Sierra Club v. Davies

955 F.2d 1188, 1992 WL 17470

• Court: Court of Appeals for the Eighth Circuit
• Decided: February 5, 1992
• Docket: Nos. 90-2639, 90-2696
• Status: Published

Opinions

MAGILL, Circuit Judge.

. This appeal concerns whether preliminary testing in a state park aimed at determining the feasibility of commercial diamond mining constitutes a conversion under the federal Land and Water Conservation Fund Act of 1965. The district court concluded that the initial testing was inextricably intertwined with mining and therefore constituted a nonrecreational use under the Act. Since we believe preliminary testing is distinct from the issue of whether commercial mining would constitute a conversion, we reverse in part. We affirm that portion of the district court decision denying damages to appellant mining companies.

I. Factual Background

Although he did not realize it at the time, John W. Huddleston opened this confrontation on August 1, 1906, when he unearthed a diamond on his property south of Mur-freesboro in Pike County, Arkansas. Despite the diligence of successive owners, however, no one has profitably mined Hud-dleston’s field.¹ By 1952, the various owners of Huddleston’s land and the neighboring fields had turned the “Crater” into a tourist attraction. The land was consolidated into a single parcel in 1969 and the State of Arkansas purchased the 887.3 acres in 1972, dedicating the field as Crater of Diamonds State Park. The park contains a thirty-seven-acre, exposed, diamond-bearing, volcanic pipe, which represents the only site in North America where the pub-lie is invited to roll up its sleeves and hunt for diamonds.²

Despite the mine’s recent tranquility, however, intrigue into the commercial mining potential of the land never completely dissipated. The most recent attempt to study the viability of commercial mining surfaced in 1986, when a task force created at the behest of the Arkansas Parks, Recreation and Travel Commission recommended an exploration of mining potential at the reserve.

The task force specifically recommended legislation permitting the Commission to enter contracts for the commercial exploration of diamonds at the Crater of Diamonds State Park. The Arkansas Legislature in 1987 authorized the Department of Parks and Tourism to execute a lease for the exploration and production of diamonds at the park. Ark.Code Ann. § 22-5-817 (Michie Supp.1991).

Armed with legislation, the task force continued to study the issue, but concluded that it lacked sufficient verified information relating to the size and value of the preserve to make valid judgments as to the park’s mining potential. It therefore recommended that the state undertake Phase I investigatory drilling of the reserve.

Federal law became implicated in the decision to explore commercial mining because in 1976 Arkansas received a federal matching grant from the National Park Service for $723,808. The grant — part of an acquisition and development project at the Crater of Diamonds State Park — was made through the Land and Water Conservation Fund Act (L & WCFA), 16 U.S.C. §§ 460l-4 to 460l-11 (1988). The Act requires all states that receive grants to maintain the benefited land as public outdoor recreational space forever. Id. at § 460l-8(f)(3). Any conversion of park land to nonrecreational use must be approved by the Secretary of Interior and can come only after the Secretary: (1) finds the conversion in accord with the existing comprehensive statewide outdoor recreation plan, and (2) is assured that the state will substitute other recreational properties of at least equal fair market value and of reasonably equivalent usefulness and location.³ Id.

In light of L & WCFA restrictions, Arkansas sought an opinion from the regional office of the National Park Service as to whether Phase I testing would constitute a conversion.⁴ Phase I testing would consist of drilling twenty-five to thirty holes — with each core measuring 1 and Vs inches in diameter — to a maximum depth of 1,000 feet. Each hole that is drilled would be refilled before researchers move on to the next hole. The drilling process would require fencing off a fifty by one hundred foot section in the public digging area for a period of not more than twelve weeks. After the test drilling is complete, the park area would be returned to its normal state.

On May 24, 1989, the acting regional director of the National Park Service rejected the Phase I testing, concluding it would convert a portion of the area from public outdoor use to nonpublic commercial use. The acting regional director said the testing “could have the potential of progressing into a full-blown commercial diamond mining operation.”⁵

The following day — May 25, 1989 — the Interior Department urged its regional field solicitor to withdraw a legal opinion on which the decision to reject Phase I testing was partially based. The Interior Department letter stated that the Park Service’s rejection was premature since the state sought only to make limited tests to determine the feasibility of commercial mining. Even though commercial mining “would certainly constitute a conversion under the Act,” it was possible that commercial mining may never take place at the park.⁶ After the Interior Department’s regional field solicitor withdrew the legal opinion, the Park Service’s acting regional director on July 18, 1989, reconsidered the initial decision and approved Phase I testing.

