NO. 93-008
IN THE SUPREME COURT OF THE STATE OF MONTANA
1993
LINCOLN COUNTY, MONTANA,
Petitioner and Appellant,
-v-
SANDERS COUNTY, THE HARD-ROCK
MINING IMPACT BOARD, THE CITY
OF LIBBY, and NORANDA MINERALS
CORPORATION, INC.
Respondents and Respondents.
APPEAL FROM: District Court of the Nineteenth Judicial District,
In and for the County of Lincoln,
The Honorable Gordon Bennett, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Scott B. Spencer, Lincoln County Attorney, Libby,
Montana
For Respondent:
Richard M. Weddle, Special Assistant Attorney
General, Department of Commerce, Helena, Montana
(Montana Hard-Rock Mining Impact Board): Robert
Slomski, Sanders County Attorney, Thompson Falls,
Montana; Alan L. Joscelyn, Gough, Shanahan, Johnson
& Waterman, Helena, Montana (Noranda Minerals Corp;
Mark J. Fennessy, Libby City Attorney, Libby,
Montana
Submitted on Briefs: August 12, 1993
Decided: November 2, 1993
Filed:
.-. ,
Clerk
Justice Fred J. Weber delivered the Opinion of the Court.
This is an appeal from a decision of the Nineteenth Judicial
District Court, Lincoln County, affirming a decision of the Hard-
Rock Mining Board. We affirm.
We restate the issues as follows:
1 . Did the District Court err in ruling that Lincoln County could
not challenge the standing of Sanders County's objection to the
Mining Board's decision?
2 . Did the District Court err in determining that the Mining Board
did not exceed its authority pursuant to § 90-6-307(8), MCA, of the
Hard-Rock Mining Impact Act and 0 90-6-404(5), MCA, of the Property
Tax Base Sharing Act when it amended the Montanore Plan's
allocation of taxes?
In 1989, Noranda Minerals Corp. Inc. (Noranda), applied to the
Montana Department of State Lands under § 82-4-335, MCA, for an
operating permit for its Montanore Project, a proposed silver and
copper mine to be located in Lincoln and Sanders Counties. While
the ore body lies beneath the Cabinet Mountain Wilderness Area in
Sanders County, access is gained through roads originating in
Lincoln County. Surface facilities are also in Lincoln County.
The Metal Mine Reclamation Act and the Hard Rock Mining Impact Act
(Impact Act) require developers of large scale hard-rock minerals
to prepare an "impact plan" identifying any increased costs to
local government units for public services and facilities which
will be needed as a result of the proposed project. Such costs
must be paid by the developer in the form of grants, proceeds of
special facility impact bonds, or prepayments of property taxes as
may be appropriate pursuant to § 82-4-335(5) and 90-6-307, MCA.
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Under the Impact Act, an affected local government unit may
file an objection to the Impact Plan with the Hard-Rock Mining
Board (the Mining Board) when the unit disagrees with an aspect of
the Impact Plan, or contends the plan fails to address certain
issues adequately. Section 90-6-301, MCA. The Impact Act
encourages parties to resolve disputes among themselves, but where
resolution has not occurred, the Mining Board is given jurisdiction
to resolve the dispute by holding a contested case hearing.
Section 90-6-307, MCA.
Also pertinent to this cause is the Hard-Rock Mining Impact
Property Tax Base Sharing Act (Tax Base Sharing Act), found at 55
90-6-401through 90-6-406, MCA. Operating in conjunction with the
Impact Act, it addresses those situations in which the proposed
project will have adverse financial impacts on local government
units other than those localities in which the mine is located.
Because of our tax system in Montana, these adjacent localities
would not receive property tax to compensate for the adverse impact
of the mine. Therefore, Montana's system allocates a portion of
the taxes paid on the valuation of the mine to these adjacent
localities. The allocation under the Tax Base Sharing Act is
required when the impact plan identifies an adverse financial
situation result which affects neighboring local units of
government.
The Tax Base Sharing Act in part provides that the real
property tax on the mine shall be spread over all governmental
units affected based upon the residence of the mine's employees and
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school age children of such employees. This act was in effect when
Noranda submitted its impact plan.
The Montanore Impact Plan predicted that a majority of the
project's employees would reside in the Libby area and that Libby
would incur significant costs because of the mine development but
would not receive a corresponding increase in taxable valuation
from the mine to offset the cost. Based on the foregoing analysis,
the Impact Plan determined that the Tax Base Sharing Act was
applicable and, therefore, the project's taxable valuation should
CJO to Libby and the rest of Lincoln County and not Sanders County.
