City of Austin, Tex. v. Decker Coal Co.
| Decision Date | 28 March 1983 |
| Docket Number | No. 81-1618,81-1618 |
| Citation | 701 F.2d 420 |
| Parties | CITY OF AUSTIN, TEXAS and Lower Colorado River Authority, Plaintiffs-Appellees, v. DECKER COAL COMPANY, a Joint Venture, Wytana, Inc. and Western Minerals, Inc., Defendants-Appellants. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Britton White, Jr., Paul D. Phillips, Denver, Colo., Brown, Maroney, Rose, Baker & Barber, Scott R. Kidd, Austin, Tex., for defendants-appellants.
Terrence Irion, Asst. City Atty., Austin, Tex., for plaintiffs-appellees.
Small, Craig & Werkenthin, James M. Alsup, C.C. Small, Jr., Austin, Tex., for Lower Colo. River Authority.
Appeal from the United States District Court for the Western District of Texas.
Before RUBIN, RANDALL and JOLLY, Circuit Judges.
I. INTRODUCTION
This case comes before this court from a decision by the district court for the Western District of Texas, Bunton, J., in favor of the plaintiffs--the City of Austin, Texas, and the Lower Colorado River Authority. 1
We are presented with a question of allocation of costs under a coal procurement contract entered into between the plaintiffs and Decker Coal Company. 2 Specifically, the issue involved is whether, pursuant to the contractual provision allowing Decker to pass costs on to the plaintiffs for "any new legislation, regulation, judicial action ... or labor agreement ... enacted, promulgated, or taken or made effective after March 31, 1974," Decker could pass through cost increases resulting from a 1976 determination by the Montana Department of State Lands [hereinafter, "MDSL"], pursuant to a pre-1974 Montana statute, which precluded "disturbance" of a certain portion of land within the proposed mine area. 3
Because we find, based on an interpretation of the entire contract as required by Montana law, 4 that the parties intended to allow pass-through of costs resulting from governmental action such as was involved here, we reverse the decision of the court below and remand for a determination of increased mining costs chargeable to the plaintiffs.
II. MOTION FOR CERTIFICATION
We note at the outset that Decker has filed a Motion for Certification to the Montana Supreme Court of the single issue involved herein. We hereby deny that motion.
Our decision not to certify the issue is based on the logic set forth in Florida ex rel. Shevin v. Exxon Corp., 526 F.2d 266, 274-76 (5th Cir.1976), and on the traditional use of certification. If this case turned on Montana's definition of "regulation" or other terms about which the Montana court possessed expertise, this would be a different case. As we discuss below, however, we base this decision on a determination of intent as manifested by the contract. Because we are as capable of making that determination on the basis of the record as is Montana, we will do so. 5
III. FACTS
In an effort to meet growing energy demands, the plaintiffs, City of Austin and Lower Colorado River Authority, formed jointly the Fayette Power Project. Included in the project's plans were an electric generation station with one 600-megawatt unit and other units with a variety of coal-burning capabilities.
On October 24, 1974, the plaintiffs entered into the Coal Purchase Contract with Decker. Under the contract, coal deliveries were scheduled to begin in 1978 and to continue for approximately 26 years, until 2003. Over the course of the contract over 50 million tons of coal are to be delivered. 6
The contract established a "base price" of $7.00 per ton as of March 31, 1974. Numerous price adjustment mechanisms were built into the contract, primarily in article IX, which is a detailed enumeration of adjustment factors, covering 11 pages. The pertinent clause within article IX of the contract is paragraph 9.06:
ADDITIONAL COSTS IMPOSED BY LEGISLATION, REGULATION,
JUDICIAL ACTION, LABOR AGREEMENT, OR CHANGES IN
The price of coal shall be increased from the base price in the same amount that the cost per ton of mining coal at the Mine is increased by any direct cost or required investment in order to comply with any new legislation, regulation, judicial action (other than the codification of the common law), or labor agreement which provides for new "add-ons" or additional personnel .... enacted, promulgated, or taken or made effective after March 31, 1974.
In July 1973 Decker filed an Application for Prospecting Permit with MDSL for exploration by rotary drill holes in Big Horn County, Montana. The site, known as "East Decker," is east of the Tongue River Reservoir directly across from another Decker mining area, dubbed "West Decker." Decker had acquired a perpetual coal lease for this area in September 1971.
