Mining Law Blog - Insight and information for the industrial mineral, aggregate and hardrock mining industry

Last week a federal district court in California issued a nationwide injunction that may have significant impacts on exploration activities within National Forests.  For years activities that were categorically excluded from review under the National Environmental Policy Act (NEPA) were also exempt from U.S. Forest Service regulations concerning public notice, comment, and administrative appeals (36 C.F.R. Part 215).  This exemption covered a wide variety of activities including mineral exploration that was categorically excluded from NEPA review.  Last week, though, in Sequoia ForestKeeper v. Tidwell, the court held this exemption from public notice, comment, and administrative appeals requirements violated Section 322(a) of the Department of the Interior and Related Agencies Appropriation Act for Fiscal Year 1993, Pub. L. No. 102-381 (aka Forest Service Decisionmaking and Appeals Reform Act). 

As a result of this decision, activities within National Forests that were categorically excluded from NEPA review will now be subject to 36 C.F.R. Part 215’s public notice, comment, and administrative appeals provisions.  This will add a new layer of procedure to the permitting process that could significantly delay implementation of these activities.  The U.S. Forest Service must now give notice of the proposed exploration activity and provide a 30-day comment period.  Anyone who submits substantive comments then has 45 days after the U.S. Forest Service approves the activity to file an administrative appeal.  The U.S. Forest Service then has 45 days to decide the appeal, and assuming the original decision is affirmed, exploration can begin 15 business days after the appeal decision is issued.  All told, this could add approximately 140 days to the permitting process.

The U.S. Forest Service is in the process of drafting revisions to 36 C.F.R. Part 215 in response to Section 428 of the Consolidated Appropriations Act of 2012, Pub. L. No. 112-74, which requires that the U.S. Forest Service provide a pre-decisional objection process rather than the current post-decision administrative appeal process.  However, it is unclear whether the changes mandated by the Consolidated Appropriations Act of 2012 extend to activities that are categorically excluded from NEPA review.  Regardless, mineral exploration within National Forests that is categorically excluded from NEPA review will be subject to additional process and delay going forward.

As the stalled economy pushes Washington closer to a decision on how to manage America’s wealth of mineral resources, two paths have emerged.

One offers the possibility of increased domestic minerals production and the potential for long-term growth. Through legislation that would assess America’s mineral needs, we can maximize opportunities in mining, one of the few sectors that consistently added jobs despite the stagnant economy.

The other path is defined by a $1.8 billion tax on mining that would further complicate domestic minerals production. The mining industry calls the proposed new tax, a “Dirt Tax,” as it is calculated based on every pound of dirt moved.  Naturally, this new tax puts expansion plans at risk and makes U.S. mining less attractive to investors. American businesses would then have no choice but to import more of their mineral raw materials from foreign suppliers—despite the $6.2 trillion worth of key minerals within our borders. 

You can learn more at the following site and/or by contacting Mike Mills or Tom Henry.  http://actformining.org/national-actions/miningtax/

I provided the following paper at the recent CalCIMA conference in Monterey, California.

Overview

The Office of Mine Reclamation’s (OMR) decision to list or delist a mine from its list of “good mines” maintained under Public Resources Code Section 2717 (the AB 3098 list) effectively precludes a mine from selling to public agencies, critical  customers in an economic environment where private-party purchases are at a historically low level.  This presentation reviews the requirements for listing a mine under Public Resources Code Section 2717, and the actual prohibitions on providing mined material to state and local agencies, as contained in Public Contract Code Sections 10295.5 and 20676. The presentation also covers the delisting criteria used by OMR and reviews the due process problems with OMR’s current delisting procedures.   The presentation also will examine the status of the State Mining and Geology Board’s (Board) current efforts to develop due process regulations for delisting decisions. 

AB 3098 Requirements

Public Resources Code Section 2717(b) requires that, for the purposes of complying with the Public Contract Code, OMR must publish a list identifying the following:

1.         Surface mining operations for which a report has been submitted pursuant to Section 2207 indicating:

                      (a)     The reclamation plan and financial assurance have been approved.

                      (b)     Compliance with state reclamation standards pursuant to Section 2773.

(c)     Compliance with the financial assurance guidelines developed pursuant to Section 2773.1.

                      (d)     The annual reporting fee has been submitted to the Department.

2.         Surface mining operations for which an appeal has been submitted pursuant to Section 2770(e), provided the appeal has not been pending before the Board for more than 180 days.

3.         Surface Mining operations for which an inspection is required and for which an inspection notice has been submitted by the lead agency indicating compliance with the reclamation plan and sufficient financial assurances.

Utilizing this list of “good mines,” Public Contract Code Section 10295.5 requires that no state agency shall acquire or use minerals from mines subject to SMARA unless the operation is identified on the list published pursuant to Public Resources Code Section 2717 as having either: (1) an approved reclamation plan and financial assurances covering the affected mining operations or (2) an appeal pending before the Board pursuant to Public Resources Code Section 2717(b) with respect to the reclamation plan or financial assurances.

Likewise Public Contract Code section 20676, mining operators and contractors are prohibited from selling mined minerals to local agencies unless the mine is not subject to SMARA or unless the operator “certifies under penalty of perjury, that the minerals are from a mining operation identified in the list published pursuant to Section 2717(b)).”

Issues Raised By OMR’s Delisting Decisions

OMR has historically kept a single list.  To be listed the mining operation had to meet all of the requirements set out in Section 2717, or have an appeal on a reclamation plan or financial assurances pending before the Board with SMARA. 

