FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

GRAND CANYON TRUST; CENTER

FOR BIOLOGICAL DIVERSITY; SIERRA

CLUB,

Plaintiffs-Appellants,

and

HAVASUPAI TRIBE,

Plaintiff,

v.

HEATHER PROVENCIO, Forest

Supervisor, Kaibab National Forest;

UNITED STATES FOREST SERVICE, an

agency in the U.S. Department of

Agriculture,

Defendants-Appellees,

and

ENERGY FUELS RESOURCES (USA),

INC.; EFR ARIZONA STRIP LLC,

Intervenor-Defendants-Appellees.

No. 20-16401

D.C. No.

3:13-cv-08045-

DGC

OPINION
2 GRAND CANYON TRUST V. PROVENCIO

Appeal from the United States District Court

for the District of Arizona

David G. Campbell, District Judge, Presiding

Argued and Submitted August 30, 2021

San Francisco, California

Filed February 22, 2022

Before: Mary M. Schroeder, Johnnie B. Rawlinson, and

Jay S. Bybee, Circuit Judges.

Opinion by Judge Bybee

SUMMARY*

Mining Law

The panel affirmed the district court’s summary judgment

in favor of the United States Forest Service and intervenors

Energy Fuels Resources (USA), Inc. and EFR Arizona Strip

LLC in an action by environmental groups (collectively, the

Trust) challenging the Forest Service’s determination that

Energy Fuels held a valid existing right to operate Canyon

Mine, a uranium mine in the Kaibab National Forest.

Canyon Mine is located within an area of public lands that

have been withdrawn from new mining claims by the

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.
GRAND CANYON TRUST V. PROVENCIO 3

Secretary of the Interior, although the withdrawal did not

extinguish “valid existing rights.”

When this court last considered this case, the court held

that the Trust had Article III standing with respect to its

fourth claim – that the Forest Service violated federal law by

failing to take various costs into account when determining

whether Canyon Mine could be operated at a profit. The

panel held that the district court did not err in finding that the

law of the case doctrine applied to the issue of standing.

The Trust argued that sunk costs – costs that have already

been incurred and that cannot be recovered – should be

considered when evaluating whether the discovery of a

“valuable mining deposit” was made under the Mining Act.

The panel held that it was not arbitrary and capricious for

the Forest Service to ignore sunk costs in determining that

Energy Fuels had a claim to “valuable mineral deposits,”

30 U.S.C. § 22. Applying Chevron analysis, the panel held

at step one that the critical term in the Mining Act – “valuable

mineral deposits” – was ambiguous. Proceeding to step two,

the panel held that the Department of the Interior (“DOI”)’s

interpretation of the Mining Act – in which sunk costs are not

considered when determining whether a mine is profitable –

was a permissible one. First, the fact that the DOI excludes

sunk costs from its profitability analysis was not manifestly

contrary to the Mining Act because this interpretation was

consistent with the prudent person and marketability tests,

which the Supreme Court has repeatedly upheld. Second,

DOI’s interpretation was not arbitrary and capricious in

substance because it was consistent with established

economic principles. It is a basic principle of economics that

sunk costs should be ignored when making a rational decision
4 GRAND CANYON TRUST V. PROVENCIO

about whether to make further expenditures. Since the panel

would be required to give DOI deference under the Chevron

doctrine, it was appropriate for the Forest Service to do so as

well in its valid existing rights determination. Accordingly, it

was not arbitrary and capricious for the Forest Service to rely

on DOI’s interpretation of the Mining Act.

COUNSEL

Aaron M. Paul (argued), Grand Canyon Trust, Denver,

Colorado; Marc Fink, Center for Biological Diversity,

Duluth, Minnesota; Neil Levine, Public Justice, Denver,

Colorado; Roger Flynn, Western Mining Action Project,

Lyons, Colorado; for Plaintiffs-Appellants.

Thekla Hansen-Young (argued), Andrew C.Mergen, Michael

T. Gray, and Sean C. Duffy, Attorneys; Jean E. Williams,

Acting Assistant AttorneyGeneral; Environment and Natural

Resources Division, United States Department of Justice,

Washington, D.C.; Nicholas L. Pino, Attorney, Office of

General Counsel, United States Department of Agriculture,

Washington, D.C.; for Defendants-Appellees.

Bradley J. Glass (argued), Gallagher & Kennedy P.A.,

Phoenix, Arizona, for Intervenor-Defendants-Appellees.
GRAND CANYON TRUST V. PROVENCIO 5

OPINION

BYBEE, Circuit Judge:

This dispute concerns Canyon Mine, a uranium mine

operated by Energy Fuels Resources (USA), Inc., and EFR

Arizona Strip LLC (collectively, Energy Fuels) in the Kaibab

National Forest. Canyon Mine is located within an area of

public lands that have been withdrawn from new mining

claims by the Secretary of the Interior, although the

withdrawal did not extinguish “valid existing rights.” The

Havasupai Tribe and three environmental groups—Grand

Canyon Trust, Center for Biological Diversity, and Sierra

Club (collectively, the Trust)—challenge the United States

Forest Service’s determination that Energy Fuels holds a

valid existing right to operate Canyon Mine. The primary

question in this appeal is, in determining that Energy Fuels

has a claim to “valuable mineral deposits,” 30 U.S.C. § 22,

whether it was arbitrary and capricious for the Forest Service

to ignore sunk costs. The district court held that it was not

and granted summary judgment to the defendants. Grand

Canyon Tr. v. Provencio, 467 F. Supp. 3d 797, 804–05,

812–23 (D. Ariz. 2020). We affirm.

