MATTHEWS, Senior Justice.
Challenged in this case are land and water use permits allowing intensive mineral exploration on State land. The main question we address is whether the Department of Natural Resources (DNR) had to give public notice before issuing the permits. Because the Alaska Constitution requires public notice when interests in land are transferred, the answer to this question depends on whether the permits conveyed an interest in land. After a trial, the superior court held that notice was not required because the permits were nominally and functionally revocable and therefore did not transfer an interest in land. We conclude that the land use permits were not functionally revocable. Because we therefore conclude that they conveyed an interest in land and consequently should have been preceded by public notice, we reverse the judgment of the superior court and remand.
The Pebble ore deposit lies north of Lake Iliamna. It consists of copper, gold, and other minerals and covers an area of about 360 square miles. The ore deposit sits astride the watersheds of the Kvichak and Nushagak Rivers, which flow into Bristol Bay. Bristol Bay is home to the world's largest wild sockeye salmon fishery. The average annual run of this high value species during 1990-2010 was about 37.5 million fish of which about 25.8 million were caught for commercial purposes.
The waters flowing into Bristol Bay host all five species of Pacific salmon as well as trout, char, and grayling. The sportfisheries for king salmon and rainbow trout in the Bristol Bay watershed are world renowned. Additionally Bristol Bay salmon form the centerpiece of the subsistence activities of the residents of this region. The area of the ore deposit also provides important habitat for land-based wildlife, providing winter and calving habitat for the Mulchatna caribou herd, "essential stream concentration" for brown bears, and moose habitat.
The Pebble ore deposit was discovered in the late 1980s. The mineral claims to the deposit were secured by discovery, location, and filing. They are now owned by Pebble Limited Partnership ("PLP"). Exploration of the deposit has continued since 1988 and has escalated over the years. Exploration has primarily been conducted by exploratory
In the years immediately before the trial, the exploration program was supported by helicopters. Drilling was conducted using portable rigs that were flown to each drill site. Several sites might operate at one time. The drill rigs were placed on wood decking or tundra mats. Between one and three sump pits were dug for the settlement of the slurry of drilling mud and drilling waste that was discharged from the bore hole.
Since 1989 DNR has issued a series of permits for exploration activity in the area, with the area encompassed in the permits and the number of claims increasing over the years.
Although the exploration has been authorized incrementally, some facilities associated with the exploration have remained in place over many years. There is a supply depot and staging area occupying an area of about 30 meters by 300 to 350 meters. This consists of plywood sheds, wall tents, and mats for storing material, interconnected by wooden walkways. All the buildings are capable of being disassembled and removed by helicopter.
There is a fueling station at a lake where float planes can land and transfer fuel to tanks. The stored fuel is used to refuel helicopters, but it is also transported to drill sites by helicopter for use at the sites. At the fueling station there are a dock, two helicopter landing pads, five large fuel tanks in an aluminum containment structure, tundra mats, and a temporary shelter building. At a different location there is a separate storage area, used primarily for storage of hoses and fuel containment structures, which consists of several plywood sheds, wall tents, and tundra mats.
The workers on the exploration project are not housed there. Instead they are flown in daily from a village some 17 miles away. As the trial court stated:
The most recent MLUP as of the time of trial provides that "[e]ffective dates of this permit shall be February 26, 2009 through December 31, 2010, unless sooner revoked for cause. This permit is also revo[c]able at will." It states that it is "for activities upon State managed lands described in the Hardrock Exploration Application" submitted by PLP.
The activities described in the application, and thus permitted by the MLUP, included 100 diamond-core drilling bore holes that could be as deep as 7,000 feet and have a diameter of up to 6 inches. Also permitted were 325 bore holes drilled with mud-rotary and reverse-circulation drills into bedrock to depths of from 10 to 500 feet.
The permit also allowed shooting 34 seismic blast lines totaling a maximum of 220,000 feet. Along the seismic lines, between 500 and 925 pounds of dynamite could be exploded in approximately 1,100 shots. Each shot will excavate a hole from 2 to 12 feet in diameter and 2 to 3 feet deep. After the permit expires these blast holes will still be present although they will be smoothed and revegetated.
The permit also allowed activities in anticipation of the yet to be reached mine development phase. It allowed 320 shallow soils test pits "to determine soil horizons for construction purposes." These pits could be approximately four feet wide, seven feet long, and up to seven feet deep. Once the sampling process terminated, they would be backfilled, the overburden would be put back in place, and re-seeding would be performed if necessary.
