond to this report. Indeed, because there is no indication that the Indian owners were notified of the Corporation Commission proceedings, the Interior Department proceedings may have been the only chance for *1049these Indian owners to be heard regarding their position as to the proper development of their mineral interests.

The Indian owners filed a response disputing the report’s conclusions. They challenged the conclusion that future leasing prospects were “not very good,” stating, “There does exist a potential lessee who is willing to lease the mineral interests of the Indian owners and pay bonus monies in excess of $400,000.00.” Applts.App. at 119. They added:

The potential lessee is fully aware of any possible litigation occurring in the Federal Courts and the Secretary may rest assured that a valid oil and gas mining lease will be entered into by and between the potential lessee and the Indian mineral owners immediately upon the disapproval of the Communization Agreement and the invalid leases with Woods Petroleum Company.

Id.

The Indian mineral owners also maintained that, if the Woods agreement was disapproved such that new leases could be negotiated, they would seek to join their mineral interests to the rest of Section 17 of Custer County through a subsequent com-munization agreement. They argued that under such an agreement they would be entitled to a proportional share of the revenues from the unit wells from the date of first production and cited a decision, Samedan Oil Corp. v. Cotton Petroleum Corp., 466 F.Supp. 521, 525 (W.D.Okla.1978), which upheld a communization agreement governing Indian land that had been given retroactive effect to the date of first production. Applts.App. at 122.

Finally, the Indian owners argued that, under principles established in several oil and gas decisions, the disapproval of the Woods agreement also entitled them (as owners of unleased tracts) to working interest revenues from the date of first production in Section 17. Under this theory, the Indian owners estimated that they would be entitled to approximately $1,920,000. Applts.App. at 119, 123-24. Woods filed a response agreeing with the report of the Energy and Minerals Branch and disputing the analysis of the Indian mineral owners. Applts.App. at 126-27.

These documents from the administrative proceedings demonstrate that, at the time that the Assistant Secretary issued his final decision in May of 1986, there was conflicting evidence before him as to whether approval of the Woods agreement was in the best interests of the Indian mineral owners. The submissions from the Energy and Minerals Branch of the BIA and from the Indian mineral owners establish that reasonable arguments could be made both in support of and in opposition to the Woods communization agreement. However, in light of the majority’s characterization of the disapproval of the Woods agreement as an unreasonable, arbitrary, and capricious act, it should be noted that the report of the Energy and Minerals Branch (which recommended approval of the agreement) turned out to be incorrect about one important factor: just as the Indian mineral interest owners reported, a new lessee was available and did pay a $400,000 bonus to lease the subject allotted tracts. In any event, in his final decision for the Interior Department, although the Assistant Secretary referred to the initial recommendation of the Department’s Minerals Management Service that the unit proposed by the Woods agreement was economically and geologically proper, he found that the $400,000 bonus that the Indian lessors could obtain if new leases were negotiated made disapproval of the agreement in their best economic interest.

As to this particular finding of the Assistant Secretary, my disagreement with the majority concerns the application of the requirement that agency officials must consider the relevant factors. Following Cotton Petroleum, the majority focuses on the Interior Department’s final written decision and seems to require an item-by-item discussion of each factor articulated in the BIA guidelines. If that is what the relevant factors requirement entails, then I would agree that the Assistant Secretary did not satisfy it here. In particular, his May 1986 decision does not discuss one of the BIA factors at all: the lessees’ compliance with the terms of the underlying leases. In addition, aside from a *1050brief reference to the Minerals Management Service’s conclusion that the proposed unit was geologically and economically proper, the decision does not discuss geological, engineering, and technical aspects of the agreement.

