24358 Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 

DEPARTMENT OF THE INTERIOR 

Bureau of Land Management 

43 CFR Parts 3000, 3200, and 3280 

[W0–310 9131 PP] 

RIN 1004–AD86 

Geothermal Resource Leasing and 

Geothermal Resources Unit 

Agreements 

AGENCY: Bureau of Land Management, 

Interior. 

ACTION: Final rule. 

SUMMARY: This final rule revises the 

Bureau of Land Management’s 

geothermal resources leasing and unit 

agreement regulations to implement the 

Energy Policy Act of 2005. The rule 

restructures regulations concerning the 

general geothermal leasing process and 

revises regulations on royalties and 

readjustment of lease terms, conditions, 

and rentals. The rule also revises 

regulations on lease duration and work 

commitment requirements, annual 

rental and credit of rental towards 

royalty, unit and communitization 

agreements, and acreage limitations. 

Additional revisions required by the 

Energy Policy Act include various 

technical corrections. Other changes in 

sections unaffected by changes in the 

statute clarify existing procedures, 

improve grammatical construction, 

conform the regulations to new 

administrative regulatory standards, and 

correct existing errors. 

DATES: This rule is effective June 1, 

2007. 

ADDRESSES: Further information or 

questions regarding this final rule 

should be addressed in writing to the 

Director (WO–300), Bureau of Land 

Management, 1849 C St., NW., 

Washington DC 20240. 

FOR FURTHER INFORMATION CONTACT: 

Kermit Witherbee at (202) 452–0385 or 

Ian Senio at (202) 452–5049. Persons 

who use a telecommunications device 

for the deaf (TDD) may contact these 

persons through the Federal Information 

Relay Service (FIRS) at 1–800–877– 

8339, 24 hours a day, 7 days a week. 

SUPPLEMENTARY INFORMATION: 

I. Background 

II. Discussion of Final Rule and Responses to 

Comments on Proposed Rule 

III. Procedural Matters 

I. Background 

On July 21, 2006, the Bureau of Land 

Management (BLM) published a 

proposed rule to amend existing 

geothermal resources leasing and unit 

agreement regulations (71 FR 41542). 

This final rule adopts most of the 

provisions of the proposed rule and in 

so doing implements the geothermal 

energy provisions of the Energy Policy 

Act of 2005 (Pub. L. 109–58) (Energy 

Policy Act), which became law on 

August 8, 2005. Sections 221 through 

236 of this Act address geothermal 

development and substantially amend 

the Geothermal Steam Act of 1970. The 

Geothermal Steam Act of 1970, as 

amended, 30 U.S.C. 1001–1028, 

provides the authority for the BLM to 

allow for the exploration, development, 

and utilization of geothermal resources 

on BLM-managed public lands, as well 

as geothermal resources on lands 

managed by other surface management 

agencies, such as the United States 

Forest Service. 

One of the more significant changes in 

the Energy Policy Act is the general 

requirement, with a few exceptions, for 

geothermal resources to be offered 

through a competitive leasing process. 

Lands not successfully sold in the 

competitive process can be leased 

noncompetitively. 

The Energy Policy Act also made 

significant changes in the way royalties 

are assessed on Federal leases. As 

discussed in the preamble to the 

proposed rule (71 FR at 41543), these 

changes were similar to, and in some 

cases identical to, recommendations in 

a 2005 report from the Geothermal 

Valuation Subcommittee 

(Subcommittee) of the Minerals 

Management Service’s (MMS) Royalty 

Policy Committee (RPC). To simplify the 

valuation methodology for royalty 

purposes, the Energy Policy Act requires 

a royalty based on the ‘‘gross proceeds’’ 

from the sale of electricity from Federal 

geothermal leases issued after August 8, 

2005 (other than leases issued in 

response to applications that were 

pending on that date for which the 

lessee does not elect to be subject to the 

royalty regulations required by the 

Energy Policy Act) multiplied by a 

royalty rate established by the BLM, 

rather than on the ‘‘net back’’ system 

that was used prior to the Energy Policy 

Act. Lessees who use geothermal 

resources directly will pay fees 

according to a fee schedule established 

by the MMS. Under the new law, 

existing lessees have the opportunity to 

convert the royalty provisions in their 

leases to those of the Energy Policy Act. 

The MMS is publishing a final rule to 

implement the changes in the Energy 

Policy Act simultaneously with BLM’s 

final rule. The BLM and the MMS have 

worked together to coordinate their 

regulations. 

References to the MMS regulations 

appear throughout the BLM’s final rule 

because the BLM and the MMS share 

responsibility with regard to the 

geothermal program. The BLM holds 

lease sales, issues geothermal leases, 

and generally administers the leases. 

The BLM establishes the terms of the 

leases, including royalty rates, and 

enforces the lease terms. The MMS is 

responsible for collecting rents (other 

than the first year’s rent) and royalties, 

and for enforcing the royalty 

obligations. The MMS regulations 

contain provisions that carry out its 

responsibilities. Appropriate crossreferences are contained both in the 

BLM and the MMS regulations. 

Other changes made by the Energy 

Policy Act include restructured lease 

terms (length of time a lease is in effect) 

and lease term extensions, and 

provisions for leases for exclusive direct 

use of geothermal resources, without 

sale, that may be issued 

noncompetitively. The Act also 

increases the maximum acreage of an 

individual lease and gives the Secretary 

of the Interior greater authority to 

require lessees to commit to unit 

agreements to conserve geothermal 

resources. 

Most of the changes in the regulations 

of this part implement the new 

provisions of the Energy Policy Act. 

Other changes in sections unaffected by 

changes in the statute clarify existing 

procedures, improve grammatical 

construction, conform the regulations to 

new administrative or regulatory 

standards, and correct existing errors. 

Changes based on the Energy Policy Act 

and substantive changes unrelated to 

the change in statute were discussed in 

detail in the preamble to the proposed 

rule. Both the preamble to the proposed 

rule and this preamble set out the basis 

and purpose of this final rule. In this 

preamble, we explain how the final rule 

differs from the proposed rule and 

discuss comments received on the 

proposed rule and our responses. 

References in this preamble to the 

previous rule mean the rule that is 

currently codified in 43 CFR and not the 

proposed regulations. 

II. Discussion of Final Rule and 

Responses to Comments on Proposed 

Rule 

The BLM received nine comments on 

the proposed rule published in the 

Federal Register on July 21, 2006 (71 FR 

41542). In this section of the preamble, 

we respond to the substantive 

comments by subpart and/or section 

number. To facilitate understanding, we 

have also generally included a brief 

summary of what the subpart or section 

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Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 24359 

provides. For additional explanation of 

the changes made to each section, 

please refer to the proposed rule at 71 

FR 41543–41565. 

Many of the comments received 

addressed both the BLM proposed rule 

and the MMS proposed rule. The BLM 

referred to the MMS any comments it 

received regarding the MMS rule. For 

responses to those comments, please see 

the MMS final rule being published 

simultaneously with this final rule. 

Subpart 3200—Geothermal Resources 

Leasing 

In subpart 3200, we changed the 

definitions section and added three 

sections to the end of the subpart. 

Definitions 

Section 3200.1 contains definitions of 

terms used throughout parts 3200 and 

3280. As explained in the proposed 

rule, we removed the definitions of 

terms and concepts that are no longer 

used or were not used previously, added 

new definitions for terms or concepts 

that are new in this rule, and clarified 

other terms. The definitions we deleted 

were: ‘‘additional term,’’ ‘‘cooperative 

agreement,’’ ‘‘extended term,’’ and ‘‘pay 

instead of produce in commercial 

quantities.’’ The new terms defined are: 

‘‘initial extension,’’ ‘‘additional 

extension,’’ ‘‘direct use,’’ ‘‘direct use 

lease,’’ ‘‘gross proceeds,’’ ‘‘commercial 

production or generation of electricity,’’ 

and ‘‘commercial production.’’ Terms 

clarified are: ‘‘geothermal exploration 

permit’’ and ‘‘geothermal steam and 

associated geothermal resources.’’ 

In this final rule, we revise the 

definition of ‘‘commercial production or 

generation of electricity,’’ by adding 

language to clarify that the term 

includes electricity or energy that is 

required to produce the resource, as 

well as that required to convert the 

resource into electrical energy for sale. 

This was the BLM’s intent in the 

proposed rule. We also specify that the 

use of resources in this manner must be 

reasonable in order to discourage waste 

of the resource and to conform to the 

parallel MMS provision at 30 CFR 

202.351(b)(2)(ii). As explained in the 

preamble to the proposed rule (71 FR 

41543), the definition of this term is 

important in determining whether 

geothermal resource production is 

subject to royalties or direct use fees, as 

referenced in 30 U.S.C. 1004(b), or 

neither. The BLM believes it is more 

appropriate to consider these 

components as part of the electrical 

generation process, both: (1) To 

encourage the production of geothermal 

resources (by not imposing a fee for a 

necessary cost of electricity generation); 

and (2) Because measurement of such 

usage would be difficult and expensive 

and the amount of moneys generated 

through the collection of fees would be 

quite small relative to the measurement 

effort. The BLM expects that an initial 

evaluation will occur at the permitting 

stage of whether the amount of the 

electricity used to produce the resource 

and to convert the resource into 

electricity is likely to be reasonable. 

In reviewing subpart 3205 of the 

proposed rule (Direct Use Leasing), we 

concluded that, in accordance with the 

statutory provisions at 30 U.S.C. 1003(f), 

the definition of a ‘‘direct use lease’’ 

should include that such a lease is 

issued noncompetitively. Section 3205.6 

of the proposed (and final) rule 

provides, mirroring the statute, that the 

BLM may issue a direct use lease only 

if, among other things, it ‘‘determines 

there is no competitive interest in the 

resource * * *.’’ If the BLM determines 

that land for which an applicant applied 

for a direct use lease is open for 

geothermal leasing and is appropriate 

for exclusive direct use operations (see 

definition of ‘‘direct use’’), and that 

there is competitive interest, it will 

include the land in a competitive lease 

sale with lease stipulations limiting 

operations to exclusive direct use. 

Unlike a direct use lease that is issued 

noncompetitively, under a competitive 

lease that is limited to exclusive direct 

use, the resource may be sold (but it 

may not used by the operator or a 

purchaser for the commercial generation 

of electricity), and the acreage 

restrictions will be those applicable to 

competitive leases rather than direct use 

leases. We have thus revised the 

definition of ‘‘direct use lease’’ to read 

as follows: ‘‘Direct use lease means a 

lease issued noncompetitively in an area 

BLM designates as available exclusively 

for direct use of geothermal resources, 

without sale, for purposes other than 

commercial generation of electricity.’’ 

We received no comments on this 

section and, except for revising the 

definition of ‘‘direct use lease’’ as 

discussed above, have adopted it as 

proposed. 

Types of Leases 

Final section 3200.6 provides general 

information about the two types of 

geothermal leases that are issued under 

this rule: (1) Leases that may be used for 

any type of geothermal use, such as 

commercial generation of electricity or 

direct use of the resource, issued either 

competitively under subpart 3203 or 

noncompetitively under subpart 3204; 

and (2) Leases that may only be used for 

direct use without sale, i.e., direct use 

leases issued under proposed subpart 

3205. We received no comments on this 

section and have adopted it as 

proposed. We discuss permitted uses 

under different types of leases in more 

detail in the discussion of subpart 3205 

(Direct Use Leasing), below. 

Transition Rules 

The Energy Policy Act at 30 U.S.C. 

1005(d), directed that the Secretary by 

regulation establish transition rules for 

leases issued before August 8, 2005. The 

only transition requirement in that 

section was that leases nearing the end 

of their terms on August 8, 2005, must 

be allowed 2-year extensions under 

certain circumstances. 

Under the authority of 30 U.S.C. 

1005(d), final sections 3200.7 and 

3200.8 contain transition rules, 

addressing how this final rule applies 

to: (1) Leases issued before August 8, 

2005, the enactment date of the Energy 

Policy Act; and (2) Leases issued on or 

after August 8, 2005, but based on lease 

applications pending on August 8, 2005. 

Final section 3200.7(a)(1) makes 

leases issued before August 8, 2005, 

generally subject to parts 3200 and 

3280, except they are subject to the 

regulations in effect on August 8, 2005 

(43 CFR parts 3200 and 3280 (2004)), 

with regard to regulatory provisions 

relating to royalties, minimum royalties, 

rentals, primary term and lease 

extensions, diligence and annual work 

requirements, and renewals. Final 

section 3200.7(a)(1) and 3200.8(a) 

include a citation to 43 CFR parts 3200 

and 3280 (2004) to clarify that these 

were the regulations in effect on August 

8, 2005. The substance of the 2004 

edition of 43 CFR parts 3200 and 3280 

is the same as the 2005 and 2006 

editions of the CFR for those parts. 

Final section 3200.7(a)(2) provides 

that the lessee of a lease issued before 

August 8, 2005, may elect generally to 

be subject to all of the new regulations 

in parts 3200 and 3280, so long as the 

lessee makes such an election no later 

than 18 months after the effective date 

of this rule, i.e., no later than December 

1, 2008. The provision notes that 

changes relating to royalty terms are 

possible only under the royalty 

conversion rules of final section 

3212.25. As explained in the preamble 

to the proposed rule (71 FR 41544), this 

provision allowing an existing lessee to 

elect to be governed by the new 

regulations is within the BLM’s 

authority under 30 U.S.C. 1005(d), and 

was prompted by the statutory provision 

at 30 U.S.C. 1003(d)(2) allowing such an 

election to lessees whose lease 

applications were pending on August 8, 

2005. 

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24360 Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 

In reviewing this section during 

drafting of the final rule, we became 

aware that the language was confusing 

regarding whether a lessee could make 

an election under section 3200.7(a)(2) 

without also obtaining a conversion of 

royalty terms under section 3212.25. We 

have therefore added a sentence to this 

section clarifying that a lessee seeking to 

make an election under section 

3200.7(a)(2) must also obtain a royalty 

rate conversion under section 3212.25 to 

make the election under section 

3200.7(a)(2) effective. This section 

alternatively allows a lessee to convert 

only the royalty rate terms of the lease 

under subpart 3212. 

Section 3200.7 provides that a lessee 

that does not convert lease terms 

relating to royalties may apply for a 

production incentive under final 

subpart 3212 (if eligible under that 

subpart). In addition, the section 

provides that the lessee of a lease issued 

before August 8, 2005, that was within 

2 years of the end of its term on that 

date, may apply to extend the lease for 

up to 2 years, to allow achievement of 

production under the lease or to allow 

the lease to be included in a producing 

unit. 

Final section 3200.8 addresses 

geothermal lease applications pending 

on August 8, 2005, and the status of 

leases issued pursuant to such 

applications. The section provides that 

such leases are subject to parts 3200 and 

3280, except that they are subject to the 

regulations in effect on August 8, 2005 

(43 CFR parts 3200 and 3280 (2004)), 

with regard to regulatory provisions 

relating to royalties, minimum royalties, 

rentals, primary term and lease 

extensions, diligence and annual work 

requirements, and renewals. However, 

such lessees may elect to be subject to 

the new regulations in their entirety. 

Under such an election, the royalty rate 

for such leases will convert to those 

specified in sections 3211.17(a) and 

3211.18(a) and not under the process in 

section 3212.25. 

One commenter asked whether 

someone could top-file over a lease 

application that was pending on August 

8, 2005, and whether the BLM could 

convert the land to a KGRA (Known 

Geothermal Resource Area). 

The informal answer given to this 

question at a public meeting in Reno, 

Nevada on August 31, 2006, was that a 

noncompetitive lease application 

pending on August 8, 2005, would have 

priority. However, if two or more 

noncompetitive lease applications filed 

before August 8, 2005, overlap in area, 

it is possible that the BLM, in 

processing the applications under the 

previous regulations, may reclassify the 

area as a KGRA and require a 

competitive sale. 

Another comment addressing 

proposed sections 3200.7 and 3200.8 

noted that in referencing the transition 

provisions that also apply in the MMS 

rules, the BLM does not define or use 

the same transition terms (i.e., Class I, 

Class II, and Class III leases) as does the 

MMS (see the MMS final rule, 30 CFR 

206.351). The commenter suggested that 

it might provide clarity if the BLM 

regulations utilized the same 

terminology as the MMS since the two 

rules have interrelated provisions. 

We did not change the proposed rule 

in response to this comment. The 

MMS’s classification system was 

designed to describe types of leases for 

royalty purposes only. In its final rule 

the MMS has revised its lease class 

definitions, but neither the proposed 

nor the final MMS class definitions fully 

describe the categories of leases for the 

BLM’s purposes. For example, the 

MMS: 

(1) Class I leases include both: (a) 

Leases existing on August 8, 2005 

(existing leases), for which the lessee 

has not converted the royalty terms 

under section 3212.25; and (b) Leases 

issued pursuant to lease applications 

pending on August 8, 2005 (pending 

applications), for which the lessee has 

not made an election under section 

3200.8(b). The BLM must, however, 

distinguish between these two subcategories because non-converting 

existing leases are eligible for 

production incentives under section 

3212.18, whereas leases issued pursuant 

to pending applications that do not elect 

to be subject to the new regulations are 

not eligible for production incentives; 

(2) Class II leases do not distinguish 

between direct use leases under subpart 

3205, which are restricted to direct use 

of the resource, and regular leases under 

subparts 3203 or 3204, which may have 

direct use. Nor does the Class II 

designation distinguish between leases 

issued pursuant to application or 

competitive sale after August 8, 2005, 

and those issued in response to pending 

applications where the lessee elects to 

be subject to the new regulations under 

section 3200.8(b); and 

(3) Class III leases do not distinguish 

between: (a) Existing leases that convert 

only under section 3212.25 (royalty 

conversion only); and (b) Existing leases 

that convert under section 3200.7(a)(2) 

(electing to be subject to all new 

regulations, which must include a 

conversion under section 3212.25). 

None of the foregoing distinctions is 

necessary for the MMS royalty 

purposes, but the BLM must make these 

distinctions in explaining to different 

categories of lessees what options 

Congress made available to them. For 

these reasons, the BLM did not use the 

MMS classification system in its 

proposed rule. We did not change the 

rule in response to this comment. 

Subpart 3201—Available Lands 

Subpart 3201 addresses which lands 

are available for geothermal leasing and 

which lands are not available for 

geothermal leasing. It is substantively 

unchanged from the previous subpart. 

We made one minor change to section 

3201.10 to make it clear that public 

lands and acquired lands that are 

administered by the Department of the 

Interior are available for leasing unless 

they are withdrawn from such use. We 

received no comments on this subpart. 

Subpart 3202—Lessee Qualifications 

Subpart 3202 addresses who may 

hold geothermal leases, qualifications to 

hold a geothermal lease, whether other 

persons are allowed to act on an 

applicant’s behalf, and what happens if 

an applicant for a lease dies. The 

subpart is substantively unchanged from 

the previous subpart. We received no 

comments on this subpart and have 

adopted it as proposed. 

Subpart 3203—Competitive Leasing 

Subpart 3203 explains the new 

process for competitive leasing, which 

requires competitive leasing to the 

highest responsible qualified bidder 

except as otherwise specified. This 

differs from the previous process, which 

provided for competitive bidding only 

for lands within a KGRA or lands from 

terminated, expired, or relinquished 

leases, or at the BLM’s discretion when 

there was public interest. 

One commenter objected to ‘‘leasing 

the geothermal resource for free.’’ The 

BLM disagrees that the geothermal 

resource will be leased for free. In 

accordance with the statute, final 

subpart 3203 provides that companies 

will pay bonus bids for competitive 

leases, and final subpart 3211 provides 

that lessees will pay rentals and either 

royalties or fees. Regarding the costs the 

government incurs, final section 

3203.12, discussed below, provides that 

nominators of lands must pay a fee of 

$100 per nomination plus $.10 per acre, 

and final sections 3203.17 and 3204.10 

provide that lease applicants must pay 

a processing fee to reimburse the 

government’s processing costs. 

One commenter stated that 

geothermal development is more akin to 

minerals development than to oil and 

gas development in that the rights to 

develop the land need to be secured 

before significant exploration can occur 

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Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 24361 

because of the risk and capital cost 

involved. To facilitate leasing and 

exploration within shorter timeframes, 

the commenter recommended 

categorical exclusions to expedite 

exploration permits and greater use of 

lease stipulations to address 

environmental or other issues, even if 

such stipulations made future 

development of the leasehold 

contingent on subsequent permitting 

and National Environmental Policy Act 

(NEPA) processes. Another commenter 

indicated that the timeframes for 

compliance with the NEPA slow down 

the overall process and suggested that a 

developer could do an environmental 

assessment to comply with the NEPA 

after the developer has been issued a 

lease. 

We did not change the rule in 

response to these comments. The Energy 

Policy Act did not address requirements 

under the NEPA with regard to 

geothermal leasing, and the suggested 

changes are beyond the scope of these 

regulations and the July 2006 proposed 

rule. 

Final section 3203.5 explains the 

three stages of the competitive leasing 

process and summarizes the four 

specific circumstances in which leases 

would be issued on a non-competitive 

basis that are addressed in detail at 

subparts 3204 and 3205. 

One commenter submitted an article 

entitled ‘‘What We Have Lost,’’ authored 

and endorsed by numerous individuals 

in the geothermal industry. The article 

contends that competitive leasing will 

remove the incentive for companies, 

large or small, to invest in pre-lease 

exploration and project assessments, 

and maintains that an all-competitive 

leasing process does not fit geothermal 

resource development. 

As the commenter realizes, the statute 

mandates competitive leasing. Any 

revision of the system prescribed by the 

statute would have to occur through 

Congressional action. 

One commenter asked if land can be 

included in a competitive lease sale 

only through the nomination process. In 

considering this question, the BLM 

concluded that there may be instances 

where it would be in the public interest 

to include land in a competitive sale 

that has not been nominated. In 

response to this comment, we have 

revised the language of sections 3203.5 

and 3203.10 to clarify that the BLM may 

include land in a competitive lease sale 

on its own initiative. We have also 

revised the language of section 3203.13 

to provide that the BLM may hold a 

competitive lease sale on its own 

initiative even in a state where no 

nominations are pending. Examples of 

when competitive sale of lands that 

have not been nominated might be in 

the public interest include adding to a 

lease sale parcels which might 

otherwise be drained by wells on 

adjacent acreage, or putting up for 

competitive sale land for which the 

BLM received an application for a direct 

use lease where the BLM determines 

that there is competitive interest. 

Final section 3203.10 describes the 

process for nominating lands for 

competitive sale. In accordance with the 

statutory amendments, it increases to 

5,120 acres (from the previous 2,560 

acres) the maximum size of a lease, 

unless the area to be leased includes an 

irregular subdivision. This section also 

explains how a nominator must describe 

the lands nominated. These land 

description provisions were previously 

found at section 3204.11. The only 

change from those provisions is a 

clarification that lands surveyed under 

the public land rectangular survey 

system are to be described to the nearest 

aliquot part. This section also makes 

clear that a nominator may submit more 

than one nomination, as long as each 

nomination satisfies the acreage and 

land description requirements and 

includes the required filing fee, and that 

the BLM may reconfigure lands to be 

included in each parcel offered for sale. 

Two commenters stated that the 

proposed rule did not address the 

situation of geothermal projects that 

contain both Federal and non-federal 

lands, which one commenter said 

constituted the majority of its projects. 

These commenters were concerned that 

a competitive leasing system could 

result in a developer having to wait up 

to 2 years to find out whether it is able 

to acquire a lease to Federal land parcels 

adjacent to or intermixed with nonfederal lands on which leases could be 

speedily acquired. They stated that if a 

developer cannot control the entire 

resource, it cannot secure financial 

backing to build a power plant. They 

recommended revising the regulations 

to provide for ‘‘direct’’—by which they 

apparently meant ‘‘non-competitive’’ 

but not exclusive direct use—leasing of 

Federal lands in a number of scenarios 

which would provide effective control 

to a holder of non-federal interests. 

The commenters appear to be 

suggesting that an entity that already 

controls the majority of leases overlying 

a geothermal resource area should have 

the right to acquire a lease on any 

contiguous Federal lands. We did not 

change the rule in response to these 

comments because the statute requires a 

competitive leasing process except in 

specific circumstances. The 

circumstances under which Congress 

decided to allow noncompetitive leasing 

do not include the leasing of adjacent or 

intermixed Federal lands. Implementing 

this suggestion would require statutory 

change. We note that once all of the 

Federal and private lands are leased, 

control of the resource can be achieved 

through commitment of all the lands, 

both Federal and private, to a unit. The 

unit provisions are in subpart 3280 and 

are discussed below. 

The commenters also suggested that a 

less-favored alternative to 

noncompetitive leasing of adjacent or 

intermixed lands would be to grant the 

‘‘contiguous resource owner’’ a right of 

first refusal in a competitive lease sale. 

In informal discussions at the public 

meeting on the proposed geothermal 

rule in Reno, a BLM representative may 

have indicated agreement with the 

suggestion that a contiguous resource 

owner might be able to obtain a right of 

first refusal. A careful reading of the 

statute, however, makes it clear that it 

does not provide a right of first refusal 

as an option to any bidder in a 

competitive lease sale. The language of 

the statute is: ‘‘Except as otherwise 

specifically provided by this Act, all 

land to be leased that is not subject to 

leasing under subsection (c) 

[noncompetitive leasing when no bids 

are received in a competitive lease sale] 

shall be leased * * * to the highest 

responsible qualified bidder * * *.’’ 30 

U.S.C. 1003(b)(1). The specific 

exceptions to including land in a 

competitive lease sale involve lands 

subject to mining claims, leases issued 

pursuant to applications pending when 

the statutory amendments were enacted, 

and direct use leases. Because Congress 

did not provide an exception for 

resource owners of contiguous or 

intermixed lands, the Department has 

no authority to make such an exception. 

One commenter asked how lease 

nominations would be prioritized in 

terms of processing under the NEPA, 

and whether all of the pending lease 

applications would be administered 

before the BLM began working on 

nominated lands. 

As explained at the public meeting in 

Reno, prioritization in terms of NEPA 

processing is not within the scope of 

these regulations. In general, 

nominations are processed on a ‘‘firstin, first-out’’ basis. However, the BLM 

may establish priorities based on the 

adequacy of existing NEPA documents 

in order to issue leases as efficiently as 

possible. In such circumstances, it is 

possible that newer nominations could 

be processed ahead of older ones. The 

BLM will begin processing nominated 

lands as the nominations are received. 

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Final section 3203.11 implements the 

new statutory provision, at 30 U.S.C. 

1003(e), that the BLM may offer parcels 

as a block at a competitive sale when it 

is reasonable to expect that a geothermal 

resource that can be produced as one 

unit underlies those parcels. 

One commenter inquired ‘‘who, when 

and how’’ it will be determined that 

leases should be issued as a block to 

avoid the ‘‘checkerboard’’ ownerships 

often arising through the competitive 

process. In response to this comment, 

we have revised the language of section 

3203.11(a) to clarify that a nominator 

may request that leases be issued as a 

block or the BLM may offer leases as a 

block on its own initiative, and that, in 

either case, the BLM will offer parcels 

as a block only if information is 

available indicating that a geothermal 

resource that could be produced as one 

unit can reasonably be expected to 

underlie such parcels. The timing of 

block requests would be at the time of 

nomination by the nominator, or by the 

time of the sale notice if by the BLM’s 

initiative. At the time of nomination, a 

nominator could bring to the BLM’s 

attention any concerns it may have that 

checkerboard ownership of the parcels 

could impede development of the 

geothermal resource. The BLM may take 

that into consideration in deciding 

whether to offer the nominated lands as 

a block or as individual parcels. 

One commenter suggested that 

proposed section 3203.11 be 

strengthened by requiring that block 

nominations be accompanied by 

geologic and scientific data sufficient to 

show that the nominated lands will 

most likely contain geothermal 

resources from the same pool or 

structure, and not rely solely on the 

BLM’s general knowledge of the area. 

We believe that proposed section 

3203.11 already addresses the 

commenter’s concern by requiring that a 

nominator submit information to 

support its request. In response to this 

comment, however, we moved the 

language in section 3203.11(b) of the 

proposed rule, that ‘‘BLM may request 

that you provide additional 

information’’ to section (a) to clarify that 

it pertains to nomination block requests, 

and we strengthened it by replacing 

‘‘request’’ with ‘‘require’’ so that it 

reads: ‘‘BLM may require that you 

provide additional information.’’ The 

BLM will not offer parcels as a block 

unless it determines that a geothermal 

resource that could be produced as one 

unit can reasonably be expected to 

underlie such parcels, and will consider 

available information to make that 

determination. 

Final § 3203.12 provides for a filing 

fee for nominations of lands. In this 

final rule, the amount of the fee—$100 

per nomination plus $0.10 per acre of 

lands nominated—was moved from 

proposed section 3203.12 to the fee 

schedule at section 3000.12 as 

explained in the preamble to the 

proposed rule (71 FR 41545). We also 

made a conforming amendment to 

section 3000.12. As with all fees in the 

fee schedule in section 3000.12, these 

amounts will be adjusted annually 

according to the change in the Implicit 

Price Deflator for Gross Domestic 

Product by way of publication of a final 

rule in the Federal Register, and will 

subsequently be posted on the BLM 

Web site (http://www.blm.gov) (see 

section 3000.12(a)). 

One commenter stated that 

government agencies incur costs with 

leasing operations and those costs 

should be covered. The commenter 

wrote that the BLM and others agencies 

need these funds to monitor nearby 

springs and monitor the effects of the 

extraction. 

The BLM agrees that the costs it 

incurs as a result of leasing operations 

should be reimbursed by the lessees. For 

this reason, final section 3203.12 

requires a filing fee for nominations of 

land, as further discussed below, and 

final sections 3203.17, 3204.10, 3205.10, 

and 3211.10 provide that lease 

applicants must pay a processing fee to 

reimburse the government’s processing 

costs. We did not change the rule in 

response to this comment. We discuss 

monitoring below in connection with 

final section 3206.11 in response to 

another part of this commenter’s 

comments. 

Two commenters opposed the 

concept of nomination fees. One 

commenter stated that the nomination 

process gives the BLM the benefit of a 

company’s exploration expertise, 

providing the BLM and the public with 

valuable insights for which the BLM 

should not charge a fee. The commenter 

asked at the public meeting in Reno 

whether a nomination was limited in 

acreage, that is, whether the $100 filing 

fee was per lease, and in later written 

comments stated that the fee ‘‘is ‘per 

parcel,’’ which has apparently been 

interpreted as ‘per lease.’ ’’ The 

commenter suggested that charging a 

nomination fee further discourages 

geothermal development on Federal 

lands. Another commenter suggested 

that the nomination fee should only 

cover administrative costs, and that 

these funds should be retained by the 

local BLM office for that specific 

purpose. 

We did not change the rule in 

response to these comments. As 

explained in the preamble to the 

proposed rule, the BLM is authorized to 

charge reasonable filing fees under 

Section 304(a) of the Federal Land 

Policy and Management Act of 1976, 43 

U.S.C. 1734(a) (71 FR 41545). Congress 

gave no indication in its amendments to 

the Geothermal Steam Act that it 

intended to insulate geothermal 

nominators from fees. The general 

Federal policy regarding fees, also 

discussed in the preamble to the 

proposed rule, is to charge a processing 

fee that recovers the agency’s reasonable 

processing costs, which corresponds to 

the suggestion by the second commenter 

just cited. The BLM does not at this time 

have the data necessary to determine its 

actual costs of processing nominations, 

but our experience indicates that those 

costs far exceed $100 per nomination 

and $0.10 per acre. In order to 

discourage frivolous nominations, we 

proposed this nominal filing fee (see 

Solicitor’s M—Opinion No. M–36987, 

‘‘BLM’s Authority to Recover Costs of 

Minerals Document Processing,’’ at n.6). 

We will collect data on the actual costs 

of processing these nominations and 

expect to propose a processing fee to 

cover reasonable agency costs in the 

future. 

One commenter at the August 31, 

2006, public meeting in Reno asked 

whether a nomination of lands for a 

competitive sale is limited in acreage. 

The response correctly noted that, as 

provided in proposed and final section 

3203.10(b), a nomination may not 

exceed 5,120 acres (unless the area to be 

leased includes an irregular 

subdivision), which is the maximum 

size of a lease (see section 3206.12). We 

want to clarify, however, that the 

nomination fee is per nomination, not 

per lease. Proposed and final section 

3203.12 states that a nominator must 

submit the filing fee ‘‘with your 

nomination.’’ While each nomination is 

limited to the maximum acreage of a 

lease, in ‘‘parceling’’ the land before the 

lease sale (see explanation below) BLM 

may decide to offer the nominated lands 

as more than one lease. Thus, the $100- 

per-nomination filing fee could cover 

more than one eventual lease, but 

cannot cover more than 5,120 acres 

(with the exception noted). 

There also appears to be some 

confusion regarding the terminology of 

‘‘nomination,’’ ‘‘lease,’’ and ‘‘parcel.’’ 

After nomination, but prior to the lease 

sale, the BLM will prepare the 

nominated lands for competitive sale. 

This process, often referred to as 

‘‘parceling,’’ involves: subdividing 

nominated areas into areas that do not 

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exceed the maximum allowed size for a 

lease; accurately describing the lands in 

conformance with the legal land system; 

and attaching appropriate stipulations 

from the land use plans. Thus, the fee 

is neither ‘‘per parcel’’ nor ‘‘per lease,’’ 

but ‘‘per nomination.’’ It is possible that 

after parceling, lands offered in a 

competitive sale may not be configured 

as originally nominated. In general, the 

BLM refers to lease offerings as parcels. 

Regarding the comment that fees 

collected should be retained by the local 

BLM office, we explained in the 

preamble to the final minerals cost 

recovery rule (70 FR 58861, October 7, 

2005) that the ‘‘BLM intends to structure 

its budget processes to return fees 

collected to the BLM office which 

processes the actions.’’ Thus, the BLM 

has already addressed future 

implementation of this suggestion. 

Final section 3203.13 provides that 

the BLM will hold a competitive lease 

sale at least once every 2 years in states 

where nominations are pending, and 

allows for a sale to include lands in 

more than one state. As explained 

above, we have also added language to 

clarify that the BLM may include land 

in a competitive lease sale on its own 

initiative. As explained in the preamble 

to the proposed rule (71 FR 41545), we 

deleted the provision at previous 

section 3205.13 regarding the fair 

market value of bids because we 

concluded that the competitive bidding 

process itself is a reflection of the fair 

market value of the lease. Moreover, 

eliminating this bidding floor may 

encourage more competitive bidding, 

which both serves the Energy Policy Act 

policy of encouraging development of 

geothermal resources and is 

economically beneficial to the United 

States to the extent leases are issued 

competitively, because competitive 

leases are issued with bonus bids and 

have higher rental rates. 

A number of commenters urged that 

proposed section 3203.13 be revised to 

require more frequent lease sales. These 

commenters noted that the statute 

requires that lease sales be held at 

minimum every 2 years and does not 

establish a cap that would prevent more 

frequent leasing. Various reasons were 

cited in support of holding lease sales 

more frequently, e.g.: Long delays in the 

leasing process would make financing 

difficult or impossible and stunt 

development; The geothermal 

production tax credit has only a 2-year 

window; Leasing only every 2 years 

would not accomplish the goals of the 

Energy Policy Act; and Competitors 

could spend the time waiting for a lease 

sale proving up the resource to know 

how to outbid the nominator. Some 

commenters suggested that the 

regulations should require the BLM to 

hold quarterly lease sales, as in the oil 

and gas program, in any state where 

there are nominations pending, and 

require that the BLM process all lease 

nominations within 6 months. One 

commenter suggested that geothermal 

lease sales be held in conjunction with 

quarterly oil and gas lease sales. A 

commenter also recommended that the 

BLM require quarterly publication of the 

status of pending lease nominations and 

the reason for further delay if the tract 

has not been put forward for leasing 

after 6 months. One commenter 

suggested that the rule provide that 2 

years is the maximum, but that the BLM 

will attempt to hold a lease sale every 

60 days. 

We did not change the rule in 

response to these comments. As the 

commenters noted, section 3203.13 

provides the same time frame as the 

statute at 30 U.S.C. 1003(b). As the 

commenters also acknowledged, 

nothing in the statute or the regulations 

precludes more frequent lease sales. The 

quarterly competitive sales for oil and 

gas are mandated by statute. Congress 

made the decision not to impose a 

similar mandate for geothermal leasing, 

and we decline to add such a mandate 

in these regulations. We recognize that 

more frequent lease sales may benefit 

geothermal development and we expect 

that BLM state offices will schedule 

sales as frequently as feasible when 

lands are available for leasing. The 

decision whether to hold geothermal 

lease sales in conjunction with some oil 

and gas lease sales will be made on a 

state-by-state basis. Regarding the 

comment that competitors could spend 

time before a lease sale exploring the 

potential resource, we note that preleasing exploration is available to the 

nominator as well as to competitors. 

Final sections 3203.14 and 3203.15 

describe how the BLM will notify the 

public of competitive lease sales, the 

types of information the BLM will 

include in a notice of sale, and how the 

BLM will conduct the sale. Unlike the 

previous regulations at subpart 3205, 

this final rule does not restrict the 

competitive sale process to sealed bids, 

but is flexible enough to allow other 

competitive sale formats, such as oral 

auctions. We anticipate that most sales 

will be conducted through oral auctions. 

In order to protect the bidding 

process, we added at section 3203.15(c) 

a standard auction requirement that a 

bid may not be withdrawn and that a 

bid constitutes a legally binding 

commitment. This is current BLM 

practice both in the geothermal and oil 

and gas leasing programs. 

We received no comments on sections 

3203.14 and 3203.15 and have adopted 

them as proposed. 

Final section 3203.17 provides 

information related to the payment 

obligations of a successful bidder. 

Because the proposed competitive sale 

process is no longer restricted to sealed 

bids, a bidder will not have to submit 

any payments unless at the end of the 

sale it is the high bidder. This section 

provides that a successful bidder must 

pay twenty percent of the bid, the total 

first year’s rental, and the processing fee 

by close of business on the day of the 

sale or such other time as the BLM may 

specify. While the general expectation is 

that these payments will be made on the 

day of the sale, the section allows the 

BLM to specify another time for 

payments to be made if circumstances 

so require, such as, for example, the 

following business day. This section 

also adds personal checks to the list of 

financial instruments that may be used 

to make it easier for the successful 

bidder to make payments immediately 

after the sale. Final section 3203.17(c), 

like previous section 3205.16, requires 

that the balance of the bid be submitted 

within 15 calendar days after the sale. 

Two commenters objected that same 

day payment is not practical, nor 

possible in some cases, since the 

amount of the successful bid is not 

known prior to auction. One suggested 

that provision should be made for a 5- 

business-day settlement period for bids. 

We did not change the rule in 

response to these comments. The 

regulations at section 3203.17 provide 

that payment may be made by personal 

check, as well as other specified means, 

and that the BLM may specify another 

time for payment. We believe that these 

provisions provide ample opportunity 

for a lessee to make payment as directed 

under the regulation. We note that the 

regulations for oil and gas lease sales 

require payment by close of business on 

the day of sale, and experience shows 

that companies are able to comply with 

this provision. 

Final section 3203.18 cross-references 

subpart 3204, which addresses 

noncompetitive leasing other than direct 

use leases. 

Subpart 3204—Noncompetitive Leasing 

Other Than Direct Use Leases 

Final subpart 3204 describes when 

and how the BLM will issue 

noncompetitive geothermal leases. The 

most common method of obtaining 

noncompetitive leases under this 

subpart will be applying for parcels of 

land that did not receive bids in a 

competitive sale. This subpart does not 

address noncompetitive leases for lands 

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available exclusively for direct use of 

geothermal resources, which are 

covered in final subpart 3205. 

Final section 3204.5 lists the four 

types of lands available for 

noncompetitive leasing: (1) Parcels of 

land that did not receive bids in a 

competitive sale; (2) Lands available 

exclusively for direct use, addressed at 

final subpart 3205; (3) Lands subject to 

mining claims, addressed at final 

section 3204.12; and (4) Lands for 

which a lease application was pending 

on August 8, 2005, if the applicant so 

chooses. 

One commenter suggested that oil and 

gas leases be allowed to include the 

rights to geothermal resources 

underlying their oil and gas leases, at 

least for a grandfathered period. The 

commenter expressed concern that if the 

geothermal rights were put up for 

competitive bid, someone else could 

acquire them and drill geothermal wells 

among the oil and gas wells, interfering 

with oil and gas production. 

Oil and gas leases do not include the 

right to develop the geothermal 

resources; they are authorized under 

separate statutes and processes and a 

separate geothermal lease would have to 

be obtained. The commenter may have 

meant to suggest that oil and gas lessees 

be allowed to acquire geothermal leases 

for underlying resources on a 

noncompetitive basis. However, the 

statute allows noncompetitive leasing 

only in the four situations listed above. 

An oil and gas operator could apply for 

a noncompetitive direct use lease for the 

underlying geothermal resources, but if 

the BLM determined that there was 

competitive interest in a direct use 

lease, or that the area was appropriate 

for commercial generation of electricity 

from the geothermal resources, it would 

hold a competitive lease sale. It is thus 

possible that another entity could 

acquire a lease for the geothermal 

resources underlying the oil and gas 

lease. It is possible that lease 

stipulations could be inserted to avoid 

interference with a senior oil and gas 

lease. The statute at 30 U.S.C. 1016 

contains requirements to avoid 

interference to protect both geothermal 

interests and other uses. 

Final section 3204.10 requires an 

applicant for a noncompetitive lease to 

submit a processing fee and advance 

rent. The advance rent will be refunded 

if the application is rejected or 

withdrawn. These provisions are 

substantively the same as previous 

section 3204.12. We received no 

comments on this section and have 

adopted it as proposed. 

Final section 3204.11 explains the 

procedures for noncompetitive leasing 

of lands for which no bid is received in 

a competitive lease sale. This 

implements the statutory requirement at 

30 U.S.C. 1003(c). For efficiency of 

administration, in the first 30 days 

following the competitive sale, 

applications will be accepted only for 

parcels as configured in the sale notice. 

To provide equal opportunity during the 

first 24 hours after the lease sale, all 

applications received for a particular 

parcel on the first business day after the 

competitive sale will be considered as 

simultaneously filed, and the BLM will 

select one at random to receive a lease 

offer. A fair market value bid is not 

required for a noncompetitive lease. It 

would be difficult for the BLM to 

determine what an appropriate bid 

should be in a noncompetitive situation; 

moreover, allowing leases to be obtained 

without a bid should encourage 

additional geothermal exploration and 

development. We received no comments 

on section 3204.11 and have adopted it 

as proposed. 

Final section 3204.12 implements the 

statutory provision at 30 U.S.C. 

1003(b)(3) that allows a mining claimant 

with an approved plan of operations to 

apply for a noncompetitive geothermal 

lease. One commenter asked if a 

developer has a mining claim on acreage 

with an approved plan of operations, 

whether there is the same required 2- 

year waiting period following a 

competitive lease sale as lands that do 

not have a mining claim. 

We did not change the rule in 

response to this comment. Under final 

section 3204.12, the 2-year 

noncompetitive window following a 

competitive lease sale does not apply to 

a mining claimant with an approved 

plan of operations. A mining claimant 

with an approved plan of operations 

may file a noncompetitive lease 

application at any time up to the point 

that the BLM has accepted a bid for a 

lease on those lands. 

Final section 3204.13 implements a 

portion of the statutory provision at 30 

U.S.C. 1003(d)(2) that allows lease 

applications pending on August 8, 2005, 

to be processed under then-existing 

policies and procedures unless the 

applicant elects for the lease to be 

subject to the new leasing procedures. 

We received no comments on this 

section and have adopted it as 

proposed. 

Final section 3204.14 governs the 

amendment of noncompetitive lease 

applications. It provides that an 

applicant may amend an application at 

any time before the BLM issues a lease 

if the amended application meets the 

requirements in this subpart and does 

not add lands not included in the 

original application. To add lands, an 

applicant must file a new application. 

(The withdrawal of lands from 

noncompetitive lease applications is 

covered by final section 3204.15, 

discussed below.) This is a change from 

the previous regulations, as discussed in 

the preamble to the proposed rule, 

because the BLM decided that adding 

lands to an application was equivalent 

to submitting a new application, 

requiring a change in the priority date. 

We received no comments on this 

section and have adopted it as 

proposed. 

Final section 3204.15 provides that 

for 30 days after a competitive lease 

sale, the BLM will not accept partial 

withdrawals of noncompetitive lease 

applications, but will only accept 

withdrawals of entire noncompetitive 

lease applications. As explained in the 

preamble to the proposed rule, this is a 

change from previous section 3204.17, 

and is parallel to the provision at final 

section 3204.11 restricting 

noncompetitive applications for 

reconfigured lease parcels for the first 

30 days following a competitive sale. 

After 30 days, partial and whole 

withdrawals will be allowed at any time 

before the BLM issues the lease. Final 

section 3204.15 also provides (as did 

section 3204.17 of the previous 

regulations) that if a partial withdrawal 

results in failure to meet the minimum 

acreage required for a lease in final 

section 3206.12, the BLM will reject the 

lease application. 

Subpart 3205—Direct Use Leasing 

The Energy Policy Act provides the 

authority for the BLM to issue 

noncompetitive leases solely for the 

direct use of geothermal resources under 

certain conditions. Subpart 3205 is a 

new subpart added to describe these 

conditions and the process for applying 

for a direct use lease. This subpart 

implements the provisions of 30 U.S.C. 

1003(f). ‘‘Direct use lease’’ as used in 

this subpart has a specific meaning. As 

discussed above in relation to section 

3200.1 (Definitions), we have revised 

the definition of ‘‘direct use lease’’ to 

clarify that such a lease is issued 

noncompetitively. The new definition of 

‘‘direct use lease’’ is ‘‘a lease issued 

noncompetitively in an area BLM 

designates as available exclusively for 

direct use of geothermal resources, 

without sale, for purposes other than 

commercial generation of electricity.’’ 

Competitive leases also allow direct use, 

but they are not direct use leases. Unlike 

a direct use lease, under a competitive 

lease that the BLM has decided to limit 

to exclusive direct use, the resource may 

be sold (but it may not be used by the 

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operator or a purchaser for the 

commercial generation of electricity), 

and the acreage restrictions will be 

those applicable to competitive leases 

rather than direct use leases. 

Thus, permitted uses under different 

types of leases are as follows: (1) A 

lessee with a direct use lease may only 

use the resource directly itself; (2) A 

lessee with a competitive lease that is 

restricted to exclusive direct use may 

either use the resource directly itself or 

sell the resource to a purchaser who will 

use it only for direct use; (3) A lessee 

with either a competitive lease or a 

noncompetitive lease obtained 

following a sale that is not restricted to 

exclusive direct use may use the 

resource directly itself, sell the resource 

for direct use, use the resource for the 

commercial generation of electricity, or 

sell the resource for the commercial 

generation of electricity. 

Final section 3205.6 addresses the 

conditions under which the BLM issues 

direct use leases. This section explains 

that a direct use lease may be issued to 

the first qualified applicant only for 

lands that: (1) Are open for geothermal 

leasing; (2) Are appropriate for 

exclusive direct use, without sale, for 

purposes other than commercial 

generation of electricity; (3) Do not 

include more acreage than reasonably 

necessary for the proposed use; (4) Have 

been the subject of a published notice 

that did not result in a nomination; and 

(5) Are of no competitive interest, as 

determined by the BLM. The BLM will 

make the determination of whether the 

lands are appropriate for a direct use 

lease on a case-by-case basis at the time 

of application. The advantage of a direct 

use lease is that it may be issued 

noncompetitively to the first qualified 

applicant and may allow additional 

lands to be made available for 

geothermal leasing that would not be 

available, for environmental or other 

reasons, if the geothermal resource 

could be used for the commercial 

generation of electricity. 

We revised the title of section 3205.6 

from that in the proposed rule, to read 

‘‘When may BLM issue a direct use 

lease to an applicant?’’, instead of 

‘‘When will’’, to reflect the statutory 

language and the language of the 

regulatory text. We also added a 

paragraph (b) to the section to clarify 

that if the BLM determines that land for 

which an applicant has applied under 

this subpart is open for geothermal 

leasing and is appropriate only for 

exclusive direct use operations (see 

definition of ‘‘direct use’’), but 

determines that there is competitive 

interest in the resource, it will include 

the land in a competitive lease sale with 

lease stipulations limiting operations to 

exclusive direct use. 

Numerous comments were received 

opposing direct use leasing. One 

commenter predicted that direct use 

leasing could cause ‘‘major headaches 

and legal entanglements down the road’’ 

because improved technology or 

discovery of high-temperature resources 

would cause a direct use lessee to wish 

to produce electricity from the lease for 

sale offsite. The commenter suggested 

that because the statute permits, but 

does not require, direct use leasing, the 

BLM should ‘‘just say no’’ to such 

leasing. Another commenter agreed, 

asking what the BLM would do if a 

direct use lessee wanted to generate 

electricity, hypothesizing that if a direct 

use lessee found the resource was 

electrical grade, others would know and 

would want to file a nomination for a 

lease for electrical generation on the 

lease which the lessee had spent a great 

deal of money to obtain. The commenter 

also asked what the BLM would do if a 

lessee were generating electricity and 

wanted to drill wells for a greenhouse 

or other direct use. 

Congress provided a detailed process 

for the Secretary to allow limited 

noncompetitive direct use leasing in 

certain areas. We have interpreted the 

statutory provisions to allow for limited 

direct use leasing on certain lands 

which: (1) Would otherwise not be open 

to geothermal development at all due to 

potential impacts to other resource 

values; or (2) The BLM determines do 

not have potential for commercial 

electrical generation. We agree that it is 

possible that improved exploration, 

technology, or energy economics could 

cause a direct use lease to have the 

potential for commercial generation of 

electricity. However, the statute is clear 

that Congress intended that leases 

permitting commercial generation of 

electricity are to be offered through 

competitive lease sales. We would 

therefore not allow commercial 

electrical generation on a direct use 

lease. If a direct use lessee found an 

electrical grade resource, it would 

continue to have the right to develop the 

resource for direct use for the duration 

of its lease. As was pointed out at the 

public meeting in Reno, nothing 

prevents a lessee with an unrestricted 

competitive lease from using the 

resource for direct use as well as for 

electrical generation. We envision direct 

use leases as providing a streamlined, 

simpler noncompetitive process for 

development of geothermal areas that 

would otherwise not be developed. 

One commenter expressed concern 

regarding the administration of units 

that contain both regular and direct use 

leases. 

The BLM, in determining what areas 

are appropriate for direct use leases, 

will make every effort to avoid issuing 

direct use leases in areas with electrical 

generation potential. We would avoid 

including a direct use lease in a unit 

with leases that generate commercial 

electricity, because a direct use lease 

does not convey the rights to develop 

the resource commercially. It is possible 

that a unit could be formed entirely of 

direct use leases. 

One commenter believed there were 

two problems that direct use leasing and 

a direct use fee schedule were designed 

to address, and that both could have 

been resolved without direct use 

leasing. First, the commenter suggested 

that direct use leasing would not solve 

the problem of undesirable features 

being built (i.e., power plants and 

transmission lines), because direct use 

itself could involve undesirable features 

(e.g., a direct use meat packing plant 

with feedlots, holding pens, and traffic). 

Second, the commenter suggested that 

the perceived problem of an overlyburdensome royalty rate for direct use 

under the previous system was created 

by the institution of all-competitive 

leasing, and could have been solved by 

retaining the prior leasing system and 

providing for a fee on all direct use and 

a royalty on power generation, keeping 

noncompetitive rentals at $1 per acre. 

Regarding the second part of this 

comment, it appears that the commenter 

may be confused regarding when the 

direct use fee schedule applies. In fact, 

as the commenter suggested was 

appropriate, the fee schedule applies to 

all direct use of the resource regardless 

of the type of lease. We also note that 

the rental for noncompetitive leases 

under these new regulations remains at 

$1 per acre for the first 10 years. The 

first part of the comment, and 

arguments that the new competitive 

leasing system should be revised, 

should, as the commenter recognized, 

be addressed by Congress. 

We did not change the rule in 

response to these comments. 

Final section 3205.7 addresses the 

statutory acreage restrictions applicable 

to a direct use lease, which must not 

cover more than the quantity of acreage 

reasonably necessary for the proposed 

use, and in no case may exceed 5,120 

acres, except in the case of an irregular 

subdivision. We received no comments 

on this section and have adopted it as 

proposed. 

Final section 3205.10 explains the 

procedures for applying for a direct use 

lease and the types of information to be 

submitted with an application. The 

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information that is submitted is used by 

the BLM to determine if the requested 

acreage is necessary for the intended 

operation as described in section 

3205.7. This section would also require 

the submission of a nonrefundable 

processing fee for noncompetitive lease 

applications, as required by section 

3204.12 of the current regulations. 

One commenter stated that 

newcomers to the industry may not 

understand that, under section 3205.10, 

a direct use lessee is permitted to 

produce electricity on the lease, but 

only to serve the load of the direct use 

facility, and suggested that this should 

be spelled out. 

To clarify the rule in response to this 

comment, we revised the last sentence 

of section 3205.10(a) to utilize the 

defined phrase ‘‘commercial generation 

of electricity,’’ instead of the proposed 

language ‘‘to commercially generate 

electricity.’’ The sentence now reads: 

‘‘You may not sell the geothermal 

resource and you may not use it for the 

commercial generation of electricity.’’ 

The definition of ‘‘commercial 

generation of electricity’’ is ‘‘generation 

of electricity that is sold or is subject to 

sale, including the electricity or energy 

that is required to convert geothermal 

energy into electrical energy for sale.’’ 

Electricity that is produced on a direct 

use lease only to serve the load of the 

direct use facility does not fall within 

this definition and, as the commenter 

correctly pointed out, such use is 

permitted. 

A commenter stated that precluding 

the sale of the geothermal resource from 

a direct use lease seems 

counterproductive, because a purchaser 

might also use the resource for direct 

use and not for the commercial 

generation of electricity. The commenter 

asked whether, for example, a lessee 

could produce the resource and sell it 

to a direct use or power generation 

facility if it served only those facilities 

and was not sold into the power grid, or 

whether a lessee could use the resource 

directly itself, then sell the effluent to a 

third party for use in an adjacent district 

heating system not owned by the 

production lessee. The answer to these 

questions is no; a direct use lessee may 

not sell the resource even if it would not 

be used for commercial generation of 

electricity after sale. The BLM is 

constrained in drafting its regulations by 

the language of the statute, which 

provides that direct use leasing must be 

‘‘exclusively for direct use of geothermal 

resources, without sale for purposes 

other than commercial generation of 

electricity * * *.’’ 30 U.S.C. 1003(f). 

Please note the use of the phrase 

‘‘without sale’’ in the statutory language. 

The BLM does not have discretion to 

allow sale of the resource by a direct use 

lessee. A potential lessee who is 

interested in selling the resource for any 

purpose should nominate the lands for 

a competitive lease sale. We did not 

change the rule in response to this 

comment. 

One commenter was concerned that a 

direct use lessee would be prohibited 

from selling the business or property 

that uses the resource that is produced 

or producible from the lease, or would 

be prohibited from transferring the lease 

and the resource producible therefrom. 

A direct use lessee may assign 

(transfer) the lease. However, the lease 

and the business to which it supplies 

the geothermal resource must be 

transferred together to the same entity. 

This is because the statute prohibits sale 

of the resource from a direct use lease. 

We did not change the rule in response 

to this comment. 

One commenter expressed concern 

that information required by section 

3205.10(b) to apply for a direct use lease 

would not be available until after the 

lease was issued and the lessee could 

drill wells. The BLM disagrees. Because 

the statute limits a direct use geothermal 

lease to the quantity of acreage 

reasonably necessary for the proposed 

use, the BLM must obtain the 

information necessary to make this 

determination in advance of lease 

issuance. The BLM expects that the 

applicant will be able to explain the 

nature and scope of the intended use, 

which is what this section requires. The 

language of the regulation recognizes 

that the information provided is not 

necessarily complete or final, but will 

be based on anticipated production and 

development. We did not change the 

rule in response to this comment. 

Final section 3205.12 addresses direct 

use lease applications for lands 

managed by an agency other than the 

BLM. The BLM will forward a copy of 

such an application to the other agency. 

If that agency consents to leasing and 

recommends that the lands are 

appropriate for a direct use lease, the 

BLM will consider that consent and 

recommendation in determining 

whether to issue the lease. This section 

requires that the BLM obtain the 

consent of the surface management 

agency before issuing a direct use lease. 

We received no comments on this 

section and have adopted it as 

proposed. 

Final sections 3205.13 and 3205.14 

allow an applicant for a direct use lease 

to withdraw its application at any time 

or amend its application, without 

adding new lands, prior to lease 

issuance. To add new lands, an 

applicant must file a new application 

(see discussion of final section 3204.14, 

above). We received no comments on 

these sections and have adopted them as 

proposed. 

Final section 3205.15 discusses how 

the BLM will inform an applicant of its 

decision to approve or deny a direct use 

lease application. We received no 

comments on this section and have 

adopted it as proposed. 

Subpart 3206—Lease Issuance 

Final subpart 3206 addresses lease 

issuance in general. 

Final section 3206.10 is nearly 

identical to previous section 3206.10, 

with the addition of a provision 

notifying applicants that all payments 

must be made before the BLM will issue 

a lease. This addition reflects current 

BLM practice. We received no 

comments on this section and have 

adopted it as proposed. 

Final section 3206.11 discusses what 

the BLM must do before issuing a lease. 

The section is unchanged from the 

previous regulations except for changing 

the words ‘‘will not significantly 

impact’’ at the beginning of paragraph 

(b), to ‘‘will not have a significant 

adverse impact on,’’ which more closely 

tracks the language of 30 U.S.C. 1026(c). 

One commenter voiced a concern 

regarding safeguarding thermal features 

of national parks. 

Both the Geothermal Steam Act and 

the regulations already provide 

safeguards for thermal features of 

national parks. Final section 3206.11(b), 

in accordance with 30 U.S.C. 1026(a), 

provides that before issuing a lease, the 

BLM must determine that lease 

development will not have a significant 

adverse impact on any significant 

thermal feature of National Park System 

units. Moreover, the Geothermal Steam 

Act at 30 U.S.C. 1026(b) provides that 

the Secretary must maintain a 

monitoring program for significant 

thermal features within units of the 

National Park System. We did not 

change the rule in response to this 

comment. 

Final section 3206.12 addresses 

minimum and maximum lease sizes, 

which were addressed in the previous 

regulations at section 3204.14. The 

maximum lease size increased from 

2,560 acres to 5,120 acres, as provided 

at 30 U.S.C. 1006. We received no 

comments on this section and have 

adopted it as proposed. 

Final section 3206.13 addresses the 

maximum acreage that one lessee may 

hold, which was addressed in the 

previous regulations at section 3206.12. 

This section is identical to the first 

sentence of previous section 3206.12 

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and implements 30 U.S.C. 1006, which 

sets the limit at 51,200 acres in any one 

State. The remainder of section 3206.12 

of the previous regulations was deleted 

because the Energy Policy Act 

amendments deleted those provisions in 

the statute. We received no comments 

on this section and have adopted it as 

proposed. 

Final section 3206.14 explains how 

the BLM computes acreage holdings. 

This section is identical to previous 

section 3206.13, except for minor 

editorial changes. We received no 

comments on this section and have 

adopted it as proposed. 

Final section 3206.15, explaining how 

the BLM will charge acreage holdings if 

the United States owns only a fractional 

interest in the geothermal resources, is 

identical to previous section 3206.14, 

except for minor editorial changes. We 

received no comments on this section 

and have adopted it as proposed. 

Final section 3206.16 explains that 

acreage is not chargeable against the 

acreage limitations if it is included in 

any approved unit agreement or 

development or drilling contract. These 

exclusions implement 30 U.S.C. 1017(d) 

and (g)(2) and were addressed at section 

3206.15 in the previous regulations. The 

reference in the previous regulations to 

cooperative agreements was deleted 

because they are no longer mentioned in 

this part. We received no comments on 

this section and have adopted it as 

proposed. 

Final section 3206.17 addresses what 

the BLM does if a lessee’s holdings 

exceed the maximum acreage limits set 

in final section 3206.13. This section is 

identical to section 3206.16 of the 

previous regulations. We received no 

comments on this section and have 

adopted it as proposed. 

Final section 3206.18 addresses when 

the BLM issues a lease. It is identical to 

section 3206.18 of the previous 

regulations, except for a minor editorial 

change. We received no comments on 

this section and have adopted it as 

proposed. 

Subpart 3207—Lease Terms and 

Extensions 

Final subpart 3207 explains the new 

system of lease terms and extensions 

provided at 30 U.S.C. 1005. 

Final section 3207.5 summarizes the 

new lease terms (length of time a lease 

is in effect) and lease term extensions, 

which include: (1) A 10-year primary 

term and two 5-year extensions of the 

primary term; (2) A five-year drilling 

extension; (3) A production extension of 

up to 35 years; and (4) A renewal term 

of up to 55 years. We received no 

comments on this section and have 

adopted it as proposed. 

Final sections 3207.10, 3207.11, and 

3207.12 address the primary term of a 

lease and explain the requirements for 

obtaining and continuing extensions of 

the primary term. As explained in the 

preamble to the proposed rule (71 FR 

41547), we interpret the statute as giving 

the BLM authority to prescribe work 

requirements that must be completed by 

the end of the 10th lease year, in accord 

with the statutory language relating to 

work requirements and in order to give 

effect to the statutory 10-year primary 

term, and to provide a basis for deciding 

whether the BLM will grant the initial 

5-year extension. We note that work 

requirements relating to the initial and 

additional extensions of the primary 

term are addressed in different 

paragraphs of 30 U.S.C. 1005. Paragraph 

(a)(2) of section 1005 mandates that for 

each year of an initial 5-year extension 

lessees must satisfy work requirements 

under paragraph (b) or make payments 

in lieu of minimum work requirements 

under paragraph (c). Paragraph (a)(3) 

provides that a lessee must be granted 

an additional 5-year extension if it 

satisfied the requirements of the initial 

extension; paragraph (b) then mandates 

minimum work requirements for each 

year after the 10th year of the lease. 

Final section 3207.11 establishes 

work requirements that a lessee must 

meet within the 10-year primary term 

for a lessee to be eligible for the initial 

5-year extension of the primary term. 

The BLM formulated its list of potential 

types of work that could be performed 

to meet the work requirements based on 

the statutory provision, at 30 U.S.C. 

1005(b)(2). The provisions require that 

the work should establish a geothermal 

potential or, if that potential has been 

established, should confirm the 

existence of producible geothermal 

resources. The amount of work that 

must be performed is quantified as a 

minimum dollar expenditure per acre, 

as it was in the previous regulations (see 

previous sections 3210.13 (diligent 

exploration requirements) and 3208.14 

(significant expenditures)). 

For the work requirements that must 

be completed by the end of the 10th 

year of the lease, final section 3207.11(a) 

requires a $40 per acre expenditure over 

the 10-year period of the primary term 

of the lease, which is the same 

expenditure that was required at section 

3210.13 of the previous regulations for 

diligent exploration during the primary 

term. For work requirements for each 

year of the initial 5-year extension, final 

section 3207.12(a) requires an annual 

dollar expenditure of $15 per acre, 

which is the same as was required at 

section 3208.14 of the previous 

regulations for significant expenditures 

during a first lease extension. For work 

requirements for years 16 through 19 of 

the additional 5-year extension, final 

section 3207.12(c) requires an annual 

dollar expenditure of $25 per acre. No 

work is required for the 20th year 

because the lessee must obtain either a 

drilling extension (section 3207.14) or a 

production extension (section 3207.15) 

to hold the lease beyond the 20th year. 

We determined that the dollar 

expenditure for work requirements 

should increase enough during an 

additional extension to motivate a lessee 

to put a lease into production if it is not 

already producing in commercial 

quantities by the end of the 15th year. 

As the annual expenditure requirement 

increases $11 per acre after the 10th 

lease year (from $40 over a 10-year 

period, or an average of $4 per acre per 

year, to $15 per acre per year), we 

require in final section 3207.12(c) that 

the expenditure increase by a nearly 

equivalent amount—$10 per acre—after 

the 15th lease year (from $15 to $25 per 

acre per year). We believe this level of 

increase serves the purpose of 

encouraging diligent development of the 

resource. 

One commenter asked whether a 

lessee’s own work on a lease would 

count toward satisfaction of the work 

requirement if the lessee was a geologist 

qualified to do valuable work on a lease. 

As was true under the previous 

regulations, a lessee’s work on a lease 

may count toward satisfaction of the 

work requirement as long as it is 

engaged in activities that establish a 

geothermal potential or confirm the 

existence of producible geothermal 

resources. A lessee’s geologic work on a 

lease may count if it results in original, 

independent data, for example, mapping 

or preparing geological cross-sections of 

the lease area. The dollar expenditure 

under such circumstances would be 

calculated by the equivalent cost of 

paying a professional geologist for 

similar maps or cross-sections. 

Final sections 3207.11(b) and 

3207.12(d) allow a lessee to make 

minimum annual payments instead of 

performing the work requirements, as 

provided in the statute at 30 U.S.C. 

1005(c). These sections provide that a 

lessee may make a payment equivalent 

to the required work expenditure, such 

that the total of the payment and the 

value of the work performed equals the 

dollar value of the expenditure that 

would otherwise be required. As 

provided in the statute, these sections 

also allow the BLM to limit the number 

of years that it accepts such payments, 

if it determines that payments in lieu of 

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work requirements will impair 

achievement of diligent development of 

the geothermal resource. We concluded 

that such impairment determinations 

are more appropriately made on a caseby-case basis and therefore we did not 

include in the rule a specific limit on 

the number of years that the BLM will 

accept such payments. 

The final rule takes a different 

approach than the previous rule 

regarding the amount of payments that 

are allowable in lieu of work 

performance, in that it does not allow 

payments in a lesser amount than the 

value of the required work. We believe 

this change furthers the statutory 

purpose of encouraging the 

development of geothermal resources. 

The final rule also includes an 

automatic inflation adjustment for the 

minimum work requirements and for 

monetary payments in lieu of the work 

performance. Final sections 3207.11(f) 

and 3207.12(i) provide that the dollar 

amount of the requirements will be 

adjusted automatically every three 

calendar years based on the Implicit 

Price Deflator for Gross Domestic 

Product that is published annually by 

the U.S. Department of Commerce. 

Because the adjustments will simply be 

based on a mathematical formula, the 

adjustments will be made in succeeding 

final rules without notice and comment, 

which is the procedure that the BLM 

used in its cost recovery rule published 

on October 7, 2005 (70 FR 58872). 

One commenter objected to the 

inclusion of an inflation adjustment for 

these payments, suggesting that such an 

adjustment is not authorized by law. We 

disagree with the comment. The statute 

authorizes the Secretary of the Interior 

to set reasonable work requirements 

(‘‘The Secretary shall issue regulations 

prescribing minimum work 

requirements for geothermal leases * * 

*.’’) and in lieu payments (‘‘In lieu of 

the minimum work requirements * * * 

the Secretary shall by regulation 

establish minimum annual payments * 

* *’’) 30 U.S.C. 1005(b)(2) and (c). It is 

within the Secretary’s discretion to 

choose a reasonable approach to setting 

such requirements and payments. 

Nothing in the statute precludes the 

inclusion of an inflation adjustment, 

which is a widely-used and generally 

accepted approach. We did not change 

the rule in response to this comment. 

Final sections 3207.11(b) and 

3207.12(d) provide that a lessee is 

exempt from work requirements if it 

submits documentation to the BLM 

showing that it has produced or utilized 

geothermal resources in commercial 

quantities. This implements 30 U.S.C. 

1005(f), which provides that minimum 

work requirements do not apply after 

the date on which the geothermal 

resource is utilized in commercial 

quantities. 

Final sections 3207.11(c) and (e) and 

3207.12(f) and (g) provide timeframes 

for a lessee to submit information to the 

BLM showing that it has met the work 

requirements or paid or produced in 

lieu thereof, explain the type of 

information that must be submitted, and 

explain the BLM’s approval process. 

Final section 3207.12(e) provides that 

if a lessee expends an amount greater 

than the dollar expenditure required in 

that year on suitable development 

activities, the lessee may apply any 

excess payment to any subsequent year 

within that same 5-year extension 

period. This is similar to section 

3208.14(a) of the previous regulations. 

Except for the comment regarding 

inclusion of an inflation adjustment 

discussed above, we received no 

comments on sections 3207.10, 3207.11, 

and 3207.12 and have adopted them as 

proposed. 

Final section 3207.13 exempts from 

the work requirements a lessee whose 

lease overlies a mining claim when: (1) 

The mining claim has a plan of 

operations approved by the appropriate 

Federal land management agency; and 

(2) Development of the geothermal 

resource would interfere with the 

mining operations. This implements 30 

U.S.C. 1005(e). We received no 

comments on this section and have 

adopted it as proposed. 

Final sections 3207.14 and 3207.15 

implement the 5-year drilling and 35- 

year production extensions provided for 

in the statute at 30 U.S.C. 1005(g). As 

explained in the preamble to the 

proposed rule (71 FR 41548), we 

conclude that the language in the statute 

supports applying the 5-year drilling 

and 35-year production extensions to 

individual leases, as well as to leases 

under cooperative or unit agreements. 

We received no comments on these 

sections and have adopted them as 

proposed. 

Final section 3207.14 addresses 

qualifications for a drilling extension. 