I. BACKGROUND AND PROCEEDINGS

This is the second time this case has come before us. 

Background concerning the history of Canyon Mine and this

case is discussed in Havasupai Tribe v. Provencio, 906 F.3d

1155, 1159–61 (9th Cir. 2018). Additional background may

be found in National Mining Ass’n v. Zinke, 877 F.3d 845,

854–60 (9th Cir. 2017), and Havasupai Tribe v. United

States, 752 F. Supp. 1471, 1475–77 (D. Ariz. 1990), aff’d sub

nom. Havasupai Tribe v. Robertson, 943 F.2d 32 (9th Cir.
6 GRAND CANYON TRUST V. PROVENCIO

1991) (per curiam). We will repeat the background here only

as necessary for the context of the issues before us.

A. Background

1. Canyon Mine

Uranium was first discovered near Grand Canyon

National Park in 1947. Uranium is often found in breccia

pipes—cylindrical deposits of broken sedimentary rock

located thousands of feet underground. See Nat’l Mining

Ass’n, 877 F.3d at 857. One such breccia pipe was located in

the Kaibab National Forest in northern Arizona, a few miles

south of Grand Canyon National Park and in the area around

Red Butte, a site of religious and cultural significance to the

Havasupai Tribe.

In 1984, Energy Fuels Nuclear, Inc. (EFN) submitted a

plan of operations to mine uranium from the breccia pipe by

building and operating what became known as Canyon Mine. 

The Forest Service approved the plan in 1986. The

Havasupai Tribe challenged the approval, but the district

court rejected the tribe’s claims and we affirmed the

judgment. See Havasupai Tribe v. Robertson, 943 F.2d

at 34–35. Over the next years, EFN built the mine’s surface

facilities and sank the first fifty feet of a 1,400-foot shaft. 

However, EFN suspended operations in 1992 due to a drop in

uranium prices. Denison Mines Corp. (later acquired by

Intervenor-Defendant Energy Fuels Resources (USA), Inc.)

acquired the mine in 1997.
GRAND CANYON TRUST V. PROVENCIO 7

2. The Grand Canyon Mineral Withdrawal

In 2007, a spike in the price of uranium generated

renewed interest in mining operations near the Grand Canyon

and with it, thousands of new mining claims. The large

volume of new claims raised concerns about the potential

environmental impact of increased uranium mining on the

Grand Canyon area. Nat’l Mining Assoc., 877 F.3d at 857. 

In response, the Secretary of the Interior published a Notice

of Intent to withdraw approximately one million acres of

public and National Forest System lands from new uranium

mining claims. Notice of Proposed Withdrawal and

Opportunity for Public Meeting; Arizona, 74 Fed. Reg.

35,887 (July 21, 2009). The withdrawn land would include

the land occupied by Canyon Mine. Grand Canyon Trust,

467 F. Supp. 3d at 802. However, consistent with the Federal

Land Policy and Management Act of 1976 (FLPMA), the

Secretary noted that the withdrawal was “subject to valid

existing rights.” 74 Fed. Reg. 35,887. After two years of

study, the Department of the Interior (DOI) issued the order

withdrawing the lands. Public Land Order No. 7787;

Withdrawal of Public and National Forest System Lands in

the Grand Canyon Watershed; Arizona, 77 Fed. Reg. 2563

(Jan. 18, 2012). We upheld the withdrawal decision in

National Mining Ass’n, 877 F.3d at 878. Before the decision

became final, Energy Fuels notified the Forest Service, which

is within the Department of Agriculture, that it intended to

return Canyon Mine to active operations. Although Forest

Service approval was not required for Energy Fuels to restart

its operations at Canyon Mine, at the Forest Service’s request,

Energy Fuels agreed not to resume sinking the mineshaft

pending review, known as a Valid Existing Rights
8 GRAND CANYON TRUST V. PROVENCIO

Determination (VER Determination), of its claim of existing

rights.1

3. The Forest Service’s VER Determination

The Forest Service issued its VER Determination in April

2012. The Forest Service concluded that “a discovery of a

valuable mineral deposit existed” on July 21, 2009 (the date

of the Secretary’s segregated withdrawal). It also concluded

that, under the economic conditions as of January 11, 2012

(the date of the mineral exam), “the uranium deposit on the

claims could be mined, removed, transported, milled and

marketed at a profit.”

