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Kuitsarak et al v. Alaska Dept. of Natural Resources (3/4/94), 870 P 2d 387
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Notice: This opinion is subject to formal correction
before publication in the Pacific Reporter. Readers
are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage,
AK 99501.
THE SUPREME COURT OF THE STATE OF ALASKA
KUITSARAK CORPORATION; ARVIQ )
CORPORATION; CENALIULRIIT; ) Supreme Court No. S-5176
TRADITIONAL VILLAGE COUNSEL )
OF MUMTRAQ; CITY OF GOODNEWS ) Superior Court No.
BAY; NUNAM KITLUTSISTI; ) 3AN-90-7663 CI
ASSOCIATION OF VILLAGE )
COUNCIL PRESIDENTS, )
) O P I N I O N
Appellants, )
)
v. ) [No. 4063 - March 4, 1994]
)
ROD SWOPE, COMMISSIONER; )
GERALD GALLAGHER, DIRECTOR, )
DIVISION OF MINING; AND )
ALASKA DEPT. OF NATURAL )
RESOURCES; COASTAL POLICY )
COUNCIL; KARIN SHEARDOWN, )
)
Appellees. )
______________________________)
Petition for Review from the Superior
Court of the State of Alaska, Third Judicial
District, Anchorage, Dana Fabe, Judge.
Appearances: Eric Smith, Anchorage, for
Appellants. Elizabeth J. Kerttula, Juneau,
and Kyle W. Parker, Anchorage, Assistant
Attorneys General, Charles E. Cole, Juneau,
Attorney General, for Appellees.
Before: Moore, Chief Justice,
Rabinowitz, Matthews and Compton, Justices.
PER CURIAM
I. INTRODUCTION
This dispute arises from the Department of Natural
Resources Division of Mining's (DNR) approval of certain Offshore
Prospecting Permits (OPPs) requested by Karin Sheardown for
Goodnews Bay and portions of Kuskokwim Bay. The Cenaliulriit
Coastal Management District (Cenaliulriit) and various local
villages challenge the superior court decisions upholding DNR's
Best Interest Finding and the Coastal Policy Council's (CPC)
determination that DNR's findings were consistent with
Cenaliulriit's Coastal Management Plan (CMP).1 We reverse the
superior court and remand to DNR to conduct further proceedings
consistent with this opinion.
II. FACTS AND PROCEEDINGS
In 1982, Karin Sheardown filed twenty-two OPP
applications for Goodnews Bay and the surrounding Kuskokwim Bay.2
These applications remained on file with DNR until November 1987,
when Sheardown formally requested that DNR consider her OPP
applications.3 DNR expressed interest in exploring the mineral
potential of Goodnews and Kuskokwim Bays, but indicated that its
financial resources were limited. In order for DNR to issue an
OPP, it must determine that it is in the State's best interest to
issue the permit. AS 38.05.035(e).
However, because DNR did not have adequate funding in
1988, Sheardown and DNR agreed that Sheardown would finance a
resource assessment report (RAR) which DNR required prior to
making its best interest determination.4 Sheardown agreed to use
contractors approved by DNR to perform the research and data
collection for the RAR. Sheardown agreed to provide a draft RAR
for public review and comment and to "consider and incorporate
[DNR's] comments as appropriate." The RAR agreement also
outlined the resource information that DNR required to make its
best interest determination.5 DNR sent copies of the RAR
agreement with Sheardown to the Alaska Department of Fish and
Game (ADF&G), the Alaska Department of Environmental Conservation
(DEC) and the Alaska Division of Governmental Coordination (DGC).
Four contractors from the DNR's approved list prepared
the draft RAR and WGM Mining Inc. (WGM) summarized it.6 Local
communities were involved in preparing the RAR draft via public
and local agency meetings. In November 1988, DNR released a
draft RAR for public comment. Cenaliulriit and ADF&G criticized
the draft RAR.7 Sheardown submitted the final RAR to DNR on
January 3, 1989. The final RAR incorporated some, but not all,
of ADF&G's comments. DNR sent copies of the final RAR to ADF&G,
DEC, DGC, Cenaliulriit, the Association of Village Council
Presidents, Vernon Bavilla of Kuitsarak Corporation, Peter
Samuels of Arviq, Inc., and Nunam Kitlutsisti.8 DNR also stated
its intention to hold "informal"public meetings in Bethel,
Goodnews Bay and Platinum to discuss the RAR prior to drafting
the preliminary best interest finding.9 In March 1989, DNR
issued its Preliminary Best Interest Finding and Proposed
Consistency Determination (PBIF). DNR stated that, although some
areas inside Goodnews Bay were to be closed for mining, it
intended to issue OPPs for other areas inside Kuskokwim Bay and
along the coast. As required under AS 38.05.945(a)(3), DNR gave
public notice of the PBIF and issued a request for comments
through publication in various newspapers throughout the state.10
The notice set forth the area being considered for issuance of
OPPs and stated that public hearings would be held in Bethel,
Goodnews Bay and Platinum to accept verbal comments about the
proposed action. In order to ensure that the local residents
understood both the proposed action and that they could
participate in the administrative process, DNR prepared a video
tape for public viewing explaining the proposed action in English
and Yupik.
