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Citizens for Protection of Arbuckle-Simpson Aquifer v. Oklahoma Department of Mines

Court of Appeals of Oklahoma, Division II

July 26, 2018

CITIZENS FOR THE PROTECTION OF THE ARBUCKLE-SIMPSON AQUIFER, Petitioner/Appellant,
v.
OKLAHOMA DEPARTMENT OF MINES, Respondent/Appellee, and ARBUCKLE AGGREGATES, LLC, Intervenor.

          Mandate Issued: 03/27/2019

          APPEAL FROM THE DISTRICT COURT OF OKLAHOMA COUNTY, OKLAHOMA HONORABLE BRYAN C. DIXON, TRIAL JUDGE

          Krystina E. Phillips, INDIAN AND ENVIRONMENTAL LAW GROUP, PLLC, Ada, Oklahoma and Tyler J. Coble, CHEEK LAW FIRM, P.L.L.C., Oklahoma City, Oklahoma, for Petitioner/Appellant

          Mark Secrest, CHIEF LEGAL COUNSEL, OKLAHOMA DEPARTMENT OF MINES, Oklahoma City, Oklahoma, for Respondent/Appellee

          Elizabeth C. Nichols, ELIZABETH C. NICHOLS, PC, Edmond, Oklahoma, for Intervenor

          P. THOMAS THORNBRUGH, CHIEF JUDGE

         ¶1 Petitioner, Citizens for the Protection of the Arbuckle-Simpson Aquifer (CPASA), appeals from a trial court judgment upholding an order by the Oklahoma Department of Mines (ODM) granting a non-coal surface mining permit to Arbuckle Aggregates, LLC (Aggregates). Based on our review of the relevant statutory and regulatory provisions as applied to the ODM order and the record of proceedings as set forth below, we affirm the decision as modified herein and remand to ODM with instructions that the agency comply prospectively with this Court's findings concerning applicable notice, hearing, and record compilation procedures.

         BACKGROUND

         ¶2 This appeal arises from a lawsuit filed by CPASA in state district court after ODM granted Aggregates' application for a permit pursuant to the Oklahoma Mining Lands Reclamation Act, 45 O.S.2011 §§ 721, et seq. (OMLRA). The record reveals a long and contentious course of litigation, reflected in a disputed administrative record containing more than 9, 000 pages and leading to an agency decision that granted Aggregates a conditional permit to initiate non-coal surface mining activities on a 15-acre plot of land.

         I. INITIAL APPLICATION, FIRST NOTICE AND FIRST INFORMAL CONFERENCE

         ¶3 The proceedings began in May 2010, when Aggregates submitted an application seeking a permit to mine limestone, dolomite, shale, sand, gravel, clay, and soil, using quarrying and strip mining methods, [1] on 575 acres in Johnston County. It is undisputed that the mine is ultimately expected to have a "life" of more than 50 years and be more than 200 feet deep. [2] It also is undisputed that the Arbuckle-Simpson Aquifer, a sensitive sole source aquifer, underlies much of Johnston County, and that the mine's proposed site is on or near the aquifer. The average depth to groundwater is not clear from the record, but testimony indicated that the water table generally is within 100 feet below the surface. [3]

         ¶4 At the time Aggregates submitted its initial application, ODM, following then-effective statutes and rules, published notice of it in a Johnston County newspaper. After receiving more than 300 written protests and comments, ODM scheduled an informal public conference for December 2, 2010. Numerous individuals and entities -- including surrounding landowners, CPASA, the Oklahoma Department of Wildlife Conservation, the National Park Service, and the U.S. Fish and Wildlife Service -- appeared and spoke against granting the permit. According to the transcript from that meeting, the primary concern of CPASA and many others was the effect of Aggregates' mining operation on the Arbuckle-Simpson Aquifer -- the region's principal water source -- particularly because several existing mines already operate in the area.