As explained in the preamble to the 

proposed rule (71 FR 41548–41549), a 

lessee who submits information 

showing that it has met the applicable 

requirements (work activities or 

payment or production in lieu thereof) 

will continue in the primary term 

through the 20th year. Because the 

statute provides for a drilling extension 

only if a lessee is engaged in qualifying 

drilling operations at the time the 

primary term ends (see 30 U.S.C. 

1005(g)), final section 3207.14 allows 

the drilling extension only if: (1) A 

lessee was drilling over the end of the 

20th lease year (when the primary term 

would end due to lease expiration); or 

(2) A lessee had failed to submit 

information showing that it had met the 

requirements for an extension of the 

primary term and was drilling over the 

end of a year subsequent to the 10th 

year (in which case the primary term 

would terminate due to a failure to 

comply with requirements). The section 

further specifies that to qualify for the 

drilling extension, the lessee must be 

drilling a well for the purposes of 

commercial production to a target that 

the BLM determines is adequate, based 

on the local geology and type of 

proposed development. The lease will 

expire if, at the end of the 5-year drilling 

extension, the lessee does not qualify for 

a production extension (i.e., if the lessee 

is not producing or utilizing the 

geothermal resource in commercial 

quantities—see discussion of final 

section 3207.15, below). We received no 

comments on this section and have 

adopted it as proposed. 

Final section 3207.15 provides a 

production extension of up to 35 years 

for a lease that is: (1) Actually 

producing geothermal resources in 

commercial quantities; or (2) Has a well 

capable of producing geothermal 

resources in commercial quantities and 

the lessee is making diligent efforts to 

utilize the resource. This reflects the 

definition at 30 U.S.C. 1005(h) of 

‘‘produced or utilized in commercial 

quantities,’’ which is also defined at 

section 3200.1. The section also 

specifies the types of information a 

lessee must provide to the BLM for the 

BLM to determine whether to grant a 

production extension. A lessee with a 

BLM-approved utilization plan allowing 

for seasonal operation would be eligible 

for the production extension as long as 

it was producing or utilizing the 

geothermal resource in commercial 

quantities during the periods that the 

utilization plan provided for operations. 

We received no comments on this 

section. In the final rule we added a 

cross-reference to section 3212.15 to 

make it clear that a lease will not 

terminate if it satisfies the conditions in 

that section. 

Final section 3207.16 provides for a 

preferential right of renewal of a lease 

for a second term that is equal to the 

length of the primary term including the 

initial and additional extensions (a total 

of 20 years) plus the length of the 

production extension (up to 35 years) 

for a total renewal period of up to 55 

years. A renewal could be granted under 

such terms and conditions as the BLM 

deems appropriate, if at the end of the 

production extension, the lessee is 

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producing or utilizing geothermal 

resources in commercial quantities and 

the lands are not needed for any other 

purpose. This provision implements 30 

U.S.C. 1005(g). This section also 

specifies that the renewal term 

continues only so long as the lessee is 

producing or utilizing geothermal 

resources in commercial quantities. The 

term ‘‘produced or utilized in 

commercial quantities’’ is defined in 

proposed section 3200.1. We received 

no comments on this section and have 

adopted it as proposed. 

Final section 3207.17 provides that 

leases committed to a unit agreement 

that would expire before the unit term 

would expire may be extended to match 

the term of the unit if unit development 

has been diligently pursued. Paragraph 

(a) of this section is virtually identical 

to the previous regulation at section 

3208.10(a)(4), with a slight change in 

wording to remove any implication that 

the holder of the expiring lease must be 

the one to have diligently pursued unit 

development. Final sections 3207.17 (b) 

and (c) establish procedures for these 

circumstances. Under final section 

3207.17 (b), to extend the term of a lease 

committed to a unit, the unit operator 

must send to the BLM a request for lease 

extension at least 60 days before the 

lease expires showing that unit 

development has been diligently 

pursued. In the final rule we amended 

the paragraph (b) to make it clear that 

BLM may require the operator to submit 

additional information prior to 

approving the application. Final section 

3207.17 (c) provides that within 30 days 

after receiving your complete extension 

request, the BLM will notify the unit 

operator whether it approves the 

request. Under final paragraph (c), the 

30 days will begin running after BLM 

has received all information necessary 

to act on the application. 

Final section 3207.18 provides that a 

lease that is eliminated from a unit is 

eligible for an extension if it meets the 

requirements for such extensions. We 

received no comments on this section. 

In the final rule we removed the 

references to drilling and production 

extensions because lands eliminated 

from a unit may also be eligible for an 

initial or additional extension of the 

primary term. 

Previous Subpart 3208—Extending the 

Primary Lease Term 

Previous subpart 3208 is removed 

because under this final rule the subject 

of extensions of lease terms is addressed 

in subpart 3207 for leases issued: (1) 

After August 8, 2005 (other than for 

leases issued in response to applications 

that were pending on that date for 

which no election is made under section 

3200.8(b)(1)); and (2) Before August 8, 

2005, for which an election is made 

under section 3200.7(a)(2). Although 

removed from the CFR, the substance of 

previous subpart 3208 (43 CFR subpart 

3208 (2004)) will continue to have 

vitality for leases issued before August 

8, 2005, for which no election is made 

under section 3200.7(a)(2), and for 

leases issued in response to applications 

pending on that date for which no 

election is made under section 

3200.8(b)(1). As discussed in an earlier 

section of this preamble, leases in these 

two categories continue to operate 

under certain provisions of the rules in 

effect on August 8, 2005, unless they 

elect otherwise. 

We received no comments on the 

removal of this subpart. 

Previous Subpart 3209—Conversion of 

Lease Producing Byproducts 

Previous subpart 3209 is removed 

because lease conversions that subpart 

covered are no longer allowable under 

the Energy Policy Act. We received no 

comments on the removal of this 

subpart. 

Subpart 3210—Additional Lease 

Information 

Final sections 3210.10 and 3210.11 on 

lease segregation remain substantively 

unchanged from the previous sections. 

We received no comments on these 

sections and have adopted them as 

proposed. 

Final section 3210.12 references new 

lease size limits. In other respects, it is 

substantively unchanged from the 

previous section. The preamble to the 

proposed rule mistakenly implied that 

the processing fee for lease 

consolidations was new in this rule. In 

fact, that fee had been previously added 

by the minerals cost recovery rule (see 

70 FR 58854 (October 7, 2005)). We 

received no comments on this section 

and have adopted it as proposed. 

This final rule removes previous 

sections 3210.13, 3210.14, 3210.15, and 

3210.16, all of which pertained to the 

previous diligent exploration 

requirements. Work requirements are 

addressed in the final rule in subpart 

3207 for leases issued: (1) After August 

8, 2005 (other than for leases issued in 

response to applications that were 

pending on that date for which no 

election is made under section 

3200.8(b)(1)); and (2) Before August 8, 

2005, for which an election is made 

under section 3200.7(a)(2). Despite the 

removal of these sections, the 

substantive terms of the cited sections 

(in the 2004 edition of the CFR) 

continue to apply to leases in effect 

before August 8, 2005, and leases issued 

on or after August 8, 2005, in response 

to applications pending on that date, 

unless the lessees elect under section 

3200.7(a)(2) or section 3200.8(b)(1) to be 

subject to the regulatory requirements of 

this final rule. We received no 

comments on the removal of these 

sections. 

Final section 3210.13 on leasing or 

locating minerals on a geothermal lease 

remains substantively unchanged from 

previous section 3210.17. We received 

no comments on this section and have 

adopted it as proposed. 

Final section 3210.14, which provides 

that the BLM may readjust the terms 

and conditions of a lease, replaces 

previous sections 3210.18, 3210.19, and 

3210.20 that related to the same topic. 

It implements 30 U.S.C. 1007, as 

revised. 

One commenter objected to allowing 

the BLM to readjust the terms and 

conditions of a lease. The commenter 

stated that allowing such changes after 

the lease is issued creates uncertainty 

for the developer and could create 

financing issues. 

We did not change the rule in 

response to this comment. As discussed 

below, these provisions are not 

substantively changed from the previous 

regulations (see previous sections 

3210.18 and 3210.20). The statutory 

provision providing that the Secretary 

may readjust lease terms and conditions 

at not less than 10-year intervals and 

may readjust rentals and royalties at not 

less than 20-year intervals beginning 35 

years after production (30 U.S.C. 1007) 

was not changed by the Energy Policy 

Act amendments, except for the removal 

of the 22.5 percent royalty cap 

previously included in 30 U.S.C. 

1007(b). The final rule implements the 

new statutory provision. 

Final section 3210.14(a) addresses 

readjustment of lease terms and 

conditions other than rentals and 

royalties; it replaces previous section 

3210.18. With one exception, paragraph 

3210.14(a) is substantively unchanged 

from previous section 3210.18. Previous 

section 3210.18 provided that once the 

BLM and the other agency reached 

agreement, the BLM would readjust the 

terms of the lease. It did not state, as the 

statute requires at 30 U.S.C. 1007(c), 

that the other agency must approve the 

readjustment. Final section 

3210.14(a)(2) clarifies that the other 

agency must approve the proposed 

readjustment. 

Final section 3210.14(b) addresses 

readjustment of rentals and royalties; it 

replaces previous section 3210.20(a). 

The previous 22.5 percent royalty cap 

for readjusted leases was removed from 

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the rules because that cap is no longer 

in the statute. 

Final sections 3210.14(c), (d), and (e) 

implement the procedures of 30 U.S.C. 

1007(b), and are somewhat different 

than the procedures in previous sections 

3210.19 and 3210.20. Under previous 

sections 3210.19(a) and 3210.20(b), the 

BLM notified lessees in writing of 

proposed readjustments and provided 

the lessee 30 days to object in writing 

to the new terms. The previous rules 

provided further that if a lessee: (1) Did 

not object, the proposed new terms 

would become part of the existing lease; 

or (2) Did object, the BLM would issue 

an appealable final decision on the new 

terms and conditions. The previous 

rules, however, did not expressly 

mention certain concepts contained in 

the statute that are described below. 

Under final sections 3210.14(c) and 

(d), the BLM will give a lessee a written 

proposal to readjust the rentals, 

royalties, or other terms and conditions 

of its lease. The lessee will have 30 days 

after receiving the proposal to file with 

the BLM an objection in writing to the 

proposed new terms and conditions. If 

the lessee does not object in writing or 

relinquish its lease, it will conclusively 

be deemed to have agreed to the 

proposed new terms and conditions. 

This concept, implied but not expressly 

stated in the previous rules, is taken 

directly from the statute. The BLM will 

then issue a written decision under final 

section 3210.14(d), setting the date that 

the new terms and conditions become 

effective as part of the lease. This 

decision will be in full force and effect 

under its own terms, and the lessee is 

not authorized to appeal the decision to 

the Department’s Office of Hearings and 

Appeals. 

We made a minor revision to 

proposed section 3210.14(c), changing 

the word ‘‘adjust’’ to ‘‘readjust,’’ to be 

consistent with language of the statute 

at 30 U.S.C. 1007 and the language of 

the other paragraphs of section 3210.14. 

Final section 3210.14(e) establishes 

procedures for the situations where a 

lessee files a timely objection to the 

proposed readjustment, and is intended 

to implement a portion of 30 U.S.C. 

1007(b) that was not addressed in 

previous regulations. 

We revised the language of proposed 

section 3210.14(e)(1) in this final rule to 

correct an error in the proposed rule. 

The section as proposed referred only to 

‘‘readjusted rental and royalty terms’’: 

If you file a timely objection in writing, 

BLM may issue a written decision making the 

readjusted rental and royalty terms effective 

no sooner than 90 days after we receive your 

objections, unless we reach an agreement 

with you as to the readjusted terms of your 

lease that makes such terms effective sooner. 

However, the intent, as was clear from 

proposed paragraphs (c), (d), and (e) 

taken as a whole, was to refer to not just 

readjusted rental and royalty terms, but 

to all readjusted terms and conditions. 

Therefore, in this final rule we 

substituted the words ‘‘readjusted terms 

and conditions’’ for ‘‘readjusted rental 

and royalty terms,’’ and for clarity also 

revised the end of the sentence to refer 

to ‘‘readjusted terms and conditions’’ 

rather than the shorthand ‘‘readjusted 

terms.’’ Final section 3210.14(e)(1) thus 

reads: 

If you file a timely objection in writing, 

BLM may issue a written decision making the 

readjusted terms and conditions effective no 

sooner than 90 days after we receive your 

objections, unless we reach an agreement 

with you as to the readjusted terms and 

conditions of your lease that makes them 

effective sooner. 

Under final section 3210.14(e)(2), if 

the BLM does not reach an agreement 

with the lessee by 60 days after 

receiving the lessee’s objections, then 

either the lessee or the BLM may 

terminate the lease, upon giving the 

other party 30 days’ notice in writing. 

This provision is contained in 30 U.S.C. 

1007(b), but did not appear in the 

previous regulations. The final rule 

clarifies that a lease termination under 

paragraph (e)(2) does not affect a 

lessee’s obligations that accrued under 

the lease when it was in effect, 

including those specified in section 

3200.4. 

Unlike a BLM decision under final 

section 3210.14(d), a lessee may appeal 

a BLM readjustment decision under 

final section 3210.14(e)(1). Final section 

3210.15 addresses such appeals. 

For consistency, we revised the 

language of proposed section 3210.15, 

which referred to ‘‘lease terms and 

conditions, or rental or royalty rate’’ to 

use the same phrase used in final 

section 3210.14(c): ‘‘rentals, royalties, or 

other terms and conditions of your 

lease.’’ 

Final section 3210.15 provides that if 

a lessee appeals the BLM’s decision 

under section 3210.14(e)(2) to readjust 

rentals, royalties, or other terms and 

conditions of its lease, the decision will 

be effective during the appeal. If the 

lessee wins its appeal and the BLM 

must change its decision, the lessee will 

receive a refund or credit for any 

overpaid rents or royalties. 

In summary, the BLM will provide a 

lessee 30 days to object to a proposed 

readjustment decision. If the lessee 

objects, the BLM may issue a written 

decision making the readjusted terms 

and conditions effective no sooner than 

90 days after receiving the objection. A 

lessee will have 30 days to appeal that 

decision under Office of Hearings and 

Appeals regulations. In addition to the 

appeal process, the BLM and the lessee 

can attempt to negotiate an agreement 

within 60 days after the BLM receives 

the objection. If an agreement is 

reached, the appeal will be withdrawn. 

If an agreement is not reached, either 

the lessee or the BLM may terminate the 

lease on 30 days’ notice in writing, even 

if an appeal is pending. 

We revised sections 3210.14 and 

3210.15 as discussed above to correct an 

error in the proposed rule and to make 

the wording consistent. 

Final sections 3210.16 and 3210.17, 

relating to drainage of geothermal 

resources, are substantively unchanged 

from previous sections 3210.22 and 

3210.23. We received no comments on 

these sections and have adopted them as 

proposed. 

Subpart 3211—Filing and Processing 

Fees, Rent, Direct Use Fees, and 

Royalties 

Final subpart 3211 incorporates 

changes made by the Energy Policy Act 

to lease rental rates, royalty rates, and 

minimum royalty requirements. 

Final section 3211.10 addresses 

processing and filing fees. Paragraph (b) 

references existing 43 CFR 3000.12 for 

the amount of the fees. The BLM 

expects to update section 3000.12 from 

time to time to reflect actual costs 

associated with these activities. We 

received no comments on this section 

and have adopted it as proposed. 

Final section 3211.11 establishes 

rental rates for geothermal leases. The 

new lease rental rates are taken directly 

from 30 U.S.C. 1004(a)(3)(A) and (B). 

The Energy Policy Act significantly 

changed rental rates from those in the 

previous regulations. The rental for new 

noncompetitive leases (that is, leases 

issued on or after August 8, 2005, other 

than leases issued in response to 

applications that were pending on that 

date for which no election is made 

under section 3200.8(b)(1)) remains at 

$1 per acre per year for the first 10 

years; the rental for new competitive 

leases is $2 per acre the first year and 

increases from $2 per acre per year to 

$3 per acre per year from years 2 

through 10. Starting with the eleventh 

year, the rental rate for all new leases 

increases to $5 per acre per year. Final 

section 3211.11(e) addresses fractional 

mineral interests in the same way as did 

previous section 3211.13. 

Although we received no comments 

on proposed section 3211.11, we 

restructured it and added language to 

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clarify that for leases issued before 

August 8, 2005, for which no election is 

made under section 3200.7(a)(2), and for 

leases issued in response to applications 

pending on August 8, 2005, for which 

no election is made under section 

3200.8(b)(1), the rental rate is the rate 

prescribed in the regulations in effect on 

August 8, 2005 (43 CFR 3211.10 (2004)). 

This is not a substantive change from 

the proposal, but is added as a 

convenience for persons trying to 

understand the rental structure for 

existing and new leases. 

Final section 3211.12 is virtually the 

same as previous section 3211.12. The 

Energy Policy Act did not make any 

changes regarding to whom the rent is 

paid for the first year and subsequent 

years. We received no comments on this 

section and have adopted it as 

proposed. 

Final section 3211.13 addresses when 

rental payments are due and replaces 

previous section 3211.11. The rule 

provides that rent is always due in 

advance. The MMS must receive annual 

rental payments for the upcoming year 

by the anniversary date of each lease 

year. If less than a full year remains on 

a lease, a lessee must still pay a full 

year’s rent by the anniversary date of the 

lease. The payment of rent in advance 

is required by 30 U.S.C. 1004(a)(3). As 

this was also required in the original 

Geothermal Steam Act of 1970, there are 

no substantial changes to this portion of 

the provision. The reference in previous 

section 3211.11 to the automatic 

termination of leases by operation of 

law is not included in the new section 

because the statute has changed in this 

regard. Lease termination for nonpayment of rental is addressed in final 

section 3213.14 of this rule and is 

discussed later in this preamble and in 

the preamble to the proposed rule at 71 

FR 41557–41558. 

One commenter requested a 

clarification of how rent will be credited 

towards royalty, as provided in section 

3211.15, in light of the requirement of 

section 3211.13 that rent is due in 

advance. The commenter is referred to 

the MMS rule at 43 CFR 218.303 for this 

clarification. In addition to the 

explanation in the MMS rule text, the 

preamble to the proposed MMS rule 

provided a thorough explanation of the 

process, including examples (71 FR 

41522). We did not change the rule in 

response to this comment. 

Final section 3211.14 addresses 

whether a lessee must always pay rent 

on a lease. Although we received no 

comments on proposed section 3211.14, 

we restructured it and added language 

to clarify that only leases issued on or 

after August 8, 2005 (other than leases 

issued in response to applications that 

were pending on that date for which no 

election is made under section 

3200.8(b)(1)), and leases issued before 

August 8, 2005, for which an election is 

made under section 3200.7(a)(2), will 

always pay rental. As explained in the 

preamble to the proposed rule (71 FR 

41550), the Energy Policy Act does not 

provide for payment of royalties in lieu 

of rent, or for minimum royalties during 

production. It provides that lessees will 

pay rental every year, and allows a 

credit of rents against royalties, as 

provided in this rule at section 3211.15. 

The language we added to section 

3211.14 explains that leases issued 

before August 8, 2005, for which no 

election is made under section 

3200.7(a)(2), and leases issued in 

response to applications pending on 

that date for which no election is made 

under section 3200.8(b)(1), continue to 

be subject to the rental and minimum 

royalty provisions of the previous 

regulations (43 CFR subpart 3211 

(2004)). While final sections 3200.7(a) 

and 3200.8(a) already provide that such 

leases are subject to the previous 

regulations in this regard, for clarity we 

included specific information in subpart 

3211 as well. The previous regulations 

provided that the lessee pays rent until 

the lease achieves production in 

commercial quantities, or until lands in 

the lease are within the participating 

area of a unit agreement or cooperative 

plan, at which time the lessee pays 

royalties for lands within the 

participating area and rent for lands 

outside the participating area (see 43 

CFR 3211.14, 3211.15, and 3211.17 

(2004)). 

Final section 3211.15, together with 

applicable MMS regulations, implement 

30 U.S.C. 1004(e), which requires that 

the advance rental payments on new 

leases be credited towards royalty due 

on production in that lease year. The 

rule provides that a lessee may credit 

rental towards royalty under the MMS 

proposed regulations at 30 CFR 218.303. 

Under the statute the rental credit 

against royalty is allowed only for rent 

paid before the first day of the year for 

which the rental is owed. In other 

words, no credit is allowable for rent 

paid after the lease anniversary date, 

even if the lease is not terminated. Thus, 

although lessees are allowed to maintain 

their leases by paying rent plus a late fee 

within 45 days of the lease anniversary 

date, they may not credit such late 

rental payments against royalties. 

Also, the Energy Policy Act does not 

provide for rental paid in excess of 

royalty to be carried over from one lease 

year as a credit against royalty for 

production in another year. Because 

rental is always due on a lease, the 

rental payment effectively becomes the 

equivalent of a minimum royalty 

payment that was required prior to the 

Energy Policy Act. 

Final section 3211.16 provides that 

rental paid cannot be credited against 

fees owed for direct use of geothermal 

resources. This provision also appears 

in the final MMS regulations at 30 CFR 

218.304. This section is based on the 

Energy Policy Act, which provides at 30 

U.S.C. 1004(e) that annual rentals ‘‘shall 

be credited to the amount of royalty that 

is required to be paid under the lease for 

that year.’’ Please note the use of the 

word ‘‘royalty’’ in this provision of the 

statute. 

Two commenters objected to the 

BLM’s interpretation of 30 U.S.C. 

1004(e) as providing for crediting 

rentals only against royalties and not 

against direct use fees. These 

commenters asserted that the statutory 

language was discretionary, that the 

BLM had chosen an unnecessarily strict 

and ‘‘nit picking’’ interpretation, and 

that the BLM’s interpretation runs 

counter to the Energy Policy Act’s goal 

of encouraging direct use development. 

We did not change the proposed rule 

in response to these comments because 

we do not believe that Congress 

intended the word ‘‘royalty’’ at 30 

U.S.C. 1004(e) to include direct use fees. 

As explained in the preamble to the 

proposed rule (71 FR 41551), a clear 

distinction exists in the statute between 

‘‘royalties’’ and ‘‘fees.’’ Congress 

provided at 30 U.S.C. 1004(b) that fees 

are ‘‘in lieu of royalties,’’ thus 

differentiating the two. Direct use fee 

payments are different from royalty 

payments, and are therefore not 

included in the statutory provision for 

rental credits. 

Final section 3211.17 establishes 

royalty rates on geothermal resources 

that are used in the commercial 

generation of electricity from or 

attributable to a geothermal lease. The 

Energy Policy Act (30 U.S.C. 

1004(a)(1)(A) and (B)) provides for a 

royalty on the sale of electricity 

produced from geothermal resources 

ranging from 1 percent to 2.5 percent of 

gross proceeds for the first 10 years of 

production, and from 2 percent to 5 

percent of gross proceeds thereafter (the 

MMS defines ‘‘gross proceeds’’ in 30 

CFR part 206, subpart H.). The BLM 

interprets this section of the Energy 

Policy Act to apply to situations in 

which the lessee or its affiliate sells 

electricity generated by use of 

geothermal resources produced from or 

attributed to the lease. Although the 

statute establishes an allowable royalty 

range, actual royalty rates are to be 

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established by regulation (30 U.S.C. 

1004(c)). 

The royalty rates established under 

final sections 3211.17(a)(1)(i) and (ii), 

for geothermal resources that a lessee or 

its affiliate uses to generate electricity 

that it sells, are the same as the 

proposed rates: (1) 1.75 percent for the 

first 10 years of production from a lease; 

and (2) 3.5 percent for production in 

subsequent years. Final section 

3211.17(a)(1)(iii) reiterates the language 

in the Energy Policy Act that the 

percentages in paragraphs (a)(1)(i) and 

(a)(1)(ii) must be applied to the gross 

proceeds from the sale of electricity, and 

specifies that gross proceeds must be 

determined in accordance with 

applicable MMS regulations. 

Final section 3211.17(a) applies to 

leases issued on or after August 8, 2005, 

except for leases issued in response to 

lease applications that were pending on 

that date for which the lessee does not 

make an election under section 

3200.8(b) to be subject to these new 

regulations. In this final rule, we 

changed the wording of proposed 

section 3211.17(a) to clarify that the 

election such a lessee may make is to be 

subject to all of the new rules; if no 

election is made, the lessee will be 

subject to the regulations in effect on 

August 8, 2005, with regard to the 

provisions specified at section 

3200.8(a), including royalties. 

The methodology for establishing 

royalty prescribed in 30 U.S.C. 

1004(a)(1)(A) and (B) represents a 

significant change from the way royalty 

was previously determined. For leases 

issued before August 8, 2005, that do 

not convert royalty terms under section 

3212.25, and for leases issued in 

response to applications that were 

pending on August 8, 2005, that do not 

make an election under section 

3200.8(b)(1), a royalty rate in the range 

from 10 percent to 15 percent of the 

value of the geothermal resource will 

apply. Historically, arm’s-length sales of 

geothermal resources from a lessee to a 

third party utility were common and the 

arm’s-length transaction established the 

value of the resource. For most 

situations where there was no sale of 

geothermal resources (as is the case for 

virtually all existing leases), the value of 

the geothermal resource was artificially 

derived using the ‘‘netback’’ method 

developed by the MMS, a method that 

in practice has often resulted in almost 

no royalty being paid and has been 

cumbersome for both the MMS and the 

lessees. For example, the Geysers 

Geothermal Field lessees informed the 

MMS that the netback method was 

unworkable, and negotiated with the 

MMS to adopt a simpler ‘‘percent of 

gross proceeds’’ method instead. 

The Energy Policy Act simplifies the 

way in which royalty is valued by 

basing royalties on a percentage of gross 

proceeds derived from the sale of 

electricity. Section 1004(c) of the Act 

requires that in establishing royalty 

rates the Secretary must seek to provide 

a simplified administrative system, 

encourage new development, and 

achieve revenue neutrality for a period 

of 10 years when compared to the 

valuation methods in the previous 

regulations. The BLM has interpreted 

the revenue-neutrality requirement to 

require the calculation of a royalty rate 

that achieves program-wide revenue 

neutrality for the first 10 years of 

production when compared to royalty 

revenues that would have been received 

during those 10 years under the 

previous netback system. Under this 

interpretation, this revenue-neutrality 

requirement does not apply to the 

royalty rate after the first 10 years of 

production. 

In establishing the proposed royalty 

rates, the BLM relied on the rates 

recommended by the MMS RPC 

Subcommittee. The RPC, established 

under the Federal Advisory Committee 

Act, makes recommendations on issues 

related to royalties on Federal resources 

and consists of representatives from 

Federal and state governments, 

industry, and the public at large. The 

Subcommittee was formed to address 

the MMS’s geothermal royalty valuation 

regulations in an effort to simplify the 

language and reduce administrative 

costs to the geothermal industry. The 

Subcommittee was composed of 

members from one industry association, 

several geothermal producers, and two 

of the major states affected. The MMS 

and BLM representatives served as 

technical advisors to the Subcommittee. 

The Subcommittee asked the MMS to 

calculate the equivalent gross proceeds 

rates for all geothermal plants paying 

royalties under the netback method in 

2003 and 2004. The MMS determined 

that the equivalent gross proceeds rate 

was 3.64 percent in 2003, and 3.94 

percent in 2004, with an average of 3.79 

percent for the 2 years (Royalty Policy 

Committee, Geothermal Valuation 

Subcommittee Report, May 2005 (‘‘RPC 

Report’’), page 10). 

The Subcommittee recommended 

rates of 1.75 percent for the first 10 

years of production, and 3.5 percent 

thereafter. The Subcommittee reported 

that, ‘‘[u]nder the netback method, 

historically during the beginning years 

of an electrical generation project 

(between 1–10 years), lessees pay a very 

low percentage of the gross proceeds 

from the sale of electricity and in later 

years of the project (after 10 years), the 

percentage increases * * *. The 

recommended proposal [1.75 percent 

and 3.5 percent] * * * attempts to 

replicate this historical trend under the 

netback method over the long term.’’ 

(RPC Report, page 10). The report stated 

that ‘‘[f]or new leases, the proposal is 

expected to increase revenues over the 

next 10 years and may be revenue 

neutral over the long run.’’ (RPC Report, 

page 11). However, it went on to state 

that there was ‘‘[r]isk of a negative 

revenue impact for the government if 

electricity prices are higher and/or costs 

are lower than anticipated; and risk of 

negative impact on companies if prices 

are lower and/or costs higher than 

anticipated.’’ (RPC Report, page 12). 

The BLM retained a contractor, 

Advanced Resources International, Inc. 

(ARI), to assess whether the proposed 

1.75 percent royalty rate was consistent 

with the statutory requirement for 

revenue neutrality over a 10-year 

period. ARI recently completed for the 

BLM a technical memorandum entitled 

‘‘Geothermal Development on Federal 

Lands: Projection of Royalty Impacts 

Resulting from the Energy Policy Act of 

2005’’ (ARI Report). The ARI Report is 

publicly available and has been 

included in the Administrative Record 

for this rulemaking. A summary of the 

ARI Report follows, much of it derived 

from the ARI Report Executive 

Summary. 

The ARI developed an analysis to 

compare the Energy Policy Act gross 

proceeds royalty rate method with the 

netback method to determine under 

what conditions the two would be 

revenue neutral. Focusing on the 

western states of California, Nevada, 

Utah, and Idaho, the analysis 

considered technology (binary and flash 

plants), potential areas of development, 

electricity prices and markets, plant 

sizes relative to the technology used, 

and financial parameters such as capital 

costs, operating and maintenance costs, 

and discount rate. The analysis assumed 

a 30-year project life. ‘‘Type’’ projects 

were developed based on these 

parameters. To obtain a programmatic 

view, the various states were weighted 

based on where development might 

occur (California was divided into two 

domains). ARI calibrated (checked) the 

analysis using historical data. 

The ARI modeled nine programmatic 

cases for analysis to capture a spectrum 

of potential development on BLM lands. 

The differences between the various 

cases derive from adjusting those 

parameters to which the model was 

most sensitive, i.e., the relative amount 

of binary plant development (as 

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compared to the total of binary plus 

flash plant development), future 

electricity prices, and capital costs. 

Scenarios modeled include ‘‘base,’’ 

‘‘low,’’ ‘‘intermediate,’’ ‘‘targeted’’ (to 

achieve a 1.75 percent royalty rate 

during the first 10 years of production) 

and ‘‘high’’ cases. For each case, the 

model derived a revenue-neutral royalty 

rate for the first 10 years of production 

(or, for the targeted cases, adjusted 

appropriate parameters that would 

result in the targeted rate), as well as an 

accompanying revenue-neutral royalty 

rate for production after the first 10 

years. All parameters used in the 

modeling were based on empirical data. 

The ARI Report did not recommend any 

particular set of royalty rates, but 

concluded instead that ‘‘[i]t is 

reasonable to expect that all scenarios 

modeled in the cases could be 

achievable (including targeted 

scenarios) depending upon geothermal 

resources, future market conditions and 

technology’’ (ARI Report, page 1). 

The ARI Report base case assumes: (1) 

65 percent of future geothermal 

development will use binary 

technology; (2) future electricity prices 

will remain flat (incorporating price 

supports in the applicable geographic 

domains under the California 

Renewable Energy Program); and (3) 

capital expenditures for plant 

construction (CAPEX) will be an average 

of data published by the Geothermal 

Energy Association (explained in ARI 

report, section 2.2.7, page 7). The ARI 

Report includes an explanation of all 

the parameters the model uses. 

The ARI also performed an historical 

analysis of a sample of existing 

geothermal leases paying royalties 

under the netback system to determine 

the equivalent royalty they paid during 

the first 10 years of their production (see 

the ARI Report, Section 2.3 on p. 8). The 

BLM and the MMS supplied electricity 

sales and royalty revenue data to the 

contractor for nine non-Standard Offer 4 

contracts for Nevada. (Standard Offer 4 

contracts had a unique price structure, 

and would not be applicable to future 

geothermal leases.) This sample was 

based on the data that was readily 

available to the BLM. ARI examined this 

data for the first 10 years of the project 

lives to determine the actual effective 

netback royalty rate. The binary plants 

showed an effective royalty rate of 0.61 

percent; for flash technology, the 

effective royalty rate was 3.52 percent. 

For this portfolio of binary and flash 

technologies, the effective royalty rate 

for the first 10 years of project lives was 

1.11 percent as a weighted average. ARI 

compared these historical percentages to 

the percentages derived when the same 

data was run in its model and found 

that the percentages were very close. 

After thorough consideration of both 

the RPC Report and the ARI Report, the 

BLM determined that its proposed 

royalty rate of 1.75% for the first 10 

years of production meets the statutory 

requirement for revenue neutrality. Both 

the RPC Report and the ARI Report 

support the conclusion that estimates of 

revenue neutrality are extremely 

sensitive to potential changes in 

electricity prices and capital 

expenditures, and the ARI Report 

indicated that the estimates are also 

very sensitive to the relative mix of 

geothermal technology that will be 

employed in the future. None of these 

variables can be predicted with absolute 

accuracy. Based on the professional 

judgment of the BLM geothermal 

program staff, the model assumed that 

binary technology would account for no 

less than 50% of new geothermal plants; 

the assumed percentage of binary plants 

in the cases analyzed in the model 

ranged from 50% to 65%. Regarding 

capital costs, while the model’s base 

case based its capital expenditures 

estimate on an average of published 

data, the data showed that actual capital 

expenditures varied from that average 

by up to a third or more (ARI Report, 

page 16 n.17). The assumed capital 

expenditures in the cases analyzed in 

the model deviated from the base case 

by no more than 12%. The ARI Report 

cited to a recent article on a geothermal 

operation in Alaska that provides some 

evidence that geothermal capital costs 

could decline if operators begin 

substituting mass-produced parts (ARI 

Report, page 16 n. 24). Electricity prices, 

too, cannot be predicted with accuracy, 

especially considering the increasing 

prevalence of government-mandated use 

of renewable energy sources such as 

geothermal energy. As noted, California 

already has a Renewable Energy 

Program that contains price support 

provisions (which the model took into 

account), and Nevada is considering 

draft legislation that could enhance 

prices for renewable energy in the 

future. 

The ARI Report demonstrates the 

impact of potential changes in any of 

these variables. For example, Targeted 

Case A (ARI Report, page 1, Table, 

column 5), changed predictions for two 

of the three parameters just discussed: It 

changed the binary plant proportion 

from 65% to 50%, and lowered the 

capital expenditures prediction by 8%. 

It used the same electricity price 

prediction as the base case. If future 

geothermal production met those 

parameters, the model shows that the 

revenue-neutral royalty rate for the first 

10 years of production would be 1.76% 

and the revenue-neutral rate for years 

11–30 would be 3.57%. These rates are 

nearly identical to the rates 

recommended by the RPC and proposed 

by the BLM in its proposed rule. 

The modeling exercise makes clear 

that a revenue-neutral royalty rate is not 

simply one number that can be 

determined with mathematical 

certainty, but instead could be within a 

range of rates, depending on reasonable 

assumptions as to what the future holds. 

The ARI Report shows that other 

changes in the parameters, 

corresponding to other potential 

scenarios for future development, result 

in different revenue-neutral royalty 

rates, some higher and some lower than 

the BLM’s proposed rates. The four 

targeted scenarios show that the 1.75% 

royalty rate for the first 10 years of 

production could result in revenueneutrality in a number of different 

future scenarios. As noted above, all 

parameter variations used in the model 

were based on empirical data, and the 

ARI report concluded that ‘‘[i]t is 

reasonable to expect that all scenarios 

modeled in the cases could be 

achievable (including targeted 

scenarios) depending upon geothermal 

resources, future market conditions and 

technology’’ ARI Report, page 1. 

The 1.75% rate is clearly within the 

reasonable range of rates that would 

meet the statutory mandate to seek 

revenue neutrality for the first 10 years 

of production. While the BLM’s 

interpretation of the statute is that there 

is no mandate of revenue-neutrality 

after the 10th year, the 3.5% rate for 

subsequent years is, nevertheless, also 

within the reasonable range of revenueneutral rates. These rates have the 

additional advantage of being 

recommended by the RPC 

Subcommittee, which carefully gathered 

input from many interested parties. 

Consequently, the BLM believes that 

these rates, to which representatives of 

the geothermal industry agreed, will 

also work to encourage geothermal 

development. 

As noted above, the royalty rate 

required by the Energy Policy Act, at 30 

U.S.C. 1004(a)(1)(A), requires a royalty 

of 1 percent to 2.5 percent of gross 

proceeds from the sale of electricity 

‘‘during the first 10 years of production 

under the lease.’’ The BLM interprets 

this language to mean that the 10-year 

period to which the 1.75 percent royalty 

rate applies starts during the month for 

which commercial operation is first 

achieved, and continues for 120 

consecutive months, unless a 

suspension of operations and 

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production is granted under subpart 

3212. 

Final section 3211.17(a)(2) sets the 

royalty rate for the arm’s-length sale of 

resources at 10 percent of gross 

proceeds from that sale. The Energy 

Policy Act is silent regarding the 

situation where the lessee sells the 

resource to an unaffiliated purchaser 

that produces electricity, rather than 

selling the electricity itself. To address 

these situations, the BLM is using the 

recommendations found in the RPC 

Report (page 9) which recommended 

that the lessee ‘‘pay a royalty on the 

geothermal resources sold under arm’slength conditions to a plant that 

generates electricity based on a royalty 

rate in the lease multiplied by the gross 

proceeds the lessee derives from the sale 

of the geothermal resources.’’ The 

Geothermal Steam Act, prior to the 

amendments of the Energy Policy Act, 

required a royalty rate of 10 to 15 

percent, and current BLM practice is to 

issue all leases with a royalty rate of 10 

percent. Section 2 of the standard lease 

terms listed on the BLM Form 3200–24, 

‘‘Offer to Lease and Lease for 

Geothermal Resources,’’ sets the royalty 

rate at 10 percent. The 10 percent 

royalty rate is thus the current practice, 

and the Subcommittee Report 

concluded that it would cause ‘‘[n]o 

change in royalty valuation.’’ 

While the 10 percent royalty rate in 

the case of an arm’s-length sale of 

resources for the commercial generation 

of electricity may appear to require 

higher payments by a lessee than the 

1.75 and 3.5 percent that are required 

for ‘‘no-sales’’ situations in section 

3211.17(a)(1), the actual amount of 

royalty paid will be roughly equivalent. 

This is because the 10 percent rate 

applies to the gross proceeds from the 

sale of the geothermal resource, whereas 

the 1.75 and 3.5 percent rates for 

electrical generation apply to the gross 

proceeds from the sale of electricity. 

The electricity generated represents a 

refined product with a much higher 

value than the heat resource entering a 

power plant. Therefore, 1.75 and 3.5 

percent of a high-value product will be 

roughly equivalent to 10 percent of a 

lower value product. Because the 

proposed 10 percent royalty on the gross 

proceeds from an arm’s-length sale of 

resource required by section 

3211.17(a)(2) is the same as the royalty 

that would be required under existing 

lease terms, the provisions of this 

paragraph are revenue neutral. 

We received no comments on section 

3211.17(a) and, except for the 

clarification change discussed above, 

have adopted it as proposed. 

Final section 3211.17(b) establishes 

the royalty rates for leases issued before 

August 8, 2005, where the lessee 

chooses to convert the royalty terms of 

the lease. As discussed earlier, the 

royalty rates will continue under the 

existing terms of such leases unless a 

lessee converts to the royalty terms of 

the new statute under final section 

3212.25. Eligibility for and procedures 

for such conversions are discussed later 

in this preamble in the discussion of 

subpart 3212. 

In this final rule we revised section 

3211.17(b). For clarity, we separated 

proposed section 3211.17(b)(1) into two 

parts. Final section 3211.17(b)(1) 

addresses leases that have produced 

geothermal resources for the commercial 

generation of electricity, or to which 

geothermal resource production for the 

commercial generation of electricity has 

been attributed. Final section 

3211.17(b)(2) addresses leases that have 

not produced geothermal resources, and 

to which geothermal resource 

production for the commercial 

generation of electricity has not been 

attributed. We replaced the word 

‘‘previously’’ with the phrase ‘‘prior to 

submitting a request to modify the 

royalty rate terms of the lease under 

section 3212.26.’’ We moved the 

information that was contained in 

proposed section 3211.17(b)(2), 

regarding application of MMS rules, to 

final section 3211.17(b)(1)(i) and (ii). 

These paragraphs are further discussed 

below. 

Conversion of the royalty terms of 

existing geothermal leases is governed 

by Section 224(e) of the Energy Policy 

Act. That section does not make the 

royalty rate ranges in 30 U.S.C. 

1004(a)(1) applicable to existing leases 

that convert to new royalty terms. 

Instead, the royalty conversion language 

in Section 224(e)(1)(B) of the Energy 

Policy Act requires that except for leases 

where the geothermal resource is used 

for a direct use to which a fee schedule 

applies, royalties are to be computed on 

a percentage of the gross proceeds from 

the sale of electricity. Under the statute, 

the royalty rate is to be set at the percent 

of gross proceeds to ‘‘yield total royalty 

payments equivalent to payments that 

would have been received for 

comparable production under the 

royalty rate in effect for the lease before 

the date of enactment * * * .’’ 

In the final rule, we divided 

converting leases that have already 

produced geothermal resources for the 

commercial generation of electricity into 

two categories under section 

3211.17(b)(1). Under section 

3211.17(b)(1)(i), where a lessee or its 

affiliate uses geothermal resources to 

generate and sell electricity, the BLM 

will establish a royalty rate by 

determining a percentage of gross 

proceeds from the sale of electricity that 

it expects will result in the same total 

amount of royalty to be paid over the 

life of the lease as would be paid under 

the current valuation method. The 

determination of such a royalty rate will 

be done on a case-by-case basis and will 

be based on the information submitted 

by the applicant. We added the words 

‘‘over the life of the lease’’ to the 

regulatory text to clarify that the 

statutory phrase ‘‘total royalty 

payments’’ means total payments during 

the existence of the lease, and not just 

during a particular period of 

production. 

In this final rule, we added the 

category covered by section 

3211.17(b)(1)(ii), where a lessee or its 

affiliate sells geothermal resources at 

arm’s length to a purchaser who uses 

those resources to generate electricity. 

We provided that in such a case, the 

royalty rate is the rate specified in the 

lease instrument. This is a change from 

the proposed rule, in which we 

proposed to establish a revenue neutral 

royalty rate for this category of leases by 

applying to the gross proceeds of the 

purchaser’s eventual sale of electricity a 

rate that would result in the same total 

amount of royalty as would be paid 

under the current valuation method. In 

reviewing MMS’s draft final rule, it was 

discovered that the MMS rule would 

apply the rate that BLM sets to the gross 

proceeds from the lessee’s sale of the 

resource rather than to the gross 

proceeds from the purchaser’s sale of 

electricity. 

As discussed above, for converting 

leases, section 224(e)(1)(B) of the Energy 

Policy Act requires that royalties be 

computed on a percentage of the gross 

proceeds from the sale of electricity, to 

achieve over the life of the lease ‘‘total 

royalty payments equivalent to 

payments that would have been 

received for comparable production 

under the royalty rate in effect for the 

lease’’ before enactment of the 

amendments. Under the previous BLM 

and MMS rules, arm’s-length sales of 

geothermal resources from a lessee to a 

third party utility established the value 

of the resource. There was no need to 

artificially derive a value for the 

geothermal resource through the 

‘‘netback’’ method. Thus, any successful 

method of applying a royalty rate to the 

gross proceeds of electricity generated 

by the purchaser in an attempt to 

achieve royalty payments equivalent to 

existing payments for arm’s-length 

resource sales would result in the same 

outcome as applying the rate in the 

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Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 24375 

existing lease to the gross proceeds from 

the sale of the resource. Because the 

existing method achieves the equivalent 

royalty payments mandated by the 

statute, we determined that for the sale 

of the geothermal resource under arm’slength contracts this method complies 

with the statute. 

A royalty rate modification under 

section 3212.25 will thus have no 

immediate effect on an existing lessee 

that only sells geothermal resources to 

commercial generators of electricity. 

However, if such a lessee elects to be 

subject to all of the new regulations 

under section 3200.7(a)(2), it must 

obtain a royalty modification, which 

requires that the rate be addressed in 

section 3211.17. 

In light of this revision of the final 

rule clarifying that MMS will apply the 

royalty rate for converting leases to the 

gross proceeds from the sale of the 

resource and not to the gross proceeds 

of electricity generated by the 

purchaser, it is no longer necessary that 

a request to modify royalty terms under 

section 3212.26 include documentation 

that a lessee selling the resource has 

access to the purchaser’s gross proceeds 

derived from the sale of electricity. We 

therefore did not include that provision 

in final section 3212.26(a)(2). 

Final section 3211.17(b)(2) establishes 

the royalty rates for leases that elect to 

convert to the royalty terms of the 

Energy Policy Act, but have never 

produced geothermal resources. In these 

cases, because the BLM will have no 

data on which it could base a 

determination of a revenue-neutral 

royalty rate, it will assign the royalty 

rates in final section 3211.17(a)(1) (1.75 

percent for the first 10 years and 3.5 

percent thereafter) or 3211.17(a)(2) (10 

percent of the gross proceeds from the 

sale of the resource), whichever is 

applicable. In this final rule we added 

the reference to section 3211.17(a)(2) to 

account for arm’s length sales of the 

resource. Because the royalty rates in 

section 3211.17(a) were derived to be 

revenue neutral, the BLM has concluded 

that this meets the intent of section 

224(e)(1)(B) of the Energy Policy Act. 

One commenter stated that in 

proposed section 3211.17, ‘‘BLM sets 

the royalty rate for leases that 

previously did not produce geothermal 

resources for commercial generation of 

electricity from Class II and III leases at 

1.75 percent’’ and objected that no 

explanation was offered as to why the 

1.75 percent rate would result in the 

same level of royalty revenue. 

First, we want to clarify that the 

proposed rule at section 3211.17(b)(1) 

and the final rule at section 

3211.17(b)(1)(ii) sets the royalty rates for 

leases issued before August 8, 2005, that 

elect to convert to the royalty terms of 

the Energy Policy Act, but have never 

produced geothermal resources for the 

commercial generation of electricity, not 

at 1.75% for the life of the lease, but at 

1.75% for the first 10 years of 

production, and 3.5% thereafter, as 

provided at sections 3211.17(a)(1)(i) and 

(ii). These are the same royalty rates that 

will be applied to new leases. 

In establishing a process for setting 

royalty rates for existing leases that elect 

to convert to the royalty terms of the 

Energy Policy Act, the BLM 

distinguished between existing leases 

that have produced and those that have 

not produced. Under final section 

3211.17(b)(1)(i), for existing leases that 

have a history of production, the BLM 

will determine on a case-by-case basis a 

royalty rate that will meet the statutory 

requirements. Under final section 

3211.17(b)(1)(2), for existing leases that 

have never produced, the BLM will 

apply the same royalty rates that it will 

apply to new leases. The reason for this 

distinction is that those leases that have 

produced geothermal resources for the 

commercial generation of electricity, 

and which have been subject to royalty 

payments under the netback method, 

can provide enough data to perform a 

case-specific revenue analysis. From 

this analysis, a new royalty rate can be 

established for that case that will yield 

an equivalent amount of royalty. In 

contrast, for leases that have never 

produced electricity and that have never 

paid royalty under the netback method, 

there are no data available for a revenue 

analysis. Actual data are especially 

critical for royalty calculations under 

the netback method, because the 

calculation is highly dependent on the 

type of facility that is built and requires 

very specific input data, such as 

operation and maintenance costs, 

capital investment, bond yield rates, 

electricity sales price, and transmission 

line costs. The BLM concluded that 

equivalent royalty calculations for 

leases that have never produced would 

be unacceptably speculative. The BLM 

believes that the royalty rates applicable 

to new leases, established in section 

3211.17(a)(1), which are intended to be 

revenue neutral on a programmatic 

basis, are a reasonable revenue-neutral 

surrogate and should apply in this 

situation. We did not change the rule in 

response to this comment. 

The same commenter said that ‘‘the 

proposed rules imply that the BLM 

prescribed rates are not applicable to a 

Class I lease that previously produced 

geothermal resources which is being 

converted to a Class II or Class III lease’’ 

and suggested that the BLM add specific 

language to section 3211.17 to ensure 

that the BLM’s rates are still applicable. 

The commenter appears to be 

confused regarding how the BLM will 

determine royalty rates for leases issued 

before August 8, 2005, that have 

produced geothermal resources and 

elect to convert to the royalty terms of 

the Energy Policy Act. The statute does 

not allow the BLM simply to apply to 

such leases the royalty rates that will 

apply to new leases. Section 224(e) of 

the Energy Policy Act provides an 

entirely different process for existing 

lessees that wish to convert to the new 

royalty terms than the process provided 

for new leases. Section 224(e)(1)(B) 

requires ‘‘that royalties be computed on 

a percentage of the gross proceeds from 

the sale of electricity, at a royalty rate 

that is expected to yield total royalty 

payments equivalent to payments that 

would have been received for 

comparable production under the 

royalty rate in effect for the lease 

before’’ August 8, 2005 (i.e., under the 

‘‘netback’’ system). To implement this 

requirement, the BLM proposed at 

section 3211.17(b)(1) that it would seek 

to establish a rate to yield total royalty 

payments equivalent to those that 

would have been paid for that lease 

under the previous system, by which it 

meant it would determine the rates on 

a case-by-case basis. The BLM decided 

that a case-by-case system of 

determining rates was necessary 

because equivalent rates under the 

netback system are highly 

individualistic and must take into 

account the specific situation of each 

lease. In response to this comment, we 

added language to section 

3211.17(b)(1)(i) to clarify that royalty 

rates for converting leases will be 

determined on a case-by-case basis. 

One commenter stated that the lack of 

a cap on the royalty rates in section 

3211.17(b) was inconsistent with the 

Energy Policy Act, ‘‘which set ranges for 

royalties (section 224(a)(1)) and which 

govern all federal leases including those 

being readjusted.’’ The commenter also 

stated that a cap would be consistent 

with the recommendations of the RPC. 

We disagree that the statute provides 

for a cap in determining modified 

royalty rates under Section 224 of the 

Energy Policy Act. Section 224(a)(1), 

cited by the commenter, which provides 

both a floor and a cap for royalty rates, 

amends Section 5 of the Geothermal 

Steam Act, at 30 U.S.C. 1004. Section 

224(a)(2), which also amends 30 U.S.C. 

1004, provides that in establishing 

royalty rates under that section, the 

Secretary must seek, among other 

things, to achieve a revenue-neutral 

royalty rate over a 10-year period. Thus, 

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the floor and cap do apply to the 

establishment of revenue-neutral rates 

for new leases under 30 U.S.C. 1004. 

However, Section 224(e)(1)(B) of the 

Act, which as discussed above, 

mandates a specific approach to 

modifying royalty rates for existing 

leases, does not amend 30 U.S.C. 1004; 

it is, in fact, a separate uncodified 

amendment. Therefore, the 

establishment of royalty rates under 

Section 224(e)(1)(B) is not subject to the 

royalty rate range provided at Section 

224(a)(1) and codified at 30 U.S.C. 1004. 

We note, moreover, that if the cap at 30 

U.S.C. 1004 did apply to modified 

existing leases, the floor would also 

apply. Because of the structure of the 

previous netback system, we believe it 

is likely that many existing leases for 

which a modified royalty rate is 

determined under Section 224(e)(1)(B) 

may have an equivalent royalty rate 

under the 1% floor. Thus it is likely that 

the lack of a specific range could work 

to the advantage of lessees. 

Final section 3211.17(c) addresses 

royalty rates for existing leases and 

leases issued in response to applications 

pending on August 8, 2005, that choose 

not to convert to the royalty terms of the 

Energy Policy Act. The royalty rates for 

these leases have already been 

established in existing lease 

instruments. This paragraph does not 

establish new requirements, but is 

included for completeness and 

convenience of the reader. In this final 

rule, we changed the wording of 

proposed section 3211.17(c) to clarify 

that the election that may be made by 

lessees of leases issued in response to 

applications pending on August 8, 2005, 

is to be subject to all of the new rules. 

If no election is made, the lessee will be 

subject to the regulations in effect on 

August 8, 2005, with regard to the 

provisions specified at section 

3200.8(a), including royalties. Except for 

the changes discussed above, we 

adopted sections 3211.17(b) and (c) as 

proposed. 

Final section 3211.18 implements 30 

U.S.C. 1004(b) and Section 224(e)(1)(A) 

of the Energy Policy Act and addresses 

the royalty rates for the direct use of 

production from or attributable to a 

geothermal lease. 

Final section 3211.18(a) establishes 

rates for leases issued after August 8, 

2005 (other than leases issued in 

response to applications that were 

pending on that date for which the 

lessee does not make an election under 

section 3200.8(b)), and for existing 

leases whose royalty terms are modified 

under section 3212.25. We revised the 

language of this section to clarify that 

the election that may be made by the 

lessee of a lease issued in response to an 

application that was pending on August 

8, 2005, is to be subject to the new 

regulations. If no election is made, the 

lessee will be subject to the regulations 

in effect on August 8, 2005, with regard 

to the provisions specified at section 

3200.8(a), including royalties. 

Final section 3211.18(a)(1) provides 

that a royalty rate does not apply to the 

direct use of geothermal resource 

production that a lessee or its affiliate 

does not sell. Instead, a lessee will pay 

direct use fees according to a schedule 

published by the MMS (see the MMS 

regulations at 30 CFR 206.356 for the 

schedule). The direct use fee schedule 

applies to traditional direct uses such as 

greenhouse heating, space heating, and 

industrial heating applications, as well 

as to non-commercial generation of 

electricity as described under final 

section 3211.18(c), below. 

Under final section 3211.18(a)(2), a 

lessee who produces a geothermal 

resource and sells it at arm’s length to 

a purchaser who uses it for direct use 

purposes is required to pay a royalty of 

10 percent, which will be applied to the 

gross proceeds derived from the arm’slength sale under applicable MMS 

regulations at 30 CFR part 206, subpart 

H. Section 3211.18(a)(2) maintains the 

royalty rate of 10 percent that was found 

in previous 43 CFR 3211.10. 

The Energy Policy Act does not 

address situations where a lessee sells 

geothermal resources in an arm’s-length 

sale to a purchaser who utilizes such 

resources for direct use purposes. Under 

30 U.S.C. 1004(b)(1)(B), the required 

schedule of fees applies only to those 

situations where the lessee ‘‘does not 

sell’’ geothermal resources. Because the 

royalty provisions in section 1004(a)(1) 

of the Act specifically refer to electrical 

generation, they do not cover sale for 

direct use, either. To the extent that a 

gap exists in the statute, we have filled 

that gap with respect to new leases 

under the rulemaking authority of 30 

U.S.C. 1023. 

Similarly, a gap exists under the 

royalty conversion provisions of Section 

224(e)(1) of the Energy Policy Act. 

Section 224(e)(1)(A) establishes the 

royalties for converted leases that meet 

the requirements of 30 U.S.C. 1004(b), 

i.e., leases whose geothermal resources 

are used for direct use purposes where 

no sale of the geothermal resources 

occurs. Section 224(e)(1)(B) of the 

Energy Policy Act establishes the 

royalties for converted leases that 

involve the sale of electricity (royalties 

are to be based on a percentage of gross 

proceeds from the sale of electricity). 

Neither subparagraph establishes the 

royalty rate for converted leases where 

a lessee sells geothermal resources in an 

arm’s-length sale to a purchaser who 

utilizes such resources for direct use 

purposes. Thus, under final section 

3211.18(a)(2), we filled that gap with 

respect to converted leases under the 

rulemaking authority of 30 U.S.C. 1023. 

The rate BLM has established under this 

final rule is the same as the rate for such 

sales under the previous regulations and 

is the same as for arm’s length sales of 

geothermal resources for electrical 

generation under these regulations. 

The Energy Policy Act, at 30 U.S.C. 

1004(b)(3), requires that if a state, tribal, 

or local government is the lessee and 

uses geothermal resources without sale 

and for public purposes other than 

commercial generation of electricity, the 

Secretary must charge only a nominal 

fee for use of the resource. Final section 

3211.18(a)(3) addresses this provision of 

the statute by referencing the MMS rules 

that implement this provision (see 30 

CFR 206.366). The fee that the MMS sets 

must be paid in addition to the rental 

due on the lease. 

Final section 3211.18(b) clarifies that 

for leases issued before August 8, 2005, 

that do not convert the royalty terms of 

their lease, and for leases issued in 

response to applications pending on 

August 8, 2005, where the lessee does 

not make an election under section 

3200.8(b), the royalty rate is established 

in the lease form and those leases will 

continue to be subject to existing royalty 

rates. This paragraph does not establish 

new requirements, but is included for 

completeness and convenience of the 

reader. We amended the language of this 

section to clarify that the election that 

may be made by the lessee of a lease 

issued in response to an application that 

was pending on August 8, 2005, is to be 

subject to the new regulations. If no 

election is made, the lessee will be 

subject to the regulations in effect on 

August 8, 2005, with regard to the 

provisions specified at section 

3200.8(a), including royalties. 

Final section 3211.18(c) clarifies the 

BLM’s interpretation of the meaning of 

non-commercial generation of 

electricity. If a lessee generates 

electricity that is used solely for the 

operation of a direct use facility and 

does not sell the electricity, this is 

considered a direct use subject to the 

direct use fee schedule. 

The Energy Policy Act, at 30 U.S.C. 

1004(b)(1), restricts the use of the direct 

use fee schedule to situations where the 

resource is not sold and is used ‘‘for a 

purpose other than the commercial 

generation of electricity.’’ As discussed 

earlier, the statute requires a royalty 

based on a percentage of gross proceeds 

for commercial generation of electricity 

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Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 24377 

(30 U.S.C. 1004(a)(1)(A) and (B)). 

However, the statute does not expressly 

address non-commercial generation of 

electricity, such as electricity generated 

to run fans, pumps, lights, automatic 

valves, and instrumentation in direct 

use facilities. If electricity is not sold, 

there are no gross proceeds on which to 

base a royalty. The BLM does not 

believe the intent of the Energy Policy 

Act is to allow the use of Federal 

geothermal resources to generate noncommercial electricity without 

compensation. Therefore, as a 

permissible interpretation of the statute, 

the BLM construes the non-commercial 

generation of electricity to be a direct 

use of the resource subject to the direct 

use fee schedule. 

One commenter objected to the 

imposition of direct use fees under 

section 3211.18 in situations where the 

geothermal resource was cascaded from 

an electrical generation project that 

already pays royalty. 

The BLM rejects the comment. The 

Energy Policy Act, at 30 U.S.C. 

1004(b)(1), requires a direct use fee ‘‘for 

geothermal resources, that a lessee or its 

affiliate—(A) uses for a purpose other 

than the commercial generation of 

electricity; and (B) does not sell.’’ The 

definition of geothermal resources 

includes heat or other associated energy 

found in geothermal formations. In 

applications where hot water or steam is 

first sent through an electrical 

generation facility and then into a direct 

use facility, the heat entering the direct 

use facility is still considered a 

geothermal resource. In other words, the 

heat entering the direct use facility is 

‘‘left over’’ heat from the geothermal 

formation that was not used by the 

electrical generation facility. It thus 

meets the definition of a geothermal 

resource and is used for a purpose other 

than the commercial generation of 

electricity. Therefore, if it is not sold, it 

is subject to direct use fees. Under the 

previous regulations as well (see 

previous section 3211.16), the BLM 

assessed royalties on all uses of heat 

energy, including those that could be 

characterized as ‘‘cascaded.’’ We did not 

change the rule in response to this 

comment. 

Final section 3211.19 addresses the 

royalty rate on byproducts derived from 

geothermal resources produced from or 

attributable to a geothermal lease. We 

restructured this section in the final rule 

to differentiate between leases that will 

be governed by these final regulations 

and those that will remain subject in 

part to the previous regulations. Final 

section 3211.19(a)(1) implements 30 

U.S.C. 1004(a)(2) by setting the 

proposed royalty rate on byproducts 

listed in the first section of the Mineral 

Leasing Act (MLA), 30 U.S.C. 181, to be 

the same as the royalty rates in the MLA 

and implementing regulations, for 

geothermal leases subject to these final 

regulations. We deleted the list of 

byproducts included as examples in the 

proposed rule. The list mistakenly 

included oil and gas, which are 

excluded under the definition of 

‘‘byproducts’’ at final section 3200.1. All 

minerals listed at 30 U.S.C. 181 that are 

not excluded under the definition of 

‘‘byproducts’’ and are physically 

possible to produce as geothermal 

byproducts are covered by this 

subsection. We also deleted the example 

in paragraph (a)(1) of this section 

because it is not necessary. 

In the proposed rule at section 

3211.19(b), we proposed maintaining 

the previous royalty rate of 5% on 

byproducts that are not listed in the 

MLA, such as gold, silver, zinc, etc. The 

rationale for this was that there was an 

apparent gap in the statute; in its 

amendments to 30 U.S.C. 1004, the 

Energy Policy Act had removed the 

language of previous 30 U.S.C. 1004(b) 

that established royalties of up to 5% for 

such byproducts. We stated that, 

because it was not clear whether 

Congress intended to establish such 

royalties at zero, or to leave it to the 

Secretary to set an appropriate royalty 

rate for such byproducts, we proposed 

a 5% royalty rate relying on the general 

policy under Section 102(a)(9) of the 

Federal Land Policy and Management 

Act (FLPMA), 43 U.S.C. 1701(a)(9), that 

we should receive fair market value for 

the use of the public lands and their 

resources. In the proposed rule we 

solicited comments on whether the rate 

was fair and based upon an acceptable 

interpretation of the statute. 

We received one comment objecting 

to the 5% royalty on byproducts that are 

not listed in the MLA. The commenter 

stated that Congress, by narrowing the 

scope of the language in the Geothermal 

Steam Act regarding royalties on 

byproducts, showed a clear intent not to 

impose a royalty on byproducts that 

would not be royalty-bearing if they 

were produced from the public lands, in 

accordance with testimony that industry 

representatives had presented on this 

issue. We accept this comment. After 

further consideration, we agree that 

because Section 228 of the Energy 

Policy Act specifically deleted the 

former statutory language that provided 

for a royalty on all byproducts and 

substituted language that limits royalties 

on byproducts to those listed in the 

MLA, the better interpretation is that 

Congress intended to eliminate royalties 

on byproducts that are not listed in the 

MLA. We therefore revised the final rule 

to reflect this interpretation. 

Final section 3211.19(a) implements 

the Energy Policy Act amendments with 

regard to leases issued on or after 

August 8, 2005 (other than leases issued 

in response to applications that were 

pending on that date for which no 

election is made under § 3200.8(b)(1)), 

and leases issued before August 8, 2005, 

for which an election is made under §

3200.7(a)(2). Final section 3211.19(b) 

provides that for leases issued before 

August 8, 2005, for which no election is 

made under § 3200.7(a)(2), and for 

leases issued in response to applications 

pending on that date for which no 

election is made under § 3200.8(b)(1), 

the royalty on all byproducts is the rate 

prescribed in the lease instrument, or if 

none is prescribed in the lease 

instrument, the rate prescribed in the 

previous regulations at 43 CFR 

3211.10(b) (2004). 

Final section 3211.20 provides that a 

lessee may credit advanced royalty 

toward royalty due under the MMS 

regulations at 30 CFR 218.305(c). This 

provision, and the MMS rule, 

implement 30 U.S.C. 1004(f)(2), which 

allows for crediting advanced royalty 

payments towards royalty due on 

production. We received no comments 

on this section and have adopted it as 

proposed. 

In the proposed rule, we proposed 

removing previous section 3211.17 

(‘‘When do I owe minimum royalty?’’) 

because minimum royalties no longer 

apply to new leases. In this final rule, 

we decided to include a section with the 

same title, final section 3211.21, with a 

paragraph (a) explaining that leases 

under the new regulations do not owe 

minimum royalty, and a paragraph (b) 

providing that minimum royalties do 

apply to certain older leases and 

incorporating the substance of previous 

section 3211.17. This section has been 

added for convenience and to facilitate 

understanding of when minimum 

royalties continue to apply. This section 

is not intended to add new 

requirements. 

Final section 3211.21(b) clarifies that 

the leases to which that paragraph 

applies owe minimum royalty either 

when the royalty on actual production 

would be less than $2.00 per acre or 

when the lease is in a period of nonproduction, as long as the lease remains 

in effect. Previous section 3211.17 

implied, but did not clearly state, that 

minimum royalties apply to periods of 

non-production. However, previous 

section 3211.14 stated that once a lease 

achieved production in commercial 

quantities it would begin paying 

royalties instead of rent. There is no 

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exception to this obligation to pay 

regular or minimum royalty instead of 

rent. The BLM has always charged 

minimum royalties in periods of nonproduction, as well as in periods of low 

production. We have made this explicit 

in this final regulation. 

Subpart 3212—Lease Suspensions, 

Cessation of Production, Royalty Rate 

Reductions and Energy Policy Act 

Royalty Rate Conversions 

The title of final subpart 3212 has 

been expanded to better reflect all 

subject matter within this subpart. 

Lease Suspensions 

Final section 3212.10 addresses the 

difference between a suspension of 

operations and production and a 

suspension of operations. Under final 

section 3212.10(a), a suspension of 

operations and production is a 

temporary relief from production 

obligations that a lessee may request 

from the BLM. 

This section removes economic 

conditions as a basis for concluding that 

continued operations are unjustifiable. 

The BLM believes that a lessee should 

not be able to hold a lease indefinitely 

merely because it is uneconomic to 

conduct operations. This would not 

promote the development and recovery 

of geothermal resources. In 

circumstances where geothermal 

operations are expected to become 

economic, the new statute provides that 

a lessee that is subject to the new 

statutory provisions could cease 

production for as much as 10 years in 

aggregate and yet hold its lease through 

the payment of advanced royalty (see 

discussion of final section 3212.15(a)(1), 

below). 

Final section 3212.10(b) explains that 

a suspension of operations is when the 

BLM, on its own initiative, orders a 

lessee to stop production temporarily in 

the interest of conservation. The 

regulatory text more closely follows the 

statute at 30 U.S.C. 1010 than did the 

previous regulation. We received no 

comments on section 3212.10, and have 

adopted it as proposed. 

Final section 3212.11 remains 

substantively unchanged from the 

previous regulation except that the final 

rule clarifies that unit obligations may 

be separately suspended under subpart 

3287. We received no comments on this 

section, and have adopted it as 

proposed. 

Final section 3212.12 is similar to the 

previous section except that paragraph 

(b) clarifies that a lessee cannot 

unilaterally terminate a suspension that 

the BLM ordered. The reference to 

‘‘minimum’’ royalties has also been 

removed because, as specified under 

final section 3211.21(a), minimum 

royalties are no longer required for 

certain categories of leases. For leases 

identified under final section 

3211.21(b), minimum royalties will 

continue to apply and will need to 

resume upon termination of a 

suspension. We received no comments 

on this section, and have adopted it as 

proposed. 

Final section 3212.13 is substantively 

similar to the previous rule except that 

during a suspension of operations, the 

BLM may also suspend lease or royalty 

obligations if it determines that a lessee 

would be denied all beneficial use of its 

lease during the period of the 

suspension. Although we received no 

comments on this section, the final rule 

makes it clear that the BLM has 

discretion to suspend a lease or royalty 

obligations. The proposal could have 

been misinterpreted to mean that BLM 

is required to suspend the rental or 

royalty obligations. 

Final section 3212.14 removes the 

previous reference to ‘‘minimum’’ 

royalties and substitutes the word 

‘‘terminate’’ for the previous word 

‘‘cancel,’’ because the remedy referred 

to should be a termination, not a 

cancellation. As noted above, the 

resumption of ‘‘rental and royalty’’ 

payments may include minimum 

royalty payments under final section 

3211.21 for certain categories of leases. 

We received no comments on this 

section, and have adopted it as 

proposed. 

Lease Requirements and Payments Due 

During a Cessation of Production 

Final section 3212.15 addresses 

whether, and under what 

circumstances, a lease can remain in full 

force and effect if a lessee ceases 

production and the BLM does not grant 

a suspension. Section 3212.15 

implements 30 U.S.C. 1004(f)(1) and (3). 

In part, the intent of final section 

3212.15 is to allow temporary cessations 

of production, lasting more than a 

month, without lease termination and 

without a lessee having to apply for a 

suspension of operations and 

production. Thus, under this final rule, 

the BLM will not consider production 

stoppages of less than one full calendar 

month to be a cessation of production. 

The BLM added this limitation for 

several reasons: 

(1) Routine maintenance, such as 

plant overhauls, is an inherent part of 

producing a geothermal resource. While 

overhauls and other maintenance can 

last more than a month, most 

maintenance operations only require 

plant shut down for a period of days or 

weeks. Because maintenance is an 

inherent part of producing a geothermal 

resource, performing maintenance for 

less than a month is still considered to 

be ‘‘production;’’ 

(2) From an administrative 

standpoint, tracking shutdowns lasting 

less than a month would be expensive 

and cumbersome. The reports that the 

BLM receives are all based on calendar 

months. If a lease was shut down for an 

entire calendar month, the reports 

required by subpart 3270 would 

indicate zero production and this would 

alert the BLM to consider implementing 

this section of the regulations. However, 

if a lease produced for part of a month, 

the reports would indicate some 

quantity of production. The only way 

the BLM could determine if the lease 

was not producing for part of a month 

would be a physical inspection of the 

lease and a review of the metering 

records to determine when the lease was 

shut-in; and 

(3) If a lease produces for any portion 

of a month, royalty would be due. As 

long as a lessee is diligently producing 

from its lease, there is no need to collect 

a royalty on actual production for a 

portion of a month and an advanced 

royalty for cessation of production for 

the remainder of the month. 