Cenaliulriit, villages, and native organizations in the
area were opposed to offshore mineral exploration until further
information was available. Specifically, Cenaliulriit found that
issuance of the proposed OPPs was inconsistent with the approved
Coastal Management Plan (CMP). The native organizations stressed
that the PBIF did not adequately analyze the impact of mining in
the region.
State agencies were also critical of the PBIF. Among
other things, DEC felt that it could not adequately assess the
impact of mining on the region and was concerned about
maintaining the water quality inside Goodnews Bay. ADF&G was
concerned about the preservation of wildlife habitat both inside
and around Goodnews Bay and believed that the PBIF inaccurately
portrayed the subsistence uses outside of Goodnews Bay. ADF&G
recommended that DNR reject all OPP applications within Goodnews
Bay and within one-half mile of the sandbars at the mouth of the
bay. ADF&G also recommended that a one-half mile buffer zone be
created along the coastline of Kuskokwim Bay where exploration
would be prohibited. Additionally, ADF&G recommended that permit
stipulations for the protection of fish and wildlife habitat be
strengthened or added.11 In July 1990, DNR issued its
"Proposed Final Best Interest Finding and Coastal Consistency
Determination Regarding Issuance of Offshore Prospecting Permits
Near Goodnews Bay, Alaska" (proposed final findings). The
proposed final findings rejected all OPP applications inside
Goodnews Bay and within one-half mile of the sandbar and shoal
entrance to the bay. DNR also established a 500-foot buffer from
the mean-high tide on tracts along the coastline in Kuskokwim Bay
and added the stipulations for the protection of wildlife that
ADF&G requested.12 OPPs were to be issued for the remaining
tracts not closed to exploration.13 Despite Cenaliulriit's claims
to the contrary, DNR found that it had given Cenaliulriit's
comments "due deference"and that the proposed final findings
were consistent with both Cenaliulriit's CMP and the Alaska
Coastal Management Plan (ACMP).
Pursuant to the ACMP, DNR was required to seek the
concurrence of Cenaliulriit, ADF&G, DEC and Sheardown for the
proposed final findings. 6 AAC 50.070(j). Sheardown,
Cenaliulriit and ADF&G did not concur with the proposed final
findings and each restated their concerns to the resource
directors pursuant to 6 AAC 50.070(j). Several issues regarding
various stipulations were resolved at the director level.
However, the primary dispute, the need for and size of the buffer
zone, was not resolved and was elevated to the commissioners.14
See AAC 50.070(j).
The commissioners of DNR, ADF&G, and DEC decided to
compromise and established a one-quarter mile buffer zone. The
decision whether to issue OPPs for tracts between the buffer and
the one-half mile mark from the coastline was postponed pending
further study of marine habitats in that area.15 DNR issued its
"Final Best Interest Finding and Coastal Consistency
Determination Regarding Issuance of Offshore Prospecting Permits
Near Goodnews Bay, Alaska"(BIF) on August 10, 1990. The BIF
discusses considerations taken into account by DNR in determining
the state's best interest and contains eighteen stipulations to
protect the region from exploration activities resulting from
DNR's grant of the OPPs to Sheardown.16 The BIF also discusses
the ACMP and Cenaliulriit CMP and how the standards specified
therein are satisfied by the rejection of some of Sheardown's OPP
applications and the imposition of the eighteen stipulations.
On August 17, 1990 Cenaliulriit sent the CPC notice of
its intent to appeal DNR's BIF. Cenaliulriit sent its "Petition
for Appeal Before the Alaska Coastal Policy Council on Goodnews
Bay Offshore Prospecting Permit Disposal Area" (petition) on
August 28, 1990. Kuitsarak filed a Notice of Appeal of the DNR
decision in superior court on September 12, 1990. DNR issued
Sheardown the OPPs specified in the BIF prior to the CPC meeting
on Cenaliulriit's petition.
A CPC subcommittee convened to review Cenaliulriit's
petition on October 8, 1990. The subcommittee was advised to
review the petition under a standard of review similar to the
"substantial evidence"test to determine whether Cenaliulriit had
made a proper "showing" under AS 46.40.100(b).17 After
considering the evidence, the CPC subcommittee found that
Cenaliulriit did not make a sufficient "showing"and denied the
petition. Cenaliulriit appealed this finding to the superior
court. The appeals of the DNR and CPC decisions were
consolidated and the parties agreed to stay the OPPs until the
superior court addressed the agency determinations.
In its February 19, 1991 opinion and its June 10, 1991
opinion on rehearing, the superior court affirmed DNR's BIF but
overturned the CPC decision, concluding that the CPC used an
incorrect standard in determining whether Cenaliulriit had made a
sufficient "showing"under AS 46.40.100(b). The superior court
ruled that AS 46.40.100(b) requires only a prima facie showing
that a district's coastal management plan is not being
implemented or complied with, before a full adjudicatory hearing
will be held. The court directed the CPC to conduct a full
adjudicatory hearing if Cenaliulriit made a prima facie showing.
On July 23, 1991 the CPC determined that Cenaliulriit made a
prima facie showing, and pursuant to Cenaliulriit's request,
scheduled a full adjudicatory hearing on the petition.
