[Federal Register Volume 71, Number 140 (Friday, July 21, 2006)]
[Proposed Rules]
[Pages 41542-41613]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-6220]


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DEPARTMENT OF THE INTERIOR

Bureau of Land Management

43 CFR Parts 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: Proposed rule.

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SUMMARY:  This proposed rule would revise the Bureau of Land 
Management's existing geothermal resources leasing and unit agreement 
regulations to implement the Energy Policy Act of 2005. The proposed 
rule would restructure existing regulations concerning the general 
geothermal leasing process and would revise existing regulations on 
royalties and readjustment of lease terms, conditions, and rentals. The 
rule would also revise existing 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 proposed changes in sections unaffected by 
changes in the statute would clarify existing procedures, improve 
grammatical construction, conform the regulations to new administrative 
regulatory standards, and correct existing errors.

DATES: Send your comments to reach the Bureau of Land Management (BLM) 
on or before September 19, 2006. The BLM will not necessarily consider 
any comments received after the above date during its decision on the 
proposed rule.

ADDRESSES: Mail: Director (630), Bureau of Land Management, Eastern 
States Office, 7450 Boston Boulevard, Springfield, VA 22153.
    Hand Delivery: 1620 L Street, NW., Suite 401, Washington, DC 20036.
    E-mail: [email protected].
    Federal eRulemaking Portal: http://www.regulations.gov.
    Send comments on the information collections in the proposal to: 
Interior Desk Officer (1004-AD86), Office of Information and Regulatory 
Affairs, Office of Management and Budget (OMB), (202) 395-6566 
(facsimile); e-mail: [email protected]. Please also send a copy 
to BLM.

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. Public Comment Procedures
II. Background
III. Discussion of the Proposed Rule
IV. Procedural Matters

I. Public Comment Procedures

A. How Do I File Comments?

    You may submit your comments by any one of several methods:
     You may mail your comments to: Director (630), Bureau of 
Land Management, Eastern States Office, 7450 Boston Boulevard, 
Springfield, Virginia 22153, Attention: RIN 1004-D86.
     You may deliver comments to 1620 L Street, NW., Suite 401, 
Washington, DC 20036.
     You may comment directly via the internet by accessing our 
automated commenting system located at www.blm.gov/nhp/news/regulatory/index.htm and following the instructions there.
     You may e-mail your comment to: comments--
[email protected]. (Include ``Attn: AD86'' in the subject line).
    Please make your comments on the proposed rule as specific as 
possible, confine them to issues pertinent to the proposed rule, and 
explain the reason for any changes you recommend. Where possible, your 
comments should reference the specific section or paragraph of the 
proposal that you are addressing.
    The Department of the Interior may not necessarily consider or 
include in the Administrative Record for the final rule comments that 
we receive after the close of the comment period (see DATES) or 
comments delivered to an address other than those listed above (see 
ADDRESSES).

B. May I Review Comments Others Submit?

    Our practice is to make comments, including names and home 
addresses of respondents, available for public review. Individual 
respondents may request that we withhold their names and or home 
addresses, but if you wish us to consider withholding this information, 
you must state this prominently at the beginning of your comments. In 
addition, you must present a rationale for withholding this 
information. This rationale must demonstrate that disclosure ``would 
constitute an unwarranted invasion of privacy.'' Unsupported assertions 
will not meet this burden. In the absence of exceptional, documentable 
circumstances, this information will be released.
    We will always make submissions from organizations or businesses, 
and from individuals identifying themselves as representatives or 
officials of organizations or businesses, available for public 
inspection in their entirety.

II. Background

    The Bureau of Land Management (BLM) is proposing these new 
regulations to implement the Energy Policy Act of 2005 (P.L. 109-58), 
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 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 of 
2005 is the general requirement, with a few exceptions, for geothermal 
resources to be offered through a competitive leasing process. Lands 
not successfully sold in

[[Page 41543]]

the competitive process can be leased noncompetitively.
    The Energy Policy Act also made significant changes in the way 
royalties are assessed on Federal leases. 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). The 
RPC, established under the Federal Advisory Committee Act, makes 
recommendations on issues related to royalties on Federal resources and 
typically consists of representatives from Federal and State 
governments and industries paying royalties for the development of 
Federal resources. The Subcommittee was formed to address 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, two of the major states affected, and MMS 
staff. A BLM representative served as technical advisor to the 
Subcommittee. The Subcommittee's goal was to develop more efficient 
royalty valuation methods that would ensure a fair return to the 
Federal Government as well as to encourage geothermal development. The 
Energy Policy Act requires that for new leases in non-arm's length 
transactions or no-sale situations the royalty on electricity produced 
from geothermal resources be based on the gross proceeds from the sale 
of electricity, 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 that would be 
established by 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. MMS is publishing proposed new regulations to 
implement the changes in the Energy Policy Act simultaneously with 
BLM's proposed rule. BLM and MMS have worked together to coordinate 
their proposed rules.
    References to MMS rules appear throughout BLM's proposed rules 
because BLM and MMS share responsibility with regard to the geothermal 
leasing program. BLM holds lease sales, issues geothermal leases and 
generally administers the leases. BLM establishes the terms of the 
leases, including royalty rates, and enforces the lease terms. MMS is 
responsible for collecting rents (other than the first year's rent) and 
royalties, and for enforcing the royalty obligations. The proposed MMS 
rules contain provisions that carry out its responsibilities. 
Appropriate cross-references are contained both in the BLM and 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 increased the maximum acreage of an 
individual lease and gave the Secretary of the Interior greater 
authority to require lessees to commit to unit agreements to conserve 
geothermal resources.
    Most of the proposed changes in the regulations of this part would 
implement the new provisions of the Energy Policy Act. Other proposed 
changes in sections unaffected by changes in the statute would clarify 
existing procedures, improve grammatical construction, conform the 
regulations to new administrative or regulatory standards, and correct 
existing errors. Substantive changes unrelated to the change in statute 
are discussed under each subpart of this preamble.

III. Discussion of the Proposed Rule

Subpart 3200--Geothermal Resources Leasing

    In subpart 3200, we propose changes to the definitions section and 
propose to add three sections to the end of the subpart.

Definitions

    Section 3200.1 contains definitions of terms used throughout parts 
3200 and 3280. The proposed rule would remove the definitions of terms 
and concepts that would no longer be used under the proposal (or were 
not used previously). Definitions proposed to be removed include 
``additional term,'' ``cooperative agreement,'' ``extended term,'' and 
``pay instead of produce in commercial quantities.''
    Proposed new definitions include ``initial extension'' and 
``additional extension.'' These two definitions reflect terms that are 
used in proposed subpart 3207, and implement concepts enacted in 30 
U.S.C. 1005(a). The portion of the preamble discussing subpart 3207 
addresses these changes.
    Other definitions added include ``direct use'' and ``direct use 
leases.'' The proposed definition of the term ``direct use'' is taken 
from the definition at 30 U.S.C. 1001(g). The proposed definition would 
state that ``direct use means utilization of geothermal resources for 
commercial, residential, agricultural, public facilities, or other 
energy needs other than the commercial production or generation of 
electricity.'' The word ``generation'' is used in addition to the 
statutory word ``production'' to be consistent with the usage in 30 
U.S.C. 1003(f), which also addresses direct use.
    The proposed definition of the term ``direct use lease'' would be 
``a lease issued in an area BLM designates as available exclusively for 
direct use of geothermal resources, without sale, for purposes other 
than commercial generation of electricity.'' This definition is 
intended to describe the geothermal leases that would be issued under 
proposed subpart 3205, which would implement 30 U.S.C. 1003(f).
    The term ``geothermal exploration permit'' would be clarified to 
explain that a BLM authorization to conduct exploration activities 
would occur under a Notice of Intent to Conduct Geothermal Resource 
Exploration Operations, a specific BLM Form.
    The term ``gross proceeds,'' used in the royalty context, would be 
defined through a cross-reference to the applicable MMS definition.
    The term ``commercial production or generation of electricity'' 
would be defined to mean 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. This term 
is needed in determining whether geothermal resource production is 
subject to royalties or direct use fees, as referenced in 30 U.S.C. 
1004(b). The statute does not expressly address whether the electricity 
required to convert geothermal energy into electrical energy for sale 
(the parasitic load) should be considered as a component of the 
generation of electricity or should be considered as a direct use. BLM 
believes it is more appropriate to consider this 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 term ``commercial production'' would mean production of 
geothermal resources when the economic benefits from the production are 
greater than the cost of production. This proposed

[[Page 41544]]

definition would implement a term used in 30 U.S.C. 1004(f)(1), related 
to advanced royalties (see proposed Sec.  3212.15). The term is also 
used for the purpose of qualifying for a drilling extension at proposed 
Sec.  3207.14.
    The term ``geothermal steam and associated geothermal resources'' 
would be slightly modified to follow the statutory definition at 30 
U.S.C. 1001.

Types of Leases

    Proposed Sec.  3200.6 would provide general information explaining 
that under the proposed rule BLM would issue two types of geothermal 
leases. The first category would be leases that may be used for any 
type of geothermal use, such as commercial generation of electricity or 
direct use of the resource. Such leases would be competitively issued 
under subpart 3203 or noncompetitively issued under subpart 3204. The 
second category, a new category required by the Energy Policy Act of 
2005 (30 U.S.C. 1003(f)), would be those that could only be used for 
direct use without sale, i.e., direct use leases issued under proposed 
subpart 3205.

Transition Rules

    The Energy Policy Act of 2005 at 30 U.S.C. 1005(d), directed that 
the Secretary by regulation establish transition rules for leases 
issued before August 8, 2005. Little guidance was provided in that 
section except for requiring that the transition rules include 
provision for two-year extensions for leases nearing the end of their 
terms on August 8, 2005, under certain circumstances.
    Proposed Sec. Sec.  3200.7 and 3200.8 would contain transition 
rules, addressing how the revised regulations would apply to: (1) 
Leases in effect on August 8, 2005, the enactment date of the Energy 
Policy Act of 2005; and (2) Leases issued after August 8, 2005, but 
based on lease applications pending on August 8, 2005.
    Proposed Sec.  3200.7 would address the regulatory status of 
geothermal leases in effect on August 8, 2005. Existing Federal leases 
generally provide that they are subject to existing BLM rules, and also 
to future BLM regulatory changes. This makes sense because the agency 
continually makes changes to its regulatory programs, and lessees have 
no legitimate expectations as a general matter to remain forever 
subject to regulations in effect on the day their leases were issued. 
Accordingly, proposed Sec.  3200.7 would make leases in effect on 
August 8, 2005, generally subject to the revised parts 3200 and 3280.
    There are certain provisions of geothermal leases for which 
existing lessees did have reasonable expectations would not be changed, 
and on which they may have based their planned and existing operations. 
Therefore, the proposed rule, at Sec.  3200.7(a)(1), attempts to 
capture such expectations by proposing an exception to the general 
rule. The exception would provide that leases in effect on August 8, 
2005, would be subject to the regulations in effect on August 8, 2005, 
with regard to regulatory provisions relating to royalties, minimum 
royalties, rentals, primary term and lease extensions, diligence and 
annual work requirements, and renewals.
    Proposed Sec.  3200.7(a)(2) would allow the lessee of a lease in 
effect on August 8, 2005, to elect to be subject to all of the 
regulations in part 3200 and part 3280, without regard to the 
exceptions in paragraph (a)(1). The lessee would have to make such an 
election no later than 18 months after a final rule becomes effective. 
The election derives from 30 U.S.C. 1003(d)(2) that allows a similar 
election to lessees whose lease applications were pending on August 8, 
2005. BLM believes that leases in effect on August 8, 2005, should be 
treated as least as favorably as those lessees who only had an 
application pending on that date. Thus, BLM is proposing that an 
election be allowable. The proposed rule would make it clear that 
although a general election would be allowed, changes relating to 
royalty terms could only occur under the royalty conversion rules of 
proposed Sec.  3212.25, discussed in the next paragraph and later in 
this preamble.
    Proposed Sec.  3200.7(b) would clarify that two other features of 
the Energy Policy Act of 2005 apply to leases in effect on August 8, 
2005: Royalty conversion (section 224(e) of the Energy Policy Act) and 
production incentives (section 224(c) and (d) of the Energy Policy 
Act). The proposal would clarify that the lessee of a lease in effect 
on August 8, 2005, may: (1) Choose to convert lease terms relating to 
royalties under subpart 3212; or (2) If it does not convert lease terms 
relating to royalties, apply for a production incentive under subpart 
3212 (if eligible under that subpart). Royalty conversion and 
production incentives are addressed later in this preamble.
    Proposed Sec.  3200.7(c) would implement the two-year extension 
authorized in the statute. Under the proposal, the lessee of a lease in 
effect on August 8, 2005, could apply to extend a lease that was within 
two years of the end of its term on August 8, 2005, for up to two 
years, to allow achievement of production under the lease or to allow 
the lease to be included in a producing unit.
    Proposed Sec.  3200.8 would implement 30 U.S.C. 1003(d)(2), 
relating to the status of geothermal lease applications pending on 
August 8, 2005, and the status of leases issued pursuant to such 
applications. That section of the Energy Policy Act of 2005 provides 
that pending lease applications and leases issued pursuant to those 
applications are subject to ``this section as in effect on the day 
before'' August 8, 2005 (30 U.S.C. 1003(d)(2)).
    Although 30 U.S.C. 1003(d)(2) uses the term ``this section,'' BLM 
interprets it to mean the entire Geothermal Steam Act, as in effect on 
the day before August 8, 2005. Because Sec.  1003 of the Act addresses 
the leasing process, interpreting the phrase ``this section'' to mean 
only Sec.  1003 would allow pending lease applications to be processed 
noncompetitively, but would make the provision meaningless with regard 
to subsequently issued leases. Accordingly, BLM construes 30 U.S.C. 
1003(d)(2) more broadly to allow leases issued pursuant to applications 
pending on August 8, 2005, to be subject to the regulations in effect 
before that date, to the same extent as leases in effect on August 8, 
2005. In other words, leases issued pursuant to applications pending on 
August 8, 2005, would be subject to the revised parts 3200 and 3280, 
except that such leases would be subject to the regulations in effect 
on August 8, 2005, with regard to regulatory provisions relating to 
royalties, minimum royalties, rentals, primary term and lease 
extensions, diligence and annual work requirements, and renewals. As 
provided in the statute, the proposal would allow lessees to elect to 
be subject to the revised rules in their entirety.

Subpart 3201--Available Lands

    Existing subpart 3201 addresses which lands are available for 
geothermal leasing and which lands are not available for geothermal 
leasing. The proposed subpart would be substantively unchanged from the 
existing subpart. Changes have been proposed to clarify terminology, 
and improve grammar and readability.

Subpart 3202--Lessee Qualifications

    Existing 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 proposed subpart would be substantively 
unchanged from the

[[Page 41545]]

existing subpart. Changes have been proposed to clarify terminology, 
and improve grammar and readability. There are several places in 
existing regulations that the term ``offer'' is used incorrectly. This 
proposed rule would replace the term ``offer'' with the term 
``application'' to make it clear that ``applications'' are filed by the 
public and ``offers'' are made by BLM.

Subpart 3203--Competitive Leasing

    Subpart 3203 would explain the process for competitive leasing 
under the Energy Policy Act amendments to the Geothermal Steam Act. The 
new provisions at 30 U.S.C.1003 require competitive leasing to the 
highest responsible qualified bidder except as otherwise specifically 
provided in the Act. This new statutory scheme differs from the 
previous one, which provided for competitive bidding only for lands 
within a known geothermal resource area or lands from terminated, 
expired, or relinquished leases, or at BLM's discretion when there was 
public interest.
    Proposed Sec.  3203.5 explains the three stages of the competitive 
leasing process. It would also summarize 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.
    Proposed Sec.  3203.10 would describe the process for nominating 
lands for competitive sale. It would implement the new statutory 
provision, at 30 U.S.C. 1006, that a lease may not exceed 5,120 acres 
unless the area to be leased includes an irregular subdivision. The 
previous statutory restriction was 2,560 acres. This section would also 
explain how a nominator must describe the lands nominated. These land 
description provisions were previously found at Sec.  3204.11. The only 
change from those provisions would be a clarification that lands 
surveyed under the public land rectangular survey system should be 
described to the nearest aliquot part. This section would also make 
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 BLM may reconfigure 
lands to be included in each parcel offered for sale.
    Proposed Sec.  3203.11 would implement the new statutory provision, 
at 30 U.S.C. 1003(e), that 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.
    Proposed Sec.  3203.12 would provide for a filing fee for 
nominations of lands of $100 per nomination plus 10 cents per acre of 
lands nominated. BLM is authorized to charge reasonable filing fees 
under Sec.  304(a) of the Federal Land Policy and Management Act of 
1976, 43 U.S.C. 1734(a). While the general Federal policy is to charge 
a processing fee that recovers the agency's reasonable processing costs 
(see OMB Circular No. A-25; 330 D.M. 1.3A; Solicitor's M-Opinion No. M-
36987), BLM does not have cost data at this point regarding its cost 
for processing nominations. We are therefore proposing a nominal filing 
fee, which is not intended to reimburse the government for its 
processing costs, but instead to limit filings to serious applicants. 
See Solicitor's M-Opinion No. M-36987, ``BLM's Authority To Recover 
Costs of Minerals Document Processing,'' at n.6. In the final rule, we 
would move the amount of the fee from this section to the fee schedule 
at Sec.  3000.12, cross-reference Sec.  3000.12, and make a conforming 
change to Sec.  3000.12. We will collect data on the costs of 
processing these nominations and expect to propose to charge a 
processing fee to cover agency costs in the future.
    Proposed Sec.  3203.13 would implement the new statutory 
requirement at 30 U.S.C. 1003(b) to hold a competitive lease sale at 
least once every 2 years in States where nominations are pending. This 
section would also allow for a sale to include lands in more than one 
State. Current regulations at Sec.  3205.13 state that BLM will not 
accept bids which do not meet or exceed the fair market value as 
determined before the sale using generally acceptable appraisal 
methods. We have not included the requirement in this rule because we 
have 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. This is because 
noncompetitive leases issued at a later date would be issued without 
any bonus bid (see discussion of proposed Sec.  3204.11, below) and 
would have lower rates of rental (see discussion of proposed Sec.  
3211.11, below).
    Proposed Sec. Sec.  3203.14 and 3203.15 would describe how BLM will 
notify the public of competitive lease sales, the types of information 
BLM will include in a notice of sale, and how BLM will conduct the 
sale. These sections differ in some respects from sections in the 
current regulations at subpart 3205 that addressed competitive leasing 
under the former statutory scheme. Unlike the current regulations, the 
proposed sections would not restrict the competitive sale process to 
sealed bids, but would be flexible enough to allow other competitive 
sale formats, such as oral auctions. We anticipate that most sales 
would be conducted through an oral auction.
    In order to protect the bidding process, we propose to add at Sec.  
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.
    Proposed Sec.  3203.17 would provide information related to the 
payment obligations of a successful bidder. Because the proposed 
competitive sale process would no longer be restricted to sealed bids, 
a bidder would not have to submit any payments unless at the end of the 
sale it was the high bidder. This section would provide 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 BLM may specify. While the general 
expectation would be that these payments be made on the day of the 
sale, we propose to allow BLM to specify another time for payments to 
be made if circumstances so require, for example, the following 
business day. We also propose to add 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. Proposed 
Sec.  3203.17(c), like current Sec.  3205.16, would require that the 
balance of the bid be submitted within 15 calendar days after the sale.
    Proposed Sec.  3203.18 would cross-reference proposed subpart 3204, 
which would implement the statutory provision at 30 U.S.C. 1003(c) 
providing for the noncompetitive offering of parcels that did not 
receive bids in a competitive lease sale.

