to do it hooch was the time when we three judges could be together so when you're ready geothermal steam can be produced from a reservoir without drilling a well on each lease units ization is used to officially produce the resource under the units as ation principle work or production anywhere in the unit is attributed to all leases in the unit all leases that over a lot of the reservoir are in title to share in the revenues from production from that reservoir whether or not a well is drilled year extensions in certain circumstances when production was not achieved during the primary term and then a continuation of up to forty years when production was achieved no you've used the word extension rather than a word continuation in reference to i believe one of the five section subsection an oil and gas law is there a distinction between continuation and extension your honor if i said  continuation is for production to hold the lease in effect to produce the lease an extension is used for extending the lease to continue exploration in order to achieve production there is some looseness and it's not consistent is that the m l a doesn't use that term consistently for example in two to six it's not consistent because just when i thought i'd figured out that continuation means you know this based on production i think it pretty much is in the g s not pretty much i think it's consistent but it's not an m l a you know your honor i would have to would you like me to take a look i don't just i don't have a basis you don't have to  i'm looking at ok i disagree i think generally for purposes of this argument and i shouldn't have cut off that flatters question because i'm very interested in the answer is that how you're using continuation that it's that it's key to enter goodbye production as opposed to extension that's correct your honor although i will say in terms of even in the regulations and certainly in decisions discussing the geothermal steam act that the terms are somewhat used interchangeably and right the real reason i asked steam act and as i read sections one hundred and five dollars so a b that looks like continuation by production and as i read some see some g one that looks like extension by into other parts of the statute and can you just go straight to it please because that's going to take all twenty minutes i think that's right so your honor i believe that you need to read the provisions as a whole and that the inference from not having the word unit plan in one thousand and five is not that the unit is ation principle does not apply there doesn't have to be an expressed reference when you read one lot to get us to do something contrary to the expressed language of the statute and you know the canons that talk about sure you're silly they use that very language and other parts of the statute so we've got that tension and we've gotten in the pages of briefing about that now and the m l a yeah i think you're  that the background section your brief was very helpful to explain the utilization principle and i'm sure we all appreciated that but the m l a bakes in this notion of continuation on a huge unit wise basis during the primary term in section two to six and you don't have that here so what's your strongest argument is it is it the anomaly or the inconsistency that that production would be were awarded on a unit wide basis everywhere else in the ga essay and not in section a right  will you posed the question why would congress have done that why would they award production everywhere else but but the primary term and so can i just one possibility is they wanted to encourage exploration during the primary term and i understand there's tension with the unit position principle but you know we're not geo thermal this expert engineers and so we don't really know that steam reacts the very same way as  oil and gas and we're working with what we've got here i don't know why congress would have done that but but i can think of some reasons that that primary term might have been treated differently and your brief doesn't seem to grapple with those well the point of exploration is to get to production and once you drill a well that is able to produce then that triggers the next stage which is the development of the lease and you start to focus in on how to effectively develop a power plant to utilize that steam so you don't do the kind of exploratory drilling through the entire unit that you do until you hit that well then you focus on that well well i you know i appreciate that but  let me just play devil's advocate because we're we're grappling with the express language of the statute here and one reason perhaps to treat the initial ten year term differently would be to avoid this very situation where there's one well capable of production no one lease and then the whole deal with that one of them in one thousand nine hundred and eighty eight when congress made the capable of production concept without a definite five year and they also added the five managed with the current boundaries then b l m issues a decision to reduce the unit ok and it talks about constricting the area plan and then what happens to the leases that are outside the constricted area then they are on their own so if the unit review shrinks the unit then the leases or the parts of the leases that are outside are on their own so they would then have to apply for is drilled is the participating area concept and so that is the time when you focus in on the well you're in the process of developing a power plant and the participating areas not necessarily smaller than the unit but often is only the people who based on the information at that point in time the leases that over a lie that specific reservoir that's going to be produce share in the revenues so i think that was the source of the confusion to mr haggerty because article twelve of the model unit agreement which was incorporated into the unit agreement for the glass mountain unit talks about forming a participating area before production and ordinarily without the capable well if you have an if you're actually ready you go into production you need to make sure that the right people are getting the revenues  and so that was the confusion about well does this get triggered when it's a capable well because we're still some period of time away from