F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

G R A N D C A N Y O N T R U S T ; C E N T E R
F O R B I O L O G I C A L D I V E R S I T Y ; S I E R R A C L U B , Plaintiffs-Appellants
,

and

H A V A S U P A I T R I B E , Plaintiff

,

v

.

H E A T H E R P R

O V E N C I O , F orest Supervisor, Kaibab National F orest; U N I T E D S T A T E S F O R

E S T S E R V I C E , an ag ency in the U.S. Department of Ag riculture, Defendants-Appellees
,

and

E N E R G Y F U E L S R E S O U R

C E S (USA), I N C .; E F R A R

I Z O N A S T R I P L L C, Intervenor-Defendants-Appellees. N o. 20-16401

D.C. No. 3:13-cv-08045- DGC

OPI NI ONG R A N D C A N Y O N T R U S T V

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O V E N C I O 2

A ppeal from the United States District Court

for the District of Ariz o na David G. Campbell, District J udg e, Presiding

Arg ued and Submitted Aug ust 30, 2021 San F rancisco, California

F iled F ebruary

22, 2022

B e fore: Mary M. Schroeder, J ohnnie B . Rawlinson, and

J a y S. B y bee, Circuit J udg es.

Opinion by

J udg e B y bee

SUMMARY *

Mining Law

The panel affirmed the d istrict court’s summary judg ment in favor of the United States F orest Service an d intervenors Energ y F uels Resources (USA), I nc. and EF R Ariz ona Strip L L C in an action by e nvironmental g roups ( c o llectively
, the Trust) challeng ing the F orest Service’s determin a t i o n that Energ y F u els held a valid ex isting rig ht to ope r a te Cany on Mine, a uranium mine in the Kaibab National F orest.

Cany on Mine is located within an area of public lands that have been withdrawn from new mining claims by the

* T h is su m m ary co n stitu

tes n o p art o f th e o pin io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.G R A N D C A N Y O N T R U S T V

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O V E N C I O 3

S ec retary of the I nterior, althoug h the withdrawal did no t

ex ting uish “valid ex isting rig hts.”

W h en this court last co n s i d er ed this case, the court h eld that the Trust had Articl e I I I standing with respect to its fourth claim – that the F orest Service violated federal law b y failing to take var i o u s costs into a ccount when d etermining whether Cany on Mine could be o perated at a p rofit. The panel held that the district court d id not err in finding that the law of the case doctrine applied to the issue of standing

.

The Trust arg ued that sunk costs – costs that have already been incurred and that cannot b e recovered – should be considere d when evaluating whether the discovery of a “valuable mining deposit” was made under the Mining Act.

The p anel h eld that it was not arbitrary and capricious for the F orest Service to ig n ore sunk costs in de t ermining that Energ y F uels had a claim to “valuable mineral d eposits,” 30 U.S.C. § 22. Apply ing Chevron anal y s is, the panel h eld
at step one that the critical term in the Mining Act – “valuable mineral deposits”

– was ambig uous. Proceeding to step two, the panel held that the Dep artment of the I nterior (“DOI ”)’s interpretation o f the Mining Act

– in which sunk costs are not considered when determining whether a mine is profitable –

was a p er m i s s ible one. F irst, the fact that the DOI ex cludes sunk c osts from its p r ofitability analy sis was not manifest l y contrary to the Mining Act because this interpretation was consistent with the prudent person and marketability tests, which the Supreme Court has repeatedly uph e ld. Second, DOI ’s interpretatio n was not arbitrary and capricious in substance because it w as consistent with establish e d economic principles. I t is a basic principle of economics that sunk costs should be ig nored when making a rational decisionG R A N D C A N Y O N T R U S T V

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O V E N C I O 4

about whether to make further ex penditures. Since the panel would be required to g ive DOI deference under the Chevron doctrine, it w as appropriate f or the F orest Service to do so a s well in its valid ex isting rig hts determination. According ly
, it

was n ot arbitrary and capricious for the F orest Service to rely on DOI ’s interpretation of the Mining Act.

COUNSEL

Aaron M. Paul (arg

u e d ), Gran d Cany on Trust, Denver, Colorado; Marc F ink, Center f or B iolog ical Diversit y , Duluth, Minnesota; N e il L evine, Public J ustice, Denver, Colorado; Rog er F ly

nn, Western Mining Action Project, L y ons, Colorado; for Plaintiffs-Appellants.

Thekla H ansen-Young (arg ued), Andrew C. M e r g en, Michael T. Gray
, a

nd Sean C. Duffy
, Attorney s; J ean E

. W illiams, Acting Assistant Attorney General; Environment and Natural Resources Division, United States Department of J u s t i ce, W a sh i n gt on, D .C.; Nicholas L

. Pino, Attorney
, Office o f General Counsel, U nited States Department of Ag r i c ulture, W a shing ton, D.C.; for Defendants-Appellees.

B radley J

. Glass (arg

ued), Galla g h e r & Kennedy P.A., Phoenix , Ariz o na, for I

ntervenor-Defendants-Appellees.G R A N D C A N Y O N T R U S T V

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O V E N C I O 5

OP INION

B YB EE, Circuit J udg e:

This d ispute concerns Cany on Mine, a uranium mine operated by Energ y F uels Resourc es (USA), I nc., a nd EF R Ariz ona Strip L L C (collectively
, Energ y F uels) in the Kaibab National F orest. Cany on Mine is located within an area o f public lands that h av e been withdrawn from new mining claims by the Secretary of t h e I nterior, althoug h the withdra w a l did not ex ting uish “valid ex isting rig h ts.” The Havasupai Tribe and three environmenta l g r oups—Grand Cany on Trust, Center for B iolog i c a l Diversity
, and Sierra Club ( collectively
, the T rust)—challeng e the United States F orest Service’s determinat i o n t hat Energ y F uels holds a valid ex isting rig ht to operate Can y o n M ine. The primary
q u e stion in this appeal is, in determining that Energ y F u e l s has a claim to “valuable mineral deposits,” 3 0 U .S.C. § 22, whether it was arbitrary and capricious for the F orest Service
to ig nore sunk costs. The district court held that it w a s n ot and g r a n t e d summary judg ment to the defendants. G rand Canyon Tr. v. Provencio
, 467 F. S u p p. 3d 797, 804–05, 812–23 (D. Ariz . 2020). W e affirm.

