Mont. Envtl. Info. Ctr. v. Westmoreland Rosebud Mining

545 P.3d 623

414 Mont. 80

2023 MT 224

MONTANA ENVIRONMENTAL INFORMATION CTR, and Sierra Club, Plaintiffs/Appellees,

v.WESTMORELAND ROSEBUD MINING, LLC, f/k/a Western Energy Co., Nat. Res. Partners, L.P., Int’l Union of Operating Engineers, Local 400, and N. Cheyenne Coal Miners Ass’n, Respondent-Intervenors/Appellants.

Montana Environmental Information Ctr. and Sierra Club, Petitioners/Appellees,

v.Montana Dep’t of Environmental Quality, Respondent/Appellant,Montana Bd. of Environmental Review, Westmoreland Rosebud Mining, LLC, f/k/a Western Energy Co., Nat. Res. Partners L.P., Int’l Union of Operating Engineers, Local 400, and N. Cheyenne Coal Miners Ass’n, Respondents.

Montana Environmental Information Ctr. and Sierra Club, Plaintiffs/Appellees,

v.Montana Dep’t of Environmental Quality, Montana Bd. of Environmental Review, Respondents,andWestmoreland Rosebud Mining, LLC, f/k/a Western Energy Co., Nat. Res, Partners L.P., Int’l Union of Operating Engineers, Local 400, and N. Cheyenne Coal Miners Ass’n, Respondent-Intervenors/Appellants.

DA 22-0064

Supreme Court of Montana.

Argued: April 3, 2023

Submitted: May 9, 2023

Decided: November 22, 2023

Rehearing Granted: January 30, 2024

APPEAL FROM: District Court of the Sixteenth Judicial District, In and For the County of Rosebud, Cause No. DV 19-34 Honorable Katherine M. Bidegaray, Presiding Judge

For Appellant Montana Department of Environmental Quality: Nicholas A. Whitaker, Jeremiah Langston (argued), Department of, Environmental Quality, Helena, Montana,

For Appellant Montana Board of Environmental Review: Amy D. Christensen, J. Stuart Segrest, Christensen & Prezeau, PLLP, Helena, Montana

For Intervenor and Appellant Westmoreland Rosebud Mining, LLC, et al.: John C. Martin (argued), Holland & Hart LLP, Jackson, Wyoming, Kyle A. Gray, Holland & Hart LLP, Billings, Montana, Samuel R. Yemington, Holland & Hart LLP, Cheyenne, Wyoming

For Appellees: Shiloh Hernandez (argued), Earthjustice, Bozeman, Montana, Derf Johnson, Montana Environmental Information Center, Helena, Montana, Roger Sullivan, McGarvey Law, Kalispell, Montana, Walton D. Morris, Morris Law Office, Charlottesville, Virginia

For Amicus Curiae: Robert L. Sterup, Brown Law Firm. PC, Billing, Montana

Chief Justice Mike McGrath delivered the Opinion of the Court.

₈₉¶1 Montana Department of Environmental Quality (DEQ or Department), the Montana Board of Environmental Review (Board), ₉₀and Westmoreland Rosebud Mining, LLC (formerly known as Western Ener- gy Co., Natural Renounces Partners L.P., International Union of Operating Engineers, Local 400), and Northern Cheyenne Coal Miners Association (collectively, Westmoreland), appeal a Sixteenth Judicial District Court ruling in favor of Montana Environmental Information Center and Sierra Club (collectively, Conservation Groups) vacating DEQ's permit for Westmoreland’s proposed coal mine expansion pursuant to the Montana Strip and Underground Mine Reclamation Act (MSUMRA).

¶2 We affirm in part, reverse in, part, and remand to the District Court for proceedings consistent with this Opinion. The Distinct Court's order to vacate the AM4 Permit is reinstated.

¶3 In 2009, Westmoreland applied for its fourth amendment to its Area B mining permit (AM4 Permit) seeking to expand coal mining operations at the Rosebud mine in Colstrip, Montana.¹ Pursuant to MSUMRA, DEQ approval of the permit is conditioned on DEQ’s determination that the proposed mining activity is "designed to prevent material damage" to the hydrologic balance outside the permit area. Section 82-4-227(3)(a), MCA. At the time of approval, "material damage" with respect to the protection of the hydro-logic balance was defined as:

degradation or reduction by coal mining and reclamation operations of the quality or quantity of water outside of the permit area in a manner or to an extent that land uses or beneficial uses of water are adversely affected, water quality standards are violated, or water rights are impacted. Violation of a water quality standard, whether or not an existing water use is affected, is material damage.