However, in my opinion, the applicable law does not and should not require the official to itemize “each and every factor discarded as well as the factors taken into account in order to reach a reasoned decision.” Cotton Petroleum, 870 F.2d at 1531 (McKay, J., dissenting). In fact, the decisions on which the majority relies distinguish .between an agency’s duty to consider factors in making a decision and its duty to articulate the reasons for a particular decision. As to the first of these duties, a court may examine the entire administrative record in order to determine whether the relevant factors have been considered. See Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823-24, 28 L.Ed.2d 136 (1971); cf. United States v. Morgano, 39 F.3d. 1358, 1373 (7th Cir.1994) (“Because the statutes and Guidelines only mandate the sentencing court to ‘consider’ the relevant factors, the district court is under no obligation to enter specific findings as to each factor. The record must merely indicate the court considered the statutory factors, in general, in arriving at the fine.”).

In contrast, the agency’s duty to articulate its reasoning applies to its final decision. In order to satisfy this duty, an agency need only provide “a satisfactory explanation for its action including ‘a rational connection between the facts found and the choice made.’ ” Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43, 103 S.Ct. at 2866 (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 246, 9 L.Ed.2d 207 (1962)). Under this requirement, a court may uphold a decision “of less than ideal clarity if the agency’s path may reasonably be discerned.” Bowman Transp., Inc., v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286, 95 S.Ct. 438, 442, 42 L.Ed.2d 447 (1974).

I believe that the majority errs in requiring the final decision-maker to engage in a factor-by-factor discussion of each relevant factor regarding the evaluation of a commun-ization agreement. Significantly, in Kenai, the only case in our communization trilogy in which we affirmed an Interior Department decision regarding a communization agreement and the first of these cases in which we applied the relevant factors requirement to agency evaluations of such agreements, we did not require such a factor-by-factor discussion. Instead, we deemed sufficient the BIA Superintendent’s testimony that the leases underlying the proposed agreement could be renegotiated for higher royalty payments and bonuses if the agreement was disapproved. Kenai, 671 F.2d at 387.1

In this case, the best-interest analysis requested by the Deputy Assistant Secretary, the responses to that analysis from the Indian mineral owners and Woods, and the Assistant Secretary’s explanation of the grounds for his decision clearly demonstrate that the Interior Department considered the relevant factors in making its final decision. Indeed, a review of the report of the Energy and Minerals Branch, which the Deputy Assistant Secretary specifically requested in order to assist in the decision regarding the Woods communization agreement, indicates that a wide variety of factors were considered and discussed, including: the market for negotiating new leases if the Woods agreement was disapproved, drainage of the allotted tracts from unit wells, the amount of royalties that the Indian owners would receive from the proposed unit, the possibility of litigation, *1051and the amount of production from wells drilled within the proposed unit. Applts. App. at 114-17. Moreover, the Indian lessors’ response to this report (which the Deputy Assistant Secretary also requested) discusses many of these same factors. Id. at 118-25.

Although the Assistant Secretary did not discuss many of these specific factors in his final May 1986 decision, I simply do not think that he was required to do so. Moreover, the discretion as to whether to approve the agreement was his and not his subordinate’s, and as long as he gave a reasoned explanation of his decision, he was free to disagree with the conclusions reached in the report of the Energy and Minerals Branch of the BIA. By explaining, after thorough review, that he deemed it to be in the best interests of the Indian owners to disapprove the Woods agreement and to allow negotiation of new leases and the payment of a $400,000 bonus, I find that he sufficiently articulated a reasoned basis for his decision that was not arbitrary, capricious, or an abuse of discretion. The majority’s decision to the contrary bodes ill for our future review of administrative decisions, for it suggests that agencies may be required to engage in faetor-by-factor discussions not required by their own guidelines or by our prior cases.

Moreover, in my judgment, the record evinces the kind of comprehensive scrutiny that modern federal Indian policy requires. Acting pursuant to a statute (25 U.S.C. § 396d) passed, in part, to increase Indian authority over mineral leases and protect Indians’ economic return on their property, Assiniboine & Sioux Tribes, 792 F.2d at 796, the Assistant Secretary reached a decision that comports with those aims.