House Bill 832, Chapter 760, Laws 1991, requires that taxable
valuation be assigned to Sanders County. Under this bill, a
minimum of 20% of the gross proceeds from the taxable valuation of
the project is allocated to those local governments within which
the ore body is located.
House Bill 832, which became 5 90-6-404, MCA, provides:
90-6-404. Allocation of taxable valuation for local
taxation purposes. When property of a large-scale
mineral development is subject to the provisions of 90-6-
403, the increase in taxable valuation must be allocated
by the department of revenue as follows:
(1) If the board determines that the local
government unit in which the ore body or the mineral
deposit being mined is located is not affected by the
development and if this determination is shown on the
impact plan, 20% of the total increase in taxable
valuation of the gross proceeds must be allocated to that
local government unit. This provision is intended to
establish a minimum allocation for the units and does not
prohibit proof by a unit that actual direct impacts would
exceed 20% of the total impacts of the development.
(2) The remaining increase in taxable valuation of
the mineral development must be allocated between
affected counties and affected municipalities according
to the following formula based on the place of residence
of mineral development employees:
4
(a) A portion, not to exceed 20%, to affected
municipalities, based on that percentage of the total
number of mineral development employees that reside
within municipal boundaries. The taxable valuation
allocated to affected municipalities must be distributed
to each municipality according to its percentage of the
total number of mineral development employees who reside
within municipal boundaries. That portion of the taxable
valuation distributed to a municipality pursuant to this
section is subject to the same county mill levy as other
taxable properties located in the municipality.
(b) The remaining portion of the taxable valuation
must be distributed to each affected county according to
its percentage of the total number of mineral development
employees that reside within the county.
(3) The increase in taxable valuation equal to that
subject to subsection (2) must be distributed pro rata
among each affected high school district according to the
percentage of the total number of mineral development
high school students that reside within each district.
(4) The increase in taxable valuation equal to that
subject to subsection (2) must be distributed pro rata
among each affected elementary school district according
to the percentage of the total number of mineral
development elementary school students that reside within
each district.
(5) The distribution formula specified in
subsections (2) through (4) may be modified by an impact
plan approved as provided in 90-6-307 or amended as
provided in 90-6-311, if the modification is needed in
order to ensure a reasonable correspondence between the
occurrence of increased costs resulting from the mineral
development and the allocation of taxable valuation
resulting from the mineral development.
During a go-day review period established by 5 90-6-307(6),
MCA, the Sanders County Board of Commissioners filed an objection
to the Montanore Impact Plan with the Mining Board. This objection
challenged 1) the Impact Plan's conclusion that the proposed mining
development held no potential for future adverse impacts on Sanders
County and, 2) the manner in which the Impact Plan proposed to
implement the Tax Base Sharing Act. The parties resolved issue one
so that only issue two went before the Mining Board.
5
When negotiations between the parties broke down, the Mining
Board held an informal contested case hearing concerning Sanders
County's objection. The Mining Board considered the following
issues:
1 . Whether the Noranda Minerals Corporation Impact Plan
for the proposed Montanore mine accurately identified the
increased capital and operating costs which would be
experienced by the City of Libby, Montana, as a result of
the development of the Montanore mine:
2. Whether, if the Plan did accurately identify the
increased capital and operating costs which would be
experienced by the City of Libby, these increased costs
warranted or required application of the Property Tax
Base Sharing Act, as the Plan proposed; and
3 . Whether, if the effects of the mining development on
the City of Libby did warrant or require the application
of the Property Tax Base Sharing Act, the Plan correctly
described the manner in which the Act should apply.
The Mining Board concluded that the Impact Plan was correct in
its projections concerning the impacts to Libby. Further, the
Mining Board concluded that these increased costs required
application of the Tax Base Sharing Act and that the triggering of
the act meant that all affected counties and municipalities must be
considered, which here includes Libby, Lincoln County and Sanders
County.
The Mining Board finally concluded that the Impact Plan did
not correctly reflect a reasonable correspondence between the
occurrence of increased costs and the allocation of taxable
valuation. It, therefore, modified the Impact Plan's allocation of
such funds pursuant to § 90-6-404(5), MCA. Under the modified plan
adopted by the Mining Board, Sanders County would receive 20% of
the anticipated yross proceeds of the taxable valuation of the
6
project, and the remaining 80% would be distributed during the
first five years as proposed in the Impact Plan. In year six, the
Mining Board affirmed that the first 20% would go to Sanders
County, and that as to the remaining 80%, 15% of the remaining 80%
of Sanders County's gross proceeds valuation as well as 15% of the
mineral development valuation of Lincoln County, would be allocated
to Libby. The remainder of such 80% was to be allocated between
Lincoln and Sanders Counties based upon their respective
contributed taxable valuations. Under § 90-6-404(2), MCA, the
allocation to Libby becomes a part of Lincoln County's tax base and
represents a part of Lincoln County's share of the taxable
valuation.