The hearing on the Cenaliulriit petition was held
September 23-24, 1991. Cenaliulriit requested three changes to
the BIF to make it consistent with Cenaliulriit's CMP. First,
Cenaliulriit wanted the one-half mile area from shore in
Kuskokwim Bay and certain areas near the entrance to Goodnews Bay
closed to mining. Second, it wanted DNR to defer issuance of
OPPs in other areas until further information was available to
determine whether mining should proceed. Lastly, Cenaliulriit
requested that both Goodnews Bay and Platinum be integrated into
the DNR's decision-making process.18
During the hearing, the focus of Cenaliulriit's case
was that mining would violate its CMP. Cenaliulriit argued that
the OPP stage was the critical stage in determining whether or
not to allow mining. DNR argued that an OPP holder had to
complete several other procedures before the OPPs are converted
to mining leases. DNR's position was that an OPP cannot be
converted into a mining lease without a second BIF. The CPC
denied Cenaliulriit's petition and affirmed the DNR's coastal
consistency determination. The CPC concluded that DNR had
adequate information to determine that issuance of the OPPs was
consistent with the ACMP and Cenaliulriit's CMP and that DNR gave
Cenaliulriit's suggested changes to the BIF "due deference."19
Following the CPC decision, Cenaliulriit appealed to
the superior court, which affirmed the CPC and DNR decisions on
February 10, 1992. The superior court's February 1991 and
February 1992 orders were consolidated for this appeal.
III. DISCUSSION
No deference is given to the superior court's decision
when it acts as an intermediate court of appeal. Leslie Cutting,
Inc. v. Bateman, 833 P.2d 691, 693 (Alaska 1992). In reviewing
agency decisions involving complex subject matters or fundamental
policy determinations, "[o]ur role is to ensure that the agency
has 'taken a "hard look" at the salient problems' and has
'genuinely engaged in reasoned decision making.'" Alaska
Survival v. State Dep't of Natural Resources, 723 P.2d 1281, 1287
(Alaska 1986) (quoting Southeast Alaska Conservation Council,
Inc., v. State, 665 P.2d 544, 549 (Alaska 1983)). We review the
agency decision "only to the extent necessary to ascertain
whether the decision has a 'reasonable basis,' and to ensure that
it 'was not arbitrary, capricious, or prompted by corruption.'"
Trustees for Alaska v. State Dep't of Natural Resources, 795 P.2d
805, 809 (Alaska 1990) (quoting Hammond v. North Slope Borough,
645 P.2d 750, 758-59 (Alaska 1982)). "[W]here an agency fails to
consider an important factor in making its decision, the decision
will be regarded as arbitrary." Trustees, 795 P.2d at 809. We
review DNR's decision to issue OPPs for portions of Kuskokwim Bay
under the "reasonable basis"standard.
A. DNR's Decision to Open Parts of Kuskokwim Bay to
OPPs Requested After January 2, 1983 Violates
State Law.
Kuitsarak initially argues that DNR erred in finding
that issuing any OPPs was in the state's best interest because
DNR's decision violates 11 AAC 86.500, which states in relevant
part:
(b) An applicant may file for and be
granted an offshore prospecting permit only
on tide and submerged land that has been
opened for offshore prospecting permits.
(c) Notwithstanding (a) and (b) of this
section and 11 AAC 86.565, all prospecting
permit applications pending as of January 2,
1983, will be adjudicated without regard to
whether the area applied for was open to
filing at the time of application. This
action is intended to preserve priority
rights established by the application's order
of filing. The commissioner is exercising
his authority under AS 38.05.020 and AS
38.05.035(b)(2) to grant and preserve these
priority rights in order to avoid inequitable
detriment to diligent applicants due to
situations over which the applicants had no
control. The commissioner finds that this
exercise of this authority under
AS 38.05.035(b)(2) is in the best interests
of the state.
(d) No person may file offshore
prospecting permit applications that exceed,
in the aggregate or in combination with
offshore prospecting permits already held by
that person, 300,000 acres.
(e) Notwithstanding (d) of this
section, any person who, as of January 2,
1983, has pending prospecting permit
applications that exceed 100,000 acres,
shall, within 24 months after January 1,
1983, reduce the acreage under prospecting
permit application to 300,000 acres or less.
The department will adjudicate and issue up
to 100,000 acres of offshore prospecting
permits according to a priority list
established by the applicant to the extent
administratively practicable. If excess
applications are not relinquished,
adjudication of pending applications will
take place in an order determined by the
department.
(f) All tide and submerged land will be
opened for offshore prospecting permit
applications on June 30, 1984, unless the
department finds that
(1) the land contains known mineral
deposits that will be offered by competitive
leasing;
(2) mining would be incompatible
with significant surface uses; or
(3) adequate funding has not been
appropriated for disposal of these minerals
under the procedures provided by law.
DNR interprets 11 AAC 86.500 as follows: first,
subsection (b) restricts the filing of new OPP applications to
those tide and submerged lands that are opened for filing OPPs.
Second, subsection (c) provides an exception to subsection (b) in
that all OPP applications filed on or before January 2, 1983,
will be processed without regard to whether a specific area was
open for filing at the time the OPP applications were made.