Appellees filed suit in January of 1990 to stop the testing and mining.⁷ After the mining companies were allowed to intervene, the district court rejected a motion to enjoin the testing. Although the court found that appellees had shown a substantial likelihood of success on the merits, the court ruled that irreparable harm would not result from Phase I testing. Testing began on July 8 and continued until August 6, when the district court permanently enjoined Phase I testing. The mining companies appeal this judgment.

II. Discussion

The heart of the L & WCFA is found in § 6(f)(3). The rather straightforward section provides:

No property acquired or developed with assistance under this section shall, without the approval of the Secretary, be converted to other than public outdoor recreation uses. The Secretary shall approve such conversion only if he finds it to be in accord with the then existing comprehensive statewide outdoor recreation plan and only upon such conditions as he deems necessary to assure the substitution of other recreation properties of at least equal fair market value and of reasonably equivalent usefulness and location.

16 U.S.C. § 460l — 8(f)(3). Appellees argue that Phase I testing constitutes just such a conversion under the Act. The acting regional director determined that Phase I testing would not constitute a conversion, but would be permitted as a “temporary non-conforming use.” The agency’s decision was emphatically limited to Phase I testing. Contrary to assertions by appel-lees and the determination of the district court, the agency’s decision in no way ushers in a parade of horribles culminating in full-blown commercial mining. The director’s letter explicitly stated that approval was made “separate from subsequent testing or mining actions.” The director went on: “This approval in no way commits the Federal government to making a similar finding for any testing beyond Phase I. Any future proposal will require rigorous review and analysis.” Moreover, the director stated that any subsequent testing proposals would have impact inseparable from actual mining and would, therefore, have to comply with the procedural substitution requirements of § 6(f)(3), as well as the National Environmental Policy Act. 42 U.S.C. §§ 4321 to 4347.⁸

It is difficult to hypothesize a statement by the director that would more clearly state that his decision rested entirely on the limited Phase I testing and did not contemplate or permit any subsequent testing or mining activity. Appellees contend, nonetheless, that the state’s elaborate planning as well as the funding by the mining companies indicates that Phase I testing is just a precursor to the inevitable commercial mining of the park. Even if the link in planning between Phase I testing and mining is shown to be ironclad, and even if it is shown that commercial mining would constitute a conversion, our review is limited to the agency action. No matter what the evidence shows might happen in the future, it is beyond this court’s power to render a speculative decision on postulated facts. It is possible that testing will reveal the potential for commercial mining at the park. If this occurs, it is possible that the elected representatives of the people of Arkansas will decide to mine the park commercially. If they do, they will need to comply with § 6(f)(3) and the National Environmental Policy Act. 42 U.S.C. §§ 4321 to 4347. The agency’s approval, if granted, will be reviewable at that point.

While the parties dispute the standard of review in this case, there is no real doubt that this appeal, as well as the district court’s opinion, are a review of an administrative action. The L & WCFA authorizes the Secretary to review any state modification proposals to determine if the proposed action would constitute a conversion. 16 U.S.C. § 460l-8(f)(3).⁹ The district court ruled that the Secretary’s decision was arbitrary and capricious.¹⁰ In this appeal of the district court action, we review the Secretary’s decision de novo. Our task is to determine whether the Secretary’s decision to permit limited Phase I testing without declaring it a conversion was arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. § 706(2)(A) (1988).

In reviewing the district court decision, the appellate court must make an independent decision based on the same administrative record that was before the factfinder. Camp v. Pitts, 411 U.S. 138, 142, 93 S.Ct. 1241, 1244, 36 L.Ed.2d 106 (1973) (per curiam); Moore v. Custis, 736 F.2d 1260, 1262 (8th Cir.1984). The district court opinion, therefore, is afforded no deference. First Nat’l Bank of Fayetteville v. Smith, 508 F.2d 1371, 1374 (8th Cir.1974), cert. denied, 421 U.S. 930, 95 S.Ct. 1655, 44 L.Ed.2d 86 (1975).