Accordingly, final section 3212.15 will 

only apply if an operation is shut down 

for more than a calendar month. 

Final section 3212.15 contains 

separate paragraphs, each of which 

describe a set of circumstances under 

which a cessation of production could 

occur without lease termination. In this 

final rule, we redesignate proposed 

section 3212.15(a) as final section 

3212.15(a)(1) and add a new section 

3212.15(a)(2) that is discussed below. 

This has been done because only certain 

categories of leases are subject to the 

advanced royalty provisions of the new 

statute, and others can maintain their 

leases in other ways, as discussed 

below. 

Final section 3212.15(a)(1) 

implements 30 U.S.C. 1004(f)(1), which 

allows the payment of advanced royalty 

in lieu of production. This paragraph 

applies to leases issued on or after 

August 8, 2005 (other than leases issued 

in response to applications pending on 

that date for which no election is made 

under section 3200.8(b)(1)), and to 

leases issued before August 8, 2005, for 

which an election to all of the terms of 

the regulation is made under section 

3200.7(a)(2). For such leases, under the 

final rule, once commercial production 

is achieved, a lessee will be allowed to 

keep a lease in effect for a total of 10 

years with no production, without 

having to apply for a suspension of 

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operations, if the lessee continues to pay 

advanced royalty under the final MMS 

regulations at 30 CFR 218.305. The BLM 

has interpreted 30 U.S.C. 1004(f)(1) to 

allow a total of 120 months (10 years) 

of advanced royalty payments, whether 

consecutive or not. As explained in the 

MMS rule at 30 CFR 218.305, the 

amount of advanced royalties due 

during a cessation of production for 

leases subject to the new statutory 

provision is no longer the ‘‘minimum 

royalty’’ referenced in previous sections 

3211.17 and 3212.14, but is based upon 

an historical average monthly royalty 

rate. 

Because 43 CFR 3207.15 

(implementing 30 U.S.C. 1005(g) and 

(h)) provides for maintaining the lease 

through a production extension if the 

lessee has a well capable of production 

and makes diligent efforts to utilize the 

resource, we interpret the cessation of 

production provision at 43 CFR 

3212.15(a)(1) as not requiring a well 

capable of production or diligent efforts 

to utilize the resource, as long as the 

lessee pays advanced royalties. 

A lessee will continue to be required 

to pay rentals during the period for 

which it pays advanced royalty. The 

BLM has reached this conclusion 

because the section of the Energy Policy 

Act that establishes rental obligations, 

30 U.S.C. 1004(a)(3), specifies that 

rentals are paid for each year of a lease, 

without exception. To understand the 

manner in which rental payments and 

rental credits will affect advanced 

royalty calculations and payments, see 

the final MMS rule. 

Because the statutory language of 30 

U.S.C. 1004(f)(1) is specific to leases on 

which royalty was previously paid, final 

section 3212.15(a)(1) does not apply to 

direct use operations where the lessee 

pays direct use fees instead of royalties. 

The Energy Policy Act does not contain 

an ‘‘advanced fee’’ counterpart for direct 

use. Therefore, a lessee using the 

geothermal resource for seasonal 

operations in a greenhouse, for example, 

could not pay advanced royalties during 

the months of the year when no 

production occurs to maintain its lease 

in effect. However, if the BLM approved 

the seasonal operations as part of the 

lessee’s utilization plan, it would not be 

considered a cessation of production. If 

seasonal operations were not approved, 

the lessee would need a lease 

suspension to maintain the lease in 

effect. 

Under final section 3212.15(a)(1), the 

term ‘‘commercial production’’ has a 

different meaning than the term 

‘‘produced or utilized in commercial 

quantities,’’ because the advanced 

royalty section is not intended to apply 

to leases that have a well capable of 

production without having actually 

produced geothermal resources; it is 

only intended to apply to leases that 

have achieved actual production or are 

receiving allocated production through 

some type of agreement. 

Although we did not receive a 

comment on this issue, in reviewing the 

proposed rule we recognized that a 

provision needed to be added to account 

for those leases that continue to be 

subject to the royalty provisions in 

effect on August 8, 2005, and do not 

have the opportunity to pay advanced 

royalties. Although these regulations 

allow leases issued before August 8, 

2005, and leases issued based upon 

applications pending on August 8, 2005, 

to elect to be subject to all of the 

regulations of 43 CFR parts 3200 and 

3280, some lessees may choose not to 

make such an election and will remain 

subject to the earlier royalty provisions. 

Those lessees will not be able to pay 

advanced royalties to maintain their 

leases. 

However, such lessees had recourse 

under the earlier rules to maintain their 

leases by paying minimum royalties. 

Thus, for leases issued before August 8, 

2005, for which no election is made 

under section 3200.7(a)(2), and for 

leases issued in response to applications 

pending on August 8, 2005, for which 

no election is made under section 

3200.8(b)(1), final section 3212.15(a)(2) 

has been added to address the 

conditions necessary for a lease to 

remain in effect during the period in 

which there is no production and the 

lessee does not have an approved 

suspension. Under such circumstances, 

a lease will remain in effect if the lessee: 

(1) Continues to make minimum royalty 

payments as specified in final section 

3211.21(b); (2) Maintains a well capable 

of production in commercial quantities; 

(3) Continues to make diligent efforts to 

utilize the geothermal resource; and (4) 

Satisfies any other applicable 

requirements. This practice was 

allowable under, but not well 

articulated in, the previous regulations 

(previous section 3211.17, now restored 

in substance as final sections 3211.21 

and 3212.14). 

Final section 3212.15(b) specifies 

other circumstances that would allow 

leases to remain in full force and effect 

without having to pay advanced 

royalties if production ceases. This 

section includes situations when the 

BLM: (1) Requires or causes the 

cessation of production; or (2) 

Determines that the cessation of 

production is required or otherwise 

caused by the Secretary of the Air Force, 

Army, or Navy; by a state or a political 

subdivision of a state; or by a force 

majeure event. This section implements 

30 U.S.C. 1004(f)(3). We received no 

comments on this section, and have 

adopted it as proposed. 

Final section 3212.15(c) allows 

lessees to keep their leases in effect 

(without paying advanced royalties) 

during extended outages due to 

maintenance activities that are 

necessary to maintain operations. For 

this paragraph to apply, the 

maintenance would be required to last 

more than one calendar month and 

would require the BLM approval before 

the end of the first month in which no 

production occurs. To obtain approval, 

the lessee must demonstrate to the 

BLM’s satisfaction that the cessation is 

part of required maintenance. The basis 

for this provision is that maintenance 

required to maintain operations is a 

production activity, not a cessation of 

operations. Required maintenance 

activities under this paragraph could 

include overhauling a power plant, redrilling or re-working wells that are 

critical to plant operation, or repairing 

and improving gathering systems or 

transmission lines that necessitate the 

discontinuation of production. It should 

be noted that the application of 

paragraph (c) of this section does not 

affect a lessee’s obligations to pay 

rentals or minimum royalties, 

whichever is applicable. 

One comment requested an 

alternative to obtaining prior approval 

for maintenance activities lasting more 

than 1 month, as required in final 

section 3212.15(c). The commenter 

alluded to ‘‘upset’’ conditions for which 

it would be impossible to plan in 

advance or to obtain prior approval. We 

accept the comment. The intent of the 

proposed requirement was twofold: (1) 

To ensure that maintenance lasting 

more than a calendar month is not 

misconstrued to be a cessation of 

production requiring advanced royalties 

to be paid; and (2) The filing of a 

Geothermal Sundry Notice would give 

the BLM the opportunity to review the 

reason for the extended outage to ensure 

that it meets the criteria for 

maintenance. However, the intent of the 

requirement does not necessarily 

require that a Geothermal Sundry Notice 

be filed in advance of the outage. As 

long as the BLM is made aware of the 

outage prior to the end of the first 

month where there will be no reported 

production on a lease, the need for a 

payment of advanced royalty will be 

averted. Therefore, the last sentence of 

final section 3212.15(c) was changed to 

read: ‘‘You must obtain BLM approval 

by submitting a Geothermal Sundry 

Notice if the activity will require more 

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24380 Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 

than 1 calendar month to be classified 

as maintenance under this paragraph. 

The Geothermal Sundry Notice must be 

received by BLM before the end of the 

first calendar month in which there will 

be no production.’’ 

For those lessees subject to the royalty 

provisions in effect on August 8, 2005, 

lessees would continue to be subject to 

applicable minimum royalty obligations 

during maintenance periods, and could 

keep their leases in effect by satisfying 

the requirements of final section 

3212.15(a)(2) instead of under final 

section 3212.15(c). 

Final section 3212.16 replaces 

previous section 3212.15 and provides 

the standards for reduction, suspension, 

or waiver of rental or royalties. It is 

similar to the previous section, but more 

closely follows the statutory provision 

at 30 U.S.C. 1012. Paragraph (b) makes 

clear that the BLM will not approve a 

royalty reduction, suspension, or waiver 

unless all royalty interest owners other 

than the United States accept a similar 

reduction, suspension, or waiver. This 

provision was in the previous 

regulations at section 3212.16(b). We 

received no comments on this section. 

Final section 3212.17 specifies the 

information that must be included with 

a request for a royalty or rental rate 

reduction, suspension, or waiver. It 

includes the information in previous 

section 3212.16, but clarifies that all of 

the information must be submitted. We 

received no comments on this section, 

and have adopted it as proposed. 

Production Incentives 

The Energy Policy Act (at Section 

224(c) and (d)) establishes production 

incentives for new facilities and 

qualified expansion projects that are put 

into commercial operation by August 8, 

2011. The incentives are in the form of 

a 4-year, 50 percent reduction in royalty 

from what otherwise would be due. 

Final sections 3212.18 through 3212.24, 

and final MMS regulations at 30 CFR 

218.307, implement these statutory 

provisions. 

If a project is defined as a ‘‘new 

facility,’’ all of the production from that 

facility is subject to the 50 percent 

reduction in royalty that would 

otherwise be due. If a project is defined 

as a ‘‘qualified expansion project,’’ only 

the additional electricity generated as a 

result of the project is subject to the 

reduced royalty. Qualifying a project as 

a ‘‘new facility’’ would generally be 

more difficult and would typically 

result in more capital expenditure than 

an expansion project. Although a 

‘‘qualified expansion project’’ may be 

easier to achieve, strict monthly 

production targets would be established 

that the project must meet in order to 

qualify. 

Final section 3212.18 provides a 

general description of the requirements 

for obtaining a production incentive. 

The production incentives will only 

be available for those leases that were 

issued before August 8, 2005, and that 

do not convert their royalty provisions 

under final section 3212.25. Because 

Section 224(c) of the Energy Policy Act 

specifically refers to reductions in 

royalty, the BLM has interpreted this to 

mean that the incentives are intended 

only for the commercial generation of 

electricity and not for direct use 

projects. 

The BLM received one comment 

requesting clarification of section 

3212.18 regarding the types of leases for 

which production incentives apply, and 

referring to the new classification of 

leases in the final MMS rule at 30 CFR 

206.351. 

The production incentives discussed 

in section 3212.18 are only available for 

leases that were in effect prior to August 

8, 2005, and on which the royalty terms 

were not converted under section 

3212.25 (equivalent to part of MMS 

Class 1). These criteria are listed in 

sections 3212.18(a) and (b), respectively. 

In addition, production incentives are 

only available for leases that provide for 

the commercial generation of electricity 

(section 3212.18(d)). Because no 

changes to these regulations were 

requested by the commenter, no changes 

were made. However, the MMS has 

made changes to its final rule to clarify 

these class designations. 

Final section 3212.19 requires lessees 

seeking a production incentive to 

submit a written request. The BLM does 

not anticipate developing a specific 

application form for production 

incentive requests; a lessee can make 

the request in a letter. The letter can 

provide a description of the project and 

whether the applicant prefers the 

project to be considered a new facility 

or a qualified expansion project. If the 

applicant is requesting the project to be 

considered as a new facility, the letter 

should include sufficient technical 

justification to support the general 

criteria set forth in section 3212.22. If 

the applicant is requesting the project to 

be considered as a qualified expansion 

project, the letter should describe the 

anticipated amount of capital 

expenditure (section 3212.21(a)) and the 

estimated increase in net generation 

resulting from the project (section 

3212.21(b)). The letter should include 

sufficient technical detail to support 

these estimates. We received no 

comments on this section, and have 

adopted it as proposed. 

Final section 3212.20 describes how 

the BLM will review a request for a 

production incentive. The BLM will 

review incentive requests on a case-bycase basis to determine whether a 

proposed project meets the criteria for a 

qualified expansion project under final 

section 3212.21 or a new facility under 

final section 3212.22 (see the 

discussions below of the criteria for 

qualified expansion projects and new 

facilities). If the request does not meet 

the criteria for the type of project the 

lessee requests, the BLM will determine 

whether it meets the criteria for the 

other type of production incentive 

project. 

Under final section 3212.20(b), if the 

BLM determines that a lessee has a 

qualified expansion project, the BLM 

will, as part of its approval, provide the 

lessee with a schedule of monthly target 

net generation amounts. Projects must 

generate greater than these amounts to 

qualify for the production incentive. 

These amounts will quantify the 

required 10 percent increase in net 

generation over the projected net 

generation without the project. The 

schedule will be specific to the facility 

or facilities that are affected by the 

project and will cover the 48-month 

time period during which the 

production incentive may apply. The 

lessee will receive the production 

incentive only for those months in 

which its net generation exceeds the 

monthly target. Averaging of production 

to achieve production targets will not be 

allowed (see the preamble discussion of 

section 3212.23). We received no 

comments on this section. However, in 

the final rule we make it clear that net 

generation must exceed the monthly 

target to qualify for the production 

incentive, as required by the Energy 

Policy Act. 

Final section 3212.21 specifies the 

criteria necessary to establish a qualified 

expansion project for the purpose of 

obtaining a production incentive. 

Because one goal of the Energy Policy 

Act is to encourage new projects that 

will increase the amount of electricity 

generated from geothermal resources, 

the BLM will not approve projects for 

this incentive that do not involve 

significant capital expenditure. 

Specifically, the BLM is concerned that 

this provision of the Energy Policy Act 

could be abused if, for instance, a lessee 

simply opens production valves to 

achieve the required increase in 

generation. Examples of activities 

involving substantial capital 

expenditure could include: (1) The 

drilling of additional wells; (2) 

Retrofitting existing wells and collection 

systems to increase production rates; (3) 

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Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 24381 

Retrofitting turbines or power plant 

components to increase efficiency; (4) 

Adding additional generation capacity 

to existing plants; and (5) Enhanced 

recovery projects such as augmented 

injection. Projects that are not 

associated with substantial capital 

expenditure, such as opening 

production valves or operating existing 

equipment at higher rates, would not be 

considered to be qualified expansion 

projects. 

While the Energy Policy Act 

specifically refers to ‘‘expansion of the 

facility’’ in relation to qualified 

expansion projects, the BLM broadly 

interprets this to mean the expansion of 

any portion of a geothermal project that 

will result in increased generation. This 

includes not only expansion to the 

power plant, but also projects in the 

well field, such as additional drilling, 

workovers, and enhanced geothermal 

projects, such as augmented injection or 

acid and fracture stimulation. 

Under Section 224(d) of the Energy 

Policy Act, a qualified expansion project 

must increase ‘‘production’’ by more 

than 10 percent over the average 

monthly production during the previous 

5 years, taking into consideration 

production trends that occurred in those 

5 years. The BLM interprets this 

provision to mean that if 5 years of data 

are not available, the project could not 

be classified as a qualified expansion 

project. In addition, the BLM interprets 

the term ‘‘production’’ to mean ‘‘net 

generation,’’ because this meets the 

intent of the statute to increase the 

amount of useable electricity from 

geothermal resources. The following 

graph illustrates these requirements: 

If a lessee satisfies the criteria for a 

qualified expansion project, the BLM 

will perform a reservoir analysis of the 

5 years of data that is submitted and, 

from that analysis, will develop a 

monthly schedule of target net 

generation amounts. The lessee could 

perform its own reservoir analysis and 

develop a schedule of target generation 

amounts and submit it to BLM for 

review. The BLM could modify this 

schedule. Whichever schedule BLM 

approves, net generation must exceed 

these target amounts to qualify for a 

reduced royalty for that month. Because 

the production incentive is only in 

effect for 4 years, a schedule will cover 

the 48-month period for which the 

production incentive may be applied. 

We received no comments on this 

section, and have adopted it as 

proposed. 

Final section 3212.22 identifies 

criteria for determining whether a 

project qualifies as a ‘‘new facility.’’ 

Because the BLM does not have a formal 

definition for ‘‘facility’’ and because of 

the high degree of variation in projects, 

each application will be considered on 

a case-by-case basis based on the factors 

described in the rule. Factors listed in 

support of concluding that a project 

qualifies as a new facility include: (1) 

The project requires a new site license 

or facility construction permit if it is on 

Federal lands; (2) The project requires a 

new Commercial Use Permit; (3) The 

project includes at least one new 

turbine-generator unit; (4) The project 

involves a new sales contract; (5) The 

project involves a new or substantially 

larger footprint; or (6) The project is not 

contiguous to an existing project. 

Generally, a new facility will not be: 

(1) Authorized only with a Geothermal 

Drilling Permit; (2) Constructed entirely 

within the footprint of an existing 

facility; or (3) Involve only well field 

projects such as drilling new wells, 

increasing injection, and enhanced 

recovery projects. 

If the BLM determines that a proposed 

project could be approved either as a 

‘‘new facility’’ or as ‘‘qualified 

expansion project,’’ the BLM will 

approve the application under the 

category requested by the applicant. If a 

project does not qualify as a ‘‘new 

facility,’’ the BLM will automatically 

review it, with no action necessary on 

the applicant’s part, to see if it will 

qualify as a ‘‘qualified expansion 

project.’’ We received no comments on 

this section, and have adopted it as 

proposed. 

Final section 3212.23 describes how 

production incentives apply to qualified 

expansion projects. The Energy Policy 

Act, at Section 224(d), requires a 

production incentive to be granted if a 

qualified expansion project resulted in 

greater than a 10 percent increase in 

production. However, that section of the 

Act is silent on how long the 10 percent 

increase would have to be maintained. 

The BLM is concerned that a project 

could exceed the target increase for a 

short period, yet obtain the production 

incentive for the entire allowable 4 year 

period. The BLM believes the intent of 

the production incentive is to encourage 

projects that would result in a 

sustainable increase in production. 

Therefore, final section 3212.23 


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authorizes a reduced royalty only for 

those months where the qualified 

expansion project exceeds the BLMestablished net generation targets. 

The Energy Policy Act at Section 

224(c)(1)(b), requires the production 

incentive to be applied to ‘‘qualified 

expansion geothermal energy,’’ which is 

further defined in Section 224(d)(1) of 

the Energy Policy Act as being a 

‘‘production’’ increase as a result of the 

expansion of the facility. The BLM 

interprets this to mean that the reduced 

royalty only applies to the increase in 

net generation resulting from a qualified 

expansion project. To define the 

increase in net generation, final section 

3212.23 includes an equation that uses 

the target generation amounts defined in 

final section 3212.20 as a basis. The 

denominator of the equation (1.1) in 

section 3212.23 converts the target 

generation amount to the baseline 

generation amount which represents the 

amount of electricity that would have 

been generated without the qualified 

expansion project. In the final rule we 

revised the description of the formula to 

make it clear exactly which production 

qualifies for the incentive. The 

following bar graph illustrates the 

application of the incentive for qualified 

expansion projects: 

Under final section 3212.24, for 

projects that qualify as ‘‘new facilities,’’ 

the royalty on all the net generation 

from the facility will be reduced by 50 

percent for the 48-month period 

following the commencement of 

commercial operation, regardless of the 

amount of electricity generated. To 

simplify the administration and tracking 

of the production incentives, the 

production incentive takes effect on the 

first day of the month following the 

commencement of commercial 

operation of the project. In the final rule 

we added a sentence to the end of 

paragraph (a) to make it clear that the 

incentive applies to the entire 

commercial generation of electricity 

from the new facility. The amount of the 

production incentive for new facilities 

is established by the final MMS 

regulations. We received no comments 

on this section, and with the exception 

of adding the clarifying language, have 

adopted it as proposed. 

Energy Policy Act Royalty Rate 

Conversions 

Final section 3212.25(a) implements 

Section 224(e) of the Energy Policy Act, 

allowing lessees of geothermal leases 

issued before August 8, 2005, to request 

that the BLM modify their leases to 

convert the royalty rate terms of their 

leases to the royalty and direct use fee 

terms in the Energy Policy Act. Final 

section 3212.25(a) also provides that, if 

the BLM modifies the royalty rate terms 

of a lease, the new royalty rates and 

direct use fees will apply to all future 

production from or allocated to that 

lease. Final section 3212.25(b) 

references final sections 3211.17 and 

3211.18 and applicable MMS 

regulations for the specific royalty rates 

and direct use fees that will apply to a 

modified lease. 

One commenter suggested that 

language be added to section 3212.25 to 

clarify that once a lessee decides to 

convert the royalty terms of its lease 

under this subpart, that the decision is 

irreversible. This comment is accepted 

because the intent of Section 224(e) of 

the Energy Policy Act is clearly to make 

the change in royalty terms permanent. 

Adding language to this effect in section 

3212.25(a) will clarify the intent. 

Section 3212.25(a) has been changed to 

read in part: ‘‘You may withdraw your 

request before it is granted, but once you 

accept the new terms, you may not 

apply to revert to the earlier royalty 

rates. If your request to modify is 

granted, the new royalty rate or direct 

use fees will apply to all geothermal 

resources produced from your lease for 

as long as your lease remains in effect.’’ 

In reviewing the comments received, 

the BLM was concerned that the first 

sentence of section 3212.25(a) could be 

construed to mean that certain entities 

besides the lessee could submit a 

request to modify the royalty terms of a 

lease. This confusion may arise because 


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Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 24383 

the MMS definition of lessee (30 CFR 

206.351) includes anyone ‘‘who has 

been assigned an obligation to make 

royalty, fee, or other payments required 

* * * .’’ The MMS definition also 

includes affiliates of the lessee who use 

the geothermal resource to generate 

electricity, in a direct use process, to 

recover byproducts, or who sell or 

transport lease production. The intent of 

section 3212.25(a) is that only the entity 

holding record title interest in a 

geothermal lease (the ‘‘lessee’’ as 

defined in the BLM regulations at 43 

CFR 3200.5) can be granted a 

modification in royalty terms of the 

lease. To make this change, we modified 

this section to make it clear that ‘‘you’’ 

refers to the lessee. 

In implementing Section 224(e) of the 

Energy Policy Act, the BLM construes 

the statute to mean that the only royalty 

term in the lease that will be converted 

is the royalty rate on production from, 

or allocated to, the lease. This is 

emphasized in the final rule by use in 

a number of places of the phrase 

‘‘royalty rate terms’’ instead of the 

proposed phrase ‘‘royalty terms.’’ 

Other lease and statutory terms 

pertaining to ‘‘royalty’’ exist, such as 

‘‘minimum royalty’’ (see final section 

3211.21 incorporating previous sections 

3211.10 and 3211.17) and ‘‘advanced 

royalty’’ during cessation of production 

(final section 3212.15(a)(1)). Under the 

final rule, these terms will not be 

converted under an application to 

convert royalty rate terms pursuant to 

final section 3212.25. Also, the royalty 

rate for byproducts will not be modified 

under a section 3212.25 conversion. 

This is because Section 224(e)(2) of the 

Energy Policy Acts specifies that the 

modification that may be made under 

that section relates to royalties that will 

be computed ‘‘on a percentage of the 

gross proceeds from the sale of 

electricity * * *.’’ Because byproducts 

are unrelated to the generation of 

electricity, the section does not apply to 

byproducts. In this final rule, we added 

a sentence to section 3212.25(a) to 

clarify this. As explained above, we also 

restructured final section 3211.19, 

relating to byproducts, to differentiate 

between leases that will be governed by 

these final regulations and those that 

will remain subject in part to the 

previous regulations. However, as 

discussed earlier, a lessee of a lease 

issued before August 8, 2005, can 

choose to make all of its lease terms 

subject to the new provisions adopted in 

this rule by making an election under 

section 3200.7(a)(2). 

For example, under the final rule, if 

the lessee of a lease issued prior to 

August 8, 2005, elects to convert the 

royalty rate terms of the lease under 

section 3212.25, the lessee will be 

subject to the new royalty rate on gross 

proceeds for the commercial generation 

of electricity and direct use fee schedule 

for direct use operations. Unless that 

lessee makes an election under section 

3200.7(a)(2), however, the lessee will 

continue to be subject to the minimum 

royalty and byproduct royalty 

provisions of the previous regulations 

and will not be required to pay rental 

once commercial production begins. In 

addition, the lessee will not be able to 

keep its lease in effect by paying 

advanced royalty under section 

3212.15(a)(1) if it ceases production for 

more than a calendar month, but would 

need to satisfy one of the other 

provisions of section 3212.15 to keep its 

lease in effect during a period of no 

production. 

This interpretation as it relates to the 

non-conversion of minimum royalty and 

advance royalty provisions is based 

upon possible complications that could 

occur if some, but not all, of the other 

provisions changed. For example, under 

the Geothermal Steam Act, prior to the 

amendments made by the Energy Policy 

Act, rental on a lease was only due until 

the lease began actual production or was 

deemed to have a well capable of 

production. At that point, the greater of 

actual royalty on production or 

minimum royalty was due every month. 

If the BLM were to include the 

minimum royalty terms in the 

conversion under final section 3212.25, 

lessees electing to convert the royalty 

terms of their lease would no longer pay 

minimum royalty because there is no 

minimum royalty provision in the 

Energy Policy Act. But, once a lease had 

a well deemed capable of production, 

the rental commitments of the existing 

lease terms would end; therefore, unless 

the rental provisions of the new statute 

applied, the lessee would not pay rental 

or minimum royalty during a period on 

non-production. The BLM does not 

believe it was the intent of the Energy 

Policy Act to allow lessees to hold a 

lease without making some type of 

payment. Section 224(e) of the Energy 

Policy Act does not allow lessees to 

apply to change the rental terms of 

existing leases; only the royalty rate 

term. 

In addition, if lessees did not convert 

the requirement at previous section 

3211.10 for minimum royalty payment, 

then becoming subject to the payment of 

advanced royalties as well when 

production ceases for more than a 

calendar month would be burdensome 

and redundant. Absent a suspension, in 

cases where an existing lessee does not 

produce for a calendar month, the 

previous minimum royalty provisions 

require that minimum royalty be paid 

(see previous sections 3211.10 and 

3211.17 and final section 3211.21). The 

BLM believes that Congress did not 

intend for one lessee to pay both 

minimum royalty and advanced royalty 

if production ceases. 

The BLM received no comments on 

its interpretation. Except for the 

addition of the clarification discussed 

above regarding byproducts, this section 

has been adopted as proposed. As 

already noted, however, existing lessees 

do have the option to elect to make all 

of the terms of their leases subject to 

these regulations (see section 3200.7), so 

that, in addition to a converted royalty 

rate, their leases would also be subject, 

for instance, both to both continual 

rental obligations and advanced royalty, 

instead of minimum royalties during a 

cessation of production. 

Section 224(e) of the Energy Policy 

Act requires any lessee wishing to 

convert the royalty rate terms of its lease 

to apply to the BLM. Final section 

3212.26 establishes an application 

process and requires certain types of 

information to be submitted together 

with the application. For electrical 

generation, the lessee must submit 

enough information to allow the BLM to 

determine how much royalty the lessee 

would have paid under the netback 

method, if that is the current method the 

lessee is using. As mentioned earlier, in 

situations where a lessee or its affiliate 

is selling geothermal resources at arm’s 

length, before those resources are used 

to generate electricity, the lessee would 

be required to document in its 

application that it has access to the 

purchaser’s gross proceeds derived from 

the sale of the electricity. From the 

information contained in the 

application, the BLM will calculate a 

new royalty rate that will result in the 

same amount of royalty. 

Final section 3212.26(c) states that the 

BLM must receive an application to 

convert no later than 18 months 

following the effective date of the 

applicable final rule. For direct use 

operations, the applicable final rule is 

the MMS rule at 30 CFR 206.356(b)(1) 

(direct use fee schedule); for the 

commercial generation of electricity, the 

applicable final rule is this rule, and the 

application deadline is December 1, 

2008. This section implements Section 

224(e)(2) of the Energy Policy Act. If 

both the MMS and the BLM final rules 

are made effective on the same day, then 

all applications will have to be received 

no later than December 1, 2008. We 

received no comments suggesting 

changes to this section, and have 

adopted it as proposed. 

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24384 Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 

Final section 3212.27 implements 

Section 224(e)(3) and (4) of the Energy 

Policy Act, and also requires the BLM 

to consult with the MMS in 

implementing the royalty conversion 

provision. The BLM will also review an 

application to ensure that the lessee has 

suitable meters necessary to determine 

the royalty due under the modified lease 

terms. 

The final rule will allow lessees who 

have requested a modification of the 

royalty terms of their lease 30 days to 

reject the modified royalty rate that the 

BLM determines. Without a review 

period, lessees would essentially be 

committing themselves to a new royalty 

rate at the time they requested the 

modification, without knowing what the 

new royalty rate would be. This could 

involve some risk for lessees, and the 

BLM felt this risk would be a 

disincentive for lessees to apply for a 

conversion of royalty terms. In addition, 

if there were no review period, the only 

recourse lessees would have to a royalty 

percentage they found objectionable 

would be an appeal to the Interior Board 

of Land Appeals (IBLA). The BLM 

believes it is in the public interest to get 

as many leases as possible off the 

netback system, and that offering a 

review period would help facilitate this 

goal. 

In the final rule the BLM has adopted 

a process in final section 3212.27(d) to 

allow the BLM to comply with the time 

specified in Section 224(e)(3)(A) of the 

Energy Policy Act and issue a lease 

modification no later than 180 days after 

the date of receipt of a complete 

application under section 3212.25. The 

revised procedure is as follows: (1) No 

later than 140 days after the day on 

which the BLM determines it received 

a complete request with all necessary 

information, the BLM will send the 

lessee written notification of the 

proposed royalty rate that the BLM 

determines to be revenue neutral; (2) No 

later than 30 days after the date of 

receipt of the BLM notification, the 

lessee may reject the proposed royalty 

rate in writing; and (3) If the lessee 

rejects the proposed rate, the BLM must 

receive written notification from the 

lessee no later than 30 days of the date 

after receipt of the BLM’s notification. 

The rule provides flexibility by 

specifying that the BLM will accept a 

faxed rejection notification received 

within the 30-day time limit, if followed 

by a written confirmation that the BLM 

must receive no later than the 179th day 

following the day on which it 

determines the complete request was 

received. The time frames specified will 

allow the BLM to issue the lease 

modification within the statutory time 

frame. The rule also provides that if a 

lessee rejects the proposed royalty rate 

on a timely basis: (1) The BLM will not 

issue a decision modifying the royalty 

rate terms of the lease; (2) The existing 

royalty rate terms in the lease continue 

to apply; and (3) The lessee may not 

reapply for a royalty rate term 

conversion under section 3212.25 of this 

part. Finally, the rule provides that 

unless timely written notification is 

received from the lessee rejecting the 

proposed rate, the BLM will issue a 

decision modifying the royalty rate 

terms of the lease no later than 180 days 

after the day on which the BLM 

determines a complete request was 

received. The effective date of the new 

royalty rate is the first day of the month 

following the date on which the 

decision was issued. For example, a 

decision issued on July 21st, will 

become effective on August 1st. The 

BLM decision establishing the royalty 

rate will be appealable to the IBLA, but 

allowing the applicant to reject the new 

royalty rate completely before it is 

finalized and maintain the existing rate 

may serve to limit the number of 

appeals. 

One commenter requested that the 

180-day period for the BLM to respond 

to a request for modification of royalty 

terms (section 3212.27(d)) be reduced to 

120 days. We did not change the rule in 

response to this comment. As 

mentioned above, the 180-day time 

frame is required by statute. In light of 

the 30-day review period now being 

afforded the lessee, the potential 

complexity of the economic analyses, 

and the expected volume of lease 

conversion requests, the BLM does not 

feel that 120 days would offer sufficient 

time to process requests. 

The BLM received a comment asking 

for clarification of a site-specific issue 

regarding pre-paid royalty. We reject 

this comment because it addresses a 

specific and unique situation. These 

regulations preserve the royalty terms 

for existing leases unless a lessee 

chooses to convert the lease. It is not 

appropriate to address in these 

regulations specific circumstances 

arising under existing leases. To the 

extent the commenter raises a valuation 

issue, it should consult with the MMS. 

One commenter commended the BLM 

and the MMS for using the royalty rates 

recommended by the MMS Royalty 

Policy Committee. The BLM 

acknowledges the comment and 

recognizes that use of these 

recommended royalty rates in the 

proposed rule reflects a consensus 

reached by our stakeholders. 

Subpart 3213—Relinquishment, 

Termination, and Cancellation 

Final sections 3213.10 and 3213.11, 

relating to lease relinquishment, contain 

minor changes from the previous 

sections. We received no comments on 

these sections, and with the exception 

of minor changes, have adopted them as 

proposed. 

Final section 3213.12, relating to the 

minimum size of a remaining lease 

following a partial relinquishment, is 

amended to create an exception for 

direct use leases. The exception is 

necessary because, under 30 U.S.C. 

1003(g)(1), the size of direct use leases 

could easily be less than 640 acres. We 

received no comments on this section, 

and have adopted it as proposed. 

Final section 3213.13 contains some 

editorial changes. For the most part, it 

remains substantively unchanged from 

the previous regulation, but clarifies 

that surface and other resources need to 

be reclaimed as well as restored. We 

received no comments on this section, 

and have adopted it as proposed. 

Final section 3213.14 implements 30 

U.S.C. 1004(g), regarding the 

termination of a lease for failure to pay 

rentals on time. This section represents 

a substantial change from the 

procedures under previous sections 

3213.14 through 3213.20, which were 

based on statutory language that was 

removed by the Energy Policy Act. 

Under previous section 3213.14 (which 

implemented previous 30 U.S.C. 

1004(c)), failure to pay the full rental 

amount by the anniversary date of the 

lease resulted in automatic termination 

of the lease by operation of law. No 

grace period was provided for late 

payment. Previous section 3213.15 

(which implemented a proviso in 

previous 30 U.S.C. 1004(c)) provided 

that a lease will not terminate if the 

MMS receives a timely rental payment 

that is deficient by a nominal amount. 

Under the previous rule, the MMS 

notified the lessee of the nominal 

deficiency and provided a date by 

which a further payment must be paid. 

If the payment was not made in the time 

allowed, the BLM terminated the lease 

as of the anniversary date of the lease. 

Previous sections 3213.17, 3213.18, 

3213.19, and 3213.20 contained a 

process for petitioning for lease 

reinstatement if a lease terminated for 

failure to pay rent on time. These 

regulatory provisions were also based 

on previous 30 U.S.C. 1004(c). The 

Energy Policy Act removed the 

provisions of 30 U.S.C. 1004(c) relating 

to lease termination, replacing them 

with the provisions of current 30 U.S.C. 

1004(g), described below. The new 

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statute contains no express process to 

petition for lease reinstatement. 

Under the revised statute at 30 U.S.C. 

1004(g)(1), a 45-day grace period 

beginning on the date of the failure to 

pay the rental (the lease anniversary 

date) is provided for a lessee to pay its 

rent in full before the BLM will 

terminate a lease. The Secretary must 

terminate any lease with respect to 

which rental is not paid in full on the 

expiration of the 45-day period 

beginning on the date of the failure to 

pay the rental. Unlike the previous 

statute, the new statute contains no 

exception for timely rental payments 

that are deficient by a nominal amount. 

The section provides further, at 30 

U.S.C. 1004(g)(3), that a lease that 

would have otherwise terminated upon 

expiration of the 45-day period will not 

terminate if the lessee pays to the 

Secretary, before the end of that period, 

the amount of rental due plus a late fee 

equal to 10 percent of the amount due. 

Final section 3213.14(a) implements 

this statutory provision. This provision 

also makes clear that, if the MMS does 

not receive a lessee’s rental plus the late 

fee by the end of the 45-day period 

described above, the BLM will terminate 

the lease. We received no comments on 

this section, and have adopted it as 

proposed. 

Under 30 U.S.C. 1004(g)(2), the 

Secretary is required to ‘‘promptly’’ 

notify a lessee that has not paid rental 

required under the lease, that the lease 

will be terminated at the end of the 45- 

day period referred to in 30 U.S.C. 

1004(g)(1). The MMS will provide this 

notification. The legislative intent of 

this paragraph appears to be that the 

Secretary should put a lessee on notice 

that it has a grace period to pay rental 

before its lease will be terminated for 

failure to pay. From a logistical 

standpoint, however, this legislative 

intent may be frustrated. For instance, it 

may take the MMS a considerable 

amount of time to notify lessees that the 

lease anniversary date has passed and 

that the MMS has not received the 

rental payment when it was due. If, for 

example, it were to take the MMS 30 

days to provide the required 

notification, a lessee would only have 

15 days’ notice to pay within the 45-day 

timeframe required by paragraph (1) of 

the Act. As a further example, it is 

possible in certain circumstances that 

the MMS notification would not occur 

until after the expiration of the 45-day 

period, and after the BLM lease 

termination. 

The BLM is concerned that the 

practical difficulties with providing a 

lessee with adequate notice could lead 

to the unintended consequence of 

having leases terminate without the 

lessees being provided adequate notice 

to pay their overdue rental. Such an 

outcome would seem to be inconsistent 

with the requirement that the Secretary 

‘‘promptly’’ notify the lessee of the 

unpaid rental. Final section 3213.14(b) 

addresses this situation and provides a 

remedy that the BLM believes to be 

consistent with Congressional intent. 

The final rule ensures that lessees have 

at least 30-days notice to pay overdue 

rental in full. It provides that if a lessee 

receives the MMS notification of the 

non-payment of rental less than 30 days 

before the end of the 45-day period, the 

lessee will have a full 30 days from 

receipt of the notice to pay its rental in 

full. If the MMS receives the rent plus 

the 10 percent late fee within 30 days 

after the lessee received the notification, 

the BLM will either not terminate the 

lease for non-payment of rental or will 

reinstate a lease that was terminated 

under final section 3213.14(a). In other 

words, every lessee will have no less 

than 30 days notice to either avoid a 

lease termination or to have its lease 

reinstated if it were terminated at the 

end of the 45-day period. 

The statutory basis for final section 

3213.14(b) is as follows: The statute 

does not expressly address the situation 

where, in practice, the ‘‘prompt’’ 

notification would compress the actual 

notice to a lessee to less than 30 days. 

The final rule more fully implements 

the Congressional intent of providing 

adequate notice to a lessee. Moreover, 

under 30 U.S.C. 1023, the Secretary may 

prescribe regulations that it may deem 

appropriate to carry out the provisions 

of the Act, and may include, without 

limitation, rules to prevent waste, 

conserve geothermal resources, and 

protect the public interest. Final section 

3213.14(b) furthers all of these goals, 

and also implements Congressional 

intent to provide a fair grace period to 

a lessee who fails to pay rent on time. 

Although not directly applicable, this 

section is consistent with the intent of 

30 U.S.C. 1011 that a lease not be 

terminated for any violation unless the 

lessee has 30 days’ notice to correct the 

violation. We received no comments on 

this section, and have adopted it as 

proposed. 

Final section 3213.15 carries forward 

the text of previous section 3213.16. 

Previous sections 3213.15, 3213.17, 

3213.18, 3213.19, and 3213.20 have 

been removed because they do not 

reflect the current statute. We received 

no comments on removing these 

sections and have made these revisions 

as proposed. 

Previous sections 3213.21 and 

3213.22, relating to lease expiration, 

have been removed because these 

matters are covered in subpart 3207, 

relating to terms and extensions of 

leases. We received no comments on 

removing these sections and have 

adopted the changes as proposed. 

Final sections 3213.16, 3213.17, 

3213.18, and 3213.19 clarify the 

provisions and terminology of previous 

sections 3213.23, 3213.24, and 3213.25, 

relating to lease cancellation and 

termination. Lease cancellation means 

undoing the lease as if it never existed. 

Cancellation is covered by final section 

3213.16 and is limited to situations 

when the BLM issues a lease in error. In 

other circumstances, the previous rules 

used the term ‘‘cancel’’ when the 

appropriate term should have been 

‘‘terminate.’’ Thus, final section 3213.17 

describes situations where the BLM 

could terminate (not cancel) a lease as 

of a particular date. Conforming changes 

are made to other provisions of the final 

regulations by replacement of the word 

‘‘cancellation’’ with the word 

‘‘termination.’’ The rule also clarifies 

that ‘‘cancellation’’ does not apply to 

non-payment of rent which, as 

explained above, would be covered by 

final section 3213.14. In response to a 

request by the MMS, the BLM has 

clarified in final section 3213.17 that 

among the bases for lease termination is 

the nonpayment of royalties or fees 

under 30 CFR 206 and 218. This is not 

new in substance, but a reminder to 

lessees of the possible consequences of 

not making correct payments to the 

MMS. 

Final section 3213.19 addresses 

circumstances where the BLM notifies a 

lessee that its lease is being terminated 

because of a violation. It clarifies the 

procedures of the previous section 

3213.25 by specifying that a hearing 

may be requested in the context of the 

appeal of a proposed lease termination. 

It also follows the statutory text of 30 

U.S.C. 1011 in that a lessee may avoid 

lease termination by diligently 

proceeding to correct a violation, but 

also states that it is insufficient to make 

a good faith attempt to correct the 

violation without actually correcting it. 

We received no comments on sections 

3213.16, 3213.17, 3213.18, and 3213.19, 

and have adopted the change in 

terminology as proposed. 

Subpart 3214—Personal and Surety 

Bonds and Subpart 3215—Bond 

Release, Termination, and Cancellation 

Subparts 3214 and 3215 address 

bonding of geothermal operations. Most 

sections of the final subparts remain 

substantively unchanged from their 

previous counterparts. Changes have 

been implemented to clarify 

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24386 Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 

terminology, and improve grammar and 

readability. The changes are explained 

below. 

In final section 3214.12(c), we specify 

that the bond must cover rent in 

addition to royalty because under the 

Energy Policy Act rents continue for the 

life of the lease and do not stop when 

commercial production begins, as was 

the case under previous regulations. 

Such a requirement was implied in the 

proposed rule under section 3214.12(d), 

which requires the bond to cover 

compliance with the requirements of 

section 3200.4. 

In final section 3214.14(b), we 

provide that the bond may be increased 

to ensure the reclamation of the surface 

‘‘and other resources.’’ The previous 

regulation did not expressly include 

‘‘other resources.’’ We received one 

comment requesting clarification of this 

language, stating a concern that it was 

ambiguous and open-ended. The BLM 

disagrees. Rather than just surface 

reclamation, we are concerned that the 

lessee’s operations could result in other 

environmental damage, such as to 

groundwater, and we want to make sure 

that the bond covers all appropriate 

reclamation and remediation. 

In final section 3214.18, the title has 

been clarified to match the content of 

the section. Final section 3214.18(b) 

clarifies that reclamation 

responsibilities extend to resources 

other than the surface, and final section 

3214.18(d) expressly mentions royalties 

as well as rents. We received no 

comments on this section, and have 

adopted it as proposed. 

Final section 3215.13 has been 

reorganized for clarity. It also clarifies 

that even after bond termination, a 

surety and any other bond provider 

remain responsible for obligations that 

accrued during the period of liability 

while a bond was in effect. We received 

no comments on this section, and have 

adopted it as proposed. 

Subpart 3216—Transfers 

Subpart 3216 addresses geothermal 

lease transfers. The final subpart is 

substantively unchanged from the 

previous subpart. Minor changes have 

been adopted to clarify terminology, and 

improve grammar and readability. 

We received one comment related to 

the last sentence in section 3216.13, 

‘‘What are my responsibilities after I 

transfer my interest?’’ While this 

provision was unchanged from the 

previous regulations, we accept the 

commenter’s observation that the 

provision is ambiguous and have 

clarified the last two sentences of 

3216.13 to read: ‘‘You also remain 

responsible for plugging and 

abandoning any wells that were drilled 

or existing on the lease while you held 

your interest. You must carry out this 

responsibility upon the BLM’s 

determination at any future time that 

the wells must be plugged and 

abandoned.’’ 

Final section 3216.14 has been 

changed to indicate that the filing fees 

for transfers are found in 43 CFR 

3000.12. We received no comments on 

this section, and except for the change 

mentioned above, have adopted it as 

proposed. 

Final section 3216.19 recognizes that 

direct use leases have different size 

constraints than regular geothermal 

leases. Thus, the final section relating to 

the size of allowable lease transfers 

contains an exception for direct use 

leases. We received no comments on 

this section, and have adopted it as 

proposed. 

Subpart 3217—Cooperative Agreements 

Subpart 3217 addresses cooperative 

agreements. The final subpart has few 

substantive changes from the previous 

subpart. Changes have been proposed to 

clarify terminology, and improve 

grammar and readability. 

Subpart 3217 describes two types of 

cooperative agreements, unit and 

communitization agreements, and 

addresses the requirements of Federal 

lessees who join with others to conserve 

the geothermal resource under unit and 

communitization agreements. The 

Energy Policy Act, at 30 U.S.C. 1017(e), 

specifically authorizes the pooling of 

land under communitization agreements 

in order to develop geothermal 

resources where operators cannot 

successfully develop tracts 

independently. The BLM cannot 

approve these agreements unless the 

BLM determines them to be in the 

public interest. 

Final section 3217.10, describing unit 

agreements, has been revised to more 

closely follow the statutory language at 

30 U.S.C. 1017(a). The term 

‘‘cooperative plan’’ is removed from the 

previous section 3217.10 because the 

agency does not require approval of a 

cooperative plan and does not use that 

term in a regulatory context. 

Sections 3217.11 through 3217.13 are 

substantively unchanged from the 

previous regulations. 

The term ‘‘operating contracts’’ is 

removed from final sections 3217.14 

and 3217.15, leaving the statutory terms 

‘‘drilling contract’’ and ‘‘development 

contract,’’ both of which appear in 30 

U.S.C. 1017(g). The BLM uses the terms 

‘‘drilling contract’’ and ‘‘development 

contract’’ interchangeably to describe 

the agreement parties use to 

cooperatively explore under a 

communitization agreement. Final 

section 3217.14(b) includes reference to 

regional exploration, which typically 

describes the scope of drilling or 

development contracts. This section has 

also been revised to make it clear that 

drilling or development contracts are 

limited to exploration activities. Final 

section 3217.14(c) is added to 

acknowledge current BLM practice of 

coordinating the review of a proposed 

drilling or development contract with 

the appropriate state agencies. Final 

section 3217.14(d) has been changed to 

more accurately reflect a provision of 

the Energy Policy Act that requires the 

BLM to determine that approval of a 

drilling or development contract best 

serves or is necessary for the 

conservation of natural resources, 

public convenience or necessity, or the 

interests of the United States. 

Section 3217.15 remains substantively 

unchanged from the previous 

regulations. We received no comments 

related to subpart 3217, and so the 

changes are adopted as proposed. 

Subpart 3250—Exploration 

Operations—General; Subpart 3251— 

Exploration Operations: Getting BLM 

Approval; Subpart 3252—Conducting 

Exploration Operations; Subpart 3253— 

Reports: Exploration Operations; 

Subpart 3254—Inspection, Enforcement, 

and Noncompliance for Exploration 

Operations; Subpart 3255— 

Confidential, Proprietary Information; 

and Subpart 3256—Exploration 

Operations Relief and Appeals 

Subparts 3250 through 3256 contain 

provisions regulating geothermal 

exploration of Federal lands. Minor 

changes to these subparts clarify 

existing terminology and procedures 

and make the subparts more readable. 

Several changes are adopted 

throughout these subparts to make it 

clear that an approved Notice of Intent 

to Conduct Geothermal Resource 

Exploration Operations would be 

equivalent to a permit. In most cases the 

terms ‘‘Notice of Intent’’ or ‘‘Notice of 

Intent to Conduct Geothermal Resource 

Exploration Operations’’ have been 

substituted for the terms ‘‘exploration 

permit’’ or ‘‘permit.’’ 

Final section 3250.10 is substantively 

unchanged from existing regulations 

and the proposed rule. 

Final section 3250.11, addressing the 

general question related to where 

exploration can occur, has been moved 

from previous section 3251.11 of the 

subpart addressing exploration 

approval. This necessitates the 

renumbering of subpart 3251. 

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Final sections 3250.12 and 3250.13 

are substantively unchanged from the 

previous regulations and the proposed 

rule. 

The content of final section 3250.14 

has been taken from the previous 

section 3250.11. This reorganization 

provides a more logical sequence of 

general questions related to the 

regulation of exploration operations. 

There are no substantive changes to 

sections 3251.10 through 3251.15. As 

mentioned previously, the content of 

previous section 3251.11 has been 

moved to final section 3250.11 and the 

remaining sections have been 

renumbered to correspond to final 

sections 3251.10 through 3251.14. 

Final section 3251.15(b) revises the 

previous section 3251.16(b) to ensure 

that bond release cannot occur unless 

operators not only have reclaimed the 

land surface, but also, if necessary, 

resolved other environmental, cultural, 

scenic, or recreational issues. 

Reclamation includes resolving the 

impacts of geothermal exploration 

activities on other resource values in 

addition to reclamation of the surface 

(see discussion and answer to comment 

related to section 3214.14(b)). 

We received no comments on the 

changes to subparts 3250 through 3256, 

and have adopted these sections as 

proposed. 

One commenter suggested expanding 

the use of categorical exclusions (CXs) 

under the NEPA to expedite exploration 

permits. Since the adoption of new 

categorical exclusions involves 

coordination and approval by the 

Council on Environmental Quality 

(CEQ), and was not part of the proposed 

rule, consideration of this request is 

beyond the scope of this final rule. 

Subpart 3260—Geothermal Drilling 

Operations—General; Subpart 3261— 

Drilling Operations: Getting a Permit; 

Subpart 3262—Conducting Drilling 

Operations; Subpart 3263—Well 

Abandonment; Subpart 3264— 

Reports—Drilling Operations; Subpart 

3265—Inspection, Enforcement, and 

Noncompliance for Drilling Operations; 

Subpart 3266—Confidential, Proprietary 

Information; and Subpart 3267— 

Geothermal Drilling Operations Relief 

and Appeals 

Subparts 3260 through 3267 establish 

permitting and operations procedures 

for drilling and testing geothermal wells 

as well as producing or injecting 

geothermal resources. These subparts 

also address other types of geothermal 

well operations. No substantive changes 

were proposed to these subparts. 

Changes have been adopted to clarify 

terminology and improve grammar and 

readability. 

We received no comments on the 

proposed minor changes to subparts 

3260 through 3267, and have adopted 

them as proposed. 

The BLM received some general 

comments related to environmental 

concerns, the NEPA, and permitting. As 

a general matter, the comments 

concerning the NEPA raise issues 

beyond the scope of these regulations. 

The NEPA process is governed by other 

regulations (40 CFR parts 1500 through 

1508), in addition to our operations 

permit requirements in the various 

subparts in parts 3250, 3260, and 3270, 

none of which are substantively 

changed by the rule being promulgated 

today. The Energy Policy Act did not 

make changes to portions of the statute 

relating to surface use rights or permit 

requirements, and therefore these 

matters, and the environmental studies 

and timeframes associated with these 

requirements, are beyond the scope of 

this rule. 

Subpart 3270—Utilization of 

Geothermal Resources—General; 

Subpart 3271—Utilization Operations: 

Getting a Permit; Subpart 3272— 

Utilization Plan and Facility 

Construction Permit; Subpart 3273— 

How to Apply for a Site License; Subpart 

3274—Applying for and Obtaining a 

Commercial Use Permit; Subpart 3275— 

Conducting Utilization Operations; 

Subpart 3276—Reports: Utilization 

Operations; Subpart 3277—Inspections, 

Enforcement, and Noncompliance; 

Subpart 3278—Confidential, Proprietary 

Information; and Subpart 3279— 

Utilization Relief and Appeals 

The regulations in subparts 3270 

through 3279 address the permitting 

and operating requirements for the 

utilization of geothermal resources. 

Except as referenced below, no other 

substantive changes from the previous 

rules are made to these subparts. 

Changes have been adopted to clarify 

terminology and improve grammar and 

readability. The final rule adopts the 

proposed rule without substantive 

change. 

Final section 3275.14 removes the 

previous requirement in section 

3275.14(c)(3) to measure the 

temperature out of a facility because this 

information is no longer needed for the 

valuation of direct use operations using 

the MMS fee schedules. For ‘‘no-sales’’ 

situations, lessees with leases issued 

under the Energy Policy Act and with 

leases converting to the new royalty 

terms under sections 3212.25 or 3200.8 

are no longer required to calculate the 

amount of heat displaced by the 

geothermal resource to compensate the 

Federal Government for the use of the 

geothermal resource. Instead, lessees 

will use a direct use fee schedule that 

is based only on inlet temperature and 

the monthly volume or mass produced 

(see the MMS regulation to be codified 

at 30 CFR 206.356). In developing the 

direct use fee schedule, the MMS 

assumed a fixed outlet temperature of 

130 [deg]F, which greatly simplifies the 

metering system and the calculations. 

For situations involving the armslength sale of geothermal resources to a 

direct use facility and for leases issued 

under the previous royalty terms which 

do not convert to the new royalty terms, 

final section 3275.14(d) gives the BLM 

the authority to require outlet 

temperature recorders on a case-by-case 

basis, if needed. 

One comment related to proposed 

section 3275.21, which provided that 

the BLM may order a lessee to drill and 

produce wells on its lease when the 

BLM finds it necessary to protect 

Federal interests, prevent drainage, or 

ensure that lease development and 

production occur in accordance with 

sound operating practices. The 

commenter asserted that it should be the 

developer’s choice to drill, not the 

BLM’s, and that the BLM should not be 

in a position to cause a developer to 

expend that kind of money. The BLM 

disagrees, and finalizes the rule as 

proposed. This provision is unchanged 

from the previous regulations. The BLM 

has the authority and responsibility to 

require the lessee to comply with lease 

terms that require a lessee to drill and 

produce to protect Federal interests, 

prevent drainage, or ensure that lease 

development and production occur in 

accordance with sound operating 

practices. 

Final section 3276.14 eliminates the 

requirements of previous section 

3276.14(a) to report a daily breakdown 

of flow, average temperature in, and 

average temperature out. The 

information requirements in previous 

sections 3276.14(d) and (e) are also 

eliminated. The purpose of the data was 

to allow the calculation and verification 

of thermal energy displaced, which was 

the basis for valuation in the previous 

MMS regulations. For leases issued 

under the Energy Policy Act, and for 

existing leases that convert to the new 

royalty terms of the Energy Policy Act 

under sections 3212.25 or 3200.8, direct 

use operations are valued using the 

MMS fee schedule that determines fees 

due as a function of inlet temperature 

and monthly volume or mass produced. 

Therefore, collection of the data is no 

longer necessary. 

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For situations where the resource is 

sold under an arm’s length contract for 

use in a direct use facility and for leases 

issued with the previous royalty terms 

that do not convert to the royalty terms 

of the Energy Policy Act, the daily 

breakdown of flow, average temperature 

in, and average temperature out may 

still be required. However, the BLM 

believes these situations will be 

relatively rare and can be handled on a 

case-by-case basis under section 

3276.14(d). 

Part 3280—Geothermal Resources Unit 

Agreements 

This final rule revises previous part 

3280. For the most part, the final rule 

adopts the rules as proposed. The 

following identifies and discusses 

changes from the proposed rule. 

The final rule implements the Energy 

Policy Act relating to unit agreements, 

specifically 30 U.S.C. 1017. 

Additionally, the final rule updates 

procedural requirements related to unit 

agreement administration. The rule 

clarifies the BLM’s expanded authority 

regarding unitization, as provided under 

the Energy Policy Act. Under the rule, 

the BLM may require: (1) The formation 

of a unit agreement; (2) Existing Federal 

leases to commit to a unit agreement; (3) 

New leases to contain a provision 

requiring the lessee to agree to commit 

to a unit agreement if the BLM so 

requires; and (4) A modification of the 

rate of resource exploration or 

development within a unit. The rule 

also establishes that a majority interest 

of owners in a Federal lease has the 

authority to commit the lease to a unit 

agreement. 

Other provisions of this rule do not 

change previous procedure or practice, 

but clarify and articulate unit agreement 

requirements. These provisions include: 

(1) Setting out application procedures 

for unit area designations and unit 

agreements, in the order each step 

typically occurs; (2) Identifying the 

BLM’s procedures for reviewing 

applications and making final decisions 

regarding unit area designations, unit 

agreements, and participating areas; (3) 

Explaining the BLM procedures for 

administering a unit agreement once it 

is in effect; (4) Specifying how a unit 

operator can receive the BLM approval 

to modify unit terms, including those 

related to unit contraction; and (5) 

Establishing minimum initial and 

continuing unit development 

requirements and conditions for 

terminating the unit agreement. The 

final rule standardizes existing 

practices, assures consistent BLM 

procedures, and informs the public how 

the BLM handles unit agreements. 

These provisions are described in 

greater detail below. 

Subpart 3280—Geothermal Resources 

Unit Agreements: General 

Final section 3280.1 explains that the 

purpose and scope of part 3280 is to 

provide holders of Federal and nonFederal geothermal leases and owners of 

non-Federal mineral interests the 

opportunity to unite under a Federal 

geothermal unit agreement to explore 

for and develop geothermal resources in 

a manner that is necessary or advisable 

in the public interest. To be consistent 

with the statute, the final rule uses the 

phrase ‘‘necessary or advisable in the 

public interest,’’ derived from 30 U.S.C. 

1017(a), rather than the proposed phrase 

‘‘meeting the public interest.’’ 

This rule removes previous section 

3280.0–3 as unnecessary. The authority 

citation for the part follows the Table of 

Contents for part 3280, and the 

discussion of functions within the 

Interior Department is covered by the 

Department of the Interior Departmental 

Manual. 

Final section 3280.2 includes 

definitions from previous section 

3280.0–5, with certain revisions. 

Unnecessary definitions of terms such 

as ‘‘agreement’’ and ‘‘cooperative 

agreement’’ are removed. Several 

definitions are added, including 

definitions for the terms ‘‘unit 

contraction provision,’’ ‘‘plan of 

development,’’ ‘‘public interest,’’ 

‘‘reasonably proven to produce’’ and 

‘‘unit well.’’ 

A minor change from the proposal 

was made to the final definition of the 

term ‘‘unit well.’’ Instead of stating that 

a unit well is located on a ‘‘lease 

committed to the unit agreement,’’ the 

final rule provides that a unit well is 

located on ‘‘unitized land,’’ a defined 

term. 

The BLM’s policy regarding the 

formation of units, previously included 

in section 3280.0–2, is revised and 

included in final section 3280.3. The 

new section sets forth the policy 

contained in 30 U.S.C. 1017(a) that, for 

the purpose of more properly 

conserving the natural resources of any 

geothermal reservoir, field, or like area, 

or any part thereof, lessees and their 

representatives can unite with each 

other, or jointly or separately with 

others, in collectively adopting and 

operating under a unit agreement for the 

reservoir, field, or like area, or any part 

thereof, including direct use resources, 

if determined and certified by the BLM 

to be necessary or advisable in the 

public interest. The BLM has decided 

not to adopt the proposed parenthetical 

phrase ‘‘whether or not any part of the 

geothermal reservoir, field, or like area, 

is subject to any unit agreement’’ 

because it does not appear to contribute 

substantially to the stated policy. 

Final section 3280.4 addresses the 

BLM’s authority to require the formation 

of a unit agreement and to require 

Federal leases to be committed to a unit 

agreement. It implements 30 U.S.C. 

1017(a)(3) and (b). Final section 

3280.4(a) provides that the BLM can 

initiate the formation of a unit 

agreement, or require an existing 

Federal lease to commit to a unit 

agreement, if it is in the public interest. 

This implements a statutory provision 

and does not require the consent of a 

lessee. Modification of lease terms to 

facilitate creation and operation of the 

unit, however, does require lessee 

consent (30 U.S.C. 1017(a)(4) and final 

section 3280.5). 

Final section 3280.4(b) states that the 

BLM can require that Federal leases 

becoming effective on or after August 8, 

2005, contain a provision stating that 

the BLM can require commitment of the 

lease to a unit agreement. Under this 

provision the BLM can also prescribe 

the unit agreement to which such lease 

will be required to commit in order to 

protect the rights of all parties in 

interest, including the United States. 

This provision implements 30 U.S.C. 

1017(b)(2). 

As mentioned above, final section 

3280.5 provides that the BLM can, with 

the consent of the lessees involved, 

establish, alter, change, or revoke rates 

of operations (including drilling, 

operations, production, and other 

requirements) of the leases, and make 

conditions with respect to the leases in 

connection with the creation and 

operation of any such unit agreement as 

the BLM can consider necessary or 

advisable to secure the protection of the 

public interest. This implements 30 

U.S.C. 1017(a)(4)(A). The rule also 

provides that if leases to be included in 

a unit have unlike lease terms, the 

leases will not be required to be 

modified to be in the same unit. This 

implements 30 U.S.C. 1017(a)(4)(B). 

One commenter had a number of 

questions concerning the applicability 

of the new final regulations to leases 

and units in existence on August 8, 

2005. Specifically, the commenter 

asked: Are the new unit provisions 

applicable to existing leases within an 

existing unit? What if they are preAugust 8, 2005, leases? Can the existing 

unit be declared void even though the 

existing unit agreement does not 

provide for this? The commenter also 

asserted that paragraphs 3280.5(a) and 

(b) would be inconsistent in their 

application, since (b) negates (a). 

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To clarify these provisions of the final 

rule, any BLM-approved unit 

agreements in effect prior to June 1, 

2007 will continue to be administered 

subject to the terms of the unit 

agreement, and will not be voided or 

canceled unless that remedy is 

warranted under the agreement. If the 

unit operator seeks the BLM’s approval 

for a modification of the agreement, 

such modification will be made under 

the regulations in effect when the BLM 

acts upon the modification request. 

Also, the new regulations will govern 

unit matters not expressly addressed in 

existing agreements. The BLM actions 

taken after June 1, 2007 on new unit 

applications or on applications pending 

on June 1, 2007 will be governed by the 

new rules. 

As to leases within units, leases in 

effect prior to August 8, 2005, will be 

administered as provided under final 

section 3200.7, which sets out which 

regulations apply to each lease. As 

mentioned above, leases with unlike 

terms are not required to be modified to 

be included in a unit. 

The BLM does not agree that section 

3280.5(b) negates section 3280.5(a). 

Although the BLM cannot require that 

leases be modified to be included in a 

unit, the BLM may obtain the consent of 

lessees to establish, alter, change, or 

revoke rates of operations (including 

drilling, operations, production, and 

other requirements) of the leases, and 

make conditions with respect to the 

leases, with the consent of the lessees, 

in connection with the creation and 

operation of any such unit agreement as 

the BLM may consider necessary or 

advisable to protect the public interest. 

Lessees will generally have an incentive 

to provide such consent because under 

final section 3281.19, the BLM cannot 

approve a unit agreement that does not 

protect the public interest. 

Final section 3280.6 provides that the 

BLM can require a unit agreement that 

applies to lands owned by the United 

States to contain a provision under 

which the BLM or an entity designated 

in the unit agreement can alter or 

modify, from time to time, the rate of 

resource exploration, development, or 

production quantity or rate under the 

unit agreement. This final section 

implements 30 U.S.C. 1017(c). 

Final section 3280.7 clarifies that the 

BLM cannot require lands that are not 

under Federal administration to be 

committed to a unit. 

Subpart 3281—Application, Review, 

and Approval of a Unit Agreement 

Final subpart 3281 reorganizes the 

application, review, and decision 

procedures for unit area designation and 

the unit agreement into a sequential, 

step-by-step, description. The final 

regulations describe in detail the steps 

to follow and the information a 

prospective unit operator has to submit, 

as well as the process the BLM follows 

to make application decisions. The first 

step is for the BLM to designate the unit 

area. 

Final section 3281.1 makes clear that 

before a unit agreement is effective, the 

BLM must designate the unit area and 

approve the unit agreement. 

Final section 3281.2 provides a list of 

information that the unit operator must 

submit before the BLM can make a unit 

area designation. The prospective unit 

operator will be required to submit a 

geologic report, a map of the final unit 

area, a list of leases and tracts located 

in the final unit area, and any other 

information the BLM requires. 

Final section 3281.3 provides more 

detail on the types of geologic 

information the unit operator should 

provide to document that the final unit 

area is geologically contiguous and 

suitable for exploration, development, 

and production of the resource. 

Final section 3281.4 makes it clear 

that final unit areas are not required to 

be of a specific size or shape, but the 

size can cause the BLM to require the 

drilling of more than one unit well to 

meet minimum initial unit obligations. 

Final section 3281.5 explains how the 

BLM will resolve conflicts between unit 

applications that contain overlapping 

areas. If separate unit applications 

overlap, the BLM can: (1) Approve the 

unit application designation which best 

meets public interest requirements; (2) 

Designate a different unit area; or (3) 

Require revision of the applications. 

The BLM will not approve any final unit 

agreement if it included lands 

committed to another unit agreement 

already in effect. 

A change from the proposal is 

included in final section 3281.5(b) to 

make it clear that the BLM can reject an 

application or a portion of an 

application for a unit. This revision 

provides the BLM with greater 

flexibility when reviewing unit 

applications. Should a unit application 

involve lands already committed to a 

unit agreement, this revision will allow 

the BLM either to reject only the 

overlapping portion of the application, 

or to reject the entire application. 

A commenter expressed concern 

about how the BLM, under section 

3281.5, will handle a unit area 

application that overlaps an existing 

approved unit area and agreement. The 

commenter’s concern is misplaced. 

Final section 3281.5(a) only describes 

procedures for reviewing competing 

unit applications, not situations where 

an application is filed for a new unit in 

the area of an existing effective unit. 

Once a unit is in effect, the BLM will 

not accept the submittal of a new unit 

application which includes lands 

located in an effective unit. 

The commenter’s concerns are 

pertinent, however, to a situation in 

which an expansion of an existing unit 

is proposed. The commenter asserted 

that lessees in an existing unit that 

would be overlapped by a new or 

expanded unit should have a voice in 

the formation of the new or expanded 

unit. The commenter suggested that at 

the very least the rule should require the 

unit operator in the original unit to 

consult with the lessees in its unit 

before expanding the unit to allow 

existing lessees to refuse joinder to 

protect their lease interest and to 

conserve the resource. The commenter 

asserted that if existing lessees are not 

given this protection by regulation, the 

methods of operation of the existing 

unit could be jeopardized contrary to 

their unit agreement, and the lessees’ 

shares of the revenues could otherwise 

be diluted or reduced without their 

consent or justification since these are 

apportioned on the basis of leased 

acreage in the unit. The commenter 

stated that this situation has to be 

clearly defined by regulation, and not 

left to the BLM’s discretion. Finally the 

commenter said that the amendments to 

the Geothermal Steam Act do not 

prohibit the BLM from adopting such a 

regulation. 

The BLM has not made any revisions 

based on the comment because the 

regulations address these concerns. 

Subpart 3281 specifies that the BLM 

must designate a unit area prior to it 

becoming effective. As required through 

the designation review process, each 

prospective unit operator must contact 

all lessees located within each 

respective unit area for unit 

commitment. This requirement has been 

in effect since geothermal unitization 

was initiated, and it should continue to 

provide all potential lessees with 

adequate information regarding unit 

proposals. Although a lessee is not 

required to agree to the expansion, the 

commenter is correct that under section 

3280.4 the BLM can require a Federal 

lessee to commit to a unit, but only if 

all involved interests are protected. 

Expanding a unit area does not affect 

individual revenue share. Only revising 

the participating area changes revenue 

share. The establishment or revision of 

a participating area is based on the 

informational requirements found in 

subpart 3282. This information, based 

primarily on well testing information, 

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provides a strong indication of the 

portion of the unit area that contains 

resources proven to be commercial. 

While expanding the participating area 

to include additional acreage and 

resources may reduce the percentage of 

total revenues to individual lessees, this 

short-term reduction in revenue should 

be balanced by the addition of 

commercially proven resources that will 

ultimately be recovered and shared by 

all lessees in the participating area. 

Final section 3281.6 describes how 

the BLM determines whether to approve 

unit designation and how the BLM 

notifies operators of the decision. 

Among other considerations, the BLM 

determines if the geologic basis for the 

unit area is sound for the development 

of the unit area. This is the principal 

factor in deciding whether the unit area 

will be designated. 

Under the rule, if the BLM approves 

a unit area designation, the prospective 

unit operator initiates the steps required 

for unit agreement approval. Final 

section 3281.7 describes the information 

a unit operator must submit to the BLM 

for unit agreement approval. 

Consistent with previous section 

3281.3, the prospective unit operator is 

required to provide an opportunity for 

all owners of mineral rights and lease 

interests to join the unit under final 

section 3281.8 and then supply the BLM 

with documentation of the commitment 

status of each lease or tract as required 

by final section 3281.9. Documentation 

includes a signed joinder agreement or 

evidence the interest owners were 

offered an opportunity to join the unit. 