generating radke ok people well as a sort of a little giving some slack because this is new this is steam this isn't oil they've expanded the definition of productions what they've done but like those like the relevant question i think i'm right that the b o m has changed its interpretation of the statute and that the statute the want to say i think they had interpreted the opposite way and they switched right and i was a little i'm not sure i want to call it can be interpreted a one way which is what the plaintiffs are arguing for and now the government has changed its own interpretation how come well it's not the more important though that it is that a yes yes your honor today but the definitive statement of the department of the interior are the regulations and the regulations have always provided  ation principle for production without regard to primary turn or later turn turn around so it's tricky and forgive my candor here and i don't mean to be disparaging but but you know you're asking for the government asking for deference here and i read the record i want to give you every opportunity to correct me i do read the record as the government did it one on its own interpretation and now it's asking for deference and i in fairness and i am i missing something there we're asking for deference to the regulations your honor which haven't changed and the rare interpretate but not you the government's interpretation did do what judge potter is describing didn't didn't do anything the california state office did yes  well in the context of when you for participating area i don't know that it was before any other office it was just an expanded definition of producing correct but it's ok well really just tells me continuation by production correct me going back to this i think this for me this was key and i want to make sure i'm understanding it i read those memos from mr haggerty as saying i don't have any way to manage this field because b l m hasn't required the participated proposed participating area from calpine so the field had not been constricted am i misunderstanding that so he thought it was all in cern so he's right so he was reading this as an all or nothing if we don't have constriction then all of a is there is that there's a unitized principle that is going to tie up all of it for up to fifty years because you're not constricting you're not requiring constriction is that right that was his concern yes  but he neglected to look at forty three c f r three thousand two hundred and three point one five b and c which has been part of the regulations from the beginning and provided that when you segregate leases when you constrict unit plan the leases outside the unit area then have to stand on their own which means that the leases inside the unit area continue by virtue of the production or work within the unit and that was part of the ideal aisha's with inside the participating area the shrinking constricting participating area continue to benefit from the into station concept but the others with the lease terms haven't expired but they're sort of kicked out of the participating area are going to have to qualify and a lease by lease basis they have five years where it's still treated as a unit so there's a difference between  what happens when you form of participating area and when you actually constrict the unit boundaries so when you form a participating area then the lease is within the unit but outside the participating area continue to exist for five years and they continue to get the benefit of the production continuation although there are then drilling requirements in order to know  doesn't work as a practical matter so am i misunderstanding but i would disagree with you because we would say that one thousand and five and a dozen expressly include the unit position principle but it doesn't expressly exclude and i don't like oh my goodness expressly include it and it's not there i just have to say an ordinary plain language reading of the statute says if it's expressly stated in c n g one and the words are absolutely absent from a an from b plain language says it's not there so you've got to convince me somehow right well the excuse me that that this reading doesn't make practical sense but let me give you a suggestion as to why it makes practical sense and then you can tell me why i'm wrong for a and b continuation by production as soon as the lease is productive then it's fine so long as it continues to be productive if the lease is not producing then you get a continuation on a unit wide basis by drilling and we're talking largely about exploratory drilling and because we're talking about exploration it may be in a fish and to require an order for extension by and we're going to we're taking you over but we'll make sure both sides get a chance to say everything they need to say ok here's how i read the statute as making sense we have continuation by production in subsection a renew renewal under be on the other hand if the lease is not producing the only way you can get a sort of a a longer lease or stay away from the world extension a continuation is by extension and you can get the extension by continuing to drill now drilling is exploratory drilling for the most part and if you have a tire unit that looks as though it may be capable of producing steam but out of a common pool it may be if it's extension by drilling gibson extensions so long as there is one lease in the unit that's doing active drilling which makes perfect sense to me it would make sense to you right ok the answer is no because that's inconsistent with the language i wasn't there sorry i don't want inconsistent in the language i'm not talking practicality does that make sense as a practical matter it does it your honor because when you categorize a lease without a well drilled on the surface as non producing that's just because we see the surface but the reason the reservoir is underneath and when that well on one lease is pulling steam it's pulling steam but potentially from under these other so the steam is being produced from that lease because our legal framework is if you own a surface you own steam under it it's just we can't see it so the concept that those other leases aren't actually producing because it's not they don't have the straw poked in them i think is the is the problem