North Fork Preservation Ass'n v. Department of State Lands
| Decision Date | 14 September 1989 |
| Docket Number | No. 88-516,88-516 |
| Citation | 238 Mont. 451,778 P.2d 862 |
| Parties | , 55 Ed. Law Rep. 1157 NORTH FORK PRESERVATION ASSOCIATION, Plaintiff and Respondent, v. DEPARTMENT OF STATE LANDS, a Department of the State of Montana, Defendant and Appellant, and Farmers Union Central Exchange (Cenex), Intervenor and Appellant. |
| Court | Montana Supreme Court |
Tommy H. Butler argued, Dept. of State Lands, Helena, Doug James argued, Moulton, Belligham, Longo & Mather, Billings, Dana L. Christensen, Murphy, Robinson, Heckathorn & Phillips, Kalispell, for appellants.
Jon L. Heberling argued, McGarvey, Heberling, Sullivan & McGarvey, Andrew Bittker argued, Kalispell, for plaintiff and respondent.
This appeal involves an oil and gas lease on school trust land within the Coal Creek State Forest, which was acquired from the State by the Farmers Union Central Exchange (Cenex). School trust lands are administered by the Department of State Lands (Department), which issued the lease to Cenex. Pursuant to an Annual Operating Plan approved by the Department, Cenex proposes to drill an exploratory well on its leased tract. North Fork Preservation Association (North Fork) has challenged the Department's approval of Cenex's operating plan, alleging that the Department failed to prepare an environmental impact statement on the proposed well as required by law. North Fork filed its complaint in the District Court of the Eleventh Judicial District, Flathead County, and obtained a summary judgment in its favor. The judgment set aside the Department's approval of Cenex's operating plan; issued a writ of mandate directing the Department to prepare an environmental impact statement; and awarded costs, fees and a small money judgment. We reverse, and remand the case to the District Court for entry of judgment in favor of the Department. We hold that the District Court incorrectly applied the "clearly erroneous" standard for reviewing the Department's decision and misinterpreted applicable statutory and case law. We further hold that the Department's decision was proper under the correct, "arbitrary, capricious or unlawful" standard of review, and that mandamus was not a proper remedy in this case, as mandamus is not available to compel a discretionary act.
The parties have stated a number of issues, some of which overlap:
As Stated by the Department:
1. Whether the Department must prepare an environmental impact statement on the drilling of a single exploratory well on school trust land which had been previously clear-cut of timber and is managed under the multiple use concept.
2. Whether the Department is required to prepare a site-specific environmental impact statement concerning full-field oil and gas development.
3. Whether mandamus is an inappropriate remedy to enforce the provisions of the Montana Environmental Policy Act.
4. Whether North Fork Preservation Association sustained its burden of proof.
As Stated by Cenex:
1. Did the District Court apply the wrong standard of review in reviewing the State Lands' decision that approval of Cenex's plan to drill one exploratory well was not a major action of state government significantly affecting the quality of the human environment?
2. Whether State Lands' decision that an environmental impact statement was not required was arbitrary and capricious.
3. Whether the 1984 preliminary environmental review was sufficient, as a matter of law, without considering the "cumulative impacts" of oil and gas development and production.
4. Whether a writ of mandamus will lie to compel the preparation of an environmental impact statement.
As Stated by North Fork:
1. Did the District Court apply the wrong standard of review to State Lands' procedural decision to forego an environmental impact statement?
2. Whether the Cenex operating plan "may significantly affect environmental attributes recognized as being endangered, fragile, or in severely short supply." ARM 26.2.603(3)(a).
3. Piecemealing: At what stage in the oil and gas lease process is an environmental impact statement on development legally required?
4. Is there a separate ground supporting the District Court's decision, which State Lands and Cenex did not raise on appeal?
5. Whether the 1984 preliminary environmental review was legally sufficient, particularly in its evaluation of cumulative impacts.
