Northern Plains Resource Council, Inc. v. Montana Board of Land Commissioners , 366 Mont. 399 ( 2012 )

October 23 2012
DA 12-0184 and DA 12-0185
IN THE SUPREME COURT OF THE STATE OF MONTANA
2012 MT 234NORTHERN PLAINS RESOURCE COUNCIL, INC.
and NATIONAL WILDLIFE FEDERATION,
Plaintiffs and Appellants,
v.
MONTANA BOARD OF LAND COMMISSIONERS,
STATE OF MONTANA, ARK LAND COMPANY, INC.
and ARCH COAL, INC.,
Defendants and Appellees.
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MONTANA ENVIRONMENTAL INFORMATION
CENTER and SIERRA CLUB,
Plaintiffs and Appellants,
v.
MONTANA BOARD OF LAND COMMISSIONERS,
ARK LAND COMPANY, INC. and ARCH COAL, INC.,
Defendants and Appellees.
APPEAL FROM: District Court of the Sixteenth Judicial District,
In and For the County of Powder River,
Cause Nos. DV-38-2010-2480 and DV-38-2010-2481
Honorable Joe L. Hegel, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
Jack R. Tuholske; Tuholske Law Office, Missoula, Montana
Patrick Parenteau; Vermont Law School, South Royalton, Vermont
(for Northern Plains Resource Council and National Wildlife Federation)
Timothy J. Preso, Jenny K. Harbine; Earthjustice, Bozeman, Montana
(for Montana Environmental Information Center and Sierra Club)
For Appellees:
Steve Bullock, Montana Attorney General; Jennifer M. Anders, Assistant
Attorney General, Keif Storrar, Legal Intern, Helena, Montana
Candace F. West, Tommy H. Butler, Special Assistant Attorneys General,
Montana Department of Natural Resources and Conservation, Helena,
Montana
Mark L. Stermitz, Jeffery J. Oven, Christopher C. Stoneback; Crowley
Fleck PLLP, Missoula, Montana (for Ark Land Company, Inc. and Arch
Coal, Inc.)
Submitted on Briefs: October 10, 2012
Decided: October 23, 2012
Filed:
__________________________________________
Clerk
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Chief Justice Mike McGrath delivered the Opinion of the Court.
¶1 The Northern Plains Resource Council, the National Wildlife Federation, the
Montana Environmental Information Center, and the Sierra Club (collectively referred to
as NPRC) appeal from the District Court’s memorandum and order of February 3, 2012
granting summary judgment to the Montana Board of Land Commissioners, Ark Land
Co., and Arch Coal. We affirm.
¶2 We restate the issue for review: Whether the State Land Board properly issued
leases to Ark Land Co., a subsidiary of Arch Coal, Inc., without first conducting
environmental review under the Montana Environmental Policy Act, Title 75, Chapter I,
MCA.
PROCEDURAL AND FACTUAL BACKGROUND
¶3 Plaintiffs filed suits seeking declaratory rulings that the State Land Board
wrongfully failed to conduct environmental studies required by the Montana Constitution
prior to entering leases with Arch Coal on March 8, 2010. The leases cover State lands
located in the Otter Creek drainage, a tributary of the Tongue River, in southeastern
Montana. Arch Coal leased the State’s mineral interest for the purpose of strip mining
for coal. In 1997 the State of Montana obtained the mineral rights to these lands from the
United States, and they are part of a larger coal reserve covering almost 20,000 acres.
That land is checker-boarded with mineral interests that are 82% privately owned; 10%
State owned; and 8% owned by the United States. The State holds its mineral interest in
trust for the financial support of public education.
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¶4 In 2003, the Legislature authorized the State to offer the Otter Creek mineral
interests for leasing. After study, appraisal, presentation of a draft lease, and opportunity
for public comment, the State Land Board approved leases to Arch Coal in 2010. The
State received a bonus payment from Arch Coal of $85,000,000.
¶5 The Arch Coal leases do not authorize or permit any mining activity, and do not
authorize or permit any degradation to any land or water. The leases do not allow any
significant surface disturbance without acquisition of all required permits from the State
of Montana. The leases specifically provide:
All rights granted to Lessee under this Lease are contingent upon Lessee’s
compliance with the Montana Strip Mine Siting Act and the Montana Strip
and Underground Mine Reclamation Act (Title 82, Chapter 4, Parts 1 and
2, MCA) and upon Lessor review and approval of Lessee’s mine operation
and reclamation plan. The rights granted under this Lease are further
subject to agency responsibilities and authority under the provisions of the
Montana Environmental Policy Act.