Two Forest Service certified mineral examiners

conducted the analysis for the VER Determination and their

findings were approved by a Forest Service locatable

minerals specialist. The mineral examiners conducted their

examination over several months, making multiple trips to

Canyon Mine as well as Energy Fuels’s offices, its Arizona

One Mine, and its White Mesa Mill. Their work included

verifying claim boundaries, documenting development

activities, observing drill core samples, and reviewing various

documents provided by Energy Fuels and the United States. 

Theyalso conducted an economic analysis that considered the

1 Although the Forest Service did not have to prepare a VER

Determination, such a determination was relevant to whether the Forest

Service would contest the mining claim before DOI. See Forest Service

Manual §§ 2814.11, 2819.1–2. See also 43 C.F.R. § 4.451 (DOI

regulations providing for the government to contest decisions). The Forest

Service’s determination would have been relevant, even if not binding, to

DOI’s own decision. See Havasupai Tribe v. Provencio, 906 F.3d

at 1162–63 (holding that the VER Determination was “final agency

action” for APA review).
GRAND CANYON TRUST V. PROVENCIO 9

tonnage and grade of uranium, the capital and operating costs,

commodity pricing, and a cash flow feasibility analysis. The

economic analysis treated costs incurred prior to 1992 (when

operations were suspended) to develop the surface structures

and sink the first fifty feet of shaft as “‘sunk’ costs since they

were previously completed for mine development and are

fixed assets on the claims.” As such, these costs were not

incorporated into its calculation of Canyon Mine’s “net sum

of cash flows.” The discounted cash flow feasibility analysis

showed that, at a uranium price of $56 per pound, Canyon

Mine would have a net sum of cash flows of $29,350,736. 

The report describes this number as “the stream of income

generated by the project as a function of time. The sum of

cash flows shows whether the proposed mining operation

would result in a profit or a loss.”

In addition to the VER Determination, the Forest Service

conducted a “Mine Review,” dated June 25, 2012. The

review was conducted by a thirteen-person interdisciplinary

team, which evaluated the 1984 plan of operations as well as

environmental, historical, and religious issues related to

continued operation of Canyon Mine. The Forest Service

concluded that “no modification or amendment to the existing

Plan of Operation [was] necessary” and “no new federal

action subject to further NEPA analysis [was] required.”

B. Proceedings

In 2013, the Tribe and Trust asserted four claims under

the Administrative Procedure Act to challenge the Forest

Service’s determination. We found the VER Determination

reviewable and affirmed the district court’s grant of summary

judgment for three claims related to the National

Environmental Policy Act of 1969 and the National Historic
10 GRAND CANYON TRUST V. PROVENCIO

Preservation Act of 1966. Havasupai Tribe v. Provencio,

906 F.3d at 1163–65. On the fourth claim—that the Forest

Service violated federal law by failing to take various costs

into account when determining whether Canyon Mine could

be operated at a profit—the district court held that the Trust

did not have prudential standing. Id. at 1165. We reversed,

holding that the Trust had prudential standing to pursue claim

four because “the FLPMA, and not the Mining Act, forms the

legal basis of the Trust’s fourth claim” and that the claim fell

within the FLPMA’s zone of interests. Id. at 1166–67. We

remanded to the district court for consideration on the merits.

On remand, the parties cross-moved for summary

judgment on the fourth claim, and the district court granted

summary judgment to the defendants. The district court held

that (1) the Trust had Article III standing based on the law of

the case doctrine; (2) assuming that environmental

monitoring and wildlife-conservation costs were omitted, the

error was harmless because the Trust had not shown that such

costs would change the Forest Service’s finding that Canyon

Mine would be profitable; and (3) the Forest Service’s failure

to consider sunk costs when evaluating the profitability of

Canyon Mine was consistent with the Bureau of Land

Management’s Handbook and the Interior Board of Land

Appeal’s (IBLA) precedent, the Forest Service’s reliance on

these sources was not arbitrary and capricious, and any error

was harmless. Grand Canyon Tr., 467 F. Supp. 3d at 804–05,

812–23.

The Trust and the Tribe timely appealed the district

court’s ruling with respect to whether the VER Determination

should have considered sunk costs in its appraisal of the

mine’s profitability. The Forest Service continues to claim

that the plaintiffs lack standing.
GRAND CANYON TRUST V. PROVENCIO 11

II. STANDARD OF REVIEW

We review the district court’s grant of summary judgment

de novo. “Viewing the evidence in the light most favorable

to the nonmoving party, we must determine whether there are

any genuine issues of material fact and whether the district

court correctly applied the relevant substantive law.” Gordon

v. Virtumundo, Inc., 575 F.3d 1040, 1047 (9th Cir. 2009)

(quoting Devereaux v. Abbey, 263 F.3d 1070, 1074 (9th Cir.

2001) (en banc)).

The Trust raises its challenge to the VER Determination

under the judicial review provisions of the APA, 5 U.S.C.