Third, subsections (d) and (e) establish acreage limitations on
new and pending applications. Last, subsection (f) mandates that
all tide and submerged land be reopened for the filing of new
applications on June 30, 1984, unless DNR makes one of three
findings expressed in subsection (f). Of particular importance
to this dispute is subsection (f)(3), which requires that all
tide and submerged lands be reopened for filing of new OPP
applications unless adequate funding is not appropriated.20
Kuitsarak argues that subsection (f)(3) applies to all
OPP applications and that DNR explicitly determined that funds
had not been appropriated for a determination whether prospecting
should be allowed in Kuskokwim and Goodnews Bays. The State
argues that because Sheardown's OPP applications were made prior
to January 2, 1983, they are exempt from subsection(f)(3)'s
funding provision.
We must uphold DNR's interpretation of its own
regulations where, as here, the proffered interpretation is not
plainly erroneous. Trustees for Alaska, 795 P.2d at 812. The
decision to grant Sheardown's OPP applications that were filed
prior to January 2, 1983 did not violate DNR's regulations.
However, to the extent DNR's decision opened some areas of
Kuskokwim Bay for OPPs that were filed after the 1983 deadline,
DNR's decision must be reversed. Tracts 1-5 were not included in
Sheardown's original application filed prior to January 1983.
These areas were opened in 1990, when state lands were closed to
new OPPs. DNR recognized, "At this time, adequate funding has
not been provided for this program and the state's tide and
submerged lands are closed to the filing of new OPP
applications." Tracts 1-5 were closed for purposes of issuing
OPPs. DNR's decision to open these areas of Kuskokwim Bay for
OPPs was contrary to its own interpretation of its regulations
and, therefore, erroneous.
B. DNR Impermissibly Declined to Adequately Analyze
the Impacts of Offshore Mining.
Kuitsarak argues that although DNR has the discretion
to make a best interest finding at the OPP stage, once the OPP
applications are granted, the State cannot deny the conversion of
the permits to mining leases because they are not in the best
interest of the state. Kuitsarak maintains that DNR was required
to assume that mining was inevitable, because once a workable
deposit is discovered, the State can only place conditions on
mining, not prohibit it altogether.
The State responds that DNR did not need to determine
the potential impacts of mining at the OPP stage because the OPPs
do not grant Sheardown the right to mine. Under the State's
interpretation of the regulatory scheme, DNR retains the
discretion to deny an OPP's conversion to a mining lease if the
conveyance would not be in the state's best interest. Therefore,
the State contends that DNR was not required to consider the
effects of mining in determining whether to grant Sheardown's
OPPs.21 We conclude that Kuitsarak's arguments are more
persuasive.
Once an OPP is granted, the holder, with appropriate
permits, is entitled to explore the specified area to determine
whether it contains "workable mineral deposits."
AS 38.05.250(a),(b); 11 AAC 86.530. A "workable mineral deposit"
is "a locatable mineral deposit that has been shown by the
applicant to have a reasonable prospect of developing into a
successful mine, based on the presence of one or more locatable
minerals of sufficient value and quality to induce a prudent
operator to pursue development under present conditions." 11 AAC
86.530(e).
Once minerals are discovered on an OPP site, the
director of DNR is vested with broad discretion in determining
whether any minerals found constitute a "workable deposit."
State Dep't of Natural Resources v. Universal Education Society,
Inc., 583 P.2d 806, 812 (Alaska 1978). However, once a workable
mineral deposit is found to exist, the statute's plain language
requires DNR to grant the OPP holder a noncompetitive mining
lease. AS 38.05.250(b).22 The State's contention that DNR is
authorized to make a second best interest finding prior to
authorization of a mining lease is not supported by the statute
or our prior decisions.23
The State relies upon two cases to support its
contention that DNR has the discretion to determine that mining
is not in the state's best interest after DNR has granted the
OPPs. In Universal Education Society, 583 P.2d at 809, the
director of DNR denied the OPP holder's request to convert his
OPPs to mining leases because DNR was not satisfied that the
mineral deposit in question was a "workable deposit." The OPP
holder appealed the agency decision to the superior court which
concluded that the DNR regulations employed in determining
whether to grant an offshore mining lease did not comport with
due process requirements. Id. at 809. We held that because the
OPP holder was not entitled to a lease until the director
determined that the minerals constituted a "workable deposit,"
the OPP holder lacked the requisite property interest to support
his due process claim.24 Id. at 809-10. Universal Education
Society does not support the State's contention that it is
entitled to conduct a second best interest finding should a
"workable mineral deposit"be discovered.
Similarly, the State's reliance on North Slope Borough
v. Leresche, 581 P.2d 1112 (Alaska 1978), is not persuasive. In
Leresche, we held that the North Slope Borough's selection of
state lands pursuant to the Alaska Land Act was qualified and
that DNR could reject the Borough's choice of property as not
being in the best interest of the state.25 Id. at 1116. Unlike
AS 38.05.250(b), the Alaska Land Act expressly provided that a
borough's or city's land selection must be in the best interest
of the state. Based on the language and the legislative history
of the statute we concluded that the state retained discretion to
reject a particular selection of land.26 The State's contention
that the "shall issue a patent"language in AS 29.18.190(b) is
analogous to the "a noncompetitive lease shall be granted"
language in AS 38.05 250(b) is without merit.