. . .
Lessor may prescribe the steps to be taken and reclamation to be made with
respect to the land and improvements thereon. Nothing in this section
limits Lessee’s obligation to comply with any applicable state or federal
law, rule, regulation, or permit.
. . .
This Lease is subject to further permitting under the provisions of Title 75
[MEPA] or 82 [mine reclamation], Montana Code Annotated. Lessee
agrees to comply with all applicable laws and rules in effect at the date of
this lease, or which may, from time to time, be adopted and which do not
impair the obligations of this Lease and do not deprive the Lessee of any
existing property right recognized by law.
The State may declare the leases forfeited and canceled if Arch Coal fails to fully
discharge any of its duties. The leases also require Arch Coal to implement written
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operating plans in agreement with the Northern Cheyenne Tribe before any mining
commences.
¶6 The State contends that environmental review under MEPA will occur at least
twice before any coal is mined. First, Arch Coal will have to obtain a prospecting permit
under the Montana Strip and Underground Mine Reclamation Act, Title 82, Chapter 4,
MCA, prior to gathering information about the coal reserves. Second, prior to any
mining Arch Coal must obtain an operating permit under § 82-4-221, MCA, which will
include detailed plans for mining, reclamation, revegetation and rehabilitation of the
disturbed land. Further, as the parties stipulated in District Court, the mine operation and
reclamation plan must be reviewed and approved by the State Land Board.
¶7 NPRC contends that mining and burning the coal may result in a broad range of
environmental and other effects including air and water pollution, boom and bust
economic cycles and global warming. The State Land Board did not conduct any
environmental review prior to entering the leases, relying on § 77-1-121(2), MCA. That
statute expressly exempts the State Land Board from compliance with the Montana
Environmental Policy Act (Title 75, Ch. 1, Pts. 1 and 2, MCA) prior to issuing any lease
as long as the lease is subject to “further permitting under any of the provisions of Title
75 or 82 [MCA].” For purposes of this case, the effect of the statute is to defer
preparation of an environmental impact statement (EIS) until later in the development
process.
¶8 NPRC contends that § 77-1-121(2), MCA, is unconstitutional because Article II,
Section 3 and Article IX, Sections 1, 2, and 3 of the Montana Constitution require that the
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State conduct activities such as leasing coal interests in a way that protects its citizens’
right to a clean and healthful environment. NPRC contends that the chief mechanism to
implement these constitutional protections is the Montana Environmental Policy Act
(MEPA), Title 75, Ch. 1, MCA. NPRC further contends that but for § 77-1-121(2),
MCA, the State Land Board would have been required to conduct environmental studies
prior to entering the coal leases. They further contend that deferral of environmental
review until the mine permitting stage unconstitutionally denies them the right to early
environmental review that would preserve the State’s right to place conditions on the
mining; to obtain better financial terms; or to decide to not enter the leases at all.
¶9 In the summary judgment proceedings the parties agreed to a joint statement of
uncontested facts. NPRC presented further evidence of the direct and indirect effects of
mining and burning the Otter Creek coal. Neither the State nor Arch Coal presented any
contrary evidence. Based upon the evidence submitted, the District Court found that it
was reasonably certain that mining and burning the coal could add a significant
percentage to the carbon dioxide released into the atmosphere, thereby exacerbating
global warming and climate change. The District Court found that the effects of climate
change include specific adverse effects on Montana’s water, air and agriculture. The
District Court found that “the myriad adverse environmental consequences alleged by
Plaintiffs, including global warming, would occur should the coal be mined and burned.”
¶10 The District Court framed the issue regarding § 77-1-121(2), MCA, as being
whether the coal lease was such an irretrievable commitment of resources to a project that
may significantly adversely affect the human environment so as to implicate the
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environmental protections of the Constitution, implemented through MEPA. The State
argued that it retained the right under the lease and the law to impose any reasonable
environmental restrictions that could have been imposed at the leasing stage, relying
upon Seven Up Pete Venture v. State of Montana, 2005 MT 146, 327 Mont. 306, 114
P.3d 1009.