I . B ACKGROUND AND PROCEEDI NGS

This is the second t i m e this case has come b efore us. B ackg round concerning the h istory of Cany on Mine a nd this

case is discussed in Havasupai Tribe v. Provencio , 906 F .3d 1155, 1159–61 (9th Cir. 2018). Additional backg round may be found in National Mining Ass’n v. Zinke
, 8 77 F

. 3 d 845, 854–60 (9th Cir. 2017), and Havasupai Tribe v. United States
, 752 F

. Supp. 1471, 1475–77 ( D. A riz

. 1990), a ff’d sub

nom. Havasupai Tribe v. Robe r t s o n , 943 F .2d 32 (9th Cir.G R A N D C A N Y O N T R U S T V

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O V E N C I O 6

1991) (per curiam). W e will repeat the backg round here only
as necessary

for the contex t of the issues before us.

A. Background

1. Cany on Mine

U ra nium was first discovered near Grand Cany o n National Park in 1947. Uran i u m is often found in breccia pipes—cy lindrical deposits o f broken sedimentary rock located thousan ds of f

eet underg r ound. See Nat’l Mining Ass’n
, 877 F .3d at 857. One such b reccia pipe was located in the Kaibab National F o rest in northern Ariz ona, a few miles south of Grand Cany o n National Park and in the area around Red B utte, a site of relig ious and cultural sig nificance to the Havasupai Tribe.

I n 1 984, Energ y F uels Nuclear, I nc. (EF N) sub m i t t ed a plan of operations to mine uranium from the breccia pipe b y building and operating w hat b ecame known as Cany on Mine. The F orest Servic e a p p r oved the plan in 1986. The Havasupai Tribe challeng ed the approval, but the district
court rejected the tribe’s claims and w e affirmed the judg ment. See Havasupai Tribe v. Robertson
, 9 4 3 F. 2 d at 34–35. Over the nex t y ears, EF N built the mine’s surface facilities and sank the first fifty f eet of a 1,400-foot sha f

t

. However, EF N suspended operations in 1992 due to a drop in uranium prices. Denison Mines C o rp. (later acquired b y I ntervenor-Defendant Energ y F uels Resources (USA), I nc.) acquired the mine in 1997.G R A N D C A N Y O N T R U S T V

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O V E N C I O 7

2. The Grand Cany

on Mineral W ithdrawal

I n 2007, a spike in the price of uranium g enera t ed renewed interest in mining operations n ear the Grand Cany on and with it, thousands o f n e w m i ning claims. The larg e volume o f new claims raised concerns about the potential environmental impact of increased ura n ium mining on the Grand Cany on area. Nat’l M i n i n g A ssoc. , 877 F .3d at 857. I n r e s p onse, the Secretary of the I nterior published a Notice of I ntent to wi t h d raw a

pprox imately one million acres o f public and N ati onal F orest Sy stem lands from new uranium mining claims. Notice of Propos e d W ithdrawal and Opportunity for Public Meeting; Arizona
, 74 F ed. Reg

. 35,887 (J uly 21, 2009). The with d r awn land w ould include the land occupied b y C a n y o n Mine. Grand Canyon Trust
, 467 F

. Supp. 3d at 8 02. However, c o n sistent with the F ederal L and Policy and Manag ement Act of 1976 (F L PMA), t h e Secretary n oted that the w ithdrawal w a s “subject to valid

ex isting rig hts.” 7 4 F ed. Reg

. 3 5,887. A f t e r two y ears o f study
, the Department of the I n terior ( DOI ) issued the order

w i thdrawing the lands. Public Land Order No. 778 7 ; W ithdrawal of Public a nd National Forest System L a n d s in the Grand Canyon W

a te r s h ed ; Arizona
, 77 F ed. Reg

. 2563 (J an. 18, 2 012). W e upheld the withdrawal decision in National M

ining Ass’n
, 877 F .3d at 878. B efore the decision became final, Energ y F uels notified the F orest Service, which is with in the Department of Ag riculture, that it intended to return Cany on Mine to active operations. Altho u gh F orest Service a pproval was not required for E n erg y F uels to restart its operations at Cany on Mine, a t the F orest Service’s request, Energ y F uels ag reed not to resume sinking the m i n e shaft pending review, known as a V alid Ex isting Rig htsG R A N D C A N Y O N T R U S T V

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O V E N C I O 8

Determination (VER Determination), of its claim of ex isting rig hts. 1

3. The F orest Service’s VER Determination

The F orest Service issued its V ER Determination in April 2012. The F orest Service concluded that “a discove ry o f a valuable mineral deposit ex isted” on J uly 21, 2009 (the date of the Secretary ’s seg reg ated withdrawal). I t a lso concluded that, under the economic c onditions as of J anuar y 11, 2012 (the da t e of the mineral ex am), “ the uranium deposit on the claims co u l d be mined, removed, transported, milled a nd marketed at a profit.”

