# Petition for Writ of Certiorari — Rith Energy, Inc. v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386009_1153%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 2002 - **Citation:** 536 U.S. 958 ## Text O VUlIlLad5rcu 4 2002 Supreme Court of the United States RITH ENERGY, INC., Petitioner, THE UNITED STATES, Respondent. On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Federal Circuit PETITION FOR A WRIT OF CERTIORARI WALTER H. FLEISCHER 1320 Old Chain Bridge Rd. Suite 440 McLean, Virginia 22101 (703) 821-0613 MICHAEL BOos 4101 Chain Bridge Rd. Suite 313 Fairfax, Virginia 22030 (703) 691-7717 RAYMOND D. BATTOCCHI Counsel of Record JOHN R. POWELL VICKI A. PAISLEY Gabeler, Battocchi & Griggs, PLLC 1320 Old Chain Bridge Rd. Suite 260 McLean, Virginia 22101 (703) 847-8888 Counsel for Petitioners (1) QUESTIONS PRESENTED FOR REVIEW In a case claiming a regulatory taking of real property leases: 1. When there is a total prohibition on any further use of the leases, does the taking become non-categorical merely because the owner was able to make limited use of the leases prior to the taking? If the taking is partial instead of categorical: 2. When the owner is prohibited from mining coal based on a statutory application which was unforeseeable, and never applied to any other miner in the state before or since, does the owner lack reasonable investment backed expectations solely because the statute existed before it acquired the leases? 3. Do various facts which show that the owner was treated in discriminatory and unfair ways, and which otherwise are relevant to several issues in a regulatory takings case, become irrelevant because the agency’s permit denial is presumptively lawful? 4. Did the Court of Appeals misconceive the legal content of and misapply various factors relevant in a partial takings case, including the economic impact on the property owner and the character of the government’s action? (ii) PARTIES TO THE PROCEEDINGS All parties to this proceeding in the United States Court of Appeals for the Federal Circuit are listed in the caption. CORPORATE DISCLOSURE STATEMENT Rith Energy, Inc., has no parent corporations, and no publicly held corporation owns 10% or more of its stock. (111) TABLE OF CONTENTS QUESTIONS PRESENTED FOR REVIEW ............ (i) PARTIES TO THE PROCEEDINGS ................-. (11) CORPORATE DISCLOSURE STATEMENT ........... (11) WP GP CORT EINES cc cccc ee ccevccessecersees (ili) TABLE OF CITED AUTHORITIES ..........ceceeees (v) pe ee. rr (vili) ee | Te ead s iy eee by bn dhe 0408 o | CONSTITUTIONAL AND STATUTORY PUP HO TUIEW TEED ccc ccecsecansecccess | eee de ey as. 2 A. Introduction and Summary. ................. 2 B. Waterand Mining Acts. .........cccceeeess 3 C. Pormettiime ACHIVMIGS. 2. ibis eee eess 4 D. Rith Compared To Other Mines. ............. 9 E. Administrative And Judicial Proceedings. ..... 11 ee be ae re 12 G. Federal Circuit Decisions. .............6006- 13 REASONS FOR GRANTING THE WRIT ............. 15 I. THE RULING THAT THE TAKING WAS NOT CATEGORICAL WARRANTS REVIEW. ....... 17 II. THE INVESTMENT BACKED EXPECTATIONS RULING WARRANTS NES a ee ae 19 (iv) III. THE RULING THAT CLAIMS OF DISCRIMINATORY TREATMENT AND UNFAIRNESS CANNOT BE PRESENTED IN A CASE WHERE THE GOVERNMENT'S CONDUCT IS LAWFUL WARRANTS i Ra BAM ae eRe AED Pere 21 IV. |THE COURT OF APPEALS’ APPLICATION OF OTHER PENN CENTRAL FACTORS WED TEs Sok cventvnsceedessiees 24 CIE boc vet dcwecesteurv reieseeenceneaeys 26 (Vv) TABLE OF CITED AUTHORITIES Cases: Page Armstrong v. United States, 364 U.S. 40 (1960) ......... 16 Babbitt v. Youpee, 519 U.S. 234 (1997)... 0.0.00... passim Concrete Pipe & Prods. v. Constr. Laborers Pension Fru, Sie ie. Gn CORE oes 5 hen eee anak eee 18 Creppel v. United States, 41 F.3d 627 (CA Fed. 1994) .. 13 Eastern Enterprises v. Apfel, 524 U.S. 498 (1998) ....... 22 Good v. United States, 189 F.3d 1355 (CA Fed. 1999), cert. denied, 529 U.S.1053 (2000) ................. 13 Hodel v. Irving, 481 U.S. 704 (1987) .........0.0.5. passim In re: Surface Mining Regulation Litigation, Gi7 F.26 1SSO GA DA. TWO) 6 scceceeesdvuts cease Keystone Bituminous Coal Ass'n. v. DeBenedictis, GO UE. SIO CLPED xcses fe te ae 18 Lucas v. South Carolina Coastal Council, See Ue. Fe CIPO) vec dene kassseuesisewiere 17 M & J Coal, Inc. v. United States, 47 F.3d. 1148 (CA Fed. 1995), cert. denied, 516 U.S. 808 ......... 13 Mitchell Arms vy. United States, 7 F.3d 212 (CA Fed. 1993), cert. denied, 511 U.S. 1106 (1994) ... 20 Palazzolo v. Rhode Island, 533 U.S. 606 (2001) .... passim Palm Beach Isles Assocs. v. United States, 208 F.3d 1374 (CA Fed. 2000), rehearing denied, 231 F.3d 1365 .............. passim Penn Central Transportation Co. v. New York City, S56 U.S. FRC 9 c0cee hea ateseesuree passim Tennessee v. Champion International Corp., 709 S.W.2d 569 (1986), vacated on other grounds, SFOS. TORS Tere. Sd aveevseexneectecee cree 3 (vi) United States v. New River Collieries Co., PGE ia DUR URE keke a aden eases rere iiee 18 United States v. Sioux Nation of Indians, SED UE. FF Cee «on Sat ewen ees ieee 18 West Virginia Mining and Reclamation Ass'n v. Babbitt, 970 F.Supp. 506 (S.D.W.Va. 1997) .......... 12 Statutes: Oe Ue © CRED eos 004 00s hateres ieee l y ba Come Bs re rere rr et 17 yi 2Uk Pom oo | rete ran ere 12,17 ae Ue 0 WE Es 6 600 h0onedesssandaeseeaee 12 CRE Se er et ry rr 3 Oe Wis. MS 60.000 0necseis ieee 4 A a LO By | rrr rere re 4 cote fem Bee) ik) er rrer rr ees mene: o bie Pee ae rr re rere rise im o PRR Rom Be ee 4 20 UBL... & VD os be caceuccneevewereeven 4 30 U.S.C. § TAGS IGMANE) occ cccvcvesuncecvess 4,22 Des BEET 600 0000509654440 ee 8 Pe Ua. @ UTD 6 vn 9 hnnpeadeekeeses 7, 14, 25 Fe Uda: 6 TST HD occ eeseecuves Siceeeeennean 7, 25 oe USK. BER e G obec ndasakestavenveceses eee 8 SOU. © Te hxc 0 sneesinescrsens ees 22 7 RUE Te i ee rrr re ao etc er oe 3 | 33 U.S.C. § 1342(a)(1). oc ccc ceccceccceucceecseeeees 3 | USC. C1 | ooo 3 | 3) UA DE: vans cvesnveuoueesucee ores 3 | ) Fel ee SD be des we ae RK A eae ere ees 12 Be en 2 AO Shae bak keto eee enecn sehen erei 3 Pe Sa ee ne coer debe akeh inches 21 Pa, GE OD PET 6 o. 6.0 G oe ccscwnceueevctsuse. 3 WO Ce BEE 6 6 o's cc nccnsdccudhevcoucns 3 Ce Re eo en bene ceeSbee vekeieuzscln 3 Federal Water Pollution Control Act, Bs og BF 2 ae passim Surface Mining Control and Reclamation Act of 1977, Bg ee a eae passim Tennessee Water Quality Control Act of 1971, Tenn. Code §§ 69-3-101, et seg. .........0.045. passim Regulations: SE CEE, Nita vectecOcutaes ene 4,22 See PR oo Sh Oh 4,22 Ee PEE 5 0s Go. Vo sedeteseReeuacrereren. 4,22 Pee NE A bb dn bien cateceneedee oie 22 Se I exe nteeesndinvenbcikenkk 22 Sr Ree oD “ak cess cscsceunexncduaxroae. 22 ee IS hone ndVernesssee vaewnececacear 8 Se evs Sos bacaweéucacnveduscaestsisks 8 GPG koa nsacacddenncdeuunveuneeveaseseata 3 i te a OO re 22 Ge I ob 60s 504s dda be deveccenewedencbees 3 ee ek Se rr re eee 4,22 50 FR 41305 (Oct. 9, 1985) .... 0... cece ccecceccceuees 3 (vill) TABLE OF APPENDICES Page Appendix A —-— Opinion of the United States Court of Appeals for the Federal Circuit Dated and Entered November 5, 2001 .............ccccccccccccccssssccseees la Appendix B — — Notice of Entry of Judgment and Opinion of the United States Court of Appeals for the Federal Circuit Dated and Entered ais HE ciscuddccdaniaiucniamedtsaanaieinecindanesaabiains lla Appendix C —— Opinion and Order of the United States Court of Federal Claims Dated and Filed Bs Fe sictashesienianiiaticdeasaacaidsieanelaianinbbinnsdatooniads 28a Appendix D —— Opinion of the United States Court of Federal Claims Dated and Filed June 25, 1999 ... 