The Pit River Tribe, the Native Coalition for Medicine Lake Highlands Defense, and the Mount Shasta Bioregional Ecology Center (collectively Pit River) sued the U.S. Forest Service, Bureau of Land Management and Department of Interior (collectively Agencies) alleging that the procedures followed by the Agencies in extending certain leases in the Medicine Lake Highlands and in approving the construction of a geothermal plant by Calpine Corporation,[1] violated the National Environmental Policy Act (NEPA),[2] the National Historical Preservation Act (NHPA),[3] the National Forest Management Act (NFMA),[4] the Administrative Procedure Act (APA),[5] and the Agencies' fiduciary obligations to Native American tribes. The district court granted summary judgment in favor of the Agencies[6] and Pit River appealed. The Ninth Circuit reversed concluding that the Agencies did not take a "hard look" at the environmental consequences of the 1998 lease extensions and failed to adequately consider the no-action alternative.

The lawsuit stemmed from Calpine's efforts to build a geothermal power plant at Fourmile Hill near Medicine Lake, California. The Secretary of Interior designated the Medicine Lake Highlands as the Glass Mountain Known Geothermal Resource Area (Resource Area) pursuant to the Geothermal Steam Act of 1970,[7] an act that allows the federal government to "issue leases for the development and utilization of geothermal steam" on federal land in national forests.[8] In 1973, the Department of Interior (DOI) issued an environmental impact statement (EIS) for the nationwide application of the Geothermal Steam Act. With the exception of three sites, the 1973 EIS did not discuss implications for specific locations, but provided a tiered environmental review with specific details to be "identified, evaluated, and described in the environmental analysis record prepared for each lease area prior to any leasing action."[9] The EIS also admitted that issuing geothermal leases "may constitute [] major Federal action significantly affecting the quality of the human environment" that would require subsequent EISs.[10] In addition, the DOI stated in the EIS that further environmental evaluation would be made prior to construction of power plants and related facilities and added that if there are "significant potentially adverse environmental impacts not previously considered, an additional environmental statement may be necessary."

In 1981, the Bureau of Land Management (the Bureau) and Forest Service released an environmental assessment (EA) to decide whether to allow geothermal leasing and "casual use" exploration of the Resource Area. It did not discuss cultural or tribal impacts of the proposed leasing, but mentioned that one of the directives for the Land Management Plan was to develop resources when "it is compatible with other uses" and with "special stipulations applied to sensitive areas."[11] The 1981 EA also acknowledged that while "a decision to lease carries with it the right to develop a discovered resource, subject to the limitations of the lease," there were also environmental safeguards throughout the process and that EAs and EISs would be required at certain stages.[12]

In 1984, the Bureau and Forest Service jointly issued a Supplemental EA tiered to the 1973 EIS that for the first time considered the potential effects of leasing activity on cultural, recreational, and spiritual aspects of certain features in the Medicine Lake area. It stated that the area remained culturally significant to modern-day Native Americans and that the American Indian Religious Freedom Act of 1979 "requires ongoing consultation with Native American organizations and individuals" in order to protect sites important to cultural traditions.[13] The EA acknowledged that any surface-disturbing activity "will disturb and/or destroy the patterning of surface and subsurface artifacts . . . [and] have the potential to adversely affect the spiritual significance of natural features important to Native American groups."[14] It also acknowledged the potential historical significance of the area, but concluded that "[n]omination and/or acceptance [to the National Register of Historic Places] is, however, no obstacle to a site's removal by scientific excavation."[15] To address these potential impacts the Bureau included a table of mitigating measures. The EA still required that the lessee prepare "an operating plan for subsequent activities in exploration, development and operation of the lease" that would include additional environmental analysis and approval.[16]

After mailing the 1984 EA to approximately 100 individuals and organizations and receiving only four letters in response, the Bureau adopted a Record of Decision (ROD) in 1985 in which it leased 41,500 acres in the Resource Area. It concluded that geothermal development would have no significant adverse impacts on the area and so an EIS was not necessary.

