FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
GEO-ENERGY PARTNERS-1983 LTD.,
Plaintiff-Appellant,
v.
KEN SALAZAR, in his capacity as No. 08-16216
Secretary of the the Interior, D.C. No.
United States Department of the 3:06-cv-00612-BES-
Interior; RONALD WENKER, In his RAM
capacity as Director of the Nevada OPINION
State Office, Bureau of Land
Management, United States
Department of the Interior;
INTERIOR BOARD OF LAND APPEALS,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Nevada
Brian E. Sandoval, District Judge, Presiding
Argued and Submitted
March 8, 2010—San Francisco, California
Filed July 27, 2010
Before: Cynthia Holcomb Hall, John T. Noonan and
Sidney R. Thomas, Circuit Judges.
Opinion by Judge Thomas
10769
10772 GEO-ENERGY PARTNERS v. SALAZAR
COUNSEL
John L. Clark, Goodin, MacBride, Squeri, Day & Lamprey,
LLP, San Francisco, California, for the plaintiff-appellant.
Gregory A. Brower and Holly Vance, United States Attor-
ney’s Office for the District of Nevada, Reno, Nevada, for the
defendants-appellees.
OPINION
THOMAS, Circuit Judge:
This appeal presents the question of whether the procedures
for periodic revision of units in the 1988 Amendments to the
Geothermal Steam Act apply to pre-amendment contract pro-
visions. Under the circumstances presented by this case, we
conclude that they do not, and we affirm the judgment of the
district court.
I
In 1970, Congress enacted the Geothermal Steam Act, 30
U.S.C. §§ 1001 et seq., to promote the development of geo-
thermal leases on federal lands. Wagner v. Chevron Oil Co.,
321 F. Supp. 2d 1195, 1198 (D. Nev. 2004). The Geothermal
Steam Act authorizes the United States Bureau of Land Man-
agement (“BLM”) to issue geothermal leases that provide for
the right to explore and develop geothermal resources on fed-
eral property. The term “geothermal resources” refers to the
GEO-ENERGY PARTNERS v. SALAZAR 10773
heat or energy found in steam, hot water, or geothermal for-
mations. 30 U.S.C. § 1001(c) (2000)1.
A
Multiple geothermal leases held by one or more lessees in
the same geographic area are typically combined into a single
unit through a unit agreement. 30 U.S.C. § 1017. The unit
agreement provides for several tracts of land to be explored
and developed as if all the tracts were one parcel. The purpose
of the unit agreement is to provide for more efficient develop-
ment and production of geothermal resources.
The terms of a unit agreement determine how a unit will be
administered, including when the agreement is effective,
when it will contract or expire, how it will be configured,
what the diligent drilling requirements will be, and when a
participating area will be established. Once a unit is formed,
a unit operator is designated to manage the unit and represent
the lessees in developing the geothermal resources. Unit
agreements become effective only upon BLM approval.
The primary term of a federal geothermal lease is ten years.
30 U.S.C. § 1005(a). Under the statute and regulations as they
existed at the time of the BLM decision at issue in this case,
if a lessee developed a well capable of commercial production
during the primary term, the lease could continue for an addi-
tional term up to forty years. Id.; 43 C.F.R. § 3200.1 (2002).
The additional term would continue so long as geothermal
resources were produced or utilized in commercial quantities.
43 C.F.R. § 3207.10(b) (2002).
1
The majority of citations to statutes and regulations in this opinion are
to those provisions as they existed at the time of the BLM decision chal-
lenged in this case, May 12, 2003, while citations without a specific date
are to the current version of the statute or regulation if unchanged since
May 2003.
10774 GEO-ENERGY PARTNERS v. SALAZAR
BLM may extend a non-producing lease for two successive
five-year periods if lessees meet certain conditions. First, a
lease could be extended if the lessee made a bona fide effort
to produce or utilize geothermal resources in commercial
quantities. This was called a “diligent efforts” extension. 43
C.F.R. § 3208.10(a)(2) (2002). Second, a lease could be
extended to match the term of its unit so long as the lease was
committed to the unit and its term would expire before the
unit term would expire. This was called a “unit commitment”
extension. 43 C.F.R. § 3208.10(a)(4) (2002). Third, a lease
could be extended if a well capable of producing geothermal
resources was drilled. 43 C.F.R. § 3208.10(b) (2002). Exten-
sions authorized by these provisions did not become effective
without BLM approval. 43 C.F.R. § 3208.11(b) (2002). BLM
could also grant extensions under its discretionary authority.
This appeal involves geothermal leases in the Fish Lake II
Unit (“Fish Lake Unit”). The unit agreement in this case
(“Fish Lake Unit Agreement”) was based on the model unit
agreement set out at 43 C.F.R. § 3286.1 (2002). Under both
the Fish Lake Unit Agreement and the model agreement,
BLM was authorized to postpone obligations established
under the unit agreement.2 Id..