         ¶5 According to the December 2010 conference transcript, the ODM officer conducting the meeting announced that all persons who signed in would receive a copy of the ODM's notice of its "departmental decision" (NDD). [4] He also announced that the gathering was "an informal conference" (IC) at which ODM was present "simply to listen to the concerns of the citizens and to make sure that we make the right decision [in] issuing this permit." Aggregates announced it was submitting supplements to its permit application. The supplements were included as exhibits to the proceeding and the conference officer announced ODM would "hold the record open" until January 14, 2011, should any of the participants want to submit additional information. [5] Departing from its usual practice, however, ODM did not issue an NDD after the IC in December 2010.

         II. AMENDED APPLICATION, SECOND INFORMAL CONFERENCE AND FIRST NDD

         ¶6 Aggregates provided additional information to ODM prior to January 14, 2011, and submitted an amended application to ODM in August 2011. This was followed by ODM's second publication of notice of the application in an area newspaper. The notice stated it was a "republication" of Aggregates' permit application notice. [6] Although it did not mention that Aggregates had amended the application, it stated that a copy of the complete application was available for public inspection at the Johnston County Courthouse.

         ¶7 In the meantime, in March 2011, the Oklahoma Supreme Court held unconstitutional the state statute and ODM rule stating that the only persons entitled to protest the issuance of a permit were "property owners and residents of occupied dwellings who may be adversely affected located within one (1) mile" of a proposed mining operation. See Daffin v. State ex rel. Dept. of Mines, 2011 OK 22, 251 P.3d 741. As a result of Daffin, ODM's published notice in August 2011 announcing Aggregates' permit application included a statement that any landowner, resident of an occupied dwelling, public entity or agency, or "any party that may be adversely affected has the right to submit comments or object to the issuance of the permit in writing." [7]

         A. Second Informal Conference

         ¶8 The August 2011 notice also drew protests and comments from numerous individuals, including CPASA, affected landowners, and federal agencies. ODM scheduled a second IC for October 4, 2011. At that conference, the presiding ODM officer again announced that the conference would result in ODM's issuance of an NDD. He stated the notice would be sent only to "qualified protestors," [8] although it also would be published in the newspaper. The officer read the names of 23 persons whose protests had been timely received after the last (August 2011) publication notice, and stated that those names represented qualified protesters for the conference, as well as the approximately 307 individuals whose names were "on the mail list" from the first IC. [9] The term "qualified protestor" does not appear in ODM rules or applicable statutes, nor do we find the term used in any published Oklahoma appellate opinion.

         ¶9 A letter from Aggregates submitting an "updated copy" of its permit application was admitted as an exhibit to the second conference. The conference officer said the amended application had been available for public inspection at the Johnston County Clerk's office since August 1, 2011, and that those attending and signing in at the previous conference had received a letter informing them the application was available at the courthouse. [10] He also reiterated that the proceeding was an IC "to hear the public's view." [11]

         B. First Findings and Recommendations

         ¶10 On November 2, 2011, the officer issued his findings and recommendation that Aggregates' permit application be granted conditioned upon its fulfilling a number of requirements. [12] The findings listed 24 persons identified as "[q]ualified protestants appearing by virtue of having complied with the rules," and six "[p]rotestants appearing, but not submitting a letter to ODM requesting an informal conference as required by (45 O.S.2001 § 724 (H)(2) and (4) (OAC 460:10-17-6)." [13] The findings also listed protesters' specific concerns, which included, in addition to the possible harm the operation might do to the Arbuckle-Simpson Aquifer, its watersheds, and nearby surface streams and springs, the following: the lack of proper notice of the supplemental materials submitted by Aggregates and lack of notice of the hearing itself; the failure of Aggregates to obtain necessary permits from other agencies concerning the operation; the alleged lack of a hydrologic study by the Oklahoma Water Resources Board (OWRB) for the site; the mining operation's effect on property values in the area; possible dust, fumes, noise, and nighttime activities associated with the operation; and the operation's impact on area wildlife.

         ¶11 Responding to these concerns, the officer's recommended prerequisites to permit approval included matters specifically addressed to the protection and conservation of water resources of the aquifer; for example, that a proposed groundwater well monitoring program (previously submitted by Aggregates) collect baseline data for a minimum of 12 months prior to commencement of mining, and that a water management plan that Aggregates was submitting to the OWRB become a part of its ODM permit. The officer also noted that, when applicable, Aggregates would need to comply with 82 O.S.2011 § 1020.2.E.1 related to management of pit water. The officer noted Aggregates had submitted two applications to OWRB for permits to use stream or surface water, and recommended that no mining activities be allowed until the OWRB approved those permits.