§§ 701–06. In general, “[t]he form of proceeding for judicial

review is the special statutory review proceeding relevant to

the subject matter.” 5 U.S.C. § 703. Because the Mining Act

does not contain a “special statutory review” provision, we

will review final agency action under § 706. See id. § 704;

Whitewater Draw Nat. Res. Conserv. Dist. v. Mayorkas,

5 F.4th 997, 1006–07 (9th Cir. 2021). Under § 706, we will

“hold unlawful and set aside agency action, findings, and

conclusions” when they are “arbitrary, capricious, an abuse

of discretion, or otherwise not in accordance with law.” 

5 U.S.C. § 706(2)(A); see Kalispel Tribe of Indians v. U.S.

Dep’t of the Interior, 999 F.3d 683, 688 (9th Cir. 2021).

An open question regarding the appropriate standard

under the APA for reviewing the Forest Service’s VER

Determination will be addressed below. See infra Part

III.B.2.
12 GRAND CANYON TRUST V. PROVENCIO

III. DISCUSSION

A. Standing

The Forest Service argues that the Trust does not have

Article III standing to pursue its claim. It reasons that,

because the Trust alleges that it is injured by the continuation

of mining operations and the VER Determination was not

legally required for operations at Canyon Mine to resume, the

Trust’s injury cannot be traced to the VER Determination and

setting aside the VER Determination would not redress the

Trust’s alleged injury.

When this case was last before us, we held that the Trust

had Article III standing with respect to its fourth claim. We

noted that:

While the parties dispute whether continued

mining required the Forest Service’s approval,

we must assume that it did in assessing

standing. If the Tribe and Trust are correct

that continued mining required approval, then

their injuries are fairly traceable to that

approval and could be redressed by setting it

aside.

Havasupai Tribe v. Provencio, 906 F.3d at 1162 n.3 (citation

omitted). The district court held that this conclusion was

“both law of the case and binding precedent.” Grand Canyon

Tr., 467 F. Supp. 3d at 804.

“Under law of the case doctrine, one panel of an appellate

court will not as a general rule reconsider questions which

another panel has decided on a prior appeal in the same case.” 
GRAND CANYON TRUST V. PROVENCIO 13

Valenzuela Gallardo v. Barr, 968 F.3d 1053, 1062 (9th Cir.

2020) (alteration omitted) (quoting Thomas v. Bible, 983 F.2d

152, 154 (9th Cir. 1993)). “[T]he law of the case doctrine is

subject to three exceptions that may arise when ‘(1) the

decision is clearly erroneous and its enforcement would work

a manifest injustice, (2) intervening controlling authority

makes reconsideration appropriate, or (3) substantially

different evidence was adduced at a subsequent trial.’” 

Minidoka Irrigation Dist. v. Dep’t of Interior, 406 F.3d 567,

573 (9th Cir.) (quoting Old Person v. Brown, 312 F.3d 1036,

1039 (9th Cir. 2002)), amended on denial of reh’g No. 03-

35697, 2005 WL 1560395 (9th Cir. July 6, 2005). In

Nordstrom v. Ryan, we held that our prior determination that

the plaintiff had standing was “both the law of the case and

binding precedent that we must follow” when the case

returned “in virtually the same procedural posture.” 856 F.3d

1265, 1270 (9th Cir. 2017).

The district court did not err in finding that the law of the

case doctrine applied to the issue of standing. The

government has not pointed us to any circumstances that

would trigger an exception to the general rule. See Minidoka,

406 F.3d at 573. We have already held that the Trust has

Article III standing, and the present appeal has returned “in

virtually the same procedural posture.” See Nordstrom,

856 F.3d at 1270.

B. Sunk Costs

The Trust argues that sunk costs—costs that have

“alreadybeen incurred and that cannot be recovered,” Black’s

Law Dictionary (11th ed. 2019)—should be considered when

evaluating whether the discovery of a “valuable mineral

deposit” was made under the Mining Act. In order to rule on
14 GRAND CANYON TRUST V. PROVENCIO

this issue, we must first review the relevant law and the

standard of review.

1. Statutory and regulatory background

The General Mining Act of 1872 (Mining Act) allows

citizens of the United States to gain rights to “valuable

mineral deposits” on federal land. 30 U.S.C. § 22. To do so,

a claimant must first “locate” a mining claim by following

certain statutory and regulatory procedures, including posting

notice. United States v. Shumway, 199 F.3d 1093, 1099 (9th

Cir. 1999). Locating a mining claim gives the claimant a

vested possessory right to the real property at issue. Id.

at 1095. For the claimant to secure an enforceable property

right, a claimant must make a “discovery” of a “valuable

mineral deposit.” See 30 U.S.C. §§ 22–23. Congress has

delegated the authority to administer the Mining Act to the

Secretary of the Interior and the Bureau of Land

Management. Cameron v. United States, 252 U.S. 450,

459–60 (1920). The Mining Act does not define what

constitutes a “valuable mineral deposit,” so the Secretary has

applied a “prudent person” test to assess whether a claimant

has discovered a valuable mineral deposit. In the Secretary’s

view, the prudent person test means that

where minerals have been found and the

evidence is of such a character that a person

of ordinary prudence would be justified in the

further expenditure of his labor and means,

with a reasonable prospect of success, in

developing the valuable mine, the

requirements of the statute have been met.
GRAND CANYON TRUST V. PROVENCIO 15

Castle v. Womble, 19 Pub. Lands Dec. 455, 457 (D.O.I.