Under 30 U.S.C. 1017(a)(2) and section 

3281.9(b), a majority interest of owners 

in a lease can commit the lease to a unit 

agreement. 

Final section 3281.10 explains that 

the BLM reviews the commitment status 

documentation to insure that the 

prospective unit operator has sufficient 

control of the unit area to conduct 

resource development in the public 

interest. 

Final section 3281.11 addresses the 

required qualifications of a prospective 

unit operator. The qualification 

requirements for unit operators have not 

changed. This is consistent with 

previous section 3282.1. 

One commenter described what it 

thought was an inconsistency in the 

proposal. The commenter asserted that 

the text of proposed section 3281.11(b), 

which stated that a unit operator is not 

required to have an interest in the unit 

area, was inconsistent with proposed 

section 3281.10 that stated that the unit 

operator must have sufficient control of 

the unit area. We agree that the proposal 

may have been unclear and have made 

a clarifying change. Under final section 

3281.11(b), a unit operator is not 

required to have an interest in any 

leases committed to the unit agreement. 

However, as stated at section 

3281.10(a)(2), the BLM will determine if 

the unit operator has sufficient control 

of the leases committed to the unit 

agreement to effectively develop the 

resources occurring in the unit area in 

the public interest. Such control may be 

demonstrated by ownership interests, 

the terms of the unit agreement and 

other relevant documents, or by other 

appropriate indicia of control. 

Final section 3281.12 explains that 

owners of geothermal rights and lease 

interests committed to the unit are the 

parties who nominate a unit operator; 

however, the BLM must determine if the 

nominee meets the qualifications before 

it designates the unit operator. 

Final section 3281.13 addresses the 

formats or models for unit agreements. 

This section allows a unit applicant the 

flexibility to create a unit agreement that 

best matches the specific development 

scenario or energy market conditions in 

an area. The prospective unit operator 

can use the model unit agreement in 

final section 3286.1, the model with 

variances noted, or another format that 

meets the requirements outlined in the 

next two final regulatory sections. While 

previous regulations at section 3281.1 

allowed for variances from a model unit 

agreement, the final regulations clearly 

describe the information that needs to 

be in a unit agreement should the 

applicant choose not to use the model 

agreement. 

Final section 3281.14(a) is adopted as 

proposed (with the modification 

discussed below). Final section 

3281.14(b) was not contained in the 

previous rules or the proposed rule, but 

has been added for the reasons 

discussed below. Proposed section 

3281.14(b) has been redesignated and 

adopted as final section 3281.14(c). 

Final 3281.14 does not change 

previous procedures related to the 

required provisions in a unit agreement. 

Previous regulations required the unit 

applicant to determine the minimum 

requirements of a unit agreement by 

following the model agreement. Listing 

the minimum requirements and terms 

for unit agreement should assist 

applicants in determining what terms 

and conditions are required in a unit 

agreement. 

One commenter noted that the term 

(meaning ‘‘duration,’’ for purposes of 

this comment) of a unit agreement 

appears to differ from the term of a 

lease. The commenter asserted that the 

terms should not conflict, but should be 

consistent with each other, and that 

lease terms should be tied to production 

like unit terms. 

The BLM has made clarifying changes 

to section 3281.14 in response to this 

comment. Except for the proposed 

model agreement, the proposed rule did 

not specify a term for a unit agreement. 

In the one section of the proposed rule 

addressing the issue, proposed section 

3281.14(a)(5) required a unit agreement 

to specify a term, which the proposed 

rule characterized as ‘‘typically 5 

years.’’ Also, that section of the proposal 

did not specify the basis for extending 

the term of a unit agreement. Article 

18.1 of the proposed model agreement, 

on the other hand, unequivocally stated 

that the term of a unit agreement is in 

fact (not just ‘‘typically’’) 5 years, and 

also specifically provided for 

extensions. Proposed Article 18.1 

specified that unit agreements would be 

extended if ‘‘unitized substances are 

produced or utilized in commercial 

quantities, in which event the 

agreement shall continue for so long as 

unitized substances are produced or 

utilized in commercial quantities.’’ This 

basis for extension, i.e., tying units to 

production, appears to be what the 

commenter was seeking. 

To make the issue clear and eliminate 

the differences between proposed 

section 3281.14(a)(5) and proposed 

Article 18.1 of the Model Agreement, 

the final rule does not include the 

‘‘typically 5 years’’ language in final 

section 3281.14(a)(5), but instead adds a 

new paragraph (b) to section 3281.14 to 

clarify the term of a unit and the bases 

for extension. Final section 3281.14(b) 

contains the substance of Article 18.1 of 

the Model Agreement. Although 

repetitive, final Article 18.1 is adopted 

as proposed so as not to confuse persons 

relying on the model agreement. 

As to the commenter’s concern over 

the differences in duration between 

leases and units, this difference has not 

caused problems since the Geothermal 

Steam Act went into effect in 1970. The 

initial term of a unit has always been 5 

years since the Geothermal Steam Act 

was made effective. There are numerous 

options for the extension of terms of 

either a lease or a unit so that either may 

remain in effect. By statute, leases have 

always had a primary period of 10 years 

that may be extended. For instance, 

once a lease goes into production, the 

term of the lease is extended for as long 

as production continues. Additionally, 

as provided at section 3207.17(a), the 

BLM may extend the term of a lease to 

match that of the unit if the lease would 

expire prior to the unit (see section 

3207.15 for details of production 

extensions for leases, and sections 

3284.5 and 3284.11, describing how 

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unit operations affect lease extensions). 

The term of the unit may also be 

extended further if drilling occurs 

outside of the participating area, but 

inside of the unit area. Because the 

terms of both a unit and the terms of the 

leases located in the participating area 

are extended as long as production 

continues, the different durations of the 

initial terms do not cause significant 

problems. 

Final section 3281.15 lists the 

minimum initial unit obligation 

information that the unit agreement 

must contain. To meet the minimum 

initial unit obligation, the unit operator 

must diligently drill and complete at 

least one unit well. The information 

required by this section is used to insure 

that the well is: (1) Located on a tract 

committed to the unit agreement; (2) 

Drilled to the depth or geologic 

formation specified in the unit 

agreement, unless commercial resources 

are found at a shallower depth; and (3) 

Completed within the timeframe 

specified in the unit agreement. 

Depending on the size of the unit, the 

BLM can require the drilling of more 

than one unit well to meet the minimum 

initial unit obligation. Since the unit 

well, by definition, must be designed to 

produce or utilize resources in 

commercial quantities, the completion 

of a narrow diameter well can satisfy the 

initial obligation only if the well is 

capable of production in commercial 

quantities. The BLM will make this 

determination on a case-by-case basis. 

Other exploration operations, such as 

drilling temperature gradient wells, can 

also be used to satisfy part of the 

minimum initial unit obligation. 

Final section 3281.16 clarifies the 

previous practice to submit Plans of 

Development for the unit at the time of 

unit designation, and for future 

activities not addressed in a previous 

Plan of Development. Plans of 

Development must be submitted to the 

BLM for future unit activities until the 

time a producible unit well is 

completed and begins commercial 

operations. 

Final section 3281.17 describes the 

information that a unit operator must 

include in a Plan of Development. 

While the scope and types of activities 

described in the Plan of Development 

may vary, a Plan of Development must 

include the completion of at least one 

unit well. 

Final section 3281.18 makes it clear 

that the BLM will not designate a unit 

area until the Plan of Development 

ensures that unit activities will meet the 

public interest requirements. 

Final section 3281.19 discusses the 

BLM’s response to a final unit 

agreement. In all instances, the BLM’s 

review of a final unit agreement must 

conclude that approval of the unit 

complies with these regulations and is 

in the public interest. This section of the 

final rule also requires the BLM to 

coordinate the review of a final unit 

agreement with appropriate State and 

other Federal surface management 

agencies. This is consistent with current 

practice. Under this section the BLM 

provides the applicant with written 

notification of unit rejection or 

approval. 

Final section 3281.20 establishes the 

effective date of an agreement as the 

first day of the month following the 

BLM approval. The unit operator has 

the option of requesting that the 

effective date be the first day of the 

month in which the BLM approved the 

agreement, or a different date if agreed 

to by the BLM. 

Subpart 3282—Participating Areas 

Final subpart 3282 defines several 

procedural requirements regarding 

participating areas. 

Section 3282.1 of the final rule 

defines a participating area as those 

portions of the unit area the BLM 

determines: (1) Are reasonably proven 

to produce in commercial quantities; or 

(2) Support production in commercial 

quantities such as through pressure 

support from injection wells. 

Final section 3282.2 explains that 

commercial operations cannot begin 

before the BLM approval of a 

participating area. This is necessary to 

ensure proper allocation of production 

and royalties within the unit. 

Final section 3282.3 specifies that a 

unit operator must propose a 

participating area the earlier of 30 days 

before starting commercial operation, or 

60 days after the BLM determines a well 

will produce or utilize geothermal 

resources in commercial quantities. 

Final section 3282.4 describes the 

general information (e.g., maps showing 

all tracts and lease information) that the 

unit operator must submit to the BLM 

when applying for a participating area. 

Final section 3282.5 describes the 

technical information (e.g., 

interpretations of well performance and 

geology documenting the tracts 

contributing to production) that the unit 

operator must submit to the BLM when 

applying for a participating area. 

Final section 3282.6 specifies the 

circumstances requiring a unit operator 

to apply to revise a participating area 

boundary. This final section also allows 

unit operators to request a delay in 

modifying participating area boundaries 

when active drilling is not complete. 

Information on the establishment of 

an effective date for new or revised 

participating areas is contained in final 

section 3282.7. This section provides 

flexibility in establishing the effective 

date of a participating area, provided the 

date is not earlier than the effective date 

of the unit agreement. 

Final section 3282.8 establishes the 

following three reasons for rejection of 

a revision of a participating area: (1) If 

the unit operator does not supply the 

required information; (2) If the 

information does not support approval; 

or (3) If the revision reduces the size of 

the participating area because of 

resource depletion in a certain area 

within the participating area. The third 

reason is included as a matter of equity 

because a lessee should not lose the 

benefit of unitization if its resources are 

depleted before other resources in the 

participating area. To provide otherwise 

would serve as a disincentive to having 

a lease’s resources developed early in 

the life of a participating area. 

Final section 3282.9 provides that 

production must be allocated equally to 

all lands in a participating area that are 

committed to the unit agreement. For 

instance, if a lessee owns or controls full 

interest in 100 acres within a 

participating area of 1000 acres, that 

lessee will be allocated 10 percent of the 

production from the participating area. 

Final section 3282.10(a) specifies that 

unleased Federal lands located within 

the participating area receive a 

proportionate allocation of production 

for royalty purposes as if the acreage 

were committed to the participating 

area. Final section 3282.10(b) specifies 

that the unit operator is primarily liable 

for paying, and must pay, royalty to the 

United States for the allocated 

production on these unleased Federal 

lands. The phrase ‘‘is primarily liable 

for paying’’ is added as a clarification. 

The proposed rule established the unit 

operator payment obligation, but did not 

expressly mention liability. 

The final rule also clarifies that in the 

event the unit operator does not pay any 

royalties owed for production from 

unleased Federal lands, each lessee of 

lands committed to the participating 

area is responsible for paying such 

royalties in the same proportion as that 

lessee’s percentage of surface acreage 

within the participating area, excluding 

the unleased acreage. This secondary 

responsibility imposed upon the lessees 

is justified because if the lessees receive 

benefits from the resource produced 

from unleased Federal lands, they 

should also retain some responsibility to 

ensure that royalties are paid to the 

United States for such production. 

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Proposed section 3282.10(b) would 

have provided that if the BLM is not 

allowed to lease the unleased Federal 

lands in the participating area because 

of restrictions based on planning 

decisions or other statutory 

requirements, the lands would not 

receive an allocation of production. The 

BLM has decided not to adopt proposed 

section 3282.10(b). The final rule 

requires that any unleased Federal lands 

in the participating area must receive an 

allocation of production for royalty 

purposes. The BLM has concluded that 

if a unit operator is draining the 

resource from unleased Federal lands, 

payment of a proportionate royalty to 

the United States serves the public 

interest, regardless of whether the BLM 

can actually lease the lands. Removal of 

the proposed restriction does not open 

withdrawn lands to leasing or entry, but 

assures that the United States will 

receive a fair return if federally-owned 

resources from the unleased lands are 

produced from wells on adjoining 

leases. 

One commenter asserted that if a 

developer has private lands and needs 

peripheral stranded Federal lands, he 

should be allowed to unitize to include 

those unleased Federal lands. The BLM 

agrees that unleased Federal lands may 

be included in a geothermal unit and in 

the participating area so that drainage 

from such lands from geothermal wells 

on adjoining lands may be considered to 

be allocated production from the unit 

and appropriate payments are made to 

the United States under section 3282.10. 

Although it can receive payments 

attributable to production of geothermal 

resources from unleased Federal lands, 

the United States will not be responsible 

for any portion of the costs of such 

production without statutory 

authorization and appropriation of 

funds for that purpose. Moreover, no 

surface disturbance on or other entry 

into the unleased Federal lands may 

occur without express BLM 

authorization separate and apart from 

approval of the unit and participating 

area. 

If the unleased Federal lands contain 

geothermal resources into which a well 

needs to be drilled to develop the 

geothermal resources fully, a person can 

attempt to have such lands leased by 

nominating such Federal lands to be 

included in a geothermal lease sale. If 

the unleased Federal lands are only 

necessary for the placement of surface 

facilities related to development of 

geothermal resources on adjacent leases 

or tracts, a person can apply to use the 

Federal surface under the BLM’s rightof-way regulations under 43 CFR part 

2800 or for a lease, permit, or easement 

under 43 CFR part 2920, whichever is 

applicable. However, if the lands are 

withdrawn or otherwise restricted from 

leasing, entry, or surface occupancy, 

such development and uses of the lands 

may not be possible. 

Final section 3282.11 explains that 

the BLM may determine that a 

participating area can continue where 

only intermittent production is 

occurring, provided such a 

determination is in the public interest. 

The regulations describe direct use 

facilities that only utilize geothermal 

resources during winter months as an 

example of intermittent production that 

the BLM considers to be in the public 

interest. 

Final section 3282.12 provides that a 

participating area will terminate when 

the unit operator either permanently 

stops commercial operations, or 60 days 

after receiving notification from the 

BLM that operations are not being 

conducted in accordance with the unit 

agreement, participating area approval, 

or the public interest. If the unit 

operator can demonstrate that the BLM’s 

reason for termination is in error or the 

situation warranting the termination has 

been rectified, the BLM may decide not 

to terminate the participating area. 

Subpart 3283—Modifications to the 

Unit Agreement 

Final subpart 3283 establishes how to 

modify a unit agreement. This final rule 

adds new provisions to specify the 

conditions under which a unit operator 

can request an extension of the unit 

contraction date and/or a partial 

contraction of the unit area. Providing 

this flexibility for unit administration 

decisions by the BLM is necessary since 

a unit operator can spend substantial 

amounts of money discovering 

commercial resources which cannot be 

immediately developed due to 

conditions beyond the operator’s 

control. An inability to place portions of 

a unit into production can subject leases 

to termination where either commercial 

resources have been found or 

monitoring or injection wells not 

directly involved in production are 

located. Termination would reduce 

additional exploration and development 

in the unit area, which is contrary to the 

public interest. 

Final section 3283.1 provides that a 

unit operator can request a modification 

of the unit agreement after all unit 

interests have agreed to the change in 

the agreement. After review, the BLM 

notifies the unit operator in writing of 

the BLM’s decision and effective date of 

approval, if applicable. 

Final section 3283.2 discusses 

circumstances under which the unit 

operator can request the BLM to revise 

contraction provisions of a unit 

agreement. Contraction provisions of a 

unit agreement describe how lands are 

removed from the unit agreement as 

exploration and development activities 

determine which lands are not capable 

of producing geothermal resources in 

commercial quantities. Under this 

section, an operator can also propose an 

extension of the unit contraction date 

and/or a partial contraction of the unit 

area. This section outlines both the 

information the operator must provide 

and information the operator should 

provide to the BLM in support of a 

request to revise contraction provisions 

of the unit area. The BLM will approve 

the request if we determine that revision 

is in the public interest. The BLM may 

also add conditions to the approval such 

as requiring an annual renewal or 

setting the timing and conditions for 

when phased contractions or 

termination of the revision can occur. 

Final section 3283.3 addresses how a 

unit operator will know the status of a 

unit contraction revision request. Under 

the final rule, the BLM will notify the 

unit operator in writing of its decision. 

If the BLM approves the request, it will 

specify the term of the contraction 

extension and/or which lands will 

remain in the unit agreement. The BLM 

may require the unit operator to update 

the information required by final section 

3282.3. Also, the BLM could terminate 

the participating area contraction 

revision if, in the public interest, it finds 

it necessary to do so. 

Final section 3283.4 addresses adding 

or removing lands from an agreement 

when the BLM determines, based on 

information submitted by the unit 

operator, that new or additional geologic 

information modifies the basis for the 

unit boundary. Once the BLM notifies 

the unit operator of approval of the 

revision to the unit, the unit operator 

must notify all interest owners in the 

unit area revision. 

Final section 3283.5 implements 30 

U.S.C. 1017(f), which requires review of 

unit agreements at 5-year intervals to 

eliminate any lands in the unit area not 

necessary for unit operations. A 

commenter stated that a requirement for 

the BLM to review all unit agreements 

every 5 years is burdensome and 

potentially unnecessary. The 

commenter asserted that, given the 

BLM’s limited resources, this appears to 

be a poor allocation of funds, 

particularly since there does not appear 

to be any history of problems to justify 

this priority. The BLM did not make 

changes to the rule based on this 

comment. The 5-year review 

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requirement is necessary to implement 

a statutory obligation. 

Final section 3283.6 describes the 

purpose of the periodic review, the basis 

for eliminating lands from the unit, and 

the consequences of elimination on 

leased lands. 

A commenter objected to the standard 

for eliminating leases from a geothermal 

unit. The commenter stated that the 

term ‘‘not reasonably necessary’’ is too 

subjective a basis for eliminating lands 

from a unit. The commenter requested 

that the regulation should include 

identifiable criteria for making such 

decisions. 

The BLM did not change the rule 

based on the comment. This standard in 

final section 3283.6 comes from the 

1988 amendment of the Geothermal 

Stream Act, and is the wording the BLM 

has used in the regulations since then. 

The BLM reviews the type and intensity 

of unit resource exploration and 

development to ensure that it is being 

conducted within operational and 

environmental standards and meets 

public interest requirements. The BLM 

is not aware it has caused an issue at 

any time when units have been 

reviewed. The wording is intended to 

provide the BLM flexibility in 

administering units given the broad 

range of development issues that may 

occur. Under the rule, any BLM 

determination to eliminate lands from a 

unit must be based on scientific 

evidence, and occur only for the 

purpose of conserving and properly 

managing the geothermal resources. To 

safeguard against misuse of this 

provision, section 3283.6(c) provides 

that the BLM will not eliminate any 

lands from a unit until the unit operator, 

the lessee, and any other person with a 

legal interest in such lands, have been 

given reasonable notice and opportunity 

to comment. The final rule uses the 

active voice to clarify that it is the BLM 

that provides the notice and opportunity 

for comment. The proposal was not 

clear because it used the passive voice. 

Final section 3283.7 provides that 

unit operators may be changed only 

with the BLM’s written approval. 

Final section 3283.8 describes the 

requirements for a new operator. The 

new operator must meet the 

qualification requirements of these 

regulations, submit evidence of 

adequate bonding for Federal lands, and 

provide to the BLM written acceptance 

of the unit terms and conditions. A 

minor change from the proposal is 

included in final paragraph (a) to clarify 

that the ‘‘qualification’’ requirements 

are the ones to be met. 

Final section 3283.9 provides that the 

change of unit operator is effective 

when the BLM approves the new 

operator in writing. 

Final section 3283.10 explains that 

the initial unit operator remains 

responsible for all duties and 

responsibilities until the BLM approves 

the new unit operator. This section also 

makes it clear that initial unit operators 

remain responsible for liabilities and 

obligations that accrue before a new unit 

operator is approved. 

Final section 3283.11 acknowledges 

that a unit agreement does not modify 

stipulations in Federal leases. While 

certain lease obligations are altered by 

commitment of lands to a unit, lease 

stipulations, such as those designed to 

protect the environment or other 

resources, are not superseded by the 

terms of a unit agreement. 

Final section 3283.12 specifies that 

transferees and successors in interest 

acquiring Federal geothermal leases 

committed to a unit agreement are 

bound by the terms and conditions of 

the unit agreement. 

Subpart 3284—Unit Operations 

Final subpart 3284 discusses unit 

operations, unit operator 

responsibilities for those operations, 

and how the BLM administers 

operational situations. 

Final section 3284.1 acknowledges 

current practice that all phases of unit 

operations are required to comply with 

the terms and conditions of the unit 

agreement and operational standards 

and orders identified in the exploration 

(subpart 3250), drilling (subpart 3260), 

and production and utilization (subpart 

3270) subparts of this rule. 

Responsibilities of the unit operator 

are described in final section 3284.2. In 

general, the unit operator has primary 

responsibility to diligently explore and 

drill for, and to produce and inject, 

unitized geothermal resources. A 

separate entity can own and operate 

utilization facilities located within the 

unit area, but only the unit operator is 

authorized to produce and inject 

unitized resources and supply 

geothermal resources to any utilization 

facilities, regardless of whether the 

location of such facilities is within the 

unit. Other working interests are not 

authorized to conduct any drilling 

activities under subpart 3260 on leases 

committed to a unit agreement without 

the BLM approval. The unit operator 

works with the BLM and the MMS to 

make unit changes and must insure all 

moneys owed to the Federal 

Government for geothermal activities 

are paid. 

Final section 3284.3 discusses what 

happens to the unit agreement and 

leases committed to the agreement if the 

minimum initial unit obligations are not 

met and how unit operations can affect 

extension of lease terms. If the initial 

unit well obligations are not met or the 

unit operator relinquishes the agreement 

before meeting the initial unit 

obligations, the agreement will be 

voided as if it was never in effect, any 

lease segregations that occurred as a 

result of unit formation become invalid, 

and any extensions issued will be 

retroactively voided to the date the unit 

became effective. 

Final section 3284.4 addresses actions 

necessary to maintain a unit agreement 

after a unit well has been completed. If 

a unit well is determined by the BLM to 

be producible, the unit operator must 

submit a final participating area 

application and, if no additional wells 

are drilled, the unit area will contract to 

conform to the participating area. If a 

unit well does not produce or utilize 

geothermal resources in commercial 

quantities, the unit operator must 

continue drilling unit wells within the 

time specified in the agreement until a 

unit well is completed that the BLM 

determines produces or utilizes 

geothermal resources in commercial 

quantities. Failure to meet this 

obligation to drill subsequent wells 

results in the unit terminating at that 

time. 

Final section 3284.5 explains how 

commitment of lands to a unit 

agreement affects lease terms. Under 

final section 3284.5(a), lease extensions 

granted based on commitment to the 

unit agreement remain in force while 

the unit is in effect. Under final section 

3207.17, a lease can receive an 

extension if it was committed to a unit 

agreement and would expire prior to the 

unit term expiring. Therefore, we added 

a cross-reference to section 3207.17 in 

final section 3284.5(a). If the unit 

operator has diligently pursued unit 

development, a lease can receive an 

extension to match the term of the unit. 

Final section 3284.5(b) is adopted as 

proposed, but corrects a mistaken crossreference that was contained in the 

proposed rule. 

Final section 3284.6 addresses 

drilling done by working interest 

owners other than the unit operator. The 

BLM may approve drilling outside the 

participating area only when the BLM 

determines the unit operator is not 

diligently developing the resource and 

drilling is in the public interest. Should 

a working interest owner complete a 

well which will produce or utilize 

geothermal resources in commercial 

quantities, the unit operator must apply 

to include the well in the participating 

area and operate the well. 

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Final section 3284.7 allows a lessee or 

operator to conduct operations on an 

uncommitted Federal lease located 

within a unit if the BLM determines that 

it is in the public interest and does not 

unnecessarily affect unit operations. 

Final section 3284.8 establishes that a 

unit can only have one operator. Given 

the nature of most geothermal resources, 

multiple unit operators would likely 

violate the purpose of the unit 

agreement that all of the resources 

within the unit be developed as if they 

were part of one operation. If multiple 

operators of a unit were allowed, then 

they could separately develop the 

resource, the resource would not 

necessarily be conserved, and the public 

interest would not be served. In effect, 

the purpose of having a unit would be 

defeated. 

One commenter expressed concern 

about the possibility of two unit 

operators if multiple units exist on 

overlapping land. As stated earlier, the 

BLM will not approve separate unit 

agreements with overlapping lands, so 

that the situation about which the 

commenter is concerned will not occur. 

However, in advance of unit approval, 

multiple prospective unit operators may 

propose a variety of unit areas. The 

designation review and final approval 

process is designed to insure the unit 

agreement which is finally made 

effective by the BLM best meets public 

interest requirements. 

Final section 3284.9 allows the BLM 

to set or modify the rate of production 

or injection within the unit area to 

ensure protection of Federal resources. 

One commenter asserted that in a 

unit, it should be the developer’s choice 

to direct injection or production rates 

and that the BLM should not be in a 

position to tell how the plant should be 

operated. The BLM disagrees with the 

comment. This provision is essentially 

unchanged from the previous 

regulations, with the exception of the 

addition of the qualifying phrase ‘‘to 

ensure protection of Federal resources.’’ 

The BLM has always had the authority 

to direct the lessee’s injection or 

production rates to ensure that the 

lessee protects Federal resources. 

Article 10.5 of the previous model unit 

agreement specified that the BLM has 

the authority to modify the rate of 

prospecting and development 

conducted by the unit operator, as well 

as the quantity and rate of production. 

This authority is necessary to ensure 

protection and conservation of the 

Federal resources. In practice, exercise 

of this retained authority has led to few, 

if any, unresolved disputes. 

Final section 3284.10 articulates the 

unit operator’s responsibility to prevent 

drainage of the unit area and ensure 

compensation (royalties) for drainage of 

geothermal resources from unitized land 

by wells not subject to the unit 

agreement. 

Final section 3284.11 establishes that 

development and production from the 

unit, regardless of location within the 

unit, fulfills the diligent development 

requirements for all leases within the 

unit. 

Final section 3284.12 requires unit 

operators to notify the BLM within 30 

days of a change in the commitment 

status of any lease or tract within the 

unit, regardless of ownership. 

Subpart 3285—Unit Termination 

Unit agreement termination is 

discussed in final subpart 3285. 

Final section 3285.1 provides that the 

BLM may terminate a unit agreement if 

the unit operator does not comply with 

any term or condition of the unit 

agreement. 

Final section 3285.2 allows a unit 

operator to request BLM approval of a 

voluntary unit agreement termination 

after the initial unit obligation well is 

completed and before starting 

commercial operations. This can occur 

when the appropriate percentage of 

working interest owners, as specified in 

the unit agreement, agree to the 

termination. If commercial operations 

are occurring, the unit will remain in 

effect until all commercial operations 

cease. 

Subpart 3286—Model Unit Agreement 

Subpart 3286 provides a model unit 

agreement. Applicants for unit 

agreements are not required to use this 

model (see final section 3281.13). For 

the most part, the final rule adopts the 

revisions to the previous model 

agreement as proposed. Changes either 

from the previous rule or from the 

proposed rule are discussed below. 

Article 1.1 of the final model 

agreement clarifies that it is the U.S. 

Department of the Interior regulations 

that are accepted, including both BLM 

and, where applicable, MMS 

regulations. Article 1.2 of the final 

model agreement clarifies that BLM 

operating regulations are accepted for 

non-federal lands within the unit and 

are made part of the unit agreement. The 

proposed model agreement did not 

expressly identify which agency’s rules 

were accepted. The BLM views this as 

a non-substantive change because it is a 

clarification of what was intended in 

both the previous and proposed rules. 

This rule adopts several revisions to 

Articles IV and XI of the previous model 

unit agreement. In these Articles, the 

previous model agreement referred to a 

‘‘Plan of Operation.’’ The term ‘‘Plan of 

Development’’ is used in the final model 

agreement, instead, to replace Plan of 

Operation. This change clarifies overall 

permit application requirements since a 

Plan of Operation is part of the well 

drilling and testing application (sections 

3261.11 and 3261.12), and is not related 

to the review of a unit agreement. The 

requirements of the Plan of 

Development are not substantially 

changed from those of the previous Plan 

of Operation. 

Article IV of the final unit model 

agreement addresses automatic 

contraction of the participating area. 

Under Article IV, unitized lands that are 

not entitled to be within a participating 

area on the fifth anniversary of the 

effective date of the initial participating 

area are eliminated automatically from 

the unit agreement effective as of the 

fifth anniversary, with one exception. 

Under the exception, lands are not 

automatically eliminated from the unit 

agreement if diligent drilling operations 

are in progress on an exploratory well 

on the fifth anniversary. Under such 

circumstances, the lands covered by the 

exploratory drilling are not eliminated 

from the unit area for as long as 

exploratory drilling operations are 

continued diligently, with not more 

than 6 months elapsing between the 

completion of one exploratory well and 

the commencement of the next 

exploratory well. The previous rule 

required the unit to contract to the 

participating area if no more than 4 

months, rather than 6 months, elapsed 

between exploratory wells. The 

expansion from 4 months to 6 months 

is referenced in a number of places in 

Article IV of the Model Agreement in 

the final rule. Expansion of this time 

frame to 6 months before contraction 

occurs provides the unit operator with 

greater flexibility, particularly when 

attempting to obtain drilling equipment. 

In addition, Article 4.6 provides that the 

BLM can authorize a specified time 

period in excess of 6 months between 

the completion of one exploratory well 

and the beginning of another without 

elimination of lands from the unit. 

An editorial change from the 

proposed rule was made in final Article 

4.7 to insert a word that was missing 

from the proposed rule. 

We are adopting several modifications 

to previous Article XI. A unit operator 

was previously required to initiate 

drilling an exploratory well within 6 

months after the effective date of the 

unit agreement. This rule modifies this 

requirement to allow the unit operator 

to conduct exploration operations as 

well as drilling a well to meet unit 

diligent development requirements. A 

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unit operator must complete at least one 

unit exploration well before the end of 

the term of the unit agreement or the 

unit will be voided and leases will not 

receive any benefit of unit commitment. 

Article XI of the previous model 

agreement specified that the BLM can 

only grant a single extension of drilling 

obligations of no longer than 4 months. 

The final rule modifies the model to 

allow the BLM to grant multiple 

extensions of time frames to meet public 

interest requirements. This greater 

flexibility in unit administration is 

needed to cover a wide variety of 

development issues facing unit 

operators that are beyond their control. 

Language in Articles 11.5 and 11.7 

referring to the ‘‘actual production of 

unitized substances’’ is changed to 

‘‘completing a well capable of 

producing or utilizing unitized 

substances in commercial quantities.’’ 

This change allows the minimum initial 

unit obligation to be met either through 

the timely completion of a producible 

unit well or the initiation of actual 

production of unitized resources. 

The final rule substantially shortens 

Article XV of the model agreement, 

related to rents and royalties. Final 

Article XV does not repeat substantive 

regulatory requirements related to 

rentals, royalties, rental credits, etc., 

which are addressed in final subpart 

3211. This is not intended as a 

substantive change because these 

matters are addressed fully in both the 

BLM and the MMS rules (see, e.g., 43 

CFR subpart 3211 and 30 CFR part 306, 

subpart H, and 30 CFR 318.303) and in 

the applicable lease instruments 

themselves. The key point that both the 

proposed and final Article XV contain is 

that nothing in the model agreement 

operates to relieve the lessees of any 

land from their respective lease 

obligations for the payment of any rental 

or royalty due under their leases. 

Repeating the requirements in the 

model agreement would have been 

complex because geothermal units can 

consist of leases subject to different 

rental and royalty terms. A restatement 

in Article XV might not have been 

complete or accurate. Final Article XV 

retains Article 15.1 from the previous 

and proposed model agreements related 

to unitized leases on non-Federal land. 

Final Article 15.3 also states, as was 

contained in proposed Articles 15.3 and 

15.5, that rentals and royalties may be 

paid by working interest owners or by 

a unit operator. 

Final Article 17.7 has been modified 

from the proposal to reflect that lease 

extensions occur through ‘‘regulation’’ 

as well as by ‘‘law.’’ A sentence has 

been added to that Article stating that 

the BLM has adopted a procedure in 

final section 3207.17 for granting lease 

extensions for leases committed to a 

unit to match the term of the unit. The 

sentence provides that if it is 

appropriate for the BLM to extend the 

term of a lease to match the term of the 

unit, the unit operator shall take the 

actions required for such extension 

under 43 CFR 3207.17. Under that 

section, the unit operator must send the 

BLM a request to extend the term of a 

lease committed to a unit at least 60 

days before the lease expires. 

We are also adopting editorial 

revisions to the model agreement. For 

instance, references in the previous 

model agreement to the ‘‘Director’’ are 

changed to the ‘‘Authorized Officer,’’ 

the person within the BLM with the 

authority to make final decisions. 

We are removing the following 

sections in subpart 3286 because the 

BLM does not require submission of 

information in the specified formats and 

the information contained in these 

sections is found elsewhere in the final 

rule: section 3286.1–1 Model Exhibit 

‘‘A’’; section 3286.1–2 Model Exhibit 

‘‘B’’; section 3286.2 Model unit bond; 

section 3286.3 Model designation of 

successor operator; and section 3286.4 

Model change of operator by 

assignment. 

Subpart 3287—Relief and Appeals 

This subpart addresses situations 

where unit operators seek relief from the 

obligations of the unit agreement and 

wish to appeal a BLM decision under 

this part. 

Final section 3287.1 allows a unit 

operator to request a suspension of any 

or all obligations under the unit 

agreement. 

Final section 3287.2 lists the 

circumstances that may warrant the 

granting of a suspension of unit 

obligations. Typically they include 

situations beyond the unit operator’s 

control, such as accidents, labor strikes, 

or Acts of God. Under this provision, 

the BLM can decide not to grant a 

suspension of unit obligations, 

especially the minimum initial 

obligation, when lengthy or indefinite 

periods of time are involved. For 

example, the BLM might not approve a 

suspension of minimum initial drilling 

obligations due to a unit operator’s 

inability to obtain an electrical sales 

contract or when poor economics affect 

the electrical generation market, 

limiting the opportunity to obtain viable 

sales contracts. 

Final section 3287.3 describes how a 

suspension of unit obligations affects 

the terms of the unit agreement. This 

section explains that the BLM has the 

discretion to toll certain provisions of 

the unit agreement while allowing 

others to remain in effect. The BLM 

specifies the terms of the suspension. 

The rule obligates the unit operator to 

notify all interests in the agreement of 

any suspension that is granted and the 

terms of the suspension. The wording of 

the final notification provision has been 

changed from the proposed rule to 

clarify that unit interests are to be 

notified of any suspension granted, and 

not just of changes in unit agreement 

obligations. 

Final section 3287.4 allows a unit 

operator to appeal decisions the BLM 

makes regarding unit agreement 

administration or operations. 

IV. Procedural Matters 

Effective Date 

This rule becomes effective 30 days 

following publication, rather than 60 

days, because the Department and the 

Geothermal Industry are interested in 

having competitive geothermal lease 

sales as soon as possible. Lease sales 

cannot be held until these rules become 

effective because it is these rules that 

prescribe key terms and conditions of 

new leases, such as royalty rates and 

rentals. In addition, the statute 

authorizes 2 year extensions of leases 

issued before August 8, 2005 that were 

within 2 years of the end of their terms 

on August 8, 2005. Having this rule 

become effective sooner will assure that 

lessees of such leases will have 

sufficient time to apply for any 

necessary extensions. 

Executive Order 12866, Regulatory 

Planning and Review 

This final rule will not have an effect 

of $100 million or more on the 

economy. It will not adversely affect in 

a material way the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

state, local, or tribal governments or 

communities. The regulatory changes in 

the nomination and leasing process, 

royalty system, and diligence 

requirements are the only provisions in 

the rule with potential economic 

impacts. However, as explained in the 

Regulatory Flexibility Act Threshold 

Analysis that follows, the royalty 

provisions are intended to be revenueneutral program-wide for the next 10 

years, and should not have any 

significant economic impact. 

These regulations will not create a 

serious inconsistency or otherwise 

interfere with an action taken or 

planned by another agency. This rule 

does not change the relationships of the 

geothermal program with other 

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agencies’ actions. These relationships 

are included in agreements and 

memoranda of understanding that 

would not change with this rule. We 

coordinated closely with the MMS in 

preparing the rule. 

These regulations do not alter the 

budgetary effects of entitlements, grants, 

user fees, or loan programs or the right 

or obligations of their recipients; nor do 

they raise novel legal or policy issues. 

Regulatory Flexibility Act 

This rule will not have a significant 

economic effect on a substantial number 

of small entities as defined under the 

Regulatory Flexibility Act (5 U.S.C. 601 

et seq.) (RFA). The Threshold Analysis 

under the RFA follows. 

The U.S. Census Bureau does not 

identify the geothermal industry as a 

discrete industrial classification. 

Instead, firms involved in exploration 

and development of geothermal 

resources are included within other 

categories. For example, geothermal 

drilling is grouped with water well 

drilling; firms involved in the 

distribution of steam are included with 

steam and air-conditioning suppliers; 

and firms generating electricity from 

geothermal resources are grouped in an 

Other Electric Power Generation 

category. As a result, there is no 

practical way to use the U.S. Census 

Data to calculate the number of entities 

involved in the domestic geothermal 

industry. 

As of September 30, 2004, there were 

259 noncompetitive Federal leases 

covering 364,506 acres in Arizona, 

California, Idaho, Nevada, Oregon, and 

Utah. Almost 300,000 of those acres are 

located in Nevada. There were also 140 

competitive leases covering 186,683 

acres in California, Nevada, New 

Mexico, Oregon and Utah. 

Approximately 170,000 of those leased 

acres are located in California and 

Nevada. 

Although this rule will only affect 

entities involved in the exploration and 

development of energy and mineral 

resources from land where the 

geothermal resources are administered 

by the BLM, there is no practical way 

to determine which of these firms will 

hold leases or operate on Federal lands 

in the future. The extent to which any 

firm is actually affected by this rule 

depends on whether it holds leases or 

operates on Federal lands. 

The Small Business Administration 

(SBA) defines small entities involved in 

the geothermal industry as individuals, 

limited partnerships, or small 

companies considered at ‘‘arm’s length’’ 

from the control of any parent 

companies, with fewer than 500 

employees. 

U.S. Census data on firms by number 

of employees is not available. However, 

based on interviews of the BLM 

specialists involved in geothermal 

leasing activity and several industry 

representatives, and reviews of 

company reports, there appears to be 

only one known firm currently 

operating on Federal lands with more 

than 500 employees. 

Based on available information, the 

preponderance of firms involved in 

geothermal resource exploration and 

development on Federal lands are small 

entities as defined by SBA. Therefore, it 

is reasonable to conclude that this rule 

will affect a ‘‘substantial number of 

small entities.’’ 

The regulatory changes in the 

nomination and leasing process, royalty 

system, and diligence requirements are 

the only provisions in the rule with 

potential economic impacts. However, 

the royalty provisions are intended to be 

revenue-neutral program-wide and 

should not have any net economic 

impact. The nomination filing fee is 

$100 per nomination, plus 10 cents for 

each acre of land nominated for 

competitive sale. This fee will have a 

negative financial impact on lessees, 

including small entities. The BLM is 

authorized to charge reasonable filing 

fees under Section 304(a) of the Federal 

Land Policy and Management Act of 

1976, 43 U.S.C. 1734(a). While our 

general policy is to charge a processing 

fee that recovers the agency’s reasonable 

processing cost, the BLM does not have 

data on our cost of processing 

nominations. In 2004, the BLM issued 

29 competitive and noncompetitive 

geothermal leases, covering 45,706 

acres. With the fees, the cost of 

acquiring those leases would have been 

increased by $2,900 due to the fixed 

nomination fee, and $4,570.60 due to 

the per acre fee, or an average of about 

$250 per lease. This nominal filing fee 

is not intended to reimburse the 

government for its processing costs, but 

instead to limit filings to serious 

applicants. We do not expect the fee to 

lead to any reduction in the number of 

serious applicants. Therefore, we do not 

anticipate any measurable reduction in 

economic activity due to the 

regulations. 

The regulations are intended to 

implement provisions of the Energy 

Policy Act related to geothermal leasing. 

Those provisions in the Energy Policy 

Act are primarily intended to promote 

the exploration and development of 

geothermal resources on Federal lands. 

The annual effect on the economy of 

the regulatory changes is less than $100 

million, as shown earlier in this section, 

and will not adversely affect in a 

material way the economy, a sector of 

the economy, productivity, competition, 

jobs, the environment, public health or 

safety, or state, local or tribal 

governments or communities. This rule 

will not create inconsistencies or 

otherwise interfere with an action taken 

or planned by another agency, also as 

discussed earlier. This rule does not 

change the relationships of the 

geothermal program with other 

agencies’ actions. These relationships 

are included in agreements and 

memoranda of understanding that 

would not change with this rule. In 

addition, this rule does not materially 

affect the budgetary impacts of 

entitlements, grants, user fees, loan 

programs, or the rights and obligations 

of their recipients. 

Therefore, the BLM has determined 

under the RFA that this rule will not 

have a significant economic impact on 

a substantial number of small entities. 

Small Business Regulatory Enforcement 

Fairness Act 

This rule is not a major rule under 5 

U.S.C. 804(2), the Small Business 

Regulatory Enforcement Fairness Act. 

That is, it would not have an annual 

effect on the economy of $100 million 

or more; it would not result in major 

cost or price increases for consumers, 

industries, government agencies, or 

regions; and it would not have 

significant adverse effects on 

competition, employment, investment, 

productivity, innovation, or the ability 

of U.S.-based enterprises to compete 

with foreign-based enterprises. See the 

Executive Order 12866 and RFA 

discussions, above. 

Unfunded Mandates Reform Act 

In accordance with the Unfunded 

Mandates Reform Act (2 U.S.C. 1501, et 

seq.): This rule does not impose an 

unfunded mandate on state, local, or 

tribal governments or the private sector, 

in the aggregate, of $100 million or more 

per year; nor does this rule have a 

significant or unique effect on state, 

local, or tribal governments. The rule 

would impose no requirements on any 

of these entities. We have already 

shown, in the previous discussions and 

in the RFA threshold analysis, that the 

changes this rule makes will not have 

effects approaching $100 million per 

year on the private sector. Therefore, the 

BLM is not required to prepare a 

statement containing the information 

required by the Unfunded Mandates 

Reform Act (2 U.S.C. 1531 et seq.). 

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Executive Order 12630, Government 

Actions and Interference With 

Constitutionally Protected Property 

Rights (Takings) 

The final rule is not a government 

action capable of interfering with 

constitutionally protected property 

rights. A takings implication assessment 

is not required, since the rule is 

essentially administrative and does not 

authorize any specific activities that 

would result in any effects on private 

property. Therefore, the Department of 

the Interior has determined that the rule 

would not cause a taking of private 

property or require further discussion of 

takings implications under this 

Executive Order. 

Executive Order 13132, Federalism 

The final rule will not have a 

substantial direct effect on the states, on 

the relationship between the national 

government and the states, or on the 

distribution of power and 

responsibilities among the levels of 

government. It would not apply to states 

or local governments or state or local 

governmental entities. The management 

of Federal geothermal leases is the 

responsibility of the Secretary of the 

Interior. This rule does not alter any 

lease management or revenue sharing 

provisions with the states, nor does it 

impose any costs to the states. 

Therefore, in accordance with Executive 

Order 13132, the BLM has determined 

that this rule does not have sufficient 

Federalism implications to warrant 

preparation of a Federalism Assessment. 

Executive Order 12988, Civil Justice 

Reform 

Under Executive Order 12988, we 

have determined that this rule would 

not unduly burden the judicial system 

and that it meets the requirements of 

sections 3(a) and 3(b)(2) of the Order. 

Paperwork Reduction Act 

As required by the Paperwork 

Reduction Act of 1995 (PRA) (44 U.S.C. 

3507(d)), the BLM submitted a copy of 

the new reporting or recordkeeping 

requirements to the Office of 

Management and Budget (OMB) for 

review. The BLM will not require 

collection of this information until the 

OMB has given its approval. The OMB 

has approved information collection 

requirements under OMB control 

numbers 1004–0074 which expires 

December 31, 2009, and 1004–0132 

which expires March 31, 2007. At the 

OMB’s request, the BLM is in the 

process of combining information 

collection 1004–0074 and ICR Reference 

Number 200607–1004–001 into 

information collection 1004–0132. 

National Environmental Policy Act 

The BLM has prepared an 

environmental assessment (EA) and has 

found that the rule would not constitute 

a major Federal action significantly 

affecting the quality of the human 

environment under Section 102(2)(C) of 

the National Environmental Policy Act 

of 1969 (NEPA), 42 U.S.C. 4332(2)(C). 

The rule has no direct effect on BLM 

environmental activities and decisions. 

It deals primarily with changes in the 

leasing procedures and royalty 

provisions of the existing regulations. 

The rule will not change operational 

standards which regulate on the ground 

impacts. Therefore, an environmental 

impact statement is not required. 

Executive Order 13175, Consultation 

and Coordination With Indian Tribal 

Governments 

In accordance with Executive Order 

13175, we have found that this rule may 

include policies that have tribal 

implications. The rule would make 

changes in the Federal geothermal 

leasing and management program, 

which does not apply on Indian tribal 

lands. At present, there are no 

geothermal leases or agreements on 

tribal or allotted Indian lands. If the 

Bureau of Indian Affairs should ever 

issue any leases or agreements, the BLM 

would then likely be responsible for the 

approval of any such proposed 

operations on all Indian (except Osage) 

geothermal leases and agreements. In 

light of this possibility, and because 

tribal interests could be implicated in 

geothermal leasing on Federal lands, the 

BLM contacted over 299 tribes who 

could potentially be impacted by this 

rule. We received only one response 

from a tribal representative, who 

requested that they be contacted upon 

publication of the final rule, but 

otherwise received no comments from 

Tribes on the rule. 

Executive Order 13211, Actions 

Concerning Regulation That 

Significantly Affect Energy Supply, 

Distribution, or Use 

In accordance with Executive Order 

13211, the BLM has determined that the 

rule is not likely to have a significant 

adverse effect on the supply, 

distribution, or use of energy. The 

changes could result in an increase in 

geothermal leasing and development, 

but any potential increases are only 

speculative. If geothermal leasing and 

development did increase, that would 

likely have a positive effect on energy 

supply. 

Executive Order 13352—Facilitation of 

Cooperative Conservation 

In accordance with Executive Order 

13352, the BLM has determined that 

this final rule will not impede 

facilitating cooperative conservation; 

takes appropriate account of and 

considers the interests of persons with 

ownership or other legally recognized 

interests in land or other natural 

resources; properly accommodates local 

participation in the Federal decisionmaking process; and provides that the 

programs, projects, and activities are 

consistent with protecting public health 

and safety. The changes are essentially 

administrative in nature and will not 

have a bearing on cooperative 

conservation issues. 

Regulatory Flexibility Act Threshold 

Analysis 

Introduction 

The Regulatory Flexibility Act (RFA) 

requires agencies to analyze the 

economic impact of proposed and final 

regulations and determine the extent to 

which there is a significant economic 

impact on a substantial number of small 

entities, and to consider regulatory 

alternatives that would achieve the 

agency’s goal while minimizing the 

burden on small entities. The RFA 

establishes an analytical process for 

determining how public policy goals 

can best be achieved without erecting 

barriers to competition, stifling 

innovation, or imposing undue burdens 

on small entities. Executive Order 13272 

reinforces executive intent that agencies 

give serious attention to impacts on 

small entities and develop regulatory 

alternatives to reduce the regulatory 

burden on small entities. To meet these 

requirements, the agency must either 

conduct a regulatory flexibility analysis 

or certify that the final rule will not 

have ‘‘a significant economic impact on 

a substantial number of small entities.’’ 

Number of Potentially Affected Entities 

Entities that will be directly affected 

by this Geothermal Resource Leasing 

rule will include most, if not all, firms 

involved in the exploration and 

development of geothermal resources on 

Federal lands. Such operators are a 

subset of entities involved in the 

domestic geothermal industry. 

The U.S. Census Bureau does not 

identify the geothermal industry as a 

discrete industrial classification. Instead 

firms involved in exploration and 

development of geothermal resources 

are included within other categories. 

For example, geothermal drilling is 

grouped with water well drilling; firms 

involved in the distribution of steam are 

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1 U.S. Department of the Interior, Bureau of Land 

Management, LR2000, June 1, 2006. 

2 U.S. Department of the Interior, Bureau of Land 

Management, Public Land Statistics 2004, (http:// 

www.blm.gov/natacq/pls04/). 

3 U.S. Department of the Interior, Bureau of Land 

Management, LR2000, June 1, 2006. 

4 BLM contacts included Richard Estabrook (CA), 

Rich Hoops (NV), Sean Hagerty (CA), Donna 

Kauffman (OR), Connie Seare, (Utah) and Gloria 

Baca (NM). 

5 Royalty Policy Committee, Geothermal 

Valuation Subcommittee Report, May 2005. 

6 Advanced Resources International, Inc., 

Geothermal Development on Federal Lands: 

Projection of Royalty Impacts Resulting from the 

Energy Policy Act of 2005, January 21, 2007. 

included with steam and airconditioning suppliers; and firms 

generating electricity from geothermal 

resources are grouped in an ‘‘Other 

Electric Power Generation’’ category. 

Therefore, there is no practical way to 

use the U.S. Census Data to calculate the 

number of entities involved in the 

domestic geothermal industry. 

There are a limited number of entities 

that currently hold Federal geothermal 

leases. As of May 19, 2006,1 there were 

69 different geothermal lessees 

identified; however, many of these 

lessees are composed of the same firms, 

individuals, and partnerships. 

The latest published Public Land 

Statistics 2 data indicates there were 259 

noncompetitive leases covering 364,506 

acres in Arizona, California, Idaho, 

Nevada, Oregon and Utah. Almost 

300,000 of those acres are located in 

Nevada. There were also 140 

competitive leases covering 186,683 

acres in California, Nevada, New 

Mexico, Oregon, and Utah. 

Approximately 170,000 of those leased 

acres are located in California and 

Nevada. During FY2004, 24 noncompetitive geothermal leases were 

issued covering 37,453 acres, along with 

5 competitive leases covering 8,253 

acres. 

Geothermal leases are issued with a 

primary term of 10 years. After the 

primary term the lease may be extended 

twice for up to 5 years each time. 

Currently there are 29,801 leased acres 

in non-producing status that have been 

under lease for 11 to 15 years, and 

another 107,335 acres that have been 

under lease for 16 to 19 years.3

Although this rule will only affect 

entities involved in the exploration and 

development of geothermal resources 

administered by the BLM, there is no 

way to determine which firms will hold 

leases or operate on Federal lands in the 

future. The extent to which the final 

rule has an actual impact on any firm 

depends on whether it holds leases or 

operates on Federal lands. 

Impacted Small Entities 

The Small Business Administration 

(SBA) has developed size standards to 

carry out the purposes of the Small 

Business Act; those size standards can 

be found in 13 CFR 121.201. The SBA 

defines small entities involved in the 

geothermal industry as individuals, 

limited partnerships, or small 

companies considered at ‘‘arm’s length’’ 

from the control of any parent 

companies, with fewer than 500 

employees. 

U.S. Census data on firms by number 

of employees is not available. However, 

based on interviews of BLM specialists 

4 involved in geothermal leasing activity 

and several industry representatives, 

and reviews of company reports, there 

appears to be only one known firm 

currently operating on Federal lands 

with more than 500 employees. 

Based on available information, the 

preponderance of firms involved in 

geothermal resource exploration and 

development on Federal lands are small 

entities as defined by SBA. Therefore, it 

is reasonable to conclude that this rule 

will impact a ‘‘substantial number of 

small entities.’’ 

Direct Economic Impacts 

The changes to the geothermal rule 

fall into a number of different areas: 

competitive and noncompetitive 

leasing, direct use leases, royalties and 

rentals, lease terms and conditions, unit 

and communitization agreements, 

acreage limitations, and termination 

provisions. However, most of the new 

provisions in the final rule are 

specifically required by the Energy 

Policy Act of 2005. 

A major concern voiced by some 

industry representatives regarding the 

pending changes is that the requirement 

in the Energy Policy Act eliminated the 

process of applying for noncompetitive 

leases directly to BLM and required all 

leases to be offered competitively. The 

concern is that this provision will limit 

future exploration and development on 

Federal lands, and decrease competition 

within the industry. Their position is 

that noncompetitive leasing promotes 

innovation and the exploration of 

undeveloped resources. These concerns 

are worth noting; however, the 

requirement that all leases must first be 

offered competitively is included in the 

rule because it is a requirement of the 

law. 

This final rule provides for the 

following: 

<bullet≤ All parcels may be leased 

competitively for no minimum bid; 

<bullet≤ Royalties for most new leases 

will be a percentage of gross proceeds; 

<bullet≤ When lessees elect to convert 

existing leases to leases administered 

under these final regulations, royalty 

rates will be determined on a case-bycase basis to obtain revenue neutrality; 

<bullet≤ Nominations for competitive 

leasing will be charged filing fees; 

<bullet≤ Minimum dollar amounts 

will be set for the work commitment 

requirements and payments in lieu of 

work expenditures; and 

<bullet≤ Near-term production 

incentives will be provided. 

Impact Significance 

In addition to determining if a 

substantial number of small entities are 

likely to be affected by this final rule, 

the BLM must also determine whether 

the rule is anticipated to have a 

significant economic impact on those 

small entities. The RFA does not define 

‘‘significant.’’ However, significance 

should be seen as relative to the size of 

the business, the size of the competitor’s 

business, and the impact the regulation 

has on larger competitors. 

Royalty—The Energy Policy Act 

requires that the royalty on production 

from all future geothermal leases be a 

gross proceeds royalty. Based on a 

report 5 prepared for the Minerals 

Management Service (MMS) on 

geothermal royalty valuation methods 

and a study 6 prepared by Advanced 

Resources International, Inc., for the 

BLM, this final rule implements a gross 

proceeds lease royalty of 1.75% for 

years 1 through 10 and 3.5% after year 

10 for all future leases. This change is 

within the parameters mandated by the 

Energy Policy Act. 

The Act also requires that for 

converted leases the royalty must be 

revenue neutral, i.e., the royalty rate 

applied to gross proceeds will generate 

no more (or less) revenue than the 

previous net proceeds royalty would 

generate if applied to those same leases. 

The Act also requires that charges for 

direct use of the geothermal resource be 

based on a fee schedule rather than a 

royalty. The MMS developed the fee 

schedule for direct use, and it is 

included in the MMS rule that is being 

finalized simultaneously with this BLM 

rule. 

Current electrical generation lessees 

that remain under the previous 

regulations will pay the same royalties 

as they have been paying all along. 

Electrical generation lessees who 

modify their existing leases to the new 

regulation’s percentage of gross 

proceeds method should pay the same 

level of royalties as they have paid 

under the previous regulations. 

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7 U.S. Department of the Interior, Bureau of Land 

Management, Public Land Statistics 2004, (http:// 

www.blm.gov/natacq/pls04/). 

Program wide, the royalty rates for 

new electric generation lessees (1.75% 

for years 1 through 10 and 3.5% after 

year 10) should result in the same 

overall level of royalties as they would 

have paid under the previous 

regulations. Under the new royalty 

scheme, new electric generation lessees 

that use binary power plant technology 

will be subject to a royalty rate that is 

approximately 1% higher than the 

effective royalty rate under the previous 

regulations. Operations that employ 

flash technology will be subject to a 

royalty rate that is almost 2% lower 

than the previous effective royalty rate 

for that type of power generation plants. 

Lessees that currently use the 

resource only for direct use and do not 

sell the resource will have the option to 

convert their leases to the new fee 

schedule, which is expected to result in 

a reduction of $60,000 per year from the 

previous level of royalties, a 95-percent 

reduction. In addition, all new direct 

use lessees who do not sell the 

resources under the new regulations 

will use the same fee schedule, also 

paying about 95 percent less than they 

would have under the previous 

regulations. The MMS has estimated 

that the royalty changes will result in 

royalty decreases for the industry as a 

result of the lower fees for direct use. 

It should be noted that likely the most 

significant effect associated with 

changes in the royalty scheme are the 

accounting savings by converting from a 

netback to a gross proceeds royalty. This 

savings will be most pronounced for 

small entities that do not have a full 

time accounting department. 

Filing Fees—The nomination filing 

fee of $100 per nomination plus a $0.10 

per acre fee will have a minor negative 

financial impact on lessees, including 

small entities. Based on Public Land 

Statistics data 7, 29 competitive and 

noncompetitive geothermal leases, 

covering 45,706 acres, were issued in 

2004. With the fees, the cost of 

acquiring those leases would have been 

increased by $2,900 by the fixed 

nomination fee and $4,570.60 by the per 

acre fee, or an average cost of about 

$250 per lease. It is highly unlikely that 

cost increases of this magnitude will 

prevent operators from obtaining leases 

on lands they are interested in exploring 

and developing. However, due to the 

cost of these fees, operators may tend to 

minimize their nominations to only 

those parcels that they are truly 

interested in obtaining. 

Work Requirements—The final 

regulations require the operator to have 

made exploration expenditures of at 

least $40 per acre by the end of the tenth 

year. After the tenth year the 

expenditure requirement will be $15 per 

acre per year for years 11 to 15 and $25 

per acre per year for years 16 through 

19. The requirement differs from the 

previous regulatory requirement of $4 

per acre for the 6th year, $6 per acre for 

the 7th year, $8 per acre for the 8th year, 

$10 per acre for the 9th year, $12 per 

acre for the 10th year, $15 per acre per 

year for years 11 through 15, and $18 

per acre per year for years 16 through 

19. 

For the expenditure requirement, the 

required amount for the first 15 years is 

essentially the same as the previous 

requirement. For the 16th through 19th 

years the expenditure requirement will 

be 28 percent higher ($7.00 per acre) 

than the requirement under the previous 

regulations. However, the increase only 

applies to future Federal geothermal 

leases in the years 11 through 19. As 

discussed below, the lessees of those 

future leases could opt to make 

payments in lieu of expenditures. 

Payment in Lieu of Expenditure— 

Both sets of regulations allow the lessee 

to make payments to the government in 

lieu of actual work expenditures. Under 

the final regulations the payment in lieu 

of work expenditures will equal the 

required expenditure amount; $40 per 

acre by year 10, $15 per acre per year 

for years 11 through 15, and $25 per 

acre per year for years 16 through 19. 

Under the previous regulations the 

payment amount is $3 per year for years 

six through 15 and $6 per acre per year 

after year 15. For lessees, including 

small entities, that are not producing or 

actively developing their leases after the 

tenth year, this provision will increase 

the cost of holding leases. However, this 

increase in holding costs will only 

apply to future leases issued under the 

final regulations and those who elect to 

be subject to these regulations. 

Non-producing leases issued under 

these final regulations will by the 16th 

year of the lease term face higher 

expenditure and/or payment in lieu of 

expenditure requirements. Assuming 

leasing activity on par with what 

occurred in FY 2004, we would have 

approximately 45,000 acres leased per 

year under the final regulations. 

Assuming no production and no 

exploration expenditures on those 

leases, by the 16th year of those leases’ 

term the lessees would need to pay the 

government $315,000 in payments in 

lieu of expenditures to hold those 

leases. This figure represents a highly 

unlikely worst case scenario in which 

all lessees simply hold on to their leases 

without ever attempting to explore or 

develop the geothermal resources. 

Near Term Incentives—The final 

regulations provide for near term 

production incentives for existing 

leases: There is a 4-year 50 percent 

reduction in the royalty for those leases 

that do not convert, which applies to 

new facilities or qualified expansion 

projects. The provision will have a 

positive impact on the lessees of these 

existing leases. 

Regulatory Analysis 

Executive Order 12866, the Unfunded 

Mandates Reform Act (UMRA), and the 

Small Business and Regulatory 

Flexibility Act (SBRFA) require agencies 

to undertake an analysis of the benefits 

and costs associated with significant 

regulatory actions. 

The changes in the royalty system, 

nomination process and diligence 

requirements are the regulatory 

provisions with potential economic 

impacts. However, the royalty scheme is 

intended to be program-wide revenueneutral and should not have any net 

economic impact. The filing fee will 

nominally increase the cost of acquiring 

a lease. Based on FY2004 data, the filing 

fee would increase the cost of obtaining 

a Federal geothermal lease by an average 

of $250. The payment in lieu of 

expenditure provision will increase the 

cost of holding future non-producing 

Federal geothermal leases beyond the 

15th year. As discussed above, for new 

leases that are not producing and are not 

being actively explored the payment in 

lieu of expenditure (holding cost) will 

increase by $7.00 per acre over the 

previous requirements. However, since 

these leases are neither producing nor 

being actively developed it is not 

anticipated any measurable reduction in 

economic activity will occur as a result 

of the final regulations. 

The final regulations are intended to 

implement certain provisions found in 

the Energy Policy Act related to 

geothermal leasing. Those provisions in 

the Act are primarily intended to 

promote the exploration and 

development of geothermal resources on 

Federal lands. 

The annual effect on the economy of 

the regulatory changes is less than $100 

million and will not adversely affect in 

a material way the economy, a sector of 

the economy, productivity, competition, 

jobs, the environment, public health or 

safety, or state, local, or tribal 

governments or communities. This rule 

will not create inconsistencies or 

otherwise interfere with an action taken 

or planned by another agency. This rule 

does not change the relationships of the 

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geothermal programs with other 

agencies’ actions. These relationships 

are included in agreements and 

memoranda of understanding that will 

not change with this rule. In addition, 

this rule does not materially affect the 

budgetary impact of entitlements, 

grants, loan programs, or the rights and 

obligations of their recipients. 

Authors 

The principal authors of this final rule 

are Rich Hoops-BLM Nevada State 

Office, Richard Estabrook—BLM Ukiah 

Field Office, Cheryl Seath—BLM Bishop 

Field Office, Sean Hagerty—BLM 

California State Office, and assisted by 

Brenda Aird of the Assistant Secretary’s 

Office, Kermit Witherbee-National 

Geothermal Program Manager, BLM’s 

Division of Regulatory Affairs, and the 

Office of the Solicitor. 

List of Subjects 

43 CFR Part 3000 

Public lands—mineral resources, 

Reporting and recordkeeping 

requirements. 

43 CFR Part 3200 

Geothermal energy, Government 

contracts, Mineral royalties, Public 

lands-mineral resources, Reporting and 

recordkeeping requirements, Surety 

bonds, Water resources. 

43 CFR Part 3280 

Geothermal energy, Government 

contracts, Public lands-mineral 

resources, Reporting and recordkeeping 

requirements, Surety bonds. 

Dated: March 30, 2007. 

Julie A Jacobson, 

Deputy Assistant Secretary, Land and 

Minerals Management. 

■ Accordingly, for the reasons stated in 

the preamble and under the authorities 

stated below, BLM amends 43 CFR parts 

3000, 3200 and 3280 as follows: 

PART 3000—MINERALS 

MANAGEMENT: GENERAL 

■ 1. The authority citation for part 3000 

continues to read as follows: 

Authority: 16 U.S.C. 3101 et seq.; 30 U.S.C. 

181 et seq., 301–306, 351–359, and 601 et 

seq.; 31 U.S.C. 9701; 40 U.S.C. 471 et seq.; 

42 U.S.C. 6508; 43 U.S.C. 1701 et seq.; and 

Pub. L. 97–35, 95 Stat. 357. 

■ 2. Amend the table in section 

3000.12(a) by adding a new entry under 

‘‘Geothermal (Part 3200):’’ after ‘‘Lease 

reinstatement’’ as follows: 

§ 3000.12 What is the fee schedule for 

fixed fees? 

(a) * * * 

FY 2006 PROCESSING FEE TABLE

Document/action Fees 

* * * * * 

Geothermal (Part 

3200): 

* * * * * 

Nomination of lands .. 100 plus $0.10 per 

acre of lands nominated. 

■ 3. Revise part 3200 to read as follows: 

PART 3200—GEOTHERMAL 

RESOURCE LEASING 

Subpart 3200—Geothermal Resource 

Leasing 

Sec. 

3200.1 Definitions. 

3200.3 Changes in agency duties. 

3200.4 What requirements must I comply 

with when taking any actions or 

conducting any operations under this 

part? 

3200.5 What are my rights of appeal? 

3200.6 What types of geothermal leases will 

BLM issue? 

3200.7 What regulations apply to geothermal 

leases issued before August 8, 2005? 

3200.8 What regulations apply to leases 

issued in response to applications 

pending on August 8, 2005? 

Subpart 3201—Available Lands 

3201.10 What lands are available for 

geothermal leasing? 

3201.11 What lands are not available for 

geothermal leasing? 

Subpart 3202—Lessee Qualifications 

3202.10 Who may hold a geothermal lease? 

3202.11 Must I prove I am qualified to hold 

a lease when filing an application to 

lease? 

3202.12 Are other persons allowed to act on 

my behalf to file an application to lease? 

3202.13 What happens if the applicant dies 

before the lease is issued? 

Subpart 3203—Competitive Leasing 

3203.5 What is the general process for 

obtaining a geothermal lease? 

3203.10 How are lands included in a 

competitive sale? 

3203.11 Under what circumstances may 

parcels be offered as a block for 

competitive sale? 

3203.12 What fees must I pay to nominate 

lands? 

3203.13 How often will BLM hold a 

competitive lease sale? 

3203.14 How will BLM provide notice of a 

competitive lease sale? 

3203.15 How does BLM conduct a 

competitive lease sale? 

3203.17 How must I make payments if I am 

the successful bidder? 

3203.18 What happens to parcels that receive 

no bids at a competitive lease sale? 

Subpart 3204—Noncompetitive Leasing 

Other Than Direct Use Leases 

3204.05 How can I obtain a noncompetitive 

lease? 

3204.10 What payment must I submit with 

my noncompetitive lease application? 

3204.11 How may I acquire a noncompetitive 

lease for lands that were not sold at a 

competitive lease sale? 

3204.12 How may I acquire a noncompetitive 

lease for lands subject to a mining claim? 

3204.13 How will BLM process 

noncompetitive lease applications 

pending on August 8, 2005? 

3204.14 May I amend my application for a 

noncompetitive lease? 

3204.15 May I withdraw my application for 

a noncompetitive lease? 

Subpart 3205—Direct Use Leasing 

3205.6 When may BLM issue a direct use 

lease to an applicant? 

3205.7 How much acreage should I apply for 

in a direct use lease? 

3205.10 How do I obtain a direct use lease? 

3205.12 How will BLM respond to direct use 

lease applications on lands managed by 

another agency? 

3205.13 May I withdraw my application for 

a direct use lease? 

3205.14 May I amend my application for a 

direct use lease? 

3205.15 How will I know whether my direct 

use lease will be issued? 

Subpart 3206—Lease Issuance 

3206.10 What must I do for BLM to issue a 

lease? 

3206.11 What must BLM do before issuing a 

lease? 

3206.12 What are the minimum and 

maximum lease sizes? 

3206.13 What is the maximum acreage I may 

hold? 

3206.14 How does BLM compute acreage 

holdings? 

3206.15 How will BLM charge acreage 

holdings if the United States owns only 

a fractional interest in the geothermal 

resources in a lease? 

3206.16 Is there any acreage which is not 

chargeable? 

3206.17 What will BLM do if my holdings 

exceed the maximum acreage limits? 

3206.18 When will BLM issue my lease? 

Subpart 3207—Lease Terms and 

Extensions 

3207.5 What terms (time periods) apply to 

my lease? 

3207.10 What is the primary term of my 

lease? 

3207.11 What work am I required to perform 

during the first 10 years of my lease for 

BLM to grant the initial extension of the 

primary term of my lease? 

3207.12 What work am I required to perform 

each year for BLM to continue the initial 

and additional extensions of the primary 

term of my lease? 

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3207.13 Must I comply with the requirements 

of § § 3207.11 and 3207.12 when my 

lease overlies a mining claim? 

3207.14 How do I qualify for a drilling 

extension? 

3207.15 How do I qualify for a production 

extension? 

3207.16 When may my lease be renewed? 

3207.17 How is the term of my lease affected 

by commitment to a unit? 

3207.18 Can my lease be extended if it is 

eliminated from a unit? 

Subpart 3210—Additional Lease 

Information 

3210.10 When does lease segregation occur? 

3210.11 Does a lease segregated from an 

agreement or plan receive any benefits 

from unitization of the committed 

portion of the original lease? 

3210.12 May I consolidate leases? 

3210.13 Who may lease or locate other 

minerals on the same lands as my 

geothermal lease? 

3210.14 May BLM readjust the terms and 

conditions in my lease? 

3210.15 What if I appeal BLM’s decision to 

readjust my lease terms? 

3210.16 How must I prevent drainage of 

geothermal resources from my lease? 

3210.17 What will BLM do if I do not protect 

my lease from drainage? 

Subpart 3211—Filing and Processing Fees, 

Rent, Direct Use Fees, and Royalties 

3211.10 What are the processing and filing 

fees for leases? 

3211.11 What are the annual lease rental 

rates? 

3211.12 How and where do I pay my rent? 

3211.13 When is my annual rental payment 

due? 