To determine whether an agency’s decision was arbitrary and capricious, the reviewing court must determine whether the decision was based on the relevant factors and whether there has been a clear error of judgment. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971). While the court’s inquiry into the facts must be exhaustive, the ultimate standard of review is a narrow one. The court is not permitted to substitute its judgment for that of the agency. Id.; Moore, 736 F.2d at 1262.

When a court reviews an agency’s construction of a statute the agency has been entrusted to administer, the court’s analysis is two-fold. If Congress has spoken to the precise question at issue, the analysis is complete. This court, as well as the agency, must give effect to the unambiguously expressed intent of Congress (Chevron Prong I). Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694 (1984). But where, as here, the court determines that Congress has not spoken directly to the issue, the court may not impose its own construction of the statute. Rather, the court’s analysis is limited to whether the agency’s construction of the statute was permissible. Id. Since the agency was vested with policy-making power, it is authorized to fill in the gaps that may have been left by Congress and this court cannot substitute its judgment for that of the agency, id. at 844, 104 S.Ct. at 2782; Schwartz v. Gordon, 761 F.2d 864, 868 (2d Cir.1985), unless the court finds the agency’s construction inconsistent with the statutory mandate or that it frustrates the purpose of Congress (Chevron Prong II). FEC v. Democratic Senatorial Campaign Comm., 454 U.S. 27, 32, 102 S.Ct. 38, 42, 70 L.Ed.2d 23 (1981).

The L & WCFA does not define conversion. The question turns, then, on whether the agency’s¹¹ determination that Phase I testing would not constitute a conversion was a reasonable construction of the Act. See Chevron U.S.A., 467 U.S. at 842-43, 104 S.Ct. at 2781. The agency has determined that conversions generally occur in four situations:

(1)Property interests are conveyed for nonpublic outdoor recreation uses.

(2) Nonrecreation uses (public or private) are made of the project area, or a portion thereof.

(3) Noneligible indoor recreation facilities are developed within the project area without (National Park Service) approval.

(4) Public outdoor recreation use of property acquired or developed with L & WCFA assistance is terminated.

L & WCFA Grants Manual, Chapter 675.-9.3(A).

The only one of these situations possibly pertinent here is the situation where a nonrecreational use is made of a project area. If Phase I testing constituted a non-recreational “use,” it plausibly could constituid ¿ conversion. But under Phase I testing, there is “use” of the park land only in the strictest sense. The park’s purpose is by no means turned nonrecreational. The exploratory drilling does not limit public use of the park, except for the ten-to twelve-week period when a 5,000 square foot region will be cordoned off. No permanent damage will come to the land and the available supply of minerals available to public visitors will not be depleted. An interpretation of the regulations holding such activity a nonrecreational “use” would render virtually any temporary, de minimis, nondestructive activity a conversion.

The agency certainly does not read its own regulations so broadly. The record is replete with instances in which the agency has construed temporary, nondestructive activities as being other than conversions. The agency specifically exempts from the definition of conversion underground utility easements which do not have a significant impact on the recreational utility of the park. L & WCFA Grants Manual, Chapter 675.9.3(A)(5)(a). The administrative record also reveals an interpretation by the Director of the Bureau of Outdoor Recreation that the construction by a nonowner of a waterline, pipeline, underground utility or “similar construction” which does not impair the present or future recreational use of the property might not constitute a conversion if the surface area is restored to its “preconstruction condition” and there is no relinquishment of control over the property.¹² The agency also has concluded that the sale of subsurface rights or the nondestructive extraction of oil and gas from Land and Water Conservation Fund-assisted land does not constitute a conversion under the Act. L & WCFA Grants Manual, Chapter 675.1(E).

The agency clearly has determined that the statute requires more than de minimis and temporary intrusions on small portions of fund-assisted land to constitute a conversion. Viewed in light of the reasonableness of the agency regulations and policies found in the administrative record, the acting regional director’s determination that Phase I testing would not constitute a conversion clearly was a permissible construction of the statute, and therefore was not arbitrary and capricious.