E. Other Indications of Unreasonableness

The majority also focuses on two other elements of the Assistant Secretary’s decision that it finds unreasonable, arbitrary, and capricious. First, the majority notes that after disapproving the Woods communization agreement in May 1986, the Assistant Secretary approved an “identical” communization agreement submitted by the new lessee of the Indian tracts, Tomlinson Properties, Inc., in September 1986. Maj. op. at 1040. Moreover, the majority notes, the Assistant Secretary made the Tomlinson agreement retroactive to September 1982, the date of first production in section 17 of Custer County. In my judgment; neither of these decisions regarding the Tomlinson agreement renders the Assistant Secretary’s actions unreasonable, arbitrary, or capricious.

In finding that approval of the Tomlinson communization agreement indicates that the Secretary acted improperly in assessing the Woods agreement, I think that the majority ignores the applicable regulations, the BIA guidelines, and the Secretary’s fiduciary obligations. 25 U.S.C. § 396d, 25 C.F.R. § 212.24(c), and the BIA regulations focus on decisions as to particular agreements and plans. The decision that § 396d and § 212.24(c) authorize the Secretary to make, and for which the BIA has established guidelines, concerns whether a specific agreement or plan is in the best interests of the Indian lessors. As the district court observed, the decision is not whether the tracts in question should ever be communitized, but whether a particular agreement or plan should be approved. Applts.App. at 326.

In this case, although the Woods agreement and the Tomlinson agreement both organized the same tracts into a unit, they had different economic effects. The Woods agreement, if approved, would have extended lease nos. 14-20-205-7048, 14-20-205-7049, and 14-20-205-7050. In contrast, the Tom-linson agreement was submitted after the Woods leases had expired and after the subject allotted tracts had been re-leased for a substantial bonus. In treating these two agreements differently, the Assistant Secretary did what his fiduciary responsibilities, Kenai, and Cheyenne-Arapaho authorize him to do: he considered the economic aspects of particular agreements in making his decision. To say, as the majority does, that the Woods agreement and the Tomlinson agreement were “identical,” is to ignore their differing effects on the very individuals whose interests should be a touchstone to both the Secretary’s and this court’s analysis.

As to this issue, I also do not believe that Cotton Petroleum supports the majority’s *1052reasoning. In that ease, the Assistant Secretary disapproved a proposed communization agreement in one respect (so that the underlying lease would expire) and then approved the same agreement so that the Indian mineral owner could participate in the proposed unit. In the instant case, the Assistant Secretary did not simultaneously approve and disapprove the Woods agreement or the Tomlinson agreement. Rather, he evaluated the two agreements differently because of their contrasting economic effects on the Indian owners.

Finally, I do not find the Assistant Secretary’s decision giving the Tomlinson agreement retroactive effect to be arbitrary, capricious, or unreasonable. Upon the disapproval of the Woods communization agreement, the subject allotted tracts became unleased for the period from February 1982 (the end of their primary terms) until the execution of the Tomlinson leases in May 1986. However, several wells had been completed on adjacent tracts, and in its report to the Assistant Secretary, the Energy and Minerals Branch found that the allotted tracts at issue here were subject to drainage. Applts.App. at 114. By giving the Tomlinson agreement retroactive effect, the Assistant Secretary allowed the Indian owners to participate in production from wells that, according to the record before him, had drained oil and gas reserves from their allotted tracts.

Rather than “demonstrating the arbitrariness of his action,” maj. op. at 1040-41, the decision giving the Tomlinson agreement retroactive effect is one that is frequently made in analogous circumstances by officials responsible for regulating oil and gas production. See, e.g., Shearn v. Ward Petroleum Corp., 808 F.Supp. 1530, 1534 (W.D.Okla.1992); Texaco, Inc. v. Industrial Comm’n, 448 N.W.2d 621 (N.D.1989); Roberts v. Funk Exploration, Inc., 764 P.2d 147 (Okla.1988); Bennion v. Utah State Bd. of Oil, Gas, & Mining, 675 P.2d 1135, 1142 (Utah 1983); Ward v. Corporation Comm’n, 501 P.2d 503 (Okla.1972). In deciding whether to make a particular agreement or order retroactive, the focus is often on whether it is equitable to afford mineral owners that benefit. See, e.g., Roberts, 764 P.2d at 148; Bennion, 675 P.2d at 1142. In turn, that inquiry requires an examination of whether there were other means available to the mineral owners to mine their interests during the period covered by the proposed agreement or order. Thus, if a spacing or pooling order prevented mineral owners from mining their interests themselves and if ongoing production on adjacent tracts has subjected their resources to drainage, courts have found it equitable to allow those owners to reap the benefits of production on adjacent tracts by means of a retroactive unitization agreement or order. See, e.g., Bennion, 675 P.2d at 1142; Ward, 501 P.2d at 507. On the other hand, if there were no legal impediments to the owners’ mining of their own interests during the disputed period, then courts have refused to make agreements and orders retroactive. See, e.g., Cowling v. Board of Oil, Gas, & Mining, 830 P.2d 220 (Utah 1991).