Two F o rest Service ce r tified mineral e x aminers conducted the analy sis for the VER Determination and their finding s were approved by a F orest Servic e l o catable minerals specialist. The mineral ex aminers c o n d u c ted their

ex a mination over several months, makin g m u l tiple trips to Cany on Mine as well as Energ y F uels’s o f f i c es, its A riz o na O n e Mine, a

nd its W hite Mesa Mill. Their work inclu d e d verify ing c laim boundaries, documenting development activities, o bserving d

rill co r e s a mples, and r eviewing v arious documents provided b y Energ y F uels a n d the U n i t ed States. They a lso conducted an economic analy sis that considered the

1 A lth o u g h t h e F o rest S erv i ce d id n o t h av e to p rep are a VER Dete r m i n atio n , su ch a d eterm in atio n w as relev an t to w h eth er th e Fo rest Serv ice w o u ld co n test th e m i n in g claim b ef ore DOI. S

ee Fo rest S

ervice Ma n u al § § 2 8 1 4 .1 1
, 2 8 1 9 .1

– 2. S e e a l s o 4 3 C.F.R. § 4 .4 5 1 (DOI
reg u latio n s p ro v id in g f

o r th e g ov ern m en t to co n t est d ecisio n s). T h e Fo rest Serv ice’ s d eterm in atio n w o u ld h av e been relev an t, ev en if n o t b in d in g , to DOI’ s o w

n d ecisio n

. See H

a va su p a i T rib e v

. P ro ven cio
, 9 0 6 F.3 d

a t 1 16 2

– 6 3 (h o ld in g t

h at th e VER Determ in atio n w as “ f in al a g e nc y actio n ” f o r A P A rev iew ).G R A N D C A N Y O N T R U S T V

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O V E N C I O 9

tonnag e a nd g rade o f uranium, the c apital and operating costs, commodity pricing
, and a cash flow feasibility analy sis. The economic analy sis treated costs incurred prior to 1992 (when operations were suspended) to develop the surface structures and sink the first fifty feet o f shaft as “‘sunk’ costs since they

were previ o u sly completed for mine development and a re fix ed assets on the claims.” As such, these costs were not incorporated into its calculation of Cany on Mine’s “net sum of cash flows.” T he d iscounted cash flow feasibility analy sis showed that, a t a u r anium price of $56 per pound, Cany on Mi n e w o u l d have a net sum o f cash flows of $29,350,736. The report describes this numbe r a s “the stream of income
ge n e r a t ed by the project as a f unction o f time. The sum o f cash f lows s h o ws whether the proposed mining operation would result in a profit or a loss.”

I n addition to the VER Determination, the F orest Service

c o n d u c ted a “Mine Review,” d ated J une 25, 2012. The review w as conducted by a thirteen-person i n t e rdisciplinary team, which evaluated the 1984 p lan of operations as well a s environmental, historical, and relig i o u s issues related to

co n t inued operation of Cany on Mine. The F orest Service concluded that “no modifica tion or amendment to the ex isting Plan o f Operation [ w as] nece s s a r y ” and “no new federal action subject to further NEPA analy sis [ was] required.”

B

. Proceedings

I n 2013, the Tribe and Trust asserted f o u r claims under the Administrati v e P r o cedure Act to c halleng e the F orest Service’s determination. W e found the VER Determination reviewable and affirmed the district c ourt’s g rant of summary judg ment for three claims related to the N atio n al Environmental Policy

Act of 1969 and the National H istoricG R A N D C A N Y O N T R U S T V

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O V E N C I O 10

Preservation Act o f 1966. Havasupai Trib e v

. P rovencio
, 906 F .3d at 1 163–65. On the fourth claim—that the F orest Service violated federal law by f ailing to t a k e various costs into account when determining whether Cany

o n Mine could be o p er ated at a profit—the district court held that the Trust did n ot have p rudential standing

. Id. at 1165. W e reversed, holding that the Trust had prudential standing to pursue claim four because “the F L PMA, and not the Mining Act, forms the leg al basis of the Trust’s fourth claim” and that the claim fell within the F L PMA’s z one of interests. Id. at 11 6 6

– 6 7

. W e remanded to the district court for consideration on the merits.

On remand, the partie s cross-moved for summary judg ment on t he fourth claim, and the district c ourt g ranted
summary judg ment to the defendants. The district court h eld that (1) the Trust had Article I I I standing based on the law o f the cas e d o ctrine; (2) assuming that environmental monitoring and wildlife-conservation costs were omitted, the

error was harmless because the Trust had not shown that such
costs w ould c hang e the F orest Service’s finding that Cany on Mine w ould be profitable; a n d (3) the F orest Service’s failure
to consider sunk costs when e v a lu a t i ng the profitability o f C a ny on Mine was consistent with the B ureau o f L a n d Manag ement’s Ha n d b o ok and the I nterior B oard of L a nd Appeal’s (I B L A) precedent, the F orest 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 T r ibe time l y appealed the district court’s ruling with respect to whether the VER Determination

s h ould have considered sunk costs in its appraisal o f t h e mine’s profitability

. The F o rest Ser v ice continues to claim that the plaintiffs lack standing

.G R A N D C A N Y O N T R U S T V

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I I

. STANDARD OF REVI EW

W e review the district court’s g rant of summary judg ment de novo. “Viewing the evide n c e in the lig ht most favorable
to the nonmoving party , we must determine whether there a re any g enuine issues of material fact a n d whether the d istrict
court c orrectly applied the relevant substantive law.” Gordon

v. Vir t u m u n d

o, Inc.
, 575 F .3d 1 040, 1047 (9th Cir. 2 009) (quoting Devereaux v. Abbey
, 263 F

. 3 d 1070, 1074 (9th Cir. 2001) (en banc)).