Subpart 3204--Noncompetitive Leasing Other Than Direct Use Leases

    Proposed subpart 3204 would describe when and how BLM will issue 
noncompetitive geothermal leases. The most common method of obtaining 
noncompetitive leases under this subpart would be to apply for parcels 
of land that did not receive bids in a competitive sale. This subpart 
would not address noncompetitive leases for lands available exclusively 
for direct

[[Page 41546]]

use of geothermal resources, which would be addressed at proposed 
subpart 3205.
    Proposed Sec.  3204.5 would describe 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 proposed subpart 3205; (3) Lands subject to 
mining claims, addressed at proposed subpart 3204.12, and (4) Lands for 
which a lease application was pending on August 8, 2005, if the 
applicant so chooses.
    Proposed Sec.  3204.10 would require an applicant for a 
noncompetitive lease to submit a processing fee and advance rent. The 
advance rent would be refunded if the application were rejected or 
withdrawn. These provisions are substantively the same as current Sec.  
3204.12.
    Proposed Sec.  3204.11 would implement the statutory requirement at 
30 U.S.C. 1003(c) that lands for which no bid was received in a 
competitive lease sale would be available for noncompetitive leasing 
for two years following the date of the competitive sale. The proposed 
sections would explain the procedures for this type of noncompetitive 
leasing, which are similar to the procedures for acquiring a 
noncompetitive oil and gas lease for lands that were not sold at a 
competitive lease sale. See 43 CFR 3110.2 and 3110.5-1. The section 
would provide that for the first 30 days following the competitive 
sale, applications would be accepted only for parcels as configured in 
the sale notice. As in the oil and gas regulations, this provision is 
for efficiency of administration. In the month following a sale, BLM 
processes both leases that sold at the lease sale and those for which 
noncompetitive applications are received after the sale; adding the 
burden of reconfiguring parcels during that period would slow down the 
process for other leases. Proposed Sec.  3204.11 would also provide 
that all applications received for a particular parcel on the first 
business day after the competitive sale would be considered as 
simultaneously filed, and BLM would select one at random to receive a 
lease offer. As in the oil and gas regulations, this is intended to 
provide all interested parties an equal opportunity to apply during the 
first 24 hours after the lease sale.
    BLM would not require a person to submit a bid for a noncompetitive 
lease to reflect fair market value because no bid had been received at 
the competitive lease sale. Moreover, it would be difficult for BLM to 
determine what an appropriate bid should be in that situation, and 
allowing leases to be obtained without a bid should encourage 
additional geothermal exploration and development.
    Proposed Sec.  3204.12 would implement 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.
    Proposed Sec.  3204.13 would implement a portion of the statutory 
provision at 30 U.S.C. Sec.  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.
    Proposed Sec.  3204.14, governing the amendment of noncompetitive 
lease applications, would provide that an applicant may amend an 
application at any time before BLM issues a lease if the amended 
application meets the requirements in this subpart and as long as the 
amendment does not add lands not included in the original application. 
To add lands, an applicant would have to file a new application. (The 
withdrawal of lands from noncompetitive lease applications would be 
covered by proposed Sec.  3204.15, discussed below.) Section 3204.18 of 
the current regulations does not prohibit amendments that add lands, 
but provides that BLM will determine priority based on the date it 
receives the amended lease application rather than on the date of the 
original application. Current Sec.  3204.18 does not differentiate 
between amendments that add lands and those that do not. We decided 
that adding lands to an application was equivalent to submitting a new 
application, thus requiring a change in the priority. We therefore 
propose to require that a new application be filed in cases of proposed 
amendments when an applicant wants to add lands to an already submitted 
application. Because amendments other than adding lands do not require 
BLM to revise the priority date, we do not propose to require a new 
application for such amendments.
    Proposed Sec.  3204.15 would provide that for 30 days after a 
competitive lease sale, BLM would not accept partial withdrawals of 
noncompetitive lease applications and would only accept withdrawals of 
entire noncompetitive lease applications. After 30 days, partial as 
well as whole withdrawals would be allowed at any time before BLM 
issues the lease. This would be a change from current Sec.  3204.17, 
which does not contain the restriction in the first 30 days. This 
proposed provision is parallel to the provision at proposed Sec.  
3204.11 restricting noncompetitive applications for reconfigured lease 
parcels for the first 30 days following a competitive sale. If an 
applicant applied for a parcel as configured in the sale notice, then 
immediately applied to withdraw the application with respect to only a 
portion of the parcel, the result would be the same as applying for a 
reconfigured parcel. Allowing this would thus defeat the provision in 
proposed Sec.  3204.11. Proposed Sec.  3204.15 would also provide that 
if a partial withdrawal results in failure to meet the minimum acreage 
required for a lease in proposed Sec.  3206.12, BLM will reject the 
lease application. This provision is in Sec.  3204.17 of the current 
regulations.

Subpart 3205--Direct Use Leasing

    The Energy Policy Act provides the authority for BLM to issue 
leases solely for the direct use of geothermal resources under certain 
conditions. Subpart 3205 would be a new subpart added to describe these 
conditions and the process for applying for a direct use lease. This 
subpart would implement the provisions of 30 U.S.C. 1003(f).
    Proposed Sec.  3205.6 would address the conditions under which BLM 
would issue a direct use lease to an applicant. ``Direct use lease'' as 
used in this subpart has a specific meaning, and is defined at proposed 
Sec.  3200.1 as ``a lease issued in an area BLM designates as available 
exclusively for direct use of geothermal resources, without sale, for 
purposes other than commercial generation of electricity.'' Regular 
geothermal leases also permit direct use of the geothermal resource, 
which the lessee may choose not to sell, but that circumstance would 
not convert a regular geothermal lease into a direct use lease. A 
regular geothermal lessee may choose to sell the resource for direct 
use or may choose to use the resource for the commercial generation of 
electricity, choices that a direct use lessee does not have.
    Proposed Sec.  3205.6 would explain that a direct use lease may be 
issued only for lands that BLM has determined are appropriate for 
exclusive direct use, without sale, for purposes other than commercial 
generation of electricity. BLM would make the determination of whether 
the lands are appropriate for direct use leasing on a case-by-case 
basis at the time of application. The advantage of a direct use lease 
would be that it could be issued noncompetitively to the first 
qualified applicant if BLM determined that there was no competitive 
interest in the geothermal resources on the land to be leased. BLM 
would make this determination after publishing a notice of proposed 
leasing

[[Page 41547]]

and receiving no nominations to include the land in a competitive lease 
sale (as required by 30 U.S.C. Sec.  1003(f)). Proposed Sec.  3205.6 
would also provide that the acreage covered by a direct use lease 
application could not exceed the quantity of acreage that is reasonably 
necessary for the proposed use, as required at 30 U.S.C. 1003(g).
    Proposed Sec.  3205.7 would specifically address the acreage 
restrictions applicable to a direct use lease as provided by 30 U.S.C. 
1003(g) (not greater than reasonably necessary for the proposed use) 
and 30 U.S.C. 1006 (not more than 5,120 acres for any geothermal lease, 
except in the case of an irregular subdivision).
    Proposed Sec.  3205.10 would explain the procedures for applying 
for a direct use lease and the types of information to be submitted 
with an application. The information that is submitted is used by BLM 
to determine if the requested acreage is necessary for the intended 
operation as described in Sec.  3205.7. This section would also require 
the submission of a nonrefundable processing fee for noncompetitive 
lease applications, as required by Sec.  3204.12 of the current 
regulations.
    Proposed Sec.  3205.12 would address direct use lease applications 
for lands managed by an agency other than BLM, explaining that BLM 
would forward a copy of such an application to the other agency. If 
that agency consented to leasing and recommended that the lands were 
appropriate for a direct use lease, BLM would consider that consent and 
recommendation in determining whether to issue the lease. This section 
would require that BLM obtain the consent of the surface management 
agency before issuing a direct use lease.
    Proposed Sec. Sec.  3205.13 and 3205.14 would 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 would have to file a new application (see 
proposed Sec.  3204.14).
    Proposed Sec.  3205.15 discusses how BLM will inform an applicant 
of its decision to approve or deny a direct use lease application.

Subpart 3206--Lease Issuance

    Subpart 3206 in both the current and proposed regulations addresses 
lease issuance in general.
    Proposed Sec.  3206.10 is nearly identical to current Sec.  
3206.10, with the addition of a provision notifying applicants that all 
payments must be made before BLM will issue a lease. This addition 
reflects current BLM practice.
    Proposed Sec.  3206.11, which implements 30 U.S.C. 1026, is 
unchanged from current 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).
    Proposed Sec.  3206.12 would address minimum and maximum lease 
sizes, which are addressed in the current regulations at Sec.  3204.14. 
The maximum lease size would be increased from 2,560 acres to 5,120 
acres, as provided at 30 U.S.C. 1006.
    Proposed Sec.  3206.13 would address the maximum acreage that one 
lessee may hold, which is addressed in the current regulations at Sec.  
3206.12. The proposed section is identical to the first sentence of 
current Sec.  3206.12 and implements 30 U.S.C. 1006, which sets the 
limit at 51,200 acres in any one State. The remainder of Sec.  3206.12 
of the current regulations would be deleted because the Energy Policy 
Act amendments deleted those provisions in the statute.
    Proposed Sec.  3206.14 would explain how BLM computes acreage 
holdings. This proposed section is identical to current Sec.  3206.13, 
except for minor editorial changes.
    Proposed Sec.  3206.15, explaining how BLM would charge acreage 
holdings if the United States owns only a fractional interest in the 
geothermal resources, is identical to current Sec.  3206.14, except for 
minor editorial changes.
    Proposed Sec.  3206.16 would explain 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 would 
implement 30 U.S.C. 1017(d) and (g)(2) and are addressed at Sec.  
3206.15 in the current regulations. Reference in current regulations to 
cooperative agreements was deleted because they are no longer mentioned 
in this part.
    Proposed Sec.  3206.17, which would address what BLM does if a 
lessee's holdings exceed the maximum acreage limits set in proposed 
Sec.  3206.13, is identical to Sec.  3206.16 of the current 
regulations.
    Proposed Sec.  3206.18, which would address when BLM issues a 
lease, is identical to Sec.  3206.18 of the current regulations, except 
for a minor editorial change.

Subpart 3207--Lease Terms and Extensions

    Subpart 3207 would explain the new scheme of lease terms and 
extensions provided at 30 U.S.C. 1005.
    Proposed Sec.  3207.5 would summarize the new lease terms (length 
of time a lease is in effect) and lease term extensions, which include: 
(1) A ten-year primary term and two five-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.
    Proposed Sec. Sec.  3207.10, 3207.11, and 3207.12 would address the 
primary term of a lease and explain the requirements for obtaining and 
continuing extensions of the primary term. The statute, at 30 U.S.C. 
1005(b), includes a provision that ``for each year after the 10th year 
of the lease'' lessees must ``satisfy minimum work requirements 
prescribed by the Secretary that apply to the lease for that year.'' 
This section can be read as providing that the Secretary may require 
that a lessee complete certain work requirements in 1 year of the lease 
that apply to the following year of the lease, in terms of informing 
the Secretary's decision whether the lease may continue into that 
following year. Under this interpretation, a work requirement 
applicable to the 12th lease year would require that work be performed 
by the end of the 11th year, and a requirement applicable to the 11th 
lease year would require that work be performed by the end of the 10th 
year.
    Even under an interpretation that 30 U.S.C. 1005(b) requires only 
that work be performed in the 11th lease year and thereafter, BLM must 
give effect to the statutory mandate at 30 U.S.C. 1005(a)(1) that the 
primary term at the beginning of a lease is ten years. BLM cannot wait 
until the end of the 11th lease year to determine whether to grant the 
initial five-year extension because that would provide lessees with a 
de facto primary term of 11 years, in contravention of the statutory 
mandate. Because the general rule-making authority granted to the 
Secretary at 30 U.S.C. 1023 allows the Secretary to prescribe rules 
appropriate to carry out the provisions of the Act, BLM has authority 
to prescribe work requirements that must be completed by the end of the 
10th lease year, in order to give effect to the statutory ten-year 
primary term and provide a basis for deciding whether BLM will grant 
the initial 5-year extension.
    Thus, Sec.  3207.11 would provide 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. 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.

[[Page 41548]]

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 is in the current regulations (see current 
Sec. Sec.  3210.13 (diligent exploration requirements) and 3208.14 
(significant expenditures)).
    For the work requirements that must be completed by the end of the 
tenth year of the lease, we propose at Sec.  3207.11(a) a $40 per acre 
expenditure over the ten-year period of the primary term of the lease, 
which is the same expenditure that is required at Sec.  3210.13 of the 
current regulations for diligent exploration during the primary term. 
For work requirements for each year of the initial five-year extension, 
we propose at Sec.  3207.12(a) an annual dollar expenditure of $15 per 
acre, which is the same as required at Sec.  3208.14 of the current 
regulations for significant expenditures during a first lease 
extension. For work requirements for each year of the additional five-
year extension, we propose at Sec.  3207.12(c) an annual dollar 
expenditure of $25 per acre. 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 would increase $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 are 
proposing that the expenditure requirement 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 will serve 
the purpose of encouraging diligent development of the resource.
    We are also proposing an automatic inflation adjustment for the 
minimum work requirements and for monetary payments in lieu of the work 
performance. We would include a provision in Sec. Sec.  3207.11 and 
3207.12 to adjust the dollar amount of the requirements automatically 
every three calendar years. The adjustment would be based on the 
Implicit Price Deflator for Gross Domestic Product that is published 
annually by the U.S. Department of Commerce. Because the work 
requirements would simply be based on a mathematical formula, we would 
make these adjustments in succeeding final rules without notice and 
comment. This is the procedure that BLM used in its cost recovery rule 
published on October 7, 2005 (70 FR 58872).
    Proposed Sec. Sec.  3207.11(b) and 3207.12(d) would 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 would 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 would also allow BLM to limit the number of 
years that it would accept such payments, if it determined that 
payments in lieu of work requirements would impair achievement of 
diligent development of the geothermal resource. We concluded that such 
impairment determinations were more appropriately made on a case-by-
case basis and therefore we did not include in the rule a specific 
limit on the number of years that BLM will accept such payments.
    The proposed rule would take a different approach than the approach 
contained in the existing rules regarding the amount of payments that 
would be allowable in lieu of work performance. Existing Sec. Sec.  
3210.15 and 3208.13 allow for a lessee to make payments in lieu of 
performing work requirements, but the payment amounts are substantially 
less than the value of the work otherwise necessary to be performed. 
The current rules thus appear to create a disincentive to the 
performance of work. BLM would reject the existing scheme in the 
proposal, and not allow payments in a lesser amount than the value of 
the required work. As stated above, if a lessee were to choose to make 
payments instead of performing work, the proposed rule would require a 
lessee to make minimum annual payments in amounts 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. By eliminating the disincentive to 
perform work, the proposal would further the statutory purpose of 
encouraging the development of geothermal resources.
    Proposed Sec. Sec.  3207.11(b) and 3207.12(d) would also provide 
that a lessee is exempt from work requirements if it submits 
documentation to BLM showing that it has produced or utilized 
geothermal resources in commercial quantities. This would implement 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.
    Proposed Sec. Sec.  3207.11(c) and (e), and 3207.12(f) and (g) 
would provide timeframes for a lessee to submit information to 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 BLM's approval process.
    Proposed Sec.  3207.12(e) would provide 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 Sec.  3208.14(a) of the current regulations.
    Proposed Sec.  3207.13 would exempt 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 would implement 30 U.S.C. 
1005(e).
    Proposed Sec. Sec.  3207.14 and 3207.15 would implement the 5-year 
drilling and 35-year production extensions provided for in the statute 
at 30 U.S.C. 1005(g). The previous version of the statute contained not 
only these extensions (at former 30 U.S.C.1005(c)), but also a separate 
40-year production extension (at former 30 U.S.C. 1005(a)). Because the 
2005 statutory amendments eliminated the 40-year production extension, 
we examined more carefully the language of the 5-year drilling and 35-
year production extension provision, to determine its applicability. We 
concluded that the language in the statute supports applying the 5-year 
drilling and 35-year production extensions to regular leases, as well 
as to leases under cooperative or unit agreements.
    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).) Under the new statutory and regulatory 
scheme, if the lessee has submitted information showing that it has met 
the applicable requirements (work activities or payment or production 
in lieu thereof), the primary term would be extended each year past the 
10th year and would end only at the end of the 20th year. If, however, 
the lessee fails to submit information showing that it has met the 
applicable requirements during any extension year

[[Page 41549]]

after the 10th lease year, the lease would terminate at the end of that 
year. (See discussion of proposed Sec. Sec.  3207.11 and 3207.12, 
above.) Thus, proposed Sec.  3207.14 would allow 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 proposed section would further specify that to 
qualify for the drilling extension, the lessee must be drilling a well 
for the purposes of commercial production to a target that BLM 
determines is adequate, based on the local geology and type of proposed 
development. The proposed section would also provide, as does the 
statute, that the lease would expire if, at the end of the five-year 
drilling extension, the lessee did not qualify for a production 
extension (i.e., if the lessee was not producing or utilizing the 
geothermal resource in commercial quantities--see discussion of 
proposed Sec.  3207.15, below).
    Proposed Sec.  3207.15 would provide 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 would reflect 
the definition at 30 U.S.C. 1005(h) of ``produced or utilized in 
commercial quantities.'' Although that term would be defined at Sec.  
3200.1, we also propose to include the definition in this section for 
the reader's convenience. The section would also indicate what types of 
information a lessee must provide to BLM for it 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.
    Proposed Sec.  3207.16 would implement the lease renewal provision 
at 30 U.S.C. 1005(g). The statute provides for renewal ``for a second 
term.'' We have interpreted ``second term'' to mean a period 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. This section would also specify 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 Sec.  3200.1.
    Proposed Sec.  3207.17 would provide 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 current regulation at Sec.  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.
    Proposed Sec.  3207.18 would implement 30 U.S.C. 1017(f)(3) and 
provide that a lease that is eliminated from a unit is eligible for a 
drilling extension or a production extension if it meets the 
requirements for such extensions.

Subpart 3208--Extending the Primary Lease Term

    Existing subpart 3208 would be removed because under this proposed 
rule the subject of extensions of lease terms would be addressed in 
proposed subpart 3207.

Subpart 3209--Conversion of Lease Producing Byproducts

    Existing subpart 3209 would be removed because the lease 
conversions that subpart covers are no longer allowable under the 
Energy Policy Act of 2005.