1894). That test has been repeatedly cited with approval by

the Supreme Court. See Watt v. West. Nuclear, Inc., 462 U.S.

36, 58 n.18 (1983); Andrus v. Charlestone Stone Prod. Co.,

436 U.S. 604, 607 n.4 (1978); United States v. Coleman,

390 U.S. 599, 602 (1968); Best v. Humboldt Placer Mining

Co., 371 U.S. 334, 335–36 (1963); Chrisman v. Miller,

197 U.S. 313, 322 (1905).

In 1962, the Secretary issued an opinion restating the

“prudent person” test in terms of a “marketability test,” which

requires that a claimant show that a mineral can be

“extracted, removed and marketed at a profit” for it to be

considered “valuable” under the Mining Act. See Coleman,

390 U.S. at 600. The Supreme Court approved the

restatement as “an admirable effort to identify with greater

precision and objectivity the factors relevant to a

determination that a mineral deposit is ‘valuable.’ It is a

logical complement to the ‘prudent-man test’ which the

Secretary has been using to interpret the mining laws since

1894.” Id. at 602. The Court explained that the Mining Act

“was to reward and encourage the discovery of minerals that

are valuable in an economic sense.” Id. “Thus, profitability

is an important consideration in applying the prudent-man

test, and the marketability test” because if a claimant is

pursuing a mineral deposit that lacks “economic value and

cannot in all likelihood be operated at a profit” it “may well

suggest that a claimant seeks the land for other

purposes”—purposes not sustainable under the Mining Act. 

Id. at 602–03.

In 1980, DOI first announced that when determining

whether a mine is profitable, it would not consider sunk costs. 

United States v. Mannix, 50 IBLA 110 (1980). In Mannix,
16 GRAND CANYON TRUST V. PROVENCIO

the government attorneys argued that “all earlier expenses in

development of the propertymust be considered, e.g., the cost

of constructing cabins, shed, and an access road and the

purchase of rail and ore cars and that such expenses must be

recouped before it can be said the mine is a profitable

venture.” Id. at 119. DOI rejected the argument, reasoning

that “[t]here is no case law of which we have knowledge . . .

that compels consideration of the above mentioned

development costs in determining if an ongoing operation is

presently profitable.” Id. So long as “the mineral material

may be now mined, removed, and marketed at a present profit

over and above the costs of such operations,” the mine may

be considered “valuable” under the Mining Act. Id. DOI has

applied this rule for over forty years. See United States v.

Clouser, 144 IBLA 110, 131–32 (1998); United States v.

Collord, 128 IBLA 266, 288 n.24 (1994); United States v.

Copple, 81 IBLA 109, 129 (1984).

In this case, the mineral examination was conducted by

the U.S. Forest Service. Although DOI has primary

jurisdiction to determine the validity of mining claims, the

Forest Service is authorized to conduct mineral examinations

on National Forest System lands and to recommend that DOI

initiate administrative contests of invalid mining claims. See

16 U.S.C. §§ 478, 482; Forest Service Manual §§ 2810.41,

2814.11, 2819, 2819.1–2.

2. Standard of review

The Forest Service determined that Energy Fuels has a

valid existing right to operate Canyon Mine. The VER

Determination relied on the legal standard for discovery of a

valuable mineral deposit announced by DOI. It twice cited

DOI’s core decision in Castle v. Womble, and it noted which
GRAND CANYON TRUST V. PROVENCIO 17

costs it regarded as sunk. The parties disagree over what

standard of review we should apply here. The Trust argues

that we can review DOI’s interpretation of the Mining Act de

novo, because it is a pure question of law. The district court

disagreed, finding that the question was whether the Forest

Service’s reliance on DOI’s construction of the act was

arbitrary and capricious, rather than whether the

interpretation itself was valid. See Grand Canyon Tr., 467 F.

Supp. 3d at 819–21. The Forest Service argues that, since an

action by DOI is not being challenged and DOI is not a party

to this lawsuit, the validity of DOI’s interpretation is not

before us.

The district court was correct. When reviewing the Forest

Service’s VER Determination, the proper standard of review

is arbitrary and capricious. We have consistently applied the

arbitrary and capricious standard to cases in which an agency

relies on or defers to the opinions or interpretations of another

agency. See, e.g., San Luis & Delta-Mendota Water Auth. v.

Jewell, 747 F.3d 581, 640 (9th Cir. 2014); Wild Fish

Conservancy v. Salazar, 628 F.3d 513, 532 (9th Cir. 2010);

Pyramid Lake Paiute Tribe of Indians v. U.S. Dep’t of Navy,

898 F.2d 1410, 1415 (9th Cir. 1990). The Trust argues that

arbitrary and capricious review applies only when an agency

defers to another agency’s judgment about factual matters, as

opposed to pure questions of law. Our law is to the contrary. 