The Trust raises its challeng e to the VER Determination under the judicial r eview provis i o n s o f the APA, 5 U .S.C. §§ 701–06

. I n g eneral, “[ t] he form of proceeding for judicial review is the special statutory review proceeding relevant to the subject matter.” 5 U.S.C. § 703. B e c ause the Mining A ct does not c ontain a “special statutory r eview” pr ovision, we

w i l l review final ag e ncy action under § 706. See id

. § 7 0 4 ; W h itewater 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 ag ency action, finding s, a nd conclusions” when they are “arbit r a ry , capricious, an abuse

o f discretion, or o therwise not in accordance with l a w

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

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

An open question reg ardin g the appropriate standard under t h e APA for reviewing the F orest Service’s VER Determina tion will be addressed below. See infra Part I I I .B .2.G R A N D C A N Y O N T R U S T V

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I I I . DI SCUSSI O N

A. Standing

The F orest Service arg ues that the Trust does not have Article I I I standing t o pursue its claim. I t reasons that, because the Trust alleg e s that it is injured by the continuation of mining operations and t h e VER Determination was not leg ally required for operations at Cany on Mine to resume, the Trust’s injury cannot be traced to the VER Determination a nd setting a side the VER Determination would not redress the Trust’s alleg ed injury

.

W h en this case was last b efore us, we held that the Trust had Article I I I stand i n g w ith respect to its fourth claim. W e noted that:

W h ile the parties dispute whether c ontinued

m i n i n g required the F orest Service’s approval
, w e must assume that it did in assess i n g standing

. I f the Tribe a

nd T rust are c o r

rect that continued mining r equired approval, then their injuries a

r e f airly 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 d istrict 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 p anel of an appellate

c o urt will not as a g eneral rule reconsider questions which another panel h as decided on a prior appeal in the same case.”G R A N D C A N Y O N T R U S T V

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O V E N C I O 13

V a lenzuela Gallardo v

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

. 2020) (alteration omitted) (quoting Thomas v. Bible
, 9 83 F .2d 152, 154 ( 9th Cir. 1993)). “[ T] he law of the case doctrine is subject to three ex ceptions that may a rise w hen ‘( 1 ) the decision is clearly erroneous and its enforcement would work

a manifest injustice, (2) intervening c ontrolling authority makes reconsideration appropriate, or ( 3 ) substantially different evidence w as adduced at a subseq uent trial.’” Minidoka I

rrigation D ist. 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 W L 1560395 (9th Cir. J u l y 6
, 2005). I n Nordstrom v. Ryan
, we held that our prior determination that the plaintif

f had standing was “both the law of the case a nd binding precedent t hat we must follow” when the case returned “in virtually the same procedural posture.” 856 F .3d 1265, 1270 (9th Cir. 2017).

The d istrict court did not err in finding that the law of the

case doctrine applied t o the issue of standing

. The government has not pointed us to any circumstances t h at would trig g er a

n ex c e ption to the g eneral rule. See Minidoka
, 406 F .3d at 573. W e have already held tha t t h e T r u st has Article I I I standin g, a nd the present appeal has returned “in virtually the sam e p rocedural p osture.” See Nordstrom
, 856 F .3d at 1270.

B

. Sunk Costs

The Trust arg ues that sunk costs—costs that have “already been 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. I n o r der to rule onG R A N D C A N Y O N T R U S T V

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O V E N C I O 14

this issue, we must f

i r st review the r elevant law and the standard of review.

1. Statutory

and reg ulatory backg round

The General Mining Act of 1872 ( Mining Act ) a l l ows citiz ens of the United Sta tes to g ain rig hts to “valuable mineral deposits” o n federal land. 30 U .S.C. § 22. To do so,

a claimant must first “locate” a mining claim by f o l l o w i ng certain statutory and reg ulatory procedures, including p osting notice. United States v. S humway
, 199 F .3d 1093, 1099 (9th Cir. 1 999). L ocating a mining c l a i m g ives the claimant a

v e s t e d p ossessory rig h t to the real property at issue. Id.
at 1095. F o r t he claimant to secure an enforceable property rig ht, a claimant must make a “discovery ” of a “valuable mineral deposit.” See 30 U.S.C. §§ 22–23. Cong ress has deleg ated the authority to administer the Mining Act to the Secr e t a ry of the I nterior and the B ureau of L a nd Manag ement. C

a m e ron v. U

nited States
, 2 52 U.S. 450, 459–60 (1920). The Mining Act does n o t d e fine what constitutes a “valuable mineral deposit,” so the Secretary has applied a “prudent p erson” test to assess whether a claimant has d iscovered a valuable mineral deposit. I n the Secretary ’s view, the prudent person test means that

where minerals have been f o und and the evidenc e i s of such a character that a person of ordinary prudence would be justified in the further ex penditure o f h is labor and means, with a reasona

b l e prospect of success, in d e v e l o p i n g t h e v a l u a b l e m i n e , t h e requirements of the statute have been met.G R A N D C A N Y O N T R U S T V

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O V E N C I O 15

Ca stle v. W

omble
, 19 Pub. L ands Dec. 455, 457 (D.O. I

. 1894). That t e s t h a s been repeatedly cited with approval b y the Supreme Court. See W a tt v. W est. Nuclear, Inc.
, 462 U.S. 36, 58 n.18 (1983); A ndrus v. Charlestone S tone P rod. C o. , 436 U.S. 604, 607 n.4 ( 1978 ) ; United States v. Coleman
, 3 9 0 U .S. 599, 602 (1968); Best v. Humboldt Placer Mining C o

. , 371 U.S. 3 34, 335–36 (1963); Chrisman v. Miller
, 197 U.S. 313, 322 (1905).

I n 1962, the Secretary issued an opini o n re stating the “prudent person” test in terms of a “marketability test,” which requires that a claimant show that a m ineral c an be “ex tracted, removed and marketed at a profit” f o r it to be considered “valuable” under the Mining Act. See Coleman
, 390 U .S. at 600. The Supreme Court approved the

re s t a tement as “an admirable effort to identify with g reater p r e cision and objectivity the factors relevant t o a determination that a mineral deposit is ‘valuable.’ I t is a log ical complement to the ‘ prudent-man test’ w h i c h the Secretary has been using to interpret t h e mining laws since 1894.” Id. at 6 02. The Court ex plained that the Mining Act “was to reward and encourag e the discovery of minerals that

are valuable in an economic sense.” Id. “Thus, profitability is an important consideration in a p p ly ing t h e prudent-man test, and the marketability test” b ecause if a claimant is pursuing a mineral deposit that lacks “ econom i c value a nd
cannot in all likelihood be operated at a profit” it “ m a y w ell

su gge s t that a claimant seeks the land for other purposes”—purposes not sustainable under the Mining Act. Id. at 602–03.

