472 N.W.2d 766 (S.D. 1991), 17262, Matter of Homestake Min. Co.

CourtSupreme Court of South Dakota
Writing for the CourtThe opinion of the court was delivered by: Wuest
Citation472 N.W.2d 766
PartiesIn the Matter of the Application to Transfer Mining Permit No. 416 from HOMESTAKE MINING COMPANY to Minerva Explorations, Inc.
Date26 June 1991
Docket Number17262,17271.

Page 766

472 N.W.2d 766 (S.D. 1991)

In the Matter of the Application to Transfer Mining Permit No. 416 from HOMESTAKE MINING COMPANY to Minerva Explorations, Inc.

Nos. 17262, 17271.

Supreme Court of South Dakota.

June 26, 1991

Argued March 18, 1991.

Page 767

Roger A. Tellinghuisen, Atty. Gen., Wade A. Hubbard, Asst. Atty. Gen., Pierre, Lawrence L. Piersol, Sioux Falls, for appellant.

Marvin D. Truhe, Rapid City, for appellee.

WUEST, Justice.

In November 1984, Homestake obtained Mining Permit No. 416 to mine precious metals (e.g. gold) at a site known as the Ragged Top Project near Spearfish Canyon in Lawrence County, South Dakota. Homestake posted a surety bond in the amount of $661,800 to cover the cost of reclamation after anticipated mining activities at the site were completed. Homestake estimated its mining operations would be completed by 1988 or 1989.

Homestake conducted mining exploration and reclamation activities at the site in 1984; however, Homestake never commenced any mining operations at the site. 1 From 1984 to 1988, Homestake filed with the South Dakota Department of Water and Natural Resources (Department) an annual report indicating that no surface disturbance had occurred. 2 Due to economic and other factors, Homestake discontinued its plan to commence mining under the permit. On February 22, 1989, Homestake requested the Department release the reclamation surety bond pursuant to Permit No. 416 on condition the permit remain "active" and a new surety be posted before any mining activities were conducted.

The Department and the Board of Minerals and Environment (Board) consented to release Homestake's surety bond but not Homestake's liability for reclamation. On April 20, 1989, the Board executed a Release of Surety which, unlike the Board's standard release, did not release Homestake from liability for reclamation under the permit. The release explicitly provided that "Permit No. 416 is to remain active with the condition that Homestake post the required surety prior to conducting any activity under the permit."

In May 1989, Homestake and Minerva Explorations, Inc. (Minerva), a Nevada corporation, requested the permit be transferred to Minerva. Minerva had acquired an interest in Permit No. 416 and the Ragged

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Top Project from Homestake in 1986. Minerva filed with the Department a Notice of Transfer required by SDCL 45-6B-47 and ARSD 74:29:04, set forth infra. Minerva did not submit a reclamation surety with the Notice of Transfer.

The Department reviewed the request, found it procedurally complete and recommended approval of the transfer on condition that Minerva submit a reclamation surety prior to commencing mining. The matter was heard before the Board, which treated the matter as a contested case. Mr. Richard Fort (Fort) intervened at the hearing as an interested party.

Notwithstanding its April 20th Release of Surety, the Board determined that Permit No. 416 had expired, and therefore, there was no permit in existence to transfer. The Board also determined that Minerva's application did not comply with ARSD 74:29:04, which requires the filing of a replacement surety with a Notice of Transfer.

Minerva appealed to circuit court, which reversed and remanded the Board's decision. The State (an amalgamation of the Board and Department) and Fort each appeal the circuit court's decision to this court. We have consolidated their appeals and address the following issues:

I. Whether the Board erred in determining that Permit No. 416 had expired and therefore could not be transferred; and

II. Whether the Board erred in denying the permit transfer on the basis that Minerva did not submit a surety bond with its Notice of Transfer.

I.

The State and Fort rely upon the conclusion of the Board that Homestake's permit had expired and therefore could not be transferred. Minerva contends the Board's conclusion is without legal authority and is unsupported by the Board's findings of fact.

Mining permits authorize mine operators to engage in mining activities for the life of the mine. SDCL 45-6B-5. A "life of the mine permit" is in effect as long as:

(a) An operator continues to engage in the extraction of minerals;

(b) Mineral reserves are shown to remain in the mining operation and the operator temporarily ceases production;

(c) Production is resumed within five years of the date production ended.

