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Moore v. State

Citation: 6 ELR 20183
No. No. 3551, 553 P.2d 8/(Alaska, 07/09/1976) oil leasing in Kachemak Bay

In separate opinions, the Alaska Supreme Court holds that the Department of Natural Resources (DNR) violated statutory requirements for consultation with local governmental before issuing oil leases in Kachemak Bay, but gives its ruling prospective effect only, and remands the case for a determination of whether the Commissioner of the Department made proper findings that the leases served the best interests of the state. The plaintiffs are commercial fishermen and a resort owner, all of whom reside near Kachemak Bay. Defendants are the Department and the oil companies who purchased the oil leases. Following DNR reassurances to plaintiffs that the plans for leases, announced in April 1972, were indefinite and a denial of a citizen request for a public hearing on the leases in December 1973, the leases were issued in January 1974 and drilling permits were granted in November 1974. Plaintiffs filed suit within a month of the permits' issuance. The trial court dismissed the suit as barred by laches.

Although the trial court has discretion in sustaining the defense of laches, it must apply the two independent tests of inexcusable delay by plaintiff and resulting undue prejudice to defendant. Concerned Citizens of South Kenai Peninsula v. Kenai Peninsula Borough, 527 P.2d 447 (Alas. 1974). In this case, plaintiffs are not guilty of inexcusable delay, having brought suit once their usufructuary rights in Kachemak Bay actually became endangered. The time when it becomes reasonable for plaintiffs to act upon a wrong, not the time when the wrong occurred, is the proper moment for measuring delay. Steubing v. Brinegar, 511 F.2d 489, 5 ELR 20183 (2d Cir. 1975). One factor is when plaintiffs could no longer reasonably assume that defendants would comply with the law. In this instance, it is not reasonable to expect that plaintiffs would not only recognize their cause of action, but also hire counsel and file suit, prior to the sale. Issuance of the drilling permit is the proper time from which to measure plaintiffs' delay. Moreover, official assurances that sale of leases did not imply that actual drilling would occur gave plaintiffs a false sense of security regarding their rights. In addition, plaintiffs' pursuit of administrative remedies in this case did not prejudice defendants. In balancing equitable factors of prejudicial delay, the court must weigh the importance of the public interest.

No prejudice accrued to defendants from plaintiffs' filing suit after the permits were issued. Release of confidential bidding information becomes no greater once the sale date has passed. In addition, one oil company defendant which began using a faulty drilling rig after the sale cannot blame the plaintiffs' delay for resulting losses. Nor can the state, as the protector of the state's resources, argue that it would be inconvenient to return lease royalties if the sale were set aside as improper.

Even though the trial court's dismissal was based only on laches, this court can uphold a grant of summary judgment if alternative grounds exist for upholding the decision. The first issue concerns whether the publication of notice met the statutory requirements. Under Alas. Stat. § 38.05.345, notice of leasing must be published in one newspaper of general circulation in the vicinity of the lease for three consecutive weeks prior to the time of the sale. Publication in the Anchorage Times, which has a circulation of 130 in the area, met this requirements.

The second issue is whether the Director of the Division of Lands properly found that the sale was in the best interests of the state. Alas. Stat. § 38.05.035(a)(14). No formal, written finding is required, but, as pointed out by the concurrence, the director's determination is judicially reviewable.

The third issue is whether the Division of Lands failed to consult, as required by Alas. Stat. § 35.05.305, with local planning agencies prior to the sale. Defendant's claim that plaintiffs lack standing to raise this allegation is without merit. Alaska follows the injury in fact test of standing. Wagstaff v. Superior Court, Family Division, 535 P.2d 1220 (Alas. 1975). As commercial fishermen of Kachemak Bay, plaintiffs clearly will be adversely affected sufficiently to be injured by the sale. Notwithstanding that the state need not consult with plaintiffs under § 305, the court's concern is not with the substantive nature of the plaintiffs' claims but with the plaintiffs' interest in the resolution of those claims.

Section 305 requires joint study and review of public land sales by the Director of Lands and local planning agencies. This process must be considered in the context of the constitutional mandate to safeguard the public's interest in the disposition of state natural resources. Alas. Const. art. VIII, § 10. Section 305, when read with the definition of land (which includes "resources") in Alas. Stat. § 38.05.365(16), applies to lease sales of oil and gas. The agency's interpretation of the statutory language is not controlling, since it is not a matter of agency expertise to which the court should defer. In addition, requiring local consultation as to leases will not paralyze agency administration of mining claims, which do not come within the ambit of § 305. Furthermore, local consultation can be no more inconvenient than pre-sale negotiations with oil and gas companies. Finally, Kachemak Bay, which is offshore of the plaintiffs' communities of Homer and Seldovia, satisfies the statutory test that public lands be "adjacent to" the localities consulted Alas. Stat. § 38.05.305. Therefore, Homer and Seldovia should have been consulted prior to the sale.