In Defenders of Wildlife v. U.S. EPA, we concluded that the

Fish and Wildlife Service had prepared a biological opinion

that relied on legal errors. 420 F.3d 946 (9th Cir. 2005),

rev’d on other grounds and remanded sub nom. Nat’l Ass’n

of Home Builders v. Defs. of Wildlife, 551 U.S. 644 (2007). 

EPA had, in turn, relied on the biological opinion. We held

EPA was arbitrary and capricious when it relied on the flawed

opinion. Id. at 976. Although we observed that an agency
18 GRAND CANYON TRUST V. PROVENCIO

“should be able to rely on the expert judgments that underlie

[a] Biological Opinion[]” prepared by another agency, in this

case “the Biological Opinion’s flaws are legal in nature. 

Discerning them requires no technical or scientific expertise.” 

Id. They were errors “EPA should have understood.” Id.

Since the VER Determination cited and applied DOI’s

interpretation of the Mining Act,2 we may reach through the

VER Determination and review DOI’s interpretation “only to

the extent that [it] demonstrate[s] whether [the Forest

Service’s] reliance on the [interpretation] is ‘arbitrary and

capricious.’” Pyramid Lake, 898 F.2d at 1415 (quoting Stop

H-3 Ass’n v. Dole, 740 F.2d 1442, 1460 (9th Cir. 1984)). 

Because DOI has authority to administer the Mining Act, its

interpretation is analyzed under Chevron, U.S.A., Inc. v.

National Resources Defense Council, Inc., 467 U.S. 837

(1984).3 Lambert v. Saul, 980 F.3d 1266, 1275 (9th Cir.

2 Although the VER Determination cited Castle v. Womble, it did not

refer explicitly to Mannix. That suggests the possibility that the Forest

Service expressed its own views on the irrelevance of sunk costs, rather

than reflecting DOI’s view of such costs. Since both agencies took the

same view of sunk costs, and we conclude that such position is not

arbitrary and capricious, we do not need to explore further this question. 

The result would be the same in either case.

3 The Trust argues that Chevron deference should not apply because

DOI failed to provide the “minimal level of analysis” required. Encino

Motorcars, LLC v. Navarro, 579 U.S. 211, 221 (2016) (requiring that an

agency give “adequate reasons for its decisions,” meaning that the

agency’s explanation must be “clear enough that its ‘path may be

reasonably discerned’” (quoting Bowman Transp., Inc. v. Arkansas-Best

Freight Sys., Inc., 419 U.S. 281, 286 (1974)). While DOI’s analysis in

Mannix is brief, it cites cases that use language consistent with its

interpretation. See Mannix, 50 IBLA at 117–18 (citing Castle, 19 Pub.

Lands Dec. at 457; United States v. McKenzie, 20 IBLA 38, 45 (1975)

(“[E]vidence should focus on current estimates of costs and prices.”)). 
GRAND CANYON TRUST V. PROVENCIO 19

2020). If DOI’s interpretation of the Mining Act is not

entitled to Chevron deference, then it is arbitrary and

capricious for the Forest Service to rely on the erroneous

interpretation. This approach is consistent with that of our

sister circuits. See, e.g., Florida Key Deer v. Paulison,

522 F.3d 1133, 1145 (11th Cir. 2008) (“If [one agency’s

opinion is] arbitrary and capricious, an[other] agency’s

decision to adopt [it] is likewise arbitrary and capricious and

may be challenged.”); CTIA-Wireless Ass’n v. FCC, 466 F.3d

105, 117 (D.C. Cir. 2006) (finding that, if the court must

defer to the agency’s interpretation, it is not arbitrary and

capricious for another agency to do so).

3. Chevron deference

Chevron analysis has two steps: “[W]e must first exhaust

the traditional tools of statutory construction to determine

whether Congress has directly spoken to the precise question

at issue.” Turtle Island Restoration Network v. U.S. Dep’t of

Com., 878 F.3d 725, 733 (9th Cir. 2017) (internal quotations

omitted). If the statute is “silent or ambiguous on the

question at hand, then at Chevron step two we must respect

the agency’s interpretation so long as it is based on a

permissible construction of the statute”—that is, one not

“arbitrary, capricious, or manifestly contrary to the statute.” 

Id. (internal quotations omitted).

This would indicate that DOI was reading the Mining Act to be consistent

with its prior case law on the prudent person and marketability tests,

which the Supreme Court approved of on multiple occasions. This is

sufficient for us to proceed with a Chevron analysis. See Encino

Motorcars, 579 U.S. at 222 (“[S]ummary discussion may suffice . . . .”).
20 GRAND CANYON TRUST V. PROVENCIO

At Chevron step one, “[t]o maintain the proper separation

of powers between Congress and the executive branch, we

must ‘exhaust all the traditional tools of construction’ before

we ‘wave the ambiguity flag.’” Route v. Garland, 996 F.3d

968, 978 (9th Cir. 2021) (quoting Medina Tovar v.