The East Decker site lies, in part, within the Deer Creek floodplain, through which Deer Creek flows on its way to Tongue River Reservoir. Deer Creek has a drainage area of approximately 50 square miles and its floodplain contains riparian timber, shrub habitat and significant wildlife.
Decker's permit application specified the acreage to be disturbed, the method of prospecting, the mineral sought, and included a Detailed Prospecting Reclamation Plan with maps. In its reclamation plan, Decker stated: 7
Decker went on to say that based on interviews with local residents of the community, no "archaeological, historical, ethnological and cultural values" would, to Decker's knowledge, be affected. Nor would the "use, enjoyment, or fundamental character" of neighboring lands with such characteristics be adversely affected. Decker promised MDSL that should any characteristics of "Section 9" lands be encountered it would cease prospecting, notify MDSL immediately, and reclaim all disturbances within the area having those characteristics. 8 The Application for Prospecting Permit and appended Detailed Prospecting Reclamation Plan were filed as required by the Montana Strip and Underground Mine Reclamation Act, 1975 Mont.Laws ch. 441, sec. 14, and by the regulations adopted by MDSL pursuant thereto, Mont.Admin.Code §§ 26-2.10(10)-S10270 to -350 (1973). 9
On July 23, 1973, MDSL issued Decker a permit allowing Decker to prospect on the lands in question, according to the procedures and assurances which it had set forth in its permit application. This permit was reissued on September 21, 1973, and renewed on September 20, 1974. In the 1974 renewal MDSL stated that the permit "in no way implies future Department approval of any area for mining," and attached a MDSL letter spelling out the requirements vis-a-vis the nearby Tongue River Reservoir so that no water pollution should occur. 10
Finally, on April 9, 1975, Decker submitted an application for a strip mining permit to MDSL. Included in the application was a proposal to place "overburden" and spoil materials into the Deer Creek floodplain, to divert Deer Creek from its original channel, and to affect Deer Creek drainage in other ways. Decker submitted archaeological, ecological and topographic data with the application and stated that the area did not encompass any "Section 9" lands. Appended to the application was a 1973 "Historic and Archaeologic Resources Impact Appraisal" which included an evaluation of the proposed mining area. According to Decker, this report, prepared by Western Interpretive Services, indicated "a low probability of the area" possessing special characteristics as set forth in Section 9. 11
Pursuant to its statutory 12 and regulatory requirements, 13 MDSL had begun its process of determining whether Decker's proposed mining plan would adversely affect any lands that had the characteristics required for "Section 9" classification. This analysis began at least as early as February 1, 1974. Over the next 2 years, MDSL conducted extensive investigations to make this determination. As set forth in Decker's response to plaintiffs' interrogatories, at least 15 meetings were held with MDSL officials to discuss the problems MDSL perceived insofar as whether the lands affected had the characteristics described in Section 9.
In February 1976, MDSL determined that portions of the mining area did possess "Section 9" characteristics. 14 Subsequently, in March 1976, MDSL established a tentative "non-disturbance" line which essentially provided that the Upper Deer Creek floodplain could not be disturbed, but which allowed disturbance of the Lower Deer Creek floodplain. This line was established finally in April 1977 and was presumably based on a decision that the Upper Deer Creek floodplain was "Section 9" land and that the Lower Deer Creek floodplain was not.
As a result of this determination, Decker had to revise its proposed mining plan to avoid disturbance of the protected area. After nine additional meetings to consider the "Section 9" problem, and after submission of three proposed mining plans by Decker, MDSL approved a plan on July 13, 1977, which replaced the use of draglines with a truck-and-shovel mining method. This plan, as determined by MDSL, eliminated the deposit of "overburden" or other disturbance in the Upper Deer Creek floodplain.
Unfortunately, as stipulated by the parties, the substitute method increased the costs of mining. 15
All of which brings us back to the only issue which concerns us: Was the action taken by MDSL in February-March 1976 in classifying the Upper Deer Creek floodplain as "Section 9" land and in establishing the non-disturbance line a "new ... regulation ... enacted, promulgated or taken or made effective after March 31, 1974," as contemplated by the contract?
IV. DETERMINATION
In the Findings of Fact and...
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