I n 1980, DOI first a

nnounced tha t w h e n d etermining whether a mine is profitable, it w ould not consider sunk costs. United States v. Mannix
, 5 0 I B L A 110 (1980). I n Mannix
,G R A N D C A N Y O N T R U S T V

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O V E N C I O 16

the g overnment attorney s arg ued that “ all earlier ex penses in development of the property must be considered, e.g. , the cost of constructing cabins, shed, a nd a n access roa d an d the purchase of rail and ore cars and that such ex penses must be recouped before it c an be s aid the mine is a profitable venture.” Id

. a t 119. DOI rejected the a rg ument, r e a s o n i ng that “[ t] here is no case law of which we have knowledg e

. . . that compels c o n sideration of the above mentioned development costs in determining if an ong oing operation is
p r e sently profitable.” Id

. So long as “the mineral mat e r i al
may be n ow mined, removed, and marketed at a present profit

over and above the costs of such operations,” t h e m i ne may be considered “valuable” under the Mining Act. Id. DOI has applied this rule for over f o r t y y e a rs. S

ee U nited States v

. Clouser
, 144 I B L A 1 1 0
, 131–32 (1998); United States v

. Collord
, 128 I B L A 266, 288 n.2 4 ( 1 994); United States v

. Copple , 81 I B L A 109, 129 (1984).

I n this case, the mineral ex amination was condu c t e d b y th e U .S. F o rest Service. Althoug h DOI has primary jurisdiction to determine the validit y o f mining claims, the F orest Service is authoriz ed to conduct mineral ex aminations

on National F orest Sy stem lands and to recommend that DOI initiate a dministrative contests of invalid mining claims. See 1 6 U.S.C. §§ 478, 482; F orest S ervice Manual §§ 2810.41, 2814.11, 2819, 2819.1–2.

2. Standard of review

T he F orest Service determined that Energ y F uels h a s a val i d ex isting rig ht to operate Cany on Mine. The VER Determination relied on the leg al standard for discovery of a valuable mineral deposit announced b y DOI

. I t twice cited DOI ’s c ore decision in Castle v. W omble
, and it noted whichG R A N D C A N Y O N T R U S T V

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O V E N C I O 17

c o s t s it reg arded as sunk. T h e parties disag ree over w ha t

s t a ndard of review we should apply h e r e. The Trust a rg u e s that w e can review DOI ’s interpretation o f the Mining Act de
novo, because it is a p ure q uestion o f law. The district court disag reed, finding that the q u estion was whether the F orest Service’s r eliance on DOI ’s cons t r u c tion of the act was

a r b i t ra r y a n d c a p r i c i o u s , r a t h er than whether t h e interpretation itself was valid. S ee Grand Canyon Tr.
, 467 F

. Supp. 3d at 819–21. The F orest Service arg ues that, since an action by DOI is not b eing challeng e d and DOI is n o t a party to this lawsuit, the validi t y o f DOI ’s interpretation is not before us.

The district court was correct. W hen reviewing the F orest Service’s VER Determination, the proper standard of r eview is arbitrary and capricious. W e h ave consistently applied the arbitrary and capricious standard to cases in which an ag ency relies on or defers to the opinions or interpretations of another
ag ency

. See, e.g. , S

an Luis & D elta-Mendota W ater Auth. v

. Jewell
, 7 47 F .3d 581, 6 4 0 (9th Cir. 2014); W ild Fish Conservancy v. Salazar
, 628 F .3d 513, 5 3 2 (9th Cir. 2 010); Pyramid Lake Paiute Tribe of Indians v. U.S. Dep’t of Navy
, 898 F .2d 1410, 1415 (9th Cir. 1990)

. The Trust arg ues that arbitrary and capricious review applies only when an ag ency defers to another ag ency ’s judg ment about factual matters, a s opposed to p ure q

uestions o f law. Our law is to the contrary

. I n Defenders of W

i l d l i f e v

. U.S. E

P A
, we concluded that the F ish and W ildli f

e Service had prepared a biolog ical opinion that r elied o n leg a l errors. 420 F .3d 9 46 (9th Cir. 2005), rev’d on other g r o u nds a nd remanded sub nom. Nat’l Ass’n of Hom e B uilders v. Defs. of W ildlife
, 551 U.S. 644 (2007). EPA had, in turn, relied on the biolog ical opinion. W e h eld EPA was arbitrary and c a

pricious when it relied on the f lawed opinion. Id. a t 976. A l t h o u gh we o bserved that an ag encyG R A N D C A N Y O N T R U S T V

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O V E N C I O 18

“should be able to rely on the ex p ert judg ments that underlie [ a] B iolog ical Opinion[ ] ” prepared by a n other ag ency , in this

case “the B iolog ical Op i n i o n ’s flaws are legal in nature. Discerning them requires no technical or scientifi c ex pertise.” Id. They were errors “EPA should have understood.” Id.

Since the V ER Determ i n a t ion cited and applied D OI ’s interpretation o f the Mining Act, 2 we may reach throug h the VER Determination and review D OI ’s interpretation “only to t he ex tent that [ it] demonstrate[ s] whether [ the F or e s t Service’s] reliance on the [ interpretation] is ‘ a r b itrary a nd capricious.’” Pyramid Lake
, 898 F .2d at 1415 (quoting Stop H-3 Ass’n v. D ole
, 74 0 F. 2d 1442, 1 460 (9th Cir. 1984)). B ecause DOI

has authority to administer the Mining Act, its interpretation is analy

z ed under Chevron, U.S.A., I n c. v

. National Resources Defense C o u n c il, Inc.
, 467 U .S. 837 (1984). 3 Lambert v. Saul
, 980 F .3d 126 6
, 1 2 7 5 (9th Cir.