Subpart 3210--Additional Lease Information

    Proposed Sec. Sec.  3210.10 and 3210.11 on lease segregation would 
remain substantively unchanged from the existing sections.
    Proposed Sec.  3210.12 would reference new lease size limits and 
the processing fee for lease consolidations. In other respects, it 
would be substantively unchanged from the existing section.
    Existing Sec. Sec.  3210.13, 3210.14, 3210.15, and 3210.16, all of 
which pertain to diligent exploration requirements, would be removed. 
These provisions would be addressed by the sections related to work 
requirements in proposed subpart 3207. Despite their removal, their 
substantive terms would continue to be applicable to leases existing on 
August 8, 2005 and leases issued after August 8, 2005 in response to 
applications pending on that date, unless the lessees elect to be 
subject to the new regulatory requirements that would be adopted in 
this rulemaking.
    Proposed Sec.  3210.13 on leasing or locating minerals on a 
geothermal lease would remain substantively unchanged from existing 
Sec.  3210.17.
    Proposed Sec.  3210.14, pertaining to readjustment of the terms and 
conditions of geothermal leases, would replace existing Sec. Sec.  
3210.18, 3210.19, and 3210.20 that relate to the same topic. It would 
implement 30 U.S.C. 1007, as revised by the Energy Policy Act of 2005. 
Proposed Sec.  3210.14(a) on readjustment of lease terms and conditions 
would replace existing Sec. Sec.  3210.18 and 3210.19(a). With one 
exception, proposed paragraph 3210.14(a) would be substantively 
unchanged from existing Sec.  3210.18. Existing Sec.  3210.18 provides 
that once BLM and the other agency reach agreement, BLM will readjust 
the terms of the lease. The existing rule does not state, as the 
statute requires at 30 U.S.C. 1007(c), that the other agency must 
approve the readjustment. Proposed Sec.  3210.14(a)(2) would clarify 
that the other agency must approve the proposed readjustment. 
``Approval'' is the term used in 30 U.S.C. 1007(c).
    Proposed Sec.  3210.14(b) would replace existing Sec.  3210.20(a). 
The existing 22.5 percent royalty cap for readjusted leases would be 
removed because that cap is no longer in the statute.
    Proposed Sec. Sec.  3210.14(c), (d), and (e) would implement the 
procedures of 30 U.S.C. 1007(b), and are somewhat different than the 
procedures in existing rules at 43 CFR 3210.19 and 3210.20. Under 
existing Sec. Sec.  3210.19(a) and 3210.20(b), BLM notifies lessees in 
writing of proposed readjustments and provides the lessee 30 days to 
object in writing to the new terms. The existing rules provide further 
that if a lessee does not object, the proposed new terms will become 
part of an existing lease and that if a lessee does object, BLM will 
issue an appealable final decision on the new terms and conditions. The 
existing rules, however, do not expressly mention certain concepts 
contained in the statute that are described below.
    Under the proposal BLM would give a lessee a written proposal to 
adjust the rentals, royalties, or other terms and conditions of its 
lease. The lessee would have 30 days after receiving the proposal to 
file with 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 would conclusively be deemed to have agreed to the proposed 
new terms and conditions. This concept, implied but not expressly 
stated in the existing

[[Page 41550]]

rules, is taken directly from the statute. BLM would then issue a 
written decision under proposed Sec.  3210.14(d), setting the date that 
the new terms and conditions become effective as part of the lease. 
This decision would be in full force and effect under its own terms, 
and under proposed Sec.  3210.14(d), the lessee would not be authorized 
to appeal the BLM decision to the Department's Office of Hearings and 
Appeals.
    Proposed paragraph (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 is not 
addressed in existing regulations. Under proposed paragraph (e)(1), if 
a lessee files a timely objection in writing, BLM could issue a written 
decision making the readjusted rental and royalty terms effective no 
sooner than 90 days after receiving the objections, unless BLM reaches 
an agreement with the lessee as to the readjusted terms of the lease 
that makes such terms effective sooner.
    Under proposed Sec.  3210.14(e)(2), if BLM does not reach an 
agreement with the lessee by 60 days after receiving the lessee's 
objections, then either the lessee or 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 does not appear in the current 
regulations. The proposed rule would clarify that a lease termination 
under proposed paragraph (e)(2) would not affect a lessee's obligations 
that accrued under the lease when it was in effect, including those 
specified in Sec.  3200.4.
    Unlike a BLM decision under proposed Sec.  3210.14(d), a lessee 
could appeal a BLM readjustment decision under proposed Sec.  
3210.14(e)(1). Proposed Sec.  3210.15 would address such appeals. It 
would provide that if a lessee appeals BLM's decision under Sec.  
3210.14(e)(2) to readjust lease terms and conditions, or rental or 
royalty rate, the decision would be effective during the appeal. If the 
lessee wins its appeal and BLM would have to change its decision, the 
lessee would receive a refund or credit for any overpaid rents or 
royalties.
    In summary, BLM would provide a lessee 30 days to object to a 
proposed readjustment decision. If the lessee objects, BLM could issue 
a written decision making the readjusted rental and royalty terms 
effective no sooner than 90 days after receiving the objection. A 
lessee would have 30 days to appeal that decision under Office of 
Hearings and Appeals regulations. In addition to the appeal process, 
BLM and the lessee could attempt to negotiate an agreement within 60 
days after receiving the objection. If an agreement is reached, the 
appeal would be withdrawn. If an agreement is not reached, either the 
lessee or BLM could terminate the lease, even if an appeal would be 
pending.
    Proposed Sec. Sec.  3210.16 and 3210.17, relating to drainage of 
geothermal resources, would be substantively unchanged from existing 
Sec. Sec.  3210.22 and 3210.23.

Subpart 3211 Filing and Processing Fees, Rent, Direct Use Fees, and 
Royalties

    Existing Sec.  3211.10 establishes filing fees, rent, and minimum 
royalties for geothermal leases. In the proposed rule, existing Sec.  
3211.10 would be split into several new sections because of the changes 
to lease rental rates, royalty rates, and minimum royalty requirements 
in the Energy Policy Act of 2005. Proposed Sec.  3211.10 would only 
address processing and filing fees. Rather than listing the various 
fees for lease nomination, lease filing, and subsequent lease 
transactions, proposed Sec.  3211.10 would reference existing 43 CFR 
3000.12, which sets fees for all mineral applications and transactions. 
BLM expects to update Sec.  3000.12 from time to time to reflect actual 
costs associated with these activities. If the specific fees were 
included in this part, the geothermal regulations would have to be 
changed every time fees were revised.
    Proposed Sec.  3211.11 would establish rental rates for geothermal 
leases. The new lease rental rates would be taken directly from 30 
U.S.C. 1004(a)(3)(A) and (B). The rental rates in the Energy Policy Act 
of 2005 have changed significantly from the rental rates in the 
existing regulations. While the rental for noncompetitive leases 
remains at $1 per acre per year for the first 10 years, the rental for 
competitive leasing has increased 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 leases increases to $5 per acre per year. 
Proposed Sec.  3211.11(d) would carry forward the current provision 
regarding fractional mineral interests that currently is contained in 
Sec.  3211.13. The references to minimum royalties in the existing rule 
would be removed because the Geothermal Steam Act as revised by the 
Energy Policy Act no longer provides for minimum royalties.
    Proposed Sec.  3211.12 is virtually the same as existing Sec.  
3211.12. The Energy Policy Act of 2005 did not make any changes to whom 
the rent is paid for the first year and subsequent years.
    Proposed Sec.  3211.13 addresses when rental payments are due and 
would replace existing Sec.  3211.11. The rule would provide that rent 
is always due in advance. MMS must receive annual rental payments 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 Steam Act of 1970, there are no substantial changes to this 
portion of the provision. The reference in existing Sec.  3211.11 to 
the automatic termination of leases by operation of law would not be 
included in the new section because the statute has changed in this 
regard. Lease termination for non-payment of rental is addressed in 
Sec.  3214.14 of this proposed rule and is discussed later in this 
preamble.
    Proposed Sec.  3211.14 would require that a lessee must always pay 
rental, whether the lease is in a unit or outside of a unit, whether 
the lease is in production or not, and whether royalties or direct use 
fees apply to production from the lease. This would be a substantial 
change from existing Sec. Sec.  3211.14 and 3211.15. Under the current 
regulations, based on Section 5(d) of the Geothermal Steam Act (30 
U.S.C. 1004(d) in effect prior to the Energy Policy Act of 2005), rent 
was not required once the lease went into production or was deemed to 
have a well capable of production. Under the earlier statute, the 
lessee paid a royalty on production, or a minimum royalty of $2 per 
acre per year, whichever was greater ``in lieu'' of rent. The Energy 
Policy Act of 2005 does not contain the ``in lieu'' language, and also 
eliminated the requirement of a minimum royalty. The statute now 
requires rent to be paid as long as the lease is in effect (but does 
allow a credit against royalties, as discussed below). There are no 
provisions in the Energy Policy Act of 2005 to waive or alter the 
rental requirement for leases committed to a unit or pooling agreement 
and there are no distinctions, other than the rental rate, for leases 
obtained competitively or noncompetitively, or used for direct use or 
commercial electrical generation.
    Existing Sec.  3211.17 would be removed because, as mentioned 
above, minimum royalties would no longer apply to new leases.
    It should be noted that, even if BLM were to finalize these 
proposed rules, under proposed Sec.  3200.7(a) the rental and minimum 
royalty schemes of the existing regulations would continue to

[[Page 41551]]

apply to leases in effect on August 8, 2005, unless the lessees elect 
under proposed Sec.  3200.7(a)(2) to have the new regulatory provisions 
apply to them. This also applies to leases issued after August 8, 2005, 
in response to applications pending on that date.
    Proposed Sec.  3211.15, together with applicable MMS regulations, 
would implement 30 U.S.C. 1004(e), which requires that the advance 
rental payments be credited towards royalty due on production in that 
lease year. The rule would provide that a lessee may credit rental 
towards royalty under 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 would be allowable for rent paid after the lease 
anniversary date, even if the lease were not terminated. Thus, although 
lessees would be allowed to maintain their leases by paying rent plus a 
late fee within 45 days of the lease anniversary date, they could not 
credit such late rental payments against royalties.
    Also, there are no provisions in the Energy Policy Act of 2005 to 
carry over rental paid in excess of royalty 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 of 2005.
    Proposed Sec.  3211.16 would provide that rental paid could not be 
credited against fees owed for direct use of geothermal resources. This 
would also appear in proposed MMS proposed regulations at 30 CFR 
218.304. The Energy Policy Act of 2005 (30 U.S.C. 1004(e)), allows only 
the ``crediting of rental towards royalty'' (emphasis added). Rentals 
cannot be credited towards the payment of direct use fees because a 
clear distinction exists between ``royalties'' and ``fees'' in the 
Energy Policy Act of 2005. Under 30 U.S.C. 1004(b), the provision that 
establishes direct use fees, direct use fees are paid ``in lieu of 
royalties'' for direct use of geothermal resources that a lessee uses 
for a purpose other than the commercial generation of electricity and 
does not sell. Thus, such fee payments would not constitute royalty 
payments. Under the proposed rule, lessees would pay direct use fees in 
addition to rental.
    Proposed Sec.  3211.17 would establish royalty rates on geothermal 
resources produced from or attributable to a geothermal lease that are 
used in the commercial generation of electricity from or attributable 
to a geothermal lease. The Energy Policy Act of 2005 (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. BLM 
interprets this section of the Energy Policy Act to apply to situations 
in which the lessee does not sell the geothermal resource produced from 
its lease or engages in a non-arm's-length transaction. Although the 
statute establishes an allowable royalty range, the statute 
contemplates under 30 U.S.C. 1004(c) that actual royalty rates would be 
established by regulation. Under proposed Sec.  3211.17(a)(1)(i), BLM 
would establish one royalty rate, 1.75 percent, that would apply to 
geothermal leases in the first 10 years of a lease, and a second 
royalty rate, 3.5 percent, that would apply in subsequent years with 
respect to geothermal resources that a lessee or its affiliate uses to 
generate electricity that it sells. Proposed Sec.  3211.17(a)(1)(iii) 
would reiterate the language in the Energy Policy Act of 2005 that the 
percentages in paragraphs (i) and (ii) must be applied to the gross 
proceeds from the sale of electricity, as opposed to the gross proceeds 
from the sale of the geothermal resource, and would specify that gross 
proceeds must be determined in accordance with applicable proposed MMS 
rules.
    Proposed Sec.  3211.17(a) would apply to leases issued on or after 
August 8, 2005, except for those leases issued in response to lease 
applications that were pending on August 8, 2005 that would be subject 
to the BLM regulations in effect on that date. Under proposed Sec.  
3200.8(b), lessees of leases issued in response to lease applications 
that were pending on August 8, 2005, could elect to have the new 
royalty rates apply to such leases.
    The methodology prescribed in 30 U.S.C. 1004(a)(1)(A) and (B) 
represents a significant change from the way royalty is currently 
determined. For leases issued before August 8, 2005 (and for leases 
issued in response to applications that were pending on August 8, 2005, 
that are subject to existing BLM rules), a royalty rate from 10 percent 
to 15 percent of the value of the geothermal resource is in effect. 
Historically, arms-length sales of geothermal resources from a lessee 
to a third party utility were common and the arms-length transaction 
established the value of the resource. For most situations where there 
was no sale of geothermal resource (as is the case for virtually all 
existing leases), the value of the geothermal resource was artificially 
derived using the ``netback'' method developed by MMS, a method that in 
practice has been cumbersome for both MMS and the lessees, and often 
resulted in almost no royalty being paid. For example, lessees at The 
Geysers geothermal field informed MMS that the netback method was 
unworkable and negotiated with MMS to adopt a simpler ``percent of 
gross proceeds'' method instead.
    The Energy Policy Act of 2005 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 
the royalty rate provide a simplified administrative system, encourage 
new development, and be revenue neutral for a period of 10 years when 
compared to the valuation methods currently in place. The change to a 
``percent of gross proceeds'' method for all new leases would 
accomplish the first two mandates of the Energy Policy Act of 2005. 
Such a method would be easier for BLM, MMS, and industry to administer 
than the current scheme, and this should help encourage development.
    In establishing the proposed royalty rates, BLM has relied upon the 
rates recommended by the MMS Royalty Policy Committee (RPC) Geothermal 
Valuation Subcommittee. Both the RPC and the Geothermal Subcommittee 
were chartered under the Federal Advisory Committee Act, and included 
representatives from the geothermal industry, State and local 
government, and the public at large. The rates recommended by the 
Subcommittee were 1.75 percent for the first 10 years, and 3.5 percent 
thereafter. The 3.5 percent royalty rate was based on the national 
average amount of royalty that is currently paid from producing Federal 
geothermal leases. In 2003 and 2004, the average royalty rate, 
expressed as a percent of gross proceeds, was 3.64 percent and 3.94 
percent, respectively.
    According to the Geothermal Valuation Subcommittee Report (May, 
2005, page 10), ``Under 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.'' Although the RPC 
recommendation is not based on a

[[Page 41552]]

detailed study, it was intended to achieve revenue neutrality for both 
the initial 10 years, and subsequent years. Because the royalty rate 
range established in the statute for the time period beyond the first 
10 years is double that of the first 10 year period, BLM believes the 
intent of Congress was to require a higher royalty rate in subsequent 
years to account for projected higher electrical prices and fewer 
capital expenditures.
    BLM also expects to conduct a study that would project royalty 
received from existing projects using the existing valuation methods, 
over the next 10 years. A percent of gross proceeds that would generate 
an equivalent amount royalty would then be determined. BLM anticipates 
that the study we are contracting could refine the proposed rates, but 
would not change them substantially. While there is no specific 
guidance in the Energy Policy Act of 2005 regarding revenue neutrality 
past the next 10 years, the study may also address royalties under the 
existing methods from 10 years to 40 years.
    The Energy Policy Act of 2005, as codified 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.'' BLM is interpreting this language to mean 
that the 10-year period to which the 1.75 percent royalty rate applies 
would start during the month for which commercial operation is first 
achieved, and would continue for 120 consecutive months, unless a 
suspension of operations and production was granted under 3212.
    Proposed Sec.  3211.17(a)(2) would set the royalty rate for the 
arms-length sale of resources at 10 percent of gross proceeds from that 
sale. The Energy Policy Act of 2005 is silent regarding the situation 
where the lessee sells the resource to an unaffiliated purchaser that 
produces electricity, rather than the electricity itself. To address 
these situations, BLM is using the recommendations found in the 
Geothermal Valuation Subcommittee Report (May, 2005, page 9) which 
states that ``[t]he lessee shall pay a royalty on the geothermal 
resources sold under arm's-length 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 of 2005, 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 BLM form 
3200-24, ``Offer to Lease and Lease for Geothermal Resources,'' sets 
the royalty rate at 10 percent. The ten percent royalty rate in this 
proposed paragraph would be adopted from the current practice, and is 
one that the Subcommittee Report characterized as ``[n]o change in 
royalty valuation.''
    While the 10 percent royalty rate in the case of an arms-length 
sale of resources for the commercial generation of electricity could 
appear to require higher payments by a lessee than the 1.75 and 3.5 
percent that would be required for ``no-sales'' situations in paragraph 
(a)(1), the actual amount of royalty paid would be roughly equivalent. 
This is because the 10 percent rate would apply to the gross proceeds 
from the sale of the geothermal resource, whereas the 1.75 and 3.5 
percent rates for electrical generation would 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 would be roughly equivalent to 10 percent of a lower 
value product. Because the proposed 10 percent royalty on the gross 
proceeds from an arms-length sale of resource required by Sec.  
3211.17(a)(2) is the same as the royalty that would be required under 
existing lease terms, this paragraph would be revenue neutral.
    As discussed earlier, the royalty rates for geothermal leases in 
effect on August 8, 2005 would continue under the existing terms of 
such leases, unless a lessee converted to the royalty terms of the new 
statute under proposed Sec.  3212.25. Eligibility for and procedures 
for such conversions are discussed later in this preamble in the 
discussion of Proposed subpart 3212. When such conversions do occur, 
proposed Sec.  3211.17(b) would establish the royalty rates for 
different conversion situations.
    Conversion of the royalty terms of existing geothermal leases is 
governed by section 224(e) of the Energy Policy Act of 2005. That 
section does not make the royalty rate ranges stated in 30 U.S.C. 
1004(a)(1) applicable to existing leases that are converting to new 
royalty terms. Instead, the royalty conversion language in Sec.  
224(e)(1)(B) of the Energy Policy Act of 2005 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 from comparable production under the royalty rate in effect 
for the lease before the date of enactment * * *.'' Thus, under 
proposed Sec.  3211.17(b)(1), BLM would seek to determine a percentage 
of gross proceeds from the sale of electricity that would result in the 
same amount of royalty to be paid as the current valuation method. The 
determination of such a royalty rate would be done on a case-by-case 
basis, and would be based on the information submitted by the 
applicant.
    As required by Sec.  224(e)(1)(B) of the Energy Policy Act of 2005, 
proposed Sec.  3211.17(b)(1) would apply to converted leases that 
produce geothermal resources that are used to generate electricity that 
is sold, regardless of whether the geothermal resource is sold in an 
arm's-length transaction to the generator of electricity or the lessee 
or its affiliate generates the electricity. In a situation where a 
lessee engages in an arm's-length sale of the geothermal resource to 
the generator of the electricity that is sold, BLM would not approve 
the conversion unless BLM had adequate assurance that the lessee will 
have access in the future to the amount of gross proceeds from the sale 
of the electricity so that the royalty could be determined. BLM 
understands that no existing lessee currently engages in arms-length 
sales of geothermal resources to commercial generators of electricity, 
but that could change in the future.
    In addition, Sec.  3211.17(b) would establish the royalty rate for 
leases that elect to convert to the royalty terms of the Energy Policy 
Act of 2005, but have never produced geothermal resources. For these 
cases, BLM would have no data on which to determine a royalty rate that 
would be revenue neutral. Therefore, BLM would assign the royalty rates 
in proposed Sec.  3211.17(a) (1.75 percent for the first 10 years and 
3.5 percent thereafter). Because the royalty rates in proposed Sec.  
3211.17 were derived to be revenue neutral, this would meet the intent 
of section 224(e)(1)(B) of the Energy Policy Act of 2005.
    Proposed Sec.  3211.17(b)(2) would reiterate language in section 
224(e)(1) of the Energy Policy Act of 2005, requiring the gross 
proceeds established for leases that are converting royalty terms, to 
be based on gross proceeds from the sale of electricity, and not on 
gross proceeds from the sale of geothermal resources, and would make it 
clear that the determination of gross proceeds would occur under 
proposed MMS regulations at 30 CFR part 206, subpart H.

