Sunday, July 26, 2015

Exploration permits up in air after court ruling

Alaska Contract Staffing
By Tim Bradner
Alaska Journal of Commerce

A May 29 Alaska Supreme Court decision will have wide-ranging impact on the state mining industry after a ruling that declared bore holes drilled and filled during exploration constitute a permanent disposal of state land requiring public notice and comment. State agencies are still interpreting the ruling to decide how to change the current system for issuing Miscellaneous Land Use Permits.

An exploration site at the Pebble prospect near Iliamna Lake is seen from the air in this 2010 photo. A May 29 Alaska Supreme Court decision will have wide-ranging impact on the state mining industry after a ruling that declared bore holes drilled and filled during exploration constitute a permanent disposal of state land requiring public notice and comment. State agencies are still interpreting the ruling to decide how to change the current system for issuing Miscellaneous Land Use Permits.

State attorneys and natural resources officials are wrestling with the implications of a May 29 state Supreme Court decision requiring expanded public notice and review procedures for certain Miscellaneous Land Use Permits issued by the Department of Natural Resources.

The decision, in a lawsuit brought by Nunamta Aulukestai, a Bristol Bay Tribal group, and three individuals, could have widespread effects in natural resource development if it opens opportunities for new litigation. At the least, it raises new uncertainties for projects, people familiar with the case say.

Nunamta Aulukestai was contesting Miscellaneous Land Use Permits, or MLUPs, and Temporary Water Use Permits, or TWUPs, issued for mining exploration at the large Pebble copper/gold project near Iliamna.

In addition to Numamta Aulukestai, four others were plaintiffs: Bristol Bay residents Ricky Delkittie Sr. and the late Violet Willson, state constitutional delegate Vic Fischer and former First Lady Bella Hammond.

The original case, filed in 2009, argued that the drilling of exploration drill holes, which are commonly done in mining exploration, was causing environmental damage through pollution, that the public hadn’t been given adequate public notice and that cumulative effects of the Pebble exploration program, which was extensive, weren’t considered.

The Superior Court initially sided with the state and with Pebble Partnership, the company doing the exploration, but the Supreme Court reversed the lower court decision on the public notice aspect.

The plaintiffs also challenged DNR’s issuing of TWUPs, but the Supreme Court found that those were indeed temporary and were functionally revocable, unlike the land permits.

The Supreme Court found the MLUPs to be functionally irrevocable based on the large investment made by Pebble in exploration that the state would be unlikely to halt, and that the well casings left behind after drilling constitute a permanent “disposal” of public land that requires notice and comment under the state Constitution.

“This decision means that all Alaskans, especially those whose rights and livelihoods are jeopardized by intensive exploration activities like those at Pebble, have the constitutional right to participate in those decisions affecting them,” said Trustees for Alaska Executive Director Vicki Clark in a formal statement after the decision. Trustees for Alaska represented the plaintiffs in the case. “The State has issued permits behind closed doors without even looking at the harm to public resources.”

The Supreme Court did not give the state resources agency much guidance in correcting the legal defects. The matter is now more or less left to the DNR to interpret what court said and devise new procedures, and then wait to be sued again to see if the interpretation is correct.

State attorneys and resource officials are not saying what steps they may take to correct the situation. In a statement, Cori Mills, spokeswoman for the state Department of Law, said, “DNR’s evaluation of the regulatory changes necessary to address the Nunamta decision is underway and will take a bit of time to establish and implement. Any rulemaking that is require to codify changes would be subject to public review and comment.”

The state Legislature may have to step in to clarify statutes, although those already distinguish permits that need public notice from those that are minor, and do not.

Mills said the case is now back to the Superior Court, which will soon issue a declaratory judgment to the DNR that recognizes the Supreme Court decision. A motion on attorneys’ fees has also been made, she said. The Supreme Court also reversed the Superior Court order to make the plaintiffs pay a portion of the state’s and Pebble’s legal fees.

The Supreme Court wrote in its decision it expected Nunamta to file a motion to collect legal fees from the state and Pebble after becoming the prevailing party.

The May 29 court decision didn’t invalidate the MLUPs at Pebble, which were all expired by then, but it has caused a big wrinkle over how certain MLUPs are to be issued in the future, and a variety of industries besides mining could be affected.

This has created a dilemma for state land managers.

“The court didn’t say we couldn’t issue the permits but dealt with what kind of public notice we should issue,” for certain permits, said Wyn Menefee, Chief of Operations for the state Division of Mining, Land and Water.

The division makes all MLUPs available to the public through the state’s on-line public notice system. The public can comment within 14 days but it must be in writing or e-mail, Menefee said, because the state’s on-line system is not set up for on-line comments.

The same notification goes to other state agencies, and the agencies often provide comments and sometime ask for more time to look at the permits, he said.

Essentially, the May 29 decision said that the on-line posting isn’t enough for certain types of land-use permits, those that can be considered “irrevocable,” or more permanent in nature, compared to “revocable” permits which are truly temporary and which the state DNR can rescind within the period of the permit, typically three to five years.

The state high court found that the specific exploration holes drilled at Pebble, some of which were drilled to 7,000 feet and involved placement of permanent steel casing, were irrevocable permits similar land easements issued by DNR and thus needed a broader public notice procedure.

While the decision doesn’t appear to be retroactive in affecting existing land permits there was also little guidance from the court as to how the agency can define the types of activities that can distinguish between irrevocable and revocable MLUPs going forward.