2 A l th ou g h th e VER Determ in atio n cited Ca s tle v. W o mb le
, it d id n o t ref er ex p licitly to Ma n n ix

. T h at su g g ests th e p o ss i b i lity th at th e Fo rest Serv ice ex p ressed its o w

n v iew s o n th e i rrelev an ce o f su n k co sts, rath er th an ref lectin g DOI’ s v ie w o f su ch co s ts. Sin ce b o th ag en cies to ok th e

sam e v iew o f su

n k co sts, an d w e co n clu d e th at s u c h p o s itio n is n o t arb itrary an d cap ricio u s , w e d o n o t n eed to ex p l o re f u rth er th is q u estio n

. T h e resu lt w ou ld b e th e sam e in eith er case.

3 T h e T ru st arg u es th at Ch evro n d ef eren ce s h o u ld n o t ap ply b ecau s e DOI f ailed to p ro v id e t

h e “ m in im al lev el o f an aly sis” req u ired

. En cin o Mo to r ca rs, LLC v. Na va rro , 5 7 9 U.S. 2 1 1, 22 1 (2 0 1 6 ) (req u irin g th at an ag en cy g iv e “ ad eq u ate reaso n s f o r its d ecisio n s,” m ean in g t h a t t h e ag en cy ’ s ex p lan atio n m

u st b e “clear en ou g h th at its ‘ p ath m ay b e

reaso n ab ly discern ed ’ ” (q u o tin g Bo wma n Tra nsp ., In c. v. Arka n sa s-Best Freig h t S ys., I n c. , 4 1 9 U.S. 2 8 1
, 2 8 6 (1 9 7 4 )). W h ile DOI’ s an aly sis in Ma n n i x is b rief

, it cites cases t

h a t u s e lan g u ag e co n sisten t w ith its in terp retatio n

. See Ma n n ix
, 50 IB L A at 1 1 7

– 1 8 (citin g Ca s tle
, 1 9 P u b

. L an d s Dec. at 4 5 7 ; Un ited S ta t e s v

. McKen zie
, 2 0 IB L A 3 8, 4 5 (1 9 7 5) (“ [E]v id en ce sh o u ld f

o cu s o n cu rren t estim a t e s o f co sts an d p rices.”)).G R A N D C A N Y O N T R U S T V

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O V E N C I O 19

2020). I f DOI ’s interpretation o f the Mi n i n g Act is not entitled to Chevron deference, then it is arbitrary a nd

c a p r i cious f

or the F orest Service to rely on the errone o u s interpretation. This approach is con s i s tent with that o f our sister circuits. See, e.g. , Florida Key Deer v. Paul i s o n , 522 F .3d 1 133, 1145 (11th Cir. 2 008) (“I f [ one ag e ncy ’s opi n i on is] arbitrary and capricious, an[ other] ag e ncy ’s decision to adopt [ it] is likewise arbitrary and capricious a nd
may be c halleng ed.”); CTIA-W ireless Ass’n v. FCC
, 466 F .3d 105, 117 ( D.C. Cir. 2006) (finding that, if the co u rt m ust defer to the ag ency ’s interpretation, it is not a r b i t r ary a nd capricious for another ag ency to do so).

3. Chevron deference

Chevron analy sis has two steps: “[ W ] e must first ex haust
t h e traditional tools of statutory construction to determ i n e whether Cong ress h as d irectly 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). I f the statute is “ silent o r ambigu o u s o n the question a t hand, then at Chevron st e p t w o we must respect the a g e n c y ’ s interpretation so long as it is based on a permissible construction of the statute”—th a t i s , one not “arbitra r y , capricious, or manifestly contrary to the statute.” Id. (internal quotations omitted).

T h is w ou ld in d icate th at DOI w as read i n g th e Min in g A ct to b e co n sisten t

w ith its p rio r case law o n th e p ru d e n t perso n an d m ark etab ility tests,

w h ich th e Su

p rem e Co u rt ap p ro v ed o f o n m u ltip le o ccasio n s

. T h is is

su f f icien t f o r u s to p ro ceed w ith a Ch evro n an a l y si s

. S ee En cin o Mo to r ca rs , 5 7 9 U.S. at 2 2 2 (“ [S]u m m ary d iscu s sio n m ay

su f f ice . . . .”).G R A N D C A N Y O N T R U S T V

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O V E N C I O 20

At Chevron step o ne, “[ t] o maintain the proper separation of powers be tween Cong ress and the ex ecutive b ranch, we must ‘ ex h a

ust all the traditional tools o f construction’ before

w e ‘wave the ambig u ity flag .’” Route v. Garland
, 996 F. 3 d 968, 978 (9 th Cir. 2021) (quoting Medina Tovar v

. Zuchowski
, 982 F .3d 631, 634 (9th Cir. 2 020)). I n this c ase, however, we have little difficulty d e termining that the critical
term in the Mining Act—“valuable mineral deposits”—is ambig uous. See 30 U.S.C. §§ 22–23. I t is neither a defined
term nor a term of a

rt in the industry

. I n Chrisman
, the Court fi r s t c onsidered, and approved the Secretary ’s “prudent person” test. 197 U.S. at 322–23. The Court stated the statutory r equirement in the most g e neral of terms: “[ T] here
must be such a di s co v ery o f mineral as g ives reasonable evidence o f the fact, e ither that there is a vein or lode carry ing th e precious mineral, o r, if it be claimed as placer g round, that it is valuable for such mining .” Id. at 323.

