I. GEOTHERMAL PERMITTING BLM EXPLORATION REGULATIONS

I. GEOTHERMAL PERMITTING BLM EXPLORATION REGULATIONS Definitin f explratin peratins (43 CFR 3200.1) Any activity that: requires physical presence n the land may cause damage t thse lands beynd casual use (see 43 CFR 3250.10) Must relat[e] t the search fr [indirect] evidence f gethermal resurces N need fr lease right: Permits NOI t cnduct explratin including TG well drilling can be granted t lessees r nn-lessees Anyne can prpse and btain an apprved NOI fr gethermal explratin peratins n any public lands pen t leasing Even if lands are leased t anther party Explratin Activities Explratin peratins DO Include: Cnstructin f Rads & Trails Crss-Cuntry Transit Gephysical Operatins Gravity Magnetics Seismic explratin Gechemical Sampling Drilling Temperature Gradient Hles --N depth limit but BLM may cnditin, deny, r require temp/pressure mnitring, dwnhle Drilling f Sht-hles Cre-Drilling But Observatin wells, aka slim hles, are nt Explratin! Lessees prpsing t reach and test gethermal resurces must use the 43 CFR subpart 3260 prcess Apply fr a GDP and submit all required inf Fr a Temperature Gradient well--apply under 43 CFR subpart 3250 regs unless Explratin des NOT include: Any cntact with the resurce (as this requires lease rights) Direct testing f gethermal resurce Drilling f prductin r injectin wells 1

Nn-cngruent uses f terminlgy have resulted in cnfusin and delays in permitting; Operatrs ften describe any activity r drilling that des nt result in prductin as "explratin" 500-ft depth limit fr TGH remved in 1998 But changed t any depth that BLM may apprve BLM has discretin t attach COAs (Cnditins f Apprval), limit depth, r deny the NOI applicatin BLM may require the applicant t fllw 3260 regulatins fr drilling and apply fr a GDP instead, t cntinue prcessing BLM cannt use its 3250 TGH prcedures t permit any drilling intended t reach the resurce. Fr every TGH r gethermal well drilled that culd encunter the resurce directly, regardless f depth, Operatrs must adhere t the safety prcedures and perating standards required in BLM's Gethermal Drilling Permit (GDP) applicatin regulatins at 43 CFR Subpart 3260 and Gethermal Resurce Order (GRO) #2 rather than the Explratin regulatins in subpart 3250 and GRO #1 (GRO #1 guidance is limited t 500 ft-depth) BLM nw uses a cmbinatin f temperature and pressure data (rather than drilling depth) n a case-by-case basis via COAs: Temperature, pressure data is required t be mnitred during drilling, t determine when the drilling activity is deemed t be nearing direct cntact with the gethermal resurce Operatrs must fllw the guidance and prcedures in GRO #1 (1975):GRO #1 requires that explratin drilling be halted immediately whenever steam r water at temperatures ver 150 degrees F are encuntered, r anytime the return-line temperature readings taken at 30-ft intervals reach 125 degrees F. BLM uses this threshld as an indicatr that direct cntact with the gethermal resurce has ccurred r is imminent. At this pint the hle must be cmpleted as an bservatin well r slim well rather than a TG hle, thus requiring steel tubing r casing that is cemented frm the ttal depth t the surface, r it must be abandned by plugging the entire depth with cement. Additinal guidance (mre recent) --1987 CA Ntice t Lessees NTL-CA-86-01 : Guidance fr Deep TH Wells Califrnia Ntice t Lessees was intended t prvide prcedures fr drilling TG wells deeper than 500 ft: Established threshlds t halt drilling and cmplete as an bservatin well where cntact with the gethermal resurce is indicated

Scpe f Resurce Assessment and Cnfirmatin Activities, as cmpared t BLM-defined Explratin Testing f the gethermal resurce itself (i.e., direct testing)-apply using 43 CFR 3260 prcess fr these industry-explratin tests Resurce cnfirmatin r assessment activities are: intended t prve a gethermal discvery (establish temperature, reservir permeability, flw rates) Resurce characterizatin and cnfirmatin tests requiring direct cntact with the g th resurce Only available t lessees/peratrs Intended t assess and cnfirm the resurce whether a well is capable f prductin in cmmercial quantities Examples f Direct Testing/Activities used t establish Resurce Cnfirmatin i.e., nt included in categry f explratin peratins (cannt be permitted under a subpart 3250 NOI t Cnduct Gethermal Explratin Operatins) may include: resurce delineatin activities such as injectin testing, interference testing, gephysical surveys (distinguishable frm gephysical explratin peratins?) well surveys (e.g. temperature and pressure surveys, fracture rientatin surveys, spinner tests, mechanical and frmatin integrity testing etc.) and TOMATO, TOMAHTO OK, SO I NEED TO USE 3260 IF I FOLLOW THAT, WHY DO WE CARE ABOUT TERMINOLOGY? flw testing. Prpsals that are described in vague r cnfusing terms, and difficult t categrize, may result in delays in prcessing by BLM. WE ALL NEED TO BE COMPARING APPLES TO APPLEs There are many gd ideas being prpsed t make federal permitting mre efficient and t reduce risks. Hwever, until terminlgy is used cnsistently and the scpe f activities under discussin fr imprvement is understd by all stakehlders, these issues present bstacles t further prgress by BLM in islating and defining issues fr analysis and cnsideratin, such as the typical resurce impacts ptentially invlved under Resurce Assessment and Cnfirmatin drilling, r the timeframes, scpe and impacts cntemplated fr direct testing r reclamatin activities. Questin: Shuld there be an intermediate categry f drilling fr slim hle bservatin wells? [with ptential fr a cmmensurate intermediate level f NEPA review?] Shuld Resurce Assessment activities be apprved under a mre streamlined prcess than full-diameter prductin wells? --if, e.g., limited in well diameter t slim hles, n prductin/injectin, limits n surface disturbed, scheduled reclamatin?

