Advisories & Insights

Mine operator may proceed with cost recovery against United States on lands leased by BIA

September, 2007

In a case of first impression, Judge Justin L. Quackenbush of the United States District Court for the Eastern District of Washington held that the United States, acting in its capacity as a trustee of Indian lands, exercised sufficient "indicia of ownership" to be a potentially responsible party ("PRP") under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), and responsible for a share of the costs of cleaning up a mine site located on trust land. United States v. Newmont USA Limited case[i] involved land held in trust for the Spokane Tribe (the "Tribe") and individual tribal members, which was leased to Dawn Mining Company ("Dawn"). The court's August 21, 2007 decision[ii] allows Newmont USA Limited ("Newmont"), Dawn's parent company, and Dawn, which are defendants in a cost recovery action brought by the United States, to proceed against the United States with counterclaims for contribution under CERCLA §113.[iii]

The Spokane Indian Reservation

The land involved in the case is on the Spokane Indian Reservation, which was created by an 1881 Executive Order of President Rutherford B. Hayes. The Executive Order set land aside "and reserved [it] for the use and occupancy of the Spokane Indians."[iv] In 1908, the United States issued ownership interests known as "allotments" to individual members of the Spokane Tribe.[v] An allotment was held in trust by the United States, and the allottee could use the land but not sell it until 25 years after the allotment was issued, when the allottee received the fee patent.[vi] In the 1900s the United States also opened the mineral lands of the Spokane Reservation to non-Indians for exploration and development, including lands remaining after tribal members had received their allotments, for "exploration, location, occupation, and purchase under the mining laws."[vii]

The Midnite Mine

The Midnite Mine is located on land within the Spokane Reservation that includes Reservation land that was not allotted to individual Indians, and allotted land held by descendents of the original allottee.[viii] The uranium mineralization at the site that would eventually become the Midnite Mine was discovered by Spokane tribal members in 1954,[ix] who thereafter leased 571 acres of Reservation land from the United States for mining purposes.[x] The lease was approved by the Department of Interior's BIA.[xi]

The initial lease and subsequent leases required that the lessees submit monthly reports to the Superintendent of the Colville Indian Agency ("Superintendent"), an agency of the Department of Interior ("Interior"), and pay rents and royalties either to the Superintendent for the use and benefit of the Tribe, or directly to the Spokane Tribe's treasury.[xii] The lessees were paid for uranium under a United States Atomic Energy Commission ("AEC") price schedule.[xiii] The Superintendent had the right under the lease to audit the lessees' accounts and books, and Interior had authority under the lease to suspend operations under certain circumstances and terminate the lease for violations of its terms and conditions; to permit assignments of the lease; to inspect the property; to approve the lessees' termination of the lease when Interior determined full provision had been made for the conservation and protection of the property; and to approve or disapprove the location of roads.[xiv]

The lessees incorporated to form Midnite Mines, Inc. ("MMI") and assigned their mining lease to the corporation.[xv] MMI later assigned the mining lease to Dawn.[xvi] Beginning in 1956, Dawn entered into a series of contracts with the AEC under which Dawn constructed and operated a mill for processing uranium and the AEC purchased all of Dawn's uranium concentrate.[xvii] The AEC purchased all of the uranium ore and concentrate produced at the Midnite Mine and mill through 1966.[xviii]

Dawn renewed its mining leases with the Superintendent, on behalf of the Spokane Tribe and the tribal members descended from the original allottee, in 1964.[xix] Throughout the leasehold, the United States, acting through several Interior bureaus including the BIA, United States Geological Survey, United States Bureau of Land Management, and United States Minerals Management Service, exercised authority granted it under the lease and by Congress through statutes and regulations pertaining to mining, leases of Indian lands, and royalty rates.[xx] The United States reviewed and approved Dawn's mining and reclamation plans under the terms of the 1964 leases and applicable regulations.[xxi]