Most important, the court didn’t signal what type of public notice procedure would be acceptable other than it must be more than what is now done.

“We’re still evaluating the decision, but there wasn’t a lot of guidance,” Menefee said. “Almost everything we do is noticed, but is it enough?”

The department will certainly plan a more widespread public notice procedure once it sorts out how to distinguish between activities that are irrevocable (most likely major mining drilling programs of the sort done at Pebble) but whatever the department does will be challenged by environmental groups, said John Shively, chairman of Pebble Partnership and a former state Commissioner of Natural Resources.

“How can this be sorted out? It’s a guessing game. I suspect the environmental groups will keep bringing lawsuits,” Shively said. “Anything the NGOs (non-governmental organizations) can to do make life miserable for miners they will do,” he said.

Shively said the original Nunamta Aulukestai lawsuit “was aimed at shutting us down at Pebble. It didn’t work.”

“They (the plaintiffs) had theories that we were destroying the environment with our drilling, but the Superior Court said there was no evidence of that and the Supreme Court didn’t disagree,” he said.

Pebble has tried to do its exploration in as much a benign way as possible. Exploration there began in 1988 and as of 2010, when the Superior Court trial was held, 1,269 holes had been drilled, along with seismic surveys. When the mineral cores were extracted from the holes they were plugged with concrete and rigs and drill-pads were removed by helicopter.

The plaintiffs lost on that point but the decision has still opened up a Pandora’s Box of other issues for land developers.

What concerns people most, Shively said, is whether continued litigation on the public notice procedures will ultimately lead to a formal Best Interest Finding, or BIF, procedure for mining exploration, but also a lot of activities that require temporary state land permits.

Best Interest Findings, or BIFs, is a state equivalent to a federal Environmental Impact Statement that are done with significant actions on state lands, such as oil and gas lease sales, forest sales or other land actions, and even sales of state royalty oil to refining companies.

Like the federal EIS, the state BIF procedure has provisions for public appeals of agency decisions. They are expensive to do, and can set the stage for litigation, but state BIFs were adopted to formally document state agency decisions and the weighing of alternatives, similar to what an EIS does on the federal level.

Ironically, the procedure was adopted to minimize the disruption to the state oil and gas lease sales cause by environmental lawsuits by spelling out in detail the rationale for the state decisions and consideration of alternatives.

Since BIFs were adopted no state oil and gas lease sale has been held up by an environmental lawsuit.

Nunamta Aulukestai raised the Best Interest Finding issues in the Pebble lawsuit but while the Supreme Court discussed it in its decision the matter was left unsettled.

The state high court said the state Constitution does not require a best interest finding. However, the decision did connect the issue with a previous Supreme Court decision, known as REDOIL (brought by Resisting Environmental Destruction on Indigenous Lands), which dealt with cumulative effects of a state decision.

“They (the plaintiffs) were obviously playing into the REDOIL decision,” Shively said.

Under the REDOIL decision an agency is required to perform some form of “continuing assessment” of impacts from a permit authorizing future actions. This moves in the direction of a cumulative effects analysis by a state agency, long a goal of environmental groups.

“I’m sure there will be more lawsuits on all this,” Shively said.

Other attorneys who familiar with the case, and state land management procedures, felt the Supreme Court decision, in finding the Pebble TLUPs permanent, or irrevocable, was correct.

“I think the court was swayed by the length of time and controversy of the interminable Pebble exploration, which comprised $300 million of expense and explosives, portable rigs, structures, fuel storage and helicopters,” said Jim Barnett, a private attorney who is also a former deputy state resources commissioner.

The sheer scale and the duration of the Pebble exploration is what set it apart, Barnett said. The department should have conducted some form of expanded public notice, he said.

Barnett said he believes that complying with the Supreme Court decision will ultimately require DNR to conduct a review of cumulative impacts, as required by the REDOIL decision, on mining exploration.

Menefee said many activities on state lands that are non-intrusive and don’t require permits, such as small-scale mining or activities with what are essentially hand tools. More substantial uses, such as drilling core holes to certain depths, do require the temporary land-use permits, the TLUPs.

The interpretation will be in what is a temporary permit, and revocable, compared with a de facto permanent permit, in practice irrevocable. The Supreme Court decision cited Pebble’s major investment in exploration at the time the lawsuit was filed, $300 million, as a factor in decided those particularly permits were permanent, but did not give any guidance as to what investment threshold might drive the determination.

Menefee said the installation of metal casing around drill holes, although discussed in the decision, might not be a workable threshold in a determination because many mining bore holes are cased and it is impractical, and very costly, to require the casing be taken out.

“The casing is always cut off below ground and covered,” and typically poses no environmental threat, Menefee said. “We often allow piping, cable or concrete to be left behind as long as it is non-polluting and doesn’t create a safety problem,” he said.

Once mining exploration gets to the stage where a lease is required it does trigger the DNR’s public notice requirements and often a formal Best Interest Finding process, Menefee said.

If the Legislature had wanted land-use permits to be subject to Best Interest Findings it would have required it in statute. Instead, the permits are specifically excluded from the BIFs, he said.

Meanwhile, the DNR will have to come up with some way of dealing with the court decision. “For now, we don’t see this as a big problem. It is something we can manage. But we’re left trying to interpret what the court meant, and someone may still sue us,” Menefee said.

“We want to ensure that our (new) procedures will match what the court said, he said.

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