BLM intends t update existing plicy guidance fr peratrs t apply fr Ntice f Intent (NOI) t drill a Temperature Gradient Hle (TGH) deeper than 500 ft. while ensuring public safety. Such guidance may be in IM frm as 1 st step: intended t clarify existing guidance related t defining the bundaries f explratin activities: Distinguishes resurce assessment r cnfirmatin activities such as: bservatin well drilling (i.e., slim hles) and direct testing frm explratin peratins such as: TGH wells Such an IM wuld als be used t clarify the authrity and jurisdictin f the Frest Service t apprve TGHs n unleased FS lands surface, r n FS lands under federal gethermal leases where the applicant is nt the lessee. Any future establishment f new plicy r amended plicy wuld require a rulemaking prcedure; interpretatins f plicy may be in Ntices t Lessee (NTL) frm A WORK IN PROGRESS: BLM TEMPERATURE GRADIENT WELL POLICY UPDATE Wrking Title t date: Gethermal Drilling f Deep Temperature Gradient Hle Permitting and Operating Requirements; Scpe f Explratin Operatins When? Nt sn; still determining scpe and cntent f text limited t an internal BLM Instructinal Memrandum (IM) at this time

JURISDICTION OVER EXPLORATION PERMITTING? ON LEASED LANDS WHERE BLM IS NOT THE SMA (e.g., FS LANDS) Based n the text f the current 43 CFR 3250.10: When d the [BLM] explratin regulatins apply? (a) The explratin peratins regulatins cntained in this subpart and subparts 3251 thrugh 3256 apply t gethermal explratin peratins: (1) On BLM-administered public lands, whether r nt they are leased fr gethermal resurces; and (2) On lands whse surface is managed by anther Federal agency, where BLM has leased the subsurface gethermal resurces and the lease peratr wishes t cnduct explratin. In this case, we will cnsult with the surface managing agency regarding surface use and reclamatin requirements befre we apprve the explratin peratins. (b) These regulatins d nt apply t: (1) Unleased land administered by anther Federal agency; (2) Unleased gethermal resurces whse surface land is managed by anther Federal agency; (3) Privately wned land; r (4) Casual use activities. It is nt entirely clear which agency (BLM? MMS? USGS? SMA?) was riginally intended t be the apprving agency fr explratin permits by nn-lessees n leased lands managed by anther agency (SMA); If the issue can be answered, did plicy shift ver time? See 43 CFR 3250.10, whse text was adpted in1998, but referred t in cmments as 3251.11 (3251.11 als relevant in 1998 and since has been mved t 3250.11); This sectin was frmerly lcated in the regulatins at 43 CFR 3209 fr nn-lessees (BLM regs) and at 30 CFR 270.78 fr leased lands (USGS regs), as amended in 1978: Lease peratr as NOI applicant n Frest Service (FS) surface vs. Applicatin fr NOI t explre anther Party s federal lease n FS surface Which agency d I submit my permit applicatin t, when they can t agree amng themselves? [Nthing is mre fun than interagency turf battles!] Hint: bth, if each will accept it Culd avert delays caused by pr cmmunicatin Des it matter? It culd if ne agency allws a mre streamlined NEPA prcess such as a CX Als: agencies culd change hrses in mid-stream if prcessing can be dne mre efficiently (Yes, it happened in OR)