Concerning the facilities that have spanned a number of permit periods, the application stated that the storage camp built in 2004 continued to be used but that certain plywood sheds were removed and replaced with a 24-foot by 60-foot WeatherPort tent. That plus one remaining 10-foot by 20-foot wooden structure were the only buildings at this location. At a separate location two structures had "been erected to protect water hose[s] and keep them from freezing." One was a 10-foot by 20-foot metal-clad building and the other is a 15-foot by 36-foot WeatherPort tent. The application noted that "[a]ll are temporary and will be removed when no longer needed."
Finally, the application noted that PLP had TWUPs allowing the use of water from streams, ponds, and previous drill holes for up to 16,200 gallons per day or 113,400 gallons per week "per rig." PLP's plan of operation called for up to 12 rigs to be on site.
Nunamta Aulukestai, an association of eight Native village corporations in the Bristol Bay region, and two individuals who reside in Nondalton, Jack Hobson and Ricky Delkittie, Sr. (collectively "Nunamta"), appealed the issuance of the MLUP for the Pebble project for 2009-10. The appeal was brought in March 2009, and was directed to the DNR Commissioner. It challenged, among other things, the lack of public notice prior to issuing the permit, DNR's failure to address the cumulative impacts of the proposed exploration activities, and the lack of specific information concerning both the sources of water and the nature of the materials to be used for plugging drill holes. When DNR denied Nunamta's request to stay the permit, Nunamta, in July of 2009, filed a complaint for declaratory judgment in the superior court.
In the administrative appeal, in November 2009 DNR denied the appeal on the ground Nunamta did not have standing. But DNR also stated that it had considered all the legal and factual grounds presented by Nunamta and indicated that it would have denied the appeal on the merits as well. DNR issued this decision without first holding an evidentiary hearing or calling for or receiving briefing on any issues.
Nunamta appealed DNR's decision to the superior court, challenging its rulings on due process grounds. In October 2011 Judge Michael Spaan ruled that DNR had violated Nunamta's due process rights by rejecting the appeal on standing grounds without offering Nunamta the opportunity to cure the alleged standing deficiency. But the court also ruled that any harm from this action was cured because DNR had rendered a decision on the merits and Nunamta had no other valid due process claims. Nunamta appealed this ruling to this court. After the case was briefed and orally argued, we asked for supplemental briefing as to why the appeal should not be dismissed as moot in light of the expiration of the permit at issue and because the pertinent issues were raised or could be raised in the declaratory judgment action. After considering the supplemental briefing, we entered an order dismissing the administrative appeal as moot without additional explanation.
We now turn to the proceedings in Nunamta's declaratory judgment action. The complaint contained six counts, each of which generally alleged that the statewide permitting process for hardrock mines is constitutionally deficient and also specifically alleged that the permitting process related to the Pebble exploration is deficient in the same way. In particular:
• Count I claimed that DNR, by granting permits for exploration and "water use without analysis or findings addressing the direct, indirect and cumulative impacts of [mining exploration] uses on the public domain, has failed to fulfill its fiduciary public trust duty to manage state resources for the common good."
• Count II claimed that the issuance of exploration and water use permits without analysis as to their effect on "reasonable concurrent users of public land, water, fish and wildlife, cultural resources and subsistence resources" violates article VIII, sections 1, 2, and 8 of the Alaska Constitution.
• Count III claimed that DNR violated article VIII, sections 3 and 4 of the Alaska Constitution relating to the reservation of fish, wildlife, and waters to the people for common use subject to preferences among beneficial users, by issuing the permits with no analysis and thus elevating mining to the highest preference without justification.
• Count IV claimed that the exploration and water use permits issued by DNR "are de facto disposals of interests in state land and water requiring public notice and other safeguards of the public interest" in violation of article VIII, section 10 of the Alaska Constitution.
• Count V alleged that DNR violated article VIII, section 13 of the Alaska Constitution relating to the reservation of water to the people for common use by permitting the use of significant amounts of water for "at least five years or longer" with "no public notice or analysis of the impacts of that water use on beneficial and concurrent uses."
• Count VI alleged a violation of article VIII, section 17 of the Alaska Constitution — the Uniform Application Clause — claiming upland hardrock mining exploration permits were issued without public notice and without a public interest review whereas offshore mining exploration permits can only be issued after notice is given and a best interest analysis is conducted. In addition, this count challenged as irrational the statutory and regulatory water use system that allows significant water use labeled "temporary" without public notice or a public interest review
PLP intervened as a defendant. The State and PLP filed motions for summary judgment on all six counts. The superior court, Judge Eric A. Aarseth presiding, granted these motions as to Count VI relating to the Uniform Application Clause, ruling that section 17 serves only to protect similarly situated users from unequal application of laws and regulations, whereas Nunamta's claim focused not on users but particular uses of the public lands.