¶11 The District Court determined that Arch Coal, by leasing the Otter Creek tracts
from the State, acquired “nothing more than the exclusive right to apply for permits from
the State.” Further, the District Court determined that, as provided in the leases,
environmental review under MEPA and any other applicable statutes will take place
before there is any significant disturbance of ground or water and before any coal is
mined or burned. Even though the District Court determined that it was probable that
mining would go forward, there is no guarantee that it will and no basis for determining
that adequate environmental protections, as required by Montana law and the leases, will
not be put into place during the permitting process. The District Court therefore found
that “the State has retained sufficient ability to require adequate environmental
protections sufficient to meet its constitutional and trust responsibilities, both
environmentally and financially.”
STANDARD OF REVIEW
¶12 This Court undertakes plenary review of questions of constitutional law. Seven
Up Pete, ¶ 18. This Court reviews a district court decision on a motion for summary
judgment de novo, applying the same criteria under M. R. Civ. P. 56. Seven Up Pete, ¶
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19. Legislative enactments are presumed to be constitutional. Powell v. State Fund,
2000 MT 321, ¶ 13, 302 Mont. 518, 15 P.3d 877.
DISCUSSION
¶13 Article II, Section 3 of the Montana Constitution provides that all persons have an
inalienable right to a clean and healthful environment. Article IX, Section 1 requires the
State to maintain and improve a clean and healthful environment, and requires the
Legislature to provide for the enforcement and administration of this duty. Article IX,
Section 2 requires that all lands disturbed by the taking of natural resources must be
reclaimed. Article IX, Section 3 recognizes and confirms all existing water rights and
requires the Legislature to provide a system for the administration, control and regulation
of water rights.
¶14 One of the ways that the Legislature has implemented Article IX, Section 1 is by
enacting MEPA. MEPA is essentially procedural and does not demand any particular
substantive decisions. Rather, it requires State agencies to review, through an EIS, major
actions that significantly affect the quality of the human environment so that the agencies
may make informed decisions. Section 75-1-102, MCA; Montana Wildlife Fed. v.
Montana Board of Oil & Gas Conservation, 2012 MT 128, ¶ 32, 365 Mont. 232, 280
P.3d 877. Under applicable regulations, an EIS is required for a “major action of state
government significantly affecting the quality of the human environment.” Montana
Wildlife Fed., ¶ 44.
¶15 As Arch Coal and the State argue, State statutes do not provide any other bright
line for when preparation of an EIS is required under MEPA. Section 75-1-201(1)(b)(iv),
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MCA, requires that an EIS be prepared prior to undertaking “major actions of state
government significantly affecting the quality of the human environment. . . .” This
“significant effect” has been defined as the “go/no go” point of action, beyond which the
State will make an “irretrievable commitment of resources.” North Fork Preservation
Association v. Department of State Lands, 238 Mont. 451, 461, 778 P.2d 862, 868 (1989).
In North Fork this Court held that leasing State lands for oil and gas development was not
an irretrievable commitment of resources because the lessee could not undertake any
ground-disturbing activity without prior State approval. “Nothing could happen under
the leases without government approval.” North Fork, 238 Mont. at 461, 778 P.2d at
868. Therefore, even though the lease could “ultimately empower” the lessee to conduct
oil and gas activities that would have a significant impact on the environment, an EIS was
not required at the point of issuing leases. North Fork, 238 Mont. at 462, 778 P.2d at
869. This is also the result under parallel Federal leasing and permitting actions. Connor
v. Burford, 848 F.2d. 1441, 1448 (9th Cir. 1988) (EIS not required when issuing leases for
Federal land where permits were required for any development activity), cited in North
Fork.
¶16 The parallels between North Fork and the present case are clear. In both instances
the State issued leases for mineral development on State lands, and did so without first
completing an EIS. In both instances the leases clearly required express approvals by
applicable State agencies before any ground disturbance could take place. In the present
case Arch Coal’s development rights are expressly contingent upon obtaining permits and
approval of mining and reclamation plans under the Strip Mine Siting Act and the Strip
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and Underground Mine Reclamation Act, as well as approval of the State Land Board.
EIS review of the project will take place when the State considers whether to issue those
permits and approvals.