Finally, the State argues that DNR considered the
impacts of mining to the extent possible at the OPP stage. The
record establishes that, although the RAR and the BIF contain
several references to the impacts of mining on biological and
subsistence resources, the analysis is less than complete. The
RAR's general discussion of mining techniques and impacts is not
a "hard look"at the potential impacts of mining in the region.
DNR closed Goodnews Bay for exploration because of the bay's
sensitivity to disturbance and concerns about the dangers of
mining in that area. It is not clear whether DNR properly
analyzed the heavy metal concentrations, fish migration patterns,
background water quality and other mining impacts outside of
Goodnews Bay.27 Additionally, there is no indication that DNR
considered the cumulative impacts of mining in the region.28 In
short, we are not convinced that DNR adequately considered the
various impacts related to mining in the Kuskokwim Bay region.
The State's argument that it could have done little more
to fully assess the impacts of mining in the region than it did
at the OPP stage is significantly undercut by evidence of
comparable federal studies. The record indicates that the
federal government has conducted environmental impact studies for
offshore mining based on various mining scenarios. DNR can
emulate these studies. Although any assessment will necessarily
be somewhat general, DNR should be familiar enough with the
different methods of mining to estimate impacts on the
environment. Once the initial impact of mining on the region has
been assessed, any unforeseen occurrences or conditions that are
revealed during exploration can be dealt with by DNR through use
of stipulations and conditions imposed on mining.29 By analyzing
the effects of mining in Kuskokwim Bay at the OPP stage, DNR can
alleviate some of the dangers associated with lease
determinations made on a case-by-case basis.30
Once DNR is satisfied that a "workable deposit"exists
on an OPP site, it must issue the OPP holder a noncompetitive
lease. While DNR must approve a plan of operations before mining
may begin,31 and may condition the terms of a mining lease or
cancel the lease under certain circumstances, it may not decide
that mining is not in the state's best interest after determining
that exploration is in the best interest of the state. AS
38.05.250(b). It is incumbent on DNR to assess the impact of
mining on the region prior to issuing OPPs.32 Where, as here, DNR
failed to consider an important factor, its decision is deemed
arbitrary. Trustees v. Dep't of Natural Resources, 795 P.2d at
811. We remand to DNR to assess the potential impacts of mining
in and around Kuskokwim Bay prior to determining whether to grant
Sheardown's OPP applications.33
C. DNR's Delegation of the Preparation of the RAR to
Sheardown and Her Contractors (one of which had a
financial interest in the project) was Impermissible
under the Circumstances.
Kuitsarak argues that DNR's decision must be reversed
because the RAR is biased, and therefore, fundamentally flawed.
Kuitsarak asserts that Sheardown's agreement with DNR to be
financially responsible for preparation of the RAR, and the
participation of an "interested"contractor in the review of the
RAR, created an impermissible conflict of interest. The RAR's
purpose was to "form the data base from which potential impacts
will be assessed and decisions made." In this respect, the RAR
was analogous to a federal Environmental Impact Statement (EIS).
See 42 U.S.C 4332(2)(c). In this case the RAR was one of the
major components of the BIF; it was the sole basis for the PBIF,
and was relied upon in the BIF.34
While Sheardown paid for the RAR, she did not write it.
DNR required Sheardown to select contractors for the RAR from a
DNR approved list. Dames & Moore prepared the biological
resource assessment; Jon Isaacs and Associates prepared the
community resources and land management assessment; and
Westervelt Engineering, Ltd. prepared the mineral potential
assessment. WGM prepared a summary based on assessments
conducted by the other three firms, contributed to the RAR
section on mineral potential and assembled the report.
Subsequent to the preparation of the RAR, Sheardown hired WGM to
assist in the planning and exploration phases of her proposed
project. Apparently, WGM also "staked"an interest in some of
the lands under consideration by DNR.
Kuitsarak argues that two separate conflicts of
interest taint the RAR, WGM's participation in the RAR process
and DNR's delegation of the RAR to Sheardown and her contractors.
Although this court has not considered the issue previously, the
weight of federal authority holds that federal agencies may
delegate their obligations to prepare environmental impact
statements to "interested"contractors provided that the agency
bears responsibility for the work product to satisfy the statute.
See Brandon v. Pierce, 725 F.2d 555, 564 (10th Cir. 1984); Essex
County Preservation Ass'n v. Campbell, 536 F.2d 956, 960 (1st
Cir. 1976); Sierra Club v. Lynn, 502 F.2d 43, 59 (5th Cir. 1974).35
We must stress that when project
consultants are also used in the preparation
of the EIS considerable caution should be
exercised by the federal agency. The agency
clearly may not substitute a private firm's
efforts and analysis for its own, and it must
bear responsibility for the ultimate work
product designed to satisfy 42 U.S.C.
4332(2)(C).
Essex County Preservation Ass'n v. Campbell, 536 F.2d at 960. In
this case, Sheardown and her contractors were responsible for
conducting the RAR. Specifically, WGM was charged with reviewing
the RAR. DNR's agreement with Sheardown simply stated that she
"consider and incorporate the division's comments as
appropriate." Although DNR did identify the type of information
needed to make its decision, the State does not argue that DNR,
in fact, bore responsibility for the RAR. Instead the State
argues that Sheardown's ability to disregard DNR's comments is
irrelevant, since DNR retained discretion to grant or deny
Sheardown's OPP applications.36 The State's argument is without
merit.
