Getty Oil Co. v. Andrus, 77-3157

• Decision Date: 22 October 1979
• Docket Number: No. 77-3157,77-3157
• Citation: 607 F.2d 253
• Parties: GETTY OIL COMPANY, a corporation, Mono Power Company, a corporation, Plaintiffs-Appellants, v. Cecil D. ANDRUS, Secretary of Interior of the United States of America, Geothermal Resources International, Inc., a corporation, and Chevron Oil Company, a corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 253

607 F.2d 253

GETTY OIL COMPANY, a corporation, Mono Power Company, a corporation, Plaintiffs-Appellants, v. Cecil D. ANDRUS, Secretary of Interior of the United States of America, Geothermal Resources International Inc., a corporation, and Chevron Oil Company, a corporation Defendants-Appellees.

No. 77-3157.

United States Court of Appeals Ninth Circuit.

Oct. 22, 1979.

Edward S. Renwick, Brien F. McMahon, Hanna & Morton, Los Angeles, Cal., for plaintiffs-appellants.

Edward J. Shawaker, Dept. of Justice, Washington, D. C., argued, for defendants-appellees; Donald E. Peterson, Pillsbury, Madison & Sutro, San Francisco, Cal., on brief.

Appeal from the United States District Court for the Central District of California.

Before HUFSTEDLER and SNEED, Circuit Judges, and WILLIAMS ^*, District Judge.

SNEED, Circuit Judge:

This is an appeal from a judgment of the district court upholding the ruling of the Secretary of Interior approving defendant Geothermal Resources International's (GRI) application to convert certain Placer mining claims into federal geothermal steam leases under the Geothermal Steam Act of 1970, 30 U.S.C.A. §§ 1001-1025, and the ensuing issuance of a lease to GRI. Two issues are presented on appeal. First, did the district court err in ruling that the doctrines of exhaustion of administrative remedies and waiver precluded the raising of the present contentions? Second, if the issues were properly raised, did the trial court correctly interpret the requirements of the Act and its regulations? Jurisdiction is provided by 28 U.S.C. § 1291. Because we agree with the trial court's interpretation of the Act and its regulation, we affirm the judgment of the trial court.

I. FACTUAL BACKGROUND

The Act grants the Secretary the power to issue leases for the development of geothermal steam and resources on designated public lands. Under a competitive bidding process, the highest qualified bidder obtains a geothermal lease to the public lands. 30 U.S.C. § 1003; 43 C.F.R. §§ 3220.1-3220.6. The leasehold bidding process, however, is subject to grandfather conversion rights which permit qualified applicants to convert to geothermal leases their existing mineral leases, permits or mining claims in public lands with geothermal resources. To perfect these conversion rights, compliance with a two step process is required. Initially, an application must be filed with the Bureau of Land Management identifying the lease, permit or mining claim and showing that the applicant has made substantial expenditures for the exploration, development, or production of geothermal steam on "the lands for which a lease is sought or on adjoining, adjacent or nearby lands, including both Federal and non-Federal lands." 43 C.F.R. § 3230.1-5; See also id. § 3230.3-2. The grandfather conversion rights applicant in due course is notified of the highest submitted bid. Within thirty days of receiving notice, the holder must exercise his option by paying an amount equal to the highest bid, paying the rental price for the first year, filing the required bonds, and submitting other specified documents. 43 C.F.R. § 3230.1-6(a)(2)(ii).

GRI filed an application to convert its Placer mining claims on June 22, 1972. Thereafter, on December 18, 1973, the Secretary announced that certain lands within the State of California would be open for competitive bidding, including the lands, designated as Leasing Unit No. 2, that GRI sought to convert. The announcement contained a declaration that Leasing Unit No. 2 was subject to the conversion rights of GRI. 38 Fed.Reg. 35029-31 (1973).

The Secretary approved GRI's application for conversion on January 14, 1974. 39 Fed.Reg. 2281-82 (1974). A week later, plaintiff-appellants, Getty Oil Company and Mono Power Company, submitted a bid on Leasing Unit No. 2 which later was selected as the high bid. On April 24, 1974, the Secretary notified GRI that appellants had submitted the high bid and that it had thirty days in which to exercise its conversion rights. GRI, in response, submitted all the documents required by 43 C.F.R. § 3202, and other subparts, to show that it was qualified to hold a geothermal lease. On July 10, 1974, the Secretary advised GRI that it had fulfilled the requirements necessary for the exercise of its conversion rights. GRI then relinquished its mining claims as consideration for the issuance of the lease.