For example, in Roberts, 764 P.2d at 148, the Supreme Court of Oklahoma held that the Oklahoma Corporation Commission acted properly by giving a spacing order retroactive effect in order to protect the correlative rights of certain royalty interest owners. The court noted that there had been protracted proceedings before the Corporation Commission prior to the entry of the order and that the royalty owners’ tracts had been subject to drainage from the date of first production in the unit. Id.

In this case, from the initial approval of the Woods agreement in April 1982 until the agreement’s final disapproval in May 1986, the Woods agreement and the underlying leases that it extended vested the right to develop the subject tracts exclusively in the working interest owners. Applts.App. at 3, 77, 81. Thus, by operation of the Woods agreement, the Indian owners were prevented from developing their own tracts independently. Moreover, from the commencement of the BIA’s initial evaluation in 1982 (prior to the date of first production in the proposed unit), the Indian mineral owners consistently opposed the Woods agreement. Accordingly, just as in Roberts and analogous cases, affording the Tomlinson agreement retroactive effect was not an arbitrary, capricious, or unreasonable way for the Assistant *1053Secretary to allow the Indian owners the benefits of production that the Energy and Minerals Branch had found to be derived, in part, from the mining of their interests through wells on adjacent tracts.

F. Guidance for the Secretary

We granted rehearing in this case to clarify the standards under which the Secretary should evaluate communization agreements governing leases on Indian land. I do not believe that the majority’s decision provides the necessary clarification.

The majority’s holding is fact-specific. It concludes that the Secretary acts arbitrarily and abuses his discretion when he: (1) disapproves a communization agreement for the sole purpose of allowing underlying leases to expire and new leases to be negotiated, (2) approves a communization agreement for the newly negotiated leases that establishes the same unit area as the previously rejected agreement, and (3) allows Indian lessors to collect royalties retroactively to the date of first production. However, the majority reaches this conclusion without reversing or expressly limiting Kenai or Cheyenne-Arapaho. Thus, in approving or disapproving communization agreements, the Secretary presumably still has a duty to act as a fiduciary for the Indian mineral owners, to maximize their lease revenues, and to consider the benefits that may be obtained by the Indian owners if a communization agreement is disapproved and new leases are negotiated.

In light of the majority’s holding, the Secretary is now in a precarious position. If he is presented with a communization agreement that operates to extend underlying leases, he must still consider whether it would be more beneficial to the Indian owners to allow the leases to expire and to negotiate new leases. If he does not consider the market value and marketability of new leases, he breaches his fiduciary duty under Cheyenne-Arapaho and the federal law that establishes his obligations to Indian mineral owners. However, if he determines that disapproval of the agreement and the negotiation of new leases is in the best interests of the Indian owners, then he may have acted unreasonably and arbitrarily under the majority’s holding here. Moreover, under the majority’s reasoning, whether the Secretary’s disapproval of a communization agreement is unreasonable and arbitrary depends on a course of events that follows his initial decision and that the Secretary may not be able to predict. Thus, according to the majority, if a communization agreement is disapproved, new leases are negotiated, and a new communization agreement establishing the same unit area as the rejected agreement is submitted to the Secretary, his approval of the second agreement makes his disapproval of the first one unreasonable. However, if the Secretary disapproves an agreement and new leases are negotiated but, for reasons that the Secretary may not been aware of at the time of the disapproval, a new communi-zation agreement is not submitted (or a substantially different communization agreement is submitted), then the disapproval of the first agreement apparently would pass the majority’s reasonableness test. To make the reasonableness of the Secretary’s decision dependent on future events deprives him of objective standards that might offer him some guidance as to whether he is making a proper decision at the time he is required to make it.

