The Ninth U.S. Circuit Court of Appeals has blocked development of a geothermal power plant on federal land in Siskiyou County because federal agencies did not complete an environmental review of leases for the land underlying the proposed power plant.

The Ninth Circuit overturned a decision by Eastern District of California Judge David Levi that an environmental impact statement (EIS) on the proposed power plant adopted in 1998 was adequate. The unanimous three-judge appellate panel determined that the power plant would not have been possible without the extension of leases to Calpine Corporation. Yet the leases were extended without environmental study.

“[T]he agencies should have prepared an EIS at the time of the 1998 lease extensions. To allow the later 1998 EIS to compensate for the nonexistent earlier review would violate both federal regulations and our case law,” Judge J. Clifford Wallace wrote for the Ninth Circuit.

At issue in the litigation is development of geothermal resources in the Medicine Lake Highlands, approximately 30 miles east of Mt. Shasta. The Pit River, Shasta and Modoc Indian tribes consider the area sacred and have conducted ceremonies at Medicine Lake for many generations. They oppose development in the area.

In 1973, the Department of the Interior issued a programmatic EIS for implementation of the Geothermal Steam Act. The document provided for subsequent, or tiered, review of specific projects. Eight years later, the Bureau of Land Management (BLM) and U.S. Forest Service issued an environmental assessment (EA) for “casual” exploration of a portion of the Medicine Lake Highlands. Finally, in 1984, the agencies issued a supplemental EA for leasing part of the resource area.

In 1988, the BLM entered into two 10-year leases covering 41,000 acres with Freeport-McMoran Resource Partners. The leases granted the company the right to “drill for, extract, produce, remove, utilize, sell and dispose of the geothermal resources.” The leases were granted without a review of environmental or cultural impacts.

Not much happened until Freeport-McMoran assigned the leases to Calpine, which, in 1995, submitted a plan for a geothermal exploration project and development of 49.9-megawatt power plant about three miles from Medicine Lake. Calpine’s Fourmile Hill Geothermal Development Project would involve a power plant and production wells on about 50 acres, and a 125-foot-wide, 24-mile-long corridor for a 230-kilovolt transmission line.

While the federal agencies were preparing an EIS for the Fourmile Hill project, the BLM extended Calpine’s lease for another five years in May 1998. As with the original 1988 leases, there was no environmental review. Four months later, the agencies issued a final EIS for the power plant project. The chosen alternative was found to have the least impact on traditional cultural values and uses.

The following year, the keeper of the National Register of Historic Places determined that the Medicine Lake caldera was eligible for listing in the National Register. Also, a briefing paper prepared by federal officials recommended the power plant be rejected because no mitigation could offset significant impacts to “the very nature and intrinsic value of the Medicine Lake area.”

Nevertheless, the federal agencies approved the power plant in May 2000, stating that Calpine had the right under the leases to develop the resources. Indian tribes and environmentalists appealed to the Interior Board of Land Appeals and the Regional Forester of the Pacific Southwest Regions, but both upheld the project approval. The opponents then sued, arguing that federal agencies violated the National Environmental Policy Act, the National Historic Preservation Act and other laws. Judge Levi issued summary judgment for the federal agencies. The Ninth Circuit, however, was not satisfied with the process.

The project opponents challenged the review of the 1998 lease extensions. The agencies argued that the 1973, 1981 and 1984 studies were sufficient, and, alternatively, that the 1998 EIS on the power plant cured any problems.

The Ninth Circuit focused on the rights granted under the leases. Citing documents of the federal agencies, the court found that the leases “grant to Calpine an absolute right to develop, subject only to procedural regulatory restrictions.” In fact, Interior Department attorneys advised in 1999 that denying the power plant project would be a taking of private property.

“The lease language, and the agencies’ interpretation of the lease language, make clear that the ‘critical decisions’ here occurred when the agencies extended absolute development rights in 1988 and again in 1998,” Judge Wallace wrote.

The environmental reviews conducted in 1973, 1981 and 1984 were insufficient, and the actual leases were inconsistent with those reviews anyway, the court ruled.

The agencies argued that the 1998 extensions only maintained the status quo. But the court rejected that argument, finding that without the extensions, “Calpine owned nothing.”

Calpine argued that preparation of the EIS on the power plant project mooted the claims over environmental review of the lease extensions — an argument Levi accepted and the Ninth Circuit rejected.

“Federal regulations explicitly, and repeatedly, require that environmental review be timely,” Wallace wrote. “[T]he tardy EIS did not address the issue that should have been addressed in 1988 and 1998: whether the land in question should be leased at all. The 1998 EIS simply did not consider the no-action alternative.”

Thus, the court ruled, the lease extensions violated NEPA. Because there was no consideration of historic sites in connection with the extensions, the agencies also violated the Historic Preservation Act, the court ruled.

The court undid the 1998 lease extensions and a subsequent 40-year extension, as well as approval of the power plant project.

The Case:
Pit River Tribe v. United States Forest Service, No. 04-15746, 06 C.D.O.S. 10253, 2006 DJDAR 14683. Filed November 6, 2006.
The Lawyers:
For Pit River Tribe: Deborah Sivas, Earthjustice, (650) 723-0325.
For the Forest Service: Thomas Sansonetti, Department of Justice, (212) 514-2000.
For Calpine: Robert Maynard, Perkins Coie, (208) 387-7508.