Under both agreements, if a unit operator determined that
a unit well was capable of commercial production, it would
propose establishing a participating area. A participating area
is a part of the unit determined to be commercially productive
based on the results of well testing. BLM approval is required
for all participating areas.
2
Article 22.1 of the Fish Lake Unit Agreement provides:
Notwithstanding any other provisions of this agreement, the
[BLM] Director, on his own initiative or upon appropriate justifi-
cation by the Unit Operator, may postpone any obligation estab-
lished by and under this Agreement to commence or continue
drilling or to operate on or produce Unitized Substances from
lands covered by this Agreement when in his judgment, circum-
stances warrant such action.
GEO-ENERGY PARTNERS v. SALAZAR 10775
Under both the Fish Lake Unit Agreement and the model
agreement, the unit would “contract” to the size of the partici-
pating area unless “diligent drilling operations are in process
on an exploratory well” five years after the participating
area’s formation. 43 C.F.R. § 3286.1 (2002); The purpose of
this provision was to provide incentive for the unit operator
to explore and develop portions of the unit that have not been
determined to be commercial. If a unit contracts, the unit and
participating area become the same. Once a unit contracts, the
leases outside the participating area continue only if they are
in their primary term or they qualify for extensions as inde-
pendently functioning leases. Id.
Contraction in this case was governed by Article 4.3 of the
Fish Lake Unit Agreement: “[U]nitized lands . . . no part of
which is entitled to be within a Participating Area on the fifth
anniversary of the effective date of the initial Participating
Area established under this Agreement, shall be eliminated
automatically from this Agreement effective as of said fifth
anniversary and such lands shall no longer be part of the Unit
Area and shall no longer be subject to this Agreement unless
diligent drilling operations are in progress on an exploratory
well on said fifth anniversary . . . .”
Pursuant to the 1988 amendments to the Geothermal Steam
Act, Pub. L. 100-443, 102 Stat. 1766, and separately from the
above process, BLM reviews a unit agreement every five
years to determine if lands within the unit are still necessary
for unit operations. Those lands that are determined to be no
longer reasonably necessary for unit operations are eliminated
from the unit. The elimination must be based on scientific evi-
dence and shown to serve geothermal conservation and man-
agement purposes. 30 U.S.C. § 1017(f).
B
The leases committed to the Fish Lake Unit were issued
pursuant to the Geothermal Steam Act of 1970. The first com-
10776 GEO-ENERGY PARTNERS v. SALAZAR
mercial well in northern Fish Lake Valley was completed in
1984 as part of the diligent development required by the Fish
Lake I Unit, which terminated in 1988 for lack of diligent
development when the unit failed to meet its drilling obliga-
tions. Geo-Energy Partners-1983 LTD (“Geo-Energy”)
acquired the interests of one of the partners in the prior Fish
Lake Unit at some point between 1982 and 1985. The leases
in that defunct unit included all of the leases involved in this
appeal. Those 12 leases were scheduled to expire because
they were beyond their primary terms, but BLM approved
extensions for all of them.
In January 1987, special legislation extended five of those
leases to December 31, 1988: N-8421, N-8428, N-9647, N-
10311 and N-17777. On February 10, 1989, BLM approved
first diligent efforts extensions for those leases, extending
them to December 31, 1993. On August 19, 1991 BLM
granted a first diligent efforts extension through August 31,
1996, for leases N-31991, N-31992, and N-31993.
In 1992, Geo-Energy and Magma Power Company
(“Magma”) pooled their leases into a joint venture, the
Magma/Geo-83 JV (“JV”), and signed a unit agreement to
establish the Fish Lake II Unit. The Fish Lake Unit Agree-
ment designated the Fish Lake Power Company (“FLPC”), a
Magma subsidiary, as Unit Operator. The JV was designated
the working interest owner, but all the rights and responsibili-
ties for Unit operations and exploration, production, and utili-
zation of the unitized resources were delegated to FLPC. The
Fish Lake Unit Agreement provided for automatic contraction
five years after the initial participating area was established
“unless diligent drilling operations [were] in progress on an
exploratory well on said fifth anniversary.” Fish Lake Unit
Agreement, Article IV, Section 4.3.
On October 16, 1992, BLM approved first diligent efforts
extensions for four leases, extending them to September 30,
1997: N-36616, N-36617, N-36618, and N-36619. In Novem-
GEO-ENERGY PARTNERS v. SALAZAR 10777
ber 1993, BLM approved second diligent efforts extensions
for leases N-8421, N-8428, N-9647, N-10311, and N-17777,
extending them to December 31, 1998.
On March 3, 1994, BLM determined the Fish Lake Unit
had met its initial diligent development obligation by drilling
a well (No. 81-13 on lease N-9647) capable of producing geo-
thermal resources in paying quantities. On September 21,
1994, BLM issued a decision declaring lease N-9647 in “addi-
tional term,” and under the Fish Lake Unit Agreement, no fur-
ther diligent development was required until the Unit
contraction date. BLM’s decision advised that contraction
would occur five years after December 1, 1993, unless dili-
gent drilling occurred at that time. The decision also extended
the following seven leases to November 30, 1998: N-31991,
N-31992, N-31993, N-36616, N-36617, N-36618, N-36619.