Zuchowski, 982 F.3d 631, 634 (9th Cir. 2020)). In this case,

however, we have little difficulty determining that the critical

term in the Mining Act—“valuable mineral deposits”—is

ambiguous. See 30 U.S.C. §§ 22–23. It is neither a defined

term nor a term of art in the industry. In Chrisman, the Court

first considered, and approved the Secretary’s “prudent

person” test. 197 U.S. at 322–23. The Court stated the

statutory requirement in the most general of terms: “[T]here

must be such a discovery of mineral as gives reasonable

evidence of the fact, either that there is a vein or lode carrying

the precious mineral, or, if it be claimed as placer ground,

that it is valuable for such mining.” Id. at 323.

Examining the purpose and history of the Mining Act

similarly yields no definitive understanding of the term. In

Coleman, the Supreme Court said that the purpose of the

Mining Act was to make “public lands available to people for

the purpose of mining valuable mineral deposits and not for

other purposes. The obvious intent was to reward and

encourage the discovery of minerals that are valuable in an

economic sense.” 390 U.S. at 602. That description is far too

general to cabin the definition of “valuable mineral deposits.” 

That does not mean that an enforcing agency such as DOI can

define it in any way it pleases, but it also means that we may

not insist that the phrase is so clear as to be capable of a

single meaning.

If the terms of the statute are not capable of precise

definition at step one, we cannot see how we could determine
GRAND CANYON TRUST V. PROVENCIO 21

that “valuable mineral deposits”—which the agency has

concluded means that the deposits would be pursued by a

prudent person—forecloses how the agency accounts for

“sunk costs,” which is not a statutory term, but is a commonly

used economic phrase. Concluding that the statute is

ambiguous, we may now proceed to step two.

At Chevron step two, we hold that DOI’s interpretation of

the Mining Act—in which sunk costs are not considered

when determining whether a mine is profitable—is a

permissible one and not “arbitrary and capricious in

substance, or manifestly contrary to the statute.” Mayo

Found. for Med. Educ. &Rsch. v. United States, 562 U.S. 44,

53 (2011) (quoting Household Credit Servs., Inc. v. Pfennig,

541 U.S. 232, 242 (2004)). First, we find that the fact that

DOI excludes sunk costs from its profitability analysis is not

manifestly contrary to the Mining Act because this

interpretation is consistent with the prudent person and

marketability tests, which the Supreme Court has repeatedly

upheld. See West. Nuclear, Inc., 462 U.S. at 58 n.18;

Coleman, 390 U.S. at 602. Although the Court has not

addressed the question of sunk costs specifically, the

language of these tests and the cases in which they are

applied suggest that the profitability analysis is forward

looking. See, e.g., Coleman, 390 U.S. at 602 (“. . . a person

of ordinary prudence would be justified in the further

expenditure of his labor and means.”); see also McKenzie,

20 IBLA at 38, 45 (“[E]vidence should focus on current

estimates of costs and prices.”). Sunk costs, on the other

hand, are backward looking.

More importantly, DOI’s interpretation is not arbitrary

and capricious in substance because it is consistent with

established economic principles. It is a basic principle of
22 GRAND CANYON TRUST V. PROVENCIO

economics that sunk costs should be ignored when making a

rational decision about whether to make further expenditures. 

See N. Gregory Mankiw, Principles of Economics 275 (8th

ed. 2016) (“Because nothing can be done about sunk costs,

you should ignore them when making [rational] decisions

about various aspects of life, including business strategy.”);

Richard A. Posner, Economic Analysis of Law 8 (9th ed.

2014) (“‘Sunk’ (already incurred) costs do not affect a

rational actor’s decisions on price and quantity. . . . Fully

rational people base their decisions on expectations of the

future rather than on regrets about the past.”); Paul A.

Samuelson &William D. Nordhaus, Economics 179 (18th ed.

2005) (“One of the most important lessons of economics is

that you should look at the marginal costs and marginal

benefits of decisions and ignore past or sunk costs.”

(emphasis omitted)); Thomas Kelly, Sunk Costs, Rationality,

and Acting for the Sake of the Past, 38 Noûs 60, 61 (2004)

(“[I]t is widely agreed that honoring sunk costs is obviously

and clearly irrational, and that doing so is, without exception,

to be avoided. In economics and business textbooks, the

tendency to honor sunk costs is treated as an elementary

fallacy.”); Armen A. Alchian & William R. Allen, Exchange

and Production: Theory in Use 288 (1969) (a “fixed or sunk

cost” is “‘fixed’ upon you and irrevocable. For any

subsequent decision this ‘cost’ is totally irrelevant and can be

forgotten.”). Federal courts have acknowledged the validity

of the sunk cost principle in other contexts. See, e.g., Verizon

Commc’ns, Inc. v. FCC, 535 U.S. 467, 499 n.17 (2002)

(stating that “costs” in an economic sense do not include sunk

costs); Alenco Commc’ns, Inc. v. FCC, 201 F.3d 608, 615–16

(5th Cir. 2000); Fresno Mobile Radio, Inc. v. FCC, 165 F.3d

965, 969 (D.C. Cir. 1999) (rejecting an argument that a

business’s actions are motivated by its past investment

because “[t]his is a foolish notion that should not be
GRAND CANYON TRUST V. PROVENCIO 23

entertained by anyone who has had even a single

undergraduate course in economics,” and collecting sources);

MCI Commc’ns Corp. v. Am. Tel. & Tel. Co., 708 F.2d 1081,

1117 (7th Cir. 1983). See also United States v. Park Place

Assoc., Ltd., 563 F.3d 907, 921 (9th Cir. 2009).