with that scenario that's exactly the way it reads though if you have under and me you have a producing lease and in this case we had twenty seven dollars so we have one of the twenty seven dollars that leaves twenty six dollars and then if it's  and it may have been in the st place where it was eunice unified and you you ended up with one producing lease then you have ten years with respect to the other twenty six leases to drill that's all you have to do is drill even if it's the day before the end of that ten years now it may be that's the way i read the statute it may well be that that makes no sense in this type of energy geothermal energy but and maybe that was the purpose in the beginning and that's why it reads the way it does or that there's been some changes i think  point we've got a producing lease and i've got the adjoining lease and it's not now producing and i'm worried that the producing lease is sucking steam from that lives on my lease all i need to do is grow and i've got a fairly long right in order to protect myself but there's no necessarily practically to have everyone drilling when the focus needs to be on the the well in developing the plant but all  is to if if they company decides this is profitable we got the twenty seven dollars leases in the st place we have one producing lease so we have to decide in ten years whether any of those other leases the twenty six are going to be profitable and we better do it in ten years or we walk away so we have to decide scientifically if we should drill one day before that ten years is up because we're going to be able in addition to the producing lease we're going to be able to produce another one but that's going to be up to the company right it's not just below i am your honor if i could just say these the leases don't necessarily they can't get extensions under ten thousand and fifty one because that says that you're only eligible for a one thousand and five g one extension if you have not produced steam in the unit during the primary term or during the extension drilling extension under one thousand and five c e so one thousand and five g one that language support our interpretation by saying that by you can get a production continuation under one thousand and five a during the primary term and if you do then you can't get an extension because you don't need one because you've already gotten a production continuation ok when we do this we're you know three minutes over let's hear from the other side will make sure to give you a chance to rethink your honor morning your honors may please the court i'm samuel lacerates appearing for the plaintiffs in this case alongside my co counsel mr caleb right i will be speaking for about twelve minutes addressing section one hundred and fifty one thousand lacked statutory authority when it granted glassman units twenty six dollars nonproductive leases additional terms of up to forty years one thousand and five plain tax makes this clear to resolve this case this court does not need to look farther than the than the sash for a tax one thousand and fifty eight dollars provides if geothermal steam is producer utilized in commercial quantities such lease shall continue into an additional term and the key language in one thousand and five dollars a is such least by using such ways congress made clear that only a lease that was producing the had to keep a well or productive well would qualify for an additional term what is the answer to opposing counsel question where she says why would it make any sense for congress to award production with continuations throughout the rest of the geothermal steam act but not insect subsection a during the primary term what's the answer the answer to that your honor is that the other additional her question really that she poses in her brief and i don't think your brief answer is why would congress have done that on unitized basis throughout the rest of the g s a during extension periods but not within the primary term or position is that cut that congress the unit are vailable on a unit wide basis so any is long as we have drilling operations being diligently prosecuted at the end of the primary term those five year extensions can be available on a unit wide basis but that a is one yes before the end of the ten years for see absolutely but your pivot i mean if you can get to the question please is it your position that actual production under sea is not going to result in a continuation on your ties basis we our position is that's the best that's the best reading that would be to read those can see read all those additional all this continuation or additional term provisions  what we think about is the individual lease and how the union activities can qualify that lease for an extension so we see that in g one's language word serves any geothermal lease and so we see that it's thinking about individual leases and ho know activists can qualify for them for the extension and then when we turn to g two it says a lease extended pursuant to paragraph one so we're still thinking about the we're still think about individual leases and whether or not those unit wide activities can extended are granted different terms in the same way and treated under the same regulation if we turn to the tax if geothermal resources are produced or utilized in commercial quantities within the primary term or any extended term of lease that we shall continue and quote into an additional term so we see there's a consistent approach of at least by only implementing rate regulations that additional terms are only available to individually productive leases and ways that make sense why do you believe the congress that to occur at the time we believe that made sense your honor because congress was creating a leasing framework for a relatively untried and untested returned to multiple use and we see that in one thousand and five dollars structure congress meat congress alap authorized leasing in areas that showed some geological signs of heat but no one conditions are met that's up to fifteen years of extensions on top of a ten year primary term giving y plenty of time to explore these units to see if they could find commercially then ten years when they have one production like we have in this case but they had to determine whether or not in that unit twenty six