BLM did not extend the remaining five leases because they
had already received their second diligent efforts extensions
in 1993: N-8421, N-8428, N-9647, N-10311, and N-17777.
On April 27, 1995, BLM changed the effective start date of
the participating area (“PA”) from December 1, 1993 to May
1, 1995. Thus, no further diligent drilling was required to
avoid contraction until the new contraction date, May 1, 2000.
In 1997, relations among Geo-Energy, Magma, and FLPC
deteriorated. In 1995, FLPC, the designated Unit Operator,
had decided to devote the Fish Lake Valley energy sales con-
tract to a Cal Energy geothermal project in California, which
caused Geo-Energy to sue for breach of contract in 1997. On
July 7, 1998, the court entered judgment in favor of Magma
and FLPC on this claim, and the decision was affirmed.
Following the May 1, 1995 commerciality determination, it
was up to FLPC as Unit Operator and the JV as Working
Interest Owner to decide how to pursue diligent development,
but they were unable to reach agreement on the issue. In the
commerciality determination, BLM warned Geo-Energy and
10778 GEO-ENERGY PARTNERS v. SALAZAR
Magma that any lease outside the PA, beyond its primary
period, and not receiving any extension of its individual
terms, would terminate upon contraction of the Fish Lake
Unit. The decision was not appealed by either party.
Relations between Geo-Energy and Magma continued to
deteriorate. The JV terminated in May 1998. The parties con-
tinued to disagree over how to dissolve their partnership. Geo-
Energy accused Magma of failing to provide information vital
to performing the drilling obligations within the Unit. Only by
filing a FOIA request with the BLM was Geo-Energy able to
obtain all of the geological and other information relating to
the geothermal resources from Magma. Geo-Energy also had
conflicts with FLPC during this time, accusing it of failing to
plug wells before relinquishing them and failing to give Geo-
Energy notice of meetings and Unit-related proposals with the
BLM. On June 3, 1999, FLPC submitted a letter to the BLM
expressing its desire to resign as Unit Operator.
At Geo-Energy’s request in letters dated April 28 and May
11, 2000, and based on Geo-Energy’s representations regard-
ing its plan to acquire a new working interest owner and unit
operator, and initiate exploration and development on leases
outside the PA but within the Unit, BLM postponed the
scheduled Unit contraction date of May 1, 2000. BLM agreed
to postpone Unit contract until April 30, 2001, provided Geo-
Energy met certain operational and other conditions. First, the
new Unit Operator would be required to submit permit appli-
cations for nine temperature gradient wells and then drill
those wells and a production well before the new contraction
date. Second, Fish Lake Green Power Company (“FLGPC”),
a Geo-Energy subsidiary, would become the new Unit Opera-
tor only if a substantial bond were posted.
BLM and Geo-Energy discussed what the bond should be
during meetings and telephone calls. BLM explained that a
$750,000 bond might be needed because the cost to plug unit
wells and reclaim the surface had been estimated by Magma
GEO-ENERGY PARTNERS v. SALAZAR 10779
several years earlier to be $1.5 million dollars. BLM noted
that Geo-Energy’s inability to develop the unit previously, the
fact that they did not possess any actively producing leases,
the company’s history of lack of compliance, plus the
involvement of a man, John E. Deymonaz, who had worked
for a previous company that had walked away from wells
without properly plugging them, all contributed to the need
for a bond that was likely to be significantly greater than the
normal amount requested.
Sometime in 2000, FLGPC submitted permit applications
to BLM for nine temperature gradient wells. BLM found the
applications deficient, but according to the BLM, the com-
pany never responded to fix the deficiencies.
In December 2000, FLPC withdrew its resignation as Unit
Operator. Geo-Energy objected to the BLM’s acceptance of
this, claiming the FLPC’s resignation had become effective
over a year earlier. On January 17, 2001, BLM sent a letter
to Geo-Energy clarifying its position regarding the status of
the Unit Operator, stating that submission of a resignation as
Unit Operator did not automatically relieve the Unit Operator
of any authority or responsiblity related to the development
and production of unitized resources. BLM explained that it
had never approved FLPC’s resignation, and FLGPC had
never satisfied the conditions set out in BLM’s May 25, 2000
letter. Therefore, FLPC had never been removed as Unit
Operator. Id.
On February 21, 2001, FLGPC submitted a second set of
permit applications for the temperature gradient wells.
According to BLM, it approved these applications on March
27, 2002, and accepted the proposed $50,000 bond, but no
drilling ever resulted.