¶17 Lessees of State land like Arch Coal have no right to engage in mining operations
until all necessary permits required by State law or regulation are obtained. Seven Up
Pete, ¶¶ 27-28; Kadillak v. Anaconda Co., 184 Mont. 127, 138-140, 602 P.2d 147, 154-
155 (1979). As the District Court recognized in the present case, lessees like Arch Coal
acquire only “the exclusive right to apply for permits from the State.”
¶18 NPRC contends that § 77-1-121(2), MCA, impacts the fundamental right to a
clean and healthful environment contained in Article II, Section 3 of the Montana
Constitution and therefore the State must present a compelling interest to justify its
application. The right to a clean and healthful environment is a fundamental right. MEIC
v. DEQ, 1999 MT 248, ¶ 63, 296 Mont. 207, 988 P.2d 1236, and a statute that impacts
that right to the extent that it interferes with the exercise of that right, is subject to strict
scrutiny, requiring the State to provide a compelling interest for its existence. MEIC, ¶¶
55, 60. In MEIC this Court found that a statute allowing the discharge of arsenic-
containing water without any environmental review “implicated” or “impacted” the right
to a clean and healthful environment and thus could survive only upon a showing of a
compelling State interest. MEIC, ¶ 79.
¶19 Unlike the situation in MEIC, the leases at issue in the present case do not remove
any action by Arch Coal from any environmental review or regulation provided by
Montana law. Those reviews are only deferred from the leasing stage to the permitting
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stage. As noted above the leases specifically require Arch Coal to comply with all
applicable State and Federal laws that apply, and specifically with Montana laws
regarding mine siting and mine reclamation and Montana laws requiring the preparation
of an EIS analysis. Because the leases themselves do not allow for any degradation of
the environment, conferring only the exclusive right to apply for State permits, and
because they specifically require full environmental review and full compliance with
applicable State environmental laws, the act of issuing the leases did not impact or
implicate the right to a clean and healthful environment in Article II, Section 3 of the
Montana Constitution. The act of leasing the Otter Creek mineral interests to Arch Coal
did not interfere with the exercise of the fundamental right to a clean and healthful
environment under the Montana Constitution so as to require strict scrutiny and
demonstration of a compelling State interest.
¶20 Therefore, § 77-1-121(2), MCA, is not subject to strict scrutiny requiring
demonstration of a compelling State interest. Similarly, “middle-tier” scrutiny is not
called for here because the statute does not adversely impact constitutional rights
provided for outside of Article II, such as the provisions of Article IX noted above. The
requirements of an EIS review under MEPA have been enacted by the Legislature in
response to the broad directives found in Article II and Article IX of the Montana
Constitution. If no constitutionally-significant interests are interfered with by § 77-1-
121(2), MCA, then the State must only demonstrate that the statute has a rational basis.
Kottel v. State, 2002 MT 278, ¶¶ 50-52, 312 Mont. 387, 60 P.3d 403; Snetsinger v. Mont.
Univ. System, 2004 MT 390, ¶¶ 16-19, 325 Mont. 148, 104 P.3d 445.
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¶21 Sufficient rational basis exists for the deferral of an EIS under the facts of this case
until there is a specific proposal to consider, rather than requiring an EIS at the leasing
stage when there would be no specific mining proposal to evaluate. Deferring EIS
consideration until there is a specific mining proposal thus strives to eliminate duplicate
and speculative studies and review, while preserving all environmental protections
required by law. For example, § 82-4-222(1), MCA, requires that a permit application
contain a complete and detailed plan for the mining, reclamation, revegetation, and
rehabilitation of the land and water to be affected by the operation. The plan must
include intricate details regarding the land and water to be affected. As a practical
matter, little of that information is available at the leasing stage. Execution of the lease
grants the prospective operator the opportunity to begin to prepare a complete application
for a mining permit. Any environmental review and protections that could have been put
into place at the leasing stage can be implemented at later permitting stages, all before
any prospecting or actual development begins. In addition, the statute in this case has
allowed the State Land Board to generate substantial income for public schools, while
still requiring full environmental review prior to any development taking place. Section
77-1-121(2), MCA, is therefore rationally based and does not contravene the Montana
Constitution.
¶22 The District Court is affirmed.
/S/ MIKE McGRATH
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We concur:
/S/ PATRICIA COTTER
/S/ MICHAEL E WHEAT
/S/ BRIAN MORRIS
/S/ BETH BAKER
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