US Courts Debate Claim Validity

When it comes to the rights that mine operators can assert with unpatented mining claims, rulings revert the General Mining Law

A 2019 decision from an Arizona Federal District Court raised a number of questions about what appeared to be the only court decision to interpret federal law governing mining on public lands to preclude ancillary use of public lands for mining. The holding upheld in Center for Biological Diversity (CBD) v. United States would create a potential impact on the rights that a min-ing claim holder may assert under federal unpatented mining claims, particularly in the mine permitting process.

The case involves Rosemont Copper Co. and its application to the U.S. Forest Service (Forest Service) to operate a large-scale pit mine for copper, molybdenum and silver extraction within the Coronado National Forest in southern Arizona. The proposed Rosemont mine is on Rosemont’s fee-owned patented mining claims and its federal unpatented mining claims. Over the course of 20 to 25 years, the mine would open a pit measuring 3,000 ft in depth and 6,000 ft in diameter. To recover the metals, the operation would extract approximately 1.2 billion tons of waste rock and produce more than 700 million tons of tailings, potentially impacting 3,653 acres of Forest Service lands.

In 2017, the Forest Service approved Rosemont’s mine plan and authorized construction and operation of the mine. A coalition of environmental groups challenged the decision asserting the Forest Service and other federal agencies violated federal mining, environmental and public land use laws in the approval process, including the Mining Law of 1872 (General Mining Law), the Organic Act of 1897, National Environmental Policy Act (NEPA), the National Historic Preservation Act, the Clean Water Act, the Endangered Species Act and others. Several Native American tribes, represented by Earthjustice, also challenged the approval of the mine plan, and those suits were consolidated with CBD.¹

The CBD Holding

On July 31, 2019, the U.S. District Court for the District of Arizona granted summary judgment to the plaintiffs and vacated and remanded the Forest Service’s Final Environmental Impact Statement (EIS) and the Record of Decision, effectively preventing mine construction or operations at the Rosemont mine.

Key to the court’s holding was its determination the Forest Service failed to sufficiently assess the validity of Rosemont’s unpatented mining claims prior to approval of the mine plan. “Notwithstanding the applicable legal provisions to the contrary, the court found that this failure resulted in a flawed analysis and a defective administrative process,” said Laura Granier, partner, Holland & Hart. “Although the agency followed the applicable law including the express provisions of its regulations, the court ruled that the Forest Service’s assumption that Rosemont had valid rights to use the surface of the Forest Service lands led to the agency’s reliance on the wrong regulatory framework, which, in turn, led the agency to inappropriately constrain its discretion to limit or restrict the proposed mining operations.”

In particular, the Forest Service appropriately concluded it could not prohibit mining on Rosemont’s unpatented mining claims because the U.S. Mining Law and the Forest Service regulations Part 228 do not allow for denial of an otherwise reasonable mining operation that is proposed in compliance with environmental requirements, Granier explained. “The court concluded that this reliance was a fatal flaw in the agency’s analysis because the mining claims should have been essentially presumably ‘invalid’ and, therefore, the agency’s discretion was not limited under the General Mining Law,” Granier said. “Instead of applying the Forest Service Part 228 regulations governing proposed mining activities, the court held the agency instead should have applied discretionary land use regulations under which approval may be denied for any activity not meeting certain standards or not in the public interest.”

Although the court acknowledged the Forest Service had no legal obligation to conduct a validity exam for each mining claim prior to approving the mine plan, and that jurisdiction to make a final determination as to claim validity lies with the Bureau of Land Management (BLM), it concluded the Forest Service could not presume Rosemont held “valid” mining claims, Granier explained. “Rather, the court concluded that the USFS’s duty under the Organic Act — to protect the forest from depredations — could not be fulfilled without first determining whether Rosemont had valid rights to the surface of USFS lands, which the court found ‘must begin with a discussion of the validity of their claims’ and, according to the court, ‘[t]his discussion necessarily must include whether the claimant discovered a valuable mineral deposit within the boundaries of their claim,’” Granier said.

The court further stated that, absent evidence of a valuable mineral discovery for each claim, the Forest Service could not rely on other statutes like the Multiple Use Act of 1955 or the Organic Act to create or enlarge mining rights not independently validated under the General Mining Law’s “discovery” test.

After finding that claim validity was the linchpin for mine plan approval, the court concluded that “the administrative record shows no basis upon which the [USFS] could find Rosemont discovered a valuable mineral deposit within the facilities, tailings and waste rock ar-eas” in part relying on Rosemont’s proposal to bury 2,447 acres of surface overlying its unpatented mining claims with 1.9 billion tons of its own waste.”

The holding is significant for several reasons, Granier said. “The court rejected the long adhered-to agency policy of accepting the validity of unpatented mining claims included in mine permit applications,” she said. “Although acknowledging that the USFS was not required to conduct a validity exam for each claim prior to approving the mine plan, the court reached its own decision on the validity of the claims. This approach circumvented the rigorous, well-defined process that is required for such determinations, which must be conducted by a certified mineral examiner in accordance with regulations and policy. While much of the evidence relied upon by the court to conclude the claims were invalid might have been rebutted by Rosemont in a full validity determination, the only evidence before the court was that placed in the administrative record, and thus there was no due process for Rosemont to defend the validity of its claims.”

Potential Implications for Mine Operators

The CBD decision is on appeal. If the holding stands, it could raise questions about the long-standing operating practices of the hard-rock mining industry, explained Karol Kahalley, counsel, Holland & Hart. “Most mining operations take place on lands covering a variety of surface and mineral rights interests, including patented mining claims and other surface and mineral interests held in fee, leased surface and minerals owned by private parties, federal unpatented mining claims that may underlie privately held surface or federally managed lands, and non-mineral mill site and tunnel site claims,” Kahalley said.