[[Page 41553]]

    Proposed Sec.  3211.17(c) would be included to address royalty 
rates for existing leases and leases issued from applications pending 
on August 8, 2005, that choose not to convert to the royalty terms of 
the Energy Policy Act of 2005. The royalty rates for these leases have 
already been established in existing leases and the lease form. This 
paragraph would not establish new requirements, but would be included 
for completeness and convenience of the reader.
    Proposed Sec.  3211.18 would implement 30 U.S.C. 1004(b) and 
section 224(e)(1)(A) of the Energy Policy Act and would address the 
royalty rates for the direct use of production from or attributable to 
a geothermal lease.
    Proposed Sec.  3211.18(a) would establish the royalty rates for new 
leases (other than leases issued in response to applications that were 
pending on that date for which the lessee elects to be subject to 
royalty regulations in effect on that date) and for existing leases 
whose royalty terms are modified under proposed Sec.  3212.25. 
Paragraph (a)(1) would provide 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 would pay direct use fees 
according to a schedule published by the MMS. (See the MMS proposed 
regulations at 30 CFR 206.356 for the schedule.) The direct use fee 
schedule would apply 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 proposed 
Sec.  3211.18(c), below.
    Under proposed Sec.  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 would be required to pay a royalty of 
ten percent. The rule would provide further that the ten percent 
royalty rate would be applied to the gross proceeds derived from the 
arm's-length sale under applicable proposed MMS regulations at 30 CFR 
part 206, subpart H. Proposed Sec.  3211.18(a)(2) would maintain the 
current royalty rate of 10 percent set in existing 43 CFR 3211.10.
    The Energy Policy Act of 2005 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 Sec.  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 would fill 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 
Sec.  224(e)(1) of the Energy Policy Act of 2005. 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) establishes the 
royalties for converted leases that involve the sale of electricity 
(royalties are to be based upon 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 proposed Sec.  3211.18(a)(2), we would fill 
that gap with respect to converted leases under the rulemaking 
authority of 30 U.S.C. 1023.
    While the 10 percent royalty rate in the case of an arm's-length 
sale of direct use resources could appear to require higher payments by 
a lessee than the 1.75 percent to 3.5 percent required for electrical 
generation under proposed Sec.  3211.17, the actual amount of royalty 
paid would be roughly equivalent. This is because the 10 percent rate 
for direct use applies to the value of the resource and the 1.75 
percent and 3.5 percent rates for electrical generation applies 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 being sold for direct use. Therefore, 1.75 percent and 3.5 
percent of a high-value product is roughly equivalent to 10 percent of 
a lower value product.
    The new statute, 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. Proposed Sec.  3211.18(a)(3) would address this provision 
of the statute by referencing proposed MMS rules that would implement 
this provision (see proposed 30 CFR 206.366). The fee that MMS sets 
would be paid in addition to the rental due on the lease.
    Proposed Sec.  3211.18(b) would be included to clarify that for 
leases issued before August 8, 2005, that do not convert the royalty 
terms of their lease, and for leases issued from applications pending 
on August 8, 2005, where the lessee elects not to convert, the royalty 
rate is established in the lease form and those leases will continue to 
use existing royalty rates. This paragraph would not establish new 
requirements, but would be included for completeness and convenience of 
the reader.
    Proposed Sec.  3211.18(c) would be added to clarify BLM's 
interpretation of how to address 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 would be considered a direct use subject to the 
direct use fee schedule.
    The new statute, 30 U.S.C. 1004(b)(1), restricts the use of the 
direct use fee schedule to situations where the resource is used ``for 
a purpose other than the commercial generation of electricity.'' As 
discussed earlier, the statute requires a royalty based on a percent of 
gross proceeds for commercial generation of electricity (Sec. Sec.  
1004(a)(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 would be no 
gross proceeds upon which to base a royalty. BLM does not believe the 
intent of the Energy Policy Act of 2005 is to allow the use of Federal 
geothermal resources to generate non-commercial electricity without 
compensation. Therefore, as a permissible interpretation of the 
statute, BLM construes the non-commercial generation of electricity to 
be a direct use of the resource subject to the direct use fee schedule.
    Proposed Sec.  3211.19(a) would implement 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 (e.g., coal, 
phosphate, oil and gas, oil shale, sodium, sulfur, and potash) to be 
the same as the royalty rates in the Mineral Leasing Act and 
implementing regulations. The list of byproducts that would be included 
as examples in the proposed rule is not the complete list of minerals 
covered under the MLA because certain minerals, such as oil shale, 
would be physically impossible to produce as a byproduct.
    In its amendments to 30 U.S.C. 1004, the Energy Policy Act of 2005 
removed the language of previous 30 U.S.C. 1004(b) that established 
royalties of up to 5 percent for byproducts that are not listed in the 
Mineral Leasing Act, such

[[Page 41554]]

as gold, silver, zinc, etc. The removal of such text appears to create 
a gap in the statute. It is 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. Given the general 
policy established under section 102(a)(9) of the Federal Land 
Management and Policy Act, 43 U.S.C. 1701(a)(9), to receive fair market 
value for the use of the public lands and their resources, BLM believes 
it appropriate, and proposes in Sec.  3211.19(b), to set a royalty rate 
of 5 percent of the gross proceeds from the sale of such byproduct, 
under the rulemaking authority of 30 U.S.C. 1023. The proposal would 
maintain the current royalty rate of 5 percent for such byproducts 
under 43 CFR 3211.10. BLM solicits comments on whether this rate is 
fair and based upon an acceptable interpretation of the statute.
    Proposed Sec.  3211.20 would provide that a lessee could credit 
advance royalty toward royalty due under proposed MMS regulations at 30 
CFR 218.305(c). This provision, and the proposed MMS rule, would 
implement 30 U.S.C. 1004(f)(2) that allows for crediting advanced 
royalty payments towards royalty due on production.

Subpart 3212--Lease Suspensions and Royalty Rate Reductions

    Proposed Sec.  3212.10 would address the difference between a 
suspension of operations and production and a suspension of operations. 
Under proposed Sec.  3212.10(a) a suspension of operations and 
production is a temporary relief from production obligations which a 
lessee may request from BLM.
    The proposal would remove the basis listed in the current rule 
referring to economic conditions making it unjustifiable to continue 
operations. 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 
would become economic, the new statute provides that a lessee that is 
subject to the new regulations could cease production and hold its 
lease through the payment of advanced royalty. (See proposed Sec.  
3212.15(a).) Under the statute, the payment of advanced royalties is 
limited to 10 years. Proposed Sec.  3212.10(b) would explain that a 
suspension of operations is when BLM, on its own initiative, orders a 
lessee to temporarily stop production in the interest of conservation. 
The proposed regulatory text would more closely follow the statute at 
30 U.S.C. 1010 than the existing regulation.
    Proposed Sec.  3212.11 would remain substantively unchanged except 
that the proposed rule would clarify that unit obligations could be 
separately suspended under proposed subpart 3287.
    Proposed Sec.  3212.12 would be similar to the existing section 
except that paragraph (b) would clarify that a lessee could not 
unilaterally terminate a suspension that BLM ordered. The reference to 
minimum royalties would also be removed.
    Proposed Sec.  3212.13 would be substantively similar to the 
existing rule except that during a suspension of operations, BLM could 
suspend lease or royalty obligations if BLM determined that a lessee 
would be denied all beneficial use of its lease during the period of 
the suspension.
    Proposed Sec.  3212.14 would remove the existing reference to 
minimum royalties and substitute the word ``terminate'' for the 
existing word ``cancel,'' because the remedy referred to should be a 
termination, not a cancellation.
    Proposed Sec.  3212.15 would address whether a lease can remain in 
full force and effect if a lessee ceases production and BLM does not 
grant a suspension. Proposed Sec.  3212.15 would implement 30 U.S.C. 
1004(f)(1) and (3). The intent of this proposed section 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.
    Under this proposed rule BLM would not allow production stoppages 
of less than one full calendar month to be considered a cessation of 
production. 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 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 
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 flag 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 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.
    (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 advance royalty for cessation of production 
for the remainder of the month. Proposed Sec.  3212.15 would only apply 
if a lease is shut in for more than a calendar month.
    Proposed Sec.  3212.15 contains separate paragraphs, each of which 
would describe a set of circumstances under which a cessation of 
production could occur without lease termination. Proposed Sec.  
3212.15(a) would implement 30 U.S.C. 1004(f)(1) that allows the payment 
of advanced royalty in lieu of production. Under the proposed rule, 
once commercial production is achieved, a lessee would be allowed a 
total of 10 years with no production, without lease termination or 
having to apply for a suspension of operations, if the lessee continued 
to pay advanced royalty under proposed MMS regulations at 30 CFR 
218.305. BLM has interpreted 30 U.S.C. 1004(f)(1) to allow a total of 
120 months (10 years), whether consecutive or not. The benefits in 
paragraph (a) would not be available to leases subject to existing 
royalty provisions, i.e., leases in effect before August 8, 2005, and 
leases issued after August 7, 2005 in response to applications pending 
on August 8, 2005, unless lessees of such leases elect to convert their 
royalty provisions under proposed Sec. Sec.  3212.25 or 3200.8(b).
    Because the statutory language is specific to leases on which 
royalty was previously paid, proposed Sec.  3212.15(a) would not apply 
to direct use operations where the resource is not sold, because such 
users pay fees instead of royalties. 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 
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.
    For proposed Sec.  3212.15(a), ``commercial production'' would be 
different from ``produced or utilized in

[[Page 41555]]

commercial quantities,'' because this section is not intended to apply 
to leases that have a well capable of production; it is only intended 
to apply to leases that are in actual production or are receiving 
allocated production through some type of agreement.
    Proposed Sec.  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 would include 
situations when 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. This section would implement 30 U.S.C. 1004(f)(3).
    Proposed Sec.  3212.15(c) would exempt lessees from having to pay 
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 prior BLM approval. To approve 
such a request, the lessee would have to demonstrate to BLM's 
satisfaction that the cessation was 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, 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.
    Proposed Sec.  3212.16 would replace existing Sec.  3212.15 and 
provide the standards for reduction, suspension, or waiver of rental or 
royalties. It would be similar to the existing section but would more 
closely follow the statutory provision at 30 U.S.C. 1012.
    Paragraph (b) would make clear that BLM would 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 is in existing regulations at Sec.  3212.16(b).
    Proposed Sec.  3212.17 would specify the information that must be 
included with a request for a royalty or rental rate reduction, 
suspension, or waiver. It would include the information currently in 
Sec.  3212.16, but clarify that all of the information must be 
submitted.
    The Energy Policy Act of 2005 (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 four-year, 50 percent 
reduction in royalty from what otherwise would be due. Proposed 
Sec. Sec.  3212.18 through 3212.24, and proposed MMS regulations at 30 
CFR 218.307, would 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.
    Proposed Sec.  3212.18 would provide a general description of the 
requirements for obtaining a production incentive. The production 
incentives would only be available for those leases that were issued 
before August 8, 2005, and that do not convert their royalty provisions 
under proposed Sec.  3212.25. Because section 224(c) of the Energy 
Policy Act specifically refers to reductions in royalty, BLM has 
interpreted this to mean that the incentives are intended only for the 
commercial generation of electricity and not for direct use projects.
    Proposed Sec.  3212.19 would require lessees seeking a production 
incentive to submit a written request for a production incentive 
describing a project that may qualify as a new facility or qualified 
expansion project. Because each type of project offers specific 
benefits and restrictions for the lessee, the request would need to 
identify whether a lessee is requesting that the project be considered 
a new facility or a qualified expansion project, and to provide 
sufficient supporting information. In order to qualify for incentives 
under this paragraph, BLM must receive the request before August 7, 
2011. Although the statute does not prescribe an application process, 
one clearly is needed. Because each project qualifying for a production 
incentive is unique, BLM would need sufficient information to determine 
the type of production incentive the applicant should receive (new 
facility or qualified expansion project). This determination would 
dictate the information that would need to be submitted and the 
requirements that the lessee would need to satisfy to receive the 
reduction in royalty.
    BLM does not anticipate developing a specific application form; 
instead, the application could be in the form of a letter. The letter 
would 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 
Sec.  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 per Sec.  3212.21(a) and 
the estimated increase in net generation resulting from the project per 
Sec.  3212.21(b). The letter should include sufficient technical detail 
to support these estimates.
    Proposed Sec.  3212.20 would describe how BLM would review a 
request for a production incentive. Under the proposal, BLM would 
review incentive requests on a case-by-case basis to determine whether 
a proposed project meets the criteria for a qualified expansion project 
under proposed Sec.  3212.21 or a new facility under proposed Sec.  
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, BLM would 
determine whether it meets the criteria for the other type of 
production incentive project.
    Under proposed Sec.  3212.20(b), if BLM determined that a lessee 
has a qualified expansion project, BLM would, as part of its approval, 
provide the lessee with a schedule of monthly target net generation 
amounts. These amounts would quantify the required 10 percent increase 
in net generation over the projected net generation without the 
project. The schedule would be specific to the facility or facilities 
that are affected by the project and would cover the 48-month time 
period during which the production incentive may apply. The lessee 
would receive the production incentive only for those months in which 
its net generation met the monthly target. BLM believes that averaging 
of production should not be allowed (see the preamble discussion of 
Sec.  3212.23).
    Proposed Sec.  3212.21 would specify the criteria necessary to 
establish a qualified

[[Page 41556]]

expansion project for the purpose of obtaining a production incentive. 
Because one goal of the Energy Policy Act of 2005 is to encourage new 
projects that would increase the amount of electricity generated from 
geothermal resources, BLM would not approve projects for this incentive 
that do not involve significant capital expenditure. Specifically, BLM 
is concerned that a production incentive could be abused if a lessee 
simply opened 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) 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 of 2005 specifically refers to 
``expansion of the facility'' in relation to qualified expansion 
projects, BLM has broadly interpreted this to mean the expansion of any 
portion of a geothermal project that would 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.
    In addition, the project would need to 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 were not available, it would not be considered to be 
a qualified expansion project. Under section 224(d) of the Energy 
Policy Act of 2005, a qualified expansion project must increase 
``production'' by at least 10 percent over the production in the 
previous 5 years, taking into consideration production trends that 
occurred in those 5 years. BLM interpreted this provision to mean that 
if 5 years of data were not available, the project could not be 
classified as a qualified expansion project. In addition, BLM 
interprets the term ``production'' to mean ``net generation,'' because 
this would meet the intent of the statute to increase the amount of 
useable electricity from geothermal resources.
    If a lessee were to satisfy the criteria for a qualified expansion 
project, BLM would perform a reservoir analysis of the 5 years of data 
that is submitted and, from that analysis, would develop a monthly 
schedule of target net generation amounts that would have to be met in 
order to qualify for a reduced royalty for that month. The lessee could 
perform its own reservoir analysis and develop a schedule of target 
generation amounts. However, BLM would review the analysis and could 
modify the schedule. Because the production incentive is only in effect 
for four years, the schedule would cover the 48-month period for which 
the production incentive may be applied.
    Proposed Sec.  3212.22 would identify criteria for determining 
whether a project qualified as a ``new facility.'' Because BLM does not 
have a formal definition for ``facility'' and because of the high 
degree of variation in projects, each application would be considered 
on a case-by-case basis based on the factors described in the rule. 
Listed factors in favor of concluding that a project qualifies as a new 
facility would 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 would 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 BLM determines that a proposed project could be approved either 
as a ``new facility'' or as ``qualified expansion project,'' BLM would 
approve the application under the category requested by the applicant. 
If a project would not qualify as a ``new facility'' BLM would 
automatically review it, with no action necessary on the applicant's 
part, to see if it would qualify as a ``qualified expansion project.''
    Proposed Sec.  3212.23 would describe how production incentives 
would apply to qualified expansion projects. The Energy Policy Act of 
2005, at section 224(d), requires a production incentive to be granted 
if a qualified expansion project resulted in 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. BLM is concerned that 
a project could meet or exceed the target increase for a short period, 
yet obtain the production incentive for the entire allowable four year 
period. BLM believes the intent of the production incentive is to 
encourage projects that would result in a sustainable increase in 
production. Therefore, proposed Sec.  3212.23 authorizes a reduced 
royalty only for those months where the qualified expansion project is 
meeting or exceeding the BLM-established net generation targets.
    The Energy Policy Act of 2005, at section 224(c)(1)(b), requires 
the production incentive 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. BLM has interpreted 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, proposed Sec.  3212.23 would include an equation that 
uses the target generation amounts defined in proposed Sec.  3212.20 as 
a basis. The denominator of the equation (1.1) 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.
    To simplify the administration and tracking of the production 
incentives, the production incentive would take effect on the first day 
of the month following the commencement of commercial operation of the 
project, but only for those months where the net generation targets are 
met. The amount of the production incentive for qualified expansion 
projects would be established by the proposed MMS regulations.
    Under Proposed Sec.  3212.24, for projects that qualify as ``new 
facilities,'' the royalty on all the net generation from the facility 
would 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 would take effect 
on the first day of the month following the commencement of commercial 
operation of the project. The amount of the production incentive for 
new facilities would be established by the proposed MMS regulations.
    Proposed Sec.  3212.25(a) would implement Section 224(e) of the 
Energy Policy Act of 2005, that allows lessees of geothermal leases 
issued before

[[Page 41557]]

August 8, 2005, to request that BLM modify their leases to convert the 
terms of their leases relating to the payment of royalties to the 
royalty and direct use fee terms in the Energy Policy Act of 2005. 
Proposed Sec.  3212.25(a) would also provide that, if BLM modified the 
royalty terms of a lease, the new royalties and direct use fees would 
apply to all production from or allocated to that lease. Proposed Sec.  
3212.25(b) would reference proposed Sec. Sec.  3211.17 and 3211.18 and 
applicable MMS rules for the specific royalty rates and direct use fees 
that would apply to a modified lease.
    In implementing section 224(e) of the Energy Policy Act of 2005, 
BLM construes the statute to mean that the only royalty term of the 
lease that would be converted is the royalty rate on production from or 
allocated to the lease. Other lease and statutory terms exist, such as 
``minimum royalty'' (existing Sec.  3211.10) and ``advanced royalty'' 
during cessation of production (proposed Sec.  3212.15), that BLM 
proposes not be converted.
    For example, under the proposed rule, if the lessee of a lease 
issued prior to August 8, 2005, elected to convert the royalty terms of 
the lease under proposed Sec.  3212.25, the lessee would 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. The 
lessee would, however, continue to be subject to the existing minimum 
royalty terms of their lease and not be required to pay rental once 
commercial production begins. In addition, the lessee would not be 
subject to paying advanced royalty if it ceased production for more 
than a calendar month.
    This interpretation 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 of 2005, rental on a lease was only due until 
the lease begins actual production or is deemed to have a well capable 
of production. At that point, the greater of actual royalty on 
production or minimum royalty is due every month. If BLM were to 
include the minimum royalty terms in the conversion under proposed 
Sec.  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 of 2005. 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. BLM does not believe it was the intent of the Energy Policy 
Act of 2005 to allow lessees to hold a lease without making some type 
of payment. The Energy Policy Act of 2005 does not include provisions 
to change the rental terms of existing leases; only the royalty terms.
    In addition, if lessees do not convert the requirement for minimum 
royalty payment under existing Sec.  3211.10, requiring the payment of 
advanced royalties when production ceases for more than a calendar 
month would be burdensome and redundant. In cases where a lessee does 
not produce for a calendar month, the existing minimum royalty 
provisions require that minimum royalty be paid. BLM believes that 
Congress did not intend for more than one payment to be made if 
production ceases.
    BLM believes that its proposal would be the simplest to administer. 
Requiring existing lessees who convert the royalty terms of their 
leases to eliminate minimum royalties without establishing new rental 
obligations and to pay advanced royalties in lieu of minimum royalties 
if production ceases, would be confusing and difficult to administer, 
and is not what Congress intended when it allowed existing lessees to 
convert royalty rates. Conversion of royalty rates only appears to be a 
straightforward way to implement the statute without imposing 
unnecessary complications. BLM is soliciting comments on this 
interpretation.
    Section 224(e) of the Energy Policy Act of 2005 requires any lessee 
wishing to convert the royalty rate terms of its lease to apply to BLM. 
Proposed Sec.  3212.26 would establish an application process and would 
require certain types of information to be submitted together with the 
application. For electrical generation, the lessee must submit enough 
information to allow 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, BLM would calculate 
a new royalty rate that would result in the same amount of royalty.
    Proposed Sec.  3212.26(c) would state that 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 30 CFR 206 (direct use fee schedule) and for 
the commercial generation of electricity, the applicable final rule is 
43 CFR 3200 (lease royalty rates). This section would implement section 
224(e)(2) of the Energy Policy Act of 2005. If both the MMS and BLM 
final rules were made effective on the same day, then all applications 
would have to be received by the same day, and the text of the final 
rule could be simplified.
    Proposed Sec.  3212.27 would implement section 224(e)(3) and (4) of 
the Energy Policy Act of 2005, and would also require BLM to consult 
with MMS in implementing the royalty conversion provision. BLM would 
also review an application to ensure that the lessee has suitable 
meters necessary to determine the royalty due under the modified lease 
terms.

Subpart 3213--Relinquishment, Termination, and Cancellation

    Proposed Sec. Sec.  3213.10 and 3213.11 relating to lease 
relinquishment would contain minor changes from the existing sections.
    Proposed Sec.  3213.12 relating to the minimum size of a remaining 
lease following a partial relinquishment would be amended to create an 
exception for direct use leases. The exception would be necessary 
because, under 30 U.S.C. 1003(g)(1), the size of direct use leases 
could easily be less than 640 acres.
    Proposed Sec.  3213.13 would contain some editorial changes. For 
the most part, it would be substantively unchanged from the existing 
regulation, although it would clarify that surface and other resources 
would need to be reclaimed as well as restored.
    Proposed Sec.  3213.14 would implement 30 U.S.C. 1004(g) regarding 
the termination of a lease for failure to pay rentals on time. This 
proposal would represent a substantial change from the procedures 
currently in place under existing Sec. Sec.  3213.14 through 3213.20, 
which are based on statutory language that was removed by the Energy 
Policy Act of 2005. Under existing Sec.  3213.14 (which implemented 
former 30 U.S.C. 1004(c)), failure to pay the full rental amount by the 
anniversary date of the lease results in automatic termination of the 
lease by operation of law. No grace period is provided for late 
payment. Existing Sec.  3213.15 (which implemented a proviso in former 
30 U.S.C. 1004(c)) provides that a lease will not terminate if MMS 
receives a timely rental payment that is deficient by a nominal amount.