30a Appendix E — — Opinion of the Interior Board of Land Appeals, dated October 24, 1989 woe eeeeeeees 46a Appendix F —-— Opinion and Decision, United States Department of the Interior, Office of Hearings and Appeals, Before an Administrative Law Judge, Ny I I aia als sacticaie caea cailaeeamtebiueen 64a Appendix G —— Federal Water Pollution Control Act, 33 U.S.C. §§ 1251 et seg. (2001): Bs ID ~ scesccisiesocccieninseshicnuisosibtuiins 109a ee ae UID | vhinibiacdeecssarcisvainiiienseitnlesiian 109a ie CE» Siistndiiicesissitlesnbendiinadiaiiiaenns 109a cs TINE sncntisitennnnsinidicreniinsecntmincdens 110a es, RINE circtdtewinintsnnssnnitbesatnnnionnisten 110a FN EO sitentetirincseninniniieininarsenieainnioonie llla Ee er (ix) Appendix H — — Surface Mining Control and Reclamation | Act of 1977, 30 U.S.C. §§ 1201 et seq (2001): Bias ENED - scincesunveinnnsndsianetionivascsintnans 112a Se ce ED ddnsesissteccinceonnenvocinbexiebemasens 112a Be Bere SD © ikniscilictaseieersvanestainbbvareceesaien 112a Be RITE sttantvctasstonininseisiareininienesees 112a SRI IIE sss ius tadacckdaapoupniectansiends 113a Fe ie SD . sssdisicisicinniacisensiuniostnideteeee 1l4a ee BD» srctennsintendieiacteidaeentncsionsss 115a SIE © dacetasiecsinsecdeenesinerinexavanssects 1l6a Appendix I — — Tennessee Water Quality Control Act of 1971, Tenn. Code §§ 69-3-101, et seq. (2001): ON tk sasiicncnsectatesnsensincninesesaninstsnenesvereniaes 117a BND ciserensecnintetsintsacsrecsaniaceneseossecnsensesseass 117a MON hiniscndscsaniesntescrsennstectsabinisiaysttinnnpnaiines 118a OE choo pscencssensnesizentanaevtatscsustinecsveesesserears 118a Appendix J — — Code of Federal Regulations: 30 CFR § 715.14(j)(1) cccccsseesscsssessssssesssssseees 120a BO CIR G TUS AIA) cecccscscccsescsonecsscsnssonsonserse 122a ee aR 123a SF a sccsnsvcicascacosenesosseasec 124a 30 CFR § 816.41(b)(1). csssssssscssssseessssseersssseees 125a DOCTT B BIG AMEND, cccsescincssceccosocsonsesecsesss 125a DIT CONN. crectssnccrserccteserevsssssesst 126a SN TI oasis icesecinesitccnsseseee 126a See | EEE NOS eet TRAITS 127a Pee, “Today” means 1997 when the factual record in the Trial Court was created. 6 In August 1985, petitioner applied to OSM for a permit to strip mine approximately 89 acres of the leased property. Petitioner intended to begin mining this acreage, and later amend the application to include additional acreage as the mining progressed (JA 350). The application contained a “generic” Toxic Materials Handling Plan of the kind frequently found in Tennessee permit applications (JA 312, 350, 122). It also indicated that petitioner would monitor water in underground wells at periodic intervals (JA 345). OSM reviewed the application “thoroughly” and “with special care” (JA 192). In January 1986, OSM issued petitioner a five year SMCRA permit to mine (JA 163, 350). The permit allowed petitioner to treat AMD generated during mining by passing it through sediment ponds prior to discharge from the property (JA 164 (Sec. 2), 311, 193). However, as is typical, the permit does not specify or limit the amounts of AMD which can be produced by mining, discharged from the property, or allowed to seep into the ground (JA 163-66, 345). Promptly after receiving the NPDES and SMCRA permits, petitioner began mining (JA 350-51). Around January 1986 Save Our Cumberland Mountains (“SOCM”), an environmental organization, complained to OSM about petitioner's mining (JA 351). OSM advised SOCM that these complaints lacked merit (JA 153, 167, 189, 190, 191). Thereafter, SOCM’s President organized a letter writing campaign to various elected officials (JA 197-201). As aresult, Senator Albert Gore, Jr. wrote OSM expressing the concerns of his constituents regarding the Rith mine (JA 203). In March 1986, following these communications, OSM decided to conduct a group tour to re-sample the overburden from the Rith permit area (JA 313, 351, 205). The alleged purpose of the re- sampling was to reassess the mine's potential to produce AMD in the future (JA 351). At that time, the Rith mine had neither produced nor discharged any AMD (JA 315, 353). Before the group tour, OSM made site visits which gave it no reason to question the data petitioner submitted with the 7 permit application. OSM also examined the overburden and water, and found it not to be acidic or toxic, and found no AMD problems (JA 195, 366-67). Because of numerous citizen complaints, OSM inspected petitioner’s site much more frequently than others (JA 366-67). During the group tour an OSM geologist took samples from the mine site (JA 205, 365). There is an unresolved factual dispute between the parties as to the nature and import of these samples. In OSM’s view, these samples showed pH levels 250% more acidic than, and had a 500% neutralization variance from, petitioner’s earlier samples (JA 12). Based on its samples, OSM determined that petitioner’s mine had the “potential” for AMD in the future (JA 205). Miller, petitioner’s consultant, stated in a declaration that the samples were not taken in the normal manner, but instead were “hand picked biased samples” which would exhibit the most potential for AMD (JA 313). On June 1986, without any notice or warning or a hearing, OSM "temporarily suspended" petitioner’s mining permit (JA 219). The suspension was not based on any findings or allegations that petitioner violated any of the terms of its mining or NPDES permits, or created any AMD (JA 219). OSM issued the suspension because petitioner's mine had the “potential” to produce AMD (JA 352, 219). 30 U.S.C. § 1271(a)(2) provides that whenever a violation of SMCRA may cause “imminent” environmental harm, OSM shall “immediately” order a cessation of the offending mining. Such orders must describe the violation with “reasonable specificity,” and automatically expire within thirty days unless a public hearing is held. Jd. § 1271(a)(5). OSM did not make any findings of “imminent” harm, issued no orders which would expire in thirty days, and did not invoke § 1271(a)(2). OSM enforces other applicable legal requirements and permit terms by issuing a Notice of Violation ("NOV") and, if the violation is not corrected, a Cessation Order ("CO"). If a CO is not obeyed, OSM imposes a series of fines and other sanctions. rl 8 30 U.S.C. §1271(a) and (c). OSM’s regulations provide that, if there are non-imminent dangers or harms resulting from SMCRA violations, OSM shall issue a NOV fixing a reasonable time for abatement. 30 CFR §§ 843.12(a)-(b). OSM did nat issue any NOVs or COs to petitioner regarding potential AMD (JA 353), and could not do so because petitioner was not violating its permit terms, or SMCRA or implementing regulations as then applied. When OSM suspended the permit in June 1986, it wrote that petitioner could resume mining if OSM made a “finding that there will be no adverse impact to the hydrologic balance” (JA 219). OSM made that finding before the permit was granted (JA 161-62, 160g). In December 1986, months after the suspension, OSM again found that petitioner’s mine was “designed to prevent material damage to the hydrologic balance” (JA 231). However, despite the finding, OSM did not allow petitioner to resume mining. OSM later made explicit that it would not approve a Toxic Materials Handling Plan (““TMHP”) which would allow Petitioner to treat any AMD which might be formed before discharge (even if all treated discharges met NPDES permit limits) (JA 354, 234). Instead, OSM required petitioner to propose a TMHP which would use impermeable pods to completely isolate toxic and acid producing material so that no AMD would be created (JA 324, 327, 316-17). OSM had never before required such a TMHP of a permit applicant (JA 316-17). In November 1987 OSM acknowledged that, while it would not approve a permit revision unless petitioner came up with such a TMHP (JA 237), OSM was "not aware of any plan that is guaranteed to work" (JA 239). Petitioner requested that OSM's Pittsburgh, Pennsylvania office ("OSM Pittsburgh") assist in the development of a TMHP (JA 315, 355). While touring the mine in November 1987, one OSM Pittsburgh official stated: “{J}Just what in the hell is wrong at this mine site because 9 I can’t see nothing and we have a hundred bigger sites with a thousand times more problems than this site will ever have!” [JA 355]. Another OSM official responded: “SOCM is interceding in this permit” (JA 355-56; see also JA 356). In December 1987, OSM Pittsburgh officials were of the opinion that “the toxic-forming material [at Rith’s site] can be handled easily and in a straight forward fashion” (JA 244-45). At petitioner's request, OSM Pittsburgh developed a new TMHP for the Rith site, and petitioner submitted the TMHP developed by OSM Pittsburgh to OSM Knoxville (JA 315, 356). In September 1988 OSM Knoxville issued a final decision denying petitioner's Significant Revision No. 10 (JA 274, 315). The TMHP OSM Knoxville required of petitioner, -even if technically feasible, would have increased petitioner's mining costs above the price for which it could sell the coal (JA 316). For this reason, OSM's requirement had the effect of preventing petitioner from mining any coal under its leases (JA 353-54). D. Rith Compared To Other Mines. No actual AMD was produced at any time while petitioner was mining the property. OSM's suspension was based on the mine's potential to produce AMD (JA 219, 314, 352). As of the mid 1980s, numerous mines in Tennessee were producing actual AMD. OSM did not suspend any of these permits, and continued to issue further permits for these mines (JA 315-16, 367, 25-26). Before petitioner, no