In June 1988, the Bureau issued the leases at issue in this case to Calpine's predecessor in interest, Freeport-McMoran Resource Partners Limited Partnership, without any additional environmental or cultural impacts analysis. The ten-year leases gave an exclusive right to develop geothermal resources on the land subject to stipulations regarding existing regulations, water use and restrictions in particular affected areas. The lease also included a restriction forbidding surface-disturbing activities during the nesting season of the Goshawk. The Bureau did not complete an EA or EIS or consult interested tribes prior to issuing these leases.

Calpine did little during the initial lease term. In 1995, it submitted a plan of operation for a proposed Fourmile Hill Goethermal Exploration Project (Exploration Plan) in the same general location of the later-proposed power plant. The agencies drafted and distributed an EA in December 1995 and, after receiving little public comment, issued a Finding of No Significant Impact (FONSI) and approved the project in April 1996.

Calpine submitted a plan in September 1995 for a geothermal power plant: the Fourmile Hill Geothermal Development Project (Fourmile Hill Plant). The agencies began preparing an EIS in June 1996 and, after commissioning an ethnographic report to identify cultural resources for the local tribes in the area, they issued a draft EIS for the Fourmile Hill Plant. The public and the Pit River Tribe highly criticized the draft EIS.

In May 1998, the Bureau extended Calpine's leases for five more years without any further environmental review. In September 1998, the agencies issued a final EIS for the Fourmile Hill Plant (1998 EIS) that included different configurations for the facilities. Although the EIS mentioned a "no-action" alternative, it was rejected because "it would not meet the purpose and need for the proposed action," namely "to develop the geothermal resource on Calpine's Federal geothermal leases."[17]

In July 1999, the Keeper of the National Register of Historical Places issued a report determining that the Medicine Lake caldera was eligible for listing in the National Register and calling for studies of other sites in the area.

On May 31, 2000, the agencies issued a ROD approving the Fourmile Hill Plan, stating that the leases they had issued to Calpine were a "vested property interest" that superceded an Executive Order on Indian Sacred Rights.[18] However, as part of the mitigation measures, the Bureau placed a moratorium on further development in the Resource Area for a minimum of five years "until an analysis of actual impacts of geothermal development can be completed by the authorizing agencies." This resulted in the Bureau suspending operation and production in multiple leases in the Resource Area.

Pit River appealed the ROD to the Interior Board of Land Appeals and the Regional Forester for the Pacific Southwest Region. Both appeals were denied and the Bureau unilaterally lifted the moratorium stating that "the energy situation in the country, and particularly in the West, ha[d] changed."[19]

In May 2002, the Bureau extended Calpine's lease for another forty years with no additional environmental analysis. In June, Pit River filed suit in the Eastern District of California and on February 17, 2004, the district court entered summary judgment for the agencies on all claims.[20]

The Ninth Circuit reviewed the district court's decision de novo, applying the same standards as the district court.[21] The court reviewed the agencies' decision under the arbitrary and capricious standard of the Administrative Procedure Act (APA).[22]

Prior to addressing the merits of the case, the court answered two gateway questions: (1) whether Pit River had Article III standing to raise the claims; and (2) whether 2005 amendments to the Geothermal Steam Act affected the justiciability of Pit River's claims.[23]

In regards to the first question, the court initially identified the three constitutional standing requirements: injury in fact, causation and redressability.[24] The court found that Pit River adequately demonstrated injury in fact, citing Pit River's testimony that the tribe had used the lands in question for cultural and religious ceremonies for "countless generations" and a 1996 ethnographic report commissioned by the agencies that stated that these areas were "traditional cultural properties of . . . the Pit River Nation."[25]

Having determined that there was injury in fact, the court stated that the causation and redressability requirements were relaxed.[26] Causation was not challenged, but the agencies asserted that the 1998 lease extensions were no longer justiciable because they were replaced by the 2002 lease extensions, thereby make them not redressable. The court concluded that it could still provide effective relief for Pit River either by invalidating the leases as of 1998, thereby invalidating the 2002 extensions, or by enjoining any surface-disturbing activity until the agencies complied with NEPA. Finally, the court rejected the agencies' argument that the preparation of the 1998 EIS foreclosed relief on Pit River's claims.

