Cemex Inc. v. Dep't of the Interior
| Decision Date | 15 September 2021 |
| Docket Number | Civil Action No. 1:19-cv-01265 (CJN) |
| Citation | 560 F.Supp.3d 268 |
| Parties | CEMEX INC., Plaintiff, v. DEPARTMENT OF THE INTERIOR, et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
Helgi C. Walker, Gibson, Dunn & Crutcher, LLP, Washington, DC, for Plaintiff.
Derek S. Hammond, U.S. Attorney's Office for the District of Columbia, Washington, DC, for Defendants.
In 1990, Cemex purchased from the federal government the right to extract sand and gravel from a mineral deposit located in Southern California. See Compl., ECF No. 1 at ¶ 2. For approximately 25 years, both parties operated under the mutual understanding that the two-decade production period would not start to run until Cemex acquired the necessary permits to begin mining. Id. That changed in 2015 when the Bureau of Land Management informed Cemex that the production period had concluded and that Cemex owed the government millions in payments in lieu of production. Id. ¶¶ 8–10. Cemex moves, among other things, to set aside the government's action as arbitrary and capricious. See generally Pl.’s Motion for Summ. J. ("Pl.’s Mot."), ECF No. 13. The government responds with a motion for summary judgment of its own. See generally Defs.’s Cross-Motion for Summ. J. ("Defs.’s Mot."), ECF No. 19. The Court grants Cemex's Motion and denies the government's Motion for the reasons that follow.
Located about 30 miles north of downtown Los Angeles near the city of Santa Clarita, Soledad Canyon has been used for mining since the 1960s. See Joint Administrative Record Appendix ("J.A."), ECF No. 26-2 at 4. The area contains one of the largest sand and gravel deposits in Southern California. Id. at 181. In 1989, the Bureau of Land Management held competitive bidding for contracts to extract the sand and gravel, two composite materials known in the mining world as "aggregates." Id. at 113. Transmix, Cemex's predecessor, came out on top. Id. at 5.
A year later, Cemex and the United States entered into two contracts. Id. The Bureau of Land Management drafted both. Id. Section 1 of the first contract (Contract CACA-20139) stated that "[t]he production period for this contract will be a maximum of ten years with an effective date beginning the day the mining plan, to be submitted by the Purchaser, is approved by the Authorized Officer." Id. at 6. Section 6 of that contract also provided that the "contract shall expire when the total amount of materials sold has been severed and removed or 10 years from the effective date of the production period unless an extension of time is granted." Compl., ECF No. 1-3, Ex. 3 at 4. Section 1 of the second contract (Contract CA-22901) specified, in turn, that "[t]he production period for this contract will be a maximum of ten years with an effective date of the day after expiration of Contract Serial No. [CA] 20139 between the Purchaser and the Authorized Officer." J.A., ECF No. 26-2 at 6–7. The two contracts taken together provide that the 10-year production period of Contract CA-22901 would run, according to its terms, following the expiration of the 10-year production period of Contract CA-20139. In sum, Cemex's winning bid bought it two consecutive 10-year production periods, starting with the effective date under Contract CA-20139.
The contracts contained additional clauses relevant to this case. They, for instance, required Cemex, upon production, to make "royalty" payments to the government, payable in twenty installments over the life of the contracts. Id. at 6. In the absence of any production, the contracts required that Cemex make "payments ... in lieu" of royalty payments. Id. The contracts also imposed several conditions before mining could begin. Special Stipulations attached to the contracts specified that "[o]perations will not commence until activities proposed in the mining and reclamation plan are reviewed ... and approved by the authorized officer." J.A., ECF No. 26-6 at 159, 173. The Stipulations also required Cemex to comply "with the rules and regulations of the South Coast Air Quality Management District," the "rules and regulations of the State of California, Regional Water Quality Control Board, Los Angeles Region," and "with the State of California Mining and Reclamation Act." Compl., ECF No. 1-3, Ex. 3 at 6, 2 ().