3211.14 Will I always pay rent on my lease? 

3211.15 How do I credit rent towards 

royalty? 

3211.16 Can I credit rent towards direct use 

fees? 

3211.17 What is the royalty rate on 

geothermal resources produced from or 

attributable to my lease that are used for 

commercial generation of electricity? 

3211.18 What is the royalty rate on 

geothermal resource produced from or 

attributable to my lease that are used 

directly for purposes other than 

commercial generation of electricity? 

3211.19 What is the royalty rate on 

byproducts derived from geothermal 

resources produced from or attributable 

to my lease? 

3211.20 How do I credit advanced royalty 

towards royalty? 

3211.21 When do I owe minimum royalty? 

Subpart 3212—Lease Suspensions, 

Cessation of Production, Royalty Rate 

Reductions, and Energy Policy Act Royalty 

Rate Conversions 

3212.10 What is the difference between a 

suspension of operations and production 

and a suspension of operations? 

3212.11 How do I obtain a suspension of 

operations or a suspension of operations 

and production on my lease? 

3212.12 How long does a suspension of 

operations or a suspension of operations 

and production last? 

3212.13 How does a suspension affect my 

lease term and obligations? 

3212.14 What happens when the suspension 

ends? 

3212.15 Will my lease remain in full force 

and effect if I cease production and I do 

not have an approved suspension? 

3212.16 Can I apply to BLM to reduce, 

suspend, or waive the royalty or rental 

of my lease? 

3212.17 What information must I submit 

when I request that BLM suspend, 

reduce, or waive my royalty or rental? 

3212.18 What are the production incentives 

for leases? 

3212.19 How do I apply for a production 

incentive? 

3212.20 How will BLM review my request for 

a production incentive? 

3212.21 What criteria establish a qualified 

expansion project for the purpose of 

obtaining a production incentive? 

3212.22 What criteria establish a new facility 

for the purpose of obtaining a production 

incentive? 

3212.23 How will the production incentive 

apply to a qualified expansion project? 

3212.24 How will the production incentive 

apply to a new facility? 

3212.25 Can I convert the royalty rate terms 

of my lease in effect before August 8, 

2005, to the terms of the Geothermal 

Steam Act, as amended by the Energy 

Policy Act of 2005? 

3212.26 How do I submit a request to modify 

the royalty rate terms of my lease to the 

applicable terms prescribed in the 

Energy Policy Act of 2005? 

3212.27 How will BLM or MMS review my 

request to modify the lease royalty rate 

terms? 

Subpart 3213—Relinquishment, 

Termination, and Cancellation 

3213.10 Who may relinquish a lease? 

3213.11 What must I do to relinquish a lease? 

3213.12 May BLM accept a partial 

relinquishment if it will reduce my lease 

to less than 640 acres? 

3213.13 When does relinquishment take 

effect? 

3213.14 Will BLM terminate my lease if I do 

not pay my rent on time? 

3213.15 How will BLM notify me if it 

terminates my lease? 

3213.16 May BLM cancel my lease? 

3213.17 May BLM terminate my lease for 

reasons other than non-payment of 

rentals? 

3213.18 When is a termination effective? 

3213.19 What can I do if BLM notifies me 

that my lease is being terminated 

because of a violation of the law, 

regulations, or lease terms? 

Subpart 3214—Personal and Surety Bonds 

3214.10 Who must post a geothermal bond? 

3214.11 Who must my bond cover? 

3214.12 What activities must my bond cover? 

3214.13 What is the minimum dollar amount 

required for a bond? 

3214.14 May BLM increase the bond amount 

above the minimum? 

3214.15 What kind of financial guarantee 

will BLM accept to back my bond? 

3214.16 Is there a special bond form I must 

use? 

3214.17 Where must I submit my bond? 

3214.18 Who will BLM hold liable under the 

lease and what are they liable for? 

3214.19 What are my bonding requirements 

when a lease interest is transferred to 

me? 

3214.20 How do I modify my bond? 

3214.21 What must I do if I want to use a 

certificate of deposit to back my bond? 

3214.22 What must I do if I want to use a 

letter of credit to back my bond? 

Subpart 3215—Bond Release, Termination, 

and Collection 

3215.10 When may BLM collect against my 

bond? 

3215.11 Must I replace my bond after BLM 

collects against it? 

3215.12 What will BLM do if I do not restore 

the face amount or file a new bond? 

3215.13 Will BLM terminate or release my 

bond? 

3215.14 When BLM releases my bond, does 

that end my responsibilities? 

Subpart 3216—Transfers 

3216.10 What types of lease interests may I 

transfer? 

3216.11 Where must I file a transfer request? 

3216.12 When does a transferee take 

responsibility for lease obligations? 

3216.13 What are my responsibilities after I 

transfer my interest? 

3216.14 What filing fees and forms does a 

transfer require? 

3216.15 When must I file my transfer 

request? 

3216.16 Must I file separate transfer requests 

for each lease? 

3216.17 Where must I file estate transfers, 

corporate mergers, and name changes? 

3216.18 How do I describe the lands in my 

lease transfer? 

3216.19 May I transfer record title interest for 

less than 640 acres? 

3216.20 When does a transfer segregate a 

lease? 

3216.21 When is my transfer effective? 

3216.22 Does BLM approve all transfer 

requests? 

Subpart 3217—Cooperative Agreements 

3217.10 What are unit agreements? 

3217.11 What are communitization 

agreements? 

3217.12 What does BLM need to approve my 

communitization agreement? 

3217.13 When does my communitization 

agreement go into effect? 

3217.14 When will BLM approve my drilling 

or development contract? 

3217.15 What does BLM need to approve my 

drilling or development contract? 

Subpart 3250—Exploration Operations— 

General 

3250.10 When do the exploration operations 

regulations apply? 

3250.11 May I conduct exploration 

operations on my lease, someone else’s 

lease, or unleased land? 

3250.12 What general standards apply to 

exploration operations? 

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3250.13 What additional BLM orders or 

instructions govern exploration? 

3250.14 What types of operations may I 

propose in my application to conduct 

exploration? 

Subpart 3251—Exploration Operations: 

Getting BLM Approval 

3251.10 Do I need a permit before I start 

exploration operations? 

3251.11 What is in a complete Notice of 

Intent to Conduct Geothermal Resource 

Exploration Operations application? 

3251.12 What action will BLM take on my 

Notice of Intent to Conduct Geothermal 

Resource Exploration Operations? 

3251.13 Once I have an approved Notice of 

Intent, how can I change my exploration 

operations? 

3251.14 Do I need a bond for conducting 

exploration operations? 

3251.15 When will BLM release my bond? 

Subpart 3252—Conducting Exploration 

Operations 

3252.10 What operational standards apply to 

my exploration operations? 

3252.11 What environmental requirements 

must I meet when conducting 

exploration operations? 

3252.12 How deep may I drill a temperature 

gradient well? 

3252.13 How long may I collect information 

from my temperature gradient well? 

3252.14 How must I complete a temperature 

gradient well? 

3252.15 When must I abandon a temperature 

gradient well? 

3252.16 How must I abandon a temperature 

gradient well? 

Subpart 3253—Reports: Exploration 

Operations 

3253.10 Must I share with BLM the data I 

collect through exploration operations? 

3253.11 Must I notify BLM when I have 

completed my exploration operations? 

Subpart 3254—Inspection, Enforcement, 

and Noncompliance for Exploration 

Operations 

3254.10 May BLM inspect my exploration 

operations? 

3254.11 What will BLM do if my exploration 

operations are not in compliance with 

my permit, other BLM approvals or 

orders, or the regulations in this part? 

Subpart 3255—Confidential, Proprietary 

Information 

3255.10 Will BLM disclose information I 

submit under these regulations? 

3255.11 When I submit confidential, 

proprietary information, how can I help 

ensure it is not available to the public? 

3255.12 How long will information I give 

BLM remain confidential or proprietary? 

3255.13 How will BLM treat Indian 

information submitted under the Indian 

Mineral Development Act? 

3255.14 How will BLM administer 

information concerning other Indian 

minerals? 

3255.15 When will BLM consult with Indian 

mineral owners when information 

concerning their minerals is the subject 

of a FOIA request? 

Subpart 3256—Exploration Operations 

Relief and Appeals 

3256.10 How do I request a variance from 

BLM requirements that apply to my 

exploration operations? 

3256.11 How may I appeal a BLM decision 

regarding my exploration operations? 

Subpart 3260—Geothermal Drilling 

Operations—General 

3260.10 What types of geothermal drilling 

operations are covered by these 

regulations? 

3260.11 What general standards apply to my 

drilling operations? 

3260.12 What other orders or instructions 

may BLM issue? 

Subpart 3261—Drilling Operations: Getting 

a Permit 

3261.10 How do I get approval to begin well 

pad construction? 

3261.11 How do I apply for approval for 

drilling operations and well pad 

construction? 

3261.12 What is an operations plan? 

3261.13 What is a drilling program and how 

do I apply for drilling program approval? 

3261.14 When must I give BLM my 

operations plan? 

3261.15 Must I give BLM my drilling permit 

application, drilling program, and 

operations plan at the same time? 

3261.16 Can my operations plan, drilling 

permit, and drilling program apply to 

more than one well? 

3261.17 How do I amend my operations plan 

or drilling permit? 

3261.18 Do I need to file a bond before I 

build a well pad or drill a well? 

3261.19 When will BLM release my bond? 

3261.20 How will BLM review applications 

submitted under this subpart and notify 

me of its decision? 

3261.21 How do I get approval to change an 

approved drilling operation? 

3261.22 How do I get approval for 

subsequent well operations? 

Subpart 3262—Conducting Drilling 

Operations 

3262.10 What operational requirements must 

I meet when drilling a well? 

3262.11 What environmental requirements 

must I meet when drilling a well? 

3262.12 Must I post a sign at every well? 

3262.13 May BLM require me to follow a 

well spacing program? 

3262.14 May BLM require me to take samples 

or perform tests and surveys? 

Subpart 3263—Well Abandonment 

3263.10 May I abandon a well without BLM’s 

approval? 

3263.11 What information must I give to 

BLM to approve my Sundry Notice for 

abandoning a well? 

3263.12 How will BLM review my Sundry 

Notice to abandon my well and notify 

me of their decision? 

3263.13 What must I do to restore the site? 

3263.14 May BLM require me to abandon a 

well? 

3263.15 May I abandon a producible well? 

Subpart 3264—Reports—Drilling 

Operations 

3264.10 What must I submit to BLM after I 

complete a well? 

3264.11 What must I submit to BLM after I 

finish subsequent well operations? 

3264.12 What must I submit to BLM after I 

abandon a well? 

3264.13 What drilling and operational 

records must I maintain for each well? 

3264.14 How do I notify BLM of accidents 

occurring on my lease? 

Subpart 3265—Inspection, Enforcement, 

and Noncompliance for Drilling Operations 

3265.10 What part of my drilling operations 

may BLM inspect? 

3265.11 What records must I keep available 

for inspection? 

3265.12 What will BLM do if my operations 

do not comply with my permit and 

applicable regulations? 

Subpart 3266—Confidential, Proprietary 

Information 

3266.10 Will BLM disclose information I 

submit under these regulations? 

3266.11 When I submit confidential, 

proprietary information, how can I help 

ensure it is not available to the public? 

3266.12 How long will information I give 

BLM remain confidential or proprietary? 

Subpart 3267—Geothermal Drilling 

Operations Relief and Appeals 

3267.10 May I request a variance from any 

BLM requirements that apply to my 

drilling operations? 

3267.11 How may I appeal a BLM decision 

regarding my drilling operations? 

Subpart 3270—Utilization of Geothermal 

Resources—General 

3270.10 What types of geothermal operations 

are governed by these utilization 

regulations? 

3270.11 What general standards apply to my 

utilization operations? 

3270.12 What other orders or instructions 

may BLM issue? 

Subpart 3271—Utilization Operations: 

Getting a Permit 

3271.10 What do I need to start preparing a 

site and building and testing a utilization 

facility on Federal land leased for 

geothermal resources? 

3271.11 Who may apply for a permit to build 

a utilization facility? 

3271.12 What do I need to start preliminary 

site investigations that may disturb the 

surface? 

3271.13 How do I obtain approval to build 

pipelines and facilities connecting the 

well field to utilization facilities not 

located on Federal lands leased for 

geothermal resources? 

3271.14 What do I need to start building and 

testing a utilization facility if it is not on 

Federal lands leased for geothermal 

resources? 

3271.15 How do I get a permit to begin 

commercial operations? 

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Subpart 3272—Utilization Plan and Facility 

Construction Permit 

3272.10 What must I submit to BLM in my 

utilization plan? 

3272.11 How do I describe the proposed 

utilization facility? 

3272.12 What environmental protection 

measures must I include in my 

utilization plan? 

3272.13 How will BLM review my utilization 

plan and notify me of its decision? 

3272.14 How do I get a permit to build or test 

my facility? 

Subpart 3273—How To Apply for a Site 

License 

3273.10 When do I need a site license for a 

utilization facility? 

3273.11 When is a site license unnecessary? 

3273.12 How will BLM review my site 

license application? 

3273.13 What lands are not available for 

geothermal site licenses? 

3273.14 What area does a site license cover? 

3273.15 What must I include in my site 

license application? 

3273.16 What is the annual rent for a site 

license? 

3273.17 When may BLM reassess the annual 

rent for my site license? 

3273.18 What facility operators must pay the 

annual site license rent? 

3273.19 What are the bonding requirements 

for a site license? 

3273.20 When will BLM release my bond? 

3273.21 What are my obligations under the 

site license? 

3273.22 How long will my site license 

remain in effect? 

3273.23 May I renew my site license? 

3273.24 When may BLM terminate my site 

license? 

3273.25 When may I relinquish my site 

license? 

3273.26 When may I assign or transfer my 

site license? 

Subpart 3274—Applying for and Obtaining 

a Commercial Use Permit 

3274.10 Do I need a commercial use permit 

to start commercial operations? 

3274.11 What must I give BLM to approve 

my commercial use permit application? 

3274.12 How will BLM review my 

commercial use permit application? 

3274.13 May I get a permit even if I cannot 

currently demonstrate I can operate 

within required standards? 

Subpart 3275—Conducting Utilization 

Operations 

3275.10 How do I change my operations if I 

have an approved facility construction or 

commercial use permit? 

3275.11 What are a facility operator’s 

obligations? 

3275.12 What environmental and safety 

requirements apply to facility 

operations? 

3275.13 How must the facility operator 

measure the geothermal resources? 

3275.14 What aspects of my geothermal 

operations must I measure? 

3275.15 How accurately must I measure my 

production and utilization? 

3275.16 What standards apply to installing 

and maintaining meters? 

3275.17 What must I do if I find an error in 

a meter? 

3275.18 May BLM require me to test for 

byproducts associated with geothermal 

resource production? 

3275.19 How do I apply to commingle 

production? 

3275.20 What will BLM do if I waste 

geothermal resources? 

3275.21 May BLM order me to drill and 

produce wells on my lease? 

Subpart 3276—Reports: Utilization 

Operations 

3276.10 What are the reporting requirements 

for facility and lease operations 

involving Federal geothermal resources? 

3276.11 What information must I include for 

each well in the monthly report of well 

operations? 

3276.12 What information must I give BLM 

in the monthly report for facility 

operations? 

3276.13 What additional information must I 

give BLM in the monthly report for flash 

and dry steam facilities? 

3276.14 What information must I give BLM 

in the monthly report for direct use 

facilities? 

3276.15 How must I notify BLM of accidents 

occurring at my utilization facility? 

Subpart 3277—Inspections, Enforcement, 

and Noncompliance 

3277.10 When will BLM inspect my 

operations? 

3277.11 What records must I keep available 

for inspection? 

3277.12 What will BLM do if I do not comply 

with all BLM requirements pertaining to 

utilization operations? 

Subpart 3278—Confidential, Proprietary 

Information 

3278.10 When will BLM disclose information 

I submit under these regulations? 

3278.11 When I submit confidential, 

proprietary information, how can I help 

ensure it is not available to the public? 

3278.12 How long will information I give 

BLM remain confidential or proprietary? 

Subpart 3279—Utilization Relief and 

Appeals 

3279.10 When may I request a variance from 

BLM requirements pertaining to 

utilization operations? 

3279.11 How may I appeal a BLM decision 

regarding my utilization operations? 

Authority: 30 U.S.C. 1001–1028; 43 U.S.C. 

1701 et seq.; and Pub. L. 109–58. 

Subpart 3200—Geothermal Resource 

Leasing 

§ 3200.1 Definitions. 

For purposes of this part and part 

3280: 

Acquired lands means lands or 

mineral estates that the United States 

obtained by deed through purchase, gift, 

condemnation or other legal process. 

Act means the Geothermal Steam Act 

of 1970, as amended (30 U.S.C. 1001 et 

seq.). 

Additional extension means the 

period of years added to the primary 

term of a lease beyond the first 10 years 

and subsequent 5-year initial extension 

of a geothermal lease. The additional 

extension may not exceed 5 years. 

Byproducts are minerals (exclusive of 

oil, hydrocarbon gas, and helium), 

found in solution or in association with 

geothermal steam, that no person would 

extract and produce by themselves 

because they are worth less than 75 

percent of the value of the geothermal 

steam or because extraction and 

production would be too difficult. 

Casual use means activities that 

ordinarily lead to no significant 

disturbance of Federal lands, resources, 

or improvements. 

Commercial operation means 

delivering Federal geothermal resources, 

or electricity or other benefits derived 

from those resources, for sale. This term 

also includes delivering resources to the 

utilization point, if you are utilizing 

Federal geothermal resources for your 

own benefit and not selling energy to 

another entity. 

Commercial production means 

production of geothermal resources 

when the economic benefits from the 

production are greater than the cost of 

production. 

Commercial production or generation 

of electricity means generation of 

electricity that is sold or is subject to 

sale, including the electricity or energy 

that is reasonably required to produce 

the resource used in production of 

electricity for sale or to convert the 

resource into electrical energy for sale. 

Commercial quantities means either: 

(1) For production from a lease, a 

sufficient volume (in terms of flow and 

temperature) of the resource to provide 

a reasonable return after you meet all 

costs of production; or 

(2) For production from a unit, a 

sufficient volume (in terms of flow and 

temperature) of the resource to provide 

a reasonable return after you meet all 

costs of drilling and production. 

Commercial use permit means BLM 

authorization for commercially 

operating a utilization facility and/or 

utilizing Federal geothermal resources. 

Development or drilling contract 

means a BLM-approved agreement 

between one or more lessees and one or 

more entities that makes resource 

exploration more efficient and protects 

the public interest. 

Direct use means utilization of 

geothermal resources for commercial, 

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residential, agricultural, public 

facilities, or other energy needs other 

than the commercial production or 

generation of electricity. Direct use may 

occur under either a regular geothermal 

lease or a direct use lease. 

Direct use lease means a lease issued 

noncompetitively in an area BLM 

designates as available exclusively for: 

(1) Direct use of geothermal resources, 

without sale; and 

(2) Purposes other than commercial 

generation of electricity. 

Exploration operations means any 

activity relating to the search for 

evidence of geothermal resources, where 

you are physically present on the land 

and your activities may cause damage to 

those lands. Exploration operations 

include, but are not limited to, 

geophysical operations, drilling 

temperature gradient wells, drilling 

holes used for explosive charges for 

seismic exploration, core drilling or any 

other drilling method, provided the well 

is not used for geothermal resource 

production. It also includes related 

construction of roads and trails, and 

cross-country transit by vehicles over 

public land. Exploration operations do 

not include the direct testing of 

geothermal resources or the production 

or utilization of geothermal resources. 

Facility construction permit means 

BLM permission to build and test a 

utilization facility. 

Facility operator means the person 

receiving BLM authorization to site, 

construct, test, and/or operate a 

utilization facility. A facility operator 

may be a lessee, a unit operator, or a 

third party. 

Geothermal drilling permit means 

BLM written permission to drill for and 

test Federal geothermal resources. 

Geothermal exploration permit means 

BLM written permission to conduct 

only geothermal exploration operations 

and associated surface disturbance 

activities under an approved Notice of 

Intent to Conduct Geothermal Resource 

Exploration Operations, and includes 

any necessary conditions BLM imposes. 

Geothermal resources operational 

order means a formal, numbered order, 

issued by BLM, that implements or 

enforces the regulations in this part. 

Geothermal steam and associated 

geothermal resources means: 

(1) All products of geothermal 

processes, including indigenous steam, 

hot water, and hot brines; 

(2) Steam and other gases, hot water, 

and hot brines resulting from water, gas, 

or other fluids artificially introduced 

into geothermal formations; 

(3) Heat or other associated energy 

found in geothermal formations; and 

(4) Any byproducts. 

Gross proceeds means gross proceeds 

as defined by the Minerals Management 

Service at 30 CFR 206.351. 

Initial extension means a period of 

years, no longer than 5 years, added to 

the primary term of a geothermal lease 

beyond the first 10 years of the lease, 

provided certain lease obligations are 

met. 

Interest means ownership in a lease of 

all or a portion of the record title or 

operating rights. 

Known geothermal resource area 

(KGRA) means an area where BLM 

determines that persons knowledgeable 

in geothermal development would 

spend money to develop geothermal 

resources. 

Lessee means a person holding record 

title interest in a geothermal lease 

issued by BLM. 

MMS means the Minerals 

Management Service of the Department 

of the Interior. 

Notice to Lessees (NTL) means a 

written notice issued by BLM that 

implements the regulations in this part, 

part 3280, or geothermal resource 

operational orders, and provides more 

specific instructions on geothermal 

issues within a state, district, or field 

office. Notices to Lessees may be 

obtained by contacting the BLM State 

Office that issued the NTL. 

Operating rights (working interest) 

means any interest held in a lease with 

the right to explore for, develop, and 

produce leased substances. 

Operating rights owner means a 

person who holds operating rights in a 

lease. A lessee is an operating rights 

owner if the lessee did not transfer all 

of its operating rights. An operator may 

or may not own operating rights. 

Operations plan, or plan of operations 

means a plan which fully describes the 

location of proposed drill pad, access 

roads and other facilities related to the 

drilling and testing of Federal 

geothermal resources, and includes 

measures for environmental and other 

resources protection and mitigation. 

Operator means any person who has 

taken responsibility in writing for the 

operations conducted on leased lands. 

Person means an individual, firm, 

corporation, association, partnership, 

trust, municipality, consortium, or joint 

venture. 

Primary term means the first 10 years 

of a lease, not including any periods of 

suspension. 

Produced or utilized in commercial 

quantities means the completion of a 

well that: 

(1) Produces geothermal resources in 

commercial quantities; or 

(2) Is capable of producing geothermal 

resources in commercial quantities so 

long as BLM determines that diligent 

efforts are being made toward the 

utilization of the geothermal resource. 

Public lands means the same as 

defined in 43 U.S.C. 1702(e). 

Record title means legal ownership of 

a geothermal lease established in BLM’s 

records. 

Relinquishment means the lessee’s 

voluntary action to end the lease in 

whole or in part. 

Secretary means the Secretary of the 

Interior or the Secretary’s delegate. 

Site license means BLM’s written 

authorization to site a utilization facility 

on leased Federal lands. 

Stipulation means additional 

conditions BLM attaches to a lease or 

permit. 

Sublease means the lessee’s 

conveyance of its interests in a lease to 

an operating rights owner. A sublessee 

is responsible for complying with all 

terms, conditions, and stipulations of 

the lease. 

Subsequent well operations are those 

operations done to a well after it has 

been drilled. Examples of subsequent 

well operations include: cleaning the 

well out, surveying it, performing well 

tests, chemical stimulation, running a 

liner or another casing string, repairing 

existing casing, or converting the well 

from a producer to an injector or vice 

versa. 

Sundry notice is your written request 

to perform work not covered by another 

type of permit, or to change operations 

in your previously approved permit. 

Surface management agency means 

any Federal agency, other than BLM, 

that is responsible for managing the 

surface overlying Federally-owned 

minerals. 

Temperature gradient well means a 

well authorized under a geothermal 

exploration permit drilled in order to 

obtain information on the change in 

temperature over the depth of the well. 

Transfer means any conveyance of an 

interest in a lease by assignment, 

sublease, or otherwise. 

Unit agreement means an agreement 

to explore for, produce and utilize 

separately-owned interests in 

geothermal resources as a single 

consolidated unit. A unit agreement 

defines how costs and benefits will be 

allocated among the holders of interest 

in the unit area. 

Unit area means all tracts committed 

to an approved unit agreement. 

Unit operator means the person who 

has stated in writing to BLM that the 

interest owners of the committed leases 

have designated it as operator of the 

unit area. 

Unitized substances means 

geothermal resources recovered from 

lands committed to a unit agreement. 

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Utilization Plan or plan of utilization 

means a plan which fully describes the 

utilization facility, including measures 

for environmental protection and 

mitigation. 

Waste means: 

(1) Physical waste, including refuse; 

or 

(2) Improper use or unnecessary 

dissipation of geothermal resources 

through inefficient drilling, production, 

transmission, or utilization. 

§ 3200.3 Changes in agency duties. 

There are many leases and agreements 

currently in effect, and that will remain 

in effect, involving Federal geothermal 

resources leases that specifically refer to 

the United States Geological Survey, 

USGS, Minerals Management Service, 

MMS, or Conservation Division. These 

leases and agreements may also 

specifically refer to various officers such 

as Supervisor, Conservation Manager, 

Deputy Conservation Manager, Minerals 

Manager, and Deputy Minerals Manager. 

Those references must now be read to 

mean either the Bureau of Land 

Management or the Minerals 

Management Service, as appropriate. In 

addition, many leases and agreements 

specifically refer to 30 CFR part 270 or 

a specific section of that part. Effective 

December 3, 1982, references in such 

leases and agreements to 30 CFR part 

270 should be read as references to this 

part 3200, which is the successor 

regulation to 30 CFR part 270. 

§ 3200.4 What requirements must I 

comply with when taking any actions or 

conducting any operations under this part? 

When you are taking any actions or 

conducting any operations under this 

part, you must comply with: 

(a) The Act and the regulations of this 

part; 

(b) Geothermal resource operational 

orders; 

(c) Notices to lessees; 

(d) Lease terms and stipulations; 

(e) Approved plans and permits; 

(f) Conditions of approval; 

(g) Verbal orders from BLM that will 

be confirmed in writing; 

(h) Other instructions from BLM; and 

(i) Any other applicable laws and 

regulations. 

§ 3200.5 What are my rights of appeal? 

(a) If you are adversely affected by a 

BLM decision under this part, you may 

appeal that decision under parts 4 and 

1840 of this title. 

(b) All BLM decisions or approvals 

under this part are immediately 

effective and remain in effect while 

appeals are pending unless a stay is 

granted in accordance with § 4.21(b) of 

this title. 

§ 3200.6 What types of geothermal leases 

will BLM issue? 

BLM will issue two types of 

geothermal leases: 

(a) Geothermal leases (competitively 

issued under subpart 3203 or 

noncompetitively issued under subpart 

3204) which may be used for any type 

of geothermal use, such as commercial 

generation of electricity or direct use of 

the resource. 

(b) Direct use leases (issued under 

subpart 3205). 

§ 3200.7 What regulations apply to 

geothermal leases issued before August 8, 

2005? 

(a) General applicability. (1) Leases 

issued before August 8, 2005, are subject 

to this part and part 3280, except that 

such leases are subject to the BLM 

regulations in effect on August 8, 2005 

(43 CFR parts 3200 and 3280 (2004)), 

with regard to regulatory provisions 

relating to royalties, minimum royalties, 

rentals, primary term and lease 

extensions, diligence and annual work 

requirements, and renewals. 

(2) The lessee of a lease issued before 

August 8, 2005, may elect to be subject 

to all of the regulations in this part and 

part 3280, without regard to the 

exceptions in paragraph (a)(1) of this 

section. Such an election must occur no 

later than December 1, 2008. Any such 

election as it pertains to lease terms 

relating to royalty rates must be made 

under the royalty rate conversion 

provisions of subpart 3212. A lessee 

must obtain a royalty conversion under 

subpart 3212 to make an election under 

this paragraph effective. 

(b) Royalty rate conversion and 

production incentives. The lessee of a 

lease issued before August 8, 2005, may: 

(1) Choose to convert lease terms 

relating to royalty rates under subpart 

3212; or 

(2) If it does not convert lease terms 

relating to royalty rates, apply for a 

production incentive under subpart 

3212 (if eligible under that subpart). 

(c) Two year extension. The lessee of 

a lease issued before August 8, 2005, 

may apply to extend a lease that was 

within 2 years of the end of its term on 

August 8, 2005, for up to 2 years to 

allow achievement of production under 

the lease or to allow the lease to be 

included in a producing unit. 

§ 3200.8 What regulations apply to leases 

issued in response to applications pending 

on August 8, 2005? 

(a) Any leases issued in response to 

applications that were pending on 

August 8, 2005, are subject to this part 

and part 3280, except that such leases 

are subject to the BLM regulations in 

effect on August 8, 2005 (43 CFR parts 

3200 and 3280 (2004)), with regard to 

regulatory provisions relating to 

royalties, minimum royalties, rentals, 

primary term and lease extensions, 

diligence and annual work 

requirements, and renewals. 

(b)(1) The lessee of a lease issued 

pursuant to an application that was 

pending on August 8, 2005, may elect to 

be subject to all of the regulations in this 

part and part 3280, without regard to the 

exceptions in paragraph (a) of this 

section. 

(2) For leases issued on or after 

August 8, 2005, and before June 1, 2007, 

an election under paragraph (b)(1) of 

this section must occur no later than 

December 1, 2008. 

(3) For leases issued on or after June 

1, 2007, the lease applicant must make 

its election under paragraph (b)(1) of 

this section and notify BLM before the 

lease is issued. 

Subpart 3201—Available Lands 

§ 3201.10 What lands are available for 

geothermal leasing? 

(a) BLM may issue leases on: 

(1) Lands administered by the 

Department of the Interior, including 

public and acquired lands not 

withdrawn from such use; 

(2) Lands administered by the 

Department of Agriculture with its 

concurrence; 

(3) Lands conveyed by the United 

States where the geothermal resources 

were reserved to the United States; and 

(4) Lands subject to Section 24 of the 

Federal Power Act, as amended (16 

U.S.C. 818), with the concurrence of the 

Secretary of Energy. 

(b) If your activities under your lease 

or permit might adversely affect a 

significant thermal feature of a National 

Park System unit, BLM will include 

stipulations to protect this thermal 

feature in your lease or permit. These 

stipulations will be added, if necessary, 

when your lease or permit is issued, 

extended, renewed or modified. 

§ 3201.11 What lands are not available for 

geothermal leasing? 

BLM will not issue leases for: 

(a) Lands where the Secretary has 

determined that issuing the lease would 

cause unnecessary or undue degradation 

of public lands and resources; 

(b) Lands contained within a unit of 

the National Park System, or otherwise 

administered by the National Park 

Service; 

(c) Lands within a National 

Recreation Area; 

(d) Lands where the Secretary 

determines after notice and comment 

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that geothermal operations, including 

exploration, development or utilization 

of lands, are reasonably likely to result 

in a significant adverse effect on a 

significant thermal feature within a unit 

of the National Park System; 

(e) Fish hatcheries or wildlife 

management areas administered by the 

Secretary; 

(f) Indian trust or restricted lands 

within or outside the boundaries of 

Indian reservations; 

(g) The Island Park Geothermal Area; 

and 

(h) Lands where Section 43 of the 

Mineral Leasing Act (30 U.S.C. 226–3) 

prohibits geothermal leasing, including: 

(1) Wilderness areas or wilderness 

study areas administered by BLM or 

other surface management agencies; 

(2) Lands designated by Congress as 

wilderness study areas, except where 

the statute designating the study area 

specifically allows leasing to continue; 

and 

(3) Lands within areas allocated for 

wilderness or further planning in 

Executive Communication 1504, NinetySixth Congress (House Document 96– 

119), unless such lands are allocated to 

uses other than wilderness by a land 

and resource management plan or are 

released to uses other than wilderness 

by an Act of Congress. 

Subpart 3202—Lessee Qualifications 

§ 3202.10 Who may hold a geothermal 

lease? 

You may hold a geothermal lease if 

you are: 

(a) A United States citizen who is at 

least 18 years old; 

(b) An association of United States 

citizens, including a partnership; 

(c) A corporation organized under the 

laws of the United States, any state or 

the District of Columbia; or 

(d) A domestic governmental unit. 

§ 3202.11 Must I prove I am qualified to 

hold a lease when filing an application to 

lease? 

You do not need to submit proof that 

you are qualified to hold a lease under 

§ 3202.10 at the time you submit an 

application to lease, but BLM may ask 

you in writing for information about 

your qualifications at any time. You 

must submit the additional information 

to BLM within 30 days after you receive 

the request. 

§ 3202.12 Are other persons allowed to 

act on my behalf to file an application to 

lease? 

Another person may act on your 

behalf to file an application to lease. 

The person acting for you must be 

qualified to hold a lease under §

3202.10, and must do the following: 

(a) Sign the application; 

(b) State his or her title; 

(c) Identify you as the person he or 

she is acting for; and 

(d) Provide written proof of his or her 

qualifications and authority to take such 

action, if BLM requests it. 

§ 3202.13 What happens if the applicant 

dies before the lease is issued? 

If the applicant dies before the lease 

is issued, BLM will issue the lease to 

either the administrator or executor of 

the estate or the heirs. If the heirs are 

minors, BLM will issue the lease to 

either a legal guardian or trustee, 

provided that the legal guardian or 

trustee is qualified to hold a lease under 

§ 3202.10. 

Subpart 3203—Competitive Leasing 

§ 3203.5 What is the general process for 

obtaining a geothermal lease? 

(a) The competitive geothermal 

leasing process consists of the following 

steps: 

(1)(i) Entities interested in geothermal 

development nominate lands by 

submitting to BLM descriptions of lands 

they seek to be included in a lease sale; 

or 

(ii) BLM may include land in a 

competitive lease sale on its own 

initiative. 

(2) BLM provides notice of the parcels 

to be offered, and the time, location, and 

process for participating in the lease 

sale. 

(3) BLM holds the lease sale and 

offers leases to the successful bidder. 

(b) BLM will issue geothermal leases 

to the highest responsible qualified 

bidder after a competitive leasing 

process, except for situations where 

noncompetitive leasing is allowed 

under subparts 3204 and 3205, which 

include: 

(1) Lease applications pending on 

August 8, 2005; 

(2) Lands for which no bid was 

received in a competitive lease sale; 

(3) Direct use lease applications for 

which no competitive interest exists; 

and 

(4) Lands subject to mining claims. 

§ 3203.10 How are lands included in a 

competitive sale? 

(a) A qualified company or individual 

may nominate lands for competitive sale 

by submitting an applicable BLM 

nomination form. 

(b) A nomination is a description of 

lands that you seek to be included in 

one lease. Each nomination may not 

exceed 5,120 acres, unless the area to be 

leased includes an irregular subdivision. 

Your nomination must provide a 

description of the lands nominated by 

legal land description. 

(1) For lands surveyed under the 

public land rectangular survey system, 

describe the lands to the nearest aliquot 

part within the legal subdivision, 

section, township, and range; 

(2) For unsurveyed lands, describe the 

lands by metes and bounds, giving 

courses and distances, and tie this 

information to an official corner of the 

public land surveys, or to a prominent 

topographic feature; 

(3) For approved protracted surveys, 

include an entire section, township, and 

range. Do not divide protracted sections 

into aliquot parts; 

(4) For unsurveyed lands in Louisiana 

and Alaska that have water boundaries, 

discuss the description with BLM before 

submission; and 

(5) For fractional interest lands, 

identify the United States mineral 

ownership by percentage. 

(c) You may submit more than one 

nomination, as long as each nomination 

separately satisfies the requirements of 

paragraph (b) of this section and 

includes the filing fee specified in §

3203.12. 

(d) BLM may reconfigure lands to be 

included in each parcel offered for sale. 

(e) BLM may include land in a lease 

sale on its own initiative. 

§ 3203.11 Under what circumstances may 

parcels be offered as a block for 

competitive sale? 

(a) As part of your nomination, you 

may request that lands be offered as a 

block at competitive sale by: 

(1) Specifying that the lands requested 

will be associated with a project or unit: 

and 

(2) Including information to support 

your request. BLM may require that you 

provide additional information. 

(b) BLM may offer parcels as a block 

in response to a request under 

paragraph (a) of this section or on its 

own initiative. BLM will offer parcels as 

a block only if information is available 

to BLM indicating that a geothermal 

resource that could be produced as one 

unit can reasonably be expected to 

underlie such parcels. 

§ 3203.12 What fees must I pay to 

nominate lands? 

Submit with your nomination a filing 

fee for nominations of lands as found in 

the fee schedule in § 3000.12 of this 

chapter. 

§ 3203.13 How often will BLM hold a 

competitive lease sale? 

BLM will hold a competitive lease 

sale at least once every 2 years for lands 

available for leasing in a state that has 

nominations pending. A sale may 

include lands in more than one state. 

BLM may hold a competitive lease sale 

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in a state that has no nominations 

pending. 

§ 3203.14 How will BLM provide notice of 

a competitive lease sale? 

(a) The lands available for competitive 

lease sale under this subpart will be 

described in a Notice of Competitive 

Geothermal Lease Sale, which will 

include: 

(1) The lease sale format and 

procedures; 

(2) The time, date, and place of the 

lease sale; and 

(3) Stipulations applicable to each 

parcel. 

(b) At least 45 days before conducting 

a competitive lease sale, BLM will post 

the Notice in the BLM office having 

jurisdiction over the lands to be offered, 

and make it available for posting to 

surface managing agencies having 

jurisdiction over any of the included 

lands. 

(c) BLM may take other measures of 

notification for the competitive sale 

such as: 

(1) Issuing news releases; 

(2) Notifying interested parties of the 

lease sale; 

(3) Publishing notice in the 

newspaper; or 

(4) Posting the list of parcels on the 

Internet. 

§ 3203.15 How does BLM conduct a 

competitive lease sale? 

(a) BLM will offer parcels for 

competitive bidding as specified in the 

sale notice. 

(b) The winning bid will be the 

highest bid by a qualified bidder. 

(c) You may not withdraw a bid. Your 

bid constitutes a legally binding 

commitment by you. 

(d) BLM will reject all bids and reoffer a parcel if: 

(1) BLM determines that the high 

bidder is not qualified; or 

(2) The high bidder fails to make all 

payments required under § 3203.17. 

§ 3203.17 How must I make payments if I 

am the successful bidder? 

(a) You must make payments by 

personal check, cashier’s check, 

certified check, bank draft, or money 

order payable to the ‘‘Department of the 

Interior—Bureau of Land Management’’ 

or by other means deemed acceptable by 

BLM. 

(b) By the close of official business 

hours on the day of the sale or such 

other time as BLM may specify, you 

must submit for each parcel: 

(1) Twenty percent of the bid; 

(2) The total amount of the first year’s 

rental; and 

(3) The processing fee for competitive 

lease applications found in the fee 

schedule in § 3000.12 of this chapter. 

(c) Within 15 calendar days after the 

last day of the sale, you must submit the 

balance of the bid to the BLM office 

conducting the sale. 

(d) If you fail to make all payments 

required under this section, or fail to 

meet the qualifications in § 3202.10, 

BLM will revoke acceptance of your bid 

and keep all money that has been 

submitted. 

§ 3203.18 What happens to parcels that 

receive no bids at a competitive lease sale? 

Lands offered at a competitive lease 

sale that receive no bids will be 

available for leasing in accordance with 

subpart 3204. 

Subpart 3204—Noncompetitive 

Leasing Other Than Direct Use Leases 

§ 3204.5 How can I obtain a 

noncompetitive lease? 

(a) Lands offered at a competitive 

lease sale that receive no bids will be 

available for noncompetitive leasing for 

a 2-year period beginning the first 

business day following the sale. 

(b) You may obtain a noncompetitive 

lease for lands available exclusively for 

direct use of geothermal resources, 

under subpart 3205. 

(c) The holder of a mining claim may 

obtain a noncompetitive lease for lands 

subject to the mining claim under §

3204.12. 

(d) If your lease application was 

pending on August 8, 2005, you may 

obtain a noncompetitive lease under the 

leasing process in effect on that date, 

unless you notify BLM in writing that 

you elect for the lease application to be 

subject to the competitive leasing 

process specified in this subpart. If you 

elect for your lease application to be 

subject to the competitive leasing 

process in this subpart, your application 

will be considered a nomination for 

future competitive lease offerings for the 

lands in your application. An election 

made under this paragraph is not the 

same as an election made under §

3200.8. 

§ 3204.10 What payment must I submit 

with my noncompetitive lease application? 

Submit the processing fee for 

noncompetitive lease applications 

found in the fee schedule in § 3000.12 

of this chapter for each lease 

application, and an advance rent in the 

amount of $1 per acre (or fraction of an 

acre). BLM will refund the advance rent 

if we reject the lease application or if 

you withdraw the lease application 

before BLM accepts it. If the advance 

rental payment you send is less than 90 

percent of the correct amount, BLM will 

reject the lease application. 

§ 3204.11 How may I acquire a 

noncompetitive lease for lands that were 

not sold at a competitive lease sale? 

(a) For a 2-year period following a 

competitive lease sale, you may file a 

noncompetitive lease application for 

lands on which no bids were received, 

on a form available from BLM. Submit 

2 executed copies of the applicable form 

to BLM. At least one form must have an 

original signature. We will accept only 

exact copies of the form on one 2-sided 

page. 

(1) For 30 days after the competitive 

geothermal lease sale, noncompetitive 

applications will be accepted only for 

parcels as configured in the Notice of 

Competitive Geothermal Lease Sale. 

(2) Subsequent to the 30-day period 

specified in paragraph (a)(1) of this 

section, you may file a noncompetitive 

application for any available lands 

covered by the competitive lease sale. 

(b)(1) All applications for a particular 

parcel under this section will be 

considered simultaneously filed if 

received in the proper BLM office any 

time during the first business day 

following the competitive lease sale. 

You may submit only one application 

per parcel. An application will not be 

available for public inspection the day 

it is filed. BLM will randomly select an 

application among those accepted on 

the first business day to receive a lease 

offer. 

(2) Subsequent to the first business 

day following the competitive lease sale, 

the first qualified applicant to submit an 

application will be offered the lease. If 

BLM receives simultaneous applications 

as to date and time for overlapping 

lands, BLM will randomly select one to 

receive a lease offer. 

§ 3204.12 How may I acquire a 

noncompetitive lease for lands subject to a 

mining claim? 

If you hold a mining claim for which 

you have a current approved plan of 

operations, you may file a 

noncompetitive lease application for 

lands within the mining claim, on a 

form available from BLM. Submit two 

(2) executed copies of the applicable 

form to BLM, together with 

documentation of mining claim 

ownership and the current approved 

plan of operations for the mine. At least 

one form must have an original 

signature. We will accept only exact 

copies of the form on one 2-sided page. 

§ 3204.13 How will BLM process 

noncompetitive lease applications pending 

on August 8, 2005? 

Noncompetitive lease applications 

pending on August 8, 2005, will be 

processed under policies and 

procedures existing on that date unless 

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the applicant notifies BLM in writing 

that it elects for the lease application to 

be subject to the competitive leasing 

process specified in this subpart, in 

which case the application will be 

considered a nomination for future 

competitive lease offerings for the lands 

in the application. 

§ 3204.14 May I amend my application for 

a noncompetitive lease? 

You may amend your application for 

a noncompetitive lease at any time 

before we issue the lease, provided your 

amended application meets the 

requirements in this subpart and does 

not add lands not included in the 

original application. To add lands, you 

must file a new application. 

§ 3204.15 May I withdraw my application 

for a noncompetitive lease? 

During the 30-day period after the 

competitive lease sale, BLM will only 

accept a withdrawal of the entire 

application. Following that 30-day 

period, you may withdraw your 

noncompetitive lease application in 

whole or in part at any time before BLM 

issues the lease. If a partial withdrawal 

causes your lease application to contain 

less than the minimum acreage required 

under § 3206.12, BLM will reject the 

application. 

Subpart 3205—Direct Use Leasing 

§ 3205.6 When may BLM issue a direct 

use lease to an applicant? 

(a) BLM may issue a direct use lease 

to an applicant if the following 

conditions are satisfied: 

(1) The lands included in the lease 

application are open for geothermal 

leasing; 

(2) BLM determines that the lands are 

appropriate for exclusive direct use 

operations, without sale, for purposes 

other than commercial generation of 

electricity; 

(3) The acreage covered by the lease 

application is not greater than the 

quantity of acreage that is reasonably 

necessary for the proposed use; 

(4) BLM has published a notice of the 

land proposed for a direct use lease for 

90 days before issuing the lease; 

(5) During the 90-day period 

beginning on the date of publication, 

BLM did not receive any nomination to 

include the lands in the next 

competitive lease sale following that 

period for which the lands would be 

eligible; 

(6) BLM determines there is no 

competitive interest in the resource; and 

(7) The applicant is the first qualified 

applicant. 

(b) If BLM determines that the land 

for which an applicant has applied 

under this subpart is open for 

geothermal leasing and is appropriate 

only for exclusive direct use operations, 

but determines that there is competitive 

interest in the resource, it will include 

the land in a competitive lease sale with 

lease stipulations limiting operations to 

exclusive direct use. 

§ 3205.7 How much acreage should I 

apply for in a direct use lease? 

You should apply for only the amount 

of acreage that is necessary for your 

intended operation. A direct use lease 

may not cover more than the quantity of 

acreage that BLM determines is 

reasonably necessary for the proposed 

use. In no case may a direct use lease 

exceed 5,120 acres, unless the area to be 

leased includes an irregular subdivision. 

§ 3205.10 How do I obtain a direct use 

lease? 

(a) You may file an application for a 

direct use lease for any lands on which 

BLM manages the geothermal resources, 

on a form available from BLM. You may 

not sell the geothermal resource and you 

may not use it for the commercial 

generation of electricity. 

(b) In your application, you must also 

provide information that will allow 

BLM to determine how much acreage is 

reasonably necessary for your proposed 

use, including: 

(1) A description of all anticipated 

structures, facilities, wells, and 

pipelines including their size, location, 

function, and associated surface 

disturbance; 

(2) A description of the utilization 

process; 

(3) A description and analysis of 

anticipated reservoir production, 

injection, and characteristics to the 

extent required by BLM; and 

(4) Any additional information or data 

that we may require. 

(c) Submit with your application the 

nonrefundable processing fee for 

noncompetitive lease applications 

found in the fee schedule in § 3000.12 

of this chapter for each direct use lease 

application. 

§ 3205.12 How will BLM respond to direct 

use lease applications on lands managed 

by another agency? 

BLM will respond to a direct use lease 

application on lands managed by 

another surface management agency by 

forwarding the application to that 

agency for its review. If that agency 

consents to lease issuance and 

recommends that the lands are 

appropriate for direct use operations, 

without sale, for purposes other than 

commercial generation of electricity, 

BLM will consider that consent and 

recommendation in determining 

whether to issue the lease. BLM may not 

issue a lease without the consent of the 

surface management agency. 

§ 3205.13 May I withdraw my application 

for a direct use lease? 

You may withdraw your application 

for a direct use lease any time before 

issuance of a lease. 

§ 3205.14 May I amend my application for 

a direct use lease? 

You may amend your application for 

a direct use lease at any time before we 

issue the lease, provided your amended 

application meets the requirements in 

this subpart and does not add lands. To 

add lands, you must file a new 

application. 

§ 3205.15 How will I know whether my 

direct use lease will be issued? 

(a) If BLM decides to issue you a 

direct use lease, it will do so in 

accordance with this subpart and 

subpart 3206. 

(b) If BLM decides to deny your 

application for a direct use lease, it will 

advise you of its decision in writing. 

Subpart 3206—Lease Issuance 

§ 3206.10 What must I do for BLM to issue 

a lease? 

Before BLM issues any lease, you 

must: 

(a) Accept all lease stipulations; 

(b) Make all required payments to 

BLM; 

(c) Sign a unit joinder or waiver, if 

applicable; and 

(d) Comply with the maximum limit 

on acreage holdings (see § § 3206.12 

and 3206.16). 

§ 3206.11 What must BLM do before 

issuing a lease? 

For all leases, BLM must: 

(a) Determine that the land is 

available; and 

(b) Determine that your lease 

development will not have a significant 

adverse impact on any significant 

thermal feature within any of the 

following units of the National Park 

System: 

(1) Mount Rainier National Park; 

(2) Crater Lake National Park; 

(3) Yellowstone National Park; 

(4) John D. Rockefeller, Jr. Memorial 

Parkway; 

(5) Bering Land Bridge National 

Preserve; 

(6) Gates of the Arctic National Park 

and Preserve; 

(7) Katmai National Park; 

(8) Aniakchak National Monument 

and Preserve; 

(9) Wrangell-St. Elias National Park 

and Preserve; 

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(10) Lake Clark National Park and 

Preserve; 

(11) Hot Springs National Park; 

(12) Big Bend National Park 

(including that portion of the Rio 

Grande National Wild Scenic River 

within the boundaries of Big Bend 

National Park); 

(13) Lassen Volcanic National Park; 

(14) Hawaii Volcanoes National Park; 

(15) Haleakala National Park; 

(16) Lake Mead National Recreation 

Area; and 

(17) Any other significant thermal 

features within National Park System 

units that the Secretary may add to the 

list of these features, in accordance with 

30 U.S.C. 1026(a)(3). 

§ 3206.12 What are the minimum and 

maximum lease sizes? 

Other than for direct use leases (the 

size for which is addressed in § 3205.7), 

the smallest lease we will issue is 640 

acres, or all lands available for leasing 

in the section, whichever is less. The 

largest lease we will issue is 5,120 acres, 

unless the area to be leased includes an 

irregular subdivision. A lease must 

embrace a reasonably compact area. 

§ 3206.13 What is the maximum acreage 

I may hold? 

You may not directly or indirectly 

hold more than 51,200 acres in any one 

state. 

§ 3206.14 How does BLM compute 

acreage holdings? 

BLM computes acreage holdings as 

follows: 

(a) If you own an undivided lease 

interest, your acreage holdings include 

the total lease acreage: 

(b) If you own stock in a corporation 

or a beneficial interest in an association 

which holds a geothermal lease, your 

acreage holdings will include your 

proportionate part of the corporation’s 

or association’s share of the total lease 

acreage. This paragraph applies only if 

you own more than 10 percent of the 

corporate stock or a beneficial interest 

in the association; and 

(c) If you own a lease interest, you 

will be charged with the proportionate 

share of the total lease acreage based on 

your share of the lease ownership. You 

will not be charged twice for the same 

acreage where you own both record title 

and operating rights for the lease. For 

example, if you own 50 percent record 

title interest in a 640 acre lease and 25 

percent operating rights, you are 

charged with 320 acres. 

§ 3206.15 How will BLM charge acreage 

holdings if the United States owns only a 

fractional interest in the geothermal 

resources in a lease? 

Where the United States owns only a 

fractional interest in the geothermal 

resources of the lands in a lease, BLM 

will only charge you with the part 

owned by the United States as acreage 

holdings. For example, if you own 100 

percent of record title in a 100 acre 

lease, and the United States owns 50 

percent of the mineral estate, you are 

charged with 50 acres. 

§ 3206.16 Is there any acreage which is 

not chargeable? 

BLM does not count leased acreage 

included in any approved unit 

agreement, drilling contract, or 

development contract as part of your 

total state acreage holdings. 

§ 3206.17 What will BLM do if my holdings 

exceed the maximum acreage limits? 

BLM will notify you in writing if your 

acreage holdings exceed the limit in §

3206.13. You have 90 days from the date 

you receive the notice to reduce your 

holdings to within the limit. If you do 

not comply, BLM will cancel your 

leases, beginning with the lease most 

recently issued, until your holdings are 

within the limit. 

§ 3206.18 When will BLM issue my lease? 

BLM issues your lease the day we sign 

it. Your lease goes into effect the first 

day of the next month after the issuance 

date. 

Subpart 3207—Lease Terms and 

Extensions 

§ 3207.5 What terms (time periods) apply 

to my lease? 

Your lease may include a number of 

different time periods. Not every time 

period applies to every lease. These 

periods include: 

(a) A primary term consisting of: 

(1) Ten years; 

(2) An initial extension of the primary 

term for up to 5 years; 

(3) An additional extension of the 

primary term for up to 5 years; 

(b) A drilling extension of 5 years 

under § 3207.14; 

(c) A production extension of up to 35 

years; and 

(d) A renewal period of up to 55 

years. 

§ 3207.10 What is the primary term of my 

lease? 

(a) Leases have a primary term of 10 

years. 

(b) BLM will extend the primary term 

for 5 years if: 

(1) By the end of the 10th year of the 

primary term in paragraph (a), you have 

satisfied the requirements in § 3207.11; 

and 

(2) At the end of each year after the 

10th year of the lease, you have satisfied 

the requirements in § 3207.12(a) or (d) 

for that year. 

(c) BLM will extend the primary term 

for 5 additional years if: 

(1) You satisfied the requirements of 

§ 3207.12(b) or (d); and 

(2) At the end of each year of the 

second 5-year extension you satisfy the 

requirements in § 3207.12(c) or (d) for 

that year. 

(d) If you do not satisfy the annual 

requirements during the initial or 

additional extension of your primary 

term, your lease terminates or expires. 

§ 3207.11 What work am I required to 

perform during the first 10 years of my 

lease for BLM to grant the initial extension 

of the primary term of my lease? 

(a) By the end of the 10th year, you 

must expend a minimum of $40 per acre 

in development activities that provide 

additional geologic or reservoir 

information, such as: 

(1) Geologic investigation and 

analysis; 

(2) Drilling temperature gradient 

wells; 

(3) Core drilling; 

(4) Geochemical or geophysical 

surveys; 

(5) Drilling production or injection 

wells; 

(6) Reservoir testing; or 

(7) Other activities approved by BLM. 

(b) In lieu of the work requirement in 

paragraph (a) of this section, you may: 

(1) Make a payment to BLM 

equivalent to the required work 

expenditure such that the total of the 

payment and the value of the work you 

perform equals $40 per acre (or fraction 

thereof) of land included in your lease; 

or 

(2) Submit documentation to BLM 

that you have produced or utilized 

geothermal resources in commercial 

quantities. 

(c) Prior to the end of the 10th year 

of the primary term, you must submit 

detailed information to BLM 

demonstrating that you have complied 

with paragraph (a) or (b) of this section. 

Describe the activities by type, location, 

date(s) conducted, and the dollar 

amount spent on those operations. 

Include all geologic information 

obtained from your activities in your 

report. Submit additional information 

that BLM requires to determine 

compliance within the timeframe that 

we specify. We must approve the type 

of work done and the expenditures 

claimed in your report before we can 

credit them toward your requirements. 

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24410 Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 

(d) If you do not perform development 

activities, make payments, or document 

production or utilization as required by 

this section, your lease will expire at the 

end of the 10-year primary term. 

(e) If you complied with paragraph (c) 

of this section, but BLM has not 

determined by the end of the 10th year 

whether you have complied with the 

requirements of paragraph (a) or (b) of 

this section, upon request we will 

suspend your lease effective 

immediately before its expiration in 

order to determine your compliance. If 

we determine that you have complied, 

we will lift the suspension and grant the 

first 5-year extension of the primary 

term effective on the first day of the 

month following our determination of 

compliance. If we determine that you 

have not complied, we will terminate 

the suspension and your lease will 

expire upon the date of the termination 

of the suspension. 

(f) Every 3 calendar years the dollar 

amount of the work requirements and 

the amount to be paid in lieu of such 

work required by this section will 

automatically be updated. The update 

will be based on the change in the 

Implicit Price Deflator-Gross Domestic 

Product for those 3 years. 

§ 3207.12 What work am I required to 

perform each year for BLM to continue the 

initial and additional extensions of the 

primary term of my lease? 

(a) To continue the initial extension of 

the primary term of your lease, in each 

of lease years 11, 12, 13, and 14, you 

must expend a minimum of $15 per acre 

(or fraction thereof) per year in 

development activities that establish a 

geothermal potential or confirm the 

existence of producible geothermal 

resources. Such activities include, but 

are not limited to: 

(1) Geologic investigation and 

analysis; 

(2) Drilling temperature gradient 

wells; 

(3) Core drilling; 

(4) Geochemical or geophysical 

surveys; 

(5) Drilling production or injection 

wells; 

(6) Reservoir testing; or 

(7) Other activities approved by BLM. 

(b) For BLM to grant the additional 

extension of the primary term of your 

lease, in year 15 you must expend a 

minimum of $15 per acre (or fraction 

thereof) in development activities that 

provide additional geologic or reservoir 

information, such as those described in 

paragraph (a) of this section. 

(c) To continue the additional 

extension of the primary term of your 

lease, in each of lease years 16, 17, 18, 

and 19, you must expend a minimum of 

$25 per acre (or fraction thereof) per 

year in development activities that 

provide additional geologic or reservoir 

information, such as those described in 

paragraph (a) of this section. 

(d) In lieu of the work requirements 

in paragraphs (a), (b), and (c) of this 

section, you may: 

(1) Submit documentation to BLM 

that you have produced or utilized 

geothermal resources in commercial 

quantities; or 

(2) Make a payment to BLM 

equivalent to the required annual work 

expenditure such that the total of the 

payment and the value of the work you 

perform equals $15 or $25 per acre per 

year of land included in your lease, as 

applicable. BLM may limit the number 

of years that it will accept such 

payments if it determines that further 

payments in lieu of the work 

requirements would impair 

achievement of diligent development of 

the geothermal resources. 

(e) Under paragraph (a) or paragraph 

(b) of this section, if you expend an 

amount greater than the amount 

specified, you may apply any payment 

in excess of the specified amount to any 

subsequent year within the applicable 5- 

year extension of the primary term. An 

excess payment during the first 5-year 

extension period may not be applied to 

any year within the second 5-year 

extension period. 

(f) You must submit information to 

BLM showing that you have complied 

with the applicable requirements in this 

section no later than: 

(1) 60 days after the end of years 11, 

12, 13, and 14; 

(2) 60 days before the end of year 15; 

and 

(3) 60 days after the end of years 16, 

17, 18, and 19. 

(g) In your submission, describe your 

activities by type, location, date(s) 

conducted, and the dollar amount spent 

on those operations. Include all geologic 

information obtained from your 

activities in your report. We must 

approve the type of work done and the 

expenditures claimed in your report 

before we can credit them toward your 

requirements. We will notify you if you 

have not met the requirements. 

(h) If you do not comply with the 

requirements of this section in any year 

of a 5-year extension of the primary 

term, BLM will terminate your lease at 

the end of that year unless you qualify 

for a drilling extension under § 3207.13. 

(i) Every three calendar years the 

dollar amount of the work requirements 

and the amount to be paid in lieu of 

such work required by this section will 

automatically be updated. The update 

will be based on the change in the 

Implicit Price Deflator-Gross Domestic 

Product for those three years. 

§ 3207.13 Must I comply with the 

requirements of § § 3207.11 and 3207.12 

when my lease overlies a mining claim? 

(a) BLM will exempt you from 

complying with the requirements of § §

3207.11 and 3207.12 when you 

demonstrate to BLM that: 

(1) The mining claim has a plan of 

operations approved by the appropriate 

Federal land management agency; and 

(2) Your development of the 

geothermal resource on the lease would 

interfere with the mining operations. 

(b) The exemption provided under 

paragraph (a) of this section expires 

upon termination of the mining 

operations. 

§ 3207.14 How do I qualify for a drilling 

extension? 

(a) BLM will extend your lease for 5 

years under a drilling extension if at the 

end of the 10th year or any subsequent 

year of the initial or additional 

extension of the primary term you: 

(1) Have not met the requirements 

that you must satisfy for BLM to grant 

or to continue the initial or additional 

extensions of your primary lease term 

under § 3207.12, or your lease is in its 

20th year; 

(2) Commenced drilling a well before 

the end of such year for the purposes of 

testing or producing a geothermal 

reservoir; and 

(3) Are diligently drilling to a target 

that BLM determines is adequate, based 

on the local geology and type of 

development you propose. 

(b) The drilling extension is effective 

on the first day following the expiration 

or termination of the primary term. 

(c) At the end of your drilling 

extension, your lease will expire unless 

you qualify for a production extension 

under § 3207.15. 

§ 3207.15 How do I qualify for a 

production extension? 

(a) BLM will grant a production 

extension of up to 35 years, if you are 

producing or utilizing geothermal 

resources in commercial quantities. 

(b) Before granting a production 

extension, BLM must determine that 

you: 

(1) Have a well that is actually 

producing geothermal resources in 

commercial quantities; or 

(2)(i) Have completed a well that is 

capable of producing geothermal 

resources in commercial quantities; and 

(ii) Are making diligent efforts toward 

utilization of the resource. 

(c) To qualify for a production 

extension under paragraph (b)(2) of this 

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Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 24411 

section, unless BLM specifies otherwise 

you must demonstrate on an annual 

basis that you are making diligent efforts 

toward utilization of the resource. 

(d) BLM will make the determinations 

required under paragraphs (b)(1) and 

(b)(2)(i) of this section based on the 

information you provide under subparts 

3264 and 3276 and any other 

information that BLM may require you 

to submit. 

(e) For BLM to make the 

determination required under paragraph 

(b)(2)(ii) of this section, you must 

provide BLM with information, such as: 

(1) Actions you have taken to identify 

and define the geothermal resource on 

your lease; 

(2) Actions you have taken to 

negotiate marketing arrangements, sales 

contracts, drilling agreements, or 

financing for electrical generation and 

transmission projects; 

(3) Current economic factors and 

conditions that would affect the 

decision of a prudent operator to 

produce or utilize geothermal resources 

in commercial quantities on your lease; 

and 

(4) Other actions you have taken, such 

as obtaining permits, conducting 

environmental studies, and meeting 

permit requirements. 

(f) Your production extension will 

begin on the first day of the month 

following the end of the primary term 

(including the initial and additional 

extensions) or the drilling extension. 

(g) Your production extension will 

continue for up to 35 years as long as 

the geothermal resource is being 

produced or utilized in commercial 

quantities. If you fail to produce or 

utilize geothermal resources in 

commercial quantities, BLM will 

terminate your lease unless you meet 

the conditions set forth in § 3212.15 or 

§ 3213.19. 

§ 3207.16 When may my lease be 

renewed? 

You have a preferential right to renew 

your lease for a second term of up to 55 

years, under such terms and conditions 

as BLM deems appropriate, if at the end 

of the production extension you are 

producing or utilizing geothermal 

resources in commercial quantities and 

the lands are not needed for any other 

purpose. The renewal term will 

continue for up to 55 years if you 

produce or utilize geothermal resources 

in commercial quantities and satisfy 

other terms and conditions BLM 

imposes. 

§ 3207.17 How is the term of my lease 

affected by commitment to a unit? 

(a) If your lease is committed to a unit 

agreement and its term would expire 

before the unit term would, BLM may 

extend your lease to match the term of 

the unit. We will do this if unit 

development has been diligently 

pursued while your lease is committed 

to the unit. 

(b) To extend the term of a lease 

committed to a unit, the unit operator 

must send BLM a request for lease 

extension at least 60 days before the 

lease expires showing that unit 

development has been diligently 

pursued. BLM may require additional 

information. 

(c) Within 30 days after receiving your 

complete extension request, BLM will 

notify the unit operator whether we 

approve. 

§ 3207.18 Can my lease be extended if it 

is eliminated from a unit? 

If your lease is eliminated from a unit 

under § 3283.6, it is eligible for an 

extension if it meets the requirements 

for such extension. 

Subpart 3210—Additional Lease 

Information 

§ 3210.10 When does lease segregation 

occur? 

(a) Lease segregation occurs when: 

(1) A portion of a lease is committed 

to a unit agreement while other portions 

are not committed; or 

(2) Only a portion of a lease remains 

in a participating area when the unit 

contracts. The portions of the lease 

outside the participating area are 

eliminated from the unit agreement and 

segregated as of the effective date of the 

unit contraction. 

(b) BLM will assign the original lease 

serial number to the portion within the 

agreement. BLM will give the lease 

portion outside the agreement a new 

serial number, and the same lease terms 

as the original lease. 

§ 3210.11 Does a lease segregated from 

an agreement or plan receive any benefits 

from unitization of the committed portion of 

the original lease? 

The new segregated lease stands alone 

and does not receive any of the benefits 

provided to the portion committed to 

the unit. We will not give you an 

extension for the eliminated portion of 

the lease based on status of the lands 

committed to the unit, including 

production in commercial quantities or 

the existence of a producible well. 

§ 3210.12 May I consolidate leases? 

BLM may approve your consolidation 

of two or more adjacent leases that have 

the same ownership and same lease 

terms, including expiration dates, if the 

combined leases do not exceed the size 

limitations in § 3206.12. We may 

consolidate leases that have different 

stipulations if all other lease terms are 

the same. You must include the 

processing fee for lease consolidations 

found in the fee schedule in § 3000.12 

of this chapter with your request to 

consolidate leases. 

§ 3210.13 Who may lease or locate other 

minerals on the same lands as my 

geothermal lease? 

Anyone may lease or locate other 

minerals on the same lands as your 

geothermal lease. The United States 

reserves the ownership of and the right 

to extract helium, oil, and hydrocarbon 

gas from all geothermal steam and 

associated geothermal resources. In 

addition, BLM allows mineral leasing or 

location on the same lands that are 

leased for geothermal resources, 

provided that operations under the 

mineral leasing or mining laws do not 

unreasonably interfere with or endanger 

your geothermal operations. 

§ 3210.14 May BLM readjust the terms and 

conditions in my lease? 

(a)(1) Except for rentals and royalties 

(readjustments of which are addressed 

in paragraph (b) of this section, BLM 

may readjust the terms and conditions 

of your lease 10 years after you begin 

production of geothermal resources 

from your lease, and at not less than 10- 

year intervals thereafter, under the 

procedures of paragraphs (c), (d), and (e) 

of this section. 

(2) If another Federal agency manages 

the lands’ surface, we will ask that 

agency to review the related terms and 

conditions and propose any 

readjustments. Once BLM and the 

surface managing agency reach 

agreement and the surface managing 

agency approves the proposed 

readjustment, we will follow the 

procedures in paragraphs (c), (d), and (e) 

of this section. 

(b) BLM may readjust your lease 

rentals and royalties at not less than 20- 

year intervals beginning 35 years after 

we determine that your lease is 

producing geothermal resources in 

commercial quantities. BLM will not 

increase your rentals or royalties by 

more than 50 percent over the rental or 

royalties you paid before the 

readjustment. 

(c) BLM will give you a written 

proposal to readjust the rentals, 

royalties, or other terms and conditions 

of your lease. You will have 30 days 

after you receive the proposal to file 

with BLM an objection in writing to the 

proposed new terms and conditions. 

(d) If you do not object in writing or 

relinquish your lease, you will 

conclusively be deemed to have agreed 

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to the proposed new terms and 

conditions. BLM will issue a written 

decision setting the date that the new 

terms and conditions become effective 

as part of your lease. This decision will 

be in full force and effect under its own 

terms, and you are not authorized to 

appeal the BLM decision to the Office 

of Hearings and Appeals. 

(e)(1) If you file a timely objection in 

writing, BLM may issue a written 

decision making the readjusted terms 

and conditions effective no sooner than 

90 days after we receive your objections, 

unless we reach an agreement with you 

as to the readjusted terms and 

conditions of your lease that makes 

them effective sooner. 

(2) If BLM does not reach an 

agreement with you by 60 days after we 

receive your objections, then either the 

lessee or BLM may terminate your lease, 

upon giving the other party 30 days’ 

notice in writing. A termination under 

this paragraph does not affect your 

obligations that accrued under the lease 

when it was in effect, including those 

specified in § 3200.4. 

§ 3210.15 What if I appeal BLM’s decision 

to readjust my lease terms? 

If you appeal BLM’s decision under §

3210.14(e)(1) to readjust the rentals, 

royalties, or other terms and conditions 

of your lease, the decision is effective 

during the appeal. If you win your 

appeal and we must change our 

decision, you will receive a refund or 

credit for any overpaid rents or 

royalties. 

§ 3210.16 How must I prevent drainage of 

geothermal resources from my lease? 

You must prevent the drainage of 

geothermal resources from your lease by 

diligently drilling and producing wells 

that protect the Federal geothermal 

resource from loss caused by production 

from other properties. 

§ 3210.17 What will BLM do if I do not 

protect my lease from drainage? 

BLM will determine the amount of 

geothermal resources drained from your 

lease. MMS will bill you for a 

compensatory royalty based on our 

findings. This royalty will equal the 

amount you would have paid for 

producing those resources. All interest 

owners in a lease are jointly and 

severally liable for drainage protection 

and any compensatory royalties. 

Subpart 3211—Filing and Processing 

Fees, Rent, Direct Use Fees, and 

Royalties 

§ 3211.10 What are the processing and 

filing fees for leases? 

(a) Processing or filing fees are 

required for the following actions: 

(1) Nomination of lands for 

competitive leasing; 

(2) Competitive lease application; 

(3) Noncompetitive lease application 

(including application for direct use 

leases); 

(4) Assignment and transfer of record 

title or operating right; 

(5) Name change, corporate merger, or 

transfer to heir/devisee; 

(6) Lease consolidation; and 

(7) Lease reinstatement. 

(b) The amounts of these fees can be 

found in § 3000.12 of this chapter. 

§ 3211.11 What are the annual lease rental 

rates? 