This construction by the agency reflects the common-sense determination that the agency’s discretion — while not boundless— must be exercised in certain cases in order that the flexibility necessary to maintain, improve, and study L & WCFA land is not replaced with a grid of arbitrary distinctions. This need for flexibility is shown by the agency’s response to a query seeking the agency’s policy under the L & WCFA for dealing with underground utility or irrigation line crossings. The agency concluded that the possible impacts of underground construction on various types of recreation areas were so diverse that no ironclad policy could be created. Rather, the potential problems must be addressed case by case.¹³

Finally, the agency’s need for flexibility in determining whether nondestructive testing is a conversion is also dictated by the requirements of § 6(f)(3) itself. In order to convert a fund-assisted parcel to another purpose — such as commercial mining — the Secretary must first be assured the state will substitute land of equivalent values and usefulness. 16 U.S.C. § 460l-8(f)(3). But the Secretary must know the value of the converted parcel first. A requirement that the Secretary must first be assured of substituted lands, and then begin testing to determine the value of the converted land, is unworkable. It would require the Secretary to create a new park of reasonably equivalent usefulness and value even before he decides whether or not to convert the state park to a commercial diamond mine and even before he knows the value of the park he is charged to create. Further, it would virtually preclude states from considering whether to convert fund-assisted land to other recreational uses. Since the states would be forced to provide substituted land even before testing to determine which use of the subject land would be most beneficial, states would be discouraged from ever pursuing even beneficial changes. This outcome contravenes the Act. The L & WCFA does not forbid conversions, it merely dictates that the state must replace the converted land with a suitable substitute. Clearly, an agency construction of the statute that enables the state to make nondestructive tests on fund-assisted land to determine its commercial value or potential for other recreational purposes cannot be deemed unreasonable.

This interpretation is also well within the confines of the only circuit court case to address the definition of conversion. In Friends of Shawangunks, Inc. v. Clark, 754 F.2d 446, 449 (2d Cir.1985), the Second Circuit ruled that the Park Service’s interpretation of what constitutes a conversion must be given considerable deference. Nevertheless, the court overturned an agency determination that transforming a portion of land covered by a conservation easement funded by the L & WCFA into a limited-access, resort golf course did not constitute a conversion. Id. The court specifically found that the proposed development would directly contravene the agency’s own regulations. By allowing the development, the agency would enable the holder of fee title to the land on which the easement rested to do precisely what the easement had precluded: change the character of the land from a conservation area for public enjoyment to a private golf course. Id. at 451. Unlike the virtual transfer of title in Shawangunks, no change in the character of the land at Crater of Diamonds State Park would take place. The only effect on park land would be a temporary disruption on approximately 5,000 square feet in the public access area.

In light of all the information contained in the record, we find it a permissible construction of the L & WCFA to conclude that temporary, nondestructive testing conducted within the confines of the Phase I proposal does not constitute a conversion. As the agency pointed out, however, any further testing would be inextricably woven with commercial mining and, therefore, would have to comply not only with § 6(f)(3) but with the National Environmental Policy Act. 42 U.S.C. §§ 4321 to 4347 (1988).

For the foregoing reasons, we reverse the permanent injunction issued by the district court. We affirm the denial of damages because we find that appellant mining companies entered into the contract for Phase I testing fully aware of the attendant risks of disapproval.

1 . The land has been commercially mined intermittently since 1906. Huddleston sold the property to the Arkansas Diamond Company, which opened the “Arkansas Mine” in 1908. From 1912 to 1919, the plant was idled by World War I, but it reorganized in 1919 as the Arkansas Diamond Corporation of Virginia. Shareholders foreclosed on the property in 1927 and backed small-scale mining operations until 1931, when the world diamond market was weakened by the stock market crash and the Depression. The North American Diamond Corporation assumed control of the property in 1941 but, beset by controversial and conflicting geological reports about the reserve’s potential, did not begin mining it until 1948.

2 . The site was placed on the National Register of Historic Places in 1973 and is listed in the Arkansas Natural Heritage Commission’s Registry of Arkansas Natural Areas.

3 . Since the public diamond mining at Crater of Diamonds State Park is unique, it would be nearly impossible to find equivalently useful land to substitute if the Secretary found a conversion. Nevertheless, the L & WCFA provides that wetlands within the state shall be considered of reasonably equivalent usefulness for all other property within the state. 16 U.S.C. § 460l — 8(f)(3).