Lincoln County brought an action in District Court seeking
judicial review pursuant to the Montana Administrative Procedure
Act (MAPA) of the Mining Board's decision. Section 2-4-702, MCA.
The District Court affirmed the Mining Board's decision. Lincoln
County appeals the District Court's affirmation.
INTRODUCTION
The legislature recognized that large scale mining operations
impact the localities that surround a mining site by producing an
influx of new people who in turn put additional stress on a
government's financial resources. Impact plans created by a mine's
developer pinpoint areas where financial stress is anticipated.
When such stress is identified, the Hard Rock Mining Impact
Property Tax Base Sharing Act is automatically triggered. The Tax
Base Sharing Act allocates funds between affected localities. In
7
this instance, those funds would come from prepaid property taxes
and the developer would receive a credit for such taxes until the
mine is in production. In this way local governments affected by
the mine opening receive compensation prior to the mine going into
production.
The Impact Act states the purpose for requiring impact
statements:
Declaration of necessity and purpose. The large-
scale development of mineral deposits in the state may
cause an influx of people directly related to the area of
the development. This influx of people and the
corresponding increase in demand for local government
facilities and services may create a burden on the local
taxpayer. There is a significant lag time between the
time when additional facilities and services must be
provided and the time when additional tax revenue is
available as a result of the increased tax base. In
addition, localgovernmentunits in whatever jurisdiction
the development is not located may receive substantial
adverse economic impacts without benefit of a major
increased tax base in the future. There is therefore a
need to provide a system to assist local government units
in meeting the initial financial impact of large-scale
mineral development.
Section 90-6-301, MCA.
It is within this framework of the legislature's intent that
we consider the following issues.
Did the District Court err in ruling that Lincoln County could not
challenge the standing of Sanders County to object to an
administrative decision?
Lincoln County argues that the Mining Board can only modify an
impact plan where objections were made to parts of the plan. Here,
according to Lincoln County, Sanders County admitted itwill suffer
no increased costs of any kind and therefore, cannot object to the
8
allocation of taxation. Further, Lincoln County argues that it
objected to Sanders County's standing with the District Court and
can, therefore, object to this Court.
Sanders County contends that Lincoln County did not raise the
issue of standing to the Mining Board and cannot, therefore, raise
it before the District Court or this Court.
The District Court determined that Lincoln County had not
raised the standing issue before the agency and could not,
therefore, raise it before the courts. MAPA specifically prohibits
parties from raising an issue for the first time on judicial
review:
Initiating judicial review of contested cases. . . .
(1) (b) A party who proceeds before an agency under
the terms of a particular statute shall not be precluded
from questioning the validity of that statute on judicial
review, but such party mav not raise any other cruestion
not raised before the aoencv unless it is shown to the
satisfaction of the court that there was oood cause for
failure to raise the ouestion before the aoencv.
Section 2-4-702(1)(b), MCA.
The District Court determined that Lincoln County had not
shown good cause for its failure to raise the question before the
agency. A review of the record indicates that the District Court
was correct in this assessment.
We conclude that Lincoln County cannot raise on judicial
review something that it did not raise before the agency itself.
Therefore, we hold that the District Court did not err in ruling
that Lincoln County could not challenge the standing of Sanders
County to object to an administrative decision.
9
II.
Did the District Court err in determining that the Mining Board did
not exceed its authority pursuant to 5 90-6-307(8), MCA, of the
Hard-Rock Mining Impact Act and § 90-6-404(5), MCA, of the Property
Tax Base Sharing Act when it amended the Montanore Plan's
allocation of taxes?
The Hard-Rock Mining Impact Act allows the Mining Board 60
days following a hearing to make findings to those portions of the
impact plan which have been objected to, and if appropriate,
amended by the Mining Board. Section 90-6-307(8), MCA. Also, the
Tax Base Sharing Act enables the Mining Board to modify an approved
impact plan, as well as one modified pursuant to § 90-6-311, MCA,
because the impact plan did not mention a governmental unit which
will be adversely affected. Section 90-6-404(5), MCA. The Mining
Board's ability to modify the plan is defined as "modification . .