As to Nunamta's other claims, the court ruled that they could not be considered generally, but could be considered to be "as applied" challenges to the statutes and regulations under which the exploration permits were issued. The court collectively summarized the remaining counts as claiming "that the State should have performed a best-interest finding before granting the permits at issue and should have made that finding available to the public."
The court stated:
The court, at least provisionally, rejected the State's argument that the provisions of article VIII did not impose any protections independent of those specifically imposed by the legislature:
The court concluded that there were material issues of fact regarding Nunamta's remaining claims that the State did not comply with the provisions of article VIII, writing, "Whether these permits themselves are disposals, and whether the nature of the land use triggers constitutional considerations requires an examination of the underlying activities."
Both the State and PLP moved for reconsideration of the court's order on summary judgment. They argued that only questions of law were presented and that requiring a trial would have the effect of creating an ambiguous and unworkable process for issuing exploration permits. The superior court denied these motions and later defined the issues for trial in an Order On Rule of Law as follows:
A ten-day trial was held. The primary focus of the trial was water contamination issues. Nunamta presented evidence that contamination had and would continue to occur through acid rock drainage. One expert witness, Dr. Moran, described this as "the tendency of mineralized rock that has sulfides... to react with air and water, and especially bacteria, to create natural acids that then solubilize the rock and release contaminants." This process occurs both in bore holes and in the sumps, where it is magnified because of the greater surface area of the pulverized drilling waste. According to another of Nunamta's experts, Dr. Zamzow, finely ground mineralized rock, when exposed to wetting and drying conditions, may take up to 15 years to become acidic. Dr. Moran agreed that plugging bore holes would minimize groundwater contamination from them, but testified that often plugging is not complete, allowing chemical and biological reactions to continue. In addition, Dr. Moran testified that the cement grout in plugs degraded over decades and "then you get groundwater contamination long-term."
According to Nunamta's experts, the other major source of potential contamination is the drilling mud. The most commonly used "EZ mud" contains toxic chemicals. A witness employed by the State Department of Environmental Conservation testified that EZ mud components were toxic to fish in the concentrations found in the water in bore holes but thought that by the time wastewater from a bore hole could travel 100 feet to a water body, it would be greatly diluted and thus "we qualitatively determined that it was unlikely for the drilling additive to reach a water body at a level that would be toxic to fish."
The testimony presented by Nunamta concerning water contamination addressed not only the potential for contamination. Dr. Moran testified that his review of the data from several monitoring wells indicated "levels of metals and other anions that if freshwater fish were exposed to them, those would be toxic." Dr. Zamzow also testified that the data collected by Pebble in monitoring wells indicated that drilling is having an impact on water chemistry, although she was unable to state the degree of the impact.
With respect to other impacts, Nunamta presented testimony that some tundra ponds used as water sources for drilling had been temporarily dewatered and that in the past, drilling muds had been discharged into ponds. Nunamta also presented testimony that the frequent helicopter traffic had caused caribou, moose, and brown bear to avoid the area. Further, a guide, Steve Morris, testified that he previously had maintained spike camps for hunters of caribou, moose, and bear, but that the exploration activity had rendered the area unusable, saying, "The helicopter activity in itself is enough that you can't bring a paying client out there, put them in a spike camp, any one of those dozen units that I used to use. They
PLP also presented expert testimony on the issue of water contamination. PLP's expert, Dr. Stelljes, testified that he reviewed data from 37 monitoring wells and was unable to find any chemical fingerprint indicative of acid rock drainage. It was his opinion that the exploration activities had not harmed water quality in the area. Dr. Stelljes also testified that drilling mud discharged into the sumps creates an impermeable barrier and is "entombed" between the shallow bedrock below and a "very impermeable" tundra mat and compacted soil above, thus preventing it from migrating into groundwater. In addition he testified that the data Dr. Zamzow relied on as indicating contamination caused by drilling were simply "outliers," that is, sampling errors. PLP also presented evidence that there has been no impact on local caribou or other wildlife as a result of its exploration activities, and that tundra ponds from which water was taken would fully recharge in less than a year.