Ex amining the purpose a n d h i s tory of the Mining A ct similarly y ields no definitive understanding of t h e t e rm. I n C oleman
, the Supreme Court said that the purpose o f t h e Mining Act was to make “public lands available to people for the purpose of mining v aluable m ineral deposits and n o t for other purposes. The obvious intent was to rew a r d a nd
encourag e the discovery o f m i n erals that are valuable in an economic sense.” 3 90 U.S. at 602. That description is far too g eneral to cabin the definition o f “valuable mineral d eposits.” That does not mean that an enforcing ag ency such as D OI can define it in any way it p leases, but it also means that we may

n o t insist that the phrase is so clear as to b e capa b l e o f a sing le meaning

.

I f the terms of the statute are not c a p a b l e of precise definition at step one, we cannot see how we could determineG R A N D C A N Y O N T R U S T V

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O V E N C I O 21

that “valuable mineral deposits”—which the ag ency h a s concluded me a

ns that the deposits would be pursued by a prudent person—forecloses how the ag ency accounts for “sunk costs,” which is n ot a statutory term, but is a commonly used economic phrase. Concluding t h a t the statute is ambig uous, we may

now proceed to step two.

At Chevron step two, we hold that DOI ’s interpretation o f the Mining Act—in w h ich sunk c osts are not considered wh e n determining whether a mine is profitable—is a permissible one and not “ ar b i trary and capricious in substance, or mani f

e s t l y contrary to the statute.” Mayo Found. for M

ed. Educ. & Rsch. v. United States
, 562 U.S. 44, 53 (2011) (quoting Household Credit S ervs., Inc. v. P

fennig
, 541 U.S. 232, 242 (20 0 4 ) )

. F irst, w e find that the fact that DOI ex cludes sunk costs from its profitability analy sis is not manifes tly contrary to the Mining Act because this interpretation is consistent with th e prudent person a nd marketability

tests, which the Supreme Court has repeatedly upheld. S

ee W est. Nuclear, I

nc ., 462 U.S. at 58 n.18; Coleman
, 390 U.S. a t 602. Althoug h the Court has not addressed the question of sunk costs specifically
, the lang uage o f t h ese tests and the cases in which they a re applied sug g est that the profitabi l i ty analy sis is forward looking

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

. . a person of o rdinary prudence would b e justified in the f urther

ex p enditure of his labor and means.”); see als o M cKenzie
, 20 I BL A at 38, 45 (“[ E] v idence should focus on current estimates of c o s t s and prices.”). Sunk costs, on the other hand, are backward looking

.

More importantly
, DOI ’s interpretation is n ot arbitr a r y and c apricious in substance because it is consistent w i th established economic principles. I t is a basic principle o fG R A N D C A N Y O N T R U S T V

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O V E N C I O 22

economics that sunk costs should be ig nored w hen making a rational decision about whether to make f urther ex penditures. See N. Greg ory Ma nkiw, Principles of Economics 275 (8th ed. 2016) (“B ecause not h i ng can be done about sunk costs,
y ou should ig nore them when m a k i ng [ rational] decisions about various aspects of life, including b usiness strate g y .”); Richard A. Posner
, Economic Analysis of Law 8 (9th ed. 2014) (“‘Sunk’ (already incurred) costs do not affect a

ra t i o n a l actor’s decisions o n price and quantity

. . . . F ully rational p e o p le base their decisions on ex p e ctations of the future r ather t han o n reg rets a bout the past.”); Paul A

. Samuelson & W illiam D. Nordhaus, Economics 179 ( 18th ed. 2005) (“One of the most importan t l e s s o ns of economics is that y ou should l o o k a t the marg inal costs and marg inal benefits of decisi o ns and ig n ore past or sunk costs.” (emphasis omitted)); Thomas Kelly
, Sunk Costs, Rationality, and Acting for the Sake o f the Past
, 38 N o û s 6 0
, 61 (2004) ( “ [ I ] t is w idely ag reed that honoring sunk costs is obviously and clearly irrational, and that doing so is, without ex ception,
to be avoided. I n economics and business t e x t b o o ks, the tendency to honor sunk costs is treated as an elementary fallacy .”); Armen A. Alchian & W illiam R. Allen, Exchange and Production: Theory in U se 2 88 (1969) (a “fix ed o r sunk cost” is “‘fix e d ’ u p o n y ou and irrevocable. F or a ny subsequent decision this ‘cost’ is totally irrelevant and can be forg otten.”). F ederal courts have acknowledg ed the validity of the sunk cost principle in other contex ts. See, e.g. , Verizon Commc’ n s , I

n c

. 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, I nc. v. FCC
, 201 F .3d 608, 615–16 (5th Cir. 2000); Fresno Mobile Radio, Inc. v. FCC
, 165 F .3d 9 6 5
, 969 (D.C. Cir. 1 999) (rejecting an arg ument tha t a bu siness’s actions a

re motivated b y its past investment because “[ t] his is a foolish notion that sho u l d not beG R A N D C A N Y O N T R U S T V

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O V E N C I O 23

entertained by any one who has h a d even a sing le underg raduate course in e conomics,” and collecting sources); MCI Commc’ns Corp. v. Am. Tel. & Tel. Co.
, 708 F .2d 1081, 1117 ( 7th Cir. 1983). See a l s o U nited States v. Park Place Assoc., Ltd. , 563 F .3d 907, 921 (9th Cir. 2009).

To illustrate, let u s suppose that AB C Mining spent $31 million to develop what it thoug ht was a valuable mine, but had to take it out of operation w h en the market value o f the mineral declined. L et us also suppose that if AB C Mining wishes to restart operation of the m i n e , i t will earn $50 million in revenue but incur $20 million in further capital and operating ex penses. I f w e ig nore sunk costs, AB C Mining shoul d reopen the mine because the benefit from mining ($50 million ) s t i l l ex ceeds the nonsunk c ost o f

o perating the mine ( $ 20 million). I n fact, the rev e n u e f a r

ex c e eds the nonsunk cost. The o p eration stands to make $30 million by ex tracting the deposit; b y a n y m easure that makes the mineral deposit a valuable one.