WGM's participation in the RAR process does not in
itself create an impermissible conflict of interest.37 However,
coupled with DNR's delegation of its obligation to prepare the
RAR to Sheardown and her contractors, we believe DNR failed to
take the requisite responsibility for the preparation of this
important document. Despite the State's claims to the contrary,
the fact that DNR retained its discretion to deny Sheardown's
applications is not dispositive in determining whether a conflict
existed. The RAR was the primary document relied upon in making
the BIF. If information in the RAR or a similar data compilation
was biased, the fact that DNR retains its decision-making power
is of little consequence. DNR's decision will necessarily be
made, in part, based on a flawed document.38 The previously cited
authorities require that DNR take responsibility for the work
product upon which the BIF is based.
Where an interested contractor participates in the
drafting of a RAR or a similar data compilation, DNR must
maintain the requisite amount of control to allow it to take
meaningful responsibility for the underlying data. DNR's failure
to do so requires us to find that the RAR was inadequate.
Therefore, we order DNR to conduct or adequately supervise a
second RAR or a similar data compilation for the proposed OPP
applications.39
IV. CONCLUSION
DNR properly considered Sheardown's OPP applications
filed prior to January 2, 1983. However, DNR's decision violated
state law when it opened areas for prospecting after January 2,
1983. DNR improperly failed to consider the effects of mining
prior to granting Sheardown's OPPs and failed to adequately
supervise the RAR conducted by Sheardown's contractors.
Therefore, DNR's Best Interest Finding was arbitrary and cannot
stand.
We REVERSE the superior court's decision regarding the
OPPs granted for applications filed after January 2, 1983, as
they were granted contrary to DNR's regulations. We also REVERSE
the superior court's decision upholding DNR's Best Interest
Finding and the CPC's affirmance of the BIF and REMAND to DNR to
conduct a BIF consistent with this opinion.
IN THE SUPREME COURT OF THE STATE OF ALASKA
KUITSARAK CORPORATION; ARVIQ )
CORPORATION; CENALIULRIIT; ) Supreme Court No. S-5176
TRADITIONAL VILLAGE COUNSEL )
OF MUMTRAQ; CITY OF GOODNEWS )
BAY; NUNAM KITLUTSISTI; ) O R D E R
ASSOCIATION OF VILLAGE )
COUNCIL PRESIDENTS, )
)
Appellant, )
)
v. )
)
ROD SWOPE, COMMISSIONER; )
GERALD GALLAGHER, DIRECTOR, )
DIVISION OF MINING; AND )
ALASKA DEPT. OF NATURAL )
RESOURCES; COASTAL POLICY )
COUNCIL; KARIN SHEARDOWN, )
)
Appellees. )
______________________________)
Superior Court No. 3AN-90-7663 CI
Before: Moore, Chief Justice, Rabinowitz,
Matthews and Compton, Justices.
On consideration of the petition for rehearing filed by
the State of Alaska on January 24, 1994, and the opposition to it
filed February 7, 1994,
IT IS ORDERED:
1. The petition for rehearing is GRANTED as to the second
issue raised by the State and DENIED as to the first issue.
2. Opinion No. 4042, published on January 14, 1994, is
WITHDRAWN.
3. Opinion No. 4063 is issued on this date in its place.
Entered by direction of the court at Anchorage, Alaska,
on March 4, 1994.
CLERK OF THE SUPREME COURT
__________________________
JAN HANSEN
_______________________________
1 The appellants in this case are Kuitsarak Corporation,
Arviq Corporation, Traditional Village Council of Mumtraq, City
of Goodnews Bay, Nunam Kitlutsisti, the Association of Village
Council Presidents and Cenaliulriit (hereinafter collectively
referred to as "Kuitsarak"). The appellees are Rod Swope,
Commissioner; Gerald Gallagher, Director, Division of Mining;
DNR; CPC and Sheardown (hereinafter collectively referred to as
"State").
2 According to DNR, OPPs are property interests that
prioritize claims to certain lands. OPPs do not authorize the
holder to mine or explore for minerals.
3 In 1975, DNR suspended the OPP program to avoid
conflicts with the federal oil and gas leasing programs in the
Gulf of Alaska. However, DNR continued to accept OPP
applications to establish preferential rights until 1983, when
the agency ceased accepting applications due to a backlog of
unadjudicated applications.
4 The RAR was to provide information necessary for DNR to
begin making its best interest determination. The purpose of the
RAR was to "form the data base from which potential impacts will
be assessed and decisions made."
5 The agreement specified that the RAR should include
information regarding: a physical description of the region,
geology and mineral potential, habitat, fisheries, wildlife,
local communities, land use plans, possible exploration and
mining operations, potential environmental and social impacts on
the region, and possible mitigation measures.
6 WGM apparently asserted an interest in the disputed
OPPs. WGM also aided Sheardown in "planning and executing
exploration of the subject lands."
7 The ADF&G suggested more than 100 substantive changes
to the draft RAR.
8 DNR also sent copies of the final RAR to each resident
of Goodnews Bay and Platinum who previously attended public
meetings regarding the OPPs. When the DNR disseminated the final
RAR to the public, Cenaliulriit questioned the objectivity of the
RAR given WGM's involvement with the RAR and its financial
interest in the outcome of DNR's decision. Cenaliulriit
requested that the matter be brought to the attention of the CPC.