other permit applicant ever was required to submit a TMHP of the kind OSM required of Rith (which would prevent AMD formation by using impermeable pods to completely isolate toxic materials) in order to obtain a permit (JA 316-17, 26). When reviewing Petitioner’s permit, OSM knew of no other mine anywhere where such a TMHP was used (JA 20). In the Trial Court, petitioner's mining consultant submitted a declaration stating that, to the best of his knowledge, to this day no mining permit in Tennessee other than petitioner’s has been suspended because of potential AMD, and no other 10 miner has been required to use a TMHP of the kind OSM required of Petitioner (JA 316-17). Despite ample opportunity, respondent has been unable to identify any other instance in the history of Tennessee mining when a permit was denied because of the potential for AMD, or on the ground that SMCRA prevented the mere formation of AMD during mining. In early June 1986, after the group tour, the State conducted an NPDES compliance inspection, and concluded that petitioner was operating within the terms of its NPDES permit (JA 207-08). In 1987, well after OSM suspended petitioner’s permit, a State official visited the site to investigate citizen concerns (JA 347, 232). He concluded that an AMD reaction was “difficult to project” (JA 233), and recommended no additional monitoring wells to protect human health or the environment since “residents are very unlikely to experience groundwater contamination” (JA 234). Petitioner’s five year NPDES permit remained in effect until 1991, when petitioner received another NPDES permit from the State (JA 315, 357, 345). The only time any AMD appeared on the property was in 1993, after a heavy rainfall, when a small amount of AMD appeared at a point prior to entering the sediment pond (JA 369). That AMD was not discharged (JA 317, 369). The sediment pond was designed to treat any AMD before discharge (JA 319). Petitioner never discharged any AMD, and always met all NPDES standards required by law (JA 315, 357, 367). Between 1984 and 1991 OSM recorded 566 violations of NPDES permit limits by miners (JA 253-61, 276-79). These violations were for either toxic waste, or for discharging AMD in excess of permit limits (JA 253). None of these miners suffered a mining permit suspension or revocation because of excess AMD discharges, or even for toxic waste violations. To this day, petitioner has never discharged AMD in violation of its NPDES permit limits (or had any toxic waste violations) (JA 315, 357, 367). 1] In July 1991, an OSM employee stated to Petitioner, “you got screwed with your permit by us, very unfair” (JA 357). In March 1992, another OSM employee stated that there was “better water on [Rith's] site than we drink out of in our office” (JA 357). An OSM inspector stated that Petitioner definitely was treated differently from various other Tennessee miners (JA 366-67). When petitioner initially acquired its leases, the 250 acres contained about 385,000 tons of minable coal (JA 350). Before the permit denial, petitioner mined about 35,000 tons, or about 9% of the total, leaving some 350,000 tons, or 91% of the total, unmined (JA 317; App. 20a, 3a). Petitioner’s investors made a profit of about $500,000.00 on the 9% of the coal they mined, and expected to make a similar profit per ton on the remaining 91% of the coal (App. 20a; JA 352-53, 363). E. Administrative And Judicial Proceedings. Petitioner administratively appealed the permit denial. After an evidentiary hearing, an Administrative Law Judge (“ALJ”) ruled that petitioner did not show it could accomplish the post- mining reclamation required by SMCRA (App. 103a-104a). The ALJ also ruled that petitioner could not prove its mine would not damage the hydrologic balance (App. 104a-106a). The ALJ found a “high probability [of AMD seepage] into the Sewanee Conglomerate aquifer” below the coal seam (App. 106a). In 1989, the Interior Board of Land Appeals (“IBLA”) affirmed. It stated that the present absence of any AMD “does not mean that acid mine drainage will not occur in the future” (App. 60a). The IBLA ruled that SMCRA does not allow miners to treat AMD before discharge, but instead prohibits the formation of AMD in the first place. Its ultimate ruling was that SMCRA, as applied in this case, required not merely minimizing the contact of water and toxic-producing deposits, but “avoiding acid or toxic mine drainage.” (App. 62a; emphasis supplied). 12 In West Virginia Mining and Reclamation Ass'n v. Babbitt, 970 F.Supp. 506 (S.D.W.Va. 1997), decided some eight years after the IBLA’s decision, OSM conceded that SMCRA allows treatment of AMD, rather than complete “avoidance,” during both mining and reclamation. /d. at 515, 517-18. OSM has not cited a single case in SMCRA’s 24 year history (other than this one) where it succeeded in denying a permit because of AMD potential. F. Trial Court Decisions. In 1988 and 1989 petitioner brought three suits in the United States District Court for the Eastern District of Tennessee seeking various forms of relief. All of petitioner’s claims, except for the takings claim, were dismissed without a ruling on the merits (JA 17a, 38a-39a). One suit was transferred to the United States Claims Court (now the United States Court of Federal Claims (“Trial Court”)) under 28 U.S.C. § 1631. The Trial Court had jurisdiction over petitioner’s regulatory takings claim under 28 U.S.C. § 1491(a)(1). The Trial Court (per Judge Wiese) decided the takings claim on cross motions for summary judgment. It entered judgment for respondent, ruling that the high probability of AMD seepage into the Sewanee aquifer was a public, statutory nuisance because it was prohibited by the State Water Quality Act (Add. 41a). The Court rejected petitioner’s argument that it was always complying with the State Act and its NPDES permit. It ruled, sua sponte, that if only State officials had been informed of the high probability of harm to the Sewanee aquifer, they would have “reexamine[d] the validity of the permit they initially had issued” (App. 44a). Rith petitioned for reconsideration on the grounds that it made full disclosure of all information requested when applying for its NPDES permit; that it always complied with its NPDES permits; and that under the Clean Water Act, 33 U.S.C. § 1342(k), compliance with an NPDES permit is deemed compliance with relevant provisions of that Act (App. 131a-133a). Without addressing petitioner’s arguments, the Trial Court denied reconsideration, and ruled 12 that the mine also was a common law nuisance (App. 28a-29a). G. Federal Circuit Decisions. The Federal Circuit affirmed, but on different grounds. Judge Bryson wrote for himself, Chief Judge Mayer, and Judge Lourie. At the outset, the Court of Appeals addressed the question whether the claimed taking was categorical (prohibiting “all economically viable use”) or partial (prohibiting some use but “leav[ing] the owner with substantial viable economic use”) (App. 19a-20a). It concluded that the taking was not categorical, even though petitioner was prohibited from making any use of its leases after the final permit denial in September 1988. It reasoned that the impact of OSM’s action should be measured by looking at the extent of petitioner’s ability to use its leases throughout the permitting process (App. 21a), and that petitioner was able to mine a significant amount of coal that earned it a substantial profit (App. 22a). The Federal Circuit noted that, under its prior decisions, the consequence of concluding that the taking was not categorical is that “Rith must show that it had a reasonable investment- backed expectation that it would not be subject to [OSM’s regulatory] restraints when it acquired the coal leases” (App. 23a). That court relied on its earlier decisions denying compensation for takings for lack of investment backed expectations (App. 23a-24a). See Palm Beach Isles Assocs. v. United States, 208 F.3d 1374, 1379 (CA Fed. 2000), rehearing denied, 231 F.3d 1365 (to recover for non-categorical taking, Owner must show it “had distinct investment backed expectations”); Good v. United States, 189 F.3d 1355, 1360-62 (CA Fed. 1999), cert. denied, 529 U.S. 1053 (2000) (reasonable expectations required in “every regulatory takings case;” and no reasonable expectations because owner “had both constructive and actual knowledge that either state or federal regulations could ultimately prevent him from building on the property”); M & J Coal, Inc. v. United States, 47 F.3d. 1148, 1154 (CA Fed. 1995), cert. denied, 516 U.S. 808 (any state authorization to mine is subordinate to national public health and safety standards of SMCR#/ *: and Creppel v. United States, 41 F.3d 14 627, 632 (CA Fed. 1994) (one who buys with knowledge of regulatory restrictions assumes risk of economic loss; compensating him would confer windfall). The Federal Circuit noted that, although OSM did not invoke 30 U.S.C. § 1271(a)(2), which allows OSM to suspend mining when there is “an imminent danger to the health or safety of the public,” that was the apparent source of its authority to issue the suspension order (App. 24a). It held that Rith “could not reasonably have expected that it would not be required to adopt potentially expensive measures to avoid [AMD] if OSM determined that its mining activities could result in the release of’ AMD (App. 23a), or because there was a high probability that there would be AMD into the Sewanee aquifer (App. 24a). In the Court of Appeals, petitioner argued that its investment expectations were reasonable because it was subjected to an application of SMCRA which was unforeseeable, prohibitively expensive, and discriminatorily applied to petitioner alone.