[[Page 41558]]

Under the existing rule, MMS notifies the lessee of the nominal 
deficiency and provides a date by which a further payment must be paid. 
If the payment is not made in the time allowed, BLM terminates the 
lease as of the anniversary date of the lease. Existing Sec. Sec.  
3213.17, 3213.18, 3213.19, and 3213.20 contain a process for 
petitioning for lease reinstatement if a lease is terminated for 
failure to pay rent on time. The lessee has 30 days from receiving a 
termination notice to petition for lease reinstatement and must 
demonstrate that the failure to pay rent on time was justifiable or was 
not due to a lack of diligence. These regulatory provisions are also 
based on former 30 U.S.C. 1004(c). The Energy Policy Act of 2005 
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 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 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 former 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. Proposed Sec.  3213.14(a) would 
implement this statutory provision. This provision would also make 
clear that if MMS does not receive a lessee's rental plus the late fee 
by the end of the 45-day period described above, BLM will terminate the 
lease.
    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). 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 would be terminated for failure 
to pay. From a logistical standpoint, however, this legislative intent 
may be frustrated. For instance, it may take MMS a considerable amount 
of time to notify lessees that the lease anniversary date has passed 
and that MMS has not received the rental payment when it was due. If, 
for example, it were to take 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.
    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. Proposed Sec.  3213.14(b) would 
address this situation and provide a remedy that BLM believes would be 
consistent with Congressional intent. The proposed rule would ensure 
that lessees have at least 30 days notice to pay overdue rental in 
full. It would provide that if a lessee receives 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 MMS received the rent plus the 10 
percent late fee within 30 days after the lessee received the 
notification, BLM would either not terminate the lease for non-payment 
of rental or would reinstate a lease that was terminated under proposed 
Sec.  3213.14(a). In other words, every lessee would 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 proposed Sec.  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 proposed rule would more fully 
implement 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. 
Proposed Sec.  3213.14(b) would further all of these goals, and also 
implement congressional intent to provide a fair grace period to a 
lessee who fails to pay rent on time. Although not directly applicable, 
this proposal would be 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.
    Proposed Sec.  3213.15 would carry forward the text of existing 
Sec.  3213.16. Existing Sec. Sec.  3213.15, 3213.17, 3213.18, 3213.19, 
and 3213.20 would be removed because they do not reflect the current 
statute.
    Existing Sec. Sec.  3213.21 and 3213.22, relating to lease 
expiration, would be removed because these matters would be covered in 
proposed subpart 3207, relating to terms and extensions of leases.
    Proposed Sec. Sec.  3213.16, 3213.17, 3213.18, and 3213.19 would 
clarify the provisions and terminology of existing Sec. Sec.  3213.23, 
3213.24, and 3213.25, relating to lease cancellation and termination. 
Lease cancellation would mean undoing the lease as if it never existed.
    This would be covered by proposed Sec.  3213.16 and limited to 
situations when BLM issued a lease in error.
    In other circumstances, the existing rules use the term ``cancel'' 
when the appropriate term should be ``terminate.'' Thus, proposed Sec.  
3213.17 would describe situations where BLM could terminate (not 
cancel) a lease as of a particular date. Conforming changes would be 
made to other provisions of the proposed regulations by replacement of 
the word ``cancellation'' with the word ``termination.'' The rule would 
also clarify that it does not apply to non-payment of rent which, as 
explained above, would be covered by proposed Sec.  3213.14. In 
response to a request by MMS, BLM would clarify in proposed Sec.  
3213.17 that among the bases for lease termination would be the 
nonpayment of royalties and 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 MMS.
    Proposed Sec.  3213.19 would address circumstances where BLM 
notifies a lessee that its lease is being terminated because of a 
violation. It would clarify the procedures of existing Sec.  3213.25 by 
specifying that a hearing may be requested in the context of the appeal 
of a proposed lease termination. It also would follow the statutory 
text of 30 U.S.C. 1011 in that a lessee could avoid lease termination 
by diligently proceeding to correct a violation, and that it is 
insufficient to make a good faith attempt to correct the violation 
without actually correcting it.

[[Page 41559]]

Subpart 3214--Personal and Surety Bonds and Subpart 3215--Bond Release, 
Termination, and Cancellation

    Both proposed and existing subparts 3214 and 3215 address bonding 
of geothermal operations. Most sections of the proposed subparts would 
be substantively unchanged from their existing counterparts. Changes 
have been proposed to clarify terminology, and improve grammar and 
readability. The proposed substantive changes are discussed.
    In proposed Sec.  3214.14(b), we propose that the bond may be 
increased to reclaim the surface and other resources. The existing rule 
does not expressly include ``other resources.''
    In proposed Sec.  3214.18, the title would be clarified to match 
the content of the section. Proposed Sec.  3214.18(b) would clarify 
that reclamation responsibilities extend to resources other than the 
surface, and proposed Sec.  3214.18(d) would expressly mention 
royalties as well as rents.
    Proposed Sec.  3215.13 would be reorganized for clarity. It would 
also clarify that even after bond termination, a surety and any other 
bond provider remains responsible for obligations that accrued during 
the period of liability while a bond was in effect.

Subpart 3216--Transfers

    Existing subpart 3216 addresses geothermal lease transfers. The 
proposed subpart would almost entirely be substantively unchanged from 
the existing subpart. Changes have been proposed to clarify 
terminology, and improve grammar and readability. Proposed section 
Sec.  3216.14 would be changed to indicate that the filing fees for 
transfers are now found in Sec.  3000.12 of the chapter.
    Proposed Sec.  3216.19 would recognize that direct use leases have 
different size constraints than regular geothermal leases. Thus, the 
proposed section relating to the size of allowable lease transfers 
would contain an exception for direct use leases.

Subpart 3217--Cooperative Agreements

    Existing subpart 3217 addresses cooperative agreements. The 
proposed subpart would have few substantive changes from the existing 
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 communitization agreements. The Energy Policy Act of 
2005, 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. BLM cannot approve these agreements unless BLM 
determines them to be in the public interest.
    Proposed Sec.  3217.10, describing unit agreements, would be 
revised to more closely follow the statutory language at 30 U.S.C. 
1017(a). The term ``cooperative plan'' would be removed from the 
existing Sec.  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 
existing regulations.
    The term ``operating contracts'' would be removed from proposed 
Sec. Sec.  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). BLM uses the terms ``drilling contract'' and 
``development contract'' interchangeably to describe the agreement 
parties use to cooperatively explore under a communitization agreement. 
Proposed Sec.  3217.14(b) would include 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. Proposed Sec.  3217.14(c) would be added to acknowledge 
current BLM practice of coordinating the review of a proposed drilling 
or development contract with the appropriate State agencies. Section 
3217.14(d) would be changed to more accurately reflect a provision of 
the Energy Policy Act that requires 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.

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. Proposed changes to these subparts would 
clarify existing terminology and procedures and make the subparts more 
readable.
    Several changes are proposed throughout these subparts to clarify 
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'' would be substituted for 
the terms ``exploration permit'' or ``permit.''
    Proposed Sec.  3250.10 is substantively unchanged from existing 
regulations.
    Proposed Sec.  3250.11, addressing the general question related to 
where exploration can occur, would be moved from existing Sec.  3251.11 
of the subpart addressing exploration approval. This would necessitate 
the renumbering of subpart 3251.
    Proposed Sec. Sec.  3250.12 and 3250.13 are substantively unchanged 
from existing regulations. The content of proposed new Sec.  3250.14 
would be taken from existing Sec.  3250.11. This proposed 
reorganization would provide a more logical sequence of general 
questions related to the regulation of exploration operations.
    There would be no substantive changes to Sec. Sec.  3251.10-15. As 
mentioned previously, the content of existing Sec.  3251.11 would be 
moved to proposed Sec.  3250.11 and the remaining sections would be 
renumbered to correspond to proposed Sec. Sec.  3251.10-14.
    Proposed Sec.  3251.15(b) would revise existing Sec.  3251.16(b) to 
ensure that bond release could not 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 
resource values in addition to reclamation of the land.
    There are no substantive changes proposed in subparts 3252 through 
3256.

[[Page 41560]]

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 are proposed to these subparts. Changes have been proposed to 
clarify terminology, and improve grammar and readability.

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 are 
proposed to these subparts. Changes have been proposed to clarify 
terminology, and improve grammar and readability.
    Proposed Sec.  3275.14 would be amended in one respect. The current 
requirement to measure the temperature out of a facility (current Sec.  
3275.14(c)(3)) would be removed because this information would no 
longer be needed for the valuation of direct use operations using the 
MMS fee schedules. For ``no-sales'' situations, leases issued under the 
Energy Policy Act and leases converting to the new royalty terms under 
Sec. Sec.  3212.25 or 3200.8 would no longer have to calculate the 
amount of heat displaced by the geothermal resource. Instead, they 
would use a direct use fee schedule that is based only on inlet 
temperature and the monthly volume or mass produced. In developing the 
direct use fee schedule, MMS assumed a fixed outlet temperature of 130 
[deg]F, which greatly simplifies the metering system and the 
calculations.
    For situations involving the arms-length 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, 
both of which BLM believes will be relatively rare, proposed Sec.  
3275.14(d) would give BLM the authority to require outlet temperature 
recorders on a case-by-case basis, if needed.
    Proposed Sec.  3276.14 would eliminate the requirements of existing 
Sec.  3276.14(a) to report a daily breakdown of flow, average 
temperature in, and average temperature out. The information 
requirements in existing sections Sec.  3276.14(d) and (e) would also 
be eliminated. The purpose of the data was to allow the calculation and 
verification of thermal energy displaced, which is the basis of 
valuation in the existing 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 Sec. Sec.  3212.25 or 
3200.8, direct use operations would now be valued using the MMS fee 
schedule which determines fees due as a function of inlet temperature 
and monthly volume or mass produced. Therefore, collection of the data 
would no longer be necessary.
    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, BLM 
believes these situations will be relatively rare and can be handled on 
a case by case basis under Sec.  3276.14(d).

Part 3280--Geothermal Resources Unit Agreements

    This proposed rule would revise existing part 3280 to implement the 
Energy Policy Act of 2005 relating to unit agreements, specifically 30 
U.S.C. 1017. Additionally, the regulations in part 3280 have not been 
updated since the 1970s, other than to add the unit review requirement 
mandated by a 1988 amendment to the Geothermal Steam Act. Therefore, 
other additions to the proposed rule would be included to provide 
needed procedural requirements related to unit agreement 
administration. These changes and additions are intended to clarify 
BLM's expanded authority regarding unitization as provided under the 
Energy Policy Act of 2005, the unit operator's application and 
operational requirements, and to identify how BLM would review an 
application and make necessary unit agreement administration decisions, 
given the manner in which geothermal resources are developed. Changes 
would include provisions specifying that BLM could 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 BLM so requires; (4) A 
modification of the rate of resource exploration or development within 
a unit; and (5) Establishing that a majority interest of owners in a 
lease has the authority to commit the lease to a unit agreement. Other 
changes in this proposal do not change existing procedure or practice, 
but clarify and articulate unit agreement requirements. These 
provisions include: (1) Setting out the application procedures for unit 
area designations and the unit agreements, in the order each step 
typically occurs; (2) Identifying BLM's procedures for reviewing 
applications and making final decisions regarding unit area 
designations, unit agreements, and participating areas; (3) Explaining 
BLM procedures for administering a unit agreement once it is in effect; 
(4) Specifying how a unit operator could receive BLM approval to modify 
unit terms, especially those related to unit contraction; and (5) 
Establishing minimum initial and continuing unit development 
requirements and conditions for terminating the unit agreement. In 
effect, the proposed provisions would standardize existing practices, 
assure consistent BLM procedures, and would inform the public as to how 
BLM handles unit agreements.

Subpart 3280--Geothermal Resources Unit Agreements: General

    Proposed Sec.  3280.1 would explain that the purpose and scope of 
part 3280 is to provide holders of Federal and non-Federal 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 meeting the public interest.
    The existing authority, Sec.  3280.0-3, would be removed 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 and delegations to BLM.

[[Page 41561]]

    Proposed Sec.  3280.2 would include definitions from existing Sec.  
3280.0-5, with certain revisions. Unnecessary definitions of terms such 
as ``agreement'' and ``cooperative agreement'' would be removed. 
Several definitions would be added, including definitions for the terms 
``unit contraction provision,'' ``plan of development,'' ``public 
interest,'' ``reasonably proven to produce'' and ``unit well.''
    BLM's policy regarding the formation of units that is set forth in 
existing Sec.  3280.0-2 would be revised and included in proposed Sec.  
3280.3. The new section would set 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 (whether or not any part of the geothermal reservoir, 
field, or like area, is subject to any unit agreement), lessees thereof 
and their representatives could 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 
BLM to be necessary or advisable in the public interest.
    Proposed Sec.  3280.4 would address BLM's authority to require the 
formation of a unit agreement and BLM's authority to require leases to 
be committed to a unit agreement and would implement 30 U.S.C. 
1017(a)(3) and (b). Proposed Sec.  3280.4(a) would provide that BLM 
could initiate the formation of a unit agreement, or require an 
existing Federal lease to commit to a unit agreement, if it was 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 does require lessee 
consent, however (30 U.S.C. 1017(a)(4) and proposed Sec.  3280.5). 
Proposed Sec.  3280.4(b) would state that BLM could require that leases 
becoming effective on or after August 8, 2005, contain a provision 
stating that BLM could require commitment of the lease to a unit 
agreement. Under this provision BLM could also prescribe the unit 
agreement to which such lease would 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, proposed Sec.  3280.5 would provide that BLM 
could, 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, with the consent of the lessees, in 
connection with the creation and operation of any such unit agreement 
as the BLM could consider necessary or advisable to secure the 
protection of the public interest. This would implement 30 U.S.C. 
1017(a)(4)(A). The proposal would also provide 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 would implement 30 
U.S.C. 1017(a)(4)(B).
    Proposed Sec.  3280.6 would provide that BLM could require a unit 
agreement that applies to lands owned by the United States to contain a 
provision under which BLM or an entity designated in the unit agreement 
could alter or modify, from time to time, the rate of resource 
exploration, development, or production quantity or rate under the unit 
agreement. This proposed section would implement 30 U.S.C. 1017(c).
    Proposed Sec.  3280.7 would clarify that BLM cannot require lands 
which are not under Federal administration.

Subpart 3281--Application, Review, and Approval of a Unit Agreement

    Proposed subpart 3281 would reorganize the application, review, and 
decision procedures for unit area designation and the unit agreement 
into a sequential, step-by-step, description. The proposed regulations 
would describe in detail the steps to follow and the information a 
prospective unit operator would have to submit, as well as the process 
BLM would follow to make application decisions. The first step would be 
for BLM to make a designation of the proposed unit area.
    Proposed Sec.  3281.1 would make clear that before a unit agreement 
is effective, BLM must designate the unit area and approve the unit 
agreement.
    Proposed Sec.  3281.2 would provide a list of information that the 
unit operator must submit before BLM can make a unit area designation. 
The prospective unit operator would be required to submit a geologic 
report, a map of the proposed unit area, a list of leases and tracts 
located in the proposed unit area and any other information BLM 
requires.
    Proposed Sec.  3281.3 would provide more detail on the types of 
geologic information the unit operator should provide to document that 
the proposed unit area is geologically contiguous and suitable for 
exploration, development, and production of the resource.
    Proposed Sec.  3281.4 would make it clear that proposed unit areas 
are not required to be of a specific size or shape, but the size could 
require the drilling of more than one unit well to meet minimum initial 
unit obligations.
    Proposed Sec.  3281.5 would explain how BLM would resolve unit 
applications that contain overlapping areas. If separate unit 
applications overlap, BLM could: (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. BLM would not approve any proposed unit agreement if it 
included lands committed to another unit agreement already in effect.
    Proposed Sec.  3281.6 would describe how BLM would determine 
whether to approve unit designation and how BLM will notify operators 
of the decision. Among other considerations, BLM would determine if the 
geologic basis for the unit area is sound for the development of the 
unit area, which is the principal factor in deciding whether the unit 
area would be designated.
    Under the proposal, if BLM approves a unit area designation, the 
prospective unit operator would initiate the steps required for unit 
agreement approval. Proposed Sec.  3281.7 describes the information a 
unit operator must submit to BLM for unit agreement approval.
    Consistent with existing regulations at Sec.  3281.3, the 
prospective unit operator would be required to provide an opportunity 
for all owners of mineral rights and lease interests to join the unit 
under proposed Sec.  3281.8 and then supply BLM with documentation of 
the commitment status of each lease or tract as required by proposed 
Sec.  3281.9. Documentation would include 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 Sec.  3281.9(b), a majority 
interest of owners in a lease could commit the lease to a unit 
agreement.
    Proposed Sec.  3281.10 explains that BLM would review the 
commitment status documentation to insure that the prospective unit 
operator will have sufficient control of the unit area to conduct 
resource development in the public interest.
    Proposed Sec.  3281.11 would address the required qualifications of 
a prospective unit operator. The qualification requirements for unit 
operators have not changed. This is consistent with existing Sec.  
3282.1.
    Proposed Sec.  3281.12 would explain that owners of mineral rights 
and lease interest committed to the unit are the

[[Page 41562]]

parties who nominate a unit operator; however, BLM must determine if 
the nominee meets the qualifications before the unit operator is 
designated.
    Proposed Sec.  3281.13 would address the formats or models for unit 
agreements. This section would allow 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 could use the model unit agreement proposed in Sec.  3286.1, 
the model with variances noted, or another format that meets the 
requirements outlined in the next two proposed regulatory sections. 
While existing regulations at Sec.  3281.1 allow for variances from a 
model unit agreement, the proposed regulations clearly describe the 
information that needs to be in a unit agreement should the applicant 
choose not to use the model agreement.
    Proposed Sec.  3281.14 is new to these regulations. The addition of 
Sec.  3281.14 does not change existing procedures related to the 
required provisions in a unit agreement. Existing 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.
    Proposed Sec.  3281.15 would list the minimum initial unit 
obligation information that the unit agreement must contain. To meet 
the minimum initial unit obligation, the unit operator would have to 
diligently drill and complete at least one unit well. The information 
required by this section will be used to ensure that the well would be: 
(1) Located on a tract committed to the 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 time frame specified in the unit agreement. Depending on the 
size of the unit, BLM could require the drilling of more than one unit 
well to meet the minimum initial unit obligation. Since the unit well, 
by definition, would have to be designed to produce or utilize 
resources in commercial quantities, the completion of a narrow diameter 
well could satisfy the initial obligation only if the well is capable 
of production in commercial quantities. BLM would make this 
determination on a case-by-case basis. Other exploration operations, 
such as drilling temperature gradient wells, could also be used to 
satisfy part of the minimum initial unit obligation.
    Proposed Sec.  3281.16 would clarify existing practice to submit 
Plans of Development for the unit at the time of unit designation, and 
for future activities not addressed in an existing Plan of Development. 
Plans of Development must be submitted to BLM for future unit 
activities until after a producible unit well is completed.
    Proposed Sec.  3281.17 would describe 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.
    Proposed Sec.  3281.18 would make it clear that BLM will not 
designate a unit area until the Plan of Development ensures that unit 
activities will meet the public interest requirements.
    Proposed Sec.  3281.19 would discuss BLM's response to a proposed 
unit agreement. In all instances, BLM's review of a proposed unit 
agreement must conclude that approval of the unit complies with these 
regulations and is in the public interest. This section of the proposed 
rule also requires BLM to coordinate the review of a proposed unit 
agreement with appropriate State and other Federal surface management 
agencies. This is consistent with current practice. Under this section 
BLM would provide the applicant with written notification of unit 
rejection or approval.
    Proposed Sec.  3281.20 would establish the effective date of an 
agreement as the first day of the month following BLM approval. The 
unit operator would have the option of requesting the effective date be 
the first day of the month in which BLM approved the agreement, or a 
more appropriate date if agreed to by BLM.