         C. First Notice of Departmental Decision

         ¶12 On November 14, 2011, ODM issued its first NDD, indicating that Aggregates' application had been conditionally approved substantially as set forth in the conference officer's recommendations. The NDD also stated that within 30 days of receipt of the notice any "person with an interest which is or maybe adversely affected may request a formal hearing on this decision." [14] A certificate of mailing in the Administrative Record indicates that copies of the conference officer's findings and recommendation, along with the first NDD, were either mailed via certified mail or via email to approximately 100 people. [15]

         ¶13 In response to the first NDD, Aggregates and numerous other parties requested a formal adjudicatory hearing. According to the appellate briefs, prior to the formal hearing Aggregates made additional changes to its application concerning its use and management of groundwater. [16] Aggregates then apparently withdrew its request for a formal hearing. ODM has referred to a formal hearing as having been "dismissed" in December 2012, [17] but the record is unclear as to when a formal hearing actually was scheduled or whether it was dismissed by ODM, by agreement of the parties, or by some other method.

         III. AMENDED UPDATED APPLICATION, THIRD INFORMAL CONFERENCE AND SECOND NDD

         ¶14 In any event, in January 2013 Aggregates submitted more "amendments to its previously revised application," with changes that included withdrawing its water monitoring plan altogether and stating that the two stream water use permit applications it had submitted to OWRB had been cancelled. [18] ODM required that Aggregates publish, for the third time, notice of the updated application. Publication occurred in January-February 2013. [19] The published notice mentioned that changes had been made to the application since the last publication, including withdrawal of the water monitoring and management plan and updates to location maps to reflect an incremental bonding plan and the 15-acre "Phase 1bonding area." After again receiving numerous protests, ODM held a third IC, in April 2013.

         A. Third Informal Conference

         ¶15 According to the presiding officer at the third IC, notice of the conference was mailed to "persons who the [ODM] showed as being objectors and other interested persons involved in this proceeding." [20] ODM's general counsel represented that there were 182 names on the matrix to whom notice of the time and date of the conference had been sent, and to whom notice of the second NDD would be sent in addition to publication notice in the newspaper. [21]

         ¶16 In addition to speaking against the permit, several parties raised questions as to whether the current proceeding was a new proceeding or a continuation of the previous proceeding, and whether documents introduced and comments made at the previous two ICs would be considered as incorporated into the ongoing proceeding. No clear conclusion appears to have been reached as to this question at the conference, [22] but ODM and Aggregates in their briefing and at the later, formal adjudicatory hearing treated the matter as a single, ongoing permit application. As a practical matter, this meant that, because Aggregates' initial application was filed prior to August 2011, it was deemed exempt from OWRB groundwater regulations authorized by 82 O.S.2011 § 1020.2, pursuant to subsection (C) of that statute. [23]

         B. Second Findings and Recommendations

         ¶17 On September 4, 2013, the officer presiding at the third IC issued his findings and recommendation that the permit be conditionally granted. [24] The findings delineated the history of the case to date, noted that the specific issues and discussion set forth by the previous conference officer remained accurate, incorporated the previous NDD's discussion by reference, and stated that records from the two previous conferences were being included and considered. [25] The findings described at length the "major amendments or revisions" to Aggregates' most recently filed application as including the following:

         ¶18 (1) The amendment changed the "bonded" area for the permit's first year of operation to 15 acres from the original 575 acres. [26] Development beyond 15 acres after the first year of operation was described in a map with the letters "TBD" ("to be determined"). ODM rules allow for incremental bonding but prohibit an operator from mining outside the bonded area.