* The Court of Appeals did not address this argument. Instead, it incorrectly characterized the argument as a challenge to the lawfulness of OSM’s permit denial, and rejected that argument (App. 25a-26a). After this Court decided Palazzolo v. Rhode Island, 533 U.S. 606 (2001), Rith petitioned for rehearing and rehearing en banc. Rith argued that, if the taking was only partial, investment backed expectations was not a requirement, but instead one of several factors to be considered; that Rith had reasonable expectations; and that the nature of OSM’s actions supported the conclusion there was a taking. The Court of Appeals ruled that Palazzolo did not provide a reason for altering the Federal Circuit’s earlier conclusion that petitioner lacked reasonable investment expectations (App. 2a, 5a-8a). The Court of Appeals stated that, although OSM’s action deprived petitioner of the ability to mine about 91% of the coal it leased, petitioner still was able to make a substantial profit in light of the price paid (App. \ * Appellant’s Opening Br., pp. 47-56; Rep.Br. pp. 5-10. 15 3a, 8a-9a). It also ruled that OSM’s action was an exercise of the police power which typically does not require compensation (App. 9a). Finally, the Federal Circuit ruled that Rith’s various claims of discriminatory treatment, political pressure, and related matters were not relevant to the takings analysis. It ruled that those claims should have been, or were, raised in the prior administrative or judicial proceedings, and “are therefore not properly presented in the context of [Rith’s] takings claim” (App. 10a). The Court of Appeals denied rehearing, and no judge voted for rehearing en banc (App. 134a). REASONS FOR GRANTING THE WRIT The Court of Appeals has decided several important questions of takings law which warrant review. The Court of Appeals’ ruling that the taking here was partial instead of categorical is unsound. It is undisputed that when OSM finally denied a permit, petitioner’s entire leases became worthless. Whether a taking is categorical should be measured by the impact on the property at the time of the taking, not uses made of it before then, and the fact that petitioner was able to mine 9% of its coal before the taking should be irrelevant. Prior decisions by the Court on this “denominator” question focus on the restraint’s impact on the property existing at the time of the taking, not uses made of it before then. This case presents a suitable vehicle for the Court to provide further guidance on this recurring question. The Federal Circuit’s rulings on why petitioner could not recover for a partial taking are far reaching and unsound. This Court has made clear that in a partial takings case, where the multi-factor Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), analysis applies, investment backed expectations is not a requirement which an owner must meet, but instead one of several relevant factors for consideration. In both Hodel v. Irving, 481 U.S. 704 (1987), and Babbitt v. Youpee, 519 U.S. 234 (1997), the Court held there was a partial taking, even though the owners showed no investment expectations. 16 Under Palazzolo v. Rhode Island, 533 U.S. 606 (2001), it is clear that the fact that an owner acquired title after a statutory scheme is passed cannot, by itself, defeat a partial takings claim, and is at most one factor for consideration. And the Court frequently has noted that considerations of “‘fairness and justice,” e.g., Penn Central, 438 U.S. at 123-124, quoting Armstrong v. United States, 364 U.S. 40, 49 (1960), play a large role in a takings analysis. The Federal Circuit disregarded these decisions. Its ruling that investment expectations is a requirement, instead of one factor for consideration, is inconsistent with Jrving and Youpee. Its ruling that petitioner could not have investment expectations unless it showed “that it would not be subject to [OSM’s regulatory] restraints when it acquired” its leases (App. 3a) is equally mistaken. No owner acquiring after a statutory scheme is in place could make this showing if it was subject to a lawful application of the statute. The Federal Circuit’s ruling that Rith’s claims of discriminatory treatment and unfairness could not be raised in a takings case is quite far reaching and should not be allowed to stand (App. 10a). These rulings, taken together, mean that no owner can recover when it is subjected to a lawful application of a pre-existing statute, no matter how objectively reasonable its expectations had been, or how unfair that outcome might be. This result cannot be reconciled with fundamental aspects of this Court’s takings jurisprudence, and presents important questions which should be reviewed. The Federal Circuit’s application of other Penn Central factors also warrants review. One factor is the economic impact on the owner. Although OSM’s regulation wiped out 91% of the property petitioner initially purchased, the Federal Circuit gave that fact virtually no weight. The Federal Circuit’s justification of OSM’s action in this case as an exercise of the police power which requires no compensation, also is unsound. It is, to put it mildly, a curious exercise of the police power to prevent a miner from conducting an operation which is in full compliance with the stringent provisions of the State Water Act, and the provisions 17 of SMCRA as it has been applied in every case but this one. This Court should review the decision below to determine whether it conflicts with this Court’s takings jurisprudence, and to provide further guidance to lower courts called upon to apply the multiple Penn Central factors. This decision is from the Circuit in which all takings claims for more than $10,000 against the United States must be brought. 28 U.S.C. §§.1346(a)(2); 1491(a)(1). If allowed to stand, it will make it extremely difficult —— if not impossible —— for any owner who obtained title after a statute is passed to recover for a partial taking. I. THE RULING THAT THE TAKING WAS NOT CATEGORICAL WARRANTS REVIEW. Under the current state of the Court’s takings decisions, it often is important to determine at the outset whether the claimed taking is categorical, because all economically beneficial use of the land has been denied, or partial, because some beneficial use remains. Where the taking is categorical, the government’s defenses are limited, and the owner’s investment expectations are irrelevant. Palazzolo, 533 U.S. at 607. If the taking is partial, then the Penn Central analysis applies, and a court considers factors including the economic effect on the landowner, the extent of interference with investment backed expectations, and the character of the government action. Jd. To determine whether a taking is total or partial the Court must define the property interest against which the loss of value is to be measured. This is the “denominator” problem. Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1016 n. 7 (1992). While before OSM’s permit denial petitioner was able to mine some 35,700 tons of the 385,000 tons initially on its land (about 9% of the total) , at the time of that denial the remaining value of Rith’s leases became worthless. The relevant property interest in a case like this should be the property existing at the time of the taking. In other words, the “denominator” should be the 350,000 tons existing when the 18 permit was denied, and not the 385,000 tons Rith leased initially. Although this Court has not provided precise guidance on how this issue should be resolved, it has addressed the issue by focusing on the property existing at the time of the taking, not uses made of it before then. See Keystone Bituminous Coal Ass’n. v. DeBenedictis, 480 U.S. 470, 497 (1987) (inquiry requires a comparison of “the value that has been taken from the property with the value that remains in the property”);and Penn Central, 438 U.S. at 130 (comparing use prohibited with “value of the remainder of the[] parcel”). Concrete Pipe & Prods. v. Constr. Laborers Pension Trust, 508 U.S. 602, 643-44 (1993) (parcel “could not first be divided into what was taken and what was left” to show the taking of the latter was complete), upon which the Federal Circuit relied (App. 21a), is not inconsistent with Rith’s position. Petitioner’s argument is that, at the time of the taking, everything was taken, and nothing was left, so the taking is categorical. Contrary to the view of the Court of Appeals (App. 21a- 22a), the fact that Rith was able to make a $500,000.00 profit before it was barred from mining should have no bearing on whether the taking was categorical. The significant fact is that the lease was worth several million dollars when OSM prohibited mining. The measure of compensation in a takings case is the value of the property at the time of the taking, see United States v. Sioux Nation of Indians, 448 U.S. 371, 387 n. 17 (1980), and whether the owner made a profit before then is usually irrelevant to that determination, United States v. New River Collieries Co., 262 U.S. 341, 344 (1923) (owner’s cost, or profit or loss, immaterial when it does not show market value). The same principle should apply when determining whether a taking is categorical. To illustrate, suppose Congress passed a law effective today prohibiting the General Electric Co. or Microsoft Corp. from hereafter transacting any business anywhere. That would be a total taking, and would not become partial because both corporations have been extremely profitable to date. Nor would the taking become partial if Congress delayed the effective date of the statute for a few months. The Court should grant certiorari to provide lower courts with further guidance on how to determine whether a taking is categorical. Il. THE INVESTMENT BACKED EXPECTATIONS RULING WARRANTS REVIEW. A. Ifthe taking is partial, then the degree of interference with the owner’s reasonable investment backed expectations is relevant. E.g., Palazzolo, supra, 533 U.S. at 607. However, this Court has made clear that, while investment expectations is a relevant consideration in a partial takings case, it is not a requirement an owner must meet. Hodel v. Irving, supra, involved a federal statute barring certain Native American owners of small interests in land from passing the property on to their heirs by will or intestate succession. The taking was partial, because the owners were free to sell or use their interests in any way before death. 481 U.S. at 715. Irving applied Penn Central, id. at 717, and concluded that the owners’ investment expectations were dubious and unproven, id. at 715, but held there was a taking. Babbitt v. Youpee, supra, addressed later legislation on the subject. The Court again agreed that investment expectations were not implicated, 519 U.S. at 239, but ruled there was a taking. There can be no requirement of proving investment expectations if a plaintiff can win without showing any. In its rehearing petition, in connection with its argument that investment expectations is not a requirement in a takings case, Rith emphasized the holdings of /rving and Youpee.° Justice O’Connor’s concurring opinion in Palazzolo (533 U.S. at 618), upon which the Federal Circuit relied in denying rehearing > Appellant’s Combined Petition for Rehearing and Rehearing En Banc, filed July 5, 2001, pp. 1, 8. 20 (App. 6a), also noted the holding in Jrving. Yet the Court of Appeals denied the petition without citing /rving and Youpee or addressing this argument. While it did not cite these decisions, it did deny rehearing based on “the precedents discussed in our original opinion, which we do not believe have been undermined by” Palazzolo (App. 10a). The Federal Circuit has given investment expectations an unduly important role in takings cases. B. The Federal Circuit’s definition of reasonable expectations for someone acquiring title after a statute is in place also warrants review. There is a big difference between (1) a tule, based on objective standards, and taking into account all factors relevant to real-world commercial transactions, that a plaintiff reasonably should have foreseen a regulatory result prohibiting the use of property, and (2) a rule that, once a statute is passed, anything goes, and a plaintiff's expectations become unreasonable even if the prohibition is unforeseeable, prohibitively expensive, and discriminatory. In ruling that petitioner could not show that its investment expectations were reasonable unless it showed “that it would not be subject to [OSM’s regulatory] restraints when it acquired” its leases (App. 23a), the Court of Appeals effectively adopted the latter rule. No owner acquiring title after a regulatory scheme is in place, and subject to a lawful application of the statute, could make this showing. By definition, whenever a permit is lawfully denied to such an owner, the denial will be based on a statute pre- dating the acquisition of title. And under the law in the Federal Circuit, whenever an owner sues based on a permit denial the lawfulness of the agency’s action must be presumed. E£.g., Mitchell Arms v. United States, 7 F.3d 212,215 (CA Fed. 1993), cert. denied, 511 U.S. 1106 (1994); and App. 10a. (Ifthe permit denial is set aside as unlawful, then the owner will be able to mine or otherwise use the property). As a practical matter, under — the standard applied by the Federal Circuit, very few owners purchasing after a statute is enacted could show reasonable investment expectations. 21 The Federal Circuit’s view of what is required to show investment expectations is different from the Court’s. Justice O’Connor’s concurring opinion in Palazzolo, which the Federal Circuit cited for other purposes (App. 6a), explains that: “Further, the state of regulatory affairs at the time of acquisition is not the only factor that may determine the extent of investment-backed expectations. For example, the nature and extent of permitted development under the regulatory regime vis-a-vis the development sought by the claimant may also shape legitimate expectations.” [533 U.S. at 618] Under this view, it is clearly relevant that when petitioner acquired its leases (and was advised by its expert that getting a mining permit should be no problem) miners all over Tennessee were allowed to generate AMD provided it was treated before discharge, and petitioner was prohibited from mining on a ground never before applied in Tennessee.° The Federal Circuit’s investment expectations ruling goes much too far and should be reviewed. Il, THE RULING THAT CLAIMS OF DISCRIMINATORY TREATMENT AND UNFAIRNESS CANNOT BE PRESENTED IN A CASE WHERE THE GOVERNMENT’S CONDUCT IS LAWFUL WARRANTS REVIEW. Throughout the proceedings in the Trial Court and the Court of Appeals, Rith claimed that it was subjected to an unforeseeable result, and treated unfairly in a variety of ways. ° State law also gave petitioner reasonable expectations that it would have the same property rights as its predecessors in the chain of title. Tenn. Code Ann. § 66-5-101 long has provided that: “Every grant . . . of real estate, or any interest therein, shall pass all the estate or interest of the grantor . . ., unless the intent to pass a less estate or interest shall appear by express terms. . . .” 22 The Federal Circuit ruled that petitioner’s discriminatory treatment and other arguments were unpersuasive and, in any event, are “not properly presented” in a takings case because the Court assumes the underlying governmental action is lawful and decides only whether there is a taking (App. 10a). This ruling severely, and improperly, limits the ability of a takings plaintiff to prove important parts of its case. It is fundamentally inconsistent with this Court’s repeated indications that considerations of “fairness and justice” guide the takings analysis, and that it is essentially ad hoc and fact intensive. Eastern Enterprises v. Apfel, 524 U.S. 498, 523 (1998). Petitioner stressed in the Court of Appeals various legal considerations which indicated that the result OSM reached was legally unforeseeable.’ The Court of Appeals never addressed ” For example, SMCRA permits a miner to use “such measures as ... (il) treating drainage to reduce toxic content... .” 30 U.S.C. § 1265(b)(10)(A)(ii) (emphasis added). It would make no sense to let miners “treat[]” AMD before discharge if Congress intended to prohibit the formation of any AMD in the first place. OSM’s regulations applicable in 1986 -- and today -- clearly contemplate that mining under toxic material will be allowed if the adverse effects of AMD are minimized. See 30 CFR §§ 715.17(g)(1)-(6), (h)(1)-(4), 715.14G)(1), 45 FR 6913 (Jan. 30, 1980). See also 30 CFR §§ 780.21(e), and 816.41(b)(1), (d)(1). OSM never has published regulations providing that mining with the potential for AMD is not allowed, or that AMD discharges complying with the Clean Water Act are banned. SMCRA also provides that nothing in it shall be construed as modifying the Clean Water Act. 30 U.S.C. § 1292(a)(3). This was deemed an “absolute prohibition” against the Interior Department’s promulgating rules any more stringent than the EPA’s. In re: Surface Mining Regulation Litigation, 627 F.2d 1346, 1367 (CA D.C. 1980); and to the extent EPA regulations give miners any effluent limitation variances or exemptions, the Interior Department cannot take them away. Jd. at 1366-69. The EPA promulgated regulations applicable specifically to miners which allow discharges of treated AMD. 40 CFR 434.30 et seq. The State, acting pursuant to these regulations and its own Water Quality Act, issued Rith an NPDES permit allowing the discharge of treated (fn. continued) 23 these considerations, presumably because of its view that they are “not properly presented” in a takings case (App. 10a). Petitioner stressed that it was prevented from mining through application of a legal standard -- no AMD could be formed at the mine site — ~ which never was successfully applied to a Tennessee miner before, or since. The Court of Appeals never addressed this, or other related facts. But surely, in determining what “expectations” are “reasonable,” the legal landscape existing at the time the property was acquired, and whether the plaintiff was Subjected to a discriminatory result, are highly relevant considerations. The Court of Appeals’ “not properly presented” ruling hamstrings takings plaintiffs on issues other than investment expectations. For example, petitioner noted that OSM had recorded more than 500 NPDES permit violations by miners for either excess AMD discharges, or toxic waste violations (JA 253-61, 275-79), and unlike Rith, which discharged no AMD, none of these polluters suffered a permit suspension or revocation. These facts undermine OSM’s claim that it was acting in Rith’s case to protect the environment, instead of for other reasons. According to one OSM official, the agency had “a hundred bigger sites with a thousand times more problems than this site will ever have” (JA 355). That surely is relevant to any “fairness” inquiry. This Court has noted that “spot zoning” (i.e., Zoning which treats one owner differently from others similarly situated) is far more likely to constitute a taking than even handed zoning. E.g., Penn Central, 438 U.S. at 132 and n. 28. Under the reasoning of the Court of Appeals it would seem that, so long as the spot-zoning was not overturned as unlawful, it could not be properly be used to prove a taking. The above points are not a collateral attack on the administrative determination that the permit denial was lawful. AMD. Petitioner could not foresee that in its case, despite 30 U.S.C. § 1292(a)(3), OSM would ban the treated AMD discharges which both the federal and state water statutes allow. 24 Petitioner does not dispute that it is bound by traditional issue preclusion principles. To the extent any specific issues were actually and necessarily litigated in the administrative proceedings, and collateral estoppel principles apply, petitioner is precluded from re-litigating those issues in this case. However, in a takings case petitioner should be allowed to rely upon any relevant factual or legal claim which it is not collaterally estopped from making. Otherwise, any agency decision to deny a permit which is not reversed on direct appeal will necessarily preclude a takings claimant from making fairness and other arguments in a takings suit. The Federal Circuit’s ruling on the effects of a presumption that the government’s conduct is lawful will greatly narrow the rights of property owners, and should be reviewed. IV. THE COURT OF APPEALS’ APPLICATION OF OTHER PENN CENTRAL FACTORS WARRANTS REVIEW. Aside from investment expectations, other Penn Central factors of particular importance are the economic effect on the landowner, and the character of the government action. Penn Central, supra, 438 U.S. at 124. The application of these factors in this case also warrants review. Regarding the economic effect on the property owner, the Court of Appeals noted (App. 9a, 20a) that petitioner was able to make a substantial profit (i.e., about $500,000.00) on its leases before its mining terminated, and that its initial investment consisted ofa relatively small ($35,000.00) outlay. (Rith also had a much larger potential royalty obligation to the lessors, and of course the need for capital expenditures to do the mining).* The notion that an owner might lose his right to recover for a taking ® If allowed to mine, petitioner would have paid the lessors some $800,000.00 in royalties (JA 80, 91, 350). A low initial purchase price with high royalties later is a reasonable way to structure a lease for a capital intensive mining operation. OE Gel OMe el Oa en PE, . le 25 merely because he previously made a profit, or because of the form of his obligation to the lessor, is unsound. Far more relevant is the fact that OSM’s action deprived petitioner of the ability to mine about 91% of the coal it leased (App. 3a, 8a-9a). A 91% reduction is, if not a total wipe-out, very close to it. Whenever a property interest has been reduced to so significant an extent, the scales should weigh heavily in favor of the property owner, and it should be able to prevail by making a lesser showing on the other Penn Central factors. See generally Hodel vy. Irving, supra, 481 U.S. at 716-17 (taking away an owner’s right to transfer at death property which he or she could fully use during life a serious impairment of property rights). On the question of the character of the government action, the Federal Circuit’s ruling that OSM’s action was an exercise of the police power which typically does not require compensation (App. 9a) is far reaching, and unsound. For all the reasons stated above, OSM’s actions and inactions are inconsistent with any proper exercise of the police power. Further, police power exercises should be defined by the terms and conditions of public laws and regulations, not the novel agency application involved here. OSM should not be permitted to claim the benefits of a statute authorizing it to prevent imminent environmental harm, when it fails to comply with or give an owner the benefits of that statute. As noted supra, pp. 7-8, if OSM invoked 30 U.S.C. §§ 1271 (a)(2), (5), it would have been required to specify the alleged violations of SMCRA, and hold a public hearing within thirty days or allow the mining to continue. When OSM suspended mining, it never gave petitioner notice of any claimed SMCRA violations, much less a hearing within thirty days. This Court has “given some, but not too specific, guidance to courts confronted with deciding whether a particular government action goes too far and effects a regulatory taking.” Palazzolo, 533 U.S. at 607. This case presents a suitable vehicle for giving lower courts more specific guidance on how certain Penn Central factors should be applied in a partial takings case. Under the Penn Central analysis, there was a taking here. 26 * * * The Court of Appeals has failed to follow legal principles clearly set forth in this Court’s decisions, and placed new roadblocks in the path of property owners seeking just compensation. If allowed to stand, its decision will make it extremely difficult for even the most deserving property owners who acquire title after a regulatory scheme is in place to recover from the United States. CONCLUSION Certiorari should be granted. Respectfully Submitted, WALTER H. FLEISCHER RAYMOND D. BATTOCCHI 1320 Old Chain Bridge Rd. Counsel of Record Suite 440 JOHN R. POWELL McLean, Virginia 22101 VICKI A. PAISLEY (703) 821-0613 Gabeler, Battocchi & Griggs, PLLC MICHAEL Boos 1320 Old Chain Bridge Rd. 4101 Chain Bridge Rd. Suite 260 Suite 313 McLean, Virginia 22101 