On April 12, 2001, BLM sent a letter expressing its contin-
ued concerns regarding the lack of diligent development in
the Unit area, the lack of new geologic information, and the
10780 GEO-ENERGY PARTNERS v. SALAZAR
need for Geo-Energy and FLPC to resolve their dispute to
avoid Unit contraction to the PA, as provided for by Section
4.3 of the Fish Lake Unit Agreement. Geo-Energy responded
on April 19, 2001, with a request that BLM postpone contrac-
tion again while Geo-Energy and Magma continued to negoti-
ate the sale of Magma’s interests to ORMAT, a Nevada
geothermal operator. ORMAT joined in that request. Geo-
Energy conceded in this letter that disagreements with FLPC
were issues “the companies must resolve themselves.” BLM
informally agreed to extend the contraction deadline.
On November 7, 2001 BLM sent a letter to Magma and
Geo-Energy that after extending the contraction terms of the
Fish Lake Unit Agreement several times in the preceding two
years to allow the parties time to complete their negotiations,
and upon recently learning that they had been unable to con-
clude an agreement, BLM had decided timely and diligent
development of the Fish Lake Unit area appeared unlikely.
Therefore, absent documentation justifying continuation of
the extension, BLM stated that it would contract the Fish
Lake Unit to the PA effective December 15, 2001, noting that
many leases outside the PA would expire.
At FLPC’s request, BLM agreed to postpone contraction
until March 1, 2002, to allow negotiations with ORMAT to
continue. BLM emphasized that the postponement was con-
tingent on the parties’ commitment to finalize an agreement.
On February 8, 2002, Geo-Energy objected to any unit con-
traction. While the company admitted no drilling had
occurred in the Fish Lake Unit in seven years, and no explor-
atory work had taken place, and that Geo-Energy was unable
to reach an agreement with ORMAT, Magma, and FLPC, it
accused these companies of trampling on its rights and frus-
trating the Fish Lake II project. On February 13, 2002, BLM
responded to Geo-Energy by reiterating its agreement to post-
pone contraction until March 1, 2002, to allow negotiations
with ORMAT to continue, but warned it would contract the
GEO-ENERGY PARTNERS v. SALAZAR 10781
Unit if no agreement was reached on that date. BLM directed
Geo-Energy to communicate directly with FLPC about any
issues rather than the BLM, since FLPC, as Unit Operator,
was BLM’s point of contact regarding Fish Lake Unit issues
pursuant to the Fish Lake Unit Agreement. BLM also noted
in this letter that it had shown great flexibility in postponing
the contraction several times to allow the parties to work out
their differences, and that the public interest now required the
situation to be resolved.
Geo-Energy replied in a letter on February 25, 2002. In
general, Geo-Energy complained that BLM had not provided
adequate information regarding the proposed contraction to
enable Geo-Energy to respond, and contended that it was
BLM’s responsibility to compel diligent development of the
Fish Lake Unit from the Unit Operator, regardless of the lack
of an agreement between ORMAT and FLPC. Geo-Energy
requested the BLM postpone action on contraction until arbi-
tration proceedings concerning Geo-Energy’s and Magma’s
dissolution of the JV concluded.
On March 19, 2002, BLM sent a letter to FLPC and Geo-
Energy commenting on the parties’ lack of action to diligently
develop the Fish Lake Unit and the negative impact of that
inaction on the public interest. BLM stated that in six months
BLM would either contract the Fish Lake Unit to the PA or,
given the failure to commence production, terminate all the
leases in the Fish Lake Unit area. BLM also requested
FLPC’s views on the Fish Lake Unit revision described in the
letter.
In a May 6, 2002, letter to FLPC, BLM requested a plan
within thirty days “describing the activities you will conduct
this year which will meet the diligent development require-
ment.” BLM cautioned that it expected any activities identi-
fied in the plan would be completed “in the time frame
provided,” and noted it would take further action, including
possible unit contraction or cancellation of all leases in the
10782 GEO-ENERGY PARTNERS v. SALAZAR
Fish Lake Unit, if the goals were not met. FLPC responded
that its plan was limited to marketing the resource, and that
it was having difficulty developing the resource due to its
remote location and limited electrical sources.
In response, Geo-Energy sent a letter to the BLM com-
plaining that in seven years the BLM had not nothing to com-
pel FLPC to undertake diligent development, and should have
removed FLPC as the operator. In addition, Geo-Energy com-
plained about the “exorbitant” amount of the bond BLM pur-
portedly had demanded for Fish Lake Unit operations, and
stated that FLGPC would not agree to succeed as Unit Opera-
tor unless FLPC plugged and abandoned wells and reclaimed
the land.
In July 2002, BLM revised the Fish Lake Unit boundaries
pursuant to the requirements set out in 30 U.S.C. § 1017,
thereby terminating several leases located outside the newly-
configured Unit. Geo-Energy and FLPC both agreed to the
revision. The revision did not affect the PA.
On August 21, 2002, ORMAT informed the BLM that it
was terminating all negotiations for interests in the Unit. At
a meeting on October 31, 2002, BLM stated that it would ter-
minate the Fish Lake Unit and leases if FLPC did not immedi-
ately acquire a sales contract.