The need for such objective standards is illustrated by the history of this case. For over twelve years, beginning with the objections to the Woods communization agreement that the Indian owners first submitted to the Anadarko Area Director of the BIA, the parties have contested the issue of whether the Secretary and his delegates should approve the Woods communization agreement. Until the matter is finally resolved, lessees such as Woods and Tomlinson remain uncertain of their rights under the various mineral leases that they have negotiated. Royalty funds to which the Indian mineral owners are entitled remain in escrow, and Interior Department officials are caught between their fiduciary responsibilities to the Indian owners and limitations on those duties imposed by Cotton Petroleum and this case. By failing to offer the necessary guidance to the Secretary and those affected by his decisions, the majority’s ruling leaves all of the interested parties uncertain as to their rights and *1054responsibilities. I fear that more tortuous litigation will result.

G. Conclusion

By requiring the Secretary to engage in a point-by-point analysis in which he must apparently afford all relevant factors equal weight when he evaluates a communization agreement, the majority deprives him of the discretion to consider his primary duty — the economic protection of Indian mineral owners. By significantly limiting the Secretary’s ability to base his decision as to a particular communization agreement on its effect on underlying leases, the majority greatly diminishes the Secretary’s ability to protect his charge. By failing to recognize the primary importance of protecting the economic rights of Indians, the court lets other mechanistic factors deprive the owners of these minerals of thousands of dollars. By second-guessing every aspect of the Secretary’s judgment, the court undermines the generally established standard of review for administrative decisions, requiring of the Secretary a detailed analysis that we do not require of other agencies. Finally, by holding that the Assistant Secretary lacked the discretion to disapprove an eleventh-hour communization agreement, submitted a few days before the primary terms of the underlying leases expired, the court deprives the Indian mineral owners of a $400,000 bonus.

Where, as here: (1) the Secretary receives a communization agreement near the end of the primary term of a lease; (2) there is no evidence that Interior Department officials or the Indian mineral owners have prevented the lessees either from drilling on the subject tracts during the lease’s primary terms or from submitting a communization agreement earlier in that primary term; (8) the Secretary receives evidence and arguments from all affected parties as to whether to approve or disapprove the proposed agreement; and (4) there is a finding that the Indian tracts have been subject to drainage from drilling on adjacent tracts during the period in which the Secretary’s decision on whether to approve a particular agreement is pending, it is certainly not an abuse of discretion for the Secretary to disapprove the proposed com-munization agreement so that the Indian mineral owners may negotiate a more profitable series of leases. In this situation, it is also not an abuse of discretion for the Secretary to approve a second communization agreement governing the newly negotiated, more profitable leases and to give that second communization agreement retroactive effect so that the Indian owners may receive their proportionate share of minerals drained from their allotted tracts.

I would therefore affirm the decisions of the Assistant Secretary and the district court.

. Moreover, the language of the BIA guidelines does not support the majority’s requirement that the Interior Department’s final decision-maker must engage in a factor-by-factor discussion in the document that sets forth his decision. The guidelines simply require that a written statement discussing the listed factors be prepared by the final decision-maker's subordinates — BIA Area Directors and Superintendents. As to the final decision reached by the Interior Department after an- Area Director's or Superintendent's decision is appealed, the guidelines are silent as to the level of specificity with which the responsible agency official must discuss the various factors. Applts.App. at 93-94. I do not believe that the majority sufficiently explains the basis for extending the requirement to discuss specific factors beyond what the BIA guidelines require, particularly when the required factor-by-factor analysis has been conducted by a subordinate BIA official and is contained in the record that the final agency decision-maker reviews.