dollars whether or not it made any sense to continue and that would be by drilling undersea right  in a sense it loosens the definition of drilling to allow whatever comes to the idea for it under the definition so in loosening up that congress also constrained how one thousand five  earlier that the other thing congress was doing that seems to been set aside and your way the argument when i read this is a whole foods the concept of constricting the participating plan area and you heard opposing counsel's response to that do you do because your time is ticking once it constricts and leases are then some leases find themselves outside the participating area she said they get a five year basically grandpa the period where they get the benefit from mutation principle and then they don't they have to qualify on their own is that right yes so under the new regulations the initial purchase being area is supposed to be formed as soon as the st well is israel and that's usually just for the lease the initial partner is usually just the of the statute work together and it seems to me that there was a real concern throughout this that that the problem with continuations under ten o five for up to forty years was going to allow whole lot of public lands to be tied up for a very long time and basically this very situation where one well was deemed capable of producing and a whole lot of land has been tied up for a very long time and i'm trying to figure out if it be a lamb had gone forward and required the p articipating area to been constructed like it was supposed to but did not would that be an answer to the concern that would be one possible way to c d o the unit but congress at congress created section one thousand five to deal with this very very situation by making sure that only that additional terms that forty year period were only available so he says that had already demonstrated their commercial potential to make sure that leases that had proven that they had they ha reason to perpetuate could exist and making sure that those five year extensions were available to other leases with the units so the lessee could have time to see if those leases could similarly produce and this all makes sense because geothermal energy requires several wells in order for it to be a profitable exercise in contrast to oil and gas yes in contrast to oil oil and gas as we see as we see it the telephone flat proposal  geothermal steam that we can keep mine in so one thousand and five makes sense  if you could put eight minutes on the clock because that's what they saw to reserve when we took him over by  but there's nothing in one thousand and seventeen dollars implementing regulations or the model unit agreement that would support of parchin departure from an interpretation where additional terms operate on a lease by we space address three arguments in turn the st department of justice claims that the unit provisions in the mineral leasing act and the geothermal steam act operate in exactly the same way and while the unit provision one thousand and seventeen is an important aspect of the geothermal steam act it differs in a significant way from the mineral leasing act congress into twenty six j in the mineral leasing act expressly provided that units can affect lease terms they said that any lease that's become the subject of a unit plan quote shall continue in force until the terminations of such plan so by virtue of being oppressed in a productive unit in the mineral leasing act lease terms can continue meanwhile congress in analogous unit provision in the geothermal steam act did provide the authority to manage units but it didn't provide that being a unit would affect a geothermal lease term so instead in the geothermal steam acts the only provisions that can affect article seventeen dollars of the model unit agreement and the geothermal c max states that any federal lease committed here in may be continued for a term so provided there and or as extended by law so it can't continue beyond and i subject to the eastern provisions that are in the g s a however in the mineral leasing act the analogous provision there eighteen he says that any federal lease shall continue in force beyond the term provided there and until the terminations hear of so  s is that our reading of the seven of seventeen four of the model unit agreement would mean that geothermal units provide no benefits but as we've seen the mother unit agreement is subject to the geothermal steam article seventeen dollars and additionally their reading of seventeen dollars reads it in isolation and so seventeen dollars can't be understood in a vacuum because it doesn't explain what benefits are you have to look elsewhere within the model unit agreement and we see that there are benefits of it within the model unit agreement for example article thirteen two stipulates that one of the benefits is that you can share in the profits of all wells article nine point one states that you can share in the costs incurred for conducting unit operations and then most importantly article seventeen three says that a benefit of unit agreements is that they enable unit activities to satisfy diligence requirements on that unit so we can see that in the modern unit agreement that a unit facilitates the cordon aged and efficient exploration and incentivize activities that will are necessary for the actual production of geothermal energy the final department of justice argument that i'd like to address is their contention that geothermal energy has a rule of capture problem which would require us to read unit into one thousand and five a because it operates in a similar fashion as oil and gas but that is a fundamental misapprehension of the difference between geothermal energy and oil and gas geothermal energy can't be exploited with a single well we have that in the record  in this is where you want to be geothermal engineers it seems to me we have an expert to tell us about those counselor no your honor it's as my co counsel stated there was a proposal for the sim telephone flat that that had multiple wells and  you know it's baked in the unit is a principle is baked in there for the for the primary term continuation we don't have that in the geothermal steam act but i'm trying to figure out why they would have treated the primary term differently and