In November 2002, Geo-Energy advised BLM that Geo-
Energy and Magma had executed a stipulation in the arbitra-
tion proceedings, pursuant to which Magma had agreed to
plug and abandon all Wells in the Fish Lake Unit and transfer
all leases to Geo-Energy. Geo-Energy stated that it had the
option of maintaining only well No. 81-13 on lease N-9647,
the “only true commercially feasible well in the unit.” Allud-
ing to past bonding problems, Geo-Energy proposed a
$50,000 bond for the well. BLM does not appear to have
responded to the proposed bond at the time, apparently
because, according to the later May 2003 decision, in 1993
GEO-ENERGY PARTNERS v. SALAZAR 10783
FLPC, the Unit Operator, had estimated the costs to plug and
abandon Unit wells and reclaim the Fish Lake Unit area
would be $1.5 million, and BLM had previously rejected a
$50,000 bond as inadequate and contrary to the public inter-
est.
On November 25, 2002, BLM received FLPC’s request to
assign the Fish Lake Unit leases to Geo-Energy. In a decision
dated December 20, 2002, BLM declared the Fish Lake Unit
terminated. Geo-Energy filed its appeal to the Interior Board
of Land Appeals (“IBLA”), but BLM moved to vacate the
decision and remand the case, having determined that termi-
nation at that time was inappropriate. The IBLA granted the
request by order dated April 14, 2003. Id.
Geo-Energy thereafter submitted letters dated April 24, 25,
and May 7, 2003, seeking approval of lease extensions, lease
assignments, a well plugging and abandonment plan, and a
$50,000 bond.
C
On May 12, 2003, BLM issued the decision at issue in this
case, declaring the Fish Lake Unit contracted to its PA, and
determining that the leases eliminated from the contracted
unit were ineligible for extensions either because they had
already received two successive extensions or because a sec-
ond extension would not be successive to the first. Addition-
ally, the decision addressed pending lease assignments, Fish
Lake Unit operations and a bond, and plugging and abandon-
ing wells in the former Fish Lake Unit area. Id. Geo-Energy
filed a petition for a stay that was denied. Id.
Geo-Energy appealed the BLM’s decision to the IBLA,
which upheld the decision on September 14, 2006. Geo-
Energy appealed to the United States District Court for the
District of Nevada, which also upheld the decision. Geo-
Energy then filed a timely notice of appeal with this Court.
10784 GEO-ENERGY PARTNERS v. SALAZAR
II
We review a district court’s grant of summary judgment in
an administrative review action de novo. Gifford Pinchot Task
Force v. U.S. Fish & Wildlife Serv., 378 F.3d 1059, 1065 (9th
Cir. 2004). In reviewing decisions of the IBLA, we exercise
a limited standard of review. Baker v. United States, 613 F.2d
224, 226 (9th Cir. 1980). We review the case from the same
position as the district court and will reverse the IBLA’s deci-
sion only if that decision is arbitrary, capricious, an abuse of
discretion, or contrary to law. Gilmore v. Lujan, 947 F.2d
1409, 1411 (9th Cir. 1991). This standard is narrow and a
reviewing court may not substitute its judgment for that of the
agency. Mount St. Helens Mining and Recovery Ltd. P’ship v.
United States, 384 F.3d 721, 728 (9th Cir. 2004). We must
determine whether the agency articulated a rational connec-
tion between the facts and the choice made. Id. In addition,
the decision must demonstrate that it was based on a consider-
ation of the relevant factors. Id.
III
On appeal, Geo-Energy argues the IBLA’s decision should
be overturned because the BLM made its decision in contra-
vention of 30 U.S.C. § 1017, and it was therefore, “contrary
to law.” As amended in 1988, the Geothermal Steam Act
thereafter required the Secretary to conduct periodic review of
the unit agreements, and “after notice and opportunity for
comment, eliminate from inclusion in such plan any lease or
part of a lease not regarded as reasonably necessary to cooper-
ative or unit operations under the plan.” 30 U.S.C. § 1017
(2000). Further, the statute provides that “[s]uch elimination
shall be based on scientific evidence.” Id. The Fish Lake Unit
Agreement, on the other hand, states that unit area lands not
part of the Participating Area “shall be eliminated automati-
cally” five years after the initial Participating Area is estab-
lished “unless diligent drilling operations are in progress.”
Fish Lake Unit Agreement § 4.3.
GEO-ENERGY PARTNERS v. SALAZAR 10785
[1] Geo-Energy argues the unit contraction under the Fish
Lake Unit Agreement cannot be automatic, but rather, is sub-
ject to the restrictions on revision in § 1017. BLM, on the
other hand, counters that § 1017 sets out a separate and paral-
lel review process that has no effect on the automatic contrac-
tion provision in the Fish Lake Unit Agreement. The IBLA
held that the processes are separate and upheld the BLM’s
automatic contraction of the Fish Lake Unit to the PA. There-
fore, the question we must answer is whether the reference to
“elimination” in the statute is merely to the specific type of
elimination described therein, or rather if the requirements
apply to any elimination of land from a unit agreement. There
is no definitive guidance on the proper relationship of the Fish
Lake Unit Agreement and § 1017.