Through the 1980s Interior monitored the site's environmental conditions and Dawn's reclamation activities, particularly relating to water quality. In 1983 Interior ordered Dawn to take steps to prevent further degradation of water resources in the area, and thereafter invoked the terms of the leases to order Dawn to undertake certain reclamation activities at the site in 1983 and again in 1984. In 1990, Interior terminated Dawn's rights under the leases based upon its determination that Dawn had failed to comply with the terms of its leases.[xxii] Uranium mining activities were ceased on the property shortly thereafter and extensive soil and groundwater contamination was discovered. Eventually the site was listed on the National Priorities List ("NPL") as a Superfund site and the federal government has incurred response costs investigating and remediating the site.

The United States' Liability

The United States initiated a cost recovery action against Dawn and Newmont in 2005 seeking reimbursement of its response costs and a declaration that Dawn and Newmont were liable for all future response costs.[xxiii] Dawn and Newmont counterclaimed against the United States for contribution as an "owner" of the reservation land,[xxiv] and the United States moved to dismiss the counterclaims. In May, 2007, Dawn and Newmont jointly filed a motion for summary judgment on the issue of whether the United States is liable as an "owner" under CERCLA of the Midnite Mine site.

In opposing the motion, the United States asserted that it only held "bare title" to the land as trustee for the Spokane Tribe and individual tribal members, and did not possess a traditional property interest in the Site, nor sufficient "indicia of ownership," to give rise to owner liability under CERCLA.[xxv]

In a detailed 40-page opinion, the court disagreed. "When the court asks the "key question" in the "indicia of ownership" analysis – ‘whether the fiduciary could have affected the disposal of the hazardous wastes on the subject property,' . . . the answer must be ‘yes,' the United States had the authority to prevent the very contamination for which it brings this action."[xxvi]

Key to the court's determination regarding "indicia of ownership" were two factors: (1) the federal government's involvement in the mining leases and its exercise of the authority over the land provided in the leases and codified in statute and regulation;[xxvii] and (2) the fiduciary obligations of the United States arising from its general trust responsibilities and the more specific responsibilities owed to the Tribe under the Indian Mineral Leasing Act and its implementing regulations.[xxviii]

The court addressed, and dismissed, the United States' argument that CERCLA § 104(c)(3) precluded a finding that the United States is the "owner" of Indian lands because such a finding would render CERCLA § 120(a)(3) a nullity. CERCLA requires states to pay a share of cleanup costs for sites within the state, unless the site is located on Indian trust lands or within an Indian reservation (under CERCLA § 104(c)(3)), or where the site is a federal facility (under CERCLA § 120(a)(3)). The court held that finding the United States liable as an "owner" due to its ownership of Indian lands " …is in line with CERCLA's overall statutory scheme" because "removing the normally mandated cost-sharing requirements from Indian land held in trust . . . requires the federal government to treat such land exactly as if it were owned by the government."[xxix]

Implications

The United States v. Newmont USA Limited case is the first we know of in which the United States has been held liable as an "owner" under CERCLA when acting in its capacity as a trustee of leased Indian lands. Where the United States has become involved in oversight of mining on Indian lands, as it was in this case, the Newmont decision provides a roadmap for establishing the government's CERCLA liability.[xxx] The decision does not establish a per se rule of liability, however, and is fact-specific. In this case, the court concluded there was substantial, direct oversight of the mining activities by agencies of the United States. The precise amount of the government's liability share remains to be seen, and may not be a substantial amount, but the finding of liability is a significant development under CERCLA. If it is followed by other courts, the decision could reduce the ability of the United States to recover its costs of cleanups on leased Indian lands, and allow mining companies and others who have incurred similar costs to recover a portion of them from the United States. There are roughly 7.2 million acres of mining claims on federal lands,[xxxi] and 48 mining sites on the NPL.

For more information about this article, or about cleanups on Indian reservations, please contact Connie Sue Martin.