(a) BLM calculates annual rent based 

on the amount of acreage covered by 

your lease. To determine lease acreage 

for this section, round up any partial 

acreage up to the next whole acre. For 

example, the annual rent on a 2,456.39 

acre lease is calculated based on 2,457 

acres. 

(b) For leases issued on or after 

August 8, 2005 (other than leases issued 

in response to applications that were 

pending on that date for which no 

election is made under § 3200.8(b)(1)), 

and for leases issued before August 8, 

2005, for which an election is made 

under § 3200.7(a)(2), the rental rate is 

as follows: 

(1) If you obtained your lease through 

a competitive lease sale, then your 

annual rent is $2 per acre for the first 

year, and $3 per acre for the second 

through tenth year; 

(2) If you obtained your lease 

noncompetitively, then your annual rent 

is $1 per acre for the first 10 years; and 

(3) After the tenth year, your annual 

rent will be $5 per acre, regardless of 

whether you obtained your lease 

through a competitive lease sale or 

noncompetitively. 

(c) For leases issued before August 8, 

2005, for which no election is made 

under § 3200.7(a)(2), and for leases 

issued in response to applications 

pending on that date for which no 

election is made under § 3200.8(b)(1), 

the rental rate is the rate prescribed in 

the regulations in effect on August 8, 

2005 (43 CFR 3211.10 (2004)). 

(d) For leases in which the United 

States owns only a fractional interest in 

the geothermal resources, BLM will 

prorate the rents established in 

paragraphs (a), (b), and (c) of this 

section, based on the fractional interest 

owned by the United States. For 

example, if the United States owns 50 

percent of the geothermal resources in a 

640 acre lease, you pay rent based on 

320 acres. 

§ 3211.12 How and where do I pay my 

rent? 

(a) First year. Pay BLM the first year’s 

rent in advance. You may use a personal 

check, cashier’s check, or money order 

made payable to the Department of the 

Interior—Bureau of Land Management. 

You may also make payments by credit 

card or electronic funds transfer with 

our prior approval. 

(b) Subsequent years. For all 

subsequent years, make your rental 

payments to MMS. See MMS 

regulations at 30 CFR part 218. 

§ 3211.13 When is my annual rental 

payment due? 

Your rent is always due in advance. 

MMS must receive your annual rental 

payment by the anniversary date of the 

lease each year. See the MMS 

regulations at 30 CFR part 218, which 

explain when MMS considers a 

payment as received. If less than a full 

year remains on a lease, you must still 

pay a full year’s rent by the anniversary 

date of the lease. For example, the rent 

on a 2,000-acre lease for the 11th year, 

would be $10,000 ($5 per acre), due 

prior to the 10th anniversary of the 

lease. 

§ 3211.14 Will I always pay rent on my 

lease? 

(a) For leases issued on or after 

August 8, 2005 (other than leases issued 

in response to applications that were 

pending on that date for which no 

election is made under § 3200.8(b)(1)), 

and for leases issued before August 8, 

2005, for which an election is made 

under § 3200.7(a)(2), you must always 

pay rental, whether you are in a unit or 

outside of a unit, whether your lease is 

in production or not, and whether 

royalties or direct use fees apply to your 

production. 

(b) For leases issued before August 8, 

2005, for which no election is made 

under § 3200.7(a)(2), and for leases 

issued in response to applications 

pending on that date for which no 

election is made under § 3200.8(b)(1), 

you must pay rent for all the lands in 

your lease until: 

(1) Your lease achieves production in 

commercial quantities, at which time 

you pay royalties; or 

(2) Lands in your lease are within the 

participating area of a unit agreement or 

cooperative plan, at which time you pay 

rent for lands outside the participating 

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area and pay royalties for lands within 

the participating area. 

§ 3211.15 How do I credit rent towards 

royalty? 

You may credit rental towards royalty 

under MMS regulations at 30 CFR 

218.303. 

§ 3211.16 Can I credit rent towards direct 

use fees? 

No. You may not credit rental towards 

direct use fees. See MMS regulations at 

30 CFR 218.304. 

§ 3211.17 What is the royalty rate on 

geothermal resources produced from or 

attributable to my lease that are used for 

commercial generation of electricity? 

(a) For leases issued on or after 

August 8, 2005 (other than leases issued 

in response to applications that were 

pending on that date for which the 

lessee does not make an election under 

§ 3200.8(b)(1)), the royalty rate is the 

rate prescribed in this paragraph. 

(1) If you or your affiliate sell(s) 

electricity generated by use of 

geothermal resources produced from or 

attributed to your lease, then: 

(i) For the first 10 years of production, 

the royalty rate is 1.75 percent; 

(ii) After the first 10 years of 

production, the royalty rate is 3.5 

percent; and 

(iii) You must apply the rate 

established under this paragraph to the 

gross proceeds derived from the sale of 

electricity under applicable MMS rules 

at 30 CFR part 206, subpart H. 

(2) If you or your affiliate sell(s) 

geothermal resources produced from or 

attributed to your lease at arm’s length 

to a purchaser who uses those resources 

to generate electricity, then the royalty 

rate is 10 percent. You must apply that 

rate to the gross proceeds derived from 

the arm’s-length sale of the geothermal 

resources under applicable MMS rules 

at 30 CFR part 206, subpart H. 

(b) For leases issued before August 8, 

2005, whose royalty terms are modified 

to the terms prescribed in the Energy 

Policy Act of 2005 under § 3212.25, 

BLM will establish royalty rates under 

paragraphs (b)(1) and (b)(2) of this 

section. 

(1) For leases that, prior to submitting 

a request to modify the royalty rate 

terms of the lease under section 

3212.26, produced geothermal resources 

for the commercial generation of 

electricity, or to which geothermal 

resource production for the commercial 

generation of electricity was attributed: 

(i) If you or your affiliate uses 

geothermal resources produced from or 

attributed to your lease to generate and 

sell electricity, BLM will establish a rate 

on a case-by-case basis that it expects 

will yield total royalty payments over 

the life of the lease equivalent to those 

that would have been paid under the 

royalty rate in effect for the lease before 

August 5, 2005. The rate is not limited 

to the range of rates specified in 30 

U.S.C. 1004(a)(1). You must apply the 

rate that BLM establishes to the gross 

proceeds derived from the sale of 

electricity under applicable MMS rules 

at 30 CFR part 206, subpart H. 

(ii) If you or your affiliate sells 

geothermal resources produced from or 

attributed to your lease at arm’s length 

to a purchaser who uses those resources 

to generate electricity, the royalty rate is 

the rate specified in the lease 

instrument. You must apply that rate to 

the gross proceeds derived from the 

arm’s-length sale of the geothermal 

resources under applicable MMS rules 

at 30 CFR part 206, subpart H. 

(2) For leases that, prior to submitting 

a request to modify the royalty rate 

terms of the lease under section 

3212.26, did not produce geothermal 

resources for the commercial generation 

of electricity, and to which geothermal 

resource production for the commercial 

generation of electricity was not 

attributed, BLM will establish royalty 

rates equal to those set forth in 

paragraph (a)(1) or (a)(2) of this section, 

whichever is applicable. 

(c) For leases issued before August 8, 

2005, whose royalty terms are not 

modified to the terms prescribed in the 

Energy Policy Act of 2005 under §

3212.25, and for leases issued in 

response to applications pending on 

that date for which the lessee does not 

make an election under § 3200.8(b)(1), 

the royalty rate is the rate prescribed in 

the lease instrument. 

§ 3211.18 What is the royalty rate on 

geothermal resources produced from or 

attributable to my lease that are used 

directly for purposes other than commercial 

generation of electricity? 

(a) For leases issued on or after 

August 8, 2005 (other than leases issued 

in response to applications that were 

pending on that date for which the 

lessee does not make an election under 

§ 3200.8(b)), and for leases issued 

before August 8, 2005, whose royalty 

terms are modified to the terms 

prescribed in the Energy Policy Act of 

2005 under § 3212.25: 

(1) If you or your affiliate use(s) the 

geothermal resources directly and do(es) 

not sell those resources at arm’s length, 

no royalty rate applies. Instead, you 

must pay direct use fees according to a 

schedule published by MMS under 

MMS regulations at 30 CFR 206.356. 

(2) If you or your affiliate sell(s) the 

geothermal resources at arm’s length to 

a purchaser who uses the resources for 

purposes other than commercial 

generation of electricity, your royalty 

rate is 10 percent. You must apply that 

royalty rate to the gross proceeds 

derived from the arm’s-length sale 

under applicable MMS regulations at 30 

CFR part 206, subpart H. 

(3) If you are a lessee and you are a 

state, tribal, or local government, no 

royalty rate applies. Instead you must 

pay a nominal fee established under 

MMS rules at 30 CFR 206.366. 

(b) For leases issued before August 8, 

2005, whose royalty terms are not 

modified to the terms prescribed in the 

Energy Policy Act of 2005 under §

3212.25, and for leases issued in 

response to applications pending on 

that date for which the lessee does not 

make an election under § 3200.8(b), the 

royalty rate is the rate prescribed in the 

lease instrument. 

(c) For purposes of this section, direct 

use of geothermal resources includes 

generation of electricity that is not sold 

commercially and that is used solely for 

the operation of a facility unrelated to 

commercial electrical generation. 

§ 3211.19 What is the royalty rate on 

byproducts derived from geothermal 

resources produced from or attributable to 

my lease? 

(a) For leases issued on or after 

August 8, 2005 (other than leases issued 

in response to applications that were 

pending on that date for which no 

election is made under § 3200.8(b)(1)), 

and for leases issued before August 8, 

2005, for which an election is made 

under § 3200.7(a)(2): 

(1) The royalty rate for byproducts 

derived from geothermal resource 

production that are identified in Section 

1 of the Mineral Leasing Act (MLA), as 

amended (30 U.S.C. 181), is the royalty 

rate that is prescribed in the MLA or in 

the regulations implementing the MLA 

for production of that mineral under a 

lease issued under the MLA; and 

(2) For a byproduct that is not 

identified in 30 U.S.C. 181, no royalty 

is due. 

(b) For leases issued before August 8, 

2005, for which no election is made 

under § 3200.7(a)(2), and for leases 

issued in response to applications 

pending on that date for which no 

election is made under § 3200.8(b)(1), 

the royalty on all byproducts is the rate 

prescribed in the lease instrument, or if 

none is prescribed in the lease 

instrument, the rate prescribed in 43 

CFR 3211.10(b) (2004). 

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§ 3211.20 How do I credit advanced 

royalty towards royalty? 

You may credit advanced royalty 

toward royalty under MMS regulations 

at 30 CFR 218.305(c). 

§ 3211.21 When do I owe minimum 

royalty? 

(a) You do not owe minimum 

royalties for: 

(1) Leases issued on or after August 8, 

2005 (other than for leases issued in 

response to applications that were 

pending on that date for which no 

election is made under § 3200.8(b)(1)); 

and 

(2) Leases issued before August 8, 

2005, for which an election is made 

under § 3200.7(a)(2). 

(b) For leases issued before August 8, 

2005, for which no election is made 

under § 3200.7(a)(2), and for leases 

issued in response to applications 

pending on that date for which no 

election is made under § 3200.8(b)(1), 

you owe minimum royalty of $2.00 per 

acre (to be paid to MMS) when: 

(1) You have not begun actual 

production following the BLM’s 

determination that you have a well 

capable of commercial production; or 

(2) The value of actual production is 

so low that royalty you would pay 

under the scheduled rate is less than 

$2.00 per acre (this applies to situations 

of no production, as long as the lease 

remains in effect). 

Subpart 3212—Lease Suspensions, 

Cessation of Production, Royalty Rate 

Reductions, and Energy Policy Act 

Royalty Conversions 

§ 3212.10 What is the difference between 

a suspension of operations and production 

and a suspension of operations? 

(a) A suspension of operations and 

production is a temporary relief from 

production obligations which you may 

request from BLM. Under this paragraph 

you must cease all operations on your 

lease. 

(b) A suspension of operations is 

when BLM orders you, to stop 

production temporarily in the interest of 

conservation. 

§ 3212.11 How do I obtain a suspension 

of operations or a suspension of operations 

and production on my lease? 

(a) If you are the operator, you may 

request in writing that BLM suspend 

your operations and production for a 

producing lease. Your request must 

fully describe why you need the 

suspension. BLM will determine if your 

suspension is justified and, if so, will 

approve it. 

(b) BLM may suspend your operations 

on any lease in the interest of 

conservation. 

(c) A suspension under this section 

may include leases committed to an 

approved unit agreement. If leases 

committed to a unit are suspended, the 

unit operator must continue to satisfy 

unit terms and obligations, unless BLM 

also suspends unit terms and 

obligations, in whole or in part, under 

subpart 3287. 

§ 3212.12 How long does a suspension of 

operations or a suspension of operations 

and production last? 

(a) BLM will state in your suspension 

notice how long your suspension of 

operations or operations and production 

is effective. 

(b) During a suspension, you may ask 

BLM in writing to terminate your 

suspension. You may not unilaterally 

terminate a suspension that BLM 

ordered. A suspension of operations and 

production that we approved upon your 

request will automatically terminate 

when you begin or resume authorized 

production or drilling operations. 

(c) If we receive information showing 

that you must resume operations to 

protect the interests of the United 

States, we will terminate your 

suspension and order you to resume 

production. 

(d) If a suspension terminates, you 

must resume paying rents and royalty 

(see § 3212.14). 

§ 3212.13 How does a suspension affect 

my lease term and obligations? 

(a) If BLM approves a suspension of 

operations and production: 

(1) Your lease term is extended by the 

length of time the suspension is in 

effect; and 

(2) You are not required to drill, 

produce geothermal resources, or pay 

rents or royalties during the suspension. 

We will suspend your obligation to pay 

lease rents or royalties beginning the 

first day of the month following the date 

the suspension is effective. 

(b) If BLM orders you to suspend your 

operations; 

(1) Your lease term is extended by the 

length of time the suspension is in 

effect; and 

(2) Your lease rental or royalty 

obligations are not suspended, except 

that BLM may suspend your rental or 

royalty obligations if you will be denied 

all beneficial use of your lease during 

the period of the suspension. 

§ 3212.14 What happens when the 

suspension ends? 

When the suspension ends, you must 

resume rental and royalty payments that 

were suspended, beginning on the first 

day of the lease month after BLM 

terminates the suspension. You must 

pay the full rental amount due on or 

before the next lease anniversary date. If 

you do not make the rental payments on 

time, BLM will refund your balance and 

terminate the lease. 

§ 3212.15 Will my lease remain in effect if 

I cease production and I do not have an 

approved suspension? 

In the absence of a suspension issued 

under § 3212.11, if you cease 

production for more than one calendar 

month on a lease that is subject to 

royalties and that has achieved 

commercial production (through actual 

or allocated production), your lease will 

remain in effect only if the 

circumstances described in paragraphs 

(a), (b), or (c) of this section apply: 

(a)(1) For leases issued on or after 

August 8, 2005 (other than leases issued 

in response to applications pending on 

that date for which no election is made 

under § 3200.8(b)(1)), and for leases 

issued before August 8, 2005, for which 

an election is made under §

3200.7(a)(2), your lease will remain in 

effect if, during the period in which 

there is no production, you continue to 

pay a monthly advanced royalty under 

MMS regulations at 30 CFR 218.305. 

This option is available only for an 

aggregate of 10 years (120 months, 

whether consecutive or not). 

(2) For leases issued before August 8, 

2005, for which no election is made 

under § 3200.7(a)(2), and for leases 

issued in response to applications 

pending on August 8, 2005, for which 

no election is made under §

3200.8(b)(1), your lease will remain in 

effect if, during the period in which 

there is no production you: 

(i) Continue to make minimum 

royalty payments as specified in §

3211.21(b) of this part; 

(ii) Maintain a well capable of 

production in commercial quantities; 

(iii) Continue to make diligent efforts 

to utilize the geothermal resource; and 

(iv) Satisfy any other applicable 

requirements. 

(b) The Secretary: 

(1) Requires or causes the cessation of 

production; or 

(2) Determines that the cessation in 

production is required or otherwise 

caused by: 

(i) The Secretary of the Air Force, 

Army, or Navy; 

(ii) A state or a political subdivision 

of a state; or 

(iii) Force majeure. 

(c) The discontinuance of production 

is caused by the performance of 

maintenance necessary to maintain 

operations. Such maintenance is 

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Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 24415 

considered a production activity, not a 

cessation of production, and 

maintenance may include activities 

such as overhauling your power plant, 

re-drilling or re-working wells that are 

critical to plant operation, or repairing 

and improving gathering systems or 

transmission lines, that necessitate the 

discontinuation of production. You 

must obtain BLM approval by 

submitting a Geothermal Sundry Notice 

if the activity will require more than one 

calendar month, for it to be classified as 

maintenance under this paragraph. The 

BLM must receive the Geothermal 

Sundry Notice before the end of the first 

calendar month in which there will be 

no production. 

§ 3212.16 Can I apply to BLM to reduce, 

suspend, or waive the royalty or rental of 

my lease? 

(a) You may apply for a suspension, 

reduction, or waiver of your rent or 

royalty for any lease or portion thereof. 

BLM may grant your request in the 

interest of conservation and to 

encourage the greatest ultimate recovery 

of geothermal resources, if we determine 

that: 

(1) Granting the request is necessary 

to promote development; or 

(2) You cannot successfully operate 

the lease under its current terms. 

(b) BLM will not approve a rental or 

royalty reduction, suspension, or waiver 

unless all rental or royalty interest 

owners other than the United States 

accept a similar reduction, suspension, 

or waiver. 

§ 3212.17 What information must I submit 

when I request that BLM suspend, reduce, 

or waive my royalty or rental? 

(a) Your request for suspension, 

reduction, or waiver of the royalty or 

rental must include all information BLM 

needs to determine if the lease can be 

operated under its current terms, 

including: 

(1) The type of reduction you seek; 

(2) The serial number of your lease; 

(3) The names and addresses of the 

lessee and operator; 

(4) The location and status of wells; 

(5) A summary of monthly production 

from your lease; and 

(6) A detailed statement of expenses 

and costs. 

(b) If you are applying for a royalty or 

rental reduction, suspension, or waiver, 

you must also provide to BLM a list of 

names of royalty and rental interest 

owners other than the United States, the 

amounts of royalties or payments out of 

production and rent paid to them, and 

every effort you have made to reduce 

these payments. 

§ 3212.18 What are the production 

incentives for leases? 

You will receive a production 

incentive in the form of a temporary 50 

percent reduction in your royalties 

under MMS regulations at 30 CFR 

218.307 if: 

(a) Your lease was in effect prior to 

August 8, 2005; 

(b) You do not convert the royalty 

rates of your lease under § 3212.25; 

(c) By August 7, 2011, production 

from or allocated to your lease is 

utilized for commercial production in a: 

(1) New facility (see § 3212.22); or 

(2) Qualified expansion project (see §

3212.21); and 

(d) The production from your lease is 

used for the commercial generation of 

electricity. 

§ 3212.19 How do I apply for a production 

incentive? 

Submit to BLM a written request for 

a production incentive describing a 

project that may qualify as a new facility 

or qualified expansion project. Identify 

whether you are requesting that the 

project be considered as a new facility 

(see § 3212.22) or as a qualified 

expansion project (see § 3212.21) and 

explain why your project qualifies 

under these regulations. The request 

must be received no later than August 

7, 2011. 

§ 3212.20 How will BLM review my 

request for a production incentive? 

(a) BLM will review your request on 

a case-by-case basis to determine 

whether your project meets the criteria 

for a qualified expansion project under 

§ 3212.21 or a new facility under §

3212.22. If it does not meet the criteria 

for the type of project you requested, we 

will determine whether it meets the 

criteria for the other type of production 

incentive project. 

(b) If BLM determines that you have 

a qualified expansion project, we will, 

as part of our approval, provide you 

with a schedule of monthly target net 

generation amounts that you must 

exceed to qualify for the production 

incentive. These amounts will quantify 

the required 10 percent increase in net 

generation over the projected net 

generation without the project. The 

schedule will be specific to the facility 

or facilities that are affected by the 

project and will cover the 48-month 

time period during which your 

production incentive may apply. 

(c) If BLM determines that you have 

met the criteria for a new facility, we 

will provide you with written 

notification of this determination. 

§ 3212.21 What criteria establish a 

qualified expansion project for the purpose 

of obtaining a production incentive? 

A qualified expansion project must 

meet the following criteria: 

(a) It must involve substantial capital 

expenditure. Examples include the 

drilling of additional wells, retrofitting 

existing wells and collection systems to 

increase production rates, retrofitting 

turbines or power plant components to 

increase efficiency, adding additional 

generation capacity to existing plants, 

and enhanced recovery projects such as 

augmented injection. Projects that are 

not associated with substantial capital 

expenditure, such as opening 

production valves and operating 

existing equipment at higher rates, do 

not qualify as expansion projects. 

(b) The project must have the 

potential to increase the net generation 

by more than 10 percent over the 

projected generation without the 

project, using data from the previous 5 

years. If 5 years of data are not available, 

it is not a qualified expansion project. 

§ 3212.22 What criteria establish a new 

facility for the purpose of obtaining a 

production incentive? 

(a) Criteria for determining whether a 

project is a new facility for the purpose 

of obtaining a production incentive 

include: 

(1) The project requires a new site 

license or facility construction permit if 

it is on Federal lands; 

(2) The project requires a new 

Commercial Use Permit; 

(3) The project includes at least one 

new turbine-generator unit; 

(4) The project involves a new sales 

contract; 

(5) The project involves a new site or 

substantially larger footprint; and 

(6) The project is not contiguous to an 

existing project. 

(b) Generally, a new facility will not: 

(1) Be permitted only with a 

Geothermal Drilling Permit; 

(2) Be constructed entirely within the 

footprint of an existing facility; or 

(3) Involve only well-field projects 

such as drilling new wells, increasing 

injection, and enhanced recovery 

projects. 

§ 3212.23 How will the production 

incentive apply to a qualified expansion 

project? 

(a) The production incentive will 

begin on the first day of the month 

following the commencement of 

commercial operation of the qualified 

expansion project. The incentive will be 

in effect for up to 48 consecutive 

months, applicable only to those 

months in which the actual generation 

from the facility or facilities affected by 

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the project exceeds the target generation 

established by BLM. The amount of the 

production incentive is established in 

MMS regulations at 30 CFR 218.307. 

(b) The production incentive will 

apply only to the increase in net 

generation. The increase in generation 

for any month in which the production 

incentive is in effect will be determined 

as follows: 

∆G G

G

i ai

ti = −,,

1 1.

where: 

i is a month for which a production incentive 

is in effect; 

[Delta]Gi is the increase in generation for 

month i to which the production 

incentive applies; 

Ga,i is the actual generation in month i; 

Gt,i is the target generation in month i, as 

provided in § 3212.19(b). 

§ 3212.24 How will the production 

incentive apply to a new facility? 

(a) If BLM determines that your 

project qualifies as a new facility, the 

production incentive will begin on the 

first day of the month following the 

commencement of commercial 

operations at that facility, and will be in 

effect for 48 consecutive months. The 

incentive applies to the entire 

commercial generation of electricity 

from the new facility. 

(b) The amount of the production 

incentive is established in MMS 

regulations at 30 CFR 218.307. 

§ 3212.25 Can I convert the royalty rate 

terms of my lease in effect before August 

8, 2005, to the terms of the Geothermal 

Steam Act, as amended by the Energy 

Policy Act of 2005? 

(a) If a lease was in effect before 

August 8, 2005, the lessee may submit 

to BLM a request to modify the royalty 

rate terms of your lease to the applicable 

royalty rate or direct use fee terms 

prescribed in the Geothermal Steam Act 

as amended by the Energy Policy Act of 

2005. You may withdraw your request 

before it is granted, but once you accept 

the new terms, you may not revert to the 

earlier royalty rates. If your request to 

modify is granted, the new royalty rate 

or direct use fees will apply to all 

geothermal resources produced from 

your lease for as long as your lease 

remains in effect. A modification under 

this section does not affect the royalty 

rate for byproducts. 

(b)(1) The royalty rate for leases 

whose terms are modified and 

production from which is used for 

commercial generation of electricity is 

prescribed in § 3211.17(b). 

(2) The direct use fees or royalty rate 

for leases whose terms are modified and 

production from which is used directly 

for purposes other than commercial 

generation of electricity is prescribed in 

§ 3211.18(a) of this part and MMS 

regulations at 30 CFR 206.356. 

§ 3212.26 How do I submit a request to 

modify the royalty rate terms of my lease to 

the applicable terms prescribed in the 

Energy Policy Act of 2005? 

(a) You must submit a written request 

to BLM that contains the serial numbers 

of the leases whose terms you wish to 

modify and: 

(1) For direct use operations, any 

other information that BLM may 

require; or 

(2) For commercial electrical 

generation operations, for each month 

during the 10-year period preceding the 

date of your request (or from when 

electrical generation operations began if 

less than 10 years before the date of 

your request): 

(i) The gross proceeds received by you 

or your affiliate from the sale of 

electricity; 

(ii) The amount of royalty paid; 

(iii) The amount of generating and 

transmission deductions subtracted 

from the gross proceeds to derive the 

royalty value if you are using the 

geothermal netback procedure under 

MMS regulations to calculate royalty 

value; and 

(iv) Any other information that BLM 

may require. 

(b) BLM must receive your request no 

later than: 

(1) For leases whose geothermal 

resource production is used directly for 

purposes other than commercial 

generation of electricity, 18 months after 

the effective date of the schedule of fees 

established by MMS under 30 CFR 

206.356(b); or 

(2) For leases whose geothermal 

resource production is used for 

commercial generation of electricity, 

December 1, 2008. 

§ 3212.27 How will BLM or MMS review 

my request to modify the lease royalty rate 

terms? 

After you submit your request to 

modify the royalty rate terms under §

3212.25, BLM will: 

(a) Review your application, and if 

BLM determines that: 

(1) Your application is complete and 

contains all necessary information, we 

will notify you of the date on which 

your complete request was received; or 

(2) Your request is not complete or 

does not contain all necessary 

information, we will notify you of the 

additional information that is required; 

(b) Analyze the data you submitted to 

establish a royalty rate if the geothermal 

resources are used for commercial 

electrical generation; 

(c) Consult with MMS and any state 

or local governments that may be 

affected by the change in royalty rate 

terms; and 

(d)(1) No later than 140 days after the 

day on which we determine a complete 

request with all necessary information 

was received, BLM will send you 

written notification of the proposed 

royalty rate that BLM determines to be 

revenue neutral. 

(2) If you reject the proposed rate, we 

must receive written notification from 

you no later than 30 days after the date 

of your receipt of our notification. BLM 

will accept a faxed notification received 

within the 30-day time limit. However, 

following the fax, you must submit to 

BLM written notification which BLM 

must receive no later than the 179th day 

following the day on which BLM 

determines we received your complete 

request. 

(3) If you reject the proposed royalty 

rate on a timely basis: 

(i) BLM will not issue a decision 

modifying the royalty rate terms of your 

lease; 

(ii) The existing royalty rate terms in 

your lease continue to apply; and 

(iii) You may not reapply for a royalty 

rate term conversion under § 3212.25. 

(4) Unless timely written notification 

is received from you rejecting the 

proposed rate, BLM will issue a 

decision modifying the royalty rate 

terms of your lease no later than 180 

days after the day on which we 

determine a complete request was 

received. The effective date of the new 

royalty rate is the first day of the month 

following the date on which the 

decision was issued. For example, a 

decision issued on July 21, will become 

effective on August 1. 

Subpart 3213—Relinquishment, 

Termination, and Cancellation 

§ 3213.10 Who may relinquish a lease? 

Only the record title owner may 

relinquish a lease in full or in part. If 

there is more than one record title 

owner for a lease, all record title owners 

must sign the relinquishment. 

§ 3213.11 What must I do to relinquish a 

lease? 

Send BLM a written request that 

includes the serial number of each lease 

you are relinquishing. If you are 

relinquishing the entire lease, no legal 

description of the land is required. If 

you are relinquishing part of the lease, 

you must describe the lands to be 

relinquished. BLM may require 

additional information if necessary. 


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§ 3213.12 May BLM accept a partial 

relinquishment if it will reduce my lease to 

less than 640 acres? 

Except for direct use leases, lands 

remaining in your lease must contain at 

least 640 acres, or all of your leased 

lands must be in one section, whichever 

is less. Otherwise, we will not accept 

your partial relinquishment. BLM will 

only allow an exception if it will further 

development of the resource. The size of 

direct use leases is addressed in §

3205.07. 

§ 3213.13 When does relinquishment take 

effect? 

(a) If BLM determines your 

relinquishment request meets the 

requirements of § § 3213.11 and 

3213.12, your relinquishment is 

effective the day we receive it. 

(b) Notwithstanding the 

relinquishment, you and your surety 

continue to be responsible for: 

(1) Paying all rents and royalties due 

before the relinquishment was effective; 

(2) Plugging and abandoning all wells 

on the relinquished land; 

(3) Restoring and reclaiming the 

surface and other resources; and 

(4) Complying with § 3200.4. 

§ 3213.14 Will BLM terminate my lease if 

I do not pay my rent on time? 

(a) If MMS does not receive your 

second and subsequent year’s rental 

payment in full by the lease anniversary 

date, MMS will notify you that the rent 

payment is overdue. You have 45 days 

after the anniversary date to pay the rent 

plus a 10 percent late fee. If MMS does 

not receive your rental plus the late fee 

by the end of the 45-day period, BLM 

will terminate your lease. 

(b) If you receive notification from 

MMS under paragraph (a) of this section 

more than 15 days after the lease 

anniversary date, BLM will reinstate a 

lease that was terminated under 

paragraph (a) of this section if MMS 

receives the rent plus a 10 percent late 

fee within 30 days after you receive the 

notification. 

§ 3213.15 How will BLM notify me if it 

terminates my lease? 

BLM will send you a notice of the 

termination by certified mail, return 

receipt requested. 

§ 3213.16 May BLM cancel my lease? 

(a) BLM may cancel your lease if it 

was issued in error. 

(b) If BLM cancels your lease because 

it was issued in error, the cancellation 

is effective when you receive it. 

§ 3213.17 May BLM terminate my lease for 

reasons other than non-payment of rentals? 

BLM may terminate your lease for 

reasons other than non-payment of 

rentals, after giving you 30 days written 

notice, if we determine that you violated 

the requirements of § 3200.4, including, 

but not limited to the nonpayment of 

royalties and fees under 30 CFR parts 

206 and 218. 

§ 3213.18 When is a termination effective? 

If BLM terminates your lease because 

we determined that you violated the 

requirements of § 3200.4, the 

termination takes effect 30 days after the 

date you receive notice of our 

determination. 

§ 3213.19 What can I do if BLM notifies me 

that my lease is being terminated because 

of a violation of the law, regulations, or 

lease terms? 

(a) You can prevent termination of 

your lease if, within 30 days after 

receipt of our notice: 

(1) You correct the violation; or 

(2) You show us that you cannot 

correct the violation during the 30-day 

period and that you are making a good 

faith attempt to correct the violation as 

quickly as possible, and thereafter you 

diligently proceed to correct the 

violation. 

(b)(1) You may appeal the lease 

termination. You have 30 days after 

receipt of our notice to file an appeal 

(see parts 4 and 1840 of this title). We 

will stay the termination of your lease 

while your appeal is pending. 

(2) You are entitled to a hearing on 

the violation or the proposed lease 

termination if you request the hearing 

when you file the appeal. The period for 

correction of the violation will be 

extended to 30 days after the decision 

on appeal is made if the decision 

concludes that a violation exists. 

Subpart 3214—Personal and Surety 

Bonds 

§ 3214.10 Who must post a geothermal 

bond? 

(a) The lessee or operator must post a 

bond with BLM before exploration, 

drilling, or utilization operations begin. 

(b) Before we approve a lease transfer 

or recognize a new designated operator, 

the lessee or operator must file a new 

bond or a rider to the existing bond, 

unless all previous operations on the 

land have already been reclaimed. 

§ 3214.11 Who must my bond cover? 

Your bond must cover all record title 

owners, operating rights owners, 

operators, and any person who conducts 

operations on your lease. 

§ 3214.12 What activities must my bond 

cover? 

Your bond must cover: 

(a) Any activities related to 

exploration, drilling, utilization, or 

associated operations on a Federal lease; 

(b) Reclamation of the surface and 

other resources; 

(c) Rental and royalty payments; and 

(d) Compliance with the requirements 

of § 3200.4. 

§ 3214.13 What is the minimum dollar 

amount required for a bond? 

The minimum bond amount varies 

depending on the type of activity you 

are proposing and whether your bond 

will cover individual, statewide, or 

nationwide activities. The minimum 

dollar amounts and bonding options for 

each type of activity are found in the 

following regulations: 

(a) Exploration operations—see §

3251.15; 

(b) Drilling operations—see §

3261.18; and 

(c) Utilization operations—see § §

3271.12 and 3273.19. 

§ 3214.14 May BLM increase the bond 

amount above the minimum? 

(a) BLM may increase the bond 

amount above the minimums referenced 

in § 3214.13 when: 

(1) We determine that the operator has 

a history of noncompliance; 

(2) We previously had to make a claim 

against a surety because any one person 

who is covered by the new bond failed 

to plug and abandon a well and reclaim 

the surface in a timely manner; 

(3) MMS has notified BLM that a 

person covered by the bond owes 

uncollected royalties; or 

(4) We determine that the bond 

amount will not cover the estimated 

reclamation cost. 

(b) We may increase bond amounts to 

any level, but we will not set that 

amount higher than the total estimated 

costs of plugging wells, removing 

structures, and reclaiming the surface 

and other resources, plus any 

uncollected royalties due MMS or 

moneys owed to BLM due to previous 

violations. 

§ 3214.15 What kind of financial guarantee 

will BLM accept to back my bond? 

We will not accept cash bonds. We 

will only accept: 

(a) Corporate surety bonds, provided 

that the surety company is approved by 

the Department of Treasury (see 

Department of the Treasury Circular No. 

570, which is published in the Federal 

Register every year on or about July 1); 

and 

(b) Personal bonds, which are secured 

by a cashier’s check, certified check, 

certificate of deposit, negotiable 

securities such as Treasury notes, or an 

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irrevocable letter of credit (see § §

3214.21 and 3214.22). 

§ 3214.16 Is there a special bond form I 

must use? 

You must use a BLM-approved bond 

form (Form 3000–4, or Form 3000–4a, 

June 1988 or later editions) for corporate 

surety bonds and personal bonds. 

§ 3214.17 Where must I submit my bond? 

File personal or corporate surety 

bonds and statewide bonds in the BLM 

State Office that oversees your lease or 

operations. You may file nationwide 

bonds in any BLM State Office. File 

bond riders in the BLM State Office 

where your underlying bond is located. 

For personal or corporate surety bonds, 

file one originally-signed copy of the 

bond. 

§ 3214.18 Who will BLM hold liable under 

the lease and what are they liable for? 

BLM will hold all interest owners in 

a lease jointly and severally liable for 

compliance with the requirements of §

3200.4 for obligations that accrue while 

they hold their interest. Among other 

things, all interest owners are jointly 

and severally liable for: 

(a) Plugging and abandoning wells; 

(b) Reclaiming the surface and other 

resources; 

(c) Compensatory royalties assessed 

for drainage; and 

(d) Rent and royalties due. 

§ 3214.19 What are my bonding 

requirements when a lease interest is 

transferred to me? 

(a) Except as otherwise provided in 

this section, if the lands to be 

transferred to you contain a well or any 

other surface disturbance which the 

original lessee did not reclaim, you 

must post a bond under this subpart 

before BLM will approve the transfer. 

(b) If the original lessee does not 

transfer all interest in the lease to you, 

you may become a co-principal on the 

original bond, rather than posting a new 

bond. 

(c) You do not need to post an 

additional bond if: 

(1) You previously furnished a 

statewide or nationwide bond sufficient 

to cover the lands transferred; or 

(2) The operator provided the original 

bond, and the operator does not change. 

§ 3214.20 How do I modify my bond? 

You may modify your bond by 

submitting a rider to the BLM State 

Office where your bond is held. There 

is no special form required. 

§ 3214.21 What must I do if I want to use 

a certificate of deposit to back my bond? 

Your certificate of deposit must: 

(a) Be issued by a Federally-insured 

financial institution authorized to do 

business in the United States; 

(b) Include on its face the statement, 

‘‘This certificate cannot be redeemed by 

any party without approval by the 

Secretary of the Interior or the 

Secretary’s delegate;’’ and 

(c) Be payable to the Department of 

the Interior, Bureau of Land 

Management. 

§ 3214.22 What must I do if I want to use 

a letter of credit to back my bond? 

Your letter of credit must: 

(a) Be issued by a Federally-insured 

financial institution authorized to do 

business in the United States; 

(b) Be payable to the Department of 

the Interior—Bureau of Land 

Management; 

(c) Be irrevocable during its term and 

have an initial expiration date of no 

sooner than 1 year after the date we 

receive it; 

(d) Be automatically renewable for a 

period of at least 1 year beyond the end 

of the current term, unless the issuing 

financial institution gives us written 

notice, at least 90 days before the letter 

of credit expires, that it will no longer 

renew the letter of credit; and 

(e) Include a clause authorizing the 

Secretary of the Interior to demand 

immediate payment, in part or in full: 

(i) If you do not meet your obligations 

under the requirements of § 3200.4; or 

(ii) Provide substitute security for a 

letter of credit which the issuer has 

stated it will not renew before the letter 

of credit expires. 

Subpart 3215—Bond Release, 

Termination, and Collection 

§ 3215.10 When may BLM collect against 

my bond? 

If you fail to comply with the 

requirements listed at § 3200.4, we may 

collect money from the bond to correct 

your noncompliance. This amount can 

be as large as the face amount of the 

bond. Some examples of when we will 

collect against your bond are when you 

do not properly or in a timely manner: 

(a) Plug and abandon a well; 

(b) Reclaim the lease area; 

(c) Pay outstanding royalties; or 

(d) Pay assessed royalties to 

compensate for drainage. 

§ 3215.11 Must I replace my bond after 

BLM collects against it? 

If BLM collects against your bond, 

before you conduct any further 

operations you must either: 

(a) Post a new bond equal to the value 

of the original bond; or 

(b) Restore your existing bond to the 

original face amount. 

§ 3215.12 What will BLM do if I do not 

restore the face amount or file a new bond? 

If we collect against your bond and 

you do not restore it to the original face 

amount, we may shut in any well(s) or 

utilization facilities covered by that 

bond and may terminate affected leases. 

§ 3215.13 Will BLM terminate or release 

my bond? 

(a) BLM does not cancel or terminate 

bonds. We may inform you that your 

existing bond is insufficient. 

(b) The bond provider may terminate 

your bond provided it gives you and 

BLM 30-days notice. The bond provider 

remains responsible for obligations that 

accrued during the period of liability 

while the bond was in effect. 

(c) BLM will release a bond, 

terminating all liability under that bond, 

if: 

(1) The new bond that you file covers 

all existing liabilities and we accept it; 

or 

(2) After a reasonable period of time, 

we determine that you paid all royalties, 

rents, penalties, and assessments, and 

satisfied all permit and lease 

obligations. 

(d) If an adequate bond is not in place, 

do not conduct any operations until you 

provide a new bond that meets our 

requirements. 

§ 3215.14 When BLM releases my bond, 

does that end my responsibilities? 

When BLM releases your bond, we 

relinquish the security but we continue 

to hold the lessee or operator 

responsible for noncompliance with 

applicable requirements under the lease. 

Specifically, we do not waive any legal 

claim we may have against any person 

under the Comprehensive 

Environmental Response, 

Compensation, and Liability Act of 1980 

(42 U.S.C. 9601 et seq.), or other laws 

and regulations. 

Subpart 3216—Transfers 

§ 3216.10 What types of lease interests 

may I transfer? 

You may transfer record title or 

operating rights, but you need BLM 

approval before your transfer is effective 

(see § 3216.21). 

§ 3216.11 Where must I file a transfer 

request? 

File your transfer in the BLM State 

Office that handles your lease. 

§ 3216.12 When does a transferee take 

responsibility for lease obligations? 

After BLM approves your transfer, the 

transferee is responsible for performing 

all lease obligations accruing after the 

date of the transfer, and for plugging 

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and abandoning wells which exist and 

are not plugged and abandoned at the 

time of the transfer. 

§ 3216.13 What are my responsibilities 

after I transfer my interest? 

After you transfer an interest in a 

lease you are still responsible for rents, 

royalties, compensatory royalties, and 

other obligations that accrued before 

your transfer became effective. You also 

remain responsible for plugging and 

abandoning any wells that were drilled 

or existing on the lease while you held 

your interest. You must carry out this 

responsibility upon the BLM’s 

determination at any future time that 

the wells must be plugged and 

abandoned. 

§ 3216.14 What filing fees and forms does 

a transfer require? 

With each transfer request you must 

send BLM the correct form and pay the 

transfer fee required by this section. 

When you calculate your fee, make sure 

it covers the full amount. For example, 

if you are transferring record title for 

three leases, submit $225 with the 

application. 

Use the following chart to determine 

the number and types of forms required. 

The applicable transfer fees are in the 

fee schedule in § 3000.12 of this 

chapter. 

Type of transfer Form required? Form No. Number of copies 

(a) Record Title ..................................... Yes ....................................................... 3000–3 ................................................. 2 executed copies. 

(b) Operating Rights ............................. Yes ....................................................... 3000–3(a) ............................................. 2 executed copies. 

(c) Estate Transfers .............................. No ........................................................ N/A ....................................................... 1 List of Leases. 

(d) Corporate Mergers .......................... No ........................................................ N/A ....................................................... 1 List of Leases. 

(e) Name Changes ............................... No ........................................................ N/A ....................................................... 1 List of Leases. 

§ 3216.15 When must I file my transfer 

request? 

(a) File a request to transfer record 

title or operating rights within 90 days 

after you sign an agreement with the 

transferee. If BLM receives your request 

more than 90 days after signing, we may 

require you to re-certify that you still 

intend to complete the transfer. 

(b) There is no specific time deadline 

for filing estate transfers, corporate 

mergers, and name changes. File them 

within a reasonable time. 

§ 3216.16 Must I file separate transfer 

requests for each lease? 

File two copies of a separate request 

for each lease for which you are 

transferring record title or operating 

rights. The only exception is if you are 

transferring more than one lease to the 

same transferee, in which case you file 

two copies of one transfer request. 

§ 3216.17 Where must I file estate 

transfers, corporate mergers, and name 

changes? 

(a) If you have posted a bond for any 

Federal lease, you must file estate 

transfers, corporate mergers, and name 

changes in the BLM State Office that 

maintains your bond. 

(b) If you have not posted a bond, you 

must file estate transfers, corporate 

mergers, and name changes in the State 

Office having jurisdiction over the lease. 

§ 3216.18 How do I describe the lands in 

my lease transfer? 

(a) If you are transferring an interest 

in your entire lease, you do not need to 

give BLM a legal description of the land. 

(b) If you are transferring an interest 

in a portion of your lease, describe the 

lands that are transferred in the same 

way they are described in the lease. 

§ 3216.19 May I transfer record title 

interest for less than 640 acres? 

Except for direct use leases, you may 

transfer record title interest for less than 

640 acres only if your transfer includes 

an irregular subdivision or all of the 

lands in your lease are in a section. We 

may make an exception to the minimum 

acreage requirements if it is necessary to 

conserve the resource. 

§ 3216.20 When does a transfer segregate 

a lease? 

If you transfer 100 percent of the 

record title interest in a portion of your 

lease, BLM will segregate the transferred 

portion from the original lease and give 

it a new serial number with the same 

terms and conditions as those in the 

original lease. 

§ 3216.21 When is my transfer effective? 

Your transfer is effective the first day 

of the month after we approve it. 

§ 3216.22 Does BLM approve all transfer 

requests? 

BLM will not approve a transfer if: 

(a) The lease account is not in good 

standing; 

(b) The transferee does not qualify to 

hold a lease under this part; or 

(c) An adequate bond has not been 

provided. 

Subpart 3217—Cooperative 

Agreements 

§ 3217.10 What are unit agreements? 

Under unit agreements, lessees unite 

with each other, or jointly or separately 

with others, in collectively adopting and 

operating under agreements to conserve 

the resources of any geothermal 

reservoir, field, or like area, or any part 

thereof. BLM will only approve unit 

agreements that we determine are in the 

public interest. Unit agreement 

application procedures are provided in 

part 3280 of this chapter. 

§ 3217.11 What are communitization 

agreements? 

Under communitization agreements 

(also called drilling agreements), 

operators who cannot independently 

develop separate tracts due to wellspacing or well development programs 

may cooperatively develop such tracts. 

Lessees may ask BLM to approve a 

communitization agreement or, in some 

cases, we may require the lessees to 

enter into such an agreement. 

§ 3217.12 What does BLM need to 

approve my communitization agreement? 

For BLM to approve a 

communitization agreement, you must 

give us the following information: 

(a) The location of the separate tracts 

comprising the drilling or spacing unit; 

(b) How you will prorate production 

or royalties to each separate tract based 

on total acres involved; 

(c) The name of each tract operator; 

and 

(d) Provisions for protecting the 

interests of all parties, including the 

United States. 

§ 3217.13 When does my communitization 

agreement go into effect? 

(a) Your communitization agreement 

is effective when BLM approves and 

signs it. 

(b) Before we approve the agreement: 

(1) All parties must sign the 

agreement; and 

(2)(i) We must determine that the 

tracts cannot be independently 

developed; and 

(ii) That the agreement is in the public 

interest. 

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§ 3217.14 When will BLM approve my 

drilling or development contract? 

BLM may approve a drilling or 

development contract when: 

(a) One or more geothermal lessees 

enter into the contract with one or more 

persons; or 

(b) Lessees need the contract for 

regional exploration of geothermal 

resources; 

(c) BLM has coordinated the review of 

the proposed contract with appropriate 

state agencies; and 

(d) BLM determines that approval best 

serves or is necessary for the 

conservation of natural resources, 

public convenience or necessity, or the 

interests of the United States. 

§ 3217.15 What does BLM need to 

approve my drilling or development 

contract? 

For BLM to approve your drilling or 

development contract, you must send 

us: 

(a) The contract and a statement of 

why you need it; 

(b) A statement of all interests held by 

the contracting parties in that 

geothermal area or field; 

(c) The type of operations and 

schedule set by the contract; 

(d) A statement that the contract will 

not violate Federal antitrust laws by 

concentrating control over the 

production or sale of geothermal 

resources; and 

(e) Any other information we may 

require to make a decision about the 

contract or to attach conditions of 

approval. 

Subpart 3250—Exploration 

Operations—General 

§ 3250.10 When do the exploration 

operations regulations apply? 

(a) The exploration operations 

regulations contained in this subpart 

and subparts 3251 through 3256 apply 

to geothermal exploration operations: 

(1) On BLM-administered public 

lands, whether or not they are leased for 

geothermal resources; and 

(2) On lands whose surface is 

managed by another Federal agency, 

where BLM has leased the subsurface 

geothermal resources and the lease 

operator wishes to conduct exploration. 

In this case, we will consult with the 

surface managing agency regarding 

surface use and reclamation 

requirements before we approve the 

exploration operations. 

(b) These regulations do not apply to: 

(1) Unleased land administered by 

another Federal agency; 

(2) Unleased geothermal resources 

whose surface land is managed by 

another Federal agency; 

(3) Privately owned land; or 

(4) Casual use activities. 

§ 3250.11 May I conduct exploration 

operations on my lease, someone else’s 

lease, or unleased land? 

(a) You may request BLM approval to 

explore any BLM-managed public lands 

open to geothermal leasing, even if the 

lands are leased to another person. A 

BLM-approved exploration permit does 

not give you exclusive rights. 

(b) If you wish to conduct operations 

on your lease, you may do so after we 

have approved your Notice of Intent to 

Conduct Geothermal Resource 

Exploration Operations. If the lands are 

already leased, your operations may not 

unreasonably interfere with or endanger 

those other operations or other 

authorized uses, or cause unnecessary 

or undue degradation of the lands. 

§ 3250.12 What general standards apply 

to exploration operations? 

BLM-approved exploration operations 

must: 

(a) Meet all operational and 

environmental standards; 

(b) Protect public health, safety, and 

property; 

(c) Prevent unnecessary impacts on 

surface and subsurface resources; 

(d) Be conducted in a manner 

consistent with the principles of 

multiple use; and 

(e) Comply with the requirements of 

§ 3200.4. 

§ 3250.13 What additional BLM orders or 

instructions govern exploration? 

BLM may issue the following types of 

orders or instructions: 

(a) Geothermal resource operational 

orders that contain detailed 

requirements of nationwide 

applicability; 

(b) Notices to lessees that contain 

detailed requirements on a statewide or 

regional basis; 

(c) Other orders and instructions 

specific to a field or area; 

(d) Conditions of approval contained 

in an approved Notice of Intent; and 

(e) Verbal orders that BLM will 

confirm in writing. 

§ 3250.14 What types of operations may I 

propose in my application to conduct 

exploration? 

(a) You may propose any activity 

fitting the definition of ‘‘exploration 

operations’’ in § 3200.1. Submit Form 

3200–9, Notice of Intent to Conduct 

Geothermal Resource Exploration 

Operations, together with the 

information required under § 3251.11, 

and BLM will review your proposal. 

(b) The exploration operations 

regulations do not address drilling wells 

intended for production or injection, 

which is covered in subpart 3260, or 

geothermal resources utilization, which 

is covered in subpart 3270. 

Subpart 3251—Exploration Operations: 

Getting BLM Approval 

§ 3251.10 Do I need a permit before I start 

exploration operations? 

BLM must approve a Notice of Intent 

to Conduct Geothermal Resource 

Exploration Operations (NOI) before you 

conduct exploration operations. The 

approved NOI, including any necessary 

conditions for approval, constitutes 

your permit. 

§ 3251.11 What information is in a 

complete Notice of Intent to Conduct 

Geothermal Resource Exploration 

Operations application? 

To obtain approval of exploration 

operations on BLM-managed lands, your 

application must: 

(a) Include a complete and signed 

Form 3200–9, Notice of Intent to 

Conduct Geothermal Resource 

Exploration Operations that describes 

the lands you wish to explore; 

(b) For operations other than drilling 

temperature gradient wells, describe 

your exploration plans and procedures, 

including the approximate starting and 

ending dates for each phase of 

operations; 

(c) For drilling temperature gradient 

wells, describe your drilling and 

completion procedures, and include, for 

each well or for several wells you 

propose to drill in an area of geologic 

and environmental similarity: 

(1) A detailed description of the 

equipment, materials, and procedures 

you will use; 

(2) The depth of each well; 

(3) The casing and cementing 

program; 

(4) The circulation media (mud, air, 

foam, etc.); 

(5) A description of the logs that you 

will run; 

(6) A description and diagram of the 

blowout prevention equipment you will 

use during each phase of drilling; 

(7) The expected depth and thickness 

of fresh water zones; 

(8) Anticipated lost circulation zones; 

(9) Anticipated temperature gradient 

in the area; 

(10) Well site layout and design; 

(11) Existing and planned access 

roads or ancillary facilities; and 

(12) Your source of drill pad and road 

building material and water supply. 

(d) Show evidence of bond coverage 

(see § 3251.15); 

(e) Estimate how much surface 

disturbance your exploration may cause; 

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(f) Describe the proposed measures 

you will take to protect the environment 

and other resources; 

(g) Describe methods to reclaim the 

surface; and 

(h) Include all other information BLM 

may require. 

§ 3251.12 What action will BLM take on 

my Notice of Intent to Conduct Geothermal 

Resource Exploration Operations? 

(a) When BLM receives your Notice of 

Intent to Conduct Geothermal Resource 

Exploration Operations, we will make 

sure it is complete and signed, and 

review it for compliance with the 

requirements of § 3200.4. 

(b) If the proposed operations are 

located on lands described under §

3250.10(a)(2), we will consult with the 

Federal surface management agency 

before approving your Notice of Intent. 

(c) We will check your Notice of 

Intent for technical adequacy and we 

may require additional information. 

(d) We will notify you if we need 

more information to process your Notice 

of Intent, and suspend the review of 

your Notice of Intent until we receive 

the information. 

(e) After our review, we will notify 

you whether we approved or denied 

your Notice of Intent and of any 

conditions of approval. 

§ 3251.13 Once I have an approved Notice 

of Intent, how can I change my exploration 

operations? 

Send BLM a complete and signed 

Form 3260–3, Geothermal Sundry 

Notice, which fully describes the 

requested changes. Do not proceed with 

the change in operations until you 

receive written approval from BLM. 

§ 3251.14 Do I need a bond for conducting 

exploration operations? 

(a) You must not start any exploration 

operations on BLM-managed lands until 

we approve your bond. You may meet 

the requirement for an exploration bond 

in two ways: 

(1) If you have an existing nationwide 

or statewide oil and gas exploration 

bond, provide a rider in an amount we 

have specified to include geothermal 

resources exploration operations; or 

(2) If you must file a new bond for 

geothermal exploration, the minimum 

amounts are: 

(i) $5,000 for a single operation; 

(ii) $25,000 for all of your operations 

within a state; and 

(iii) $50,000 for all of your operations 

on public lands nationwide. 

(b) See subparts 3214 and 3215 for 

additional details on bonding 

procedures. 

§ 3251.15 When will BLM release my 

bond? 

BLM will release your bond after you 

request it and we determine that you 

have: 

(a) Plugged and abandoned all wells; 

(b) Reclaimed the land and, if 

necessary, resolved other 

environmental, cultural, scenic, or 

recreational issues; and 

(c) Complied with the requirements of 

§ 3200.4. 

Subpart 3252—Conducting Exploration 

Operations 

§ 3252.10 What operational standards 

apply to my exploration operations? 

You must keep exploration operations 

under control at all times by: 

(a) Conducting training during your 

operation to ensure that your personnel 

are capable of performing emergency 

procedures quickly and effectively; 

(b) Using properly maintained 

equipment; and 

(c) Using operational practices that 

allow for quick and effective emergency 

response. 

§ 3252.11 What environmental 

requirements must I meet when conducting 

exploration operations? 

(a) You must conduct your 

exploration operations in a manner that: 

(1) Protects the quality of surface and 

subsurface waters, air, and other natural 

resources, including wildlife, soil, 

vegetation, and natural history; 

(2) Protects the quality of cultural, 

scenic, and recreational resources; 

(3) Accommodates other land uses, as 

BLM deems necessary; and 

(4) Minimizes noise. 

(b) You must remove or, with our 

permission, properly store all 

equipment and materials not in use. 

(c) You must provide and use pits, 

tanks, and sumps of adequate capacity. 

They must be designed to retain all 

materials and fluids resulting from 

drilling temperature gradient wells or 

other operations, unless we have 

specified otherwise in writing. When 

they are no longer needed, you must 

properly abandon pits and sumps in 

accordance with your exploration 

permit. 

(d) BLM may require you to submit a 

contingency plan describing procedures 

to protect public health, safety, 

property, and the environment. 

§ 3252.12 How deep may I drill a 

temperature gradient well? 

(a) You may drill a temperature 

gradient well to any depth that we 

approve in your exploration permit or 

sundry notice. In all cases, you may not 

flow test the well or perform injection 

tests of the well unless you follow the 

procedures for geothermal drilling 

operations in subparts 3260 through 

3267. 

(b) BLM may modify your permitted 

depth at any time before or during 

drilling, if we determine that the bottom 

hole temperature or other information 

indicates that drilling to the original 

permitted depth could directly 

encounter the geothermal resource or 

create risks to public health, safety, 

property, the environment, or other 

resources. 

§ 3252.13 How long may I collect 

information from my temperature gradient 

well? 

You may collect information from 

your temperature gradient well for as 

long as your permit allows. 

§ 3252.14 How must I complete a 

temperature gradient well? 

Complete temperature gradient wells 

to allow for proper abandonment, and to 

prevent interzonal migration of fluids. 

Cap all tubing when not in use. 

§ 3252.15 When must I abandon a 

temperature gradient well? 

When you no longer need it, or when 

BLM requires you to. 

§ 3252.16 How must I abandon a 

temperature gradient well? 

(a) Before abandoning your well, 

submit a complete and signed Sundry 

Notice, Form 3260–3, describing how 

you plan to abandon wells and reclaim 

the surface. Do not begin abandoning 

wells or reclaiming the surface until 

BLM approves your Sundry Notice. 

(b) You must plug and abandon your 

well for permanent prevention of 

interzonal migration of fluids and 

migration of fluids to the surface. You 

must reclaim your well location 

according to the terms of BLM approvals 

and orders. 

Subpart 3253—Reports: Exploration 

Operations 

§ 3253.10 Must I share with BLM the data 

I collect through exploration operations? 

(a) For exploration operations on your 

geothermal lease, you must submit all 

data you obtain as a result of the 

operations with a signed notice of 

completion of exploration operations 

under § 3253.11, unless we approve a 

later submission. 

(b) For exploration operations on 

unleased lands or on leased lands where 

you are not the lessee or unit operator, 

you are not required to submit data. 

However, if you want your exploration 

operations to count toward your diligent 

exploration expenditure requirement 

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(see § 3210.13), or if you are making 

significant expenditures to extend your 

lease (see § 3208.14), you must send 

BLM the resulting data under the rules 

of those sections. 

§ 3253.11 Must I notify BLM when I have 

completed my exploration operations? 

After you complete exploration 

operations, send to BLM a complete and 

signed notice of completion of 

exploration operations, describing the 

exploration operations, well history, 

completion and abandonment 

procedures, and site reclamation 

measures. You must send this to BLM 

within 30 days after you: 

(a) Complete any geophysical 

exploration operations; 

(b) Complete the drilling of 

temperature gradient well(s) approved 

under your approved Notice of Intent to 

conduct exploration; 

(c) Plug and abandon a temperature 

gradient well; and 

(d) Plug shot holes and reclaim all 

exploration sites. 

Subpart 3254—Inspection, 

Enforcement, and Noncompliance for 

Exploration Operations 

§ 3254.10 May BLM inspect my 

exploration operations? 

BLM may inspect your exploration 

operations to ensure compliance with 

the requirements of § 3200.4 and the 

regulations in this subpart. 

§ 3254.11 What will BLM do if my 

exploration operations are not in 

compliance with my permit, other BLM 

approvals or orders, or the regulations in 

this part? 

(a) BLM will issue you a written 

Incident of Noncompliance and direct 

you to correct the problem within a set 

time. If the noncompliance continues or 

is serious in nature, we will take one or 

more of the following actions: 

(1) Correct the problem at your 

expense; 

(2) Direct you to modify or shut down 

your operations; or 

(3) Collect all or part of your bond. 

(b) We may also require you to take 

actions to prevent unnecessary impacts 

on the lands. If so, we will notify you 

of the nature and extent of any required 

measures and the time you have to 

complete them. 

(c) Noncompliance may result in BLM 

terminating your lease, if appropriate 

under § § 3213.17 through 3213.19. 

Subpart 3255—Confidential, 

Proprietary Information 

§ 3255.10 Will BLM disclose information I 

submit under these regulations? 

All Federal and Indian data and 

information submitted to the BLM are 

subject to part 2 of this title. Part 2 

includes the regulations of the 

Department of the Interior covering 

public disclosure of data and 

information contained in Department 

records. Certain mineral information not 

protected from disclosure under part 2 

may be made available for inspection 

without a Freedom of Information Act 

(FOIA) request. 

§ 3255.11 When I submit confidential, 

proprietary information, how can I help 

ensure it is not available to the public? 

When you submit data and 

information that you believe to be 

exempt from disclosure by 43 CFR part 

2, you must clearly mark each page that 

you believe contains confidential 

information. BLM will keep all data and 

information confidential to the extent 

allowed by 43 CFR 2.13(c). 

§ 3255.12 How long will information I give 

BLM remain confidential or proprietary? 

The FOIA (5 U.S.C. 552) does not 

provide a finite period of time during 

which information may be exempt from 

public disclosure. BLM will review each 

situation individually and in 

accordance with part 2 of this title. 

§ 3255.13 How will BLM treat Indian 

information submitted under the Indian 

Mineral Development Act? 

Under the Indian Mineral 

Development Act of 1982 (IMDA) (25 

U.S.C. 2101 et seq.), the Department of 

the Interior will hold as privileged 

proprietary information of the affected 

Indian or Indian tribe: 

(a) All findings forming the basis of 

the Secretary’s intent to approve or 

disapprove any Minerals Agreement 

under IMDA; and 

(b) All projections, studies, data, or 

other information concerning a Minerals 

Agreement under IMDA, regardless of 

the date received, related to: 

(1) The terms, conditions, or financial 

return to the Indian parties; 

(2) The extent, nature, value, or 

disposition of the Indian mineral 

resources; or 

(3) The production, products, or 

proceeds thereof. 

§ 3255.14 How will BLM administer 

information concerning other Indian 

minerals? 

For information concerning Indian 

minerals not covered by § 3255.13, 

BLM will withhold such records as may 

be withheld under an exemption to the 

FOIA when it receives a request for 

information related to tribal or Indian 

minerals held in trust or subject to 

restrictions on alienation. 

§ 3255.15 When will BLM consult with 

Indian mineral owners when information 

concerning their minerals is the subject of 

a FOIA request? 

(a) We use the standards and 

procedures of § 2.15(d) of this title 

before making a decision about the 

applicability of FOIA exemption 4 to 

information obtained from a person 

outside the United States Government. 

(b) BLM will notify the Indian mineral 

owner(s) identified in the records of the 

Bureau of Indian Affairs (BIA), and BIA, 

and give them a reasonable period of 

time to state objections to disclosure. 

BLM will issue this notice following 

consultation with a submitter under §

2.15(d) of this title if: 

(1) BLM determines that the submitter 

does not have an interest in withholding 

the records that can be protected under 

FOIA; and 

(2) BLM has reason to believe that 

disclosure of the information may result 

in commercial or financial injury to the 

Indian mineral owner(s), but is 

uncertain that such is the case. 

Subpart 3256—Exploration Operations 

Relief and Appeals 

§ 3256.10 How do I request a variance 

from BLM requirements that apply to my 

exploration operations? 

(a) You may submit a request for a 

variance for your exploration operations 

from any requirement in § 3200.4. Your 

request must include enough 

information to explain: 

(1) Why you cannot comply with the 

regulatory requirement; and 

(2) Why you need the variance to 

control your well, conserve natural 

resources, or protect public health and 

safety, property, or the environment. 

(b) BLM may approve your request 

orally or in writing. If we give you an 

oral approval, we will follow up with 

written confirmation. 

§ 3256.11 How may I appeal a BLM 

decision regarding my exploration 

operations? 

You may appeal a BLM decision 

regarding your exploration operations in 

accordance with § 3200.5. 

Subpart 3260—Geothermal Drilling 

Operations—General 

§ 3260.10 What types of geothermal 

drilling operations are covered by these 

regulations? 

(a) The regulations in subparts 3260 

through 3267 establish permitting and 

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operating procedures for drilling wells 

and conducting related activities for the 

purposes of performing flow tests, 

producing geothermal fluids, or 

injecting fluids into a geothermal 

reservoir. These subparts also address 

redrilling, deepening, plugging back, 

and other subsequent well operations. 

(b) The operations regulations in 

subparts 3260 through 3267 do not 

address conducting exploration 

operations, which are covered in 

subpart 3250, or geothermal resources 

utilization, which is covered in subpart 

3270. 

§ 3260.11 What general standards apply 

to my drilling operations? 

Your drilling operations must: 

(a) Meet all environmental and 

operational standards; 

(b) Prevent unnecessary impacts on 

surface and subsurface resources; 

(c) Conserve geothermal resources and 

minimize waste; 

(d) Protect public health, safety, and 

property; and 

(e) Comply with the requirements of 

§ 3200.4. 

§ 3260.12 What other orders or 

instructions may BLM issue? 

BLM may issue: 

(a) Geothermal resource operational 

orders for detailed requirements that 

apply nationwide; 

(b) Notices to Lessees for detailed 

requirements on a statewide or regional 

basis; 

(c) Other orders and instructions 

specific to a field or area; 

(d) Permit conditions of approval; and 

(e) Oral orders, which will be 

confirmed in writing. 

Subpart 3261—Drilling Operations: 

Getting a Permit 

§ 3261.10 How do I get approval to begin 

well pad construction? 

(a) If you do not have an approved 

geothermal drilling permit, Form 3260– 

2, apply using a completed and signed 

Sundry Notice, Form 3260–3, to build 

well pads and access roads. Send us a 

complete operations plan (see §

3261.12) and an acceptable bond with 

your Sundry Notice. You may start well 

pad construction after we approve your 

Sundry Notice. 

(b) If you already have an approved 

drilling permit and you have provided 

an acceptable bond, you do not need 

any further permission from BLM to 

start well pad construction, unless you 

intend to change something in the 

approved permit. If you propose a 

change in an approved permit, send us 

a completed and signed Sundry Notice 

so we may review your proposed 

change. Do not proceed with the change 

until we approve your Sundry Notice. 

§ 3261.11 How do I apply for approval of 

drilling operations and well pad 

construction? 

(a) Send to BLM: 

(1) A completed and signed drilling 

permit application, Form 3260–2; 

(2) A complete operations plan (§

3261.12); 

(3) A complete drilling program (§

3261.13); and 

(4) An acceptable bond (§ 3261.18). 

(b) Do not start any drilling operations 

until after BLM approves the permit. 

§ 3261.12 What is an operations plan? 

An operations plan describes how you 

will drill for and test the geothermal 

resources covered by your lease. Your 

plan must tell BLM enough about your 

proposal to allow us to assess the 

environmental impacts of your 

operations. This information should 

generally include: 

(a) Well pad layout and design; 

(b) A description of existing and 

planned access roads; 

(c) A description of any ancillary 

facilities; 

(d) The source of drill pad and road 

building material; 

(e) The water source; 

(f) A statement describing surface 

ownership; 

(g) A description of procedures to 

protect the environment and other 

resources; 

(h) Plans for surface reclamation; and 

(i) Any other information that BLM 

may require. 

§ 3261.13 What is a drilling program and 

how do I apply for drilling program 

approval? 

(a) A drilling program describes all 

the operational aspects of your proposal 

to drill, complete, and test a well. 

(b) Send to BLM: 

(1) A detailed description of the 

equipment, materials, and procedures 

you will use; 

(2) The proposed/anticipated depth of 

the well; 

(3) If you plan to directionally drill 

your well, also send us: 

(i) The proposed bottom hole location 

and distances from the nearest section 

or tract lines; 

(ii) The kick-off point; 

(iii) The direction of deviation; 

(iv) The angle of build-up and 

maximum angle; and 

(v) Plan and cross section maps 

indicating the surface and bottom hole 

locations; 

(4) The casing and cementing 

program; 

(5) The circulation media (mud, air, 

foam, etc.); 

(6) A description of the logs that you 

will run; 

(7) A description and diagram of the 

blowout prevention equipment you will 

use during each phase of drilling; 

(8) The expected depth and thickness 

of fresh water zones; 

(9) Anticipated lost circulation zones; 

(10) Anticipated reservoir temperature 

and pressure; 

(11) Anticipated temperature gradient 

in the area; 

(12) A plat certified by a licensed 

surveyor showing the surveyed surface 

location and distances from the nearest 

section or tract lines; 

(13) Procedures and durations of well 

testing; and 

(14) Any other information we may 

require. 

§ 3261.14 When must I give BLM my 

operations plan? 

Send us a complete operations plan 

before you begin any surface 

disturbance on a lease. You do not need 

to submit an operations plan for 

subsequent well operations or altering 

existing production equipment, unless 

these activities will cause more surface 

disturbance than originally approved, or 

we notify you that you must submit an 

operations plan. Do not start any 

activities that will result in surface 

disturbance until we approve your 

drilling permit or Sundry Notice. 

§ 3261.15 Must I give BLM my drilling 

permit application, drilling program, and 

operations plan at the same time? 

You may submit your completed and 

signed drilling permit application and 

complete drilling program and 

operations plan either together or 

separately. 

(a) If you submit them together and 

we approve your drilling permit, the 

approved drilling permit will authorize 

both the pad construction and the 

drilling and testing of the well. 

(b) If you submit the operations plan 

separately from the drilling permit 

application and program, you must: 

(1) Submit the operations plan before 

the drilling permit application and 

drilling program to allow BLM time to 

comply with National Environmental 

Policy Act (NEPA); and 

(2) Submit a completed and signed 

Sundry Notice for well pad and access 

road construction. Do not begin 

construction until we approve your 

Sundry Notice. 

§ 3261.16 Can my operations plan, drilling 

permit, and drilling program apply to more 

than one well? 

(a) Your operations plan and drilling 

program can sometimes be combined to 

cover several wells, but your drilling 

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permit cannot. To include more than 

one well in your operations plan, give 

us adequate information for all well 

sites, and we will combine your plan to 

cover those well sites that are in areas 

of similar geology and environment. 

(b) Your drilling program may also 

apply to more than one well, provided 

you will drill the wells in the same 

manner, and you expect to encounter 

similar geologic and reservoir 

conditions. 

(c) You must submit a separate 

geothermal drilling permit application 

for each well. 

§ 3261.17 How do I amend my operations 

plan or drilling permit? 

(a) If BLM has not yet approved your 

operations plan or drilling permit, send 

us your amended plan and completed 

and signed permit application. 

(b) To amend an approved operations 

plan or drilling permit, submit a 

completed and signed Sundry Notice 

describing your proposed change. Do 

not start any amended operations until 

after BLM approves your drilling permit 

or Sundry Notice. 