Following the trial the court issued detailed written findings. The court found that the evidence presented was "insufficient for this Court to find it more likely true than not that the exploration activities at the Pebble study area have actually caused or will in fact cause long-term, harmful environmental impacts from acid rock drainage or other contamination." As to water contamination issues, the court adopted the views advocated by PLP. The court found that Dr. Moran was a trustworthy witness but that his testimony as to toxic concentrations of dissolved metals in monitoring wells did not establish that the elevated levels were caused by exploration activities; the court further discounted this testimony as conclusory, speculative, and lacking a basis in scientific data. The court also observed that Dr. Moran "admitted ... that fish do not live in the groundwater" and that "Dr. Zamzow similarly admitted that fish are not swimming in underground monitoring wells." "Thus," the court concluded, "elevated levels of metals in groundwater monitoring wells is not evidence probative of impacts to aquatic organisms." The court also concluded that Dr. Zamzow was relying on unreliable outlier data points in reaching her conclusion that some of the monitoring wells indicated ongoing acid rock drainage reactions.
The court also found "that most of the core holes drilled at the Pebble site since 2006 have been plugged" and that "[b]ecause the holes have generally been plugged, the likelihood of acid rock generation is substantially reduced or stopped altogether." With respect to acid rock drainage from the drill cuttings in the sumps, the court found the evidence "insufficient to conclude that the sump pits are in fact generating [acid rock drainage] contamination" and that even if they were "there is no evidence that such contamination is actually migrating to an area in concentrations that may cause harm to a living organism."
With reference to the evidence that PLP had temporarily pumped dry several tundra ponds, the court concluded that this did not necessarily mean that harm to fish and aquatic life had occurred because there would have to be proof that PLP "(1) extracted all the water in a pond, (2) that fish were actually present in the pond, and (3) that the lack of water in fact harmed the fish." The court concluded that there was not credible evidence that all three of these things had occurred. The court further noted that even if all the water were removed from a tundra pond containing blackfish, that would not necessarily mean that the fish would be impacted because they can breathe air for a period of time.
As to impacts on wildlife, the court found that the decline in the number of caribou in the Pebble area was due to the natural migratory nature of caribou and cyclical variations in their population, and not to any of PLP's exploration activities. The court also found there to be insufficient evidence that PLP's exploration activities had caused a permanent impact on any other wildlife in the area.
Concerning the testimony of the guide, Steve Morris, that his guided hunting activities had been displaced by helicopter activity, the court refused to accept this reason, finding it more likely that he no longer used this area because of a change in state hunting
The court concluded in general that Nunamta did not show that it was more likely than not that exploration had caused long-term and harmful environmental impacts in the Pebble project area, or that such harms "necessarily will occur." The court also concluded that PLP's exploration and water use permits were not disposals of interests in State lands and did not unconstitutionally impinge on reasonable concurrent uses. The court's final paragraph stated:
Nunamta has organized its arguments under four main captions as follows:
(1) "The superior court incorrectly determined that MLUPs and TWUPs were functionally revocable and did not constitute a disposal";
(2) "The extensive land and water uses were of sufficient magnitude to trigger safeguards of Article VIII, sections 1, 2, 3, 4, 8, 10, 13 and 17";
(3) "The State failed to undertake the public-interest analysis required by Article VIII prior to issuing the MLUPs and TWUPs"; and
(4) "The superior court improperly excluded evidence of economic impacts and cumulative impacts, and failed to make findings on Mineral Closing Order 393 and Leasehold Location Order #1."
The State raises two points in its cross-appeal claiming:
(1) "The superior court should not have allowed Nunamta to litigate two separate cases challenging Pebble's permits"; and
(2) "The Court should not review specific permitting decisions or weigh in on the general quality of DNR's permitting and enforcement."
This is a case about process. Before issuing permits, did the State have a duty under the constitution to give notice and did it have a duty to consider potential consequences of the permitted activity? The relevant time period raised by these questions is prospective. They are not answered by an after-the-fact inquiry in which a private party is tasked with the burden of proving that substantial environmental damage has occurred. The State must know how it should act before it acts. Similarly, to the extent that the answer to these questions turns on an assessment of the environmental impacts of permitted activities, the assessment must be made prospectively based on known and reasonably possible consequences. Further, if the duties to give notice and consider potential consequences exist, they are not discharged by the apparent harmlessness of what later takes place; and, if the duties do not exist, they are not created by subsequent acts
The central issue as framed by the superior court was an as-applied challenge to the constitutionality of a statute; from the trial court's perspective, some factual context was needed.