The court applies its ruling only prospectively. The case is one of first impression. Also, settled property rights would be vulnerable to attack with a retrospective holding. And the oil companies were entitled to rely on the department's long-standing, and not implausible, interpretation of § 305.

In other matters, plaintiffs are not barred by the statute of limitations, since the declaratory judgment act, Alas. Stat. § 22.10.020(b), does not set a 30-day limit on actions. See Alyeska Ski Corp. v. Holdsworth, 426 P.2d 1006 (Alas. 1967). Also official records, even though not generated by the Division of Lands, are authenticated evidence, not subject to the hearsay rule, and admissible to show notice of knowledge.

Reversed in part, affirmed in part, and remanded for proceedings consistent with this opinion and the concurrence.

A separate opinion of four justices, per Rabinowitz, J., holds that the Superior Court on remand should determine whether the Natural Resources Commissioner assumed the responsibility for approving the lease sale from the Director of Lands, whether the decision was made in the best interests of the state, and whether he set forth findings or a record to support his decision. The Alaska Constitution requires that development of state resources should proceed only for the benefit of the people. Alas. Const. art. VIII, § 10. Under Alas. Stat. § 38.05.035(a)(14), the Director of the Division of Lands must find that a sale or lease of lands must be in the best interests of the state. Plaintiffs do not argue that the Director made a substantive error in his decision here, but that he never considered the question at all. Defendants assert that the courts may not review the policy decisions of the Director.

Alaska courts have held that the judicial power extends to review of such decisions. Alyeska Ski Corp. v. Holdsworth, 426 P.2d 1006 (Alas. 1967). The court will exercise its independent judgment as to whether the administrative agency has met the statutory procedural safeguards specified in the Alaska Land Act. State v. Aleut Corp., 541 P.2d 730 (Alas. 1975). See Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 1 ELR 20110 (1971); Aberdeen & Rockfish R.R. v. SCRAP, 422 U.S. 289, 5 ELR 20418 (1975). Therefore, plaintiffs' contention that the Director failed to consider the best interests of the state prior to the lease sale is judicially reviewable. The Director, while not required to make a formal written finding, must at a minimum establish a record that reflects a reasoned basis for his decision.

The record here indicates that the Director made no such reasoned evaluation prior to the sale. Actually, the decision was made by the Natural Resources Commissioner, the Director's immediate supervisor. Since the Commissioner may review the decisions of the Director, Alas. Stat. § 38.05.020, the Superior Court should determine whether the Commissioner lawfully assumed the obligation under Alas. Stat. § 39.05.035(a)(14) to find that the lease sale served the best interests of the state and whether he set forth a finding or record to demonstrate the basis for his decision.

A dissent argues that the court's holding should apply in favor of the plaintiffs in this case as well as prospectively, since the state violated the law in issuing the lease. The oil companies' interest in the lease is not paramount to the interest of Homer and Seldovia in being consulted prior to the leases. Alas. Stat. § 38.05.305 unambiguously requires such consultation, which was absent here. Similarly, the state's "long-standing" interpretation that § 305 does not apply to oil and gas cannot outweigh the clear intent of § 305 to apply to oil and gas leasing. Defendants cannot be harmed by application of the court's ruling to them, since they violated the law and the leases are therefore of "no legal force and effect." State v. Aleut Corp., 541 P.2d 730, 740 (Alas. 1975). The majority in effect tells the plaintiffs, who have gone to the time and expense of exposing a violation of the law, that they won the battle but lost the war.

The full text of this opinion is available from ELR (28 pp. $3.50, ELR Order No. C-1092).

Counsel for Plaintiffs
Warren W. Matthews, Jr.
David Shimek
Matthews, Dunn & Baily
Suite 201, 429 D St.
Anchorage AK 99501
(907) 272-2491

Counsel for Defendant State of Alaska
Avrum M. Gross, Attorney General
James N. Reeves, Asst. Attorney General
Department of Law
Pouch K
Juneau AK 99801
(907) 465-3600

Connor, J., joined by Rabinowitz, Erwin and Burke, JJ. (Rabinowitz, J., joined by Erwin, Burke and Dimond, concurs; Dimond, J., joined by Rabinowitz, J., dissents).