In regards to the 2005 amendments to the Geothermal Steam Act, the court determined that they did not render Pit River's claims moot by eliminating the Bureau's discretion to deny lease extensions. Prior to 2005, the Act stated that the agencies "may" extend any geothermal lease for successive 5-year periods.[27] The 2005 amended Act states that "[t]he Secretary shall extend the primary term of a geothermal lease for 5 years" if the lessee satisfies work commitment requirements of the lease and makes annual payments.[28] In other words, if these two conditions were met, then "the statute eliminated the Bureau's discretion in extending geothermal leases . . . ."[29] Since NEPA's EIS requirement only applies to discretionary federal decisions,[30] Pit River's relief would be foreclosed if the 2005 amendment was retroactive.

The court then set out to determine whether the amendments applied retroactively. It adopted the test from Landgraf v. USI Film Products:[31] if Congress expressly states that an amendment applies retroactively then the matter is settled. However, absent an express statement, the court must determine "whether the new statute would have retroactive effect, i.e., whether it would impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transaction already completed."[32] If so, the court presumes against applying the statute retroactively.

Applying Landgraf, the Ninth Circuit determined there was no such express statement. Furthermore, applied retroactively, the amendment would impose new duties on Calpine including new minimum work and payment requirements. Therefore, the court presumed against applying the amendments retroactively the case was not moot.

The court then turned to the merits of the case addressing the claims under NEPA and the NHPA. Because the statute of limitations had run on the 1988 leasing decision, Pit River claimed that the agencies violated NEPA, the NHPA and their fiduciary trust obligations to the Pit River Tribe by failing to complete an EIS prior to extending the lease in 1998. The agency argued that its environmental analysis under the 1973 EIS, 1981 EA and 1984 EA were adequate to cover the 1998 extension or, in the alternative, that the court could not provide adequate relief because the preparation of the post-lease-extension 1998 EIS that analyzed effects of the power plant already provided relief.

The first question the court addressed was whether under NEPA the agencies had taken the requisite "hard look" at the environmental consequences of its decision.[33] This "hard look" had to include consideration of a "no action" alternative prior to the agency selling leases that constitute "an irreversible and irretrievable commitment of federal forest land . . . that could have a significant impact on the environment."[34] If the agencies did not conduct such an analysis, it foreclosed the possibility of considering a reasonable range of alternatives.[35] The court cited Conner v. Burford,[36] a case in which federal agencies sold oil and gas leases, some of which did not allow the government to later preclude surface-disturbing activities:[37]

[A]fter the lease is sold the government no longer has the ability to prohibit potentially significant inroads on the environment. By relinquishing the "no action" alternative without the preparation of an EIS, the government subverts NEPA's goal of insuring that federal agencies infuse in project planning a thorough consideration of environmental values. . . . [The "no action" alternative] analysis would serve no purpose if at the time the EIS is finally prepared, the option is no longer available.[38]

However, when the agency does not irretrievably commit resources, an EIS is not required.[39]

The question was then whether the Agencies irretrievably committed resources when they issued the leases and 1998 extensions or whether they reserved the right to preclude surface-disturbing activities entirely. The court determined that the 1998 lease extensions only reserved the Agencies' right to limit development "when not inconsistent with lease rights granted," and not the absolute right to deny exploitation of the resources.[40] Although there were some absolute limitations on surface-disturbances in sections of the leases for certain periods of the year, that was not enough.

The court supported its decision with the Agencies' own interpretations of the leases. According to a 1999 briefing paper, although the agencies were considering a no action alternative, DOI Solicitors advised that "denial of the Projects would be a taking of private property rights associated with the leases. . . . The decision makers would like to have the authority to deny the geothermal Projects, which may require compensation to the leaseholders for the taking."[41] The Court determined that this language demonstrated that the agencies "did not have the authority to deny the projects."[42] The court also examined the ROD for Fourmile Hill Plant and its analysis that, although the surface-disturbance activities would have adverse effects on sacred sites under Executive Order 13007, it was not possible to deny the project without also denying Calpine's vested rights as a leaseholder.