All the permits that were challenged in this case have expired. As to them, this case is moot. A suit challenging the lawfulness of a government-issued permit is technically moot once the permit has expired.
A second important question is potentially presented. As expressed by the superior court in the concluding paragraph of its decision, did the Constitution require DNR to "conduct a best interest finding" before issuing the permits, even if a statute or regulation did not? The superior court answered this question in the negative, but only because it concluded that the permits were not disposals of an interest in land. This conclusion must be vacated based on our holding that the MLUPs were disposals of an interest in land. The parties have briefed the impact that Sullivan v. Resisting Environmental Destruction on Indigenous Lands (REDOIL),
We do not address Nunamta's other arguments for they raise issues as to the validity
We address the issues raised in the State's cross-appeal, for they raise a potential procedural bar to Nunamta's lawsuit.
All the questions reviewed in this appeal are questions of law. The standard of review we use in deciding them is the non-deferential "independent judgment" standard under which this court adopts "the rule of law most persuasive in light of precedent, reason, and policy."
The State argues that this appeal should be dismissed because Nunamta should have exhausted its administrative remedies by litigating the issues presented in this case in the administrative appeal rather than by filing a separate declaratory judgment action. The State also argues that by pursuing both the administrative action and the declaratory judgment action, Nunamta violated the doctrine prohibiting splitting a cause of action.
The State raised the exhaustion issue twice. In September 2009 the State moved to dismiss on grounds that included failure to exhaust. The State noted that with respect to the 2009 MLUP, Nunamta was pursuing a timely administrative remedy before DNR and that Nunamta should not be allowed to short-circuit that proceeding with an original action. Acknowledging that Nunamta had raised constitutional claims, the State argued that the administrative remedy would be appropriate in order to supply a factual context in which constitutional issues could be decided.
Nunamta opposed on the ground that exhaustion is not required where only constitutional issues are raised. It also argued that exhaustion was not required because DNR's appeal process was dysfunctional and exhaustion would be futile given DNR's inaction in the administrative appeal and its evident partiality.
The superior court, Judge Craig Stowers presiding, denied the State's motion, ruling that forcing this case into an agency forum would probably not "appreciably advance the issues in the case, especially in light of the fact that both the state and the plaintiffs are arguing that these are essentially pure questions of constitutional law in some sense or another." The court also observed, "I don't see that the facts are necessarily inextricably intertwined with the constitutional law principles." The court also stated that in view of the full briefing on the issues, "I'm not sure why I couldn't rule on them as a matter of law."
After the case was reassigned and Judge Aarseth ruled on the appellee's motions for summary judgment, both PLP and the State again moved to dismiss the case on failure to exhaust grounds. As an alternative to dismissal, PLP asked for a remand to DNR so it could conduct any needed evidentiary hearing.
Generally, a party who wishes to challenge action by an administrative agency must do so using available administrative procedures before filing suit in court.
When Judge Stowers denied the State's first motion to dismiss based on exhaustion grounds, he did so because the issues seemed to be pure questions of constitutional law. In light of the constitutional law exception to the exhaustion doctrine, this ruling was not an abuse of discretion.
With respect to the second round of motions to dismiss on exhaustion grounds, we think that the motions were properly denied, though not necessarily for the reasons stated by the court. In our view the dispositive questions presented remained relatively discrete questions of constitutional law that would fall under the exception for such questions.
Further, outright dismissal for failure to exhaust would not have been appropriate given that at the time of the second round of motions Nunamta still had an active administrative proceeding pending. It could have been appropriate to take either alternative course suggested by the appellees, but since Nunamta had in no sense slept on its rights and all parties were aware of its claims, outright dismissal would have been unwarranted.
We turn now to the State's claim splitting argument. "The rule against claim splitting provides that all claims arising out of a single transaction must be brought in a single suit, and those that are not become extinguished by the judgment in the suit in which some of the claims were brought."
First, DNR's decision was based on standing grounds, although DNR indicated that it would deny the appeal on the merits as well. The superior court ruled that DNR erred in relying on the alleged lack of standing but that DNR's decision could be affirmed on the merits. That decision was appealed to this court, and we ultimately dismissed the appeal as moot. But our decision was based on the
In addition, DNR is a forum of limited jurisdiction that lacks authority to issue declaratory relief. The rule prohibiting splitting claims does not apply to forums of limited jurisdiction that lack the authority to grant all the forms of relief a plaintiff requests.