         ¶19 (2) The amended application reflected that Aggregates had withdrawn two surface water permit applications on file with the OWRB, replaced by Aggregates' statement in the amended application that its products would be processed with water from "any legal source permissible," and applicable water permits would be obtained "when necessary and/or required." The officer noted that while ODM rules require an applicant to demonstrate that its mining and reclamation operations "can be feasibly accomplished under the mining and reclamation plan" included with its application, ODM does not require, as part of its feasibility analysis, that an applicant obtain OWRB or other permits for mines located in the area (the Mill Creek watershed) of Aggregates' proposed mine. The conference officer's other comments also included the following:

[Aggregates], in previous filings and statements made to ODM, indicated that it owns the groundwater under the 575 acres described for the permit area, and further that it has leased approximately 1, 950 acres of water rights (surface and ground). Additionally, [Aggregates] indicates that for initial site work dust control and other construction activities it can truck in the amount of water needed, and further that groundwater will not be encountered in the quarry pit during the initial mining activities.
Regardless of depth to groundwater at the proposed mining site... [i]t does appear... that eventually [Aggregates] would have to use an amount of water for normal mining operations that would be greater than could feasibly be trucked in, and that possible sources of supply would be [groundwater and surface water accumulating in the quarry pit] as well as surface water in nearby streams and groundwater that could be withdrawn from water wells.
Whether [Aggregates] will need a permit or permits... will be matters for the OWRB to determine.... If such a permit or permits are required... [Aggregates] would have to obtain the same to... avoid being shut down by ODM's enforcement of the mining permit condition to comply with all government permits and licenses. [27]

         ¶20 The conference officer rejected the claim by several protesters that Aggregates' latest revisions were so substantial that its application should be treated as a new rather than an amended application. The officer mentioned the change in law [28] that had occurred after the initial application's date, but concluded that the OWRB would have the ultimate say as to whether Aggregates could claim an exemption under the amended law, and that ODM's rules did not contemplate that certain amendments required an application be treated as new.

         ¶21 The officer therefore recommended the application be granted, conditioned, inter alia, on Aggregates either obtaining OWRB permits or providing "documentation" from OWRB that no permits were required before initiating any use of groundwater or surface water for mining activities. The permit as recommended would allow Aggregates to "truck" water in and out for construction and mining activities, but would prohibit Aggregates from initiating any mining activities outside the 15-acre area without first obtaining ODM's permission to do so after submitting a revised permit application with bond coverage and other required information. [29]

         C. Second Notice of Departmental Decision

         ¶22 On September 19, 2013, ODM issued its second Notice of Departmental Decision (second NDD) conditionally granting the permit per the conference officer's recommendations. [30] The second NDD recites that notice of the decision was provided in accordance with "Title 45 Oklahoma Statutes, 2001 § 724(H)(6)." [31]

         ¶23 Despite ODM counsel's and the conference officer's representations (at the third IC) that ODM would send the second NDD to each of the approximately 200 people who had filed written protests, however, ODM in fact mailed the second NDD only to persons who were in attendance at the third IC. The agency also published notice of the decision in the local newspaper. [32] Even so, the second NDD triggered more than 130 written protests requesting a formal adjudicatory hearing on Aggregates' permit application.

         IV. FORMAL AJUDICATORY HEARING

         ¶24 Following discovery and pretrial motions, the formal hearing occurred over two days in September 2014. [33] Aggregates presented evidence in favor of granting the permit, while CPASA, the U.S. Fish and Wildlife Service, the National Park Service, and Oklahomaranch.com, LLC (whose property is adjacent to the proposed mining site) presented opposing evidence. Among Aggregates' witnesses was a representative of the OWRB, Kent Wilkins, who testified that "at this time" the OWRB did not require a permit or anything further from Aggregates. On cross-examination, he stated that Aggregates previously withdrew two stream water permit applications, and that, since the mine was not yet in operation, there was "not a whole lot that we could review" of a water management plan that Aggregates had submitted in 2012.

         ¶25 In November and December 2014, CPASA and Aggregates submitted proposed findings of fact and conclusions of law. [34] In February 2015, the ODM hearing examiner issued proposed findings of fact, conclusions of law, and a recommendation that a conditional permit be granted pursuant to the terms of the second NDD. The examiner found that Aggregates had demonstrated that its non-coal surface mining plan was "feasible," that it had agreed to comply with the other conditions of the second NDD, and that the company currently was "in compliance with the statutory requirements" of the OWRB. CPASA thereafter filed numerous exceptions challenging the substance of the findings, [35] and the ODM Director requested briefs from the parties as to those exceptions.