Subpart 3282--Participating Area

    Proposed subpart 3282 would define several procedural requirements 
regarding participating areas.
    Section 3282.1 of the proposed rule would define a participating 
area as those portions of the unit area 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.
    Proposed Sec.  3282.2 would explain that commercial operations 
cannot begin without BLM approval of a participating area. This is 
necessary to ensure proper allocation of production and royalties 
within the unit.
    Proposed Sec.  3282.3 would specify that a unit operator would have 
to propose a participating area the earlier of 30 days before starting 
commercial operation, or 60 days after BLM determined a well is 
produced or utilized in commercial quantities.
    Proposed Sec.  3282.4 would describe the general information (e.g., 
maps showing all tracts and lease information) that the unit operator 
must submit to BLM when applying for a participating area.
    Proposed Sec.  3282.5 would describe the technical information 
(e.g., interpretations of well performance and geology documenting the 
tracts contributing to production) that the unit operator must submit 
to BLM when applying for a participating area.
    Proposed Sec.  3282.6 would specify the circumstances requiring a 
unit operator to apply to revise a participating area boundary. This 
proposed section would also allow 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 would be in proposed Sec.  3282.7. 
Provisions in this section would provide flexibility in establishing 
the effective date, provided the date is not earlier than the effective 
date of the unit agreement.
    Proposed Sec.  3282.8 would outline the following as the three 
reasons BLM would reject 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 proposed revision 
reduces the size of the participating area because of resource 
depletion in a certain 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 utilized 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.
    Proposed Sec.  3282.9 would provide that production be allocated 
equally to all lands in a participating area which are committed to the 
unit agreement. For instance, if you owned or controlled full interest 
in 100 acres within a participating area of 1000 acres, you would be 
allocated 10 percent of the production from the participating area.
    Proposed Sec.  3282.10 would specify that unleased Federal lands, 
which are available for leasing and located within the participating 
area, would receive a proportionate allocation of production for 
royalty purposes. The unit operator would pay royalty to the United 
States on these lands. This section further provides that if BLM is not 
allowed to lease the unleased Federal lands in the

[[Page 41563]]

participating area because of restrictions based on planning decisions 
or other statutory requirements, the lands will not receive an 
allocation of production (see Sec.  3201.11).
    Proposed Sec.  3282.11 would explain that BLM may determine that a 
participating area could 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 BLM would consider in the public interest.
    Proposed Sec.  3282.12 would provide that a participating area 
would terminate when the unit operator either permanently stops 
commercial operations, or 60 days after receiving notification from 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 BLM's reason for termination is in 
error or the situation warranting the termination has been rectified, 
BLM may decide to not terminate the participating area.

Subpart 3283--Modifications to the Unit Agreement

    Proposed subpart 3283 would establish how modifications to a unit 
agreement could be proposed and approved. This proposed rule would add 
new provisions to specify the conditions under which a unit operator 
could 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 BLM is necessary since a unit operator 
could have spent substantial amounts of money discovering commercial 
resources which can not be immediately developed due to conditions 
beyond the operator's control. An inability to place portions of a unit 
into production could subject leases to termination where either 
commercial resources could have been found or monitoring or injection 
wells not directly involved in production are located. This would 
reduce the incentive for additional exploration and development in the 
unit area, which is contrary to public interest objectives.
    Proposed Sec.  3283.1 would provide that a unit operator could 
request a modification of the unit agreements after all unit interests 
have agreed to the change in the agreement. After review, BLM will 
notify the unit operator of BLM's decision and effective date of 
approval, if applicable.
    Proposed Sec.  3283.2 would discuss circumstances under which the 
unit operator could request BLM to revise contraction provisions of a 
unit agreement. Contraction provisions of a unit agreement describe how 
lands will be 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 could 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 BLM in support of a request 
to revise contraction provisions of the unit area. BLM would approve 
the request if we determine that revision was in the public interest. 
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 could occur.
    Proposed Sec.  3283.4 would address adding or removing lands from 
an agreement when BLM determines, based on information submitted by the 
unit operator, that new or additional geologic information modifies the 
basis for the unit boundary. Once 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.
    Proposed Sec.  3283.5 would implement 30 U.S.C. 1017(f) that 
requires review of unit agreements at 5 year intervals to eliminate any 
lands in the unit area not necessary for unit operations.
    Proposed Sec.  3283.6 would describe the purpose of the periodic 
review, the basis for eliminating lands from the unit, and the 
consequences of elimination on leased lands.
    Proposed Sec.  3283.7 would provide that unit operators may be 
changed only with BLM's written approval.
    Proposed Sec.  3283.8 would describe the requirements of the new 
operator. The new operator must meet the qualification requirements, 
submit evidence of adequate bonding for Federal lands, and provide 
written acceptance of the unit terms and conditions to BLM.
    Proposed Sec.  3283.9 would provide that the change of unit 
operator is effective when BLM approves the new operator in writing.
    Proposed Sec.  3283.10 would explain that the previous unit 
operator would remain responsible for all duties and responsibilities 
until BLM approved the new unit operator. This section also makes it 
clear that previous unit operators remain responsible for liabilities 
and obligations that accrued before a new unit operator was approved.
    Proposed Sec.  3283.11 would acknowledge that a unit agreement does 
not modify stipulations in Federal leases. While certain lease 
provisions, such as lease term, annual work requirements, and royalty 
provisions 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.
    Proposed Sec.  3283.12 would stipulate that persons acquiring 
Federal interests in a unit agreement are bound by the terms and 
conditions of the unit agreement.

Subpart 3284--Unit Operations

    Proposed subpart 3284 would discuss unit operations, unit operator 
responsibilities for those operations, and how BLM would administer 
operational situations.
    Proposed Sec.  3284.1 would acknowledge current practice that all 
phases of unit operations would be 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 would be described in 
proposed Sec.  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 could own and 
operate utilization facilities located within the unit area, but only 
the unit operator would be 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 would not be authorized to 
conduct any drilling activities under subpart 3260 on leases committed 
to a unit agreement without BLM approval. The unit operator works with 
BLM and MMS to make unit changes and must ensure all monies owed to the 
Federal government for geothermal activities are paid.
    Proposed Sec.  3284.3 would discuss what happens to the unit 
agreement and leases committed to the agreement if the minimum initial 
unit obligations were not met and how unit operations could affect 
extension of lease terms. If the initial unit well obligations were not

[[Page 41564]]

met or the unit operator relinquished the agreement before meeting the 
initial unit obligations, the agreement would be voided as if it was 
never in effect, and any lease segregations become invalid and any 
extensions issued would be retroactively voided to the date the unit 
became effective.
    Proposed Sec.  3284.4 would address actions necessary to maintain a 
unit agreement after a unit well has been completed. If a unit well is 
determined by BLM to be producible, the unit operator must submit a 
proposed 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 will not produce or utilize geothermal resources 
in commercial quantities, the unit operator would have to continue 
drilling unit wells within the time specified in the agreement until 
unit well is completed which BLM determines produces or utilizes 
geothermal resources in commercial quantities. Failure to meet this 
obligation to drill subsequent wells would result in the unit 
terminating at that time.
    Proposed Sec.  3284.5 would explain how commitment of lands to a 
unit agreement affects lease terms. Lease extensions granted based on 
commitment to the agreement would remain in force while the unit is in 
effect. Under proposed Sec.  3207.17, a lease could receive an 
extension if it was committed to a unit agreement and would expire 
prior to the unit term expiring. If the unit operator has diligently 
pursued unit development, a lease could receive an extension to match 
the term of the unit.
    Proposed Sec.  3284.6 would address drilling by working interest 
owners other than the unit operator. BLM may approve drilling outside 
the participating area only when 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 would 
produce or utilize in commercial quantities, the unit operator must 
apply to include the well in the participating area and operate the 
well.
    Proposed Sec.  3284.7 would allow a lessee or operator to conduct 
operations on an uncommitted Federal lease located within a unit if BLM 
determined that it was in the public interest and would not 
unnecessarily affect unit operations.
    Proposed Sec.  3284.8 would establish 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 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.
    Proposed Sec.  3284.9 would allow BLM to set or modify the rate of 
production or injection within the unit area to ensure protection of 
Federal resources.
    Proposed Sec.  3284.10 would articulate 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.
    Proposed Sec.  3284.11 would explain that development and 
production from the unit, regardless of location within the unit, 
fulfills the diligent development requirements for all leases within 
the unit.
    Proposed Sec.  3284.12 would require unit operators to notify 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 proposed subpart 3285.
    Proposed Sec.  3285.1 would provide that BLM may terminate a unit 
agreement if the unit operator does not comply with any term or 
condition of the unit agreement.
    Proposed Sec.  3285.2 would allow 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 could occur when the appropriate percentage of working 
interest owners, as specified in the unit operating agreement, agree to 
the termination. If commercial operations are occurring, the unit would 
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 proposed Sec.  
3281.13).
    This rule proposes several revisions to Articles IV and XI of the 
model unit agreement. In these Articles, the existing model refers to a 
Plan of Operation. The term Plan of Development would be used in the 
proposed model to replace the Plan of Operation. This change is 
proposed to clarify overall permit application requirements since a 
Plan of Operation is part of the well drilling and testing application 
(Sec. Sec.  3261.11 and 3261.12), and is not related to the review of a 
unit agreement. The requirements of the Plan of Development would not 
be substantially changed from those of the existing Plan of Operation.
    Article IV of the existing unit model requires the unit to contract 
to the participating area if no more than 4 months could elapse between 
the establishment of the participating area and completing the drilling 
of an exploratory well outside of the participating area. This time 
frame is proposed to be expanded to 6 months before contraction would 
occur to provide the unit operator with greater flexibility when 
attempting to obtain drilling equipment.
    We are proposing several modifications to existing Article XI. A 
unit operator is currently required to initiate drilling an exploratory 
well within six months of the effective date of the unit agreement. 
This rule would modify this requirement to allow the unit operator to 
conduct exploration operations as well as drilling a well to meet unit 
diligent development requirements. A unit operator would have to 
complete at least one unit exploration well prior to the end of the 
term of the unit agreement or the unit would be voided and leases would 
not receive any benefit of unit commitment. Article XI of the existing 
model agreement specifies that BLM could only grant a single extension 
of drilling obligations of no longer than four months. We are proposing 
to modify the model so that BLM could grant multiple extensions of time 
frames that 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'' would be changed to ``completing a well capable of 
producing or utilizing unitized substances in commercial quantities.'' 
This change would allow 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.
    We are also proposing editorial revisions to the model agreement. 
For instance, references to the ``Director'' are changed to the 
``Authorized Officer,'' the person within BLM with the authority to 
make final decisions.
    We are proposing to delete the following sections in this part 
because the BLM does not require submission of

[[Page 41565]]

information in these formats and the information contained in these 
sections is found elsewhere in the proposed rule: Sec.  3286.1-1 Model 
Exhibit ``A''; Sec.  3286.1-2 Model Exhibit ``B''; Sec.  3286.2 Model 
unit bond; Sec.  3286.3 Model designation of successor operator; and 
Sec.  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.
    Proposed Sec.  3287.1 would allow a unit operator to request a 
suspension of any or all obligations under the unit agreement.
    Proposed Sec.  3287.2 would list the circumstances that may warrant 
the granting of a suspension of unit obligations. Typically they are 
situations beyond the unit operator's control, such as accidents, labor 
strikes or Acts of God. Under this provision, BLM could decide to not 
grant a suspension of unit obligations, especially the minimum initial 
obligation, when lengthy or indefinite periods of time are involved. 
For example, 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.
    Proposed Sec.  3287.3 would describe how a suspension of unit 
obligations would affect the terms of the unit agreement. This section 
explains that BLM has the discretion to toll certain provisions of the 
unit agreement while allowing others to remain in effect. BLM will 
specify the terms of the suspension. The unit operator is obligated to 
notify all interests in the agreement of changes in unit agreement 
obligations effected by the suspension.
    Proposed Sec.  3287.4 would allow a unit operator to appeal 
decisions BLM makes regarding unit agreement administration or 
operations.

IV. Procedural Matters

Executive Order 12866, Regulatory Planning and Review

    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 the regulatory action.
    The proposed regulations are intended to implement provisions of 
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 they 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. The regulatory changes in the nomination 
and leasing process, royalty system, and diligence requirements are the 
only provisions in the proposed rule with potential economic impacts. 
However, the royalty provisions are intended to be revenue neutral and 
should not have any economic impact. The nomination filing fee added in 
section 3203.12 is $100 per nomination for competitive sale, plus 10 
cents for each acre of land nominated. This fee will have some negative 
financial impact on lessees. However, 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 costs, BLM does not have data on our cost of processing 
nominations. In 2004, BLM issued 29 competitive and noncompetitive 
geothermal leases, covering 45,706 acres. With the proposed 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 a little over $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 proposed regulations, and certainly nothing 
approaching $100 million annually.
    The payment-in-lieu-of-expenditure provision would increase the 
cost of holding future non-producing Federal geothermal leases beyond 
the 15th year. However, since these leases are neither producing nor 
being actively developed, we do not expect any measurable reduction in 
economic activity to occur as a result of the proposed rule.
    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 geothermal program with other agencies' 
actions, and we coordinated closely with the Minerals Management 
Service in preparing this proposed rule. These relationships are 
included in agreements and memoranda of understanding that would not 
change with this rule.
    This rule does not materially affect the budgetary impact of 
entitlements, grants, user fees, loan programs, or the rights and 
obligations of their recipients.

Clarity of the Regulations

    Executive Order 12866 requires each agency to write regulations 
that are simple and easy to understand. We invite your comments on how 
to make these proposed regulations easier to understand, including 
answers to questions such as the following: (1) Are the requirements in 
the proposed regulations clearly stated? (2) Do the proposed 
regulations contain technical language or jargon that interferes with 
their clarity? (3) Does the format of the proposed regulations 
(grouping and order of sections, use of headings, paragraphing, etc.) 
aid or reduce their clarity? (4) Would the regulations be easier to 
understand if they were divided into more (but shorter) sections? (A 
``section'' appears in bold type and is preceded by the symbol ``Sec.  
'' and a numbered heading, for example ``Sec.  3251.10 Do I need a 
permit before I start my exploration operations?'' (5) Is the 
description of the proposed regulations in the SUPPLEMENTARY 
INFORMATION section of this preamble helpful in understanding the 
proposed regulations? How could this description be more helpful in 
making the proposed regulations easier to understand?
    Please send any comments you have on the clarity of the regulations 
to the address specified in the ADDRESSES section.

National Environmental Policy Act

    BLM has prepared an environmental assessment (EA) and has found 
that the proposed 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 proposed 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 would not change operational standards 
to cause impacts on the ground. Therefore, an environmental impact 
statement is not required. BLM has placed the EA and the Finding of No 
Significant Impact (FONSI) on file in the administrative

[[Page 41566]]

record at the address specified in the ADDRESSES section. BLM invites 
the public to review these documents and suggests that anyone wishing 
to submit comments in response to the EA and FONSI do so in accordance 
with the Public Comment Procedures section, above.

Regulatory Flexibility Act

    Congress enacted the Regulatory Flexibility Act of 1980, as 
amended, 5 U.S.C. 601-612, to ensure that Government regulations do not 
unnecessarily or disproportionately burden small entities. The RFA 
requires a regulatory flexibility analysis if a rule would have a 
significant economic impact, either detrimental or beneficial, on a 
substantial number of small 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 
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 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 
administered by BLM, there is no practical way to determine which of 
these firms will operate on Federal lands in the future. The extent to 
which any firm is actually affected by this rule depends on whether it 
operates on Federal lands.
    For firms involved in the geothermal industry, small entities are 
defined by the SBA 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 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. That firm, 
Calpine Corporation, operates The Geysers in northern California, and 
is a major power company that owns, leases, and operates natural gas-
fired and geothermal power plants.
    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 proposed rule with potential economic impacts. However, the royalty 
provisions are intended to be revenue neutral and should not have any 
economic impact. The nomination filing fee in section 3203.12 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.
    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, BLM does not have 
data on our cost of processing nominations. In 2004, BLM issued 29 
competitive and noncompetitive geothermal leases, covering 45,706 
acres. With the proposed 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 proposed 
regulations.
    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, BLM has determined under the RFA that this proposed rule 
would not have a significant economic impact on a substantial number of 
small entities. The determination and findings discussed herein are 
supported by a Threshold Analysis prepared under the RFA. BLM has place 
the Threshold Analysis on file in the administrative record at the 
address specified in the ADDRESSES section.

Small Business Regulatory Enforcement Fairness Act (SBREFA)

    This proposed rule is not a ``major rule'' as defined at 5 U.S.C. 
804(2). 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 discussion under Executive Order 12866, above.

Unfunded Mandates Reform Act

    This proposed 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 proposed rule has 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 paragraphs of this section of the 
preamble, that the change proposed in this rule would not

[[Page 41567]]

have effects approaching $100 million per year on the private sector. 
Therefore, 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.).

Executive Order 12630, Governmental Actions and Interference With 
Constitutionally Protected Property Rights (Takings)

    The proposed rule is not a government action capable of interfering 
with constitutionally protected property rights. A takings implication 
assessment is not required, since the proposed rule 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 proposed rule would not have federalism implications. The rule 
would 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. The 
proposed rule would not alter any lease management or revenue sharing 
provisions with the states, nor does it impose any costs to the states. 
Therefore a federalism assessment is not required.

Executive Order 12988, Civil Justice Reform

    Under Executive Order 12988, we have determined that this proposed 
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.

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 proposed 
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, 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, BLM has begun consultation on the proposed revisions 
to the geothermal regulations and will continue to consult with Tribes 
during the comment period on the proposed rule.

Executive Order 13211, Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    In accordance with Executive Order 13211, BLM has determined that 
the proposed rule is not likely to have a significant adverse effect on 
the supply, distribution, or use of energy. The proposed 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, BLM has determined that 
this proposed rule would not impede facilitating cooperative 
conservation; would take 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 decision-making process; and provide 
that the programs, projects, and activities are consistent with 
protecting public health and safety. The proposed changes are 
essentially administrative in nature and would have a bearing on 
conservation issues.

Paperwork Reduction Act of 1995 (PRA)

    This proposed rule contains a collection of information that has 
been submitted to OMB for review and approval under section 3507(d) of 
the PRA. As part of our continuing effort to reduce paperwork and 
respondent burdens, BLM invites the public and other Federal agencies 
to comment on any aspect of the reporting and recordkeeping burden. If 
you wish to comment on the information collection aspects of this 
proposed rule, you may send your comment directly to OMB and a copy to 
BLM (see the ADDRESSES section of this notice). You may obtain a copy 
of the supporting statement for the new collection of information by 
contacting the Bureau's Information Collection Clearance Officer 
Contact at (202) 452-5033.
    The PRA provides that an agency may not conduct or sponsor a 
collection of information unless it displays a currently valid OMB 
control number. Until OMB approves a collection of information and 
assigns a control number, you are not required to respond. OMB is 
required to make a decision concerning the collection of information 
contained in these proposed regulations between 30 to 60 days after 
publication of this document in the Federal Register. Therefore, a 
comment to OMB is best assured of having its full effect if OMB 
receives it within 30 days of publication. This does not affect the 
deadline for the public to comment to BLM on the proposed regulations.
    The title of the collection of information for the rule is ``43 CFR 
Parts 3200 and 3280, Geothermal Resource Leasing and Geothermal 
Resources Unit Agreements.'' We estimate the respondents to include 79 
geothermal lessees who may apply for lease conversions and lease 
extensions (50 lease conversions and 29 lease extensions). Responses to 
this collection are required to obtain a benefit.
    The collection of information required by the current parts 43 CFR 
3200 and 3280 regulations is approved under OMB Control Numbers 1004-
0074 (expiration 9/30/06) and 1004-0132 (expiration 3/31/07). The 
proposed rule imposes changes to the information collection burden 
hours (see table below). This rulemaking will make an estimated 
increase of 2,040 new burden hours. The hour burden and responses 
remain the same for those collections, and therefore, those numbers are 
not included in the total reporting burden of this rulemaking.

[[Page 41568]]



----------------------------------------------------------------------------------------------------------------
                                                                                   Annual number   Annual burden
    43 CFR proposed section       Reporting requirement         Hour burden        of responses        hours
----------------------------------------------------------------------------------------------------------------
3200.7(a)(2)...................  Notify BLM of request    1.....................              79              79
                                  to convert the
                                  existing lease or
                                  determine whether
                                  lessee qualifies for a
                                  two-year extension of
                                  its term.
3203.10........................  Submit nominations for   3.5...................             300           1,050
                                  geothermal lease sale
                                  and required fees from
                                  section 3203.12..
3203.12........................  Submit the required      15 min................             300              75
                                  fees (see section
                                  3203.10).
3205.10........................  Submit application for   10....................              10             100
                                  a direct use lease.
3212.10........................  Submit application for   16....................              20             320
                                  production incentive.
3212.26........................  Submit application to
                                  convert royalty terms
                                  of leases issued
                                  before August 8, 2005
                                  to the terms of the
                                  Energy Policy Act of
                                  2005.
                                 (a) Leases with          4.....................              31             124
                                  existing electrical
                                  generation projects.
                                 (b) Leases with          1.....................               2               2
                                  existing direct use
                                  operations.
                                 (c) Leases without       1.....................              50              50
                                  electrical generations
                                  or direct use
                                  operations.
3276.14........................  Submit monthly report    12 (1 hour each month)              20             240
                                  for direct use
                                  facilities.
                                --------------------------------------------------------------------------------
    Total......................  .......................  ......................             812           2,040
----------------------------------------------------------------------------------------------------------------

    The BLM specifically solicits comments on the following questions:
    (a) Is the proposed collection of information necessary and useful 
for BLM to properly perform its functions?
    (b) Are the estimates of the burden hours of the proposed 
collection reasonable?
    (c) Do you have any suggestions that would enhance the quality, 
clarity, or usefulness of the information to be collected?
    (d) Is there a way to minimize the information collection burden on 
those who are to respond, including the use of appropriate automated 
electronic, mechanical, or other forms of information technology?