Finally, the rule prohibiting claim splitting would not apply to those appellants — Willson, Fischer, and Hammond — who were not parties to the administrative appeal.
We now address Nunamta's argument that the MLUPs were disposals of an interest in land that come within the protection of the public notice clause of article VIII, section 10 of the Alaska Constitution. We do not discuss TWUPs at this point because they do not lend themselves to the same analysis as MLUPs. We also focus only on the 2009 MLUP because the details of this permit are clearly in the record and the activities allowed under this permit appear to be representative of the activities under MLUPs issued for the period 2002 to 2008.
Nunamta argues in general that the MLUPs were disposals of interests in land that fall within the protection of article VIII, section 10. It argues that under either of the tests for functional irrevocability adopted by this court in Northern Alaska Environmental Center v. State, Department of Natural Resources,
We will now summarize the relevant legal authorities.
The constitutional provision most centrally involved in this case is article VIII, section 10, the Public Notice Clause, which provides that "[n]o disposals or leases of state lands, or interests therein, shall be made without prior public notice and other safeguards of the public interest as may be prescribed by law." A number of other sections of article VIII are relied on by the parties, including section 1, Statement of Policy;
Many uses of the public domain are allowed without a permit.
For uses that are not generally allowed, DNR has regulatory authority to issue permits for a specified term up to five years unless sooner revoked.
Three statutory sections are cited in this regulation as authority for its promulgation: AS 38.05.020, AS 38.05.035, and AS 38.05.850. Alaska Statute 38.05.020(b)(4) authorizes the Commissioner of the Department of Natural Resources to "exercise the powers and do the acts necessary to carry out the provisions and objectives of [chapter 5 of Title 38]," which establishes the Division of Lands within the Department and specifies its functions and responsibilities.
Alaska Statute 38.05.035 defines the powers and duties of the Director of the Division of Lands. Pertinent to this case, AS 38.05.035(e) provides:
Alaska Statute 38.05.850 deals specifically with permits. It provides in part:
Another statutory section, AS 38.05.945, provides for notice to be given by DNR for certain actions. Subsection (e) of this section states that "[n]otice is not required under this section for a permit or other authorization revocable by the department."
Article VIII, section 11 of the Alaska Constitution establishes the basis for locatable mineral rights. It provides: "Prior discovery, location, and filing, as prescribed by law, shall establish a prior right to these minerals and also a prior right to permits, leases, and transferable licenses for their extraction."
Holders of mining claims acquired by discovery, location, and filing do not have an automatic right to mine their claims. To actually extract minerals, they must acquire
The Public Notice Clause of the Alaska Constitution, article VIII, section 10, prohibits disposals of interests in state lands without prior public notice. The central question posed by Nunamta's appeal is whether the MLUPs are disposals of interests in state land under the Public Notice Clause. A permit that is revocable at the will of the grantor is generally considered a license.
In Northern Alaska, we adopted from the D.C. Circuit two tests of functional irrevocability.
Both the State and PLP argue that the Northern Alaska/Wilderness Society analysis as to whether a permit is functionally irrevocable should not be applied to determine whether the constitution's Public Notice Clause has been triggered because both Northern Alaska and Wilderness Society involved statutory and regulatory requirements, not constitutional interpretation. But they offer little or nothing by way of substantive reasons as to why the revocability analysis of those cases should not apply.
Both the Alaska Land Act and the Public Notice Clause concern disposals of interests in land.
Turning to the question of the applicability of the Wilderness Society tests to this case, Nunamta argues that under both tests, the MLUPs are functionally irrevocable. As to the first — the destruction of the licensee's investment test — Nunamta points to trial testimony by PLP's vice-president of environment that PLP had invested "$300-$400 million" dollars in exploration since 2002.
To further support its argument that the permits were functionally irrevocable because of potential loss of investment, Nunamta cites arguments and affidavits submitted by PLP and the State during the preliminary injunction phase of the case that contended there would be significant "destruction of the licensee's investments" resulting even from a preliminary injunction. PLP argued at the preliminary injunction phase that "Pebble's ability to further this project, and to realize a return on its investment, would be impaired by an injunction," claiming that a preliminary injunction "would have a ripple effect throughout the entire operation, and would cause a major loss of jobs and economic activity in Alaska."
PLP objects to Nunamta's reliance on the affidavits, asserting that only evidence presented at trial can be used in our review of the case.