Researching histrical plicy re this recent turf battle between BLM and the FS: Des the SMA issue explratin permits when lands are leased (usually BLM apprves)-- but where the explratin applicant hlds n interest in the lease/is nt an peratr? Oldest mentin f the issue (appeared ddly in a regulatin fr the agency gverning pst-leasing activities): 1978 Final Rule by USGS (wh gverned pst-leasing activities n leased lands at that time): Issue addressed in a cmment respnse in preamble ( Cmment: One cmmentr suggested that clarificatin be inserted t prevent misunderstanding that a nn-lessee must btain the apprval f the Supervisr [USGS] befre cnducting explratin peratins n lands leased t anther party. Ratinale: It is agreed since nn-lessees must btain the apprval f the cncerned surface management agency and nt the Supervisr ) Resulted in a clarified versin f 30 CFR 270.78(a) Ntice f Intent and permit t cnduct explratin peratins r nt? The clarificatin merely inserted by the lessee t the line A permit t cnduct explratin peratins n the leased lands must be btained by the lessee frm the Supervisr befre the peratin is begun. 43 FR 13832 at 13833/1 & 13834/2 (3/31/78) [ and Yes, we are STILL stuck with by the lessee as clarified text in 2014] Ah, clarity: BLM Gethermal Resurce Order [GRO] #5, August 1980 at p 16: (nte: in the G th Explratin Permit sectin, nt the G th Plan f Explratin sectin): Fr explratin activities n unleased lands, r lands leased t ther than the applicant, the explratin permit is issued by the apprpriate surface management agency (either BLM r FS). But: GRO #5 is nce and frever in DRAFT frm it was never finalized. Therefre: Nt fficial BLM plicy [despite decades f use] s it cannt be cited as definitive 1988: Statewide MOU fr the Gethermal Prgram In CA between the USFS, Regin V and the BLM, CA: Prelease and Pst-lease Respnsibilities and Actins, at pp 6-7 (11/10/88): Under FS will apprve: Pre-lease explratin activities are thse peratins cnducted n unleased lands r n leased lands where the applicant hlds n interest in the lease r is nt a designated peratr f the lessee. Sme BLM sages added supprt fr lcating this passage in the pre-leasing sectin: that TG drilling was seen as a surface activity, since a TG well under a GEP is nt allwed t reach r physically

Finally: Genesis f current reg text: has been unchanged since 1998 Final Rule. S a 3-part cmpare: 1996 Prpsed Rule: prpsed text fr 43 CFR 3250.10 wuld have made apprval f NOIs fr Explratin n any leased lands clearly a BLM respnsibility --thus altering the plicy as stated in GRO #5 BUT the language f the 1998 Final Rule was changed frm the prpsed rule-- Adpts the current text that leaves this issue unanswered, and was nt addressed in its preamble Prpsed rule: 3250.10 What is the purpse, scpe and authrity f the subparts pertaining t explratin peratins? (a) The regulatins in this subpart establish prcedures fr cnducting gethermal explratin peratins: (1) On BLM administered public lands, whether leased r unleased and cvers lessees and nnlessees; and (2) On any federally wned lands leased fr gethermal resurces. The crux: Did the FS bject by submitting an n-pint cmment? Yes! See Jan. 8, 1997 Dean Crandall Letter. FS cmment letter signed by Dean Crandall: Please include a statement [in sectin 3251.11] indicating that explratin activities n unleased land are permitted by the SMA and that the regulatins which gvern the ccupatin f lands administered by ther SMAs may differ.... It shuld be clear t the reader that there is a difference between permitting explratin n leased vs. unleased federal land. This still leaves the questin f permitting explratin activities n a lease by smene ther than the lessee. We wuld prefer that the SMA permit these activities with the prvisin that the apprved activity wuld be subject t the same stipulatins and regulatry requirements as are required f the lessee. 1998 Final rule text: 3250.10 When d the explratin peratins regulatins apply? (a) The explratin peratins regulatins, cntained in 43 CFR subparts 3250 thrugh 3256, apply t gethermal explratin peratins: (1) On BLM-administered public lands, whether r nt they are leased fr gethermal resurces; and (2) On lands whse surface is managed by anther federal agency, where BLM has leased the subsurface gethermal resurces and the lease peratr will cnduct the explratin. In that case, we will cnsult with the surface management agency regarding surface use and reclamatin requirements befre we apprve the explratin permit. Cnclusin: OK t infer that cnsideratin f the FS cmment letter resulted in changes t the Final text f 43 CFR 3250.10 (63 FR 52356, 52379/2 (9/30/98)) frm the prpsed rule (61 FR 52736, 52756/1 (10/8/96)). Thus the attempt t alter plicy failed, leaving in place the plicies in GRO #5 and the CA 1988 MOU: FS apprves these NOIs.

CONCLUSION: ISSUE OF GAP IN REGULATORY AUTHORITY (SEE 43 CFR 3250.10) RE: WHOSE AGENCY REGULATIONS APPLY (BLM VS. SMA) WHICH AGENCY SHOULD APPROVE EXPLORATION ON LANDS UNDER FEDERAL LEASE, BUT WHERE THE NOI APPLICANT IS NOT THE LESSEE? and the answer is: An applicant shuld apply t BLM when: On BLM lands, leased r nt On ther Federal surface under BLM gethermal lease when the lessee is the NOI applicant An applicant shuld apply t the FS r ther Surface Management Agency (BLM regulatins nt applicable) when: Seeking an explratin permit n unleased lands managed by anther federal agency such as the Frest Service On lands leased t anther party (nt the explratin applicant) when the federal gethermal lease is n lands whse surface is managed by anther agency (i.e., yu want t drill a TG well n smene else s lease)

Wyndy Rausenberger Attrney-Advisr Office f the Slicitr, Divisin f Mineral Resurces 1849 C Street, NW MS 5358 Washingtn, DC 20240 (202) 208-5360 wyndy.rausenberger@sl.di.gv 2014 GRC Gethermal Leasing, Unitizatin and Water Use Legal Issues Wrkshp September 26-27, 2014