Authors

    The principal authors of this proposed 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 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.

    Accordingly, for the reasons stated in the preamble and under the 
authorities stated below, BLM proposes to amend 43 CFR parts 3200 and 
3280 as follows:

R.M. ``Johnnie'' Burton,
Director, Minerals Management Service, Exercising the Delegated 
Authority of the Assistant Secretary, Land and Minerals Management.

    1. 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 in effect on 
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 do I request lands for competitive sale?
3203.11 How do I request that nominations 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 will 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?

[[Page 41569]]

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?
3207.13 Must I comply with BLM requirements 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 Can anyone 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 the 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?
Subpart 3212--Lease Suspensions and Royalty Rate Reductions
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 operations and 
production on my lease?
3212.12 How long does a suspension of operations or operations and 
production last?
3212.13 How does a suspension affect my lease terms and obligations?
3212.14 What happens when the suspension ends?
3212.15 Can my lease remain in full force and effect if I cease 
production and I do not have a 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 terms of a 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 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 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 my 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?

[[Page 41570]]

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?
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 to 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 any 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 get 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?

[[Page 41571]]

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 land leased for geothermal resources?
3271.14 What do I need to do to start building and testing a 
utilization facility if it is not located on Federal land leased for 
geothermal resources?
3271.15 How do I get a permit to begin commercial operations?
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 to 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


Sec.  3200.1  Definitions.

    For purposes of this part and part 3280 of this chapter:
    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

[[Page 41572]]

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 required to convert geothermal energy 
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, 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 in an area BLM designates as 
available exclusively for direct use of geothermal resources, without 
sale, for 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 of this chapter, 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

[[Page 41573]]

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.
    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.


Sec.  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.


Sec.  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.


Sec.  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 Sec.  4.21(b) of this title.


Sec.  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 of 
this part or noncompetitively issued under subpart 3204 of this part) 
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 of this part).


Sec.  3200.7  What regulations apply to geothermal leases in effect on 
August 8, 2005?

    (a) General applicability. (1) Leases in effect on August 8, 2005, 
are subject to this part and part 3280 of this chapter, except that 
such leases are subject to the BLM regulations in effect on August 8, 
2005, 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 in effect on August 8, 2005, may elect to 
be subject to all of the regulations in this part and part 3280 of this 
chapter, without regard to the exceptions in paragraph (a)(1) of this 
section. Such an election must occur no later than 18 months after 
[Effective Date of Final Rule]. Any such election as it pertains to 
lease terms relating to royalties must be made under the royalty 
conversion provisions of subpart 3212 of this part.
    (b) Royalty conversion and production incentives. The lessee of a 
lease in effect on August 8, 2005, may:
    (1) Choose to convert lease terms relating to royalties under 
subpart 3212 of this part; or
    (2) If it does not convert lease terms relating to royalties, apply 
for a production incentive under subpart 3212 of this part (if eligible 
under that subpart).
    (c) Two year extension. The lessee of a lease in effect on August 
8, 2005, may apply to extend a lease that was within two years of the 
end of its term on August 8, 2005, for up to two years to allow 
achievement of production under the lease or to allow the lease to be 
included in a producing unit.


Sec.  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, 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 after August 8, 2005, and before [Effective 
Date of Final Rule], an election under paragraph (b)(1) of this section 
must occur no later than 18 months after [Effective Date of Final 
Rule].
    (3) For leases issued on or after [Effective Date of Final Rule], 
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


Sec.  3201.10  What lands are available for geothermal leasing?

    (a) BLM may issue leases on:

[[Page 41574]]

    (1) Lands administered by the Department of the Interior, including 
public, withdrawn and acquired lands;
    (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.


Sec.  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 
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, Ninety-Sixth 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


Sec.  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.


Sec.  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 Sec.  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.


Sec.  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 Sec.  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.


Sec.  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 Sec.  3202.10.

Subpart 3203--Competitive Leasing


Sec.  3203.5  What is the general process for obtaining a geothermal 
lease?

    (a) The competitive geothermal leasing process consists of the 
following steps:
    (1) Entities interested in geothermal development nominate lands by 
submitting to BLM descriptions of lands they seek to be included in a 
lease sale.
    (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 issues 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 covered by subparts 3204 and 3205 of this part, 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.


Sec.  3203.10  How do I request lands for competitive sale?

    (a) A qualified company or individual must 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 Sec.  3203.12.
    (d) BLM may reconfigure lands to be included in each parcel offered 
for sale.

[[Page 41575]]

Sec.  3203.11  How do I request that nominations 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.
    (b) BLM may 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. BLM may request that you provide additional information.


Sec.  3203.12  What fees must I pay to nominate lands?

    Submit with your nomination a filing fee for nominations of lands 
of $100 per nomination plus 10 cents per acre of lands nominated, as 
found in the fee schedule in Sec.  3000.12 of this chapter.


Sec.  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.


Sec.  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.


Sec.  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 re-offer 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 Sec.  
3203.17.


Sec.  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 Sec.  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 Sec.  3202.10, BLM will revoke 
acceptance of your bid and keep all money that has been submitted.


Sec.  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 of this part.

Subpart 3204--Noncompetitive Leasing Other Than Direct Use Leases


Sec.  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 
of this part.
    (c) The holder of a mining claim may obtain a noncompetitive lease 
for lands subject to the mining claim, under Sec.  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 leasing process specified in 
this subpart. If you elect for your lease application to be subject to 
the leasing process in this subpart, your application will be 
considered a nomination for future competitive sale offerings for the 
lands in your application.


Sec.  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 Sec.  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.


Sec.  3204.11  How may I acquire a noncompetitive lease for lands that 
were not sold at a competitive lease sale?

    (a) For a two-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.

[[Page 41576]]

    (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.


Sec.  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 two-
sided page.


Sec.  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 
the applicant notifies BLM in writing that it elects for the lease 
application to be subject to the leasing process specified in this 
subpart, in which case the application will be considered a nomination 
for future competitive sale offerings for the lands in the application.


Sec.  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.


Sec.  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 Sec.  3206.12, BLM will reject the 
application.

Subpart 3205--Direct Use Leasing


Sec.  3205.6  When will BLM issue a direct use lease to an applicant?

    BLM may issue a direct use lease to an applicant if the following 
conditions are satisfied:
    (a) The lands included in the lease application are open for 
geothermal leasing;
    (b) BLM determines that the lands are appropriate for exclusive 
direct use operations, without sale, for purposes other than commercial 
generation of electricity;
    (c) The acreage covered by the lease application is not greater 
than the quantity of acreage that is reasonably necessary for the 
proposed use;
    (d) BLM has published a notice of the land proposed for a direct 
use lease for 90 days before issuing the lease;
    (e) 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;
    (f) BLM determines there is no competitive interest in the 
resource; and
    (g) The applicant is the first qualified applicant.


Sec.  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.


Sec.  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 to commercially generate 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 processing fee for 
noncompetitive lease applications found in the fee schedule in Sec.  
3000.12 of this chapter for each direct use lease application.


Sec.  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.


Sec.  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.


Sec.  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.


Sec.  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


Sec.  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 
Sec. Sec.  3206.12 and 3206.16).

[[Page 41577]]

Sec.  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;
    (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).


Sec.  3206.12  What are the minimum and maximum lease sizes?

    Other than for direct use leases (the size for which is addressed 
in Sec.  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.


Sec.  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.


Sec.  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 
beneficial interest of 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.


Sec.  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.


Sec.  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.


Sec.  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 Sec.  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.


Sec.  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


Sec.  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 Sec.  3207.14;
    (c) A production extension of up to 35 years; and
    (d) A renewal period of up to 55 years.


Sec.  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 Sec.  3207.11; and
    (2) At the end of each year after the 10th year of the lease, you 
have satisfied the requirements in Sec. Sec.  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 Sec. Sec.  3207.12(b) or (d); 
and
    (2) At the end of each year of the second 5-year extension you 
satisfy the requirements in Sec.  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.


Sec.  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

[[Page 41578]]

    (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.
    (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 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.


Sec.  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) per year 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;
    (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 Sec.  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.


Sec.  3207.13  Must I comply with BLM requirements when my lease 
overlies a mining claim?

    (a) BLM will exempt you from complying with the requirements of 
Sec. Sec.  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.


Sec.  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 Sec.  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

[[Page 41579]]

you qualify for a production extension under Sec.  3207.15.


Sec.  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 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 Sec.  3213.19.


Sec.  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 as long as you produce or utilize geothermal resources in 
commercial quantities and satisfy other terms and conditions BLM 
imposes.


Sec.  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 request additional information.
    (c) Within 30 days after receiving your extension request, BLM will 
notify the unit operator whether we approve.


Sec.  3207.18  Can my lease be extended if it is eliminated from a 
unit?

    If your lease is eliminated from a unit under Sec.  3283.6, it is 
eligible for a drilling extension or a production extension if it meets 
the requirements for such extensions.

Subpart 3210--Additional Lease Information


Sec.  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 portion of the lease outside the participating 
area would be 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 plan or agreement. BLM will give the lease portion outside 
the plan or agreement a new serial number, and the same lease terms as 
the original lease.


Sec.  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.


Sec.  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 
Sec.  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 Sec.  3000.12 of this chapter with your request to consolidate 
leases.


Sec.  3210.13  Can anyone lease or locate other minerals on the same 
lands as my geothermal lease?

    Yes. 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.


Sec.  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.

[[Page 41580]]

    (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 adjust 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 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 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.
    (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 Sec.  3200.4.


Sec.  3210.15  What if I appeal BLM's decision to readjust my lease 
terms?

    If you appeal our decision under Sec.  3210.14(e)(1) to readjust 
your lease terms and conditions, or rental or royalty rate, 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.


Sec.  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.


Sec.  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


Sec.  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 Sec.  3000.12 of this 
chapter.


Sec.  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) 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.
    (c) If you obtained your lease noncompetitively, then your annual 
rent is $1 per acre for the first 10 years.
    (d) 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.
    (e) 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.


Sec.  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.


Sec.  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.


Sec.  3211.14  Will I always pay rent on my lease?

    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.


Sec.  3211.15  How do I credit rent towards royalty?

    You may credit rental towards royalty under MMS regulations at 30 
CFR 218.303.


Sec.  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.


Sec.  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 after August 8, 2005 (other than leases 
issued in response to applications that were pending on that date for 
which the lessee elects to be subject to royalty regulations in effect 
on that date), 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;

[[Page 41581]]

    (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 Sec.  3212.25, BLM will establish the royalty rate.
    (1) BLM will seek to establish a rate that it expects will yield 
total royalty payments equivalent to those that would have been paid 
under the royalty rate in effect for the lease before August 5, 2005. 
That rate is not limited to the range of rates specified in 30 U.S.C. 
1004(a)(1). If you have not previously produced geothermal resources 
under your lease for the commercial generation of electricity, BLM will 
establish a royalty rate equal to that set forth in paragraph (a)(1) of 
this section.
    (2) 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.
    (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 Sec.  3212.25, and for leases issued in response to 
applications pending on that date for which the lessee elects to be 
subject to the royalty regulations in effect on that date, the royalty 
rate is the rate prescribed in the lease instrument.


Sec.  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 after August 8, 2005 (other than leases 
issued in response to applications that were pending on that date for 
which the lessee elects to be subject to royalty regulations in effect 
on that date), 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 Sec.  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 Sec.  3212.25, and for leases issued in response to 
applications pending on that date for which the lessee elects to be 
subject to the royalty regulations in effect on that date, 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.


Sec.  3211.19  What is the royalty rate on byproducts derived from 
geothermal resources produced from or attributable to my lease?

    (a) 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) (e.g., oil, gas, phosphate, sodium, and 
potash), the royalty rate 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. For example, if you produce 
sodium as a byproduct, the royalty on that sodium would be 2 percent, 
which would be applied to the gross value of the product under 
applicable MMS rules (30 U.S.C. 262).
    (b) For a byproduct that is not specified in 30 U.S.C. 181, the 
royalty rate is 5 percent. You must apply that rate to the value of 
that byproduct established under applicable MMS rules at 30 CFR part 
206 subpart H.


Sec.  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).

Subpart 3212--Lease Suspensions and Royalty Rate Reductions


Sec.  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.


Sec.  3212.11  How do I obtain a suspension of operations or 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 of this part.


Sec.  3212.12  How long does a suspension of operations or 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 Sec.  3212.14).


Sec.  3212.13  How does a suspension affect my lease term and 
obligations?

    (a) If BLM approves a suspension of operations and production:

[[Page 41582]]

    (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, 
unless BLM determines that you will be denied all beneficial use of 
your lease during the period of the suspension.


Sec.  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.


Sec.  3212.15  Can my lease remain in full force and effect if I cease 
production and I do not have a suspension?

    In the absence of a suspension approved or ordered under Sec.  
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 full force and effect only if the circumstances described in 
paragraph (a), (b), or (c) apply:
    (a) If, during the period in which production is ceased, 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).
    (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 
considered a production activity, not a cessation of production. Such 
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 in advance 
if the activity will require more than one calendar month to be 
classified as maintenance under this paragraph.


Sec.  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 royalty reduction, suspension or waiver 
unless all royalty interest owners other than the United States accept 
a similar reduction, suspension, or waiver.


Sec.  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 reduction, suspension or 
waiver, you must also provide to BLM a list of names of royalty 
interest owners other than the United States, the amounts of royalties 
or payments out of production paid to them, and every effort you have 
made to reduce these payments.


Sec.  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 Sec.  
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 Sec.  3212.22); or
    (2) Qualified expansion project (see Sec.  3212.21); and
    (d) The production from your lease is used for the commercial 
generation of electricity.


Sec.  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 Sec.  3212.22) or as a qualified 
expansion project (see Sec.  3212.21) and explain why your project 
qualifies under these regulations. The request must be received no 
later than August 7, 2011.


Sec.  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 Sec.  3212.21 or a new facility under Sec.  
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. 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.


Sec.  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

[[Page 41583]]

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.


Sec.  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.


Sec.  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 the 
project meets or 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:
[GRAPHIC] [TIFF OMITTED] TP21JY06.004


Where:

i is a month for which a production incentive is in effect;
[Delta]Gi is the increase in generation for month i;
Ga,i is the actual generation in month i;
Gt,i is the target generation in month i, as provided in 
Sec.  3212.19(b).

Sec.  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.
    (b) The amount of the production incentive is established in MMS 
regulations at 30 CFR 218.307.


Sec.  3212.25  Can I convert the royalty terms of a 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 your lease was in effect before August 8, 2005, you may 
submit to BLM a request to modify the royalty terms of your lease to 
the applicable royalty or direct use fee terms prescribed in the 
Geothermal Steam Act as amended by the Energy Policy Act of 2005. 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.
    (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 Sec.  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 Sec.  
3211.18(a) and MMS regulations at 30 CFR 206.356.


Sec.  3212.26  How do I submit a request to modify the royalty 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;
    (iv) If you are or your affiliate is selling the geothermal 
resources at arm's length before those resources are used to generate 
electricity, documentation that you have access to the purchaser's 
gross proceeds derived from the sale of the electricity; and
    (v) Any other information that BLM may require.
    (c) 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, [DATE 18 MONTHS AFTER THE 
EFFECTIVE DATE OF THE FINAL RULE].


Sec.  3212.27  How will BLM or MMS review my request to modify the 
lease royalty terms?

    After you submit your request to modify the royalty terms under 
Sec.  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 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 terms; and
    (d) Within 180 days from the day on which we determine a complete 
request when all necessary information was

[[Page 41584]]

received, we will send you a decision letter notifying you whether we 
approve the modification to the lease terms.

Subpart 3213--Relinquishment, Termination, and Cancellation


Sec.  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.


Sec.  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 relinquished. BLM may 
request additional information if necessary.


Sec.  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 Sec.  3205.07.


Sec.  3213.13  When does my relinquishment take effect?

    (a) If BLM determines your relinquishment request meets the 
requirements of Sec. Sec.  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 Sec.  3200.4.


Sec.  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 from 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.


Sec.  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.


Sec.  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.


Sec.  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 Sec.  3200.4, including, but not 
limited to the nonpayment of royalties and fees under 30 CFR parts 206 
and 218.


Sec.  3213.18  When is a termination effective?

    If BLM terminates your lease because we determined that you 
violated the requirements of Sec.  3200.4, the termination takes effect 
30 days from the date you receive notice of our determination.


Sec.  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


Sec.  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.


Sec.  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.


Sec.  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) Royalty payments; and
    (d) Compliance with the requirements of Sec.  3200.4.


Sec.  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 Sec.  3251.15;
    (b) Drilling operations--see Sec.  3261.18; and
    (c) Utilization operations--see Sec. Sec.  3271.12 and 3273.19.


Sec.  3214.14  May BLM increase the bond amount above the minimum?

    (a) BLM may increase the bond amount above the minimums referenced 
in Sec.  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

[[Page 41585]]

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.


Sec.  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 the 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 irrevocable letter of credit (see Sec. Sec.  
3214.21 and 3214.22).


Sec.  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.


Sec.  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.


Sec.  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 Sec.  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.


Sec.  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.


Sec.  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.


Sec.  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.


Sec.  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 one year after the date we receive it;
    (d) Be automatically renewable for a period of at least one 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:
    (1) If you do not meet your obligations under the requirements of 
Sec.  3200.4; or
    (2) 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


Sec.  3215.10  When may BLM collect against my bond?

    If you fail to comply with the requirements listed at Sec.  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.


Sec.  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.


Sec.  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.


Sec.  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 which meets our requirements.


Sec.  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.

[[Page 41586]]

Subpart 3216--Transfers


Sec.  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 Sec.  3216.21).


Sec.  3216.11  Where must I file a transfer request?

    File your transfer in the BLM State Office that handles your lease.


Sec.  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 and abandoning wells which exist and are not 
plugged and abandoned at the time of the transfer.


Sec.  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 must also plug 
and abandon any wells drilled or existing on the lease while you held 
your interest.


Sec.  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 forms and fees:

----------------------------------------------------------------------------------------------------------------
                                                                                               Filing  transfer
        Type of transfer           Form  required?          Form No.        Number of copies   fee  (per lease)
----------------------------------------------------------------------------------------------------------------
(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.  *
----------------------------------------------------------------------------------------------------------------
* The applicable transfer fees are in the fee schedule in Sec.   3000.12 of this chapter.

Sec.  3216.15  When must I file my transfer request?

    (a) File a transfer 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.


Sec.  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 application.


Sec.  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.


Sec.  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.


Sec.  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.


Sec.  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.


Sec.  3216.21  When is my transfer effective?

    Your transfer is effective the first day of the month after we 
approve it.


Sec.  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


Sec.  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 title.


Sec.  3217.11  What are communitization agreements?

    Under communitization agreements (also called drilling agreements), 
operators who cannot independently develop separate tracts due to well-
spacing 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.


Sec.  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

[[Page 41587]]

    (d) Provisions for protecting the interests of all parties, 
including the United States.


Sec.  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.


Sec.  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.


Sec.  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


Sec.  3250.10  When do the exploration operations regulations apply?

    (a) The exploration operations regulations contained in this 
subpart and subparts 3251 through 3256 of this part 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.


Sec.  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.


Sec.  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 Sec.  3200.4.


Sec.  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.


Sec.  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 Sec.  3200.1. Submit Form 3200-9, Notice 
of Intent to Conduct Geothermal Resource Exploration Operations, 
together with the information required under Sec.  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 of this part, or geothermal resources utilization, which is 
covered in subpart 3270 of this part.

Subpart 3251--Exploration Operations: Getting BLM Approval


Sec.  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.


Sec.  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;

[[Page 41588]]

    (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 Sec.  3251.15);
    (e) Estimate how much surface disturbance your exploration may 
cause;
    (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.