. needed in order to ensure a reasonable correspondence between the
occurrence of increased costs resulting from the mineral
development and the allocation of taxable valuation resulting from
the mineral development.t' Section 90-6-404(5), MCA.
The District Court determined that the Mining Board had a
great deal of discretion when modifying an impact plan and had not
abused its discretion. We determine that this issue involves a
question of interpretation of statutes. Such interpretation is a
legal conclusion which this Court will review as to whether the
District Court was correct. Steer Inc. v. Department of Revenue
(1991), 245 Mont. 470, 803 P.2d 601.
10
Under § 90-6-404(5), MCA, the Mining Board may modify the
Impact Plan if it finds a reasonable connection between the impact
on a governmental unit and the allocation of taxable valuation.
Lincoln County argues that the Mining Board can only modify
the formula set up by the legislature in subsections (2) through
(4) of 5 90-6-404, MCA. That formula, argues Lincoln County,
provides only adjustments to counties that will suffer financially
because of an influx in workers. According to Lincoln County,
Sanders County is not such a county sustaining loss. Sanders
County contends that it is an affected county and that the Mining
Board's allocation to it was indicative of a "reasonable
connection' to the taxable valuation of the mineral development.
Section 90-6-404(5), MCA, provides:
(5) The distribution formula specified in
subsections (2) through (4) may be modified by an impact
plan approved as provided in 90-6-307 or amended as
provided in 90-6-311, if the modification is needed in
order to ensure a reasonable correspondence between the
occurrence of increased costs resulting from the mineral
development and the allocation of taxable valuation
resulting from the mineral development.
We conclude that the statute includes Sanders County in any
permissible modification. While paragraphs (2) through (4) of the
code section deal with the influx of workers to local areas, the
statute also provides that the modifications under 35 90-6-307 and
311, MCA, of the act are permitted in order to ensure reasonable
correspondence between increased costs and valuation.
As previously described, the Mining Board first allocated 20%
of the taxable valuation increase to Sanders County because it is
the site of the ore deposit. Sanders County is entitled to that
11
amount even though it fails to prove adverse financial impact. The
Mining Board then considered the remaining 80% of taxable proceeds
during year six and awarded 15% of the remaining 80% to the City of
Libby. This percentage represents concrete projections presented
to the Mining Board. The Mining Board then allocated the remainder
of the 80% between Lincoln and Sanders Counties based upon each
county's respective contributed taxable valuation.
This formula results in Sanders County receiving an amount in
addition to the required 20% minimum. We have previously affirmed
the portion allocated to Libby based upon the costs which are
allocated to it. The Mining Board then divided between Lincoln
County and Sanders County based upon their taxable valuation. We
emphasize that such division is over and above any projected cost
to the two counties related to the mining project. We conclude
that such a division is reasonable.
An important fact in the District Court's review of the Mining
Board's consideration is that the actual costs involved to
surrounding localities amount to only the costs (projected to be
15% of 80% of total mineral development worth of the mine) to
Libby. All other revenues the District Court describes as a
'1windfall.11 The District Court here makes a distinction between
compensation for loss (to finances of Libby where workers reside)
and surplus, the increased property valuation of the two counties
caused by the mine development where no compensation for loss is a
factor. In other words, the Mining Board determined and the
District Court agreed that after the first five years Lincoln
12
County would have increased in property valuation enough that it
would not need tax base sharing to cover any costs caused by the
mine.
On the other hand, the Mining Board and the District Court
were cognizant that Sanders County was not in such a good position
even though it contained the ore body, because the majority of
increased property valuation after year 5 would be in Lincoln
County. The Mining Board's analysis shows a reasonable connection
between the counties and their respective positions in the Impact
Plan.
We hold the District Court did not err in determining that the
Mining Board did not exceed its authority pursuant to § 90-6-
307(S), MCA, of the Hard-Rock Mining Act and § 90-6-404(5), MCA, of
the Tax Base Sharing Act when it amended the Montanore's allocation
of taxes.
Affirmed.
We Concur:
Chief Justice
November 2, 1993
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:
Scott B. Spencer
Lincoln County Attorney
512 California Ave.
Libby, MT 59923
Richard M. Weddle
Special Asst. Atty. General
Dept. of Commerce, Capitol Station
Helena, MT 59620
Robert Slomski
Sanders County Attorney
P.O. Box 519
Thompson Falls, MT 59873
Alan L. Joscelyn, Esq.
Gough, Shanahan, Johnson &
P.O. Box 1715
Helena, MT 59624
Mark .I. Fennessy
Libby City Attorney
505 Mineral Ave.
Libby, MT 59923
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF, MONTANA