Archive for May, 2015

Court Delivers Double-Whammy Over Pebble

Friday, May 29th, 2015
Court Delivers Double-Whammy Over Pebble

Today, the Alaska Supreme Court issued two decisions that will have far-reaching impacts about how the Department of Natural Resources conducts business in hard rock mineral exploration, and the ability of the State and others to chill opposition. While the two cases involved the Pebble Prospect exploration, neither will impact the development of that mine.

Background

In 1988, Teck Cominco drilled the first exploration wells in what would become the 360 square-mile Pebble Prospect. By 2010, ownership of the Pebble claims would change hands from Teck Cominco to Northern Dynasty Minerals to the Pebble Limited Partnership. Collectively, those entities would drill some 1,269 core holes, some as deep as 7,000 feet, and deposit countless amounts of waste materials in unlined sump pits in this porous, water-rich area at the headwaters of the Talarik Creek/Kvichak River and Koktuli/Multchatna/Nushagak River systems in the Bristol Bay region. And all of this was conducted without a public process.

By 2009, Nunamta Aulukestai, an association of ten village corporations and ten tribal governments, and four plaintiffs – Rick Delkittie, Violet Willson, Bella Hammond, and Vic Fischer – had had enough. They filed suit against the State of Alaska, Department of Natural Resources, claiming that the land use permits issued to Pebble for exploration were disposals of interests in land that required a public process according to article VIII, section 10 of the Alaska Constitution. Unlike oil and gas operations, which require a public interest determination by statute before any serious exploration begins, hard rock mineral exploration is exempt from such scrutiny.

After a two-week trial in December 2010, the plaintiffs in the case were delivered a devastating loss. The trial judge ruled that they had not shown that the exploration actions to date had caused environmental damage, and therefore they had not made their case. Under Alaska law, if a party files a suit based solely on constitutional grounds, they are exempt from paying the winning party’s attorneys fees and costs, unless the winning party can show that the plaintiffs had a “significant economic incentive.” In this case, both Pebble and the State sought to recover nearly $1 million in costs and attorneys fees from the plaintiffs, arguing that Nunamta and the other plaintiffs were merely proxies for the commercial fishing industry and thus had an economic interest. And in the process of trying to prove this economic interest, Pebble and the State went after both the non-profit law firm that represented the plaintiffs pro bono (Trustees for Alaska) as well as one of the private non-profit foundations that provided funding support to Trustees’ work.

DNR’s Practice of Allowing Unfettered Use of Land Without a Public Process

“This case is about process.”

The first of today’s decisions, Nunamta Aulukestai v. State of Alaska, addressed the merits of what the December 2010 trial addressed – whether the State was required to engage the public when authorizing permits that authorized immense disturbances to State lands. While the trial judge required the plaintiffs to enter a lengthy trial to provide evidence to prove that the lands and waters involved in the Pebble exploration had been damaged, the Alaska Supreme Court disagreed with that approach, noting that the issues presented were “primarily ones of law” and adding that, in the future, such issues should resolved without a full trial.

And what was that key legal issue? Whether or not the types of permits issues (called Miscellaneous Land Use Permits) were disposals of an interest in land requiring a public process under the Alaska Constitution. The State had argued that since the permits themselves indicated they could be revoked “at will,” they were not disposals. In considering that argument, the Court examined both the Alaska Land Act and the Public Notice Clause of the Alaska Constitution, and prior case law. The Court noted several facts of relevance. Evidence was presented that showed that Pebble had invested nearly $400 million at that point in the project. The State and Pebble had entered into a Memorandum of Understanding, whereby Pebble would reimburse the State for its expenses associated with issuing the permits. Additionally, Nunamta had presented evidence that Pebble feared damage to its return on investment. Finally, there was the perceived public importance of the exploration – how many jobs were at stake – and how that would deter DNR from ever revoking the permits. The Court concluded that, given this evidence “a state land manager could feel tremendous pressure not to revoke or refuse to renew” the permits in question, making it unlikely that DNR would revoke the permit.

The second issue the Court examined was whether, if a permit was revoked, the permittee could vacate the land without damaging or destroying the property. The Court recounted evidence of substantial waste product stored on the land,  and abandoned and core holes plugged with concrete and steel, which the Court determined would be structures that could not be removed. The Court added that the buried waste sumps were “lasting alterations of the land,” and that there was “potential for environmental damage primarily through pollution of groundwater by the toxic waste that has been disposed of on the land and by acid rock drainage.” In the end, these two factors – the unlikelihood that the State would revoke the permits and the longlasting impacts to the land – showed that the permits were functionally irrevocable and thus disposals of interest in land that required a public process.

And the plaintiffs should not have been required to prove that the land had already been damaged. Rather, it was up to the State to look prospectively. The Court noted the central question of the case was whether the State had a constitutional duty to give notice and consider the potential consequences of the permitted activity. The court noted that these questions were “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.” Rather, the Court noted, “The State must know how it should act before it acts.” And if the State needs to assess potential environmental impacts, “the assessment must be made prospectively based on known and possibly known consequences.” That means, for example, if you know that acid rock drainage can occur as a result of hard rock mineral exploration, it must be considered. And if there is a duty to give notice and consider those potential consequences, the duty is not discharged simply because the activity may seem harmless in foresight. “The duties asserted are intended to facilitate public involvement and informed decision making, and to minimize environmental harm and damage to conflicting users.”