§ 3261.18 Do I need to file a bond with 

BLM before I build a well pad or drill a well? 

Before starting any operation, you 

must: 

(a) File with BLM either a surety or 

personal bond in the following 

minimum amount: 

(1) $10,000 for a single lease; 

(2) $50,000 for all of your operations 

within a state; or 

(3) $150,000 for all of your operations 

nationwide; 

(b) Get our approval of your surety or 

personal bond; and 

(c) To cover any drilling operations on 

all leases committed to a unit, either 

submit a bond for that unit in an 

amount we specify, or provide a rider to 

a statewide or nationwide bond 

specifically covering the unit in an 

amount we specify. 

(d) See subparts 3214 and 3215 for 

additional details on bonding 

procedures. 

§ 3261.19 When will BLM release my 

bond? 

BLM will release your bond after you 

request it and we determine that you 

have: 

(a) Plugged and abandoned all wells; 

(b) Reclaimed the surface and other 

resources; and 

(c) Met all the requirements of §

3200.4. 

§ 3261.20 How will BLM review 

applications submitted under this subpart 

and notify me of its decision? 

(a) When we receive your operations 

plan, we will make sure it is complete 

and review it for compliance with the 

requirements of § 3200.4. 

(b) If another Federal agency manages 

the surface of your lease, we will 

consult with it before we approve your 

drilling permit. 

(c) We will review your drilling 

permit and drilling program or your 

Sundry Notice for well pad 

construction, to make sure they conform 

with your operations plan and any 

mitigation measures we developed 

while reviewing your plan. 

(d) We will check your drilling permit 

and drilling program for technical 

adequacy and may require additional 

information. 

(e) We will check your drilling permit 

for compliance with the requirements of 

§ 3200.4. 

(f) If we need any further information 

to complete our review, we will contact 

you in writing and suspend our review 

until we receive the information. 

(g) After our review, we will notify 

you as to whether your permit has been 

approved or denied, as well as any 

conditions of approval. 

§ 3261.21 How do I get approval to change 

an approved drilling operation? 

(a) Send BLM a Sundry Notice, form 

3260–3, describing the proposed 

changes. Do not proceed with the 

changes until we have approved them in 

writing, except as provided in paragraph 

(c) of this section. If your operations 

such as redrilling, deepening, drilling a 

new directional leg, or plugging back a 

well would significantly change your 

approved permit, BLM may require you 

to send us a new drilling permit (see 43 

CFR 3261.13). A significant change 

would be, for example, redrilling the 

well to a completely different target, 

especially a target in an unknown area. 

(b) If your changed drilling operation 

would cause additional surface 

disturbance, we may also require you to 

submit an amended operations plan. 

(c) If immediate action is required to 

properly continue drilling operations, or 

to protect public health, safety, property 

or the environment, BLM may provide 

oral approval to change an approved 

drilling operation. However, you must 

submit a written Sundry Notice within 

48 hours after we orally approve your 

change. 

§ 3261.22 How do I get approval for 

subsequent well operations? 

Send BLM a Sundry Notice describing 

your proposed operation. For some 

routine work, such as cleanouts, 

surveys, or general maintenance (see §

3264.11(b)), we may waive the Sundry 

Notice requirement. Contact your local 

BLM office to ask about waivers for 

subsequent well operations. Unless you 

receive a waiver, you must submit a 

Sundry Notice. Do not start your 

operations until we grant a waiver or 

approve the Sundry Notice. 

Subpart 3262—Conducting Drilling 

Operations 

§ 3262.10 What operational requirements 

must I meet when drilling a well? 

(a) When drilling a well, you must: 

(1) Keep the well under control at all 

times by: 

(i) Conducting training during your 

operation to maintain the capability of 

your personnel to perform emergency 

procedures quickly and effectively; 

(ii) Using properly maintained 

equipment; and 

(iii) Using operational practices that 

allow for quick and effective emergency 

response. 

(b) You must use sound engineering 

principles and take into account all 

pertinent data when: 

(1) Selecting and using drilling fluid 

types and weights; 

(2) Designing and implementing a 

system to control fluid temperatures; 

(3) Designing and using blowout 

prevention equipment; and 

(4) Designing and implementing a 

casing and cementing program. 

(c) Your operation must always 

comply with the requirements of §

3200.4. 

§ 3262.11 What environmental 

requirements must I meet when drilling a 

well? 

(a) You must conduct your operations 

in a manner that: 

(1) Protects the quality of surface and 

subsurface water, air, natural resources, 

wildlife, soil, vegetation, and natural 

history; 

(2) Protects the quality of cultural, 

scenic, and recreational resources; 

(3) Accommodates, as necessary, 

other land uses; 

(4) Minimizes noise; and 

(5) Prevents property damage and 

unnecessary or undue degradation of 

the lands. 

(b) You must remove or, with BLM’s 

approval, properly store all equipment 

and materials that are not in use. 

(c) You must retain all fluids from 

drilling and testing the well in properly 

designed pits, sumps, or tanks. 

(d) When you no longer need a pit or 

sump, you must abandon it and restore 

the site as we direct. 

(e) BLM may require you to give us a 

contingency plan showing how you will 

protect public health and safety, 

property, and the environment. 

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§ 3262.12 Must I post a sign at every well? 

Yes. Before you begin drilling a well, 

you must post a sign in a conspicuous 

place and keep it there throughout 

operations until the well site is 

reclaimed. Put the following 

information on the sign: 

(a) The lessee or operator’s name; 

(b) Lease serial number; 

(c) Well number; and 

(d) Well location described by 

township, range, section, quarter-quarter 

section or lot. 

§ 3262.13 May BLM require me to follow 

a well spacing program? 

BLM may require you to follow a well 

spacing program if we determine that it 

is necessary for proper development. If 

we require well spacing, we will 

consider the following factors when we 

set well spacing: 

(a) Hydrologic, geologic, and reservoir 

characteristics of the field, minimizing 

well interference; 

(b) Topography; 

(c) Interference with multiple use of 

the land; and 

(d) Environmental protection, 

including ground water. 

§ 3262.14 May BLM require me to take 

samples or perform tests and surveys? 

(a) BLM may require you to take 

samples or to test or survey the well to 

determine: 

(1) The well’s mechanical integrity; 

(2) The identity and characteristics of 

formations, fluids, or gases; 

(3) Presence of geothermal resources, 

water, or reservoir energy; 

(4) Quality and quantity of geothermal 

resources; 

(5) Well bore angle and direction of 

deviation; 

(6) Formation, casing, or tubing 

pressures; 

(7) Temperatures; 

(8) Rate of heat or fluid flow; and 

(9) Any other necessary well 

information. 

(b) See § 3264.11 for information on 

reporting requirements. 

Subpart 3263—Well Abandonment 

§ 3263.10 May I abandon a well without 

BLM’s approval? 

(a) You must have a BLM-approved 

Sundry Notice documenting your 

plugging and abandonment program 

before you start abandoning any well. 

(b) You must also notify the local 

BLM office before you begin 

abandonment activities, so that we may 

witness the work. Contact your local 

BLM office before starting to abandon 

your well to find out what notification 

we need. 

§ 3263.11 What information must I give 

BLM to approve my Sundry Notice for 

abandoning a well? 

Send us a Sundry Notice with: 

(a) All the information required in the 

well completion report (see § 3264.10), 

unless we already have that 

information; 

(b) A detailed description of the 

proposed work, including: 

(1) Type, depth, length, and interval 

of plugs; 

(2) Methods you will use to verify the 

plugs (tagging, pressure testing, etc.); 

(3) Weight and viscosity of mud that 

you will use in the uncemented 

portions; 

(4) Perforating or removing casing; 

and 

(5) Restoring the surface; and 

(c) Any other information that we may 

require. 

§ 3263.12 How will BLM review my Sundry 

Notice to abandon my well and notify me of 

their decision? 

(a) When BLM receives your Sundry 

Notice, we will make sure it is complete 

and review it for compliance with the 

requirements of § 3200.4. We will 

notify you if we need more information 

or require additional procedures. If we 

need any further information to 

complete our review, we will contact 

you in writing and suspend our review 

until we receive the information. If we 

approve your Sundry Notice, we will 

send you an approved copy once our 

review is complete. Do not start 

abandonment of the well until we 

approve your Sundry Notice. 

(b) BLM may orally approve plugging 

procedures for a well requiring 

immediate action. If we do, you must 

submit the information required in §

3263.11 within 48 hours after we give 

oral approval. 

§ 3263.13 What must I do to restore the 

site? 

You must remove all equipment and 

materials and restore the site according 

to the terms of your permit or other 

BLM approval. 

§ 3263.14 May BLM require me to 

abandon a well? 

If we determine that your well is no 

longer needed for geothermal resource 

production, injection, or monitoring, or 

if we determine that the well is not 

mechanically sound, BLM may order 

you to abandon the well. In either case, 

if you disagree you may explain to us 

why the well should not be abandoned. 

We will consider your reasons before we 

issue any final order. 

§ 3263.15 May I abandon a producible 

well? 

(a) You may abandon a producible 

well only after you receive BLM’s 

approval. Before abandoning a 

producing well, send BLM the 

information listed in § 3263.11. We may 

also require you to explain why you 

want to abandon the well. 

(b) BLM will deny your request if we 

determine that the well is needed: 

(1) To protect a Federal lease from 

drainage; or 

(2) To protect the environment or 

other resources of the United States. 

Subpart 3264—Reports—Drilling 

Operations 

§ 3264.10 What must I submit to BLM after 

I complete a well? 

You must submit a Geothermal Well 

Completion Report, Form 3260–4, 

within 30 days after you complete a 

well. Your report must include the 

following: 

(a) A complete, chronological well 

history; 

(b) A copy of all logs; 

(c) Copies of all directional surveys; 

and 

(d) Copies of all mechanical, flow, 

reservoir, and other test data. 

§ 3264.11 What must I submit to BLM after 

I finish subsequent well operations? 

(a) Submit to BLM a subsequent well 

operations report within 30 days after 

completing operations. At a minimum, 

this report must include: 

(1) A complete, chronological history 

of the work done; 

(2) A copy of all logs; 

(3) Copies of all directional surveys; 

(4) The results of all sampling, tests, 

or surveys we require you to make (see 

§ 3262.14); 

(4) Copies of all mechanical, flow, 

reservoir, and other test data; and 

(5) A statement of whether you 

achieved your goals. For example, if the 

well was acidized to increase 

production, state whether the 

production rate increased when you put 

the well back on line. 

(b) We may waive this reporting 

requirement for work we determine to 

be routine, such as cleanouts, surveys, 

or general maintenance. To request a 

waiver, contact BLM. If you do not 

receive a waiver, you must submit the 

report. 

§ 3264.12 What must I submit to BLM after 

I abandon a well? 

Send us a well abandonment report 

within 30 days after you abandon a 

well. If you plan to restore the site at a 

later date, you may submit a separate 

report within 30 days after completing 

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site restoration. The well abandonment 

report must contain: 

(a) A complete chronology of all work 

done; 

(b) A description of each plug, 

including: 

(1) Type and amount of cement used; 

(2) Depth that the drill pipe or tubing 

was run to set the plug; 

(3) Depth to top of plug; and 

(4) If the plug was verified, whether 

it was done by tagging or pressure 

testing; and 

(c) A description of surface restoration 

procedures. 

§ 3264.13 What drilling and operational 

records must I maintain for each well? 

You must keep the following 

information for each well, and make it 

available for BLM to inspect, upon 

request: 

(a) A complete and accurate drilling 

log, in chronological order; 

(b) All other logs; 

(c) Water or steam analyses; 

(d) Hydrologic or heat flow tests; 

(e) Directional surveys; 

(f) A complete log of all subsequent 

well operations, such as cementing, 

perforating, acidizing, and well 

cleanouts; and 

(g) Any other information regarding 

the well that could affect its status. 

§ 3264.14 How do I notify BLM of 

accidents occurring on my lease? 

You must orally inform us of all 

accidents that affect operations or create 

environmental hazards within 24 hours 

of the accident. When you contact us, 

we may require you to submit a written 

report fully describing the incident. 

Subpart 3265—Inspection, 

Enforcement, and Noncompliance for 

Drilling Operations 

§ 3265.10 What part of my drilling 

operations may BLM inspect? 

(a) BLM may inspect all of your 

Federal drilling operations regardless of 

surface ownership. We will inspect your 

operations for compliance with the 

requirements of § 3200.4. 

(b) BLM may inspect all of your maps, 

well logs, surveys, records, books, and 

accounts related to your Federal drilling 

operations. 

§ 3265.11 What records must I keep 

available for inspection? 

You must keep a complete record of 

all aspects of your activities related to 

your drilling operation available for our 

inspection. Store these records in a 

place which makes them conveniently 

available to us. Examples of records 

which we may inspect include: 

(a) Well logs and maps; 

(b) Records, books, and accounts 

related to your Federal drilling 

operations; 

(c) Directional surveys; 

(d) Records pertaining to casing type 

and setting; 

(e) Records pertaining to formations 

penetrated; 

(f) Well test results; 

(g) Records pertaining to 

characteristics of the geothermal 

resource; 

(h) Records pertaining to emergency 

procedure training; and 

(i) Records pertaining to operational 

problems. 

§ 3265.12 What will BLM do if my 

operations do not comply with my permit 

and applicable regulations? 

(a) We will issue you a written 

Incident of Noncompliance, directing 

you to take required corrective action 

within a specific time period. If the 

noncompliance continues or is of a 

serious nature, we will take one or more 

of the following actions: 

(1) Enter your lease, and correct any 

deficiencies at your expense; 

(2) Collect all or part of your bond; 

(3) Direct modification or shutdown 

of your operations; and 

(4) Take other enforcement action 

under subpart 3213 against a lessee who 

is ultimately responsible for 

noncompliance. 

(b) Noncompliance may result in BLM 

terminating your lease. See § § 3213.17 

through 3213.19. 

Subpart 3266—Confidential, 

Proprietary Information 

§ 3266.10 Will BLM disclose information I 

submit under these regulations? 

All Federal and Indian data and 

information submitted to the BLM are 

subject to part 2 of this title. Part 2 

includes the Department of the Interior 

regulations covering public disclosure 

of data and information contained in 

Department records. Certain mineral 

information not protected from 

disclosure under part 2 of this title may 

be made available for inspection 

without a Freedom of Information Act 

(FOIA) request. BLM will not treat 

surface location, surface elevation, or 

well status information as confidential. 

§ 3266.11 When I submit confidential, 

proprietary information, how can I help 

ensure that it is not available to the public? 

When you submit data and 

information that you believe to be 

exempt from disclosure by part 2 of this 

title, you must clearly mark each page 

that you believe contains confidential 

information. BLM will keep all data and 

information confidential to the extent 

allowed by § 2.13(c) of this title. 

§ 3266.12 How long will information that I 

give BLM remain confidential or 

proprietary? 

The FOIA does not provide a finite 

period of time during which 

information may be exempt from public 

disclosure. BLM reviews each situation 

individually and in accordance with 

part 2 of this title. 

Subpart 3267—Geothermal Drilling 

Operations Relief and Appeals 

§ 3267.10 How do I request a variance 

from BLM requirements that apply to my 

drilling operations? 

(a) You may file a request for a 

variance from the requirements of §

3200.4 for your approved drilling 

operations. Your request must include 

enough information to explain: 

(1) Why you cannot comply with the 

requirements of § 3200.4; and 

(2) Why you need the variance to 

control your well, conserve natural 

resources, or protect public health and 

safety, property, or the environment. 

(b) We may approve your request 

orally or in writing. If BLM gives you an 

oral approval, we will follow up with 

written confirmation. 

§ 3267.11 How may I appeal a BLM 

decision regarding my drilling operations? 

You may appeal our decisions 

regarding your drilling operations in 

accordance with § 3200.5. 

Subpart 3270—Utilization of 

Geothermal Resources—General 

§ 3270.10 What types of geothermal 

operations are governed by these utilization 

regulations? 

(a) The regulations in subparts 3270 

through 3279 of this part cover the 

permitting and operating procedures for 

the utilization of geothermal resources. 

This includes: 

(1) Electrical generation facilities; 

(2) Direct use facilities; 

(3) Related utilization facility 

operations; 

(4) Actual and allocated well field 

production and injection; and 

(5) Related well field operations. 

(b) The utilization regulations in 

subparts 3270 through 3279 do not 

address conducting exploration 

operations, which is covered in subpart 

3250, or drilling wells intended for 

production or injection, which is 

covered in subpart 3260. 

§ 3270.11 What general standards apply 

to my utilization operations? 

Your utilization operations must: 

(a) Meet all operational and 

environmental standards; 

(b) Prevent unnecessary impacts on 

surface and subsurface resources; 

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(c) Result in the maximum ultimate 

recovery of geothermal resources; 

(d) Result in the beneficial use of 

geothermal resources, with minimum 

waste; 

(e) Protect public health, safety, and 

property; and 

(f) Comply with the requirements of §

3200.4. 

§ 3270.12 What other orders or 

instructions may BLM issue? 

BLM may issue: 

(a) Geothermal resource operational 

orders, for detailed requirements that 

apply nationwide; 

(b) Notices to lessees, for detailed 

requirements on a statewide or regional 

basis; 

(c) Other orders and instructions 

specific to a field or area; 

(d) Permit conditions of approval; and 

(e) Oral orders, which BLM will 

confirm in writing. 

Subpart 3271—Utilization Operations: 

Getting a Permit 

§ 3271.10 What do I need to start 

preparing a site and building and testing a 

utilization facility on Federal land leased for 

geothermal resources? 

In order to use Federal land to 

produce geothermal power, you must 

obtain a site license and construction 

permit from BLM before you start 

preparing the site. Send BLM a plan that 

shows what you want to do, and draft 

a proposed site license agreement that 

you think is fair and reasonable. We will 

review your proposal and decide 

whether to give you a permit and 

license to proceed with work on the site. 

§ 3271.11 Who may apply for a permit to 

build a utilization facility? 

The lessee, the facility operator, or the 

unit operator may apply to build a 

utilization facility. 

§ 3271.12 What do I need to start 

preliminary site investigations that may 

disturb the surface? 

(a) You must: 

(1) Fully describe your proposed 

operations in a Sundry Notice; and 

(2) File a bond meeting the 

requirements of either § 3251.14 or §

3273.19. See subparts 3214 and 3215 for 

additional details on bonding 

procedures. 

(b) Do not begin the site investigation 

or surface disturbing activity until BLM 

approves your Sundry Notice and bond. 

§ 3271.13 How do I obtain approval to 

build pipelines and facilities connecting the 

well field to utilization facilities not located 

on Federal lands leased for geothermal 

resources? 

Before constructing pipelines and 

well field facilities on Federal lands 

leased for geothermal resources, you as 

lessee, unit operator, or facility operator 

must submit to BLM a utilization plan 

and facility construction permit 

addressing any pipelines or facilities. 

Do not start construction of your 

pipelines or facilities until BLM 

approves your facility construction 

permit. 

§ 3271.14 What do I need to do to start 

building and testing a utilization facility if it 

is not located on Federal lands leased for 

geothermal resources? 

(a) You do not need a BLM permit to 

construct a facility located on either: 

(1) Private land; or 

(2) Lands where the surface is 

privately owned and BLM has leased 

the underlying Federal geothermal 

resources, when the facility will utilize 

Federal geothermal resources. 

(b) Before testing a utilization facility 

that is not located on Federal lands 

leased for geothermal resources, send us 

a Sundry Notice describing the testing 

schedule and the quantity of Federal 

geothermal resources you expect to be 

delivered to the facility during the 

testing. Do not start delivering Federal 

geothermal resources to the facility until 

we approve your Sundry Notice. 

§ 3271.15 How do I get a permit to begin 

commercial operations? 

Before using Federal geothermal 

resources, you as lessee, operator, or 

facility operator must send us a 

completed commercial use permit (see 

§ 3274.11). This also applies when you 

use Federal resources allocated through 

any form of agreement. Do not start any 

commercial use operations until BLM 

approves your commercial use permit. 

Subpart 3272—Utilization Plans and 

Facility Construction Permits 

§ 3272.10 What must I submit to BLM in 

my utilization plan? 

Submit to BLM an application 

describing: 

(a) The proposed facilities as required 

by § 3272.11; and 

(b) The anticipated environmental 

impacts and how you propose to 

mitigate those impacts, as required by §

3272.12. 

§ 3272.11 How do I describe the proposed 

utilization facility? 

Your submission must include: 

(a) A generalized description of all 

proposed structures and facilities, 

including their size, location, and 

function; 

(b) A generalized description of 

proposed facility operations, including 

estimated total production and injection 

rates; estimated well flow rates, 

pressures, and temperatures; facility net 

and gross electrical generation; and, if 

applicable, interconnection with other 

utilization facilities. If it is a direct use 

facility, send us the information we 

need to determine the amount of 

resource utilized; 

(c) A contour map of the entire 

utilization site, showing production and 

injection well pads, pipeline routes, 

facility locations, drainage structures, 

existing and planned access, and lateral 

roads; 

(d) A description of site preparation 

and associated surface disturbance, 

including the source for site or road 

building materials, amounts of cut and 

fill, drainage structures, analysis of all 

site evaluation studies prepared for the 

site(s), and a description of any 

additional tests, studies, or surveys 

which are planned to assess the geologic 

suitability of the site(s); 

(e) The source, quality, and proposed 

consumption rate of water to be used 

during facility operations, and the 

source and quantity of water to be used 

during facility construction; 

(f) The methods for meeting air 

quality standards during facility 

construction and operation, especially 

standards concerning non-condensable 

gases; 

(g) An estimated number of personnel 

needed during construction and 

operation of the facility; 

(h) A construction schedule; 

(i) A schedule for testing of the 

facility and/or well equipment, and for 

the start of commercial operations; 

(j) A description of architectural 

landscaping or other measures to 

minimize visual impacts; and 

(k) Any additional information or data 

that we may require. 

§ 3272.12 What environmental protection 

measures must I include in my utilization 

plan? 

(a) Describe, at a minimum, your 

proposed measures to: 

(1) Prevent or control fires; 

(2) Prevent soil erosion; 

(3) Protect surface or ground water; 

(4) Protect fish and wildlife; 

(5) Protect cultural, visual, and other 

natural resources; 

(6) Minimize air and noise pollution; 

and 

(7) Minimize hazards to public health 

and safety during normal operations. 

(b) If BLM requires it, you must also 

describe how you will monitor your 

facility operations to ensure that they 

comply with the requirements of §

3200.4, and applicable noise, air, and 

water quality standards, at all times. We 

will consult with other involved surface 

management agencies, if any, regarding 

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monitoring requirements. You must also 

include provisions for monitoring other 

environmental parameters we may 

require. (c) Based on what level of impacts 

that BLM finds your operations may 

cause, we may require you to collect 

data concerning existing air and water 

quality, noise, seismicity, subsidence, 

ecological systems, or other 

environmental information for up to 1 

year before you begin operating. BLM 

must approve your data collection 

methodologies, and will consult with 

any other surface managing agencies 

involved. 

(d) You must also describe how you 

will abandon utilization facilities and 

restore the site, in order to comply with 

the requirements of § 3200.4. (e) Finally, you must submit any 

additional information or data that BLM 

may require. 

§ 3272.13 How will BLM review my 

utilization plan and notify me of its 

decision? 

(a) When BLM receives your 

utilization plan, we will make sure it is 

complete and review it for compliance 

with § 3200.4. 

(b) If another Federal agency manages 

the surface of your lease, we will 

consult with that agency as part of the 

plan review. (c) If we need any further information 

to complete our review, we will contact 

you in writing and suspend our review 

until we receive the information. 

(d) We will notify you in writing of 

our decision on your plan. 

§ 3272.14 How do I get a permit to build 

or test my facility? 

(a) Before building or testing a 

utilization facility, you must submit to 

BLM a: 

(1) Utilization plan; 

(2) Completed and signed facility 

construction permit; and (3) Completed and signed site license. 

(See subpart 3273.) (b) Do not start building or testing 

your utilization facility until we have 

approved both your facility construction 

permit and your site license. (c) After our review, we will notify 

you whether we have approved or 

denied your permit, as well as of any 

conditions we require for conducting 

operations. 

Subpart 3273—How To Apply for a Site 

License 

§ 3273.10 When do I need a site license 

for a utilization facility? 

You must obtain a site license 

approved by BLM, unless your facility 

will be located on lands leased as 

described in § 3273.11. Do not start 

building or testing your utilization 

facility on public lands leased for 

geothermal resources until BLM has 

approved both your facility construction 

permit (see § 3272.14) and your site 

license. The facility operator must apply 

for the license. 

§ 3273.11 When is a site license 

unnecessary? 

You do not need a site license if your 

facility will be located: (a) On private land or on split estate 

land where the United States does not 

own the surface; or 

(b) On Federal land not leased for 

geothermal resources. In this situation, 

the Federal surface management agency 

will issue you the permit you need. 

§ 3273.12 How will BLM review my site 

license application? 

(a) When BLM receives your site 

license application, we will make sure 

it is complete. If we need more 

information for our review, we will ask 

you for that information and stop our 

review until we receive the information. 

(b) If your site license is located on 

geothermal leases where the surface is 

managed by the Department of 

Agriculture, we will consult with that 

agency and obtain concurrence before 

we approve your application. The 

agency may require additional license 

terms and conditions. 

(c) If the land is subject to section 24 

of the Federal Power Act, we will issue 

the site license with the terms and 

conditions requested by the Federal 

Energy Regulatory Commission. (d) If another Federal agency manages 

the surface, we will consult with them 

to determine if they recommend 

additional license terms and conditions. 

(e) After our review, we will notify 

you whether we approved or denied 

your license, as well as any additional 

conditions we require. 

§ 3273.13 What lands are not available for 

geothermal site licenses? 

BLM will not issue site licenses under 

these regulations for lands that are not 

leased or not available for geothermal 

leasing (see § 3201.11). 

§ 3273.14 What area does a site license 

cover? 

A site license covers a reasonably 

compact tract of Federal land, limited to 

as much of the surface as is necessary 

to utilize geothermal resources. That 

means the site license area will only 

include the utilization facility itself and 

other necessary structures, such as 

substations and processing, repair, or 

storage facility areas. 

§ 3273.15 What must I include in my site 

license application? 

Your site license application must 

include: 

(a) A description of the boundaries of 

the land applied for, as determined by 

a certified licensed surveyor. Describe 

the land by legal subdivision, section, 

township and range, or by approved 

protraction surveys, if applicable; 

(b) The affected acreage; 

(c) A non-refundable filing fee of $50; 

(d) A site license bond (see §

3273.19); 

(e) The first year’s rent, if applicable 

(see § 3273.18); and 

(f) Documentation that the lessee or 

unit operator accepts the siting of the 

facility, if the facility operator is neither 

the lessee nor the unit operator. 

§ 3273.16 What is the annual rent for a 

site license? 

BLM will specify the annual rent in 

your license and the date you must pay 

it, if you are required to pay rent (see 

§ 3273.18). Your rent will be at least 

$100 per acre or fraction thereof for an 

electrical generation facility, and at least 

$10 per acre or fraction thereof for a 

direct use facility. Send the first year’s 

rent to BLM, and all subsequent rental 

payments to MMS under 30 CFR part 

218. 

§ 3273.17 When may BLM reassess the 

annual rent for my site license? 

BLM may reassess the rent for lands 

covered by the license, beginning with 

the 10th year and every 10 years after 

that. 

§ 3273.18 What facility operators must 

pay the annual site license rent? 

If you are a lessee siting a utilization 

facility on your own lease, or a unit 

operator siting a utilization facility on 

leases committed to the unit, you are 

not required to pay rent. Only a facility 

operator who is not also a lessee or unit 

operator must pay rent. 

§ 3273.19 What are the bonding 

requirements for a site license? 

(a) For an electrical generation 

facility, the facility operator must 

submit a surety or personal bond to 

BLM for at least $100,000 that meets the 

requirements of subpart 3214.BLM may 

increase the required bond amount. See 

subparts 3214 and 3215 for additional 

details on bonding procedures. 

(b) For a direct use facility, the facility 

operator must submit a surety or 

personal bond to BLM that meets the 

requirements of subpart 3214 in an 

amount BLM will specify. 

(c) The bond’s terms must cover 

compliance with the requirements of §

3200.4. 

(d) Until BLM approves your bond, do 

not start construction, testing, or any 

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other activity that would disturb the 

surface. 

§ 3273.20 When will BLM release my 

bond? 

We will release your bond after you 

request it and we determine that you 

have: 

(a) Removed the utilization facility 

and all associated equipment; 

(b) Reclaimed the land; and 

(c) Met all the requirements of §

3200.4. 

§ 3273.21 What are my obligations under 

the site license? 

As the facility operator, you: 

(a) Must comply with the 

requirements of § 3200.4; 

(b) Are liable for all damages to the 

lands, property, or resources of the 

United States caused by yourself, your 

employees, or your contractors or their 

employees; 

(c) Must indemnify the United States 

against any liability for damages or 

injury to persons or property arising 

from the occupancy or use of the lands 

authorized under the site license; and 

(d) Must restore any disturbed 

surface, and remove all structures when 

they are no longer needed for facility 

construction or operation. This includes 

the utilization facility if you cannot 

operate the facility and you are not 

diligent in your efforts to return the 

facility to operation. 

§ 3273.22 How long will my site license 

remain in effect? 

(a) The primary term of a site license 

is 30 years, with a preferential right to 

renew the license under terms and 

conditions set by BLM. 

(b) If your lease on which the licensed 

site is located ends, you may apply for 

a facility permit under Section 501 of 

FLPMA, 43 U.S.C. 1761, if your facility 

is on BLM-managed lands. Otherwise, 

you must get permission from the 

surface management agency to continue 

using the surface for your facility. 

§ 3273.23 May I renew my site license? 

(a) You have a preferential right to 

renew your site license under terms and 

conditions BLM determines. 

(b) If your site license is located on 

leased lands managed by the 

Department of Agriculture, we will 

consult with the surface management 

agency and obtain concurrence before 

renewing your license. The agency may 

require additional license terms and 

conditions. If another Federal agency 

manages the surface, we will consult 

with them before granting your renewal. 

§ 3273.24 When may BLM terminate my 

site license? 

(a) BLM may terminate a site license 

by written order. We may terminate 

your site license if you: 

(1) Do not comply with the 

requirements of § 3270.11; or 

(2) Do not comply with the 

requirements of § 3200.4. 

(b) To prevent termination, you must 

correct the violation within 30 days 

after you receive a correction order from 

BLM, unless we determine that: 

(1) The violation cannot be corrected 

within 30 days; and 

(2) You are diligently attempting to 

correct it. 

§ 3273.25 When may I relinquish my site 

license? 

You may request approval to 

relinquish your site license by sending 

BLM a written notice requesting 

relinquishment review and approval. 

We will not approve the relinquishment 

until you comply with § 3273.21. 

§ 3273.26 When may I assign or transfer 

my site license? 

You may assign or transfer your site 

license in whole or in part. Send BLM 

your completed and signed transfer 

application and a $50 filing fee. Your 

application must include a written 

statement that the transferee will 

comply with all license terms and 

conditions, and that the lessee accepts 

the transfer. The transferee must submit 

a bond meeting the requirements of §

3273.19. The transfer is not effective 

until we approve the bond and site 

license transfer. 

Subpart 3274—Applying for and 

Obtaining a Commercial Use Permit 

§ 3274.10 Do I need a commercial use 

permit to start commercial operations? 

You must have a commercial use 

permit approved by BLM before you 

begin commercial operations from a 

Federal lease, a Federal unit, or a 

utilization facility. 

§ 3274.11 What must I give BLM to 

approve my commercial use permit 

application? 

Submit a completed and signed 

commercial permit form, to BLM, 

containing the following information: 

(a) The design specifications, and the 

inspection and calibration schedule of 

production, injection, and royalty 

meters; 

(b) A schematic diagram of the 

utilization site or individual well, 

showing the location of each production 

and royalty meter. If the sales point is 

located off the utilization site, give us a 

generalized schematic diagram of the 

electrical transmission or pipeline 

system, including meter locations; 

(c) A copy of the sales contract for the 

sale and/or utilization of geothermal 

resources; 

(d) A description and analysis of 

reservoir, production, and injection 

characteristics, including the flow rates, 

temperatures, and pressures of each 

production and injection well; 

(e) A schematic diagram of each 

production and injection well showing 

the wellhead configuration, including 

meters; 

(f) A schematic flow diagram of the 

utilization facility, including 

interconnections with other facilities, if 

applicable; 

(g) A description of the utilization 

process in sufficient detail to enable 

BLM to determine whether the resource 

will be utilized in a manner consistent 

with law and regulations; 

(h) The planned safety provisions for 

emergency shutdown to protect public 

health, safety, property, and the 

environment. This should include a 

schedule for the testing and 

maintenance of safety devices; 

(i) The environmental and operational 

parameters that will be monitored 

during the operation of the facility and/ 

or well(s); and 

(j) Any additional information or data 

that we may require. 

§ 3274.12 How will BLM review my 

commercial use permit application? 

(a) When BLM receives your 

completed and signed commercial use 

permit application, we will make sure it 

is complete and review it for 

compliance with § 3200.4. 

(b) If another Federal agency manages 

the surface of your lease, we will 

consult with that agency before we 

approve your commercial use permit. 

(c) We will review your commercial 

use permit to make sure it conforms 

with your utilization plan and any 

mitigation measures we developed 

while reviewing your plan. 

(d) We will check your commercial 

use permit for technical adequacy, and 

will ensure that your meters meet the 

accuracy standards (see § § 3275.14 and 

3275.15). 

(e) If we need any further information 

to complete our review, we will contact 

you in writing and suspend our review 

until we receive the information. 

(f) After our review, we will notify 

you whether your permit has been 

approved or denied, as well as any 

conditions of approval. 

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§ 3274.13 May I get a permit even if I 

cannot currently demonstrate I can operate 

within required standards? 

Yes, but we may limit your operations 

to a prescribed set of activities and a set 

period of time, during which we will 

give you a chance to show you can 

operate within environmental and 

operational standards, based on actual 

facility and well data you collect. Send 

us a Sundry Notice to get BLM approval 

for extending your permit. If during this 

set time period you still cannot 

demonstrate your ability to operate 

within the required standards, we will 

terminate your authorization. You must 

then stop all operations and restore the 

surface to the standards we set in the 

termination notice. 

Subpart 3275—Conducting Utilization 

Operations 

§ 3275.10 How do I change my operations 

if I have an approved facility construction 

or commercial use permit? 

Send BLM a completed and signed 

Sundry Notice describing your proposed 

change. Until we approve your Sundry 

Notice, you must continue to comply 

with the original permit terms. 

§ 3275.11 What are a facility operator’s 

obligations? 

You must: 

(a) Keep the facility in proper 

operating condition at all times by; (1) Conducting training during your 

operation to ensure that your personnel 

are capable of performing emergency 

procedures quickly and effectively; (2) Using properly maintained 

equipment; and (3) Using operational practices that 

allow for quick and effective emergency 

response. (b) Base the design of the utilization 

facility siting and operation on sound 

engineering principles and other 

pertinent geologic and engineering data; (c) Prevent waste of, or damage to, 

geothermal and other energy and 

minerals resources; and 

(d) Comply with the requirements of 

§ 3200.4. 

§ 3275.12 What environmental and safety 

requirements apply to facility operations? 

(a) You must perform all utilization 

facility operations in a manner that: (1) Protects the quality of surface and 

subsurface waters, air, and other natural 

resources, including wildlife, soil, 

vegetation, and natural history; (2) Prevents unnecessary or undue 

degradation of the lands; (3) Protects the quality of cultural, 

scenic, and recreational resources; 

(4) Accommodates other land uses as 

much as possible; (5) Minimizes noise; 

(6) Prevents injury; and 

(7) Prevents damage to property. 

(b) You must monitor facility 

operations to identify and address local 

environmental resources and concerns 

associated with your facility or lease 

operations. 

(c) You must remove or, with BLM 

approval, properly store all equipment 

and materials not in use. 

(d) You must properly abandon the 

facility and reclaim any disturbed 

surface to standards approved or 

prescribed by us, when the land is no 

longer needed for facility construction 

or operation. 

(e) When we require, you must submit 

a contingency plan describing 

procedures to protect public health and 

safety, property, and the environment. 

(f) You must comply with the 

requirements of § 3200.4. 

§ 3275.13 How must the facility operator 

measure the geothermal resources? 

The facility operator must: 

(a) Measure all production, injection 

and utilization in accordance with 

methods and standards approved by 

BLM (see § 3275.15); 

(b) Maintain and test all metering 

equipment. If your equipment is 

defective or out of tolerance, you must 

promptly recalibrate, repair, or replace 

it; and 

(c) Determine the amount of 

production and/or utilization in 

accordance with methods and 

procedures approved by BLM (see §

3275.17). 

§ 3275.14 What aspects of my geothermal 

operations must I measure? 

(a) For all well operations, you must 

measure wellhead flow, wellhead 

temperature, and wellhead pressure. 

(b) For all electrical generation 

facilities, you must measure: 

(1) Steam and/or hot water flow 

entering the facility; 

(2) Temperature of the water and/or 

steam entering the facility; 

(3) Pressure of the water and/or steam 

entering the facility; 

(4) Gross electricity generated; 

(5) Net electricity at the facility 

tailgate; 

(6) Electricity delivered to the sales 

point; and 

(7) Temperature of the steam and/or 

hot water exiting the facility. 

(c) For direct use facilities, you must 

measure: 

(1) Flow of steam and/or hot water; 

and 

(2) Temperature of the steam or water 

entering the facility. 

(d) We may also require additional 

measurements, depending on the type of 

facility, the type and quality of the 

resource, and the terms of the sales 

contract. 

§ 3275.15 How accurately must I measure 

my production and utilization? 

It depends on whether you use a 

meter to calculate Federal production or 

royalty, and what quantity of resource 

you are measuring. 

(a) For meters that you use to 

calculate Federal royalty: 

(1) If the meter measures electricity, it 

must have an accuracy of <plusminus≤0.25% or better of reading; 

(2) If the meter measures steam 

flowing at more than 100,000 lbs/hr on 

a monthly basis, it must have an 

accuracy reading of <plus-minus≤2 

percent or better; 

(3) If the meter measures steam 

flowing at less than 100,000 lbs/hr on a 

monthly basis, it must have an accuracy 

reading of <plus-minus≤4 percent or 

better; 

(4) If the meter measures water 

flowing at more than 500,000 lbs/hr on 

a monthly basis, it must have an 

accuracy reading of <plus-minus≤2 

percent or better; 

(5) If the meter measures water 

flowing at 500,000 lbs/hr or less on a 

monthly basis, it must have an accuracy 

reading of <plus-minus≤4 percent or 

better; 

(6) If the meter measures heat content, 

it must have an accuracy reading of 

<plus-minus≤4 percent, or better; or 

(7) If the meter measures two-phase 

flow at any rate, BLM will determine 

and inform you of the meter accuracy 

requirements. You must obtain our prior 

written approval before installing and 

using meters for two-phase flow. 

(b) Any meters that you do not use to 

calculate Federal royalty are considered 

production meters, which must 

maintain an accuracy of <plus-minus≤5 

percent or better. 

(c) We may modify these 

requirements as necessary to protect the 

interests of the United States. 

§ 3275.16 What standards apply to 

installing and maintaining meters? 

(a) You must install and maintain all 

meters that we require, either according 

to the manufacturer’s recommendations 

and specifications or paragraphs (b) 

through (e) of this section, whichever 

are more restrictive. 

(b) If you use an orifice plate to 

calculate Federal royalty, the orifice 

plate installation must comply with 

‘‘API Manual of Petroleum 

Measurement Standards, Chapter 14, 

Section 3, Part 2, Fourth Edition, April 

2000.’’ 

(c) For meters used to calculate 

Federal royalty, you must calibrate the 

meter against a known standard as 

follows: 

(1) You must annually calibrate 

meters measuring electricity; 

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(2) You must calibrate meters 

measuring steam or hot water flow with 

a turbine, vortex, ultrasonics, or other 

linear devices, every 6 months, or as 

recommended by the manufacturer, 

whichever is more frequent; and 

(3) You must calibrate meters 

measuring steam or hot water flow with 

an orifice plate, venturi, pitot tube, or 

other differential device, every month, 

and you must inspect and repair the 

primary device (orifice plate, venturi, 

pitot tube) annually. 

(d) You must use calibration 

equipment that is more accurate than 

the equipment you are calibrating. 

(e) BLM may modify any of these 

requirements as necessary to protect the 

resources of the United States. 

§ 3275.17 What must I do if I find an error 

in a meter? 

(a) If you find an error in a meter used 

to calculate Federal royalty, you must 

correct the error immediately and notify 

BLM by the next working day of its 

discovery. 

(b) If the meter is not used to calculate 

Federal royalty, you must correct the 

error and notify us within 3 working 

days after its discovery. 

(c) If correcting the error will cause a 

change in the sales quantity of more 

than 2 percent for the month(s) in which 

the error occurred, you must adjust the 

sales quantity for that month(s) and 

submit an amended facility report to us 

within 3 working days. 

§ 3275.18 May BLM require me to test for 

byproducts associated with geothermal 

resource production? 

You must conduct any tests we 

require, including tests for byproducts, 

if we find it necessary to require such 

tests for a given operation. 

§ 3275.19 How do I apply to commingle 

production? 

To request approval to commingle 

production, send us a completed and 

signed Sundry Notice. We will review 

your request to commingle production 

from wells on your lease with 

production from your other leases or 

from leases where you do not have an 

interest. Do not commingle production 

until we have approved your Sundry 

Notice. 

§ 3275.20 What will BLM do if I waste 

geothermal resources? 

We will determine the amount of any 

resources you have lost through waste. 

If you did not take all reasonable 

precautions to prevent waste, we will 

require you to pay compensation based 

on the value of the lost production. If 

BLM finds that you have not adequately 

corrected the situation, we will follow 

the noncompliance procedures in §

3277.12. 

§ 3275.21 May BLM order me to drill and 

produce wells on my lease? 

BLM may order you to drill and 

produce wells on your lease when we 

find it necessary to protect Federal 

interests, prevent drainage, or ensure 

that lease development and production 

occur in accordance with sound 

operating practices. 

Subpart 3276—Reports: Utilization 

Operations 

§ 3276.10 What are the reporting 

requirements for facility and lease 

operations involving Federal geothermal 

resources? 

(a) When you begin commercial 

production and operation, you must 

notify BLM in writing within 5 business 

days. 

(b) Submit completed and signed 

monthly reports thereafter to BLM as 

follows: 

(1) If you are a lessee or unit operator 

supplying Federal geothermal resources 

to a utilization facility on Federal land 

leased for geothermal resources, submit 

a monthly report of well operations for 

all wells on your lease or unit; 

(2) If you are the operator of a 

utilization facility on Federal land 

leased for geothermal resources, submit 

a monthly report of facility operations; 

(3) If you are both a lessee or unit 

operator and the operator of a utilization 

facility on Federal land leased for 

geothermal resources, you may combine 

the requirements of paragraphs (b)(1) 

and (b)(2) of this section into one report; 

or 

(4) If you are a lessee or unit operator 

supplying Federal geothermal resources 

to a utilization facility not located on 

Federal land leased for geothermal 

resources, and the sales point for the 

resource utilized is at the facility 

tailgate, submit all the requirements of 

paragraphs (b)(1) and (b)(2) of this 

section. You may combine these into 

one report. 

(c) Unless BLM grants a variance, 

your reports must be received by BLM 

by the end of the month following the 

month that the report covers. For 

example, the report covering the month 

of July is due by August 31. 

§ 3276.11 What information must I include 

for each well in the monthly report of well 

operations? 

(a) Any drilling operations or changes 

made to a well; 

(b) Total production or injection in 

thousands of pounds (klbs); 

(c) Production or injection 

temperature in degrees Fahrenheit (deg. 

F); 

(d) Production or injection pressure in 

pounds per square inch (psi). You must 

also specify whether this is gauge 

pressure (psig) or absolute pressure 

(psia); 

(e) The number of days the well was 

producing or injecting; 

(f) The well status at the end of the 

month; 

(g) The amount of steam or hot water 

lost to venting or leakage, if the amount 

is greater than 0.5 percent of total lease 

production. We may modify this 

standard by a written order describing 

the change; 

(h) The lease number or unit name 

where the well is located; 

(i) The month and year to which the 

report applies; 

(j) Your name, title, signature, and a 

phone number where BLM may contact 

you; and 

(k) Any other information that we 

may require. 

§ 3276.12 What information must I give 

BLM in the monthly report for facility 

operations? 

(a) For all electrical generation 

facilities, include in your monthly 

report of facility operations: 

(1) Mass of steam and/or hot water, in 

klbs, used or brought into the facility. 

For facilities using both steam and hot 

water, you must report the mass of each; 

(2) The temperature of the steam or 

hot water in deg. F; 

(3) The pressure of the steam or hot 

water in psi. You must also specify 

whether this is psig or psia; 

(4) Gross generation in kilowatt hours 

(kwh); 

(5) Net generation at the tailgate of the 

facility in kwh; 

(6) Temperature in deg. F and volume 

of the steam or hot water exiting the 

facility; 

(7) The number of hours the plant was 

on line; 

(8) A brief description of any outages; 

and 

(9) Any other information we may 

require. 

(b) For electrical generation facilities 

where Federal royalty is based on the 

sale of electricity to a utility, in addition 

to the information required under 

paragraph (a) of this section, you must 

include the following information in 

your monthly report of facility 

operations: 

(1) Amount of electricity delivered to 

the sales point in kwh, if the sales point 

is different from the tailgate of the 

facility; 

(2) Amount of electricity lost to 

transmission; 

(3) A report from the utility 

purchasing the electricity documenting 

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the total number of kwh delivered to the 

sales point during the month, or 

monthly reporting period if it is not a 

calendar month, and the number of kwh 

delivered during diurnal and seasonal 

pricing periods; and 

(4) Any other information we may 

require. 

§ 3276.13 What additional information 

must I give BLM in the monthly report for 

flash and dry steam facilities? 

In addition to the regular monthly 

report information required by §

3276.12, send to BLM: 

(a) Steam flow into the turbine in 

klbs; for dual flash facilities, you must 

separate the steam flow into high 

pressure steam and low pressure steam; 

(b) Condenser pressure in psia; 

(c) Condenser temperature in deg. F; 

(d) Auxiliary steam flow used for gas 

ejectors, steam seals, pumps, etc., in 

klbs; 

(e) Flow of condensate out of the 

plant (after the cooling towers) in klbs; 

and 

(f) Any other information we may 

require. 

§ 3276.14 What information must I give 

BLM in the monthly report for direct use 

facilities? 

(a) Total monthly flow through the 

facility in thousands of gallons (kgal) or 

klbs; 

(b) Monthly average temperature in, 

in deg. F; 

(c) Number of hours that geothermal 

heat was used; and 

(d) Any other information we may 

require. 

§ 3276.15 How must I notify BLM of 

accidents occurring at my utilization 

facility? 

You must orally inform us of all 

accidents that affect operations or create 

environmental hazards within 24 hours 

after each accident. When you contact 

us, we may require you to submit a 

written report fully describing the 

incident. 

Subpart 3277—Inspections, 

Enforcement, and Noncompliance 

§ 3277.10 When will BLM inspect my 

operations? 

BLM may inspect all operations to 

ensure compliance with the 

requirements of § 3200.4. You must 

give us access during normal operating 

hours to inspect all facilities utilizing 

Federal geothermal resources. 

§ 3277.11 What records must I keep 

available for inspection? 

(a) The operator or facility operator 

must keep all records and information 

pertaining to the operation of your 

utilization facility, royalty and 

production meters, and safety training 

available for BLM inspection for a 

period of 6 years following the time the 

records and information are created. 

(b) This requirement also pertains to 

records and information from meters 

located off your lease or unit, when 

BLM needs them to determine: 

(1) Resource production to a 

utilization facility; or 

(2) The allocation of resource 

production to your lease or unit. 

(c) Store all of these records in a place 

where they are conveniently available. 

§ 3277.12 What will BLM do if I do not 

comply with all BLM requirements 

pertaining to utilization operations? 

(a) We will issue you a written 

Incident of Noncompliance, directing 

you to take required corrective action 

within a specific time period. If the 

noncompliance continues or is serious 

in nature, BLM will take one or more of 

the following actions: 

(1) Enter the lease, and correct any 

deficiencies at your expense; 

(2) Collect all or part of your bond; 

(3) Order modification or shutdown of 

your operations; and 

(4) Take other enforcement action 

against a lessee who is ultimately 

responsible for the noncompliance. 

(b) Noncompliance may result in BLM 

terminating your lease (see § § 3213.17 

through 3213.19). 

Subpart 3278—Confidential, 

Proprietary Information 

§ 3278.10 When will BLM disclose 

information I submit under these 

regulations? 

All Federal and Indian data and 

information submitted to BLM are 

subject to part 2 of this title. Part 2 

includes the regulations of the 

Department of the Interior covering 

public disclosure of data and 

information contained in Department 

records. Certain mineral information not 

protected from disclosure under part 2 

may be made available for inspection 

without a Freedom of Information Act 

(FOIA) request. Examples of information 

we will not treat as confidential include: 

(a) Facility location; 

(b) Facility generation capacity; or 

(c) To whom you are selling 

electricity or produced resources. 

§ 3278.11 When I submit confidential, 

proprietary information, how can I help 

ensure it is not available to the public? 

When you submit data and 

information that you believe to be 

exempt from disclosure under part 2 of 

this title, you must clearly mark each 

page that you believe contains 

confidential information. BLM will keep 

all data and information confidential to 

the extent allowed by § 2.13(c) of this 

title. 

§ 3278.12 How long will information I give 

BLM remain confidential or proprietary? 

The FOIA does not provide a finite 

period of time during which 

information may be exempt from public 

disclosure. BLM will review each 

situation individually and in 

accordance with part 2 of this title. 

Subpart 3279—Utilization Relief and 

Appeals 

§ 3279.10 When may I request a variance 

from BLM requirements pertaining to 

utilization operations? 

(a) You may file a request with BLM 

for a variance for your approved 

utilization operations from the 

requirements of § 3200.4. Your request 

must include enough information to 

explain: 

(1) Why you cannot comply with the 

requirements; and 

(2) Why you need the variance to 

operate your facility, conserve natural 

resources, or protect public health and 

safety, property, or the environment. 

(b) We may approve your request 

orally or in writing. If we give you oral 

approval, we will follow up with 

written confirmation. 

§ 3279.11 How may I appeal a BLM 

decision regarding my utilization 

operations? 

You may appeal our decision affecting 

your utilization operations in 

accordance with § 3200.5. 

■ 4. Revise part 3280 to read as follows: 

PART 3280—GEOTHERMAL 

RESOURCES UNIT AGREEMENTS 

Subpart 3280—Geothermal Resources Unit 

Agreements—General 

Sec. 

3280.1 What is the purpose and scope of this 

part? 

3280.2 Definitions. 

3280.3 What is BLM’s general policy 

regarding the formation of unit 

agreements? 

3280.4 When may BLM require Federal 

lessees to unitize their leases or require 

a Federal lessee to commit a lease to a 

unit? 

3280.5 May BLM require the modification of 

lease requirements in connection with 

the creation and operation of a unit 

agreement? 

3280.6 When may BLM require a unit 

operator to modify the rate of 

exploration, development, or 

production? 

3280.7 Can BLM require an owner or lessee 

of lands not under Federal 

administration to unitize their lands or 

leases? 

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Subpart 3281—Application, Review, and 

Approval of a Unit Agreement 

3281.1 What steps must I must follow for 

BLM to approve my unit agreement? 

3281.2 What documents must the unit 

operator submit to BLM before we may 

designate a unit area? 

3281.3 What geologic information may a unit 

operator use in proposing a unit area? 

3281.4 What are the size and shape 

requirements for a unit area? 

3281.5 What happens if BLM receives 

applications that include overlapping 

unit areas? 

3281.6 What action will BLM take after 

reviewing a proposed unit area 

designation? 

3281.7 What documents must a unit operator 

submit to BLM before we will approve a 

unit agreement? 

3281.8 Must a unit operator provide working 

interests within the designated unit area 

the opportunity to join the unit? 

3281.9 How does a unit operator provide 

documentation to BLM of lease and tract 

commitment status? 

3281.10 How will BLM determine that I have 

sufficient control of the proposed unit 

area? 

3281.11 What are the unit operator 

qualifications? 

3281.12 Who designates the unit operator? 

3281.13 Is there a format or model a unit 

operator must use when proposing a unit 

agreement? 

3281.14 What minimum requirements and 

terms must be incorporated into the unit 

agreement? 

3281.15 What is the minimum initial unit 

obligation a unit agreement must 

contain? 

3281.16 When must a Plan of Development 

be submitted to BLM? 

3281.17 What information must be provided 

in the Plan of Development? 

3281.18 What action will BLM take in 

reviewing the Plan of Development? 

3281.19 What action will BLM take on a 

proposed unit agreement? 

3281.20 When is a unit agreement effective? 

Subpart 3282—Participating Area 

3282.1 What is a participating area? 

3282.2 When must the unit operator have a 

participating area approved? 

3282.3 When must the unit operator submit 

an application for BLM approval of a 

proposed initial participating area? 

3282.4 What general information must the 

unit operator submit with a proposed 

participating area application? 

3282.5 What technical information must the 

unit operator submit with a proposed 

participating area application? 

3282.6 When must the unit operator propose 

to revise a participating area boundary? 

3282.7 What is the effective date of an initial 

participating area or revision of an 

existing participating area? 

3282.8 What are the reasons BLM would not 

approve a revision of the participating 

area boundary? 

3282.9 How is production allocated within a 

participating area? 

3282.10 When will unleased Federal lands in 

a participating area receive a production 

allocation? 

3282.11 May a participating area continue if 

there is intermittent unit production? 

3282.12 When does a participating area 

terminate? 

Subpart 3283—Modifications to the Unit 

Agreement 

3283.1 When may the unit operator modify 

the unit agreement? 

3283.2 When may the unit operator revise the 

unit contraction provision of a unit 

agreement? 

3283.3 How will the unit operator know the 

status of a unit contraction revision 

request? 

3283.4 When may the unit operator add 

lands to or remove lands from a unit 

agreement? 

3283.5 When will BLM periodically review 

unit agreements? 

3283.6 What is the purpose of BLM’s 

periodic review? 

3283.7 When may unit operators be changed? 

3283.8 What must be filed with BLM to 

change the unit operator? 

3283.9 When is a change of unit operator 

effective? 

3283.10 If there is a change in the unit 

operator, when does the previous 

operator’s liability end? 

3283.11 Do the terms and conditions of a unit 

agreement modify Federal lease 

stipulations? 

3283.12 Are transferees and successors in 

interest of Federal geothermal leases 

bound by the terms and conditions of the 

unit agreement? 

Subpart 3284—Unit Operations 

3284.1 What general standards apply to 

operations within a unit? 

3284.2 What are the principal operational 

responsibilities of the unit operator? 

3284.3 What happens if the minimum initial 

unit obligations are not met? 

3284.4 How are unit agreement terms 

affected after completion of the initial 

unit well? 

3284.5 How do unit operations affect lease 

extensions? 

3284.6 May BLM authorize a working interest 

owner to drill a well on lands committed 

to the unit? 

3284.7 May BLM authorize operations on 

uncommitted Federal leases located 

within a unit? 

3284.8 May a unit have multiple operators? 

3284.9 May BLM set or modify production or 

injection rates? 

3284.10 What must a unit operator do to 

prevent or compensate for drainage? 

3284.11 Must the unit operator develop and 

operate on every lease or tract in the unit 

to comply with the obligations in the 

underlying leases or agreements? 

3284.12 When must the unit operator notify 

BLM of any changes of lease and tract 

commitment status? 

Subpart 3285—Unit Termination 

3285.1 When may BLM terminate a unit 

agreement? 

3285.2 When may BLM approve a voluntary 

termination of a unit agreement? 

Subpart 3286—Model Unit Agreement 

3286.1 Model Unit Agreement. 

Subpart 3287—Relief and Appeals 

3287.1 May the unit operator request a 

suspension of unit obligations or 

development requirements? 

3287.2 When may BLM grant a suspension of 

unit obligations? 

3287.3 How does a suspension of unit 

obligations affect the terms of the unit 

agreement? 

3287.4 May a decision made by BLM under 

this part be appealed? 

Authority: 30 U.S.C. 1001–1028 and 43 

U.S.C. 1701 et seq. 

Subpart 3280—Geothermal Resources 

Unit Agreements—General 

§ 3280.1 What is the purpose and scope 

of this part? 

(a) The purpose of this part is to 

provide holders of Federal and nonFederal geothermal leases and owners of 

non-Federal mineral interests the 

opportunity to unite under a Federal 

geothermal unit agreement to explore 

for and develop geothermal resources in 

a manner that is necessary or advisable 

in the public interest. 

(b) These regulations identify: 

(1) The procedures a prospective unit 

operator must follow to receive BLM 

approval for unit area designation and a 

Federal geothermal unit agreement; 

(2) The operational requirements a 

unit operator must meet once the unit 

agreement is approved; and 

(3) The procedures BLM will follow 

in reviewing, approving, and 

administering a Federal geothermal unit 

agreement. 

§ 3280.2 Definitions. 

The following terms, as used in this 

part or in any agreement approved 

under the regulations in this part, have 

the following meanings unless 

otherwise defined in such agreement: 

Minimum initial unit obligation 

means the requirement to complete at 

least one unit well within the timeframe 

specified in the unit agreement. If this 

requirement is not met, BLM deems the 

unit void as though it was never in 

effect. 

Participating area means that part of 

the unit area that BLM deems to be 

productive from a horizon or deposit, 

and to which production would be 

allocated in the manner described in the 

unit agreement, assuming that all lands 

are committed to the unit agreement. 

Plan of development means the 

document a unit operator submits to 

BLM defining how the unit operator 

will diligently pursue unit exploration 

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and development to meet both initial 

and subsequent unit development and 

public interest obligations. 

Public interest means operations 

within a geothermal unit resulting in: 

(1) Diligent development; 

(2) Efficient exploration, production 

and utilization of the resource; 

(3) Conservation of natural resources; 

and 

(4) Prevention of waste. 

Reasonably proven to produce means 

a sufficient demonstration, based on 

scientific and technical information, 

that lands are contributing to unit 

production in commercial quantities or 

are providing reservoir pressure support 

for unit production. 

Unit agreement means an agreement 

for the exploration, development, 

production, and utilization of separately 

owned interests in the geothermal 

resources made subject thereto as a 

single consolidated unit without regard 

to separate ownerships, which provides 

for the allocation of costs and benefits 

on a basis defined in the agreement or 

plan. 

Unit area means the area described in 

a unit agreement as constituting the 

land logically subject to development 

under such agreement. 

Unit contraction provision means a 

term of a unit agreement providing that 

the boundaries of the unit area will 

contract to the size of the participating 

area, by having those lands outside of 

the participating area removed. BLM 

will contract the unit area if additional 

unit wells are not drilled and completed 

within the timeframe specified in the 

unit agreement. 

Unit operator means the person, 

association, partnership, corporation, or 

other business entity designated under a 

unit agreement to conduct operations on 

unitized land as specified in such 

agreement. 

Unit well means a well that is: 

(1) Designed to produce or utilize 

geothermal resources in commercial 

quantities; 

(2) Drilled and completed to the bona 

fide geologic objective specified in the 

unit agreement, unless a commercial 

resource is found at a shallower depth; 

and 

(3) Located on unitized land. 

Unitized land means the part of a unit 

area committed to a unit agreement. 

Unitized substances means deposits 

of geothermal resources recovered from 

unitized land by operation under and 

pursuant to a unit agreement. 

Working interest means the interest 

held in geothermal resources or in lands 

containing the same by virtue of a lease, 

operating agreement, fee title, or 

otherwise, under which, except as 

otherwise provided in a unit agreement, 

the owner of such interest is vested with 

the right to explore for, develop, 

produce, and utilize such resources. The 

right delegated to the unit operator as 

such by the unit agreement is not to be 

regarded as a working interest. 

§ 3280.3 What is BLM’s general policy 

regarding the formation of unit 

agreements? 

For the purpose of more properly 

conserving the natural resources of any 

geothermal reservoir, field, or like area, 

or any part thereof, lessees and their 

representatives may unite with each 

other, or jointly or separately with 

others, in collectively adopting and 

operating under a unit agreement for the 

reservoir, field, or like area, or any part 

thereof, including direct use resources, 

if BLM determines and certifies this to 

be necessary or advisable in the public 

interest. 

§ 3280.4 When may BLM require Federal 

lessees to unitize their leases or require a 

Federal lessee to commit a lease to a unit? 

(a) BLM may initiate the formation of 

a unit agreement, or require an existing 

Federal lease to commit to a unit 

agreement, if in the public interest. 

(b) BLM may require that Federal 

leases that become effective on or after 

August 8, 2005, contain a provision 

stating that BLM may require 

commitment of the lease to a unit 

agreement, and may prescribe the unit 

agreement to which such lease must 

commit to protect the rights of all 

parties in interest, including the United 

States. 

§ 3280.5 May BLM require the 

modification of lease requirements in 

connection with the creation and operation 

of a unit agreement? 

(a) BLM may, with the consent of the 

lessees involved, establish, alter, 

change, or revoke rates of operations 

(including drilling, operations, 

production, and other requirements) of 

the leases, and make conditions with 

respect to the leases, in connection with 

the creation and operation of any such 

unit agreement as BLM may consider 

necessary or advisable to secure the 

protection of the public interest. 

(b) If leases to be included in a unit 

have unlike lease terms, such leases 

need not be modified to be in the same 

unit. 

§ 3280.6 When may BLM require a unit 

operator to modify the rate of exploration, 

development, or production? 

BLM may require a unit agreement 

applying to lands owned by the United 

States to contain a provision under 

which BLM or an entity designated in 

the unit agreement may alter or modify, 

from time-to-time, the rate of resource 

exploration or development, or 

production quantity or rate, under the 

unit agreement. 

§ 3280.7 Can BLM require an owner or 

lessee of lands not under Federal 

administration to unitize their lands or 

leases? 

BLM cannot require the commitment 

of lands or leases not under Federal 

administration or jurisdiction to a 

Federal unit. 

Subpart 3281—Application, Review, 

and Approval of a Unit Agreement 

§ 3281.1 What steps must I follow for BLM 

to approve my unit agreement? 

Before a unit agreement becomes 

effective, BLM must designate the unit 

area and approve the unit agreement. 

Procedures for designating the unit area 

are set forth in § § 3281.2 through 

3281.6. Procedures for approving the 

unit agreement are set forth in § §

3281.7 through 3281.17. 

§ 3281.2 What documents must the unit 

operator submit to BLM before we may 

designate a unit area? 

(a) The unit operator must submit the 

following documents before BLM may 

designate a proposed unit area: 

(1) A report detailing the geologic 

information and interpretation that 

indicates, to the satisfaction of BLM, the 

proposed area is geologically 

appropriate for unitization; 

(2) A map showing: 

(i) The proposed unit area; 

(ii) All leases (including Federal, 

state, or private) and tracts (unleased 

privately owned land or mineral rights); 

(iii) The Federal lease number and 

lessee; and 

(iv) An individual unit tract number; 

(3) A list which includes the 

following information as to each 

Federal, state, and private lease, and 

tracts of unleased land, to be included 

in the unit: 

(i) The lease number; 

(ii) The legal land description of each 

lease and tract; 

(iii) The acreage of each lease or tract; 

(iv) The lessor and lessee of each 

lease; 

(v) The mineral rights owner of any 

unleased tract; and 

(vi) The total number of acres: 

(A) In the unit area; 

(B) Under Federal administration; and 

(C) In private or other (such as state) 

ownership; and 

(4) Any other information BLM may 

require. 

(b) Before submitting any documents, 

ask BLM how many copies are required. 

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§ 3281.3 What geologic information may a 

unit operator use in proposing a unit area? 

(a) A unit operator may use any 

reasonable geologic information 

necessary to justify its proposed unit 

area. The information must document 

that the proposed unit area is: 

(1) Geologically contiguous; and 

(2) Suitable for resource exploration, 

development and production under a 

unit agreement. 

(b) BLM will decide which 

information and interpretations are 

acceptable. BLM’s acceptance of the 

information and interpretations may 

vary depending on the types and level 

of geologic information available for the 

area. 

§ 3281.4 What are the size and shape 

requirements for a unit area? 

There are no specific size or shape 

requirements for a unit area, except that 

it must meet the requirements of §

3281.3. The size of the unit area may 

affect the minimum initial unit 

obligation requirements (see §

3281.15(b)). 

§ 3281.5 What happens if BLM receives 

applications that include overlapping unit 

areas? 

(a) If BLM receives unit area 

applications that include overlapping 

lands, we will request that each 

prospective unit operator resolve the 

issue with the other operator(s). If the 

prospective operators cannot reach a 

resolution, BLM may: 

(1) Return all unit applications and 

request all applicants to revise their 

proposed unit areas; 

(2) Designate any unit area proposal 

that is geologically appropriate for 

unitization and best meets public 

interest requirements; or 

(3) Designate a different area for 

unitization when doing so is in the 

public interest. 

(b) BLM will reject either an 

application or a portion of an 

application that includes lands already 

in an approved unit area. 

§ 3281.6 What action will BLM take after 

reviewing a proposed unit area 

designation? 

(a) BLM will approve the unit area 

designation in writing and notify the 

prospective unit operator once we 

determine that: 

(1) We have received the information 

required at § 3281.2; 

(2) Information available to BLM 

documents that the area is geologically 

appropriate for unitization; and 

(3) Unitization is appropriate to 

conserve the natural resources of a 

geothermal reservoir, field, or like area, 

or part thereof. 

(b) BLM will notify a prospective unit 

operator in writing if we do not 

designate a proposed unit area. 

§ 3281.7 What documents must a unit 

operator submit to BLM before we will 

approve a unit agreement? 

After BLM approves a unit area 

designation, a unit operator must submit 

the following information in order for 

BLM to approve a unit agreement: (a) Documentation of tract 

commitment (see § § 3281.8 and 

3281.9); 

(b) The unit agreement (see §

3281.15); 

(c) The map required by §

3281.2(a)(2), if any modifications have 

occurred since the unit area was 

designated; (d) The list required by § 3281.2(a)(3) 

indicating whether each lease or tract is 

committed to the unit agreement; and (e) The plan of development. 

§ 3281.8 Must a unit operator provide 

working interests within the designated unit 

area the opportunity to join the unit? 

After BLM designates a unit area, the 

unit operator must invite all owners of 

mineral rights (leased or unleased) and 

lease interests (record title and 

operating rights) in the designated unit 

area to join the unit. The unit operator 

must provide the lease interests and 

mineral rights owners 30 days to 

respond. If an interest or owner does not 

respond, the unit operator must provide 

BLM with written evidence that all the 

interests or owners were invited to join 

the unit. BLM will not approve a unit 

agreement proposal if this evidence is 

not submitted. 

§ 3281.9 How does a unit operator provide 

documentation to BLM of lease and tract 

commitment status? 

(a) The unit operator must provide 

documentation to BLM of the 

commitment status of each lease and 

tract in the designated unit area. The 

documentation must include a joinder 

or other comparable document signed 

by the lessee or mineral rights owner, or 

evidence that an opportunity to join was 

offered and no response was received 

(see § 3281.8). 

(b) A majority interest of owners of 

any single Federal lease has authority to 

commit the lease to a unit agreement. 

§ 3281.10 How will BLM determine that I 

have sufficient control of the proposed unit 

area? 

(a) BLM will determine whether: 

(1) A unit operator has sufficient 

control of the proposed unit area by 

reviewing the number and location of 

leases and tracts committed and their 

geologic potential for development in 

relation to the entire proposed unit area; 

and 

(2) The committed tracts provide the 

unit operator with sufficient control of 

the unit area to conduct resource 

exploration and development in the 

public interest. 

(b) If BLM determines that the unit 

operator does not have sufficient control 

of the unit area, we will not approve the 

unit agreement. 

§ 3281.11 What are the unit operator 

qualifications? 

(a) Before BLM will approve a unit 

agreement, the unit operator must: 

(1) Meet the same qualifications as a 

lessee (see § 3202.10 of this chapter); 

and 

(2) Demonstrate sufficient control of 

the unit area (see § 3281.10). 

(b) A unit operator is not required to 

have an interest in any lease committed 

to the unit agreement. 

§ 3281.12 Who designates the unit 

operator? 

The owners of geothermal rights and 

lease interests committed to the unit 

agreement will nominate a unit 

operator. Before designating the unit 

operator, BLM must also determine 

whether the prospective unit operator 

meets the requirements of § 3281.11. 

§ 3281.13 Is there a format or model a unit 

operator must use when proposing a unit 

agreement? 

When proposing a unit agreement, 

submit to BLM: 

(a) The model unit agreement (see §

3286.1); 

(b) The model unit agreement with 

variances noted; or 

(c) Any unit agreement format that 

contains all the terms and conditions 

BLM requires (see § § 3281.14 and 

3281.15). 

§ 3281.14 What minimum requirements 

and terms must be incorporated into the 

unit agreement? 