“We start, as always, with the language of the statute.” Wil-
liams v. Taylor, 529 U.S. 420, 431 (2000). “Our first step in
interpreting a statute is to determine whether the language at
issue has a plain and unambiguous meaning with regard to the
particular dispute in the case. Our inquiry must cease if the
statutory language is unambiguous and the statutory scheme
is coherent and consistent.” Robinson v. Shell Oil Co., 519
U.S. 337, 340 (1997) (internal quotation marks omitted). “The
plainness or ambiguity of statutory language is determined by
reference to the language itself, the specific context in which
the language is used, and the broader context of the statute as
a whole.” Id. at 341.
[2] Thus, we turn to the text of 30 U.S.C. § 1017. First, the
specific language setting out the revision requirements sug-
gest they only apply to those types of eliminations, rather than
all eliminations. The 1988 Amendments added the following
paragraph after the first full paragraph of § 1017:
No more than five years after approval of any coop-
erative or unit plan of development or operation, and
at least every five years thereafter, the Secretary
shall review each such plan and, after notice and
10786 GEO-ENERGY PARTNERS v. SALAZAR
opportunity for comment, eliminate from inclusion
in such plan any lease or part of a lease not regarded
as reasonably necessary to cooperative or unit opera-
tions under the plan. . . . Such elimination shall be
based on scientific evidence, and shall occur only
when it is determined by the Secretary to be for the
purpose of conserving and properly managing the
geothermal resource. Any lease or part of lease so
eliminated shall be eligible for an extension under
subsection (c) or (g) of section 1005 of this title if it
separately meets the requirements for such an
extension.
Pub. L. No. 100-443, 102 Stat. 1766 (1988) (emphasis added).
Geo-Energy focuses on the language in the penultimate
sentence in section 1017, which states that, “elimination shall
be based on scientific evidence, and shall occur only when it
is determined . . . to be for the purpose of conserving and
properly managing the geothermal resource.” (Emphasis
added in appellant’s opening brief). From this Geo-Energy
argues any elimination from a unit agreement must meet these
requirements.
[3] However, Geo-Energy’s interpretation ignores the first
word of the sentence: “Such elimination shall be based on sci-
entific evidence.” When read together with the beginning of
the paragraph, it appears the requirements apply only to the
five-year review and revision process. “Such” indicates that
the requirements are tied only to the elimination described
immediately prior, that of the five year revision and review,
rather than any elimination from the unit for any reason.
Reading the paragraph as a whole, rather than the sentences
in isolation, we conclude that the requirements for elimination
only apply to “such” eliminations as described immediately
prior—those for the five year review and revision of unit
agreements. The section does not state that it applies to other
situations, or all eliminations generally. In addition, presum-
GEO-ENERGY PARTNERS v. SALAZAR 10787
ably Congress knew of the model agreement in the imple-
menting regulations, and made no indication in the text or
legislative history, that such automatic contraction provisions
were no longer viable, and neither did the BLM.
Second, the context of the language, specifically, the last
sentence of section 1017, relating to lease extensions autho-
rized by section 1005 for leases eliminated in the periodic
review process, provides support for the above interpretation
of the statute’s text. As stated, the 1988 Amendments added
the following paragraph to § 1017:
No more than five years after approval of any coop-
erative or unit plan of development or operation, and
at least every five years thereafter, the Secretary
shall review each such plan and, after notice and
opportunity for comment, eliminate from inclusion
in such plan any lease or part of a lease not regarded
as reasonably necessary to cooperative or unit opera-
tions under the plan. . . . Such elimination shall be
based on scientific evidence, and shall occur only
when it is determined by the Secretary to be for the
purpose of conserving and properly managing the
geothermal resource. Any lease or part of a lease so
eliminated shall be eligible for an extension under
subsection (c) or (g) of section 1005 of this title if it
separately meets the requirements for such an exten-
sion.”
Pub L. No. 100-433 § 4 (emphasis added).
Section 1005 outlines the prerequisites for extending a
lease after five years following the unit’s formation. By nega-
tive implication, § 1005 outlines the prerequisites for elimi-
nating a lease by “contraction.” As the BLM has defined the
term, “contraction” is the refusal to grant a lease extension
pursuant to § 1005.
10788 GEO-ENERGY PARTNERS v. SALAZAR
In particular, when BLM made its decision to contract the
Fish Lake II Unit, subsection 1005(c) provided:
(c) Cooperative or unit plan for drilling operations;
extension of term; renewal
Any lease for land on which, or for which under an
approved cooperative or unit plan of development or
operation, actual drilling operations were com-
menced prior to the end of its primary term and are
being diligently prosecuted at that time shall be
extended for five years and so long thereafter, but
not more than thirty-five years, as geothermal steam
is produced or utilized in commercial quantities. If,
at the end of such extended term, steam is being pro-
duced or utilized in commercial quantities3 and the
lands are not needed for other purposes, the lessee
shall have a preferential right to a renewal of such
lease for a second term in accordance with such
terms and conditions as the Secretary deems appro-
priate.