         V. FINAL ODM DECISION

         A. Adoption of the Hearing Examiner's Report and Recommendations

         ¶26 In December 2015, ODM issued its final decision adopting and modifying the report and recommendation of the hearing examiner. [36] Although the order largely incorporated the recommendations of the hearing examiner, it modified and/or clarified the examiner's recommendations in a few significant ways, as discussed below.

         B. Modifications and Clarifications of the Hearing Examiner's Report and Recommendations

         1. OWRB's Jurisdiction Over Water Issues

         ¶27 The order confirmed that ODM "may rely on the Oklahoma Water Resources Board in its exercise of jurisdiction over water issues" as to whether Aggregates was in compliance or out of compliance with OWRB's regulatory requirements; and found that if OWRB notified ODM that Aggregates was out of compliance, then ODM would suspend Aggregates' permit until it demonstrated such compliance and "amend[ed] its ODM permit accordingly." [37] The order stated:

The rules promulgated by OWRB to implement SB 597 [ 82 O.S. § 1020.2 ] codified as 785:30-15-1 et seq., include provisions which address the water issues raised. [Aggregates] must comply with these rules and any requirements made by OWRB pursuant to SB 597. Before [Aggregates] initiates any use of groundwater from wells or use of surface water from area springs or streams for any mining activities, [Aggregates] must first obtain the applicable permit or permits, for groundwater or for surface water as the case may be, from the OWRB, and provide copies of such permits to ODM. If no OWRB permit is needed, documentation stating such must be provided to ODM. [Aggregates] may truck in water for its initial construction activities, initial mining activities, and other mining activities as long as the trucked in water is from an authorized source.
If the OWRB notifies ODM that [Aggregates] is out of compliance with any requirements of the OWRB, ODM will temporarily suspend the authority of [Aggregates] to conduct mining operations until such time as [Aggregates] demonstrates that it is in compliance with OWRB requirements and ODM will amend the mining permit to comply with any terms and conditions imposed by the OWRB. [38]

         2. Incremental Bonding

         ¶28 The order agreed with CPASA that Aggregates had not complied with ODM regulation OAC 460:10-21-4(b)(2), and that ODM's grant of a permit was conditioned on Aggregates' compliance with that regulation. Among other things, the regulation requires that an applicant identify all property increments that eventually are proposed to be bonded on the application map. [39] The ODM order added findings of fact that Aggregates had chosen to bond the "proposed mining permit in increments," but had "submitted a permit application map showing only the initial [15-acre] increment to be bonded" rather than the 575 acres described in the application. The order also added a conclusion of law that Aggregates had "failed to satisfy" ODM regulations on incremental bonding. "Otherwise," it stated, Aggregates had submitted an "administratively complete and technically correct application for mining permit." [40]

         3. Federal Wetlands Requirements

         ¶29 The order clarified that the permit was subject to Aggregates' compliance with federal wetlands requirements, and that Aggregates would be subject to an enforcement action by ODM if it fell out of compliance with those regulations.

         4. Restriction to the Initial 15-acre Bonded Area

         ¶30 The order clarified that both the permit and ODM's finding of "feasibility" of the proposed mining operation, was limited to the initial, 15-acre phase of the mining operation. The order pointed out that the record reflected Aggregates' "initial phase of mining only covers 15 acres"; that both ODM's Deputy Director and Minerals Division Administrator had testified to feasibility with reference to a permit application that addressed only the 15-acre initial phase; and that the OWRB had testified to Aggregates' compliance with OWRB regulations on the same basis. Only after setting forth this explanation did the order find sufficient evidence to support the hearing examiner's recommendation to grant a conditional permit based on a determination of feasibility. [41] The order specifically restricted Aggregates "to the initial 15 acres so designated on the bonding area map until a revision is submitted and approved by ODM," and that "a revision to the permit to increase the bonded area will be required before initiating any mining activities in the permit area outside the initial 15-acre bonded area." [42]

