Grand Canyon Trust v. Provencio

• Decision Date: 22 February 2022
• Docket Number: No. 20-16401,20-16401
• Citation: 26 F.4th 815
• Parties: GRAND CANYON TRUST; Center for Biological Diversity ; Sierra Club, Plaintiffs-Appellants, and Havasupai Tribe, Plaintiff, v. Heather PROVENCIO, Forest Supervisor, Kaibab National Forest; United States Forest Service, an agency in the U.S. Department of Agriculture, Defendants-Appellees, and Energy Fuels Resources (USA), Inc.; EFR Arizona Strip LLC, Intervenor-Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

26 F.4th 815

GRAND CANYON TRUST; Center for Biological Diversity ; Sierra Club, Plaintiffs-Appellants,andHavasupai Tribe, Plaintiff,

v. Heather PROVENCIO, Forest Supervisor, Kaibab National Forest; United States Forest Service, an agency in the U.S. Department of Agriculture, Defendants-Appellees,andEnergy Fuels Resources (USA), Inc.; EFR Arizona Strip LLC, Intervenor-Defendants-Appellees.

No. 20-16401

United States Court of Appeals, Ninth Circuit.

Filed February 22, 2022

Argued and Submitted August 30, 2021 San Francisco, California

Aaron M. Paul (argued), Grand Canyon Trust, Denver, Colorado; Marc Fink, Center for Biological Diversity, Duluth, Minnesota; Neil Levine, Public Justice, Denver, Colorado; Roger Flynn, Western Mining Action Project, Lyons, Colorado; for Plaintiffs-Appellants.

Thekla Hansen-Young (argued), Andrew C. Mergen, Michael T. Gray, and Sean C. Duffy, Attorneys; Jean E. Williams, Acting Assistant Attorney General; Environment and Natural Resources Division, United States Department of Justice, Washington, D.C.; Nicholas L. Pino, Attorney, Office of General Counsel, United States Department of Agriculture, Washington, D.C.; for Defendants-Appellees.

Bradley J. Glass (argued), Gallagher & Kennedy P.A., Phoenix, Arizona, for Intervenor-Defendants-Appellees.

Before: Mary M. Schroeder, Johnnie B. Rawlinson, and Jay S. Bybee, Circuit Judges.

BYBEE, Circuit Judge:

This dispute concerns Canyon Mine, a uranium mine operated by Energy Fuels Resources (USA), Inc., and EFR Arizona Strip LLC (collectively, Energy Fuels) in the Kaibab National Forest. Canyon Mine is located within an area of public lands that have been withdrawn from new mining claims by the Secretary of the Interior, although the withdrawal did not extinguish "valid existing rights." Three environmental groups—Grand Canyon Trust, Center for Biological Diversity, and Sierra Club (collectively, the Trust)—challenge the United States Forest Service's determination that Energy Fuels holds a valid existing right to operate Canyon Mine. The primary question in this appeal is, in determining that Energy Fuels has a claim to "valuable mineral deposits," 30 U.S.C. § 22, whether it was arbitrary and capricious for the Forest Service to ignore sunk costs. The district court held that it was not and granted summary judgment to the defendants. Grand Canyon Tr. v. Provencio , 467 F. Supp. 3d 797, 804–05, 812–23 (D. Ariz. 2020). We affirm.

I. BACKGROUND AND PROCEEDINGS

This is the second time this case has come before us. Background concerning the history of Canyon Mine and this case is discussed in Havasupai Tribe v. Provencio , 906 F.3d 1155, 1159–61 (9th Cir. 2018). Additional background may be found in National Mining Ass'n v. Zinke , 877 F.3d 845, 854–60 (9th Cir. 2017), and Havasupai Tribe v. United States , 752 F. Supp. 1471, 1475–77 (D. Ariz. 1990), aff'd sub nom. Havasupai Tribe v. Robertson , 943 F.2d 32 (9th Cir. 1991) (per curiam). We will repeat the background here only as necessary for the context of the issues before us.

A. Background

1. Canyon Mine

Uranium was first discovered near Grand Canyon National Park in 1947. Uranium is often found in breccia pipes—cylindrical deposits of broken sedimentary rock located thousands of feet underground. See Nat'l Mining Ass'n , 877 F.3d at 857. One such breccia pipe was located in the Kaibab National Forest in northern Arizona, a few miles south of Grand Canyon National Park and in the area around Red Butte, a site of religious and cultural significance to the Havasupai Tribe.

In 1984, Energy Fuels Nuclear, Inc. (EFN) submitted a plan of operations to mine uranium from the breccia pipe by building and operating what became known as Canyon Mine. The Forest Service approved the plan in 1986. The Havasupai Tribe challenged the approval, but the district court rejected the tribe's claims and we affirmed the judgment. See Havasupai Tribe v. Robertson , 943 F.2d at 34–35. Over the next years, EFN built the mine's surface facilities and sank the first fifty feet of a 1,400-foot shaft. However, EFN suspended operations in 1992 due to a drop in uranium prices. Denison Mines Corp. (later acquired by Intervenor-Defendant Energy Fuels Resources (USA), Inc.) acquired the mine in 1997.