The court then rejected the argument that the 1973 programmatic EIS adequately addressed the potential impact of leasing. Although the court held in 1978 that the 1973 EIS was adequate for "casual use" exploration,[43] that case dealt with casual leases that did not constitute "irreversible and irretrievable commitments" of resources for development.[44] In addition, the ruling was based on the assumption that the leasing program would not proceed without "fully considering [the] obligation to comply with the EIS requirements of NEPA."[45]

The court also found the 1981 and 1984 EAs insufficient because they dealt only with the issue of leases and casual use exploration and not actual geothermal development.

The court also rejected the argument that the 1998 lease extensions were just a continuation of the status quo that did not require a separate assessment.[46] If it were not for the extension in 1998, Calpine would have lost its right to develop the leased property and its ability to move ahead with the construction of the Fourmile Hill Plant. Therefore, agencies were required to conduct an EIS prior to extending the 1998 leases.

Next the court addressed Calpine's argument that the 1998 EIS for the Fourmile Hill Plant "mooted" Pit River's claim because its preparation was the relief the plaintiff sought. The court reframed the issue as one of standing and, more specifically, redressability. The 1998 EIS did not provide the remedy Pit River sought because it was an ex post facto environmental review that could not include the no-action remedy necessary in the required review of a "'maximum range of options'" in an EIS.[47] The NEPA procedures must be integrated into the decision-making process "as close as possible to the time the agency is developing or is presented with a proposal."[48] The court cited two of its earlier decisions. In Save the Yaak Committee v. Block, the court held that the Forest Service's completion of an EA two years after starting construction on a road was untimely and "seriously imped[ed] the degree to which their planning and decisions could reflect environmental values."[49] In Metcalf v. Daley the court held that the issuance of a FONSI for hunting of gray whales was insufficient because the EA was prepared after the government agencies had already entered into two agreements with the Makah Tribe.[50] This was a "irreversible and irretrievable commitment of resources" prior to environmental review.[51]

The court in this case found even more reason, as compared to Metcalf and Save the Yaak, to hold that the later environmental review was insufficient. Not only was the EIS untimely, but it failed to address the issue of whether the land should be leased at all and only discussed configurations of the proposed power plant. The no action alternative was not considered because it was inconsistent with the purpose of the project, namely developing the geothermal resources. This did not fulfill the hard look requirement of NEPA.

Therefore, the Ninth Circuit held that "the 1998 lease extensions-and the entire Fourmile Hill Plant approval process for development of the invalid lease right-violated NEPA."[52]

The Pit River Tribe also claimed that the agencies violated the NHPA by not identifying traditional cultural properties prior to the extension of the leases. The district court found that the 1998 EIS provided all the relief sought or, in the alternative,[53] that the NHPA did not apply to the lease extension because the extension simply maintained the status quo. The court rejected these decisions. "NHPA is similar to NEPA except that it requires consideration of [the action's effects on] historical sites, rather than the environment."[54] If the agency determines an action may affect the historic values of an Indian tribe, the agency must give the tribe an opportunity to participate[55] early in the undertaking process.[56] The court held that, similar to the claims under NEPA, the lease extensions were a federal undertaking requiring review and that an ex post facto review could not cure the earlier violation because it did not address the no action alternative. Therefore, the court held that the agencies violated NHPA.

Lastly, the court held that the agencies violated their fiduciary duty to the Pit River Tribe. It cited two earlier decisions in which it held that the federal government owes a fiduciary duty to the tribes[57] and that this duty includes ensuring compliance with regulations and statutes not specifically aimed at protecting the tribes.[58] Because the court decided that the agencies violated NEPA and the NHPA, it concluded that the agencies also violated their minimum fiduciary duty to the tribe. However, the court did not reach the question of "whether the fiduciary obligations of federal agencies to Indian nations might require more."[59]

In conclusion, the Ninth Circuit held that the agencies violated NEPA, NHPA, and their fiduciary duty to the Pit River tribe for failing to conduct an EIS prior to the 1998 lease extensions. Hence, the court ordered that the five year extensions and the subsequent forty-year extensions be undone and the rest of the project approval process be set aside. The court did not reach Pit River's claims for actions subsequent to the 1998 extensions including the 2000 agency decisions, the NFMA claims, and the APA claim related to the rescission of the development moratorium. The court reversed the district court's summary judgment in favor of the agencies and directed the district court to enter summary judgment in favor of Pit River.