DNR denied that a conflict of interest existed in the
preparation of the RAR, but nonetheless rewrote the summary
section and had the U.S. Bureau of Mines rewrite the section on
mineral potential. The propriety of WGM's participation in the
preparation of the RAR and the comments regarding the draft best
interest finding is discussed infra at section C.
9 The "informal"public meetings regarding the RAR were
held on February 6, 1989 in Bethel and on February 7, 1989 in
Goodnews Bay and Platinum.
10 Notice and copies of the PBIF were sent to the
postmasters in Goodnews Bay and Platinum, the Calista Regional
Native Corporation, Kuitsarak Corp., Arviq, Inc. and other
affected village corporations. Additionally, the forty-eight
people who had previously attended the public meetings, fifteen
state and federal agencies and the state representatives from the
region, were also mailed the notice and PBIF.
11 Sheardown also criticized the preliminary best interest
finding and proposed consistency determination. She believed
that all the OPPs should be approved. According to Sheardown,
the potential adverse effects of mining should only be considered
if prospecting discovered the presence of platinum in the region.
12 These stipulations addressed the timing of exploration,
pump intake screening, monitoring, use of explosives, habitat
rehabilitation and aerial disturbance of wildlife. In response
to DEC's concerns, DNR also added a stipulation requiring
sampling and monitoring of water quality and adoption of a DEC
approved oil spill contingency plan as conditions for approval of
a plan of operations.
13 DNR reasoned that it did not fully analyze the impact
of mining for the explorable tracts because it was difficult to
predict what mining activities would eventually be proposed, and
thus the impact could best be analyzed when the lessee submitted
a mining plan of operation in order to have the OPPs converted
into mining leases.
14 Sheardown requested that OPPs be granted in Goodnews
Bay and that a buffer zone was not required to make the proposed
findings consistent with the ACMP. ADF&G maintained that the 500-
foot buffer proposed by DNR was inconsistent with the habitat
standards enumerated in 6 AAC 80.130, (providing that coastal
area habitats must be managed to maintain or enhance the
biological, physical and chemical characteristics which
contribute to its capacity to support living resources) and that
a one-half mile buffer zone along the coastline in Kuskokwim Bay
was necessary to protect the marine habitat. Cenaliulriit also
supported the one-half mile buffer proposed by ADF&G.
15 Plans for studying marine habitat in the deferral zone
were not included in the DNR's final best interest findings. DNR
maintains that details of the marine study need not be included
in the final best interest findings because OPPs were not issued
inside the deferral zone.
16 Sheardown was granted OPPs for areas outside of
Goodnews Bay and the buffer zone. The BIF allowed limited
exploration inside the deferred zone, provided that certain
studies are conducted at the same time as the exploration.
17 AS 46.40.100(b) provides: "On petition of a coastal
resource district, a citizen of the district, or a state agency,
showing that a district coastal management program is not being
implemented, enforced or complied with, the council shall convene
a public hearing to consider the matter. . . ."
18 This last request was made because DNR previously
stated that Platinum was not a "traditional village" and that
Goodnews Bay was too distant to require notification of certain
events per the BIF.
19 The CPC noted that DNR adequately considered
Cenaliulriit's concerns and that DNR had not authorized mining
activities.
20 On June 27, 1984, three days before the deadline for
reopening all state lands for OPP applications, the state issued
a finding that because of funding limitations, only one area
would be open for filing new OPP applications between July 1984
and December 1985. The June 27, 1984 finding also stated that
"[o]ther state tide and submerged land will remain closed to the
filing of new offshore prospecting permit applications."
21 DNR declined to conduct an in-depth analysis of the
effects of mining in the region because it lacked the information
to make an adequate determination.
22 "A noncompetitive lease shall be granted to a holder of
a prospecting permit for so much of the land subject to the
permit as is shown to the satisfaction of the director to contain
workable mineral deposits." AS 38.05.250(b). 11 AAC 86.530(a)
states, "At any time while an offshore prospecting permit is in
effect, the permittee is entitled to a noncompetitive mining
lease on that part of the permit area that has been shown to the
satisfaction of the director to contain workable mineral
deposits."
23 Interestingly, in Table 1 of the BIF, DNR states that a
prospecting permit is converted to a lease "[u]pon satisfying
[the] Director that workable deposits exist." A second best
interest determination is not mentioned.
24 The State cites the following passage from Universal
Education Society, 583 P.2d at 811-12, to support its claims:
It is clear to us that the decision to
grant or deny offshore mining leases is
within the expertise of the Division of
Lands. The decision involves both
fundamental policy formulations and complex
subject matter. The Division has been
entrusted by the legislature with the
allocation of lands for offshore mining
leases. In making this allocation the
Division must make, among others,
determinations as to what is the best use of
land, where precisely the land is located,
and what method of mining will most
efficiently recover the valuable minerals.
By necessity the answers to these questions
are based on complex data which no court is
as capable of analyzing and deciding as is
the Division.
These statements are not contrary to our holding in this case.
DNR is the agency that determines what lands will or will not be
opened for mining and its decisions are entitled to great
deference. However, DNR cannot open an area for exploration and
then later determine that mining is not in the best interest of
the state. The proper time to conduct a best interest finding
regarding mining is at the OPP stage.
