McWILLIAMS, Circuit Judge.
Marathon Oil Company brought an action to set aside two decisions of the Secretary of the Interior, each of which precluded the counting, for royalty rate determination purposes, of water injection wells located outside the "participating areas." The trial
For a detailed statement of the background facts the reader is referred to the memorandum opinion of the trial court, and we shall proceed here on the premise that the reader of this opinion is thoroughly conversant with the trial court's memorandum opinion. For our purposes we would only note that, as relates to both the Oregon Basin and the Elk Basin, the royalty owed the United States is tied into the average daily production per well. Under this formula, assuming a given volume of production from a given participating area, it is apparent that the greater the number of wells which may be counted, the lower the average daily production per well. In turn, then, the royalty rate decreases, as specified in the royalty schedule, and the total royalty due the United States is accordingly less.
As concerns the Oregon Basin, twenty-nine water injection wells were drilled for the purpose of increasing the oil production from the oil wells situate within the participating areas. The selection of the specific site for each of these wells was made on the basis of maximizing the oil production from the producing wells in the participating areas. Thirteen of these water injection wells were located outside the outer boundaries of the participating areas.
As concerns the Elk Basin, eight water injection wells were drilled in order to increase oil production from the wells within the participating area, the site in each instance being determined by where the water injection well would do the most good in increasing oil production. Seven of these were located outside the participating area.
The question as to both the Oregon and Elk basins is whether the water injection wells located outside the participating areas are to be counted as wells in determining the average daily production per well. If such are to be included, then Marathon owes a lesser royalty to the United States. If these wells are not to be included, then Marathon owes the United States a much greater royalty. Resolution of the Oregon Basin case turns on the interpretation to be given section 13 of the unit agreement. Resolution of the Elk Basin case turns on the interpretation to be given 30 C.F.R. § 221.49, which was incorporated by reference into the Elk Basin unit agreement. The critical language in section 13 of the Oregon Basin unit agreement is in some respects similar to, though not identical with, the critical language in 30 C.F.R. § 221.49.
Section 13 of the Oregon Basin Unit Agreement reads as follows:
As indicated, 30 C.F.R. § 221.49 is incorporated by reference into the Elk Basin unit agreement, and that regulation provides, in pertinent part, as follows:
Both section 13 and the regulation authorize approved water injection wells used for repressuring to be counted as if they were producing wells for the purpose of determining the average daily production per well. It is agreed that all the water injection wells with which we are here concerned in both the Oregon and Elk basins, whether located within or without the participating areas, were approved by the Supervisor of the United States Geological Survey, and that all of these water injection wells have in fact contributed to an appreciable increase in production from the oil producing wells located within the respective participating areas. The narrow issue is whether under the unit agreement, and whether under the regulation, water injection wells located off the participating area may be counted in determining the average daily production per well. Marathon argues that under the agreement and the regulation such wells may be counted, and the Secretary says they may not. Therein lies the area of dispute.
In our view the critical language in section 13 of the Oregon Basin unit agreement is: "[A]ll wells of any character actually used for repressuring or recycling, shall be counted as producing oil wells." It is at once apparent that the quoted language does not contain within itself any requirement that in order to be counted as a producing oil well the water injection well must be located within the participating area. The only stated requirement is that the well be actually used for repressuring.
In sum, the Oregon Basin unit agreement provides that: "[A]ll wells of any character actually used for repressuring or recycling, shall be counted as producing wells." Such language is clear and unequivocal. It means that wells actually used for repressuring shall be counted as oil producing wells. It is not a function of the courts to add a further limitation that such wells, in addition to being actually used for repressuring, must also be within the participating area. It is enough if the well is actually used for repressuring, and it is agreed that such is true in the instant case.
Our reading of the regulation involved in the Elk Basin case parallels our reading of the unit agreement in the Oregon Basin case. 30 C.F.R. § 221.49(b) provides that water injection wells approved by the supervisor as input wells shall be counted as producing wells for the entire month if so used for 15 days or more during the month and shall be disregarded if so used less than 15 days during the month. This section of the regulation, then, authorizes water injection wells, if approved by the supervisor and if used the requisite number of days, to be counted as oil producing wells. Such authorization contains no limitation or requirement that the water injection wells be located within the participating area, and it is not for us to add such limiting language.
The Secretary points out that there is language in the introductory paragraph which refers to "wells on the leasehold" (which is the equivalent of wells on the participating area), and suggests that such language should be carried over into subsection (b). We do not agree. It is significant to us that the restrictive language "on the leasehold" appearing in the introductory paragraph does not appear in subsection (b). In other words, the omission is itself noteworthy. "[W]here a term is carefully employed in one place and excluded in another, it should not be implied where excluded." Diamond Roofing Co. v. Occupational Safety & Health Review Comm'n, 528 F.2d 645, 648 (5th Cir.1976). The use of the term "on the leasehold" in the introductory paragraph and its absence in subparagraph (b) have a logical explanation. The introductory paragraph deals with producing wells, which necessarily are within the participating area. Subparagraph (b) deals with a different kind of well entirely. Giving subsection (b) its plain meaning, water injection wells approved by the supervisor as input wells shall be counted if so used 15 or more days during the month, and we decline to hold that there is a further and unexpressed limitation that such wells be located within the participating area.
We recognize that the interpretation given by the Secretary to one of his own regulations is entitled to judicial deference. Udall v. Tallman, 380 U.S. 1, 85 S.Ct. 792, 13 L.Ed.2d 616 (1965); United States v. Southwest Potash Corp., 352 F.2d 113 (10th
As indicated at the outset, we agree with the result reached by the trial judge in this matter, and generally subscribe to his reasoning. The interpretation given the unit agreement and the regulation by the trial court is consistent with the purpose of the repressuring concept. The Secretary's construction is not. The use of water injection wells is a conservation measure designed to get maximum production from the oil producing wells in a given participating area. Both parties agree that water injection wells are permitted to be counted as oil producing wells, in determining the average daily production per well, in order to encourage lessees to drill as many injection wells as will efficiently contribute to increased production. Both also agree that the injection wells in these basins are located at points which result in the maximum and most efficient recovery. There is no logical reason for encouraging input wells at certain locations, but not encouraging them at other locations which would result in the most efficient production. In other words, it seems illogical to count a water injection well located a few feet within the boundary of a participating area, but not to count another water injection well located a few feet outside the boundary of the particular participating area, when both wells admittedly serve the same purpose, namely, to increase production from the oil producing wells located in the participating area. And our reading of both the regulation and the unit agreement does not require such incongruous result.
Additionally, we would note that the interpretation given the Oregon Basin unit agreement by the trial court squares with the conduct of the parties from 1961 to 1969. Similarly, the interpretation given to the regulation involved in the Elk Basin case by the trial court squares with the conduct of the parties from 1967 to 1970.