30 U.S.C. § 1005(c) (emphasis added) (2000).4
At the same time, Subsection 1005(g) provided:
(g) Five-year extensions; conditions
3
The statute defined “produced or utilized in commercial quantities” as:
[T]he completion of a well producing geothermal steam in com-
mercial quantities. Such term shall also include the completion of
a well capable of producing geothermal steam in commercial
quantities so long as the Secretary determines that diligent efforts
are being made toward the utilization of the geothermal steam.
30 U.S.C. § 1005(d) (emphasis added) (2000).
4
Pursuant to the 2005 amendments to the Geothermal Steam Act, this
provision was relocated and renumbered as 30 U.S.C. § 1005(g). See Pub.
L. 109-58, § 231(2).
GEO-ENERGY PARTNERS v. SALAZAR 10789
(1) Any geothermal lease issued pursuant to this
chapter for land on which . . . geothermal steam has
not been produced or utilized in commercial quanti-
ties by the end of its primary term, or by the end of
any extension provided by subsection (c) of this sec-
tion, may be extended for successive 5-year periods,
but totaling not more than 10 years, if the Secretary
determines that the lessee has met the bona fide
effort requirement of subsection (h)5 of this section
....
30 U.S.C. § 1005(g) (2000) (emphasis added).6
[4] To summarize, when the BLM decided to contract the
Fish Lake II Unit in May 2003, 30 U.S.C. § 1017 outlined the
procedures for “review and revision,” under which the elimi-
nation of leases must be “based on scientific evidence” and
“for the purpose of conserving and properly managing the
geothermal resource.” That section expressly provided, how-
ever, that a lease eliminated by “review and revision” could
still be preserved under former 30 U.S.C. § 1005(g) or (c), but
the lease had to “separately” meet the requirements of those
subsections. Those subsections, in turn, required “bona fide
efforts” or the “diligent[ ] prosecut[ion]” of drilling opera-
tions. These were the “separate” criteria the BLM considered
to determine whether to eliminate a lease by contraction, i.e.,
by refusing to grant an extension.
[5] Accordingly, the interplay between 30 U.S.C. §§ 1017
and 1005 strongly suggests that the requirements for eliminat-
5
Subsection (h) defines “bona fide effort” as the submission of “a report
to the Secretary demonstrating bona fide efforts (as determined by the
Secretary) to produce or utilize geothermal steam in commercial quantities
for such lease, given the then current economic conditions.” 30 U.S.C.
§ 1005(h) (2000). This subsection was stricken by the 2005 amendments
to the Geothermal Steam Act. See Pub. L. 109-58, § 231(1).
6
Former subsection (g) was stricken by the 2005 amendments to the
Geothermal Steam Act. See Pub. L. 109-58, § 231(1).
10790 GEO-ENERGY PARTNERS v. SALAZAR
ing a lease through review and revision are wholly separate
from those that govern the elimination of a lease through con-
traction.7
7
The legislative history surrounding the passage of the 1988 Amend-
ments does not shed much light on the reach of the statute. None of the
discussion surrounding the Amendments specifically mentions the review
and revision requirements, focusing instead on the liberalization of lease
extensions and the protection of geothermal resources in National Parks
embodied in other sections of the Amendments. See, e.g., 134 Cong. Rec.
S11266-05 (Aug. 9, 1988) (statement of Sen. Melcher) (“S. 1889 provides
for the extension of Federal geothermal leases if the lessee meets certain
criteria. The legislation also contains park protection provisions, including
language to ensure that the world-renowned thermal features of Yellow-
stone National Park are protected from any adverse impact from geother-
mal development.”); 134 Cong. Rec. H7372-02 (Sept. 9, 1988) (statement
of Rep. Rahall) (“[T]he purpose of S. 1889 as amended is to provide for
the orderly development of Federal geothermal resources, and to ensure
the protection of significant thermal features within units of the National
Park System from potential geothermal development activities.”).
One tangentially related statement provides some illumination. The
Senate Report on the Amendment includes a statement from Robert H.
Lawton, Deputy Assistant Director of the BLM. His discussion of the pro-
posed addition to Section 1017 (which codified Section 18 of the Geother-
mal Steam Act of 1970) is as follows:
We also believe the bill should be modified to clear up one appar-
ent inconsistency in language between section 3 and section 6, in
that section 6 would amend section 18 of the Act to direct that
leases be eliminated from units if they are no longer necessary for
unit operations, while section 3 would amend section 6(a) to pro-
tect leases from expiration if they are within a producing unit or
one that is capable of production. We suggest that this apparent
inconsistency be clarified by adding to section 18 the statement
that leases may be eliminated notwithstanding the provisions of
6(a).