25 AS 29.18.190 provided in relevant part:
State Land. A borough or city may
select 10 per cent of the vacant,
unappropriated, unreserved state land located
within its boundaries. In the selection of
land under the Alaska Statehood Act, it is
the policy of the state to make available to
cities and boroughs the maximum land area
from which to make selections under this
section consistent with the best interest of
the state. . . .
(b) If land desired by the borough
or city is unsurveyed at the time of its
selection, the Department of Natural
Resources shall survey or approve a survey by
the borough or city of the exterior
boundaries of the area requested without
interior subdivision and shall issue a patent
for the selected area in terms of the
exterior boundary survey. . . .
26 North Slope Borough attempted to select land within the
Prudhoe Bay oil field, at the time the largest oil field in North
America. Leresche, 581 P.2d at 1116.
27 Despite DNR's refusal to grant Sheardown OPPs inside
Goodnews Bay due to turbidity concerns, DNR did not adequately
consider turbidity outside Goodnews Bay. The BIF does not
address turbidity concerns outside of Goodnews Bay and the RAR
simply mentions that turbidity outside of Goodnews Bay should be
minimal and can be controlled through the use of silt curtains
and containment ponds. The BIF also does not contain any
analysis of oil spill impacts. DNR simply states that a fuel
spill contingency plan will be required.
28 In her Appellee's brief, Sheardown admits that DNR did
not assess the impacts of mining in Kuskokwim Bay. The RAR
recommended that offshore mining impacts in Kuskokwim Bay be
assessed after exploration identifies specific mineral deposits:
Detailed impacts and constraints to
marine reclamation cannot be determined until
site specific mining plans have been
prepared. Obviously, such plans would not be
prepared until exploration reveals whether or
not commercially viable minerals exist.
DNR correctly recognized it would need
to assess offshore mining impacts [in
Kuskokwim Bay] after exploration revealed
more about the quality, location and
characteristics of any such deposits.
29 In contrast, the current stipulations in the BIF are
directed solely at exploration activities.
30 The primary danger associated with lease determinations
made on a case-by-case basis is that the cumulative environmental
threat posed by mining is not adequately considered. See
Trustees for Alaska v. State, DNR, 851 P.2d 1340 (Alaska 1993).
31 See 11 AAC 86.800.
32 We believe that in enacting AS 38.05.250(b),the
legislature recognized the unfairness of allowing a permittee to
prospect for minerals and then deny him or her the opportunity to
mine the same. We also acknowledge the potential for waste of
both economic and judicial resources in requiring multiple best
interest determinations.
33 Kuitsarak also asserts that the OPPs issued to
Sheardown violate the Bristol Bay Area Plan (BBAP).
Specifically, the BBAP states that dredging is permitted only
after a determination is made that it will cause no significant
adverse impact on the fish habitat and that no other prudent
alternative site exists. The OPPs do not authorize any dredging
or mining activity. DNR failed to adequately analyze the effects
of mining, which it must do. For the reasons stated above, on
remand, DNR must consider whether the OPPs comply with the BBAP.
34 The BIF also relied upon additional information
provided by other resource agencies, the Bureau of Mines and
public comment.
35 Contra, Greene County Planning Bd. v. Federal Power
Comm'n, 455 F.2d 412, 420 (2nd Cir. 1972), cert. denied. Federal
Power Comm'n v. Greene County Planning Bd., 409 U.S. 849 (1972).
("The Commission appears to be content to collate the comments of
other federal agencies, its own staff and the intervenors and
once again act as an umpire. The danger of this procedure, and
one obvious shortcoming, is the potential, if not likelihood,
that the applicant's statement will be based on self-serving
assumptions.") (footnotes omitted).
36 The State also argues that the BIF did not rely solely
on the RAR and thus need not be disturbed even if the RAR was
tainted. This argument is not persuasive given that the RAR was
the cornerstone of the State's best interest determination.
37 Portions of the RAR that were drafted by WGM were
rewritten by the U.S. Bureau of Mines.
38 The fact that ADF&G suggested over 100 substantive
changes to the document and that it disagreed with the RAR's
characterization of subsistence uses in the area indicates that
the original RAR was at best flawed. Although DNR made some
changes as a result of other agencies' input, we do not believe
that suggestions by the other resource agencies supplants DNR's
responsibility for data contained in the RAR.
39 Because we remand to DNR to provide a new RAR or a
similar data compilation and to consider the effects of mining on
the region, we need not consider whether (1) DNR properly
concluded that issuance of the OPPs was consistent with
Cenaliulriit's CPM; (2) DNR granted Cenaliulriit's comments due
deference; and (3) whether CPC's determination that DNR's
decision was consistent with Cenaliulriit's CMP was supported by
substantial evidence. In light of our decision, DNR must make a
new determination as to whether issuance of the OPPs is
consistent with Cenaliulriit's CMP. Additionally, Cenaliulriit
should be provided a new opportunity to comment on DNR's
findings. However, we note that Kuitsarak's claims that DNR
erred in not classifying Platinum as a traditional village and
that DNR erroneously did not include Goodnews Bay in the notice
requirement of stipulation 16 are without merit.
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