Since the public process associated with the best interest findings required for oil and gas operations is statutory, it is difficult to predict how the State will react to this decision. Will DNR develop some interim rules to incorporate the Court’s ruling? Or will there be a push in the next legislative session to provide statutory guidance for upland hardrock mineral exploration like there is for oil and gas? It is too early to tell.

No Chilling Citizen Lawsuits

The second case, Alaska Conservation Foundation v. Pebble Limited Partnership, could have even broader implications than whether the State has to provide public notice when it plans to authorize long term, potentially damaging use of public lands.

Under Alaska’s Civil Rule 82, the losing party typically has to pay costs and attorneys fees to the winning party in a civil lawsuit. But in its 1974 Gilbert v. State decision, the Alaska Supreme Court recognized a “public interest exception” to protect litigants who raise issues that are of public importance. But, the Alaska Legislature gutted that exception in 2003 by enacting what is now AS 09.60.010, which limited the protection to only claimants who raised constitutional claims. And that protection against paying costs and fees would go away if the losing party had a “sufficient economic incentive.”

And while Nunamta Aulukestai and the other plaintiffs pursued only constitutional claims in their key case, Pebble and the State claimed that no, their interest was not constitutional, but economic, and therefore they had to pay Pebble’s and the State’s costs and fees. Pebble and the State claimed that other parties who had economic interests were merely hiding behind the plaintiffs, pulling the strings. And they argued that protecting subsistence hunting and fishing was an economic interest. In an attempt to prove this, Pebble and the State pursued relentless post-trial discovery, going after Nunamta to disclose its members and sources of funding, looking for ties between its shareholders and commercial fishing and recreation industries, and going after individuals’ personal assets. These inquiries even went after Nunamta’s attorneys, Trustees for Alaska, and one of Trustees’ funding sources, the Alaska Conservation Foundation. And Pebble openly admitted that it was going after ACF because ACF had funded other organizations and efforts that sought to protect Bristol Bay.  And among the people that Pebble and the State pursued were Bella Hammond, former First Lady of Alaska, and Victor Fischer, one of the two surviving delegates of Alaska’s Constitutional Convention. In other words, Pebble and the State sought to silence plaintiffs who would challenge highly-financed activities like hard rock mineral exploration, as well as any attorneys that might dare to represent them and any one else who would provide funding support. Needless to say, such an assault, if successful, would have a substantial chilling effect on anyone who would want to challenge State actions in the future.

And yet, somehow, the trial court accepted Pebble’s arguments and ordered the discovery. Fortunately for future public interest litigants, the Alaska Supreme Court did not.

The Court noted that the “sufficient economic incentive” test can only be met when the case is brought “primarily to advance the litigant’s direct economic interest, regardless of the nature of the claim.” The Court noted that the trial court erred by reaching beyond the parties and the actual claims in the case to find there was an economic interest by Nunamta and the other plaintiffs. It was clear that the primary objective of the case was to raise constitutional claims about DNR’s permitting process. The Court stressed that party’s had to have a direct economic interest, and that even if there were a third party “pulling the strings,” even that party would have to have a direct economic interest. And even if commercial fishing interests were funding the litigation or other efforts to stop the Pebble development, the outcome of whether the Pebble permits were unconstitutional would not have any direct impact on commercial fishing.

And allowing a successful litigant to go after the funding for constitutional litigation “can lead easily to the wrong result.” The Court added that “there rarely, if ever, should be a situation where the economic interests of lawyers representing a constitutional claimant are relevant to AS 09.60.010.” Simply earning an attorney’s fee award cannot meet this standard, nor can the publicity or fundraising that such a case could generate.

Finally, the Court addressed the issue of whether the desire to protect the Bristol Bay area for subsistence hunting and fishing was a “sufficient economic incentive.” But Nunamta’s desires in the case focused on the public process and notice it desired for issuing the permits, not direct economic compensation; and the Court noted that protecting subsistence uses “is not sufficient economic incentive to bring a lawsuit.”

Thus, the end result of the two cases left the Alaska Supreme Court sending the case back to the trial court and ordering it to render judgment in favor of Nunamta Aulukestai and the other plaintiffs, and thus, also ordering the trial court to prepare to issue an order of attorney’s fees in favor of the plaintiffs. The case was filed in 2009, taking nearly six years to resolve. Unfortunately, two of the plaintiffs would not live to see this day. Violet Willson, the matriarch of a four-generation family of commercial fisherman (and herself a commercial fisherman for over 50 years), passed away on January 15. Bobby Andrew, who was a spokesperson for Nunamta Aulukestai and one of the elders who routinely made trips to London to speak out at Anglo-American shareholder meetings, passed away on May 12. But their legacy in this effort will live on to ensure that the State will act more responsibly in the future, and that if it doesn’t, the citizens of Alaska will still be protected when they fight to make sure the State lives up to its constitutional obligations.