The State argues that the destruction of sizable investment test only applies where the licensee builds improvements on the property, not where the investment is in exploration. Noting the inherently speculative nature of mineral prospecting, the State contends that
To illustrate its point, the State quotes from a law journal article on the Pebble exploration that states "[w]here government approval is required but not assured for a project, any investment in that project is akin to a business gamble."
The superior court based its decision that "revocation would not result in the destruction of Pebble's investment" on the lack of "permanent infrastructure or installments on the land." Although the superior court acknowledged that "Pebble has spent a significant amount of money on exploration and environmental studies," the court also considered that the sole purpose of these activities was "to collect intellectual property."
We agree with Nunamta that the hundreds of millions of dollars invested in exploration by PLP, including the money PLP furnishes to the State to pay for the permitting process, is the investment that must be considered. The potential loss of an investment of this magnitude could deter DNR from cutting short PLP's exploration process by revoking or not renewing a permit. Such an act could signal the end of the development and thus make useless the data that PLP had already gathered.
We do not agree with the State that the destruction of sizeable investments test only applies to investment in physical improvements, as the superior court evidently believed. A land manager could easily be reluctant to revoke a permit if doing so rendered valueless an investment of hundreds of millions of dollars related to a necessary step in a significant economic venture regardless of whether physical improvements were created. The point of the test is that where large sums have been invested, the government is effectively forced to honor the full term of the permit, because revoking it prematurely would
Nunamta also argues that the perceived public importance of the exploration would deter revocation. Relying on the MOU Nunamta asserts that some 58 State employees have been assigned to work on the project and that PLP will reimburse the State at least in part for their work. Under the MOU an estimated two million dollars in billings were budgeted for reimbursement over five years. Additionally, according to Hughes's affidavit, in excess of 610 jobs would be lost if PLP's exploration efforts were shut down. Nunamta also cites Hughes's testimony as demonstrating that the State's perception is that the suspension of the exploration permits would harm the entire mining industry in Alaska.
To discount Nunamta's public importance argument the State contends that "[t]o the extent that Pebble is important to the public, it is the mineral deposits themselves and the potential mine that are important, not the exploration authorized by the MLUPs." But the mineral deposits and potential mine can never be developed without the continuing, extensive exploration authorized by the MLUPs. The scope and number of the claims have expanded considerably since PLP and its predecessors began exploratory drilling under the MLUPs.
We agree with Nunamta that the perceived public importance of the exploration also would deter DNR from cutting short the exploration process. According to Hughes's affidavit, such an act would result in the loss of employment of many hundreds of people. In addition, according to Hughes, it would send a negative message to the mining industry that Alaska's regulatory climate is unsettled and that Alaska has "seemingly capricious regulations." This message would "deter companies looking for new projects," "definitely impact exploration investment," and harm "the mining industry in Alaska, and the Alaskan economy generally."
The perceived public importance of permitting the exploration of the Pebble ore deposit is underscored by a letter from the Governor of Alaska to the U.S. Environmental Protection Agency urging the agency not to invoke a procedure that could effectively prohibit development of the Pebble mine "prematurely," that is, without allowing the mine to advance to the development permitting phase. In the letter the Governor states: "There has been tremendous investment in the area based on the potential for mineral development. We cannot fathom the liability and legal challenges that could accompany an unprecedented, after-the-fact determination by the federal government that mineral development from these State lands is no longer viable."
We conclude that the first Wilderness Society test has been satisfied. It is easy to see how a state land manager could feel tremendous pressure not to revoke or refuse to renew a MLUP thereby imposing a loss of hundreds of millions of dollars in exploration funds and hundreds of jobs as well as risking the loss of the State's credibility as a location for future mining projects. Based on the record, there was a "negligible likelihood" that a MLUP would be revoked.
With respect to the second Wilderness Society test, Nunamta starts with the language of Northern Alaska describing this test: "[T]he court focuses on whether, upon revocation, the licensee could remove the installed structures, or otherwise vacate the land, without permanently damaging or destroying the property for governmental use."
By contrast, the State characterizes the second Wilderness Society test as the "government use test." The State argues that this test is satisfied as long as "the structures which the licensee proposes to erect are capable of being removed," and "upon revocation the land may be left in suitable condition for Government use."
We agree with Nunamta that the bore holes plugged with concrete and encased by steel are installed structures for the purposes of the second Wilderness Society test. These columns will remain in the land. They are not in a practical sense capable of being removed, and it is undisputed that removing them would increase the potential for environmental harm. In our view the buried sumps containing drilling mud and other drilling wastes should also be considered under the second test. The waste disposal sumps are not structures, but they are lasting alterations to the land. The landfill analogy used by Nunamta seems apt, for the sumps, like landfills, are used to dispose of potentially toxic material. The sumps of course could be dug up and the waste material removed, but only at great cost. The record does not reflect whether this would create additional environmental risks, but it seems clear that this will never occur.