2. The Grand Canyon Mineral Withdrawal

In 2007, a spike in the price of uranium generated renewed interest in mining operations near the Grand Canyon and with it, thousands of new mining claims. The large volume of new claims raised concerns about the potential environmental impact of increased uranium mining on the Grand Canyon area. Nat'l Mining Assoc. , 877 F.3d at 857. In response, the Secretary of the Interior published a Notice of Intent to withdraw approximately one million acres of public and National Forest System lands from new uranium mining claims. Notice of Proposed Withdrawal and Opportunity for Public Meeting; Arizona , 74 Fed. Reg. 35,887 (July 21, 2009). The withdrawn land would include the land occupied by Canyon Mine. Grand Canyon Trust , 467 F. Supp. 3d at 802. However, consistent with the Federal Land Policy and Management Act of 1976 (FLPMA), the Secretary noted that the withdrawal was "subject to valid existing rights." 74 Fed. Reg. 35,887. After two years of study, the Department of the Interior (DOI) issued the order withdrawing the lands. Public Land Order No. 7787; Withdrawal of Public and National Forest System Lands in the Grand Canyon Watershed; Arizona , 77 Fed. Reg. 2563 (Jan. 18, 2012). We upheld the withdrawal decision in National Mining Ass'n , 877 F.3d at 878. Before the decision became final, Energy Fuels notified the Forest Service, which is within the Department of Agriculture, that it intended to return Canyon Mine to active operations. Although Forest Service approval was not required for Energy Fuels to restart its operations at Canyon Mine, at the Forest Service's request, Energy Fuels agreed not to resume sinking the mineshaft pending review, known as a Valid Existing Rights Determination (VER Determination), of its claim of existing rights.¹

3. The Forest Service's VER Determination

The Forest Service issued its VER Determination in April 2012. The Forest Service concluded that "a discovery of a valuable mineral deposit existed" on July 21, 2009 (the date of the Secretary's segregated withdrawal). It also concluded that, under the economic conditions as of January 11, 2012 (the date of the mineral exam), "the uranium deposit on the claims could be mined, removed, transported, milled and marketed at a profit."

Two Forest Service certified mineral examiners conducted the analysis for the VER Determination and their findings were approved by a Forest Service locatable minerals specialist. The mineral examiners conducted their examination over several months, making multiple trips to Canyon Mine as well as Energy Fuels's offices, its Arizona One Mine, and its White Mesa Mill. Their work included verifying claim boundaries, documenting development activities, observing drill core samples, and reviewing various documents provided by Energy Fuels and the United States. They also conducted an economic analysis that considered the tonnage and grade of uranium, the capital and operating costs, commodity pricing, and a cash flow feasibility analysis. The economic analysis treated costs incurred prior to 1992 (when operations were suspended) to develop the surface structures and sink the first fifty feet of shaft as " ‘sunk’ costs since they were previously completed for mine development and are fixed assets on the claims." As such, these costs were not incorporated into its calculation of Canyon Mine's "net sum of cash flows." The discounted cash flow feasibility analysis showed that, at a uranium price of $56 per pound, Canyon Mine would have a net sum of cash flows of $29,350,736. The report describes this number as "the stream of income generated by the project as a function of time. The sum of cash flows shows whether the proposed mining operation would result in a profit or a loss."

In addition to the VER Determination, the Forest Service conducted a "Mine Review," dated June 25, 2012. The review was conducted by a thirteen-person interdisciplinary team, which evaluated the 1984 plan of operations as well as environmental, historical, and religious issues related to continued operation of Canyon Mine. The Forest Service concluded that "no modification or amendment to the existing Plan of Operation [was] necessary" and "no new federal action subject to further NEPA analysis [was] required."

B. Proceedings

In 2013, the Tribe and Trust asserted four claims under the Administrative Procedure Act to challenge the Forest Service's determination. We found the VER Determination reviewable and affirmed the district court's grant of summary judgment for three claims related to the National Environmental Policy Act of 1969 and the National Historic Preservation Act of 1966. Havasupai Tribe v. Provencio , 906 F.3d at 1163–65. On the fourth claim—that the Forest Service violated federal law by failing to take various costs into account when determining whether Canyon Mine could be operated at a profit—the district court held that the Trust did not have prudential standing. Id. at 1165. We reversed, holding that the Trust had prudential standing to pursue claim four because "the FLPMA, and not the Mining Act, forms the legal basis of the Trust's fourth claim" and that the claim fell within the FLPMA's zone of interests. Id. at 1166–67. We remanded to the district court for consideration on the merits.

On remand, the parties cross-moved for summary judgment on the fourth claim, and the district court granted summary judgment to the defendants. The district court held that (1) the Trust had Article III standing based on the law of the case doctrine; (2) assuming that environmental monitoring and wildlife-conservation costs were omitted, the error was harmless because the Trust had not shown that such costs would...