         5. Protection of Taxable Value of the Mining Site

         ¶31 The order interpreted ODM's duty to "protect and perpetuate the taxable value of property," set forth in 45 O.S. § 722, as applying only to property to be reclaimed as a result of being disturbed by a mining operation, and that the statute does not impose a duty on ODM to protect the value of property outside the mine site. As such, ODM rejected CPASA's contention that the duty set forth in § 722 extended to protecting the value of property surrounding the mined lands. It modified the hearing examiner's proposed order by adding to its conclusions of law that "ODM properly interprets 45 O.S. § 722 when it insures the reclamation of the mine site." [43]

         6. Property Disputes Between Interested Parties

         ¶32 Finally, ODM refused to consider CPASA's argument, raised during the formal adjudicatory hearing but not addressed by the hearing examiner in his proposed order, that Aggregates' use of groundwater would lower the water table under adjoining owners' property and thereby deprive them of the use and benefit of a valuable property right. The ODM referred to OAC 460:10:11-5(d) and (e), which provide, respectively, that "nothing herein shall authorize [ODM] to adjudicate property disputes between any interested parties," and that upon receiving notice of such a dispute "from any reasonable source," ODM's review of any "pending application... shall be suspended until the Department receives notice that such dispute has been conclusively resolved." ODM found that "since ODM's review of the permit application was completed prior to" the second NDD, ODM was not aware of "the property right issue during its review of this permit application." Apparently, the agency concluded it therefore was not required to suspend further action on the permit. Confusingly, however, ODM also found that it had not been put "on notice" of any "declaratory action regarding this legal issue" filed by a party to the proceeding. [44]

         VI. DISTRICT COURT REVIEW

         ¶33 In April 2016, CPASA alone petitioned for judicial review of the ODM decision by the Oklahoma County District Court. Aggregates intervened as a party respondent. Before the trial court, CPASA argued that ODM had violated principles of procedural due process in its notice procedures; that ODM had not provided the trial court with the full administrative record because it had not included certain records introduced during the first and second informal conferences; [45] and that ODM's grant of the permit was arbitrary and capricious in light of applicable law and the substantial evidence. CPASA also offered evidence that, since issuing its decision, ODM had allowed Aggregates to increase the mine's "footprint" from 15 acres to 575 acres without notifying any party, by accepting Aggregates' revised incremental bonding map, which lists a total of eight phases of mining over the larger area.

         ¶34 The district court found ODM's order was supported by substantial evidence and was not contrary to law. It denied CPASA's request to supplement the record with the IC records as well as evidence related to the permit revision, stating that the items were outside the administrative record. Although stating his "biggest concern" [46] was the adequacy of notice given by ODM "to people," the trial court upheld the ODM order. CPASA filed this appeal.

         STANDARD OF REVIEW

         ¶35 Pursuant to the OMLRA, 45 O.S.2011 §§ 721 through 738, ODM decisions issuing or denying a non-coal mining permit are subject to judicial review under the Oklahoma Administrative Procedures Act (OAPA), 75 O.S.2011 & Supp. 2017 §§ 250 through 323. [47] Accordingly, a district court and this Court apply the same review standard to the administrative record. City of Tulsa v. State ex rel. Pub. Employees Relations Bd., 1998 OK 92, ¶ 12, 967 P.2d 1214. Under that standard:

An agency's order will be affirmed if the record contains substantial evidence in support of the facts upon which the decision is based and the order is otherwise free of error. Scott v. Oklahoma Secondary School Activities Ass'n, 2013 OK 84, 313 P.3d 891, 299 Ed. Law Rep. 233. The order is subject to reversal, however, if the appealing party's substantial rights were prejudiced because the agency's findings, inferences, conclusions or decisions were entered in excess of its statutory authority or jurisdiction, or were arbitrary, capricious, or clearly erroneous in view of the reliable, material, probative and substantial competent evidence. Id.; Oklahoma Dept. of Public Safety v. McCrady, 2007 OK 39, 176 P.3d 1194. An appellate court may not substitute its judgment for that of the agency on its factual determinations. McCrady, supra, at 1200-1201.

Agrawal v. Okla. Dep't of Labor, 2015 OK 67, ¶ 5, 364 P.3d 618; see also 75 O.S.2011 ยง ...


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