Following execution of the contracts, Cemex together with the Bureau worked through the environmental review process, which included having to come to terms on a mining and reclamation plan. In 1991, the Bureau rejected in an internal memorandum the position that Cemex had to begin making either installment or in lieu of payments at that time, stating that the "effective date" "[i]s the date the mine plan is approved, and not the date the contract is signed (obligation date)." J.A., ECF No. 26-6 at 181. The memorandum provided a rationale for that conclusion: Id. The Department of Justice later took the same position in federal court, explaining in 1997 that the United States would receive revenue from Cemex's mining operation once it began mining, and that a delay of the start date means a "consequent delay in the date the United States begins to receive royalties." Id. at 242. And in a memorandum circulated in 2000 in response to a request for information about the sand and gravel deposits the Bureau stated that Cemex's "scheduled payments begin after all of the necessary permits have been obtained." J.A., ECF No. 26-3 at 358.
In August 2000, the Bureau executed a record of decision, approving a mining and reclamation plan. J.A., ECF No. 26-6 at 120. The record of decision not only directed Cemex on how it would excavate 56 million tons of aggregate over a 20-year period, but it also identified various terms required to commence mining. Pl.’s Mot., ECF No. 13-1 at 2–3. Approval of the plan hinged on compliance with "agency approvals and reviews" at the federal, state, and local level, "contract compliance, monitoring requirements, and bonding requirements." Compl., ECF No. 1-10, Ex. 10 at 8. It also stated that Cemex, "[a]s a condition of approval," must "comply with the mitigation measures specified in Appendix ...; the provisions of the mining reclamation plan ...; and ... must consult with and obtain approvals from [ ] regulatory agencies ..., and any other permits or authorizations required by law." Id. at 4.
The City of Santa Clarita, together with others, appealed to the Interior Board of Land Appeals the Bureau's decision to issue the record of decision. J.A., ECF No. 26-6 at 270. The Board rejected the challenges. See generally City of Santa Clarita v. U.S. Dep't of Interior , No. CV02-00697 DT FMOX, 2006 WL 4743970, at *3 (C.D. Cal. Jan. 30, 2006). And the Ninth Circuit affirmed the federal district court's decision rejecting them as well. City of Santa Clarita v. U.S. Dep't of Interior , 249 F. App'x 502 (9th Cir. 2007). In doing so, the Ninth Circuit also affirmed the federal district court's conclusion that the plaintiffs acted in "bad faith" by filing a lawsuit "to delay, obstruct and harass defendants." Id. at 505.
Throughout the 2000s, the Bureau together with Cemex defended the mining project against numerous other challenges. See Ctr. for Biological Diversity v. U.S. Fish & Wildlife Serv. , 450 F.3d 930, 933 (9th Cir. 2006). While mounting the joint defense, both Cemex and the Bureau certainly appeared to operate under the mutual understanding that the effective date of the first production period had not yet occurred.1 As the Central District of California explained in 2006, the record of decision "approv[ed] the Project subject to CEMEX's compliance with a myriad of mitigation, monitoring, and bonding requirements."
City of Santa Clarita v. U.S. Dep't of Interior Bd. of Land Appeals , No. CV04-1572 DT(FMOX), 2006 WL 4748737, at *3 (C.D. Cal. Feb. 8, 2006). In a letter sent to Cemex that same year, the Bureau reaffirmed that the first production period would be triggered once Cemex obtained "additional agency approvals and reviews," and that "pre-production activities ... would not trigger royalty payments or the beginning of the contract term." Compl., ECF No. 1-12, Ex. 12 at 2.
Despite coming up short in court, the City of Santa Clarita persisted in its opposition to the project and continued to threaten recourse to litigation to halt Cemex from proceeding with its mining operation. So, in 2007, Cemex entered into a "truce" with the City. J.A., ECF No. 26-3 at 132. The truce called for Cemex to pause its efforts to obtain the remaining necessary permits in exchange for the City suspending its opposition activities. Id. It also encouraged both parties to pursue federal legislation as a way "to resolve outstanding differences," cancel the contracts, compensate Cemex, and preclude mining on the site. J.A., ECF No. 26-2 at 286. The Bureau knew about the truce, writing to Cemex in 2008 that it had "no intention to interfere with or disrupt on-going efforts during the ‘truce’ to find a creative solution to this difficult issue." J.A., ECF No. 26-4 at 29. A year later, Cemex wrote back to the Bureau to provide an update on its continued efforts "to develop a mutually-agreeable solution to the protracted and on-going disputes relating to the Project." Id. at 33. In the same correspondence, Cemex mentioned that it had "continued to take all necessary steps to protect the status of existing permits and applications." Id.
The truce fell apart years later. Cemex, in turn, continued its efforts to obtain the necessary permits to get its mining project off the ground. These efforts led to a series of...
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