Fairfax, Virginia 22030 (703) 847-8888 (703) 691-7717 February 4, 2001 Counsel for Petitioners a 23 es z es AS XN APPENDIX la Appendix A —— Opinion of the United States Court of Appeals for the Federal Circuit Dated and Entered November 5, 2001 RITH ENERGY, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee. 99-5153 UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT 270 F.3d 1347; 2001 U.S. App. LEXIS 25140 November 5, 2001, Decided PRIOR HISTORY: Appealed from: United States Court of Federal Claims. Judge John P. Wiese. Original Opinion of May 2, 2001, Reported at: 247 F.3d 1355, 2001 U.S. App. LEXTS 7986. COUNSEL: Raymond D. Battocchi, Gabeler, Battocchi & Griggs LLC, of McLean, Virginia, filed a combined petition for panel rehearing and rehearing en banc for plaintiff-appellant. With him on the brief were John R. Powell and Vicki A. Paisley. Of counsel on the brief was Walter H. Fleischer, of Washington, DC. Katherine J. Barton, Attorney, Environmental and Natural Resources Division, Department of Justice, of Washington, DC, filed a response for defendant-appellee. With her on the brief was Susan V. Cook, Attorney. Of counsel on the brief was Thomas A. Bovard, Attorney, Office of the Solicitor, Department of the Interior, of Washington, DC. 2a Glenn Sugameli, Senior Counsel, National Wildlife Federation, of Washington, DC, for amicus curiae National Wildlife Federation. Nancie G. Marzulla, Defenders of Property Rights, of Washington, DC, for amicus curiae National Mining Association. JUDGES: Before MAYER, Chief Judge, LOURIE, and BRYSON, Circuit Judges. OPINIONBY: BRYSON OPINION: ON PETITION FOR REHEARING BRYSON, Circuit Judge. Appellant Rith Energy, Inc., has filed a petition for rehearing. The petition focuses principally on the Supreme Court's decision in Palazzolo v. Rhode Island, 150 L. Ed. 2d 592, 121 S. Ct. 2448 (2001), a case that was decided two months after the opinion in this case issued. Rith contends that Palazzolo is contrary to the analysis in our opinion and requires that the judgment be changed. We disagree. As we read Palazzolo, it is not inconsistent with either the judgment or the analysis in our opinion. We therefore deny the petition for rehearing. / l - Rith first challenges our conclusion that the asserted taking in this case was not categorical. We reached that conclusion after noting that the suspension and subsequent revocation of Rith's mining permit did not deprive Rith of all value in its coal leases, since Rith was able to mine approximately 35,700 tons of coal from the lease area, or about nine percent of what it hoped to mine if its mining permit had not been suspended and ultimately revoked. Rith eT ee ee Le eee 3a suggests that the 91 percent reduction in the amount of the coal that it expected to mine "has wiped out virtually all of the property's value" and that the resultant taking, "if not complete, [is] very close to it." As to whether the claimed 91 percent reduction in the amount of coal Rith has been allowed to mine constitutes a categorical taking of Rith's property under its coal leases, Palazzolo is distinctly unhelpful to Rith. The Supreme Court held that because Mr. Palazzolo retained some economic value in the regulated property, the denial of a building permit in Mr. Palazzolo's case did not constitute a categorical taking. In particular, the Court accepted the State court's finding that Mr. Palazzolo's property retained $200,000 in development value under the state's wetlands regulation, as contrasted with Mr. Palazzolo's estimate that the investment value of the property absent the wetlands regulations would be approximately $3,185,000. Although the value remaining in the property after the regulatory action was only about six percent of the value that Mr. Palazzolo expected to derive from the project, the Court ruled that the remaining value was not "a token interest" that left the property "economically idle." /2/ S. Ct. at 2464, 2465. The Court therefore rejected Mr. Palazzolo's argument that he suffered a total, or categorical, taking. The Court's ruling on that point is consistent with earlier Supreme Court decisions in which the Court has held that “mere diminution in the value of property, however serious, is insufficient to demonstrate a taking." Concrete Pipe & Prods. of California, Inc. v. Constr. Laborers Pension Trust, 508 U.S. 602, 645, 124 L. Ed. 2d 539, 113 S. Ct. 2264 (1993), citing Village of Euclid v. Ambler Realty Co., 272 U.S. 365, 384, 71 L. Ed. 303, 47 S. Ct. 114 (1926) (approximately 75% diminution in value), and Hadacheck v. Sebastian, 239 U.S. 394, 405, 60 L. Ed. 348, 36S. Ct. 143 (1915) (92.5% diminution); see also Lucas v. South da Carolina Coastal Council, 505 U.S. 1003, 1019-20n.8, 120 L. Ed. 2d 798, 112 S. Ct. 2886 (1992) (suggesting that a 95% diminution in value would not constitute a categorical taking). The same principle applies here, where the percentage value remaining to Rith despite the regulatory action was greater than the percentage value remaining to Mr. Palazzolo. The diminution in the value of the coal lease therefore does not, by itself, establish a categorical taking. In support of its contention that the asserted taking in this case was categorical, Rith argues that the amount of coal that it was permitted to mine during the time its permit was in effect is irrelevant. According to Rith, the nature of the taking must be measured by the economic value remaining in the coal leases at the time the permit was revoked. Because the revocation of the permit prevented Rith from taking any more coal from the leased property, Rith argues that the permit revocation deprived it of all of its remaining property, i.e., 100 percent of the coal that was left in the ground. We reject that argument. As we explained in our initial opinion, it is artificial to divide the interests in the coal lease in the way that Rith proposes and to disregard the coal that had already been mined under the permit when the Office of Surface Mining Regulation and Enforcement ("OSM") reversed itself and revoked the permit. Regulatory action that limits a coal lease owner to removing only 10 percent of the available coal at the outset cannot be meaningfully distinguished from a course of regulatory action that initially permits unrestricted mining but then, after 10 percent of the coal has been removed, prohibits the owner from taking the remaining 90 percent. The effect of the regulatory action in this case was to permit Rith to take ~ some coal from the property that was the subject of its leases and then to prohibit it from taking any more. The course of regulatory action, viewed as a whole, did not Sa deprive Rith of all the economic value in its coal leases and thus did not constitute a categorical taking of Rith's property. 2 Rith's principal argument in its petition for rehearing is that after Palazzolo "the mere fact that an owner bought after a regulatory scheme was passed cannot defeat a partial takings claim." Citing Nollan v. California Coastal Commission, 483 U.S. 825, 97 L. Ed. 2d 677, 107 S. Ct. 314] (1987), Rith argues that it was "entitled to stand in the shoes of its predecessors who owned before SMCRA [the Surface Mining Control and Reclamation Act of 1977]." The implication of Rith's argument seems to be that in assessing Rith's investment-backed expectations, it was improper for this court to assign any weight to the regulatory regime established by SMCRA. Neither Palazzolo nor Nollan holds that investment- backed expectations are irrelevant in analyzing a regulatory taking. The Palazzolo Court rejected the argument that when governmental action regulates the use of property, a person who purchases property after the date of the regulation may never challenge the regulation under the Takings Clause. 121 S. Ct. at 2462. As the Court explained, "A blanket rule that purchasers with notice have no compensation right when a claim becomes ripe is too blunt an instrument to accord with the duty to compensate for what is taken." 