Sec.  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 Sec.  
3200.4.
    (b) If the proposed operations are located on lands described under 
Sec.  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.


Sec.  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.


Sec.  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;
    (iii) $50,000 for all of your operations on public lands 
nationwide.
    (b) See subparts 3214 and 3215 of this part for additional details 
on bonding procedures.


Sec.  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 Sec.  3200.4.

Subpart 3252--Conducting Exploration Operations


Sec.  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 which ensures 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.


Sec.  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.


Sec.  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 of this part.
    (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.


Sec.  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.


Sec.  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.


Sec.  3252.15  When must I abandon a temperature gradient well?

    When you no longer need it, or when BLM requires you to.


Sec.  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.

[[Page 41589]]

Subpart 3253--Reports: Exploration Operations


Sec.  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 Sec.  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 (see Sec.  
3210.13), or if you are making significant expenditures to extend your 
lease (see Sec.  3208.14), you must send BLM the resulting data under 
the rules of those sections.


Sec.  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


Sec.  3254.10  May BLM inspect my exploration operations?

    BLM may inspect your exploration operations to ensure compliance 
with the requirements of Sec.  3200.4 and the regulations in this 
subpart.


Sec.  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 subpart?

    (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 Sec. Sec.  3213.17 through 3213.19.

Subpart 3255--Confidential, Proprietary Information


Sec.  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 of the Interior 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.


Sec.  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).


Sec.  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.


Sec.  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.


Sec.  3255.14  How will BLM administer information concerning other 
Indian minerals?

    For information concerning Indian minerals not covered by Sec.  
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.


Sec.  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 Sec.  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 Sec.  
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


Sec.  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 Sec.  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.

[[Page 41590]]

Sec.  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 Sec.  3200.5.

Subpart 3260--Geothermal Drilling Operations--General


Sec.  3260.10  What types of geothermal drilling operations are covered 
by these regulations?

    (a) The regulations in subparts 3260 through 3267 of this part 
establish permitting and 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 of 
this part do not address conducting exploration operations, which are 
covered in subpart 3250 of this part, or geothermal resources 
utilization, which is covered in subpart 3270 of this part.


Sec.  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 Sec.  3200.4.


Sec.  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


Sec.  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 Sec.  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.


Sec.  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 (Sec.  3261.12);
    (3) A complete drilling program (Sec.  3261.13); and
    (4) An acceptable bond (Sec.  3261.18).
    (b) Do not start any drilling operations until after BLM approves 
the permit.


Sec.  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.


Sec.  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.


Sec.  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 permit or Sundry Notice.


Sec.  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:

[[Page 41591]]

    (1) Submit the operations plan before the drilling permit 
application and drilling program to allow BLM time to comply with 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.


Sec.  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 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.


Sec.  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.


Sec.  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 of this part for additional details 
on bonding procedures.


Sec.  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 Sec.  3200.4.


Sec.  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 Sec.  
3200.4.
    (b) If another Federal agency manages the surface of your lease, we 
will consult with them 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 we may require additional information.
    (e) We will check your drilling permit for compliance with the 
requirements of Sec.  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.


Sec.  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.


Sec.  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 Sec.  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


Sec.  3262.10  What operational requirements must I meet when drilling 
a well?

    (a) When drilling a well, you must keep the well under control at 
all times by:
    (1) Conducting training during your operation to maintain the 
capability of your personnel to perform emergency procedures quickly 
and effectively;
    (2) Using properly maintained equipment; and
    (3) 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 
Sec.  3200.4.


Sec.  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.

[[Page 41592]]

    (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 you to.
    (e) BLM may require you to give us a contingency plan showing how 
you will protect public health and safety, property, and the 
environment.


Sec.  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.


Sec.  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.


Sec.  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 Sec.  3264.11 for information reporting requirements.

Subpart 3263--Well Abandonment


Sec.  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.


Sec.  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 
Sec.  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.


Sec.  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 Sec.  
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 
Sec.  3263.11 within 48 hours after we give oral approval.


Sec.  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.


Sec.  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.


Sec.  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 Sec.  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


Sec.  3264.10  What must I submit to BLM when 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.


Sec.  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 Sec.  3262.14);
    (5) Copies of all mechanical, flow, reservoir, and other test data; 
and
    (6) 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

[[Page 41593]]

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.


Sec.  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 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.


Sec.  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.


Sec.  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


Sec.  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 Sec.  3200.4.
    (b) BLM may inspect all of your maps, well logs, surveys, records, 
books, and accounts related to your Federal drilling operations.


Sec.  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, maps;
    (b) Records, books, and accounts related to your Federal drilling 
operations;
    (b) Directional surveys;
    (c) Records pertaining to casing type and setting;
    (d) Records pertaining to formations penetrated;
    (e) Well test results;
    (f) Records pertaining to characteristics of the geothermal 
resource;
    (g) Records pertaining to emergency procedure training; and
    (h) Records pertaining to operational problems.


Sec.  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 
Sec. Sec.  3213.17 through 3213.19.

Subpart 3266--Confidential, Proprietary Information


Sec.  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.


Sec.  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 Sec.  
2.13(c) of this title.


Sec.  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


Sec.  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 
Sec.  3200.4 for your approved drilling operations. Your request must 
include enough information to explain:
    (1) Why you cannot comply with the requirements of Sec.  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.


Sec.  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 Sec.  3200.5.

Subpart 3270--Utilization of Geothermal Resources--General


Sec.  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.

[[Page 41594]]

    (b) The utilization regulations in subparts 3270 through 3279 of 
this part do not address conducting exploration operations, which is 
covered in subpart 3250 of this part, or drilling wells intended for 
production or injection, which is covered in subpart 3260 of this part.


Sec.  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;
    (c) Result in the maximum ultimate recovery;
    (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 Sec.  3200.4.


Sec.  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


Sec.  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.


Sec.  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.


Sec.  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 Sec.  3251.14 or 
Sec.  3273.19. See subparts 3214 and 3215 of this part 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.


Sec.  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.


Sec.  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.


Sec.  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 Sec.  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?


Sec.  3272.10  What must I submit to BLM in my utilization plan?

    Submit to BLM an application describing:
    (a) The proposed facilities as set out in Sec.  3272.11; and
    (b) The anticipated environmental impacts and how you propose to 
mitigate those impacts, as set out at Sec.  3272.12.


Sec.  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.


Sec.  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;

[[Page 41595]]

    (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 Sec.  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 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 one 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 Sec.  3200.4.
    (e) Finally, you must submit any additional information or data 
that BLM may require.


Sec.  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 Sec.  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.


Sec.  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 of this 
part.)
    (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


Sec.  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 provided in Sec.  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 Sec.  3272.14) and your site license. 
The facility operator must apply for the license.


Sec.  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.


Sec.  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 leased lands 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.


Sec.  3273.13  What lands are not available for geothermal site 
licenses?

    BLM will not issue site licenses for lands that are not leased or 
not available for geothermal leasing (see Sec.  3201.11).


Sec.  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.


Sec.  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 Sec.  3273.19);
    (e) The first year's rent, if applicable (see Sec.  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.


Sec.  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 Sec.  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.


Sec.  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 tenth year and every ten years after that.


Sec.  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.


Sec.  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 of this

[[Page 41596]]

part. BLM may increase the required bond amount. See subparts 3214 and 
3215 of this part 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 of this part in an amount BLM will specify.
    (c) The bond's terms must cover compliance with the requirements of 
Sec.  3200.4.
    (d) Until BLM approves your bond, do not start construction, 
testing, or any other activity that would disturb the surface.


Sec.  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 Sec.  3200.4.


Sec.  3273.21  What are my obligations under the site license?

    As the facility operator, you:
    (a) Must comply with the requirements of Sec.  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.


Sec.  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.


Sec.  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.


Sec.  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 Sec.  3270.11; or
    (2) Do not comply with the requirements of Sec.  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.


Sec.  3273.25  When may I relinquish my site license?

    You may relinquish your site license by sending BLM a written 
notice requesting relinquishment for review and approval. We will not 
approve the relinquishment until you comply with Sec.  3273.21.


Sec.  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 Sec.  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


Sec.  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.


Sec.  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.


Sec.  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 Sec.  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 Sec. Sec.  3275.14 and 3275.15.)
    (e) If we need any further information to complete our review, we 
will contact

[[Page 41597]]

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.


Sec.  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


Sec.  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.


Sec.  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 Sec.  3200.4.


Sec.  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 Sec.  3200.4.


Sec.  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 Sec.  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 Sec.  
3275.17).


Sec.  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.


Sec.  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 
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 of 2 percent 
or better of reading;
    (3) If the meter measures steam flowing at less than 100,000 lbs/hr 
on a monthly basis, it must have an accuracy of 4 percent 
or better of reading;
    (4) If the meter measures water flowing at more than 500,000 lbs/hr 
on a monthly basis, it must have an accuracy of 2 percent 
or better of reading;
    (5) If the meter measures water flowing at 500,000 lbs/hr or less 
on a monthly basis, it must have an accuracy of 4 percent 
or better of reading;
    (6) If the meter measures heat content, it must have an accuracy of 
4%, 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 5 percent or better.
    (c) We may modify these requirements as necessary to protect the 
interests of the United States.


Sec.  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

[[Page 41598]]

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;
    (2) You must calibrate meters measuring steam or hot water flow 
with a turbine, vortex, ultrasonics, or other linear devices, every six 
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.


Sec.  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 days of 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 three working days.


Sec.  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.


Sec.  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.


Sec.  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 Sec.  
3277.12.


Sec.  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


Sec.  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.


Sec.  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.


Sec.  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

[[Page 41599]]

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 which 
documents the total number of kwhs delivered to the sales point during 
the month, or monthly reporting period if it is not a calendar month, 
and the number of kwhs delivered during diurnal and seasonal pricing 
periods; and
    (4) Any other information we may require.


Sec.  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 
Sec.  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.


Sec.  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.


Sec.  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


Sec.  3277.10  When will BLM inspect my operations?

    BLM may inspect all operations to ensure compliance with the 
requirements of Sec.  3200.4. You must give us access during normal 
operating hours to inspect all facilities utilizing Federal geothermal 
resources.


Sec.  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.


Sec.  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 
Sec. Sec.  3213.23 through 3213.25).

Subpart 3278--Confidential, Proprietary Information


Sec.  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.


Sec.  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 Sec.  
2.13(c) of this title.


Sec.  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


Sec.  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 Sec.  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.


Sec.  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 Sec.  3200.5.
    2. 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

[[Page 41600]]

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?
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 I 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 subpart be appealed?

    Authority: 30 U.S.C. 1001-1028 and 43 U.S.C. 1701 et seq.

Subpart 3280--Geothermal Resources Unit Agreements--General


Sec.  3280.1  What is the purpose and scope of this part?

    (a) The purpose of this part is to provide holders of Federal and 
non-Federal 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 
meeting 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.


Sec.  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 time frame 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

[[Page 41601]]

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 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 and 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 a lease committed to the unit agreement.
    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.


Sec.  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 
(whether or not any part of the geothermal reservoir, field, or like 
area, is subject to any unit agreement), lessees thereof 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.


Sec.  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 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.


Sec.  3280.5  May BLM require the modification of lease requirements in 
connection with the creation and operation of a unit agreement?

    (a) BLM may, in its discretion and 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, with the 
consent of the lessees, 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.


Sec.  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.


Sec.  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


Sec.  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 Sec. Sec.  3281.2 through 3281.6. 
Procedures for approving the unit agreement are set forth in Sec. Sec.  
3281.7 through 3281.17.


Sec.  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 leases, 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;

[[Page 41602]]

    (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.


Sec.  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.


Sec.  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 Sec.  3281.3. The size of 
the unit area may affect the minimum initial unit obligation 
requirements (see Sec.  3281.15(b)).


Sec.  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 any application that includes lands already in 
an approved unit area.


Sec.  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 Sec.  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.


Sec.  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 Sec. Sec.  3281.8 and 
3281.9);
    (b) The unit agreement (see Sec.  3281.15);
    (c) The map required by Sec.  3281.2(a)(2), if any modifications 
have occurred since the unit area was designated;
    (d) The list required by Sec.  3281.2(a)(3) indicating whether each 
lease or tract is committed to the unit agreement; and
    (e) The plan of development.


Sec.  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.


Sec.  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 
Sec.  3281.8).
    (b) A majority interest of owners of any single lease has authority 
to commit the lease to a unit agreement.


Sec.  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.


Sec.  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 Sec.  3202.10 of 
this chapter); and
    (2) Demonstrate sufficient control of the unit area (see Sec.  
3281.10).
    (b) A unit operator is not required to have an interest in the unit 
area.


Sec.  3281.12  Who designates the unit operator?

    The owners of mineral 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 Sec.  3281.11.


Sec.  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 Sec.  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 Sec. Sec.  3281.14 and 3281.15).


Sec.  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);

[[Page 41603]]

    (4) Include procedures for amending the unit agreement;
    (5) State the effective date and term of the unit, which is 
typically 5 years;
    (6) Incorporate the minimum initial unit obligations, as specified 
in Sec.  3281.16;
    (7) State that BLM may require a modification of the rate of 
resource 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 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.


Sec.  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 time frame 
specified in the unit agreement, at least one unit well;
    (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 Sec.  
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.


Sec.  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.


Sec.  3281.17  What information must be provided in the Plan of 
Development?

    (a) The Plan of Development must state the types of and time frames 
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 
time frame for the completion of these wells, may be the first phase. A 
second phase may include drilling of observation or slim 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 lease one unit well.


Sec.  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 time frames for their completions 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.


Sec.  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 
Sec. Sec.  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.


Sec.  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


Sec.  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.


Sec.  3282.2  When must the unit operator have a participating area 
approved?

    You must have an established BLM-approved participating area to 
allocate production and royalties before beginning commercial 
operations under a unit agreement to allocate production within the 
unit.


Sec.  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:
    (a) 60 days after receiving BLM's determination identified in Sec.  
3281.15(a)(3) that a unit well will produce or utilize in commercial 
quantities; or

[[Page 41604]]

    (b) 30 days before the initiation of commercial operations, 
whichever occurs earlier.


Sec.  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 Sec.  
3282.5);
    (b) The information required in Sec.  3281.2(a)(2) and (3) for the 
lands in the proposed participating area; and
    (c) Any other information BLM may require.


Sec.  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 Sec.  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.


Sec.  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 Sec.  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.


Sec.  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 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.


Sec.  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.


Sec.  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.


Sec.  3282.10  When will unleased Federal lands in a participating area 
receive a production allocation?

    (a) Unleased Federal lands within a participating area that are 
available for leasing are treated as follows:
    (1) 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.
    (2) The unit operator must pay royalty to the United States based 
on a rate not less than the highest royalty rate for any Federal lease 
in the participating area.
    (b) If 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 will not receive 
an allocation of production (see Sec.  3201.11 of this chapter).


Sec.  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.


Sec.  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 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.

Subpart 3283--Modifications to the Unit Agreement


Sec.  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

[[Page 41605]]

    (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.


Sec.  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.


Sec.  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 Sec.  3282.3; and
    (c) May terminate the participating area contraction revision when 
we find it necessary in the public interest.


Sec.  3283.4  When may I 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 Sec. Sec.  3281.2 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.


Sec.  3283.5  When will BLM periodically review unit agreements?

    BLM will periodically review all unit agreements to determine 
compliance with Sec.  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.


Sec.  3283.6  What is the purpose of BLM's periodic review?

    (a) BLM must review all unit agreements to determine whether any of 
the 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 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.
    (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 land meets the requirements for the extension.


Sec.  3283.7  When may unit operators be changed?

    Unit operators may be changed only with BLM's written approval.


Sec.  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 requirements of Sec.  3281.11;
    (b) Submit to BLM evidence of bonding acceptable under Sec. Sec.  
3214.13 or 3261.18(c) of this chapter, if operations have caused an 
adverse impact on Federal lands; and
    (c) File with BLM written acceptance of the unit terms and 
obligations.


Sec.  3283.9  When is a change of unit operator effective?

    The change is effective when BLM approves the new unit operator in 
writing.


Sec.  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 Sec.  3215.14 of this 
chapter).
    (b) The new unit operator is responsible for all unit duties and 
obligations after BLM approves the change.


Sec.  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.


Sec.  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

[[Page 41606]]

and successors in interest to Federal geothermal leases.

Subpart 3284--Unit Operations


Sec.  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:

------------------------------------------------------------------------
                                            Operational      Orders or
                                             standards     instructions
            Type of operation               regulations     regulations
                                             (43 CFR)        (43 CFR)
------------------------------------------------------------------------
Exploration.............................  Sec.   3250.12  Sec.   3250.13
Drilling................................  Sec.   3260.11  Sec.   3260.12
Production or Utilization...............  Sec.   3270.11  Sec.   3270.12
------------------------------------------------------------------------

Sec.  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 part 
3200 of this chapter, unless another person is specifically authorized 
by BLM to conduct drilling (see Sec.  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 Sec. Sec.  3281.9 and 3284.11); and
    (c) Insuring that the Federal Government receives all royalties, 
direct use fees, and rents for activities within the participating 
area.


Sec.  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 
time frame 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 becomes invalid.
    (b) BLM will send the unit operator a written decision confirming 
that the unit agreement is void.


Sec.  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 pursuant 
to Sec.  3282.2, 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 
time frames 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 time frames 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.


Sec.  3284.5  How do unit operations affect lease extensions?

    (a) Once the minimum initial unit obligation is met, lease 
extensions 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 Sec.  3207.7 of this chapter.


Sec.  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) Must operate the well.


Sec.  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.


Sec.  3284.8  May a unit have multiple operators?

    A unit may have only one operator.


Sec.  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.


Sec.  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

[[Page 41607]]

compensate for drainage of geothermal resources from unitized land by 
wells on land not subject to the unit agreement (see Sec. Sec.  3210.22 
and 3210.23 of this chapter).


Sec.  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.


Sec.  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 Sec. Sec.  3281.1(a)(2) and (3)) 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


Sec.  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.


Sec.  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


Sec.  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''.

WITNESSETH:

    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 below-defined Unit Area, 
and agree severally among themselves as follows:

Article I--Enabling Act and Regulations

    1.1 The Act and all valid pertinent 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 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 non-Federal 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.
    (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.

[[Page 41608]]

    (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 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 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 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

[[Page 41609]]

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 his 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 paying 
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 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 paying 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.

[[Page 41610]]

    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 
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 Any 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

[[Page 41611]]

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 Rentals are payable on Federal leases on or before the 
anniversary date of each lease year.
    15.3 Beginning with the lease year commencing on or after ------
-- and for each lease year thereafter, rental payments for lands of 
the United States subject to this Agreement shall be made on the 
following basis: An annual rental in the amount prescribed in 
unitized Federal leases, in no event creditable against production 
royalties, shall be paid for each acre or fraction thereof that is 
not within a Participating Area.
    15.4 Rental 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.
    15.5 Settlement for royalty interest shall be made by Working 
Interest Owners responsible under existing contracts, laws, and 
regulations, or by the Unit Operator, on or before the last day of 
each month for Unitized Substances produced during the preceding 
calendar month.
    15.6 Royalty due the United States shall be computed as provided 
in the operating regulations, and paid in value as to all Unitized 
Substances, on the basis of the amounts thereof allocated to 
unitized Federal land as provided herein, at the royalty rate or 
rates specified in the respective Federal leases.
    15.7 Nothing herein shall operate to relieve the lessees of any 
land from their respective lease obligations for the payment of any 
rental, or royalty due under their leases.

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 therein, or as 
extended by law. 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.

[[Page 41612]]

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 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:

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Name:

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[[Page 41613]]

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Title:

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Date:------------------------------------------------------------------

Subpart 3287--Relief and Appeals


Sec.  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 the suspension and any requirements the unit operator must meet 
for the suspension to remain in effect.


Sec.  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, which BLM determines are beyond the 
reasonable control of the unit operator, such as agency time frames 
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.


Sec.  3287.3  How does a suspension of unit obligations affect the 
terms of the unit agreement?

    (a) At BLM's discretion, we 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 changes regarding the agreement.


Sec.  3287.4  May a decision made by BLM under this subpart be 
appealed?

    A unit operator or any other adversely affected person may appeal a 
BLM decision regarding unit administration or operations in accordance 
with Sec.  3200.5 of this chapter.

[FR Doc. 06-6220 Filed 7-20-06; 8:45 am]
BILLING CODE 4310-84-P