S. REP. No. 100-283, at 13 (1988), reprinted in 1988 U.S.C.C.A.N. 2350,
2359. Congress did not adopt this suggestion, as the final amendment
stated that leases so eliminated shall be eligible for extensions under sub-
sections (c) or (g) of section 6 if they separately met the requirements for
such extensions, but does not mention 6(a). Pub. L. No. 100-443, 102 Stat.
1766. This suggests Congress only wanted the eliminations to proceed
under the specific revision procedures set out in the paragraph, and did not
think the elimination procedure should apply to other situations discussed
in the amendments.
GEO-ENERGY PARTNERS v. SALAZAR 10791
[6] In this situation, given the reasonableness of both BLM
and the IBLA’s interpretation of the statute, it is not “contrary
to law,” as is necessary to overturn an administrative agency
decision on appellate review. Therefore we affirm the IBLA
on this point.
IV
[7] Geo-Energy also argues the IBLA’s failure to consider
whether the BLM properly exercised its discretion to post-
pone any contractual obligation under Section 22.1 of the Fish
Lake Unit Agreement in deciding to contract the unit requires
reversal. Geo-Energy concedes in its briefing that it did not
raise this issue directly with the IBLA, and did not raise it in
the district court. While we generally will not consider issues
on appeal that were not raised with the administrative agency,
we may do so “when ‘exceptional circumstances’ warrant
such review, notwithstanding the petitioner’s failure to pres-
ent them to the agency.” Reid v. Engen, 765 F.2d 1457, 1461
(9th Cir. 1985). “In determining whether to require exhaus-
tion, this court balances the agency’s interests in applying its
expertise, correcting its own errors, making a proper record,
enjoying appropriate independence of decision and maintain-
ing an administrative process free from deliberate flouting,
and the interests of private parties in finding adequate redress
for their grievances.” Litton Industries, Inc. v. Fed. Trade
Comm., 676 F.2d 364, 369-70 (9th Cir. 1982) (internal quota-
tion marks omitted). For example, “[o]bjective and undis-
puted evidence of administrative bias would render pursuit of
an administrative remedy futile.” Anderson v. Babbitt, 230
F.3d 1158, 1164 (9th Cir. 2000).
[8] There are not exceptional circumstances here to war-
rant review of an issue not squarely presented to either the
IBLA or the district court. The question of whether BLM
properly refused to exercise its discretion under Section 22.1
in exercising the automatic contraction provision, while rely-
ing in part on facts already contained in the record, is not one
10792 GEO-ENERGY PARTNERS v. SALAZAR
we should decide in the first instance. It directly concerns the
agency’s interests in “applying its expertise, correcting its
own errors, making a proper record, [and] enjoying appropri-
ate independence of decision.” Litton, 676 F.2d at 369-70. If
Geo-Energy had made this argument directly to the IBLA, it
would have been able to determine, through its own expertise,
whether BLM failed to exercise this discretion in a reasonable
manner. It would have given the IBLA the chance to correct
its own errors, if in fact, there was an error.
The private interest of Geo-Energy does not outweigh the
interests above in this case. Geo-Energy gives no reason for
failing to make this argument explicitly to either the IBLA or
the district court. That it made the decision to focus on other
aspects of the case, which were decided contrary to its inter-
ests, and then to come up with new arguments supporting its
position on appeal, does not rise to the level of “extraordinary
circumstances.”
[9] In addition, it does not appear that raising the argument
would have been “futile” in the sense recognized by the “ex-
traordinary circumstances” doctrine. There is no objective and
undisputed evidence of administrative bias that would render
pursuit of an administrative remedy “futile.” While Geo-
Energy has accused the BLM of thwarting its efforts, it has
made no such argument about the IBLA, nor did it make such
an argument to the IBLA. Therefore, that the evidence indi-
cates the IBLA would not have thought the BLM acted arbi-
trarily and capriciously in refusing to exercise its discretion to
give Geo-Energy yet another extension on contraction, is not
evidence of “futility” in the way meant by the exception. That
it was likely a court would render a decision contrary to a
party’s interest based on the merits is not itself objective evi-
dence of bias to support futility. Therefore, there are not “ex-
ceptional circumstances” warranting review of this issue for
the first time in this Court.
GEO-ENERGY PARTNERS v. SALAZAR 10793
V
[10] The procedures for periodic revision of units in the
1988 Amendments to the Geothermal Steam Act, codified at
30 U.S.C. § 1017, do not apply to automatic contraction pro-
visions such as the one in the Fish Lake Unit Agreement at
issue here. Geo-Energy consistently failed to meet the
requirements of the Fish Lake Unit Agreement that would
prevent contraction, and despite several extensions over sev-
eral years, was unable to comply. Contraction under these cir-
cumstances was not contrary to law. Second, Geo-Energy
failed to make the argument regarding the BLM’s exercise of
discretion under Article 22.1 of the Fish Lake Unit Agreement
below, and exceptional circumstances do not exist such that
we will exercise our discretion to decide the issue in the first
instance. Therefore, we affirm the decision of the IBLA.
AFFIRMED.