As a general matter, Kahalley said federal unpatented mining claims are characterized by the following rights, limitations
and risks:

• Under the General Mining Law, if claims are located in compliance with statutory requirements, the claimant automatically acquires the full interest in the claims, without action by the government. This process is distinctly different from obtaining rights by leases or material sales contracts, which must be obtained with federal agency approval.

• A locator’s possessory rights to mine all of the minerals to exhaustion are complete in unpatented claims, and the locator is never required to apply for or obtain a patent to fully mine the minerals found on the claims. Prior to patenting, surface rights for mining operations overlying unpatented mining claims may be constrained by the rights of the surface owner.

• Mill site locations are made in association with mineral claims and create the right of surface entry to support ongoing mining or milling operations. The maximum size of a mill site location is five acres.

• While mill site locations are intended to provide surface support for mining operations, the locator also has the right to possess surface areas of mineral (lode and placer) claims for purposes reasonably incident to mining.

• The use of one mining claim for incidental purposes to support another mining claim (e.g., for waste rock disposal) has been viewed broadly by the courts, but it is not without limits (e.g., location held invalid where claims were located in bad faith).

• Other than as required in a patenting proceeding, there is no statutory requirement for a validity determination of unpatented mining claims.² However, the U.S. may bring a claim contest at any time to challenge claim validity. A private party who asserts an interest in the same minerals covered by an unpatented mining claim also may contest claim validity.

• Because of the vast number of unpatented mining claims and the limited resources of the BLM, validity determinations have not typically occurred outside of the patenting process, with the following exceptions: (1) the claim is located on withdrawn lands and establishing validity is key to determining valid existing rights that may have existed before withdrawal, (2) an inquiry is requested by another agency, or (3) there is conflicting use of the land by various parties that requires resolution.

Based on the rarity of validity determinations, mine operators historically have relied upon the surface rights associated with unpatented mineral claims for a wide range of incidental activities,” Kahalley said. “However, if the holding in CBD stands, the longstanding policies and practices of the agencies considering approval of mine plans may be called into question in evaluating discovery of a valuable mineral deposit prior to approval.”

Last Year’s Earthworks Decision

The long-anticipated October 2020 decision by the U.S. District Court for the District of Columbia was a significant victory for the mining industry and pre-discovery rights under the General Mining Law and stands in conflict with the Rosemont decision. In Earthworks et al. vs. U.S. Department of the Interior et al., the court rejected the plaintiffs’ challenges to BLM’s 2008 Mining Claim Rule and 2003 Mill Site Rules.

Plaintiffs challenged the BLM’s 2008 Mining Claim Rule claiming that unpatented mining claims are not within the protective scope of the Mining Law until discovery of a valuable mineral deposit has been confirmed on the claim and, therefore, under Federal Land Policy and Management Act (FLPMA), “fair market value” must be paid for use of unpatented mining claims of “unknown validity.”  Similar to the issues in the Rosemont ap-peal, Kahalley explained, industry intervenors carefully focused on the importance of vocabulary and avoiding the use of the term “invalid claims” to describe claims of “unknown validity.”

The court adopted this same approach and also went on to use some of the same authority cited in the American Exploration and Mining Association’s (AEMA) Rosemont amicus brief to explain why a pre-discovery claim cannot be presumed “invalid,” Kahalley explained. “This is a tremendous victory not only for the industry but especially for AEMA, which has long fought to protect pre-discovery rights that are so critical to its members,” Kahalley said. “Exploration is a statutorily granted right under the Mining Law. This is a big step to start correcting the misuse of the concept of ‘valid’ claims.”

The D.C. District Court Judge ruled that the General Mining Law, implementing regulations, and related case law have never required the Department of the Interior or BLM to verify validity of a claim by independently confirming a discovery. Relying on the same case law and analysis cited by AEMA in the Rosemont amicus brief, the court ruled that a claim of unknown validity is not a legal nullity, noting the government cannot find such a claim invalid without a degree of process, Granier explained. “The court noted that it had never been BLM’s practice to determine claim validity other than for patents or instances of withdrawals and that the cost to do so based on 250,000 existing claims and a cost of between $12,000-$80,000 per validity exam would exceed the BLM’s budget many times over,” Granier said.  “The court refused to ‘strain to read FLPMA’ as ‘silently working such a fundamental change to longstanding practice under the General Mining Law.’

The second major issue was to address Earthworks’ claim that the 2003 Mill Site Rule incorrectly omitted any limitation on the number of mill sites that can be held per mining claim. Their claim asserted a limitation of one mill site per mining claim. The court relied on the lack of any statutory authority to support such a limitation notwithstanding Congress went to the trouble to limit the Mill Site claims to 5 acres, Kahalley explained, and the predecessor to the General Mining Law, the Lode Law of 1866, limited the number of mill site to one per load claim. The plaintiffs have appealed this decision in the D.C. District Court of Appeals.

For more information about this case and other mining related legal matters, readers can contact Laura Granier
at lgranier@hollandhart.com and Karol Kahalley at: kkahalley@hollandhart.

¹ The same plaintiffs also have challenged the Clean Water Act permit issued for the mine by the U.S. Army Corps of Engineers, and those cases are consolidated separately.

² In 1994, Congress defunded the process for patent applications, effectively creating a patent moratorium that remains in place.