6. Whether a writ of mandate will lie to compel preparation of an environmental impact statement.
In April of 1975, the Department received applications for oil and gas leases on 14 tracts of school trust land in the Coal Creek State Forest. The Department deferred action on possible leases until an environmental impact statement (EIS) could be prepared. Coal Creek State Forest is bordered on three sides by National Forest Service land, and on the fourth side by the North Fork of the Flathead River. The river is part of the National Wild and Scenic Rivers System, as well as the western boundary of Glacier National Park.
The surrounding National Forest Service land was also the subject of oil and gas development proposals at about the same time. In 1976, the National Forest Service issued a draft EIS concerning proposed leases on land in its charge. The Department also issued an EIS in 1976. The introduction to the Department's EIS stated that the National Forest Service EIS dealt with the impacts of oil and gas leasing in the larger area surrounding Coal Creek, and the Department's EIS would therefore focus only on the state lands involved and should be considered "an extension of that made by the federal government." The Department's EIS permitted leasing of all 14 Coal Creek tracts. However, at a meeting of the State Board of Land Commissioners held in March of 1976, all of the bids received were rejected. The National Forest Service subsequently undertook a new environmental analysis of the area, and abandoned its 1976 draft EIS.
In 1982, the Department received new applications for oil and gas leases covering a larger portion of the Coal Creek area. The Department prepared a preliminary environmental review (PER) for the purpose of determining whether issuance of oil and gas leases would be an action by state government "significantly affecting the quality of the human environment," therefore requiring an EIS under Sec. 75-1-201, MCA. The PER was issued in 1983, and concluded that no such significant effect would result if certain protective stipulations were included in any leases granted.
The Department then offered leases in Coal Creek State Forest at public auction. Cenex purchased leases to 17 tracts. Each lease contained 16 environmentally protective stipulations. Under these stipulations, Cenex was required to submit an annual operating plan to the Department detailing all activities to be carried out on the leased acreage during the coming year. No activity could be undertaken until written approval of each year's plan was received from the Department.
Cenex's first annual operating plan was submitted in 1984. The plan proposed drilling an exploratory well on one of the leased tracts located approximately three miles south of the town of Polebridge and one mile west of Glacier Park. The proposed well site was a clear-cut left from previous logging under lease from the Department. Cenex planned to make improvements to an existing logging road in order to transport necessary drilling equipment and supplies. The Department delayed approval of the plan while it completed a site-specific PER, held two public hearings and received comments on the PER during a 30-day review period. After reviewing the comments, the Department issued a supplement to the PER. The Department then approved the plan, subject to 31 additional protective stipulations.
In February of 1985, North Fork filed this action. The complaint sought an order setting aside the Department's approval of the Cenex operating plan and the Cenex lease, and a writ of mandate directing the Department to prepare an EIS on the cumulative effects of oil and gas development in the Coal Creek area. Cenex successfully petitioned to intervene as a defendant in the case. The Department and Cenex filed a motion for summary judgment, as did North Fork. In 1988, the District Court issued a Memorandum and Order granting North Fork's motion, and subsequently entered judgment in North Fork's favor. This appeal followed.
The many issues taken up by the parties have rendered their arguments difficult to follow. North Fork has gone so far as to attempt a "chart of corresponding issue numbers" in its brief to this Court. A careful reading of the issues and arguments offered, as well as the record from below, shows that the parties are posing three core questions:
1. Did the District Court apply the proper standard of review?
2. Did the Department proceed properly in approving Cenex's annual operating plan?
3. Is mandamus an appropriate remedy to enforce provisions of the Montana Environmental Policy Act?
We will proceed with our review by addressing these three questions.
The District Court looked to the Montana Administrative Procedure Act (MAPA) for its standard of review. The court applied the standard of review found in Sec. 2-4-704(2)(e), MCA:
(2) ... The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:
...
(e) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record.
On appeal, the Department and Cenex argue that the "clearly erroneous" standard was improper in this case. Cenex specifically argues that Sec. 2-4-704, MCA, was inapplicable because the section deals with judicial review of "contested cases", and this was not a contested case. A "contested case" is defined at Sec. 2-4-102(4), MCA, as a...
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