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Aulukestai v. State, Department of Natural Resources

Supreme Court of Alaska

May 29, 2015

PEBBLE LIMITED PARTNERSHIP, acting through its General Partner, PEBBLE MINES CORPORATION, Intervenor-Appellee

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Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, Eric A. Aarseth, Judge. Superior Court No. 3AN-09-09173 CI.

Nancy S. Wainwright, Victoria Clark, Stephen E. Cotton, Trustees for Alaska, Anchorage, for Appellants and Cross-Appellees.

Laura Fox, Assistant Attorney General, Anchorage, and Michael C. Geraghty, Attorney General, Juneau, for Appellee and Cross-Appellant.

Matthew Singer and Howard S. Trickey, Jermain, Dunnagan & Owens, P.C., Anchorage, for Intervenor-Appellee.

J. P. Tangen, Attorney at Law (P.C.), Anchorage, and Lawrence V. Albert, Anchorage, for Amicus Curiae Alaska Miners Association.

Before: Winfree, Maassen, and Bolger, Justices, Matthews and Eastaugh, Senior Justices.[*] [Fabe, Chief Justice, and Stowers, Justice, not participating.] MATTHEWS, Senior Justice. WINFREE, Justice, concurring.


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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.


A. The Setting

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.[1] The majority of the production of Bristol Bay sockeye comes from the Kvichak and Nushagak River watersheds.

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.

B. Exploration Activities

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

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drilling. As of 2010, when the trial in this case took place, some 1,269 bore holes had been drilled. In addition, extensive seismic studies had been conducted using explosives along seismic lines. PLP and its predecessors had expended over $300 million on exploration.

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.[2] Water for drilling was obtained from nearby sources. When drilling was completed at each site, bore holes were generally plugged with concrete and the rigs and drill pads were removed by helicopter. The sump holes were covered up using the original overburden and re-seeded if necessary. Concrete plugs remained in all drill holes, and metal casings were left in some drill holes as well. Some bore holes containing water that might be useful for future operations were merely capped, rather than plugged.

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.[3] The permits were " Miscellaneous Land Use Permits," abbreviated as " MLUPs." [4] Until 2007 PLP's predecessor mining companies took any needed water out of nearby streams, ponds, or bore holes to support their drilling operations without a separate water use permit.[5] PLP first applied for a water use permit in late 2006 for its 2007 activities; the Department issued water use permits for five-year periods. These permits were " Temporary Water Use Permits," or " TWUPs." The MLUPs and the TWUPs were issued for specific terms, but they also provided that they were revocable at will.

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:

There are no roads or wheeled vehicles as it is an entirely helicopter-supported program. There is no permanent airstrip, no residential camp facilities, no four-wheel trails, no sewage lagoon, no water treatment plant, no bridges and no obstructions to any water body. All of the structures

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found at Pebble are temporary and can be deconstructed and removed by helicopter. (Citations omitted.)

C. The 2009 MLUP

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.[6]

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.

D. Proceedings

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.[7] This complaint forms

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the basis for the present appeal, and we will describe it below, after we describe the course of the administrative appeal.

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:

o 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."

o 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.

o 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.

o 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.

o 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."

o 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

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whereas withdrawals deemed " permanent" must be accompanied by such protections.

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:

As the State notes, the constitution does not mention a best-interest finding, and one is not specifically required by the language of the various natural resource provisions. Instead, a best-interest finding is an artifact of the State's consideration of constitutional policies of maximum beneficial use, sustained yield, concurrent uses, etc. All of these considerations, in turn, are expressions of the same underlying constitutional policy " to encourage the settlement of [public] land and developments of [the State's] resources by making them available for maximum use consistent with the public interest." Because these intertwined constitutional considerations are encompassed by a single finding, the ultimate question here is whether the State should have made such a finding before issuing permits to the Pebble Project, or whether (as the State alleges) it was only required to adhere to its own statutory and regulatory limitations and authorizations.

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:

[P]rovisions of Article VIII, in order to have any meaning at all, must be interpreted as containing independent constraints on State action. As noted above, however, because the main dispute in this case is whether the State should have considered the content of any of these constitutional provisions before issuing the MLUPs and TWUPs, the Court need not consider the application of these provisions on a count by count basis. The State either needed to balance the policy considerations entrenched in Article VIII or it did not.

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:

At trial, the court will consider:
1) Whether the permits issued for mineral exploration at the Pebble Project are functionally irrevocable1 and amount to a " disposal" under Art. VIII, Section 10.
2) Whether, if the permits amount to a " disposal," the State provided constitutionally adequate prior public notice of the disposal under Art. VIII, Section 10, and
3) Whether the exploration permits and the associate[d] mining exploration activity unconstitutionally impinged on reasonable concurrent uses under Art. VIII, Section 8.
The common theme in Counts I, II, III and V in Plaintiffs' Complaint is that permits are subject to restrictions based on reasonable concurrent uses.2

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The court will receive testimony and evidence as it relates to the revocable nature of the permits and any actual impact the exploration activities or permit issuance has had on the reasonable concurrent uses or common uses of the land and water as defined by the pertinent sections of Art. VIII and as pled by the Plaintiffs. The court will not conduct its own best interest finding (" BIF" ) or determine whether the State conducted a " functional equivalent" of a BIF. The court will not need to bifurcate the trial. The court will not entertain evidence or argument about prospective harm due to the development or actual mining within the concerned geographical areas.
1 The supreme court adopted a hybrid approach to determining whether a permit is functionally irrevocable. Northern Alaska Environmental Center[] v. DNR, 2 P.3d 629, 638 [(Alaska 2000)]. A permit is functionally irrevocable if the permit is not likely to be revoked because of its magnitude or if there is long-term and harmful environmental impact. Id. at 638-39. This test reads consistent with the constitutional commentary on Section 10: " [t]ransactions may vary in importance from routine to those of substantial value."
2 " Reasonable concurrent uses" is similarly described in the various sections of Art. VIII as follows: Section 1 - " public interest; " Section 2 - " benefit of the people; " Section 3 - " common use; " Section 4 - " preferences among beneficial uses; " and Section 13 - " common use" and concurrent uses.

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 ...

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