To illustrate, let us suppose that ABC Mining spent

$31 million to develop what it thought was a valuable mine,

but had to take it out of operation when the market value of

the mineral declined. Let us also suppose that if ABC Mining

wishes to restart operation of the mine, it will earn

$50 million in revenue but incur $20 million in further capital

and operating expenses. If we ignore sunk costs, ABC

Mining should reopen the mine because the benefit from

mining ($50 million) still exceeds the nonsunk cost of

operating the mine ($20 million). In fact, the revenue far

exceeds the nonsunk cost. The operation stands to make

$30 million by extracting the deposit; by any measure that

makes the mineral deposit a valuable one.

By contrast, if ABC Mining considers the sunk costs as

part of its decision whether to re-start operations, it would

refuse to continue operation because it would stand to lose

$1 million after considering sunk costs ($31 million +

20 million ! 50 million). But if ABC Mining decides not to

re-open the mine, it will lose $31 million total, instead of

$1 million, because it chose not to offset its prior losses

against the promise of a $30 million benefit. No prudent

person should follow such a plan. ABC Mining will have

misjudged the situation by considering its total costs rather

than its nonsunk costs. It is true that the mine operator will

have lost $1 million over the life of the mine, but if the
24 GRAND CANYON TRUST V. PROVENCIO

operator declines to proceed when its revenues will exceed its

costs, it will have lost $31 million at the mine.4

DOI’s sunk costs rule from Mannix5simply recognizes

that a prudent person cannot change sunk costs, and thus

those costs should not be considered when determining

whether that person is “justified in the further expenditure of

his labor and means.” Castle, 19 Pub. Lands Dec. at 457; see

also Thomas T. Nagle, John E. Hogan, & Joseph Zale, The

Strategy and Tactics of Pricing: A Guide to Growing More

Profitably 224 (5th ed. 2011) (“Since nonincremental

fixed and sunk costs do not change with a pricing decision,

they do not affect the relative profitability of one

price versus an alternative.”); David D. Friedman, Price

4 Of course if a mine operator knew from the outset that it would lose

even one dollar over the life of the mine, it would decline to file the

mineral claim. But the operator—and DOI, which must approve such

claims—can only work off the information they have. They are not

responsible for accurately predicting the vagaries of the market over the

life of the mine. And DOI has decided not to punish operators whose

claims, once unprofitable, have returned to profitability.

5 The Trust argues that, even if DOI’s interpretation is entitled to

deference, the Forest Service erred in applying Mannix because Mannix

has an exception for withdrawn land. The Trust relies on the “absent a

prior withdrawal” language in the Mannix opinion and a concurrence in

Collord, in which the concurring ALJ stated that the existence of the

withdrawal was “critical” to the Mannix decision. Mannix, 50 IBLA

at 119; Collord, 128 IBLA at 304 (Burski, J., concurring in the result). 

However, the majority in Collard decided to exclude sunk costs even in

the face of a withdrawal. See Collard, 128 IBLA at 288 n.24. 

Furthermore, DOI has applied the Mannix rule consistently—without an

exception for withdrawal—for the past forty years. See, e.g., Clouser,

144 IBLA at 131; Copple, 81 IBLA at 129. Given this precedent, the

Forest Service did not act arbitrarily and capriciously by failing to apply

a nonexistent exception for withdrawn land.
GRAND CANYON TRUST V. PROVENCIO 25

Theory: An Intermediate Text ch. 13, pt. 1 (2d ed. 1990),

http://www.daviddfriedman.com/Academic/Price_Theor

y/PThy_ToC.html (“The significance of sunk costs is that

a firm will continue to produce even when revenue does not

cover total cost, provided that it does cover nonsunk costs

(called recoverable costs), since nonsunk costs are all the firm

can save by closing down.”).

We need not go so far as to pronounce DOI’s approach to

sunk costs required by the statute or correct as a matter of

principle. See Friends of Santa Clara River v. U.S. Army

Corps of Eng’rs, 887 F.3d 906, 922 (9th Cir. 2018). We do

not decide that any other approach would be arbitrary and

capricious. It is sufficient that we can conclude that DOI’s

rule excluding sunk costs is not arbitrary and capricious. And

since we would be required to give DOI deference under the

Chevron doctrine, it was appropriate for the Forest Service to

do so as well in its VER Determination. As such, it was not

arbitrary and capricious for the Forest Service to rely on

DOI’s interpretation of the Mining Act.

IV. CONCLUSION

The judgment of the district court is AFFIRMED.