SDCL 45-6B-3(6)(a)-(c).

Fort and the State argue that Permit No. 416 does not meet any of the requirements of SDCL 45-6B-3(6) and therefore cannot be an effective "life of the mine permit." It is undisputed that Homestake never engaged in the extraction of minerals at the permit site. Thus, it logically follows that Homestake could not "continue to engage in," "temporarily cease," or "resume" mineral production within the provisions of SDCL 45-6B-3(6). However, the fact that Permit No. 416 does not fit neatly within the statute does not render the permit invalid. It would be anomalous, indeed, to find a permit issued yesterday invalid today because its owner had not yet begun mining operations. Under Fort's and State's argument, mining permits would be invalid the moment they were issued. The Board's administrative rules provide that a mining operation is not in a state of temporary cessation under SDCL 45-6B-3(6)(b) when the mining permit has been issued, but the mining operation has not begun. ARSD 74:29:09:01(3). The clear implication is that mining permits "exist" after issuance, but before mining operations commence. There is no significant statutory or administrative provision to the contrary, and we reject this argument.

At the hearing, the Board discussed the definition of the term "life of the mine." Apparently, the Board determined the term not only refers to the time when all valuable mineral deposits have been extracted, but also includes the permit holder's intention to extract such minerals. Under this reasoning, the Board determined that Homestake's delay in beginning mining operations, its reclamation of the exploration activities, and the release of the surety bond all evidenced Homestake's intention

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to not mine under Permit No. 416. Accordingly, the permit "expired" or "lapsed."

We have gleaned the preceding facts and rationale from the transcript of the hearing and the appellate briefs. The Board's findings of fact, however, are almost completely devoid of any reference to Homestake's intentions and the relevance of those intentions to the conclusion that Permit No. 416 had expired. For all practical purposes, there are no findings which support this conclusion. The failure to enter proper findings is reversible error. See SDCL 15-6-52(a); Olson v. Olson, 438 N.W.2d 544 (S.D.1989); Talbert v. Talbert, 290 N.W.2d 862 (S.D.1980).

However, we refrain from remanding to the Board for findings in this instance because a review of the entire record does not support an inference that Homestake intended its permit to expire. First, Homestake arranged for the transfer of Permit No. 416 and the release of the reclamation surety before expiration of the estimated completion date of the mining project (1989). Second, and more compelling, in seeking the release of the reclamation surety, Homestake specifically requested that Permit No. 416 remain "active." Clearly, Homestake never intended the permit to expire; they intended to transfer it. The Board found as fact that Homestake's surety had been released "with the condition that [the permit] remain 'active.' " Any conclusion to the contrary is unsupported in the findings and in the record. We hold that Homestake's permit did not lapse or expire, but was in effect and subject to transfer.

II.

Pursuant to Homestake's and Minerva's Notice of Transfer, the Department informed Minerva that it would not have to file a surety bond with its application, but would be required to submit a reclamation surety prior to commencing mining under the permit. The surety required would be $661,800, equivalent to the surety formerly required of Homestake. Accordingly, Minerva did not submit a bond with its transfer application.

The Board found both Homestake and Minerva to be in compliance with applicable state, federal and local laws; however, the Board concluded as a matter of law that Minerva's Notice of Transfer was fatally deficient because Minerva failed to file a surety bond.

Pursuant to SDCL 45-6B-47:

Any mining operation permit may be transferred. If one operator succeeds another at any uncompleted operation, he shall make application for a transfer to the board of minerals and environment. The board may not deny a transfer unless the operation is not in compliance or cannot be brought into compliance with all applicable local, state and federal laws pertaining to the operation prior to the transfer, or unless the successor operator is in violation of state statutes, rules, mining permit conditions or requirements with respect to any mining operation in the state. The board shall release the first operator from all liability as to that particular reclamation operation and shall release his surety as to such operation if the successor operator assumes, as part of his obligation under this chapter, all liability for the reclamation of the affected land, and his obligation is covered by an appropriate surety as to such affected land[.]

(Emphasis added). The administrative rules adopted in conjunction with this statute provide:

A transferred permit authorizes only those activities approved in the operating and reclamation plan, permit conditions, and approved permit amendments. Any changes in the permit, including adding contiguous land, minor modifications,...

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