4 . The state initially sought an opinion on Phase I testing, Phase II testing, Phase III testing, and commercial mining. Phase II and Phase III testing, as well as the commercial mining, involve a much more extensive intrusion on park property and are not at issue here. The National Park Service refused to render a decision on the request, claiming it needed further information. The National Park Service requested not only more detailed information on the various testing phases, but also a full analysis of environmental impacts under the National Environmental Policy Act. 42 U.S.C. §§ 4321 to 4347 (1988). The state subsequently updated and renewed its request, inquiring only as to the appropriateness of Phase I testing.

5 . Letter from Richard Marks, Acting Director of the Southwest Region of the National Park Service, to Jo Luck Wilson, Director of the Arkansas Department of Parks and Tourism (May 24, 1989) (Administrative R., Appellant’s App. at 508).

6 . Letter from Martin J. Suuberg, Associate Solicitor for Conservation and Wildlife in the Interior Department, to Gayle E. Manges, Southwest Region Field Solicitor (May 25, 1989) (Administrative R., Appellant’s App. at 515).

7 . After negotiations between the parties failed, the state began taking bids for Phase I testing. Appellees immediately petitioned for a temporary restraining order, which was treated by the court as a motion for preliminary injunction. The district court on June 25 granted appellant mining companies’ motion to intervene. Capricorn Diamonds, Ltd., and Kennecott Corporation funded the Phase I testing and anticipate submitting bids if full-scale commercial mining is approved at the park.

8 .Letter from Richard Marks, Acting Director of the Southwest Region of the National Park Service, to Richard Davies, Acting Director of the Arkansas Department of Parks and Tourism (July 18, 1989) (Administrative R., Appellant’s App. at 579).

9 . The Secretary has delegated this determination to the regional director. Land and Water Conservation Fund Grants Manual, Chapter 675.9(3). The acting regional director's decision is reviewable as a final agency action under § 704 of the Administrative Procedure Act. 5 U.S.C. § 704 (1988). The Director of the Heritage Conservation and Recreation Service of the Interior Department, in a memorandum dated May 15, 1978, delegated the authority to approve conversion requests under § 6(f)(3) to the regional directors. The memorandum stipulated that only in cases in which the regional director recommended disapproval of a conversion request or the rejection of a proposed substitution would a report to the director be warranted. (Administrative R., Appellant’s App. at 253).

10 . The district court partially applied the wrong standard of review, concluding that the agency decision was "arbitrary, capricious, not supported by substantial evidence, and is contrary to the [law].’’ Sierra Club v. Davies, 743 F.Supp. 1334, 1341 (E.D.Ark.1990) (emphasis added). Under the Administrative Procedure Act, the "substantial evidence” standard applies only to agency decisions made under formal rulemaking procedures or formal adjudications. 5 U.S.C. § 706(2)(E); Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 414, 91 S.Ct. 814, 822, 28 L.Ed.2d 136 (1971). The agency adjudication in this case was not made "on the record after opportunity for an agency hearing.” 5 U.S.C. § 554 (1988).

11 . The acting regional director did not articulate the basis for his decision that the Phase I testing was permissible as a temporary nonconforming use and, therefore, not a conversion under the L & WCFA. While this court should not itself supply a reasoned basis where the agency has not, the court will "uphold a decision of less than ideal clarity if the agency’s path may reasonably be discerned.” Motor Vehicle Mfrs. Assn. v. State Farm Mut., 463 U.S. 29, 43, 103 S.Ct. 2856, 2867, 77 L.Ed.2d 443 (1983), quoting Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286, 95 S.Ct. 438, 442, 42 L.Ed.2d 447 (1974).

12 . Memorandum from Interior Department’s Director of Bureau of Outdoor Recreation to the Regional Director of the Northwest Region of the National Park Service (Feb. 8, 1974) (Administrative R., Appellant’s App. at 262).

13 . Memorandum from Interior Department’s Director of Bureau of Outdoor Recreation to the Regional Director of the Northwest Region of the National Park Service (Feb. 8, 1974) (Administrative R., Appellant’s App. at 262).