The State's characterization of the second test as "the government use test" is flawed. The State focuses only on the final part of the test and ignores the question of whether installed structures can be removed.
Thus, under the test, where the structures are not capable of being removed, the question of suitability for government use does not arise.
This reading of the test thus emphasizes the importance of the continuing physical presence on the land of the structures constructed
On the record of the present case it cannot be said that PLP's exploration activities will likely cause irreversible ecological changes.
We conclude that the MLUPs are not functionally revocable in light of the investment in prior exploration activities that would be lost if they were revoked, and the strong reasons the State has for not pretermitting the Pebble exploration process. We also believe that the concrete plugs and steel casings in the bore holes represent a lasting occupancy of state lands that is inconsistent with the concept of revocability. Further, the hundreds of sumps containing toxic waste and chemically reactive material represent a continuing potential source of environmental harm that is also inconsistent with the concept of revocability.
In the case of TWUPs, DNR did not issue just one permit for a given exploratory period. Rather, it issued PLP nine TWUPs in January 2007, and two additional TWUPs in May 2009. Most of the TWUPs each covered five separate water sources. Overall the nine 2007 TWUPs permitted taking water from 21 stream sources, 18 pond sources, and five bore holes. Each TWUP covered a five-year period. The revocation clause in each TWUP provided: "Pursuant to 11 AAC 93.210(b), authorized temporary water use is subject to amendment, modification, or revocation by the Department of Natural Resources if the Department of Natural Resources determines that amendment, modification or revocation is necessary to supply water to lawful appropriators of record or to protect the public interest." Because this language is similar to the "at will" clause in the regulations governing MLUPs, we assume that this language qualifies
Any particular TWUP could be revoked for a number of reasons that would not threaten PLP's overall exploration program. Thus a land manager would not inevitably feel pressured not to revoke a TWUP by the possibility of imposing an enormous financial loss on PLP or by the possibility of causing the loss of hundreds of jobs or threatening the State's credibility with potential mining investors. Further, unlike in the case of MLUPs, there are no permanent structures or other features left in or on the land with respect to the water use permits. For these reasons, we conclude that the TWUPs do not meet the Wilderness Society tests for functional irrevocability.
We have held that the judgment should be reversed because the MLUPs are disposals of an interest in land requiring prior public notice. On remand, therefore, the superior court should enter a declaratory judgment reflecting this view. We leave to the superior court the question of whether any other action is appropriate.
The judgment of the superior court is REVERSED and this case is REMANDED for entry of a declaratory judgment in accordance with this opinion and for such further action as may be appropriate.
WINFREE, Justice, concurring.
WINFREE, Justice, concurring.
I agree with the court's conclusion that the facially short-term and revocable land use permits issued by the State of Alaska, Department of Natural Resources (DNR) to Pebble Limited Partnership (Pebble) are disposals of land requiring public notice under article VIII, section 10 of the Alaska Constitution. But reaching that conclusion by analyzing whether facially short-term and revocable permits are, functionally, long term and irrevocable seems ill-founded and far more complicated than necessary.
A simpler analysis can be accomplished without relying on the permit's facial or functional temporal quality or revocability, or on the necessarily arbitrary conclusion that a particular mining project has become such an unstoppable financial engine it likely would overcome the will of State employees charged with determining whether issuing or revoking a permit is in the State's best interest. This analysis relies on a mineral exploration permit's appurtenance to an existing mining claim, a property interest acquired from the State through article VIII, section 11 of the Alaska Constitution:
Alaska Statute 38.05.195(a) further explains that "[r]ights to deposits of minerals... in or on state land that is open to claim staking may be acquired by discovery, location, and recording.... The locator has the exclusive right of possession and extraction of the minerals ... lying within the boundaries of the claim."
A mining claim owner's permit application must include a detailed "map at a sufficient scale showing the general location of all activities and routes of travel of all equipment" as well as "a description of the proposed activity, any associated structures, and the type of equipment that will be used."
We have not had much occasion to consider the tension between (1) a mining claim holder's mineral property rights and associated right to use the surface estate, and (2) the State's regulatory restrictions on the mining claim holder's ability to use the surface estate for exploration and development.