Section 82-4-203(32), MCA (2015).²

¶4 Area B is located within the watershed of the nearby upper East Fork Armell’s Creek (Creek), a small watercourse with intermittent to ephemeral flows that eventually drains to the Yellowstone River. The present appeal centers around the permit's potential impacts on the Creek and its alluvium. The Creek's water quality standard ₉₁designation is a C-3³ surface water, which requires the Creek to be suitable for various uses including, as relevant here, "growth and propagation of non-salmonid fishes and associated aquatic life." Admin. R. M. 17.30.629(1) (2017) (emphasis added). The Creek's surface water is not currently subject to any numerical standards for various pollutants. DEQ attainment documents indicate the Creek has been listed as "impaired" for meeting its aquatic life support standards.⁴

¶5 We restate the issues on appeal as follows:

Issue One: Whether the Board of Environmental Review applied the wrong burden of proof.

Issue Two: Whether the Board of Environmental Review improperly limited Conservation. Groups’ evidence and argument

Issue Threes Whether the Board of Environmental Review improperly relied on facts and opinions regarding salinity concentrations that were not included in the Cumulative Hydrologic Impact Assessment.

Issue Four: Whether the Bowrd of Environmental Review erred in holding that extending the duration, but not the magnitude, of a water quality violation could not constitute material damage.

Issue Five: Whether the Board of Environmental Review improperly excluded the cumulative impact of mining activity from its analysis.

Issue Six: Whether the Board of Environmental Review improperly relied upon evidence regarding aquatic life.

Issue Seven: Whether the District Court erred in its award of attorney fees.

Issue Eight: Whether the Board of Environmental Review was properly included as a party on judicial review.

We affirm the District Court on Issues Two, Four, and Five. We reverse the District Court on Issues One, Three, Six, Seven, and Eight.

₉₂FACTUAL AND PROCEDURAL BACKGROUND

¶6 During a six-year permit application review, DEQ and Westmoreland engaged in a back-and-forth process through which Westmoreland addressed various concerns raised by DEQ. When DEQ deemed Westmoreland’s application—which contained a lengthy Probable Hydrological Consequences (PHC) report and addendum—to be acceptable, it solicited public objections to the proposed permit. Conservation Groups filed objections on August 3, 2015. DEQ subsequently responded to these comments and issued its written findings and Cumulative Hydrologic Impact Assessment (CHIA) in December 2015. DEQ found that Westmoreland had made the required showing that the permit proposal was designed to prevent "material damage" under MSUMRA and greenlit the permit proposal.

¶7 Conservation Groups challenged the decision to the Board. After lengthy discovery, a Board hearing examiner held a four-day hearing in which Conservation Groups, DEQ, and Westmoreland presented evidence and argument. After the hearing, the hearing examiner recommended that the Board uphold DEQ’s permitting decision. The Board majority adopted in large part the hearing examiner’s proposed findings of fact and conclusions of law in favor of DEQ, holding that Conservation Groups had failed to carry the burden of proving that the permit would cause material damage.

¶8 Conservation Groups sought judicial review from the Sixteenth Judicial District Court, naming the Board as a party along with Westmoreland and DEQ.⁵ Conservation Groups challenged the Board’s analysis as erroneously placing the burden of proof on Conservation Groups, rather than Westmoreland, in proceedings before the Board. Conservation Groups also challenged the hearing examiner’s evidentiary decisions in limiting Conservation Groups’ argument and evidence to issues raised in pre-CHIA objections; allowing Westmoreland and DEQ to present post-decisional evidence and rationales in support of DEQ’s permitting decision; and admitting testimony by a DEQ hydrologist on aquatic life. Conservation Groups also challenged the Board’s substantive reliance upon an allegedly-unreliable aquatic life survey and its ultimate conclusion, in light of a projected 13% increase in TDS in the Creek’s alluvium, that the Creek would not suffer material damage in the form of a water quality violation. Further, they question the Board’s determinations that the ₉₃duration of the projected increase in TDS and the cumulative effects of mining in the area are not relevant to an analysis of whether the proposed mine expansion was designed to prevent material damage to the hydrologic balance outside the permit area.

¶9 The District Court ruled in favor of Conservation Groups on these issues and vacated Westmoreland’s AM4 Permit. We stayed the vacatur pending appeal.⁶ The District Court also granted Conservation Groups nearly $900,000 in attorney fees and costs. DEQ and Westmoreland appeal the District Court’s rulings overturning the Board, its vacatur remedy, and the award of attorney fees. The Board appeals the District Court’s denial of the Board’s motion to be dismissed from judicial review. Additional factual and procedural history is presented as relevant below.

STANDARDS OF REVIEW

[1–5] ¶10 The Montana Administrative Procedure Act (MAPA) provides the applicable standards of judicial review of an agency decision. Section 2-4-704, MCA. On appeal, this Court applies the same standards of review that a district court applies. Whitehall Wind, LLC v. Mont Puh Serv. Com., 2015 MT 119, ¶ 8, 379 Mont. 119, 347 P.3d 1273. A court may reverse or modify the decision if the petitioner’s substantial rights have been prejudiced through findings, inferences, conclusions, or decisions that violate constitutional or statutory provisions, exceed the agency’s statutory authority, are made...