B y c ont r a s t, if AB C Mining considers the sunk c osts a s part o f its decision w hether to r e-start operations, it would refuse to continue o peration b e c a u s e it would stand to lose $1 million after considering s u n k costs ($31 million + 20 million

! 50 million). B ut if AB C Mining decides not to re-open the m i n e , it will lose $31 million total, instead o f $1 million, becaus e i t chose not to offset its prior losses
ag ainst the promise of a $30 million b enefit. N o p r u d ent person should follow such a plan. ABC M i n i n g will have misjudg ed the situation by considering i t s total costs rather than i t s n o n s u n k costs. I t is true that the mine operator will have lost $1 million over the life of the mine, but if theG R A N D C A N Y O N T R U S T V

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O V E N C I O 24

operator declines to proceed w hen its revenues will ex c eed its costs, it will have lost $31 million at the mine. 4

DOI ’s sunk c osts rule from Mannix 5 simply recog n i z e s that a prudent person cannot chang e sunk costs, and t h u s those c osts should not be considered when d e t e r m ining whether that person is “justified in the further ex p enditure o f his labor and means.” Castle
, 19 Pub. L ands Dec. at 457; see also Thomas T. Nag le, J ohn E. Hog an, & J oseph Za l e , The Strategy and Tactics of Pricing: A G uide to Growing More Profitably 224 (5th ed. 201 1 ) (“Since nonincremental fix ed and sunk costs do not chang e with a pricing decision,
t h e y do not affect the relative profitability of o n e price versus an a l t e r n a t i v e

. ” ) ; D a v i d D

. F r i e d m a n , P r i c e

4 Of co u rse if a m in e o p erato r k n ew f ro m th e o u tset th at i t w o u ld l ose

ev en o n e do llar ov er th e lif e o f th e m in e, i t w o u l d d e c l in e to f ile th e

m in eral claim

. B u t th e o p erato r—an d DOI, w h ich m u st ap pro v e su ch claim s—can on ly w o rk of f t h e in f o rm atio n th e y h av e. T h ey are n o t resp on s ib le f

o r accu rate l y pred ictin g th e v ag aries o f th e m ark et ov er th e lif e o f th e m i ne

. An d D O I h as d ecid ed n ot to p u n ish o p erato rs w h ose claim s, o n ce u n

pro f itab le, h av e retu rn ed to p ro f i tab ility

.

5 T h e T ru st arg u es th at, ev en if D O I ’s i n terp retatio n is en titled to d ef e r en ce, th e Fo rest S erv ice erred in ap ply in g M a n n ix b ecau s e Ma nn ix h as an ex cep tio n f

o r w ith d raw

n lan d

. T h e T ru st relies o n t h e “a b sen t a p rio r w ith d raw al” lan g u ag e in th e Ma nn ix op in io n an d a co n cu rren ce in Co llo rd
, in w

h i c h th e co n cu rrin g A L J stated t h at th e ex isten ce o f th e

w ith d raw al w as “ critical” to t h e M a n n ix decisio n

. Ma n n ix
, 5 0 IB L A
at 1 1 9 ; Co llo rd
, 12 8 I B LA at 3 0 4 (B u rsk i, J
., co n cu rrin g i n t

h e resu lt). Ho w ev er, th e m aj o rity in Co lla r d d e cid ed t o ex clu d e s u n k co sts ev en in th e f ace o f a w ith d raw al. S ee C o l l a r d
, 1 2 8 IB L A at 2 8 8 n .2 4

. Fu rth erm o re, DOI h as ap p l ied th e Ma nn ix ru le co n s isten tly —w ith o u t an

ex cep tio n f

o r w ith d raw al—f

o r t h e p ast fo r t y y ears. S

ee, e.g

. , C

lo u ser , 1 4 4 I B LA at 1 3 1 ; Co

p p le
, 8 1 IB L A at 12 9

. G iv en th is p reced en t , th e Fo rest Serv ice d id n o t act arb i trarily an d cap ricio u sly

b y f ailin g to ap p ly

a n o n ex isten t ex cep tio n

f o r w ith d raw

n lan d

.G R A N D C A N Y O N T R U S T V

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O V E N C I O 25

T h e o r y : A n I n t e r m e d i a t e T

e x t c h

. 1 3
, p t

. 1 ( 2 d e d

. 1 9 9 0 )
, h t t p : / / w w w

. d a v i d d f

r i e d m a n

. c o m / A c a d e m i c / P r i c e

_ T h e o r y / P T h y

_ T o C

. h t m l ( “ T h e s i g n i f

i c a n c e o f s u n k c o s t s i s t h a t

a firm will continue to produce even when revenue does not

cover total cost, provide d t h at it does cover nonsunk costs (called recoverable costs), since nonsunk costs are all the f irm can save by

closing down.”).

W e need not g o so far as to pronounce DOI ’ s approach to sunk c osts required by the statu te or correct as a matter o f principle. See Friends o f San t a C l a r a River v. U.S. Army Corps of Eng’rs
, 887 F .3d 906, 922 (9th Cir. 2 0 18). W e do
not decide that any o ther approa c h w o u l d be arbitrary a nd capricious. I t is sufficien t that w e can c onclude that D OI ’s rule ex cluding sunk costs is not arbitrary and capricious. A nd since we would be required to g ive DOI deference under the Chevron doctrine, it was appropriate for the F orest Service to do so as well in its VER Determination. As such, it was not arbitrary and c apricious for the F o rest S ervice to r ely on DOI ’s interpretation of the Mining Act.

I V. CONCL USI O N

The judg ment of the district court is AF F IRMED.