and maybe what we mean maybe we'll get to know that and we're left with the pla might not be baked into additional term i think as my co counsel explained that this might not be satisfactory but we believe that the important thing is to produce geothermal energy once a well is drilled and that requires extensive on site activities that will lead to production so in this regard to to liberalize the definition of of what qualifies as production this reason the congress limited one thousand and five a just to just to individual pieces because there are there's plenty of time available in the other extensions there is the primary term and then these these leases exist within units can then still qualify for extensions under either c or g one which would be total fifteen you know let me ask you yes and i'm sure you heard the argument i was asking the government  well why doesn't it make sense because of the valar reason if you've got a producing lease that just gets to continue if you don't have a producing lease you get an extension if you're actively drilling or you're making bonafide efforts and the reason for treating them differently is you don't want to require for a continuation of exploratory activity that there be active drilling on every lease the government st said maybe because she didn't understand me that makes perfect sense or at least that makes sense and then after repeated said well no that doesn't make sense because and the because as i heard it was well if you have a producing lease that means it will be she didn't use this word but sucking steam out of adjoining leases and therefore you want to treat a producing lease as part of a unit rather than as a single you know better than a single lease what's your response to that yes your honor well the mother unit agreement does provide for profit sharing as an initial matter so it's not like these other leases that that are not producing will be able to share in the profits so long as they continue to be part of the participating area so you so even if there's only one lease this producing and the next police is not producing the non producing lease is entitle to profit sharing yes your honor unless it's contract it out of the unit through the participating essentially hot rocks so it's not this idea where you can just suck up the heat out from adjoining we soldiers you can't just drill from one end of the range to suck up from the other and i know that that's not with oil and gas yes your honor and so that's  that's another reason why you don't have this frantic over competition that you had in oil and gas and geothermal steam is there not sucking steam here you to some degree of cooling off your own rocks on your own lease and that may or may not be who lay off the rocks in the adjoining  thermal leases it makes a lot more sense in terms of energy to have one or more going at the same time right yes your honor is opposed to oil aggress so is this case an oddity you only have one that was producing and then that's the end of it what was capable of producing but that was capable of producing we had one that was capable of producing the other twenty six yes your honor did the other twenty six said  determination more remand back to the agency and will give b l m for the st time the opportunity to consult with our clients over these tens of thousands of acres of land that is of such profound spiritual anaesthetic importance thank you thank you very much you a necessary surface disturbance and that's not the way you find the resources you have a well which was my explanation for why you treat extension by drilling differently but during the primary term right so they found a well that was capable of production under the statute then the attention turns to that and developing a plant for that well not just simply continuing exploration for other reservoirs the focus is on determining how to develop and who will share in the reservoir that has been found so is it your position then that the the status quo that what we have here which is one well capable of then allowed to if everything had gone according to plan should have been allowed to tie up all of the land all of this time without any further well it's all of this time because there were complications from the lawsuit  this suit as a reason that the b l m didn't constrict the unit right and i don't think you meant to really imply there were problems that explains from two thousand and two on the problem early how should this have worked if the government had done  followed that path how should this how what should have happened if it is that from one thousand nine hundred and eighty nine when the capable well determination was made then at that point the unit operator should have submitted an initial participating area b l m would have evaluated it and the the reservoir contours would have been defined to leases that would share in the participant the participating area would have been defined all the leases that were outside the participating area would then be put on the five year clock to commence drilling to find another reservoir by one basis on an individual basis leased by lease the unit still existed so that i appreciate that so during the five year clock period your time is ticking during that five year clock that would have been entitled to the year to zation benefit and then what the but the unit operator would continue working on behalf of all of them outside the participating area to explore five years correct and then what and then if another well another reservoir was found that was capable of production then that would have triggered the process to form a new participating area but absent that the council more to the point if that had been if another will have been found then then those get excluded correct then the unit area contracts down to the participating area so all those leases are outside the unit and have no benefit of the unit is a sure principle and they're on their own the less than the unit operator is not responsible for them each individual lessee has to get an extension and find a resource or that lease would expire thank arguments the case of river tribe is now submitted for decision and we are in adjournment there will be rescheduled for another set of hearings for another panel at ten o'clock but that's going to be delayed by