Sunday, October 23, 2011

Court decision raises stakes in mineral lease standoff

Lavender Pit, Bisbee, AZ - Credit: Wikimedia Commons
The controversy over the sale of 77 state mineral leases underlying private property in northeastern Minnesota has put a spotlight on Minnesota's byzantine mining laws which favor the holder of mineral rights over the surface property owner. But a 3rd Circuit Court of Appeals decision in Minard Run Oil Company vs. U.S. Forest Service (Minard Run II) has created an even more ominous situation. The court's decision in Minard Run II gives holders of mineral the ability to force the U.S. Forest Service to allow prospecting and mining on privately held mineral rights. This could affect on PolyMet's mine proposal, proposals to prospect for minerals in the Superior National Forest, and could potentially  open vast swaths of the forest to mining.

Many Minnesotans were surprised to learn that private property owners have very little recourse when the state sells a lease to prospect and develop a mine on their property. Minnesota law heavily favors the owners of mineral rights, deemed the "dominant estate" in Minnesota law. Between the heavy bias in Minnesota laws and the direction the federal courts are taking, it will take action by policy makers to prevent widespread copper-nickel mining around, and perhaps even in, the Boundary Waters Wilderness.

The Alleghany National Forest in Pennsylvania was created in 1923, and is in the oil and gas producing area known as the Marcellus Shale. Over 9,000 oil and gas wells are operating in the forest, and 93% of the land area in the forest has mineral rights that are owned by private parties. Much of this area is comprised of "reserved mineral rights" which were created when a landowner sold the surface rights to property but reserved the mineral rights for themselves. This was a common practice in the acquisition of National Forest land, since it allowed the U.S. Government to buy more land with less money. The mining regulations which were in place at the time of the reservation applied to Forest Service decisions made about permitting mineral development. This meant that 1911 era regulations applied to many of the applications to place oil and gas wells on Forest Service land in the Alleghany. These 1911 regulations require only that the applicant inform the Forest Service 60 days in advance, attempt to minimize the surface impact, and remove buildings when drilling or mining is complete.

In 2009, the Forest Service changed its policy, and decided a completed Environmental Impact Statement  (EIS) was required before it would approve additional oil and gas wells. Minard Run Oil Company sued, arguing the new policy deprived them of access to their mineral rights. A district court agreed, and the 3rd Circuit upheld this decision. The takeaway, according to law firm K and L Gates, is that "the mineral owner retains the right to use as much surface land as reasonably necessary to extract minerals, and the mineral owner need not obtain consent or approval before entering land to mine for minerals." If courts here used the same logic it would have wide-ranging effects for mineral exploration and development in the Superior National Forest.

First, large areas of the Superior National Forest are comprised of similar lands, where the surface rights are held by the U.S. Government or private landowners, but the mineral rights are held by someone else. The current conflict over the state mineral lease sale is just a small example of the conflicts created by severed mineral rights. Public notices for mineral prospecting permit (this one, for example) make specific reference to the 1911 rules when they apply. Since much of the land in the forest was acquired between 1909 and 1936, these rules apply for a significant portion of the forest. If the logic in Minard Run II applied here, mining companies could sue, claiming additional conditions violate their inherent right to access privately held mineral rights.

Second, the largest existing mining issue in front of the Forest Service is the PolyMet Supplemental Draft Environmental Impact Statement, which includes a complicated land swap. PolyMet leases privately held mineral rights on the mine site, but the Forest Service owns the surface rights. If the logic of Minard Run II applied to PolyMet, then there would be no need for a land swap, since PolyMet could assert their inherent right to access their mineral rights. It's highly unlikely that PolyMet would now change their position on a land swap, since they've received a $4 million loan from the Iron Range Resources board to pay for it. However, it could impact future negotiations with mining companies about the need for surface land swaps.

Third, and perhaps most disturbing, is the presence of a vast area of privately held mineral rights underlying the Boundary Waters Canoe Area Wilderness itself. A 1984 report by the General Accounting Office identified the presence of privately held mineral rights in the BWCAW as a significant issue. There are over 600,000 acres of privately held mineral rights underlying federally owned surface land in the BWCAW. A 1967 report estimated the cost of acquiring these mineral interests at over $100 million. This map shows the extent of these privately held mineral rights - all of the orange area on the map is BWCAW land with private mineral rights.

Image Credit: Save Our Sky Blue Waters

The BWCAW Act of 1978 provides additional protections regarding mining than are enjoyed by other wilderness areas. But even these protections may be tested by the logic in the Minard Run II decision.

Since Minard Run II is not binding precedent in Minnesota (which is in the 8th Circuit), it is not already in force here. But it should serve as a warning that federal courts are limiting the ability of the Forest Service to regulate mining on land on which it owns the surface rights.

Reliance on regulators applying existing laws may prove to be ineffective at curbing the environmental damage that widespread copper-nickel mining could do to the Quetico-Superior ecosystem. Mark Dayton's call for the Legislature to revisit Minnesota's laws regarding mineral leases is timely, but given the makeup of the Legislature changes that enhance environmental protection seem like a remote prospect.  Only heavy pressure from an engaged citizenry can force politicians to do the right thing.

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