Appellants first contested the proposed granting of GRI's geothermal lease on August 5, 1974. The protest alleged, Inter alia, that the application for conversion rights was untimely filed, that GRI did not have "existing mining claims" upon which to base its application, that there was improper reliance upon development work relied upon by another applicant, and that under the Act there must be a full disclosure of all parties' interest, which GRI failed to do.

The Secretary, in his decision of February 13, 1975, indicated that appellants' protest was untimely due to their failure to object until after the application was approved. The Secretary, nonetheless, considered the contentions on their merits and rejected each of them.

Appellants brought suit in district court seeking judicial review. They alleged that GRI's failure to comply with the sole party in interest statement requirement of 43 C.F.R. § 3202.2-5 and its failure to establish "unity" between development work and the land on which it held mining claims invalidated its conversion.

The district court found that the Secretary's approval of GRI's application for conversion rights and his dismissal of appellants' protest was not an abuse of discretion and was fully supported by substantial evidence in the administrative record. Getty Oil Co. v. Andrus, 433 F.Supp. 1317 (C.D.Cal.1977). The court also held that a sole-party-in-interest statement was not required in order to exercise conversion rights and that the Act did not require a "unity" between the geothermal work and the mining claim on which GRI based its application. Moreover, the court concluded that contentions made by appellants not raised before the administrative hearing at the appropriate time were barred from review by the doctrines of exhaustion of administrative remedies and waiver. We hold that these doctrines do not bar review in this case and that each of appellants' claims lacks merit.

II. EXHAUSTION OF ADMINISTRATIVE REMEDIES AND WAIVER

The doctrines of exhaustion of administrative remedies and waiver are well established and serve fairly obvious purposes. "Simple fairness to those who are engaged in the tasks of administration, and to litigants, requires as a general rule that courts should not topple over administrative decisions unless the administrative body not only has erred but has erred against objection made at the time appropriate under its practice." United States v. L. A. Tucker Truck Lines, 344 U.S. 33, 37, 73 S.Ct. 67, 69, 97 L.Ed. 54 (1952); See also Federal Power Commission v. Colorado Interstate Gas, 348 U.S. 492, 498-99, 75 S.Ct. 467, 99 L.Ed. 583 (1955). "A reviewing court usurps the agency's function when it sets aside the administrative determination upon a ground not theretofore presented . . . ." Unemployment Compensation Commission of Territory of Alaska v. Aragon, 329 U.S. 143, 155, 67 S.Ct. 245, 251, 91 L.Ed. 136 (1946). Thus, absent exceptional circumstances, a reviewing court will refuse to consider contentions not presented before the administrative proceeding at the appropriate time. Widing Transportation Inc. v. I. C. C., 545 F.2d 652, 660 (9th Cir. 1976); Reese Sales Co. v. Hardin, 458 F.2d 183, 187 (9th Cir. 1972); See Hormel v. Helvering, 312 U.S. 552, 61 S.Ct. 719, 85 L.Ed. 1037 (1941).

Exhaustion of remedies and waiver, however, are doctrines to be invoked only when the administrative process has been completed. They are not designed to extinguish claims which, although not comprehensively or artfully presented in the early stages of the administrative process, are presented fully before the process ends. It has been said that "the touchstone of finality is suitability for judicial review." Blanco Oil Company v. Federal Power Commission, 158 U.S.App.D.C. 257, 259, 485 F.2d 1036, 1038 (D.C.Cir. 1973). The Administrative Procedure Act, 5 U.S.C. § 704, provides:

Agency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review.

It is the imposition of an obligation or the fixing of a legal relationship that is the indicium of finality of the administrative process. See, ECEE, Inc. v. Federal Power Commission, 526 F.2d 1270, 1273 (5th Cir. 1976); Chicago & Southern Airlines v. Waterman Steamship Corp., 333 U.S. 103, 113, 68 S.Ct. 431, 92 L.Ed. 568 (1948).

These principles clearly indicate that the Secretary quite properly considered appellants' claims although the protest followed the Secretary's recognition in January, 1974 of GRI's grandfather rights. Another step of the two step process remained to be completed. The Secretary's suggestion that his recognition of these rights made appellants' protest untimely is supported neither by the principles set forth above nor by the regulations themselves. The pertinent regulation is 43 C.F.R. § 4.450-2 and reads as follows:

Where the elements of a contest are not present, any objection raised by any person to any action proposed to be taken in any proceeding before the Bureau will be deemed to be a protest and such action thereon will be taken as is deemed to be appropriate in the circumstances.

The contention that the...