(a) The unit agreement must, at a 

minimum: 

(1) State who the unit operator is, and 

that the unit operator and participating 

lessees accept the unit terms and 

obligations set forth in the agreement 

and applicable BLM regulations; 

(2) State the size and general location 

of the unit area; 

(3) Include procedures for revising the 

unit area or participating area(s); 

(4) Include procedures for amending 

the unit agreement; 

(5) State the effective date and term of 

the unit, as provided in paragraph (b) of 

this section; 

(6) Incorporate the minimum initial 

unit obligations, as specified in §

3281.15; 

(7) State that BLM may require a 

modification of the rate of resource 

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exploration or development, or the 

production quantity or rate, within the 

unit area; 

(8) State that the agreement is subject 

to periodic BLM review; 

(9) State that BLM will deem the unit 

agreement as void as if it were never in 

effect if the minimum initial unit 

obligations are not met; 

(10) Include a plan of development; 

and 

(11) Include a unit contraction 

provision. 

(b) The unit agreement must provide 

that it terminates 5 years after its 

effective date unless: 

(1) BLM extends such date of 

expiration; 

(2) Unitized substances are produced 

or utilized in commercial quantities in 

which event the agreement continues 

for so long as unitized substances are 

produced or utilized in commercial 

quantities; or 

(3) BLM terminates the agreement 

under subpart 3285 of this part before 

the end of the 5 year period. 

(c) The agreement may include any 

other provisions or terms that BLM and 

the unit operator agree are necessary for 

proper resource exploration and 

development, and management of the 

unit area. 

§ 3281.15 What is the minimum initial unit 

obligation a unit agreement must contain? 

(a) The unit agreement must: 

(1) Require the unit operator to drill, 

within the timeframe specified in the 

unit agreement, at least one unit well on 

a tract committed to the unit agreement; 

(2) Specify the location and the 

minimum depth and/or geologic 

structure to which the initial unit well 

will be drilled; and 

(3) Require the unit operator, upon 

completing a unit well, to provide to 

BLM in a timely manner the information 

required at § 3264.10 of this chapter. 

(b) Depending on the size of the 

proposed unit area, BLM may require 

the minimum initial unit agreement 

obligation to include the drilling of 

more than one unit well. 

(c) If necessary to aid in the 

evaluation of drilling locations, BLM 

and the unit operator may agree to 

include types of exploration operations 

as part of the initial unit obligation. An 

example of such work is drilling 

temperature gradient wells. 

(d) BLM will not consider any work 

done prior to unit approval for the 

purpose of meeting initial unit 

obligations. 

§ 3281.16 When must a Plan of 

Development be submitted to BLM? 

(a) The prospective unit operator must 

submit an initial Plan of Development at 

the time the unit area is proposed for 

designation. 

(b) Subsequent Plans of Development 

that were not already provided must be 

submitted to address future unit 

activities to be conducted throughout 

the term of the unit agreement. For 

example, if the Plan only addressed 

activities until a unit well is completed, 

the subsequent Plan must address 

activities including the drilling of 

additional unit wells until a producible 

well is completed. Once a producible 

well is completed, the Plan or 

subsequent Plan must address those 

activities related to utilizing the 

resource. 

(c) There is no requirement to submit 

a Plan of Development once unitized 

resources begin commercial operation. 

§ 3281.17 What information must be 

provided in the Plan of Development? 

(a) The Plan of Development must 

state the types of and timeframes for 

activities the unit operator will conduct 

in diligent pursuit of unit exploration 

and development. The Plan may address 

those activities that will be conducted 

until the minimum initial unit 

obligation is met, or it may address all 

activities that will occur through the 

term of the unit agreement. 

(b) The Plan of Development may 

specify that the activities will be 

conducted in phases during the term of 

the unit agreement. For example, the 

number, location, and depth of 

temperature gradient wells, and the 

timeframe for the completion of these 

wells, may be the first phase. A second 

phase may include drilling of 

observation or slim-hole wells to a 

greater depth than that specified in the 

first phase. Completion of the unit well 

may be the third phase. In all cases, the 

Plan of Development must include the 

completion of at least one unit well. 

§ 3281.18 What action will BLM take in 

reviewing the Plan of Development? 

BLM will review the Plan of 

Development to ensure that the types of 

activities and the timeframes for their 

completion meet public interest 

requirements. If BLM determines that 

the Plan of Development does not meet 

these requirements, BLM will negotiate 

with the prospective unit operator to 

revise the proposed activities. BLM will 

not designate a unit area until the Plan 

of Development meets applicable 

requirements. 

§ 3281.19 What action will BLM take on a 

proposed unit agreement? 

BLM will: 

(a) Review the proposed unit 

agreement to ensure that the public 

interest is protected and that the 

agreement conforms to applicable laws 

and regulations; 

(b) Coordinate the review of a 

proposed unit agreement with 

appropriate state agencies, and other 

Federal surface management agencies, if 

applicable; 

(c) Approve the unit agreement and 

provide the unit operator with signed 

copies of the agreement, if we 

determine: 

(1) That the unit operator has 

submitted all required information; 

(2) That the unit agreement and the 

unit operator satisfy all required terms 

and conditions, including the 

requirements specified at § § 3281.14 

and 3281.15, and conform with all 

applicable laws and regulations; and 

(3) That the unit agreement is 

necessary or advisable to meet the 

public interest; 

(d) Notify the unit operator in writing 

if we reject the unit agreement proposal; 

and 

(e) Reject any unit application that 

includes lands already committed to an 

approved unit agreement. 

§ 3281.20 When is a unit agreement 

effective? 

The effective date of the unit 

agreement approval is the first day of 

the month following the date BLM 

approves and signs it. The unit operator 

may request that the effective date be 

the first day of the month in which the 

agreement is signed by BLM, or a more 

appropriate date agreed to by BLM. 

Subpart 3282—Participating Area 

§ 3282.1 What is a participating area? 

(a) A participating area is the 

combined portion of the unitized area 

which BLM determines: 

(1) Is reasonably proven to produce 

geothermal resources; or 

(2) Supports production in 

commercial quantities, such as pressure 

support from injection wells. 

(b) The size and configuration of all 

participating areas and revisions are not 

effective until BLM approves them. 

§ 3282.2 When must the unit operator 

have a participating area approved? 

You must have an established BLMapproved participating area to allocate 

production and royalties before 

beginning commercial operations under 

a unit agreement to allocate production 

within the unit. 

§ 3282.3 When must the unit operator 

submit an application for BLM approval of 

a proposed initial participating area? 

The unit operator must submit an 

application for BLM approval of a 

proposed participating area no later 

than: 

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(a) 60 days after receiving BLM’s 

determination identified in §

3281.15(a)(3) that a unit well will 

produce or utilize in commercial 

quantities; or 

(b) 30 days before the initiation of 

commercial operations, whichever 

occurs earlier. 

§ 3282.4 What general information must 

the unit operator submit with a proposed 

participating area application? 

The unit operator must submit the 

following information with a 

participating area application: 

(a) Technical information supporting 

its application (see § 3282.5); 

(b) The information required in §

3281.2(a)(2) and (3) for the lands in the 

proposed participating area; and 

(c) Any other information BLM may 

require. 

§ 3282.5 What technical information must 

the unit operator submit with a proposed 

participating area application? 

At a minimum, the unit operator must 

submit the following technical 

information with a proposed 

participating area application: 

(a) Documentation that the 

participating area includes: 

(1) The production and injection 

wells necessary for unit operations; 

(2) Unit wells that are capable of 

being produced or utilized in 

commercial quantities; and 

(3) The area each well drains or 

supplies pressure communication. 

(b) Data, including logs, from 

production and injection well testing, if 

not previously submitted under §

3264.10 of this chapter; 

(c) Interpretations of well 

performance, and reservoir geology and 

structure, that document that the lands 

are reasonably proven to produce; and 

(d) Any other information BLM may 

require. 

§ 3282.6 When must the unit operator 

propose to revise a participating area 

boundary? 

(a) The unit operator must submit a 

written application to BLM to revise a 

participating area boundary no later 

than 60 days after receipt of the BLM 

determination described herein, when 

either: 

(1) A well is completed that BLM has 

determined will produce or utilize in 

commercial quantities, and such well: 

(i) Is located outside of an existing 

participating area; or 

(ii) Drains an area outside the existing 

participating area; or 

(2) An injection well located outside 

of an existing participating area is put 

into use that BLM has determined 

provides reservoir pressure support to 

production. 

(b) The unit operator may submit a 

written application for a revision of a 

participating area when new or 

additional technical information or 

revised interpretations of any 

information provides a basis for revising 

the boundary. 

(c) The unit operator may submit a 

written request to BLM to delay a 

participation area revision decision 

when drilling multiple wells in the unit 

is actively pursued or the drilling is 

providing additional technical 

information. A delay will not affect the 

effective date of any participation area 

revision (see § 3282.7). The request 

must include: 

(1) The well locations; 

(2) Anticipated spud and completion 

dates of each well; 

(3) The timing of well testing and 

analyses of technical information; and 

(4) The anticipated date BLM will 

receive the participation area revision 

for review. 

(d) BLM will provide the unit 

operator with a written decision on the 

application to revise a participating area 

or the request to delay a participating 

area revision decision by BLM. 

§ 3282.7 What is the effective date of an 

initial participating area or revision of an 

existing participating area? 

(a) BLM will establish the appropriate 

effective date of an initial participating 

area or any revision to a participating 

area. The effective date may be, but is 

not limited to, the first day of the month 

in which: 

(1) A well is completed that causes 

the participating area to be formed or 

revised; 

(2) Commercial operations start; or 

(3) New or additional technical 

information becomes known that 

provides a basis for revising the 

boundary (such as when production 

from, or injection to, an area outside the 

participating area first became known). 

(b) The unit operator may request 

BLM to approve a specific effective date 

for the participating area or revision, but 

the date may not be earlier than the 

effective date of the unit. 

§ 3282.8 What are the reasons BLM would 

not approve a revision of the participating 

area boundary? 

BLM will not approve a revision of 

the participating area boundary: 

(a) If the unit operator does not 

submit the required information; 

(b) If BLM determines that the new or 

additional technical information does 

not support a boundary revision; or 

(c) If it reduces the size of a 

participating area because of depletion 

of the resource. 

§ 3282.9 How is production allocated 

within a participating area? 

Allocation of production to each 

committed lease or tract within a 

participating area is in the same 

proportion as that lease’s or tract’s 

surface acreage within the participating 

area. 

§ 3282.10 When will unleased Federal 

lands in a participating area receive a 

production allocation? 

Unleased Federal lands within a 

participating area are treated as follows: 

(a) For royalty purposes only, you 

must allocate production to unleased 

Federal lands in the participating area 

as if the acreage were committed to the 

participating area. 

(b) The unit operator is primarily 

liable for paying and must pay royalty 

to the United States for such allocated 

production based on a rate not less than 

the highest royalty rate for any Federal 

lease in the participating area. In the 

event the unit operator does not pay any 

royalties owed under this paragraph, 

each lessee of lands committed to the 

participating area is responsible for 

paying such royalties in the same 

proportion as that lessee’s percentage of 

surface acreage within the participating 

area, excluding the unleased acreage. 

§ 3282.11 May a participating area 

continue if there is intermittent unit 

production? 

A participating area may continue if 

there is intermittent unit production 

only if BLM determines that 

intermittent production is in the public 

interest. For example, a direct use 

facility may only require production to 

occur during winter months. 

§ 3282.12 When does a participating area 

terminate? 

A participating area terminates when 

either: 

(a) The unit operator permanently 

stops operations in or affecting the 

participating area; or 

(b) Sixty (60) days after BLM notifies 

the unit operator in writing that we have 

determined that operations in the 

participating area are not being 

conducted in accordance with the unit 

agreement, the participating area 

approval, or the public interest. If before 

the expiration of the 60 days, the unit 

operator demonstrates to BLM’s 

satisfaction that the basis for BLM’s 

determination is erroneous or has been 

rectified, BLM will not terminate the 

participating area. 

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Subpart 3283—Modifications to the 

Unit Agreement 

§ 3283.1 When may the unit operator 

modify the unit agreement? 

(a) The unit operator may propose to 

modify a unit agreement by submitting 

an application to BLM that: 

(1) Identifies the proposed change and 

the reason for the change; and 

(2) Certifies that all necessary unit 

interests have agreed to the change. 

(b) BLM will send the unit operator 

written notification of BLM’s decision 

regarding the application. Proposed 

modifications to a unit agreement will 

not become effective until BLM 

approves them. BLM’s approval may be 

made effective retroactively to the date 

the application was complete. BLM may 

approve a different effective date, 

including a date the unit operator 

requests and for which the unit operator 

provides acceptable justification. 

§ 3283.2 When may the unit operator 

revise the unit contraction provision of a 

unit agreement? 

(a) The unit operator may submit to 

BLM a request to revise the unit 

contraction provision of a unit 

agreement, if the unit operator has 

either: 

(1) Commenced commercial 

operations of unitized resources; or 

(2) Completed a unit well that 

produces or utilizes geothermal 

resources in commercial quantities. 

(b) The request may propose an 

extension of the unit contraction date 

and/or a partial contraction of the unit 

area, and must include the following 

information: 

(1) The period for which the revision 

is requested; and 

(2) Whether an extension of the unit 

contraction date and/or a partial 

contraction of the unit area is requested. 

(c) The request should address the 

following factors when applicable: 

(1) Economic constraints that limit the 

opportunity to drill and utilize the 

resource from additional wells; 

(2) Reservoir monitoring or injection 

wells that BLM determines are 

necessary for unit operations are not 

located in the participating area; 

(3) An inability to drill additional 

wells is due to circumstances beyond 

the unit operator’s control, and a unit 

well that has produced or utilized in 

commercial quantities already is located 

in the unit; 

(4) The types and intensity of unit 

operations already conducted in the 

unit area; 

(5) The availability of viable electrical 

or resource sales contracts; 

(6) The opportunity to utilize the 

resource economically; or 

(7) Any other information that 

supports revision of the unit contraction 

provision. 

(d) BLM will consider the factors 

discussed along with any other 

information submitted, and will 

approve the request if we determine that 

the revision is in the public interest. 

The approval may be subject to 

conditions such as requiring an annual 

renewal, or setting the timing and 

conditions for when phased 

contractions or termination of the 

revision may occur. 

§ 3283.3 How will the unit operator know 

the status of a unit contraction revision 

request? 

BLM will notify the unit operator in 

writing of our decision. If we approve 

the request, we: 

(a) Will specify the term of the 

contraction extension and/or which 

lands will remain in the unit agreement; 

(b) May require the unit operator to 

update the informational requirements 

of subpart 3282; and 

(c) May terminate the participating 

area contraction revision if we find 

termination is necessary in the public 

interest. 

§ 3283.4 When may the unit operator add 

lands to or remove lands from a unit 

agreement? 

(a) The unit operator may request 

BLM to designate the addition or 

removal of lands to or from a unit 

agreement. 

(b) In order for BLM to complete a 

review of the unit area revision request, 

the unit operator must submit to BLM 

the information required in § § 3281.2, 

3281.3, and 3281.7. 

(c) BLM will: 

(1) Review the request; 

(2) Determine whether the 

information provided is sufficient and 

whether the new or additional geologic 

information or interpretation provides 

an acceptable basis for the unit 

boundary change; and 

(3) Notify the unit operator in writing 

of our decision. 

(d) If BLM approves the revision, the 

unit operator must notify all owners of 

lease interests or mineral rights of the 

unit area revision. 

§ 3283.5 When will BLM periodically 

review unit agreements? 

BLM will periodically review all unit 

agreements to determine compliance 

with § 3283.6 in accordance with the 

following schedule: 

(a) Not later than 5 years after the 

approval of each unit agreement; and 

(b) At least every 5 years following the 

initial unit review. 

§ 3283.6 What is the purpose of BLM’s 

periodic review? 

(a) BLM must review all unit 

agreements to determine whether any 

leases, or portions of leases, committed 

to any unit are no longer reasonably 

necessary for unit operations, and 

eliminate from inclusion in the unit 

agreement any such lands it determines 

not reasonably necessary for unit 

operations. 

(b) The elimination will be based on 

scientific evidence, and occur only for 

the purpose of conserving and properly 

managing the geothermal resources. 

(c) BLM will not eliminate any lands 

from a unit until BLM provides the unit 

operator, the lessee, and any other 

person with a legal interest in such 

lands, with reasonable notice and an 

opportunity to comment. 

(d) Any lands eliminated from a unit 

under this section are eligible for a lease 

extension under subpart 3207 of part 

3200 of this chapter if the lands meet 

the requirements for the extension. 

§ 3283.7 When may unit operators be 

changed? 

Unit operators may be changed only 

with BLM’s written approval. 

§ 3283.8 What must be filed with BLM to 

change the unit operator? 

To change the unit operator, the new 

operator must: 

(a) Meet the qualification 

requirements of § 3281.11; 

(b) Submit to BLM evidence of 

acceptable bonding under § § 3214.13 of 

this chapter; and 

(c) File with BLM written acceptance 

of the unit terms and obligations. 

§ 3283.9 When is a change of unit 

operator effective? 

The change is effective when BLM 

approves the new unit operator in 

writing. 

§ 3283.10 If there is a change in the unit 

operator, when does the previous 

operator’s liability end? 

(a) The previous unit operator 

remains responsible for all duties and 

obligations of the unit agreement until 

BLM approves a new unit operator. The 

change of the unit operator does not 

release the previous unit operator from 

any liability for any obligations that 

accrued before the effective date of the 

change (see § 3215.14 of this chapter). 

(b) The new unit operator is 

responsible for all unit duties and 

obligations after BLM approves the 

change. 

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Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 24439 

§ 3283.11 Do the terms and conditions of 

a unit agreement modify Federal lease 

stipulations? 

Nothing in a unit agreement modifies 

stipulations included in any Federal 

lease. 

§ 3283.12 Are transferees and successors 

in interest of Federal geothermal leases 

bound by the terms and conditions of the 

unit agreement? 

The terms and conditions of the unit 

agreement are binding on transferees 

and successors in interest to Federal 

geothermal leases committed to a unit 

agreement. 

Subpart 3284—Unit Operations 

§ 3284.1 What general standards apply to 

operations within a unit? 

All unit operations must comply with: 

(a) The terms and conditions of the 

unit agreement; and 

(b) The standards and orders listed in 

the following chart: 

Type of operation 

Regulations on 

Operational 

Standards 

(43 CFR) 

Regulations on Orders or Instructions 

(43 CFR) 

Exploration ............................................................................................................................................... § 3250.12 § 3250.13 

Drilling ...................................................................................................................................................... § 3260.11 § 3260.12 

Production or Utilization ........................................................................................................................... § 3270.11 § 3270.12 

§ 3284.2 What are the principal 

operational responsibilities of the unit 

operator? 

The unit operator is responsible for: 

(a) Diligently drilling for and 

developing in the public interest the 

geothermal resource occurring in the 

unit area. Only the unit operator is 

authorized to conduct: 

(1) Any phase of drilling authorized 

under subpart 3260 of this chapter, 

unless another person is specifically 

authorized by BLM to conduct drilling 

(see § 3284.3); 

(2) Resource development activities 

such as production and injection; and 

(3) Delivery of the resource for 

commercial operation. An entity other 

than the unit operator, such as a facility 

operator, may purchase or utilize the 

resource produced from the unit. 

(b) Providing written notification to 

BLM within 30 days after any changes 

to the commitment status of any lease or 

tract in the unit area (see § § 3281.9 and 

3284.12); and 

(c) Insuring that the Federal 

Government receives all royalties, direct 

use fees, and rents for activities within 

the participating area. 

§ 3284.3 What happens if the minimum 

initial unit obligations are not met? 

(a) If the unit operator does not drill 

a well designed to produce or utilize 

geothermal resources in commercial 

quantities within the timeframe 

specified in the unit agreement, or the 

unit operator relinquishes the unit 

agreement before meeting the minimum 

initial unit obligations: 

(1) BLM will deem the unit agreement 

void as though it was never in effect; 

(2) BLM will deem any lease 

extension based upon the existence of 

the unit as void retroactive to the date 

the unit was effective; and 

(3) Any lease segregations based on 

the unit become invalid. 

(b) BLM will send the unit operator a 

written decision confirming that the 

unit agreement is void. 

§ 3284.4 How are unit agreement terms 

affected after completion of the initial unit 

well? 

(a) Upon completion of a unit well 

that BLM determines will produce or 

utilize geothermal resources in 

commercial quantities, the unit operator 

must submit a proposed participating 

area application under § 3282.3, and no 

additional drilling to meet unit 

obligations is required. If no additional 

drilling in the unit occurs, the unit area 

will contract to the participating area as 

specified in the unit agreement. 

(b) If a unit operator drills a well 

designed to produce or utilize 

geothermal resources in commercial 

quantities, but the well will not produce 

commercially or is not producible, the 

unit operator must continue drilling 

additional wells within the timeframes 

specified in the unit agreement until a 

unit well is completed that BLM 

determines will produce or utilize 

geothermal resources in commercial 

quantities. BLM may terminate a unit if 

additional wells are not drilled within 

the timeframes specified in the unit 

agreement. 

(c) The unit agreement will expire if 

no well that BLM determines will 

produce or utilize geothermal resources 

in commercial quantities is completed 

within the timeframes specified in the 

unit agreement. 

(d) BLM will send the unit operator a 

written decision confirming that the 

unit agreement has been terminated or 

has expired. 

§ 3284.5 How do unit operations affect 

lease extensions? 

(a) Once the minimum initial unit 

obligation is met, lease extensions 

approved under § 3207.17 of this 

chapter based upon unit commitment 

will remain in effect until the unit is 

relinquished, expires, terminates, or the 

lease on which the initial unit 

obligation was met is eliminated from 

the unit. 

(b) As long as there are commercial 

operations within the unit or there 

exists a unit well that BLM has 

determined is producing or utilizing 

geothermal resources in commercial 

quantities, lease extensions for any 

leases or portions of leases within the 

participating area will remain in effect 

as long as operations meet the 

requirements of § 3207.15 of this 

chapter. 

§ 3284.6 May BLM authorize a working 

interest owner to drill a well on lands 

committed to the unit? 

(a) BLM may authorize a working 

interest owner to drill a well on the 

interest owner’s lease only if it is 

located outside of an established 

participating area. However, BLM will 

only do so upon determining that: 

(1) The unit operator is not diligently 

pursuing unit development; and 

(2) Drilling the well is in the public 

interest. 

(b) If BLM determines that a working 

interest has completed a well that will 

produce or utilize geothermal resources 

in commercial quantities, the unit 

operator must: 

(1) Apply to revise the participating 

area to include the well; and 

(2) Operate the well. 

§ 3284.7 May BLM authorize operations 

on uncommitted Federal leases located 

within a unit? 

BLM may authorize a lessee/operator 

to conduct operations on an 

uncommitted Federal lease located 

within a unit if the lessee/operator 

demonstrates to our satisfaction that 

operations on the lease are: 

(a) In the public interest; and 

(b) Will not unnecessarily affect unit 

operations. 

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§ 3284.8 May a unit have multiple 

operators? 

A unit may have only one operator. 

§ 3284.9 May BLM set or modify 

production or injection rates? 

BLM may set or modify the quantity, 

rate, or location of production or 

injection occurring under a unit 

agreement to ensure protection of 

Federal resources. 

§ 3284.10 What must a unit operator do to 

prevent or compensate for drainage? 

The unit operator must take all 

necessary measures to prevent or 

compensate for drainage of geothermal 

resources from unitized land by wells 

on land not subject to the unit 

agreement (see § § 3210.16 and 3210.17 

of this chapter). 

§ 3284.11 Must the unit operator develop 

and operate on every lease or tract in the 

unit to comply with the obligations in the 

underlying leases or agreements? 

The unit operator is not required to 

develop and operate on every lease or 

tract in the unit agreement to comply 

with the obligations in the underlying 

leases or agreement. The development 

and operation on any lands subject to a 

unit agreement is considered full 

performance of all obligations for 

development and operation for every 

separately owned lease or tract in the 

unit, regardless of whether there is 

development of any particular tract of 

the unit area. 

§ 3284.12 When must the unit operator 

notify BLM of any changes of lease and 

tract commitment status? 

The unit operator must provide 

updated documentation of commitment 

status (see § § 3281.8 through 3281.10) 

of all leases and tracts to BLM whenever 

a change in commitment, such as the 

expiration of a private lease, occurs. The 

unit operator must submit the 

documentation to BLM within 30 days 

after the change occurs. The unit 

operator must also notify all lessees and 

mineral interest owners of these 

changes. 

Subpart 3285—Unit Termination 

§ 3285.1 When may BLM terminate a unit 

agreement? 

BLM may terminate a unit agreement 

if the unit operator does not comply 

with any term or condition of the unit 

agreement. 

§ 3285.2 When may BLM approve a 

voluntary termination of a unit agreement? 

BLM may approve the voluntary 

termination of a unit agreement at any 

time: 

(a) After receiving a signed 

certification agreeing to the termination 

from a sufficient number of the working 

interest owners specified in the unit 

agreement who together represent a 

majority interest in the unit agreement; 

and 

(b)(1) After the completion of the 

initial unit obligation well but before 

the establishment of a participating area; 

or 

(2) After a participating area is 

established, upon receipt of information 

providing adequate assurance that: 

(i) Diligent development and 

production of known commercial 

geothermal resources will occur; and 

(ii) The public interest is protected. 

Subpart 3286—Model Unit Agreement 

§ 3286.1 Model Unit Agreement. 

A unit agreement may use the 

following language: 

Unit Agreement for the Development and 

Operation of the ——— Unit Area, County of 

———, State of ———. 

Table of Contents 

Article I—Enabling Act and Regulations 

Article II—Definitions 

Article III—Unit Area and Exhibits 

Article IV—Contraction and Expansion of 

Unit Area 

Article V—Unitized Land and Unitized 

Substances 

Article VI—Unit Operator 

Article VII—Resignation or Removal of Unit 

Operator 

Article VIII—Successor Unit Operator 

Article IX—Accounting Provisions and Unit 

Operating Agreement 

Article X—Rights and Obligations of Unit 

Operator 

Article XI—Plan of Development 

Article XII—Participating Areas 

Article XIII—Allocation of Unitized 

Substances 

Article XIV—Relinquishment of Leases 

Article XV—Rentals 

Article XVI—Operations on Nonparticipating 

Land 

Article XVII—Leases and Contracts 

Conformed and Extended 

Article XVIII—Effective Date and Term 

Article XIX—Appearances 

Article XX—No Waiver of Certain Rights 

Article XXI—Unavoidable Delay 

Article XXII—Postponement of Obligations 

Article XXIII—Nondiscrimination 

Article XXIV—Counterparts 

Article XXV—Subsequent Joinder 

Article XXVI—Covenants Run With the Land 

Article XXVII—Notices 

Article XXVIII—Loss of Title 

Article XXIX—Taxes 

Article XXX—Relation of Parties 

Article XXXI—Special Federal Lease 

Stipulations and/or Conditions 

This Agreement entered into as of the 

——— day of ———, 20 ———, by and 

between the parties subscribing, ratifying, or 

consenting hereto, and herein referred to as 

the ‘‘parties hereto’’. Whereas the parties 

hereto are the owners of working, royalty, or 

other geothermal resources interests in land 

subject to this Agreement; and 

Whereas the Geothermal Steam Act of 1970 

(84 Stat. 1566), as amended, hereinafter 

referred to as the ‘‘Act’’ authorizes Federal 

lessees and their representatives to unite 

with each other, or jointly or separately with 

others, in collectively adopting and operating 

under a unit agreement for the purpose of 

more properly conserving the natural 

resources of any geothermal resources 

reservoir, field, or like area, or any part 

thereof, whenever determined and certified 

by the Secretary of the Interior to be 

necessary or advisable in the public interest; 

and 

Whereas the parties hereto hold sufficient 

interest in the ——— Unit Area covering the 

land herein described to effectively control 

operations therein; and 

Whereas, it is the purpose of the parties 

hereto to conserve natural resources, prevent 

waste, and secure other benefits obtainable 

through development and operations of the 

area subject to this Agreement under the 

terms, conditions, and limitations herein set 

forth; 

Now, therefore, in consideration of the 

premises and the promises herein contained, 

the parties hereto commit to this agreement 

their respective interests in the belowdefined Unit Area, and agree severally among 

themselves as follows: 

Article I—Enabling Act and Regulations 

1.1 The Act and all valid pertinent U.S. 

Department of the Interior regulations, 

including operating and unit plan 

regulations, heretofore or hereafter issued 

thereunder are accepted and made a part of 

this agreement as to Federal lands. 

1.2 As to non-Federal lands, the Bureau of 

Land Management (‘‘BLM’’) geothermal 

resources operating regulations in effect as of 

the effective date hereof governing drilling 

and producing operations, not inconsistent 

with the laws of the State in which the nonFederal land is located, are hereby accepted 

and made a part of this agreement. 

Article II—Definitions 

2.1 The following terms shall have the 

meanings here indicated: 

(a) Geothermal Lease. A lease issued under 

the act of December 24, 1970 (84 Stat. 1566), 

as amended, pursuant to the leasing 

regulations contained in 43 CFR Group 3200 

and, unless the context indicates otherwise, 

‘‘lease’’ shall mean a geothermal lease. 

(b) Unit Area. The area described in Article 

III of this Agreement. 

(c) Unit Operator. The person, association, 

partnership, corporation, or other business 

entity designated under this Agreement to 

conduct operations on Unitized Land as 

specified herein. 

(d) Participating Area. That area of the 

Unit deemed to be productive as described in 

Article 12.1 herein and areas committed to 

the Unit by the Authorized Officer needed for 

support of operations of the Unit Area. The 

production allocated for lands used for 

support of operations shall be approved by 

the Authorized Officer pursuant to Articles 

12.1 and 13.1 herein. 

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(e) Working Interest. The interest held in 

geothermal resources or in lands containing 

the same by virtue of a lease, operating 

agreement, fee title, or otherwise, under 

which, except as otherwise provided in this 

Agreement, the owner of such interest is 

vested with the right to explore for, develop, 

produce and utilize such resources. The right 

delegated to the Unit Operator as such by this 

Agreement is not to be regarded as a Working 

Interest. 

(f) Secretary. The Secretary of the Interior 

or any person duly authorized to exercise 

powers vested in that officer. 

(g) Director. The Director of the Bureau of 

Land Management or any person duly 

authorized to exercise powers vested in that 

officer. 

(h) Authorized Officer. Any person 

authorized by law or by lawful delegation of 

authority in the Bureau of Land Management 

to perform the duties described. 

Article III—Unit Area and Exhibits 

3.1 The area specified on the map attached 

hereto marked ‘‘Exhibit A’’ is hereby 

designated and recognized as constituting the 

Unit Area, containing ——— acres, more or 

less. The above-described Unit Area shall be 

expanded, when practicable, to include 

therein any additional lands or shall be 

contracted to exclude lands whenever such 

expansion or contraction is deemed to be 

necessary or advisable to conform with the 

purposes of this Agreement. 

3.2 Exhibit A attached hereto and made a 

part hereof is a map showing the boundary 

of the Unit Area, the boundaries and identity 

of tracts and leases in said area to the extent 

known to the Unit Operator. 

3.3 Exhibit B attached hereto and made a 

part thereof is a schedule showing to the 

extent known to the Unit Operator the 

acreage, percentage, and kind of ownership 

of geothermal resources interests in all lands 

in the Unit Area. 

3.4 Exhibits A and B shall be revised by 

the Unit Operator whenever changes in the 

Unit Area render such revision necessary, or 

when requested by the authorized officer, 

and not less than five copies of the revised 

Exhibits shall be filed with the authorized 

officer. 

Article IV—Contraction and Expansion of 

Unit Area 

4.1 Unless otherwise specified herein, the 

expansion and/or contraction of the Unit 

Area contemplated in Article 3.1 hereof shall 

be effected in the following manner: 

(a) The Unit Operator, either on demand of 

the authorized officer or on its own motion 

and after prior concurrence by the authorized 

officer, shall prepare a notice of proposed 

expansion or contraction describing the 

contemplated changes in the boundaries of 

the Unit Area, the reasons therefore, and the 

proposed effective date thereof, preferably 

the first day of a month subsequent to the 

date of notice. 

(b) Said notice shall be delivered to the 

authorized officer, and copies thereof mailed 

to the last known address of each Working 

Interest Owner, Lessee, and Lessor whose 

interests are affected, advising that 30 days 

will be allowed to submit any objections to 

the Unit Operator. 

(c) Upon expiration of the 30-day period 

provided in the preceding item 4.1(b), Unit 

Operator shall file with the authorized officer 

evidence of mailing of the notice of 

expansion or contraction and a copy of any 

objections thereto that have been filed with 

the Unit Operator, together with an 

application in sufficient number, for 

approval of such expansion or contraction 

and with appropriate joinders. 

(d) After due consideration of all pertinent 

information, the expansion or contraction 

shall, upon approval by the authorized 

officer, become effective as of the date 

prescribed in the notice thereof. 

4.2 Unitized Leases, insofar as they cover 

any lands excluded from the Unit Area under 

any of the provisions of this Article IV, may 

be maintained and continued in force and 

effect in accordance with the terms, 

provisions, and conditions contained in the 

Act, and the lease or leases and amendments 

thereto, except that operations and/or 

production under this Unit Agreement shall 

not serve to maintain or continue the 

excluded portion of any lease. 

4.3 All legal subdivisions of unitized lands 

(i.e., 40 acres by Governmental survey or its 

nearest lot or tract equivalent in instances of 

irregular surveys), no part of which is 

entitled to be within a Participating Area on 

the 5th 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 5th anniversary. Such lands shall 

no longer be a 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 5th 

anniversary, in which event such lands shall 

not be eliminated from the Unit Area for as 

long as exploratory drilling operations are 

continued diligently with not more than six 

(6) months time elapsing between the 

completion of one exploratory well and the 

commencement of the next exploratory well. 

4.4 An exploratory well, for the purposes 

of this Article IV, is defined as any well, 

regardless of surface location, projected for 

completion: 

(a) In a zone or deposit below any zone or 

deposit for which a Participating Area has 

been established and is in effect; or 

(b) At a subsurface location under Unitized 

Lands not entitled to be within a 

Participating Area. 

4.5 In the event an exploratory well is 

completed during the six (6) months 

immediately preceding the 5th anniversary of 

the initial Participating Area established 

under this Agreement, lands not entitled to 

be within a Participating Area shall not be 

eliminated from this Agreement on said 5th 

anniversary, provided the drilling of another 

exploratory well is commenced under an 

approved Plan of Development within six (6) 

months after the completion of said well. In 

such event, the land not entitled to be in 

participation shall not be eliminated from the 

Unit Area so long as exploratory drilling 

operations are continued diligently with not 

more than six (6) months time elapsing 

between the completion of one exploratory 

well and the commencement of the next 

exploratory well. 

4.6 With prior approval of the authorized 

officer, a specified period of time in excess 

of six (6) months may be allowed to elapse 

between the completion of one well and the 

commencement of the next well without the 

automatic elimination of nonparticipating 

acreage. 

4.7 Unitized lands proved productive by 

drilling operations that serve to delay 

automatic elimination of lands under this 

Article IV shall be incorporated into a 

Participating Area (or Areas) in the same 

manner as such lands would have been 

incorporated in such areas had such lands 

been proven productive during the year 

preceding said 5th anniversary. 

4.8 In the event nonparticipating lands are 

retained under this Agreement after the 5th 

anniversary of the initial Participating Area 

as a result of exploratory drilling operations, 

all legal subdivisions of unitized land (i.e., 40 

acres by Government survey or its nearest lot 

or tract equivalent in instances of irregular 

Surveys), no part of which is entitled to be 

within a Participating Area, shall be 

eliminated automatically as of the 183rd day, 

or such later date as may be established by 

the authorized officer, following the 

completion of the last well recognized as 

delaying such automatic elimination beyond 

the 5th anniversary of the initial Participating 

Area established under this Agreement. 

Article V—Unitized Land and Unitized 

Substances 

5.1 All land committed to this Agreement 

shall constitute land referred to herein as 

‘‘Unitized Land.’’ All geothermal resources in 

and produced from any and all formations of 

the Unitized Land are unitized under the 

terms of this agreement and herein are called 

‘‘Unitized Substances.’’ 

Article VI—Unit Operator 

6.1 ——— is hereby designated as Unit 

Operator, and by signature hereto as Unit 

Operator agrees and consents to accept the 

duties and obligations of Unit Operator for 

the discovery, development, production, 

distribution, and utilization of Unitized 

Substances as herein provided. Whenever 

reference is made herein to the Unit 

Operator, such reference means the Unit 

Operator acting in that capacity and not as 

an owner of interest in Unitized Substances, 

and the term ‘‘Working Interest Owner,’’ 

when used herein, shall include or refer to 

Unit Operator as the owner of a Working 

Interest when such an interest is owned by 

it. 

Article VII—Resignation or Removal of Unit 

Operator 

7.1 The Unit Operator shall have the right 

to resign. Such resignation shall not become 

effective so as to release Unit Operator from 

the duties and obligations of Unit Operator 

or terminate Unit Operators rights, as such, 

for a period of six (6) months after notice of 

its intention to resign has been served by 

Unit Operator on all Working Interest 

Owners and the authorized officer, nor until 

all wells then drilled hereunder are placed in 

a satisfactory condition for suspension or 

abandonment, whichever is required by the 

authorized officer, unless a new Unit 

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Operator shall have been selected and 

approved and shall have taken over and 

assumed the duties and obligations of Unit 

Operator prior to the expiration of said 

period. 

7.2 The Unit Operator may, upon default 

or failure in the performance of its duties or 

obligations hereunder, be subject to removal 

by the same percentage vote of the owners of 

Working Interests as herein provided for the 

selection of a new Unit Operator. Such 

removal shall be effective upon notice thereof 

to the authorized officer. 

7.3 The resignation or removal of Unit 

Operator under this Agreement shall not 

terminate its right, title, or interest as the 

owner of a Working Interest or other interest 

in Unitized Substances, but upon the 

resignation or removal of Unit Operator 

becoming effective, such Unit Operator shall 

deliver possession of all wells, equipment, 

material, and appurtenances used in 

conducting the unit operations to the new 

duly qualified successor Unit Operator or, if 

no such new unit operator is elected, to the 

common agent appointed to represent the 

Working Interest Owners in any action taken 

hereunder, to be used for the purpose of 

conducting operations hereunder. 

7.4 In all instances of resignation or 

removal, until a successor Unit Operator is 

selected and approved as hereinafter 

provided, the Working Interest Owners shall 

be jointly responsible for performance of the 

duties and obligations of Unit Operator, and 

shall not later than 30 days before such 

resignation or removal becomes effective 

appoint a common agent to represent them in 

any action to be taken hereunder. 

7.5 The resignation or removal of Unit 

Operator shall not release Unit Operator from 

any liability for any default by it hereunder 

occurring prior to the effective date of its 

resignation or removal. 

Article VIII—Successor Unit Operator 

8.1 If, prior to the establishment of a 

Participating Area hereunder, the Unit 

Operator shall resign as Operator, or shall be 

removed as provided in Article VII, a 

successor Unit Operator may be selected by 

vote of the more than one-half of the owners 

of the Working Interests in Unitized 

Substances, based on their respective shares, 

on an acreage basis, in the Unitized Land. 

8.2 If, after the establishment of a 

Participating Area hereunder, the Unit 

Operator shall resign as Unit Operator, or 

shall be removed as provided in Article VII, 

a successor Unit Operator may be selected by 

a vote of more than one-half of the owners 

of the Working Interests in Unitized 

Substances, based on their respective shares, 

on a participating acreage basis; provided 

that, if a majority but less than 60 percent of 

the Working Interest in the Participating 

Lands is owned by a party to this agreement, 

a concurring vote of one or more additional 

Working Interest Owners owning 10 percent 

or more of the Working Interest in the 

participating land shall be required to select 

a new Unit Operator. 

8.3 The selection of a successor Unit 

Operator shall not become effective until: 

(a) The Unit Operator so selected shall 

accept in writing the duties, obligations, and 

responsibilities of the Unit Operator; and 

(b) The selection shall have been approved 

by the authorized officer. 

8.4 If no successor Unit Operator is 

selected and qualified as herein provided, the 

authorized officer at his or her election may 

declare this Agreement terminated. 

Article IX—Accounting Provisions and Unit 

Operating Agreement 

9.1 Costs and expenses incurred by Unit 

Operator in conducting unit operations 

hereunder shall be paid and apportioned 

among and borne by the owners of Working 

Interests; all in accordance with the 

agreement or agreements entered into by and 

between the Unit Operator and the owners of 

Working Interests, whether one or more, 

separately or collectively. 

9.2 Any agreement or agreements entered 

into between the Working Interest Owners 

and the Unit Operator as provided in this 

Article, whether one or more, are herein 

referred to as the ‘‘Unit Operating 

Agreement.’’ 

9.3 The Unit Operating Agreement shall 

provide the manner in which the Working 

Interest Owners shall be entitled to receive 

their respective share of the benefits accruing 

hereto in conformity with their underlying 

operating agreements, leases, or other 

contracts, and such other rights and 

obligations, as between Unit Operator and 

the Working Interest Owners. 

9.4 Neither the Unit Operating Agreement 

nor any amendment thereto shall be deemed 

either to modify any of the terms and 

conditions of this Agreement or to relieve the 

Unit Operator of any right or obligation 

established under this Agreement. 

9.5 In case of any inconsistency or conflict 

between this Agreement and the Unit 

Operating Agreement, this Agreement shall 

govern. 

9.6 Three true copies of any Unit Operating 

Agreement executed pursuant to this Article 

IX shall be filed with the authorized officer 

prior to approval of this Agreement. 

Article X—Rights and Obligations of Unit 

Operator 

10.1 The right, privilege, and duty of 

exercising any and all rights of the parties 

hereto that are necessary or convenient for 

exploring, producing, distributing, or 

utilizing Unitized Substances are hereby 

delegated to and shall be exercised by the 

Unit Operator as provided in this Agreement 

in accordance with a Plan of Development 

approved by the authorized officer. 

10.2 Upon request by Unit Operator, 

acceptable evidence of title to geothermal 

resources interests in the Unitized Land shall 

be deposited with the Unit Operator and 

together with this Agreement shall constitute 

and define the rights, privileges, and 

obligations of Unit Operator. 

10.3 Nothing in this Agreement shall be 

construed to transfer title to any land or to 

any lease or operating agreement, it being 

understood that the Unit Operator, in its 

capacity as Unit Operator, shall exercise the 

rights of possession and use vested in the 

parties hereto only for the purposes specified 

in this Agreement. 

10.4 The Unit Operator shall take such 

measures as the authorized officer deems 

appropriate and adequate to prevent drainage 

of Unitized Substances from Unitized Land 

by wells on land not subject to this 

Agreement. 

10.5 The authorized officer is hereby 

vested with authority to alter or modify, from 

time to time, in the authorized officer’s 

discretion, the rate of prospecting and 

development and the quantity and rate of 

production under this Agreement. 

Article XI—Plan of Development 

11.1 Concurrently with the submission of 

this Agreement to BLM for approval, the Unit 

Operator shall submit to BLM an acceptable 

initial Plan of Development. Said plan shall 

be as complete and adequate as the 

authorized officer may determine to be 

necessary for timely exploration and/or 

development, and to insure proper protection 

of the environment and conservation of the 

natural resources of the Unit Area. 

11.2 Prior to the expiration of the initial 

Plan of Development, or any subsequent Plan 

of Development, Unit Operator shall submit 

for approval of the authorized officer an 

acceptable subsequent Plan of Development 

for the Unit Area which, when approved by 

the authorized officer, shall constitute the 

exploratory and/or development drilling and 

operating obligations of Unit Operator under 

this Agreement for the period specified 

therein. 

11.3 Any Plan of Development submitted 

hereunder shall: 

(a) Specify the number and locations of any 

exploration operations to be conducted or 

wells to be drilled, and the proposed order 

and time for such operations or drilling; and 

(b) To the extent practicable, specify the 

operating practices regarded as necessary and 

advisable for proper conservation of natural 

resources and protection of the environment 

in compliance with section 1.1 of this 

Agreement. 

11.4 The Plan of Development submitted 

concurrently with this Agreement for 

approval shall prescribe that the Unit 

Operator shall begin to drill a unit well 

identified in the Plan of Development 

approved by the authorized officer, unless on 

such effective date a well is being drilled 

conformably with the terms hereof, and 

thereafter continue such drilling diligently 

until the ——— formation has been tested or 

until at a lesser depth unitized substances 

shall be discovered that can be produced in 

commercial quantities (i.e., quantities 

sufficient to repay the costs of drilling, 

completing, and producing operations, with 

a reasonable profit) or the Unit Operator shall 

at any time establish to the satisfaction of the 

authorized officer that further drilling of said 

well would be unwarranted or impracticable; 

provided, however, that the Unit Operator 

shall not in any event be required to drill 

said well to a depth in excess of ——— feet. 

11.5 The initial Plan of Development and/ 

or subsequent Plan of Development 

submitted under this Article shall provide 

that the Unit Operator shall initiate a 

continuous drilling program providing for 

drilling of no less than one well at a time, 

and allowing no more than six (6) months 

time to elapse between completion and 

testing of one well and the beginning of the 

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next well, until a well capable of producing 

or utilizing Unitized Substances in 

commercial quantities is completed to the 

satisfaction of the authorized officer, or until 

it is reasonably proven that the Unitized 

Land is incapable of producing Unitized 

Substances in commercial quantities in the 

formations drilled under this Agreement. 

11.6 The authorized officer may modify the 

exploration operation or drilling 

requirements of the initial or subsequent 

Plans of Development by granting reasonable 

extensions of time when, in his or her 

opinion, such action is warranted and in the 

public interest. 

11.7 Until a well capable of producing or 

utilizing Unitized Substances in commercial 

quantities is completed, the failure of Unit 

Operator in a timely manner to conduct any 

exploration operations or drill any of the 

wells provided for in Plans of Development 

required under this Article XI or to submit 

a timely and acceptable subsequent Plan of 

Development, shall, after notice of default or 

notice of prospective default to Unit Operator 

by the authorized officer, and after failure of 

Unit Operator to remedy any actual default 

within a reasonable time (as determined by 

the authorized officer), result in automatic 

termination of this Agreement effective as of 

the date of the default, as determined by the 

authorized officer. 

11.8 Separate Plans of Development may 

be submitted for separate productive zones, 

subject to the approval of the authorized 

officer. Also subject to the approval of the 

authorized officer, Plans of Development 

shall be modified or supplemented when 

necessary to meet changes in conditions or to 

protect the interest of all parties to this 

Agreement. 

Article XII—Participating Areas 

12.1 Prior to the commencement of 

production of Unitized Substances, the Unit 

Operator shall submit for approval by the 

authorized officer a schedule (or schedules) 

of all land then regarded as reasonably 

proven to be productive from a pool or 

deposit discovered or developed; all lands in 

said schedule (or schedules), on approval of 

the authorized officer, will constitute a 

Participating Area (or Areas), effective as of 

the date production commences or the 

effective date of this Unit Agreement, 

whichever is later. Said schedule (or 

schedules) shall also set forth the percentage 

of Unitized Substances to be allocated, as 

herein provided, to each tract in the 

Participating Area (or Areas), and shall 

govern the allocation of production, 

commencing with the effective date of the 

Participating Area. 

12.2 A separate Participating Area shall be 

established for each separate pool or deposit 

of Unitized Substances or for any group 

thereof that is produced as a single pool or 

deposit, and any two or more Participating 

Areas so established may be combined into 

one, on approval of the authorized officer. 

The effective date of any Participating Area 

established after the commencement of actual 

production of Unitized Substances shall be 

the first of the month in which is obtained 

the knowledge or information on which the 

establishment of said Participating Area is 

based, unless a more appropriate effective 

date is proposed by the Unit Operator and 

approved by the authorized officer. 

12.3 Any Participating Area (or Areas) 

established under 12.1 or 12.2 above shall, 

subject to the approval of the authorized 

officer, be revised from time to time to: 

(a) Include additional land then regarded 

as reasonably proved to be productive from 

the pool or deposit for which the 

Participating Area was established; 

(b) Include lands necessary to unit 

operations; 

(c) Exclude land then regarded as 

reasonably proved not to be productive from 

the pool or deposit for which the 

Participating Area was established; or 

(d) Exclude land not necessary to unit 

operations; and 

(e) Revise the schedule (or schedules) of 

allocation percentages accordingly. 

12.4 Subject to the limitation cited in 12.1 

hereof, the effective date of any revision of 

a Participating Area established under 

Articles 12.1 or 12.2 shall be the first of the 

month in which is obtained the knowledge 

or information on which such revision is 

predicated; provided, however, that a more 

appropriate effective date may be used if 

justified by the Unit Operator and approved 

by the authorized officer. 

12.5 No land shall be excluded from a 

Participating Area on account of depletion of 

the Unitized Substances, except that any 

Participating Area established under the 

provisions of this Article XII shall terminate 

automatically whenever all operations are 

abandoned in the pool or deposit for which 

the Participating Area was established. 

12.6 Nothing herein contained shall be 

construed as requiring any retroactive 

adjustment for production obtained prior to 

the effective date of the revision of a 

Participating Area. 

Article XIII—Allocation of Unitized 

Substances 

13.1 All Unitized Substances produced 

from a Participating Area established under 

this Agreement shall be deemed to be 

produced equally, on an acreage basis, from 

the several tracts of Unitized Land within the 

Participating Area established for such 

production. 

13.2 For the purpose of determining any 

benefits accruing under this Agreement, each 

Tract of Unitized Land shall have allocated 

to it such percentage of said production as 

the number of acres in the Tract included in 

the Participating Area bears to the total 

number of acres of Unitized Land in said 

Participating Area. 

13.3 Allocation of production hereunder 

for purposes other than settlement of the 

royalty obligations of the respective Working 

Interest Owners shall be on the basis 

prescribed in the Unit Operating Agreement, 

whether in conformity with the basis of 

allocation set forth above or otherwise. 

13.4 The Unitized Substances produced 

from a Participating Area shall be allocated 

as provided herein, regardless of whether any 

wells are drilled on any particular part or 

tract of said Participating Area. 

Article XIV—Relinquishment of Leases 

14.1 Pursuant to the provisions of the 

Federal leases and 43 CFR subpart 3213, a 

lessee of record shall, subject to the 

provisions of the Unit Operating Agreement, 

have the right to relinquish any of its 

interests in leases committed hereto, in 

whole or in part; provided, that no 

relinquishment shall be made of interests in 

land within a Participating Area without the 

prior approval of the authorized officer. 

14.2 A Working Interest Owner may 

exercise the right to surrender, when such 

right is vested in it by any non-Federal lease, 

sublease, or operating agreement, provided 

that each party who will or might acquire the 

Working Interest in such lease by such 

surrender or by forfeiture is bound by the 

terms of this Agreement, and further 

provided that no relinquishment shall be 

made of such land within a Participating 

Area without the prior written consent of the 

non-Federal Lessor. 

14.3 If, as the result of relinquishment, 

surrender, or forfeiture, the Working Interests 

become vested in the fee owner or lessor of 

the Unitized Substances, such owner may: 

(a) Accept those Working Interest rights 

and obligations subject to this Agreement and 

the Unit Operating Agreement, or 

(b) Lease the portion of such land as is 

included in a Participating Area established 

hereunder, subject to this Agreement and the 

Unit Operating Agreement, and provide for 

the independent operation of any part of 

such land that is not then included within a 

Participating Area established hereunder. 

14.4 If the fee owner or lessor of the 

Unitized Substances does not, (1) accept the 

Working Interest rights and obligations 

subject to this Agreement and the Unit 

Operating Agreement, or (2) lease such lands 

as provided in 14.3 above within six (6) 

months after the relinquished, surrendered, 

or forfeited Working Interest becomes vested 

in said fee owner or lessor, the Working 

Interest benefits and obligations accruing to 

such land under this Agreement and the Unit 

Operating Agreement shall be shared by the 

owners of the remaining unitized Working 

Interests in accordance with their respective 

Working Interest ownerships, and such 

owners of Working Interests shall 

compensate the fee owner or lessor of 

Unitized Substances in such lands by paying 

sums equal to the rentals, minimum 

royalties, and royalties applicable to such 

lands under the lease or leases in effect when 

the Working Interests were relinquished, 

surrendered, or forfeited. 

14.5 Subject to the provisions of 14.4 

above, an appropriate accounting and 

settlement shall be made for all benefits 

accruing to or payments and expenditures 

made or incurred on behalf of any 

surrendered or forfeited Working Interest 

subsequent to the date of surrender or 

forfeiture, and payment of any moneys found 

to be owing by such an accounting shall be 

made as between the parties within thirty 

(30) days. 

14.6 In the event no Unit Operating 

Agreement is in existence and a mutually 

acceptable agreement cannot be 

consummated between the proper parties, the 

authorized officer may prescribe such 

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reasonable and equitable conditions of 

agreement as he deems warranted under the 

circumstances. 

14.7 The exercise of any right vested in a 

Working Interest Owner to reassign such 

Working Interest to the party from whom it 

was obtained shall be subject to the same 

conditions as set forth in this Article XIV in 

regard to the exercise of a right to surrender. 

Article XV—Rentals 

15.1 ny unitized lease on non-Federal land 

containing provisions that would terminate 

such lease unless (1) drilling operations are 

commenced upon the land covered thereby 

within the time therein specified or (2) 

rentals are paid for the privilege of deferring 

such drilling operations, the rentals required 

thereby shall, notwithstanding any other 

provisions of this Agreement, be deemed to 

accrue as to the portion of the lease not 

included within a Participating Area and 

become payable during the term thereof as 

extended by this Agreement, and until the 

required drillings are commenced upon the 

land covered thereby. 

15.2 Nothing herein operates to relieve the 

lessees of any land from their respective lease 

obligations for the payment of any rental or 

royalty due under their leases. 

15.3 Rental and royalty due on the leases 

committed to the Unit shall be paid by 

Working Interest Owners responsible under 

existing contracts, laws, and regulations, or 

by the Unit Operator. 

Article XVI—Operations on 

Nonparticipating Land 

16.1 Any party hereto owning or 

controlling the Working Interest in any 

Unitized Land having a regular well location 

may, with the approval of the authorized 

officer and at such party’s sole risk, costs, 

and expense, drill a well to test any 

formation of deposit for which a Participating 

Area has not been established or to test any 

formation or deposit for which a 

Participating Area has been established if 

such location is not within said Participating 

Area, unless within 30 days of receipt of 

notice from said party of his intention to drill 

the well, the Unit Operator elects and 

commences to drill such a well in like 

manner as other wells are drilled by the Unit 

Operator under this Agreement. 

16.2 If any well drilled by a Working 

Interest Owner other than the Unit Operator 

proves that the land upon which said well is 

situated may properly be included in a 

Participating Area, such Participating Area 

shall be established or enlarged as provided 

in this Agreement, and the well shall 

thereafter be operated by the Unit Operator 

in accordance with the terms of this 

Agreement and the Unit Operating 

Agreement. 

Article XVII—Leases and Contracts 

Conformed and Extended 

17.1 The terms, conditions, and provisions 

of all leases, subleases, and other contracts 

relating to exploration, drilling, 

development, or utilization of geothermal 

resources on lands committed to this 

Agreement, are hereby expressly modified 

and amended only to the extent necessary to 

make the same conform to the provisions 

hereof. Otherwise said leases, subleases, and 

contracts shall remain in full force and effect. 

17.2 The parties hereto consent that the 

Secretary shall, by his or her approval hereof, 

modify and amend the Federal leases 

committed hereto to the extent necessary to 

conform said leases to the provisions of this 

Agreement. 

17.3 The development and/or operation of 

lands subject to this Agreement under the 

terms hereof shall be deemed full 

performance of any obligations for 

development and operation with respect to 

each and every separately owned tract 

subject to this Agreement, regardless of 

whether there is any development of any 

particular tract of the Unit Area. 

17.4 Drilling and/or producing operations 

performed hereunder upon any tract of 

Unitized Lands will be deemed to be 

performed upon and for the benefit of each 

and every tract of Unitized Land. 

17.5 Suspension of operations and/or 

production on all Unitized Lands pursuant to 

direction or consent of the Secretary or his 

duly authorized representative shall be 

deemed to constitute such suspension 

pursuant to such direction or consent as to 

each and every tract of Unitized Land. A 

suspension of operations and/or production 

limited to specified lands shall be applicable 

only to such lands. 

17.6 Subject to the provisions of Article XV 

hereof and 17.10 of this Article, each lease, 

sublease, or contract relating to the 

exploration, drilling, development, or 

utilization of geothermal resources of lands 

other than those of the United States 

committed to this Agreement, is hereby 

extended beyond any such term provided 

therein so that it shall be continued for and 

during the term of this Agreement. 

17.7 Subject to the lease renewal and the 

readjustment provision of the Act, any 

Federal lease committed hereto may, as to the 

Unitized Lands, be continued for the term so 

provided in such lease, or as extended by law 

or regulation. If it is appropriate for BLM to 

extend the term of a lease to match the term 

of the unit, the Unit Operator shall take the 

actions required for such extension under 43 

CFR 3207.17, This subsection shall not 

operate to extend any lease or portion thereof 

as to lands excluded from the Unit Area by 

the contraction thereof. 

17.8 Each sublease or contract relating to 

the operations and development of Unitized 

Substances from lands of the United States 

committed to this Agreement shall be 

continued in force and effect for and during 

the term of the underlying lease. 

17.9 Any Federal lease heretofore or 

hereafter committed to any such unit plan 

embracing lands that are in part within and 

in part outside of the area covered by any 

such plan shall be segregated into separate 

leases as to the lands committed and the 

lands not committed, as of the effective date 

of unitization. 

17.10 In the absence of any specific lease 

provision to the contrary, any lease, other 

than a Federal lease, having only a portion 

of its land committed hereto shall be 

segregated as to the portion committed and 

the portion not committed, and the 

provisions of such lease shall apply 

separately to such segregated portions, 

commencing as of the effective date hereof. 

In the event any such lease provides for a 

lump-sum rental payment, such payment 

shall be prorated between the portions so 

segregated in proportion to the acreage of the 

respective tracts. 

17.11 Upon termination of this Agreement, 

the leases covered hereby may be maintained 

and continued in force and effect in 

accordance with the terms, provisions, and 

conditions of the Act, the lease or leases, and 

amendments thereto. 

Article XVIII—Effective Date and Term 

18.1 This Agreement shall become effective 

upon approval by the Secretary or his duly 

authorized representative, and shall 

terminate five (5) years from said effective 

date unless: 

(a) Such date of expiration is extended by 

the authorized officer; 

(b) Unitized Substances are produced or 

utilized in commercial quantities in which 

event this Agreement shall continue for so 

long as Unitized Substances are produced or 

utilized in commercial quantities; or 

(c) This Agreement is terminated prior to 

the end of said five (5) year period as 

heretofore provided. 

18.2 This Agreement may be terminated at 

any time by the owners of a majority of the 

Working Interests on an acreage basis, with 

the approval of the authorized officer. Notice 

of any such approval shall be given by the 

Unit Operator to all parties hereto. 

Article XIX—Appearances 

19.1 Unit Operator shall, after notice to 

other parties affected, have the right to 

appear for and on behalf of any and all 

interests affected hereby before the 

Department of the Interior, and to appeal 

from decisions, orders or rulings issued 

under the regulations of said Department, or 

to apply for relief from any of said 

regulations or in any proceedings relative to 

operations before the Department of the 

Interior or any other legally constituted 

authority: Provided, however, that any 

interested parties shall also have the right, at 

their own expense, to be heard in any such 

proceeding. 

Article XX—No Waiver of Certain Rights 

20.1 Nothing contained in this Agreement 

shall be construed as a waiver by any party 

hereto of the right to assert any legal or 

constitutional right or defense pertaining to 

the validity or invalidity of any law of the 

State wherein lands subject to this 

Agreement are located, or of the United 

States, or regulations issued thereunder, in 

any way affecting such party, or as a waiver 

by any such party of any right beyond his or 

its authority to waive. 

Article XXI—Unavoidable Delay 

21.1 The obligations imposed by this 

Agreement requiring Unit Operator to 

commence or continue drilling or to produce 

or utilize Unitized Substances from any of 

the land covered by this Agreement, shall be 

suspended while, but only so long as, Unit 

Operator, despite the exercise of due care and 

diligence, is prevented from complying with 

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such obligations, in whole or in part, by 

strikes, Acts of God, Federal or other 

applicable law, Federal or other authorized 

governmental agencies, unavoidable 

accidents, uncontrollable delays in 

transportation, inability to obtain necessary 

materials in open market, or other matters 

beyond the reasonable control of Unit 

Operator, whether similar to matters herein 

enumerated or not. 

21.2 No unit obligation that is suspended 

under this section shall become due less than 

thirty (30) days after it has been determined 

that the suspension is no longer applicable. 

21.3 Determination of creditable 

‘‘Unavoidable Delay’’ time shall be made by 

the Unit Operator, subject to approval by the 

authorized officer. 

Article XXII—Postponement of Obligations 

22.1 Notwithstanding any other provisions 

of this Agreement, the Authorized officer, on 

his own initiative or upon appropriate 

justification by Unit Operator, may postpone 

any obligation established 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, 

circumstances warrant such action. 

Article XXIII—Nondiscrimination 

23.1 In connection with the performance of 

work under this Agreement, the Operator 

agrees to comply with all of the provisions 

of section 202(1) to (7) inclusive, of Executive 

Order 11246 (30 FR 12319), as amended by 

Executive Order 11375 (32 FR 14303), which 

are hereby incorporated by reference in this 

Agreement. 

Article XXIV—Counterparts 

24.1 This Agreement may be executed in 

any number of counterparts, no one of which 

needs to be executed by all parties, or may 

be ratified or consented to by separate 

instruments in writing specifically referring 

hereto, and shall be binding upon all parties 

who have executed such a counterpart, 

ratification, or consent hereto, with the same 

force and effect as if all such parties had 

signed the same document. 

Article XXV—Subsequent Joinder 

25.1 If the owner of any substantial interest 

in geothermal resources under a tract within 

the Unit Area fails or refuses to subscribe or 

consent to this Agreement, the owner of the 

Working Interest in that tract may withdraw 

said tract from this Agreement by written 

notice delivered to the authorized officer and 

the Unit Operator prior to the approval of 

this Agreement by the authorized officer. 

25.2 Any geothermal resources interests in 

lands within the Unit Area not committed 

hereto prior to approval of this Agreement 

may thereafter be committed by the owner or 

owners thereof subscribing or consenting to 

this Agreement, and, if the interest is a 

Working Interest, by the owner of such 

interest also subscribing to the Unit 

Operating Agreement. 

25.3 After operations are commenced 

hereunder, the right of subsequent joinder, as 

provided in this Article XXV, by a Working 

Interest Owner is subject to such 

requirements or approvals, if any, pertaining 

to such joinder, as may be provided for in the 

Unit Operating Agreement. Joinder to the 

Unit Agreement by a Working Interest Owner 

at any time must be accompanied by 

appropriate joinder to the Unit Operating 

Agreement, if more than one committed 

Working Interest Owner is involved, in order 

for the interest to be regarded as committed 

to this Unit Agreement. 

25.4 After final approval hereof, joinder by 

a nonworking interest owner must be 

consented to in writing by the Working 

Interest Owner committed hereto and 

responsible for the payment of any benefits 

that may accrue hereunder in behalf of such 

nonworking interest. A nonworking interest 

may not be committed to this Agreement 

unless the corresponding Working Interest is 

committed hereto. 

25.5 Except as may otherwise herein be 

provided, subsequent joinders to this 

Agreement shall be effective as of the first 

day of the month following the filing with 

the authorized officer of duly executed 

counterparts of all or any papers necessary to 

establish effective commitment of any tract to 

this Agreement, unless objection to such 

joinder is duly made within sixty (60) days 

by the authorized officer. 

Article XXVI—Covenants Run With the 

Land 

26.1 The covenants herein shall be 

construed to be covenants running with the 

land with respect to the interest of the parties 

hereto and their successors in interest until 

this Agreement terminates, and any grant, 

transfer, or conveyance, of interest in land or 

leases subject hereto shall be and hereby is 

conditioned upon the assumption of all 

privileges and obligations hereunder by the 

grantee, transferee, or other successor in 

interest. 

26.2 No assignment or transfer of any 

Working Interest or other interest subject 

hereto shall be binding upon Unit Operator 

until the first day of the calendar month after 

Unit Operator is furnished with the original, 

photostatic, or certified copy of the 

instrument of transfer. 

Article XXVII—Notices 

27.1 All notices, demands, or statements 

required hereunder to be given or rendered 

to the parties hereto shall be deemed fully 

given if given in writing and personally 

delivered to the party or sent by postpaid 

registered or certified mail, addressed to such 

party or parties at their respective addresses 

set forth in connection with the signatures 

hereto, or to the ratification or consent 

hereof, or to such other address as any such 

party may have furnished in writing to the 

party sending the notice, demand, or 

statement. 

Article XXVIII—Loss of Title 

28.1 In the event title to any tract of 

Unitized Land shall fail and the true owner 

cannot be induced to join in this Agreement, 

such tract shall be automatically regarded as 

not committed hereto, and there shall be 

such readjustment of future costs and 

benefits as may be required on account of the 

loss of such title. 

28.2 In the event of a dispute as to title to 

any royalty, Working Interest, or other 

interests subject hereto, payment or delivery 

on account thereof may be withheld without 

liability for interest until the dispute is 

finally settled: Provided, That, as to Federal 

land or leases, no payments of funds due the 

United States shall be withheld, but such 

funds shall be deposited as directed by the 

authorized officer to be held as unearned 

money pending final settlement of the title 

dispute, and then applied as earned or 

returned in accordance with such final 

settlement. 

Article XXIX—Taxes 

29.1 The Working Interest Owners shall 

render and pay for their accounts and the 

accounts of the owners of nonworking 

interests all valid taxes on or measured by 

the Unitized Substances in and under, or that 

may be produced, gathered, and sold or 

utilized from, the land subject to this 

Agreement after the effective date hereof. 

29.2 The Working Interest Owners on each 

tract may charge a proper proportion of the 

taxes paid under 29.1 hereof to the owners 

of nonworking interests in said tract, and 

may reduce the allocated share of each 

royalty owner for taxes so paid. No taxes 

shall be charged to the United States or the 

State of ——— or to any lessor who has a 

contract with his lessee which requires the 

lessee to pay such taxes. 

Article XXX—Relation of Parties 

30.1 It is expressly agreed that the relation 

of the parties hereto is that of independent 

contractors, and nothing in this Agreement 

contained, expressed, or implied, nor any 

operations conducted hereunder, shall create 

or be deemed to have created a partnership 

or association between the parties hereto or 

any of them. 

Article XXXI—Special Federal Lease 

Stipulations and/or Conditions 

31.1 Nothing in this Agreement shall 

modify special lease stipulations and/or 

conditions applicable to lands of the United 

States. No modification of the conditions 

necessary to protect the lands or functions of 

lands under the jurisdiction of any Federal 

agency is authorized except with prior 

consent in writing whereby the authorizing 

official specifies the modification permitted. 

In witness whereof, the parties hereto have 

caused this Agreement to be executed and 

have set opposite their respective names the 

date of execution. 

Unit operator (as unit operator and as 

working interest owner): 

By: 

Name: 

Title: 

Date: 

Subpart 3287—Relief and Appeals 

§ 3287.1 May the unit operator request a 

suspension of unit obligations or 

development requirements? 

The unit operator may provide a 

written request to BLM to suspend any 

or all obligations under the unit 

agreement. BLM will specify the term of 

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24446 Federal Register / Vol. 72, No. 84 / Wednesday, May 2, 2007 / Rules and Regulations 

the suspension and any requirements 

the unit operator must meet for the 

suspension to remain in effect. 

§ 3287.2 When may BLM grant a 

suspension of unit obligations? 

(a) BLM may grant a suspension of 

unit obligations when, despite the 

exercise of due care and diligence, the 

unit operator is prevented from 

complying with such obligations, in 

whole or in part, by: 

(1) Acts of God; 

(2) Federal, state, or municipal laws; 

(3) Labor strikes; 

(4) Unavoidable accidents; 

(5) Uncontrollable delays in 

transportation; 

(6) The inability to obtain necessary 

materials or equipment in the open 

market; or 

(7) Other circumstances that BLM 

determines are beyond the reasonable 

control of the unit operator, such as 

agency timeframes required to complete 

environmental documents. 

(b) BLM may deny the request for 

suspension of unit obligations when the 

suspension would involve a lengthy or 

indefinite period. For example, BLM 

might not approve a suspension of 

initial drilling obligations due to a unit 

operator’s inability to obtain an 

electrical sales contract, or when poor 

economics affect the electrical 

generation market, limiting the 

opportunity to obtain a viable sales 

contract. BLM may grant a suspension 

of subsequent drilling obligations when 

it is in the public interest. 

§ 3287.3 How does a suspension of unit 

obligations affect the terms of the unit 

agreement? 

(a) BLM may suspend any terms of the 

unit agreement during the period a 

suspension is effective. During the 

period of the suspension, the involved 

unit terms are tolled. The suspension 

may not relieve the unit operator of its 

responsibility to meet other 

requirements of the unit agreement. For 

example, the unit operator may 

continue to be required to diligently 

develop or produce the resource during 

a suspension of drilling obligations. 

(b) The unit operator must ensure all 

interests in the agreement are notified of 

any suspension granted and the terms of 

the suspension. 

§ 3287.4 May a decision made by BLM 

under this part be appealed? 

A unit operator or any other adversely 

affected person may appeal a BLM 

decision regarding unit administration 

or operations in accordance with §

3200.5 of this chapter. 

[FR Doc. E7–7991 Filed 5–1–07; 8:45 am] 

BILLING CODE 4310–84–P 

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