OMR’s manner of maintaining the AB 3098 list is problematic.  To be on the list maintained by OMR, the mining operation has to meet all of the requirements of Section 2717.  Thus, a mining operation could have a reclamation plan and financial assurances, thereby meeting the requirements to sell to a State Agency under Public Contract Code section 10295.5, and yet be removed from the list because an inspection report reflected a problem with its operations. 

Dennis O’Bryant’s February 2010 testimony before the Board as to how the program has been implemented also reflects other problems.  In particular, OMR did not rely solely on lead agencies’ inspection reports, but appears to have made independent decisions with regard to whether a mining operation met the requirements of SMARA.  In some instances OMR has taken the position that a mining operation that has a reclamation plan with a minor deviation no longer has an “approved” reclamation plan.  Also, it appears that OMR would remove mining operations from the list when complaints were made to OMR about the operation, while other mining operations with problematic inspection reports remained on the list essentially because no one complained to OMR.  Finally, OMR appears to have required that an inspection report indicate “full compliance” with SMARA, while the law suggests that “compliance” can mean “substantial” compliance.

Moreover, OMR’s historic interpretation of its responsibilities creates problems for mining operations that are committed to coming into compliance with SMARA.   For example, a mining operation may overshoot their mining boundary and require a minor amendment to its CUP and reclamation plan.  The operator may agree an amendment is needed, post financial assurances to ensure reclamation of the area, and diligently pursue a reclamation plan amendment.  However, compliance with legal provisions such as environmental review under CEQA may delay the necessary approval for months.  Other factors may make the situation even more complicated.  For example, the deviation may have occurred on property not owned by the mine operator.  Despite its best efforts the mining operation may be precluded from selling to state and local agencies during the time it takes to resolve all of these issues.

The Due Process Issue

In our opinion previous delisting actions by OMR have failed to provide legally required due process protections.  California courts have held that actions by government agencies that exclude a person from doing business with a government entity must be accompanied by procedural safeguards, such as notice of the violation, an opportunity to rebut those violations and, under most circumstances, a hearing.  The courts have further held that basic fairness in these circumstances requires establishing written standards for debarment, the right to cross-examine witnesses, and the development of administrative findings and conclusions based on the record.

Debarment of a government contractor requires procedural due process as such an action implicates a constitutionally protected liberty interest.  The courts also have stated that the hearing must take place before an impartial arbiter or tribunal.  Typically, due process would prohibit a government official  that was involved in investigating and prosecuting a case from participating as an adjudicator. 

For example, in the case of Golden Day Schools, Inc. v. State Department of Education, the court stated that “Disqualification from bidding or contracting . . . directs the power and prestige of government at a particular person and . . . may have a serious economic impact on that person.  Such debarment cannot be left to administrative improvisation on a case-by-case basis.” (2000) 83 Cal.App.4th 695, 706.

SMGB Proposed Regulations

The State Mining and Geology Board has attempted to remedy this problem by proposing regulations that would, in part, provide procedures for removing mines from the AB 3098 List.  The proposed regulations have been opposed by CalCIMA on the grounds that: 1) the Board lacks authority to enact the proposed regulations; and 2) the regulations go far beyond what is needed to fix the current problems with OMR’s delisting decisions.  In particular, CalCIMA has noted that the regulations set out stringent requirements for listing decisions, including requirements that local agencies are likely to find onerous, and provides that third parties may challenge listing decisions. 

Tom Henry and Mike Mills are partners at Stoel Rives LLP in the Sacramento, California office. They may be reached via email at tahenry@stoel.com and mnmills@stoel.com, respectively. Their business address is 500 Capitol Mall, Sacramento, CA 95814; telephone: 916-447-0700.

Falling victim to a Legislature pre-occupied with massive budget deficit issues and last minute wrangling over the Governor’s corporate tax package on out-of-state companies, AB 591, California’s legislative foray into the charged arena of hydraulic fracturing regulation, stalled in the State Senate’s Appropriations Committee.  In its current form, the bill embodied a fairly comprehensive agreement between the bill’s author, Assemblymember Wieckowski, and its sponsors, but several outstanding issues remained.  Among the remaining outstanding issues was mandatory reporting of hydraulic fracturing fluid components.  The sponsors had hoped for far-reaching reporting regulations for hydraulic fracturing fluid, but confidentiality issues based on trade secret concerns led to protracted negotiations that stalled the bill.  AB 591’s proposed language had included requirements mandating disclosure of the constituent compounds in each operator’s hydraulic fracturing fluid, and requirements for disposal of such fluids.  With the end of the regular legislative session today, interested parties can expect a new version of the bill to appear early in the next legislative session, set to open on January 4, 2012.  If it is adopted as an urgency measure, it would take effect immediately, and oil and gas operators could potentially be faced with immediate reporting obligations under the legislation beginning in early 2012. 

Please join the Stoel Rives Oil and Gas, Pipelines & Mining Law Team at the 57th Annual Rocky Mountain Mineral Law Institute in Santa Fe, NM on July 21-23, 2011.

We are pleased to be a sponsor of the Thursday evening Reception and we look forward to reconnecting with familiar faces and meeting new attendees. Please say hello to the nine attorneys from the Stoel Rives Oil and Gas, Pipelines & Mining team who are in attendance at the conference.

On Saturday, July 23, Jennie Bricker will be presenting on "Lake Beds and River Channels: Legal Issues in Boundaries and Ownership" which discusses the ownership of land and minerals underneath waterways.

We look forward to seeing you there!

For more information on this event, please visit: http://www.rmmlf.org/AI57brochure.pdf