12] S. Ct. at 2463. In rejecting such a "blanket rule," however, the Court did not suggest that the reasonable expectations of persons in a highly regulated industry are not relevant to determining whether particular regulatory action constitutes a taking. Justice O'Connor, a member of the five-Justice majority in Palazzolo, made that point explicitly in her concurrence, where she wrote: 6a “Today's holding does not mean that the timing of the regulation's enactment relative to the acquisition of title is immaterial to the Penn Central analysis. Indeed, it would be just as much error to expunge this consideration from the takings inquiry as it would be to accord it exclusive significance. . . . Interference with investment-backed expectations is one of a number of factors that a court must examine. Further, the regulatory regime in place at the time the claimant acquires the property at issue helps to shape the reasonableness of those expectations.” /2/ S. Ct. at 2465-66 (O'Connor, J., concurring). As Justice O'Connor's opinion indicates, the role of investment-backed expectations in regulatory takings cases is well settled. Indeed, only three years ago in Eastern Enterprises v. Apfel, 524 U.S. 498, 141 L. Ed. 2d 451, 118 S. Ct. 2131 (1998), the four-Justice plurality reaffirmed the role of investment-backed expectations in regulatory takings analysis. Justice O'Connor, writing for herself and three other Justices who were in the majority in Palazzolo, reiterated that among the factors that are entitled to "particular significance" in regulatory takings analysis is the regulation's "interference with reasonable investment backed expectations." 524 U.S. at 523; see also id. at 532; Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 224-25, 89 L. Ed. 2d 166, 106 S. Ct. 1018 (1986); Penn Central Transp. Co. v. New York City, 438 U.S. 104, 124, 57 L. Ed. 2d 631, 98 S. Ct. 2646 (1978). If the Court in Palazzolo had intended to discard this long-standing element of regulatory takings analysis it presumably would have been more explicit about doing so. Nollan is no more helpful to Rith. The passage from Nollan on which Rith relies states: 7a “Nor are the Nollans' rights altered because they acquired the land well after the Commission had begun to implement its policy. So long as the Commission could not have deprived the prior owners of the easement without compensating them, the prior owners must be understood to have transferred their full property rights in conveying the lot.” 483 U.S. at 833-34 n.2. In that passage, the Nollan Court explained that the state was not entitled to an easement across the Nollans' property simply because the state had announced its policy requiring property owners to transfer such an easement prior to the time the Nollans purchased their land. That passage is couched in terms of a physical taking; the majority was simply stating that the timing of the state's announcement of its policy does not alter the fact that the fundamental nature of the action of obtaining an easement over land is a physical occupation, as opposed to a "mere restriction on its use," as suggested in a dissenting opinion. See Nollan, 483 U.S. at 848-49 n.3 (Brennan, J., dissenting). We do not read the passage quoted by Rith to suggest that, in the context of a regulatory taking, the fact that a regulatory regime was in place before the owner purchased the property is irrelevant to the owner's investment-backed expectations. In this case, which involves a business engaged in a highly regulated industry, the plaintiff's reasonable investment-backed expectations are an especially important consideration in the takings calculus. A party in Rith's position necessarily understands that it can expect the regulatory regime to impose some restraints on its right to mine coal under a coal lease. The leases themselves notified Rith of the uncertainty of obtaining permits to mine, and the low price that Rith paid for the leases may well reflect the widely understood risk that Rith would not be permitted to extract as much coal as it hoped from the leased properties. 8a The likelihood of regulatory restraint is especially high with regard to possible adverse environmental effects, such as potentially harmful runoff from the mining operations, which have long been regarded as proper subjects for the exercise of the state's police power. In sum, our conclusion that reasonable investment-backed expectations play an important role in regulatory takings cases is not inconsistent with anything in the Supreme Court's decisions in Nollan and Palazzolo. In its starkest form, the argument that the Supreme Court rejected in Nollan and Palazzolo suggests that the government may take any private property without compensation as long as it announces far enough in advance its intention to do so. To reject such a “blanket rule," as the Palazzolo Court ~ termed it, falls far short of suggesting that reasonable investment-backed expectations no longer have a role to play in regulatory takings analysis. 3 Two other factors that the Supreme Court has emphasized as especially important in the analysis of regulatory takings are the nature of the governmental action and the diminution in value caused by that action. See Penn Central, 438 U.S. at 124. Rith argues that even if the regulatory action in this case does not constitute a categorical taking, and the Penn Central analysis applies, it should prevail. We disagree. Although the regulatory action in this case caused a substantial diminution in the value of Rith's coal leases, it did not deprive Rith of its opportunity to make a profit on the leases; it simply reduced the margin of profit that Rith had hoped to achieve. The record reflects that the coal that Rith was able to mine resulted in a substantial profit for its investors in light of the price paid for the coal lease. Thus, the permit revocation in this case, like the regulation at issue in Keystone Bituminous Coal Ass'n v. DeBenedictis, 9a 480 U.S. 470, 485, 94 L. Ed. 2d 472, 107 S. Ct. 1232 (1987), did not "make[ Jit impossible for [Rith] to profitably engage in [its] business." With respect to the nature of the governmental action, the revocation of the permit, as we suggested earlier, was an exercise of the police power directed at protecting the safety, health, and welfare of the communities surrounding the Rith mine site by preventing harmful runoff. The exercise of the police power to address that kind of general public welfare concern is the type of governmental action that has typically been regarded as not requiring compensation for the burdens it imposes on private parties who are affected by the regulations. See Keystone, 480 U.S. at 488-92; Agins v. Tiburon, 447 U.S. 255, 260, 65 L. Ed. 2d 106, 100 S. Ct. 2138 (1980) (land use regulation does not effect a taking if it “substantially advance[s] legitimate state interests"); Penn Central, 438 U.S. at 127 (use restriction on property is not a taking if it is "reasonably necessary to the effectuation of a substantial government purpose"). 4 Finally, Rith continues to press its assertions that the government's decisions in this case were driven by political pressure, that Rith's mining activities did not present a significant risk of harmful acid mine drainage, and that Rith was unfairly singled out for disparate treatment. Those are claims that Rith either raised or could have raised in the administrative and judicial challenge to the denial of its permit. That challenge resulted in a ruling sustaining the permit denial on the merits, and findings by an administrative law judge that "the overburden [in Rith's mine] had a high propensity to produce acid mine drainage," and that Rith's abatement plan "would not accomplish the necessary reclamation of the site nor would it prevent damage to the hydrologic balance." In light of the 10a conclusion reached by both the administrative law judge and the Court of Federal Claims that Rith's mining proposal presented what the Court of Federal Claims judge called a "high probability of pollution of an aquifer," we have no basis from which to conclude that Rith was singled out for rejection because of political pressures brought to bear on OSM, and that but for those improper considerations, Rith's permit would not have been revoked. In any event, in a takings case we assume that the underlying governmental action was lawful, and we decide only whether the governmental action in question constituted a taking for which compensation must be paid. Rith's complaints about the wrongfulness of the permit denial are therefore not properly presented in the context of its takings claim. The only question before us is whether Rith was entitled to be compensated for the effects of that action. Under the precedents discussed in our original opinion, which we do not believe have been undermined by the Supreme Court's decision in Palazzolo, we conclude that the revocation of Rith's mining permit did not constitute a taking for which Rith is entitled to compensation. The petition for rehearing is denied. | , lla Appendix B — — Notice of Entry of Judgment and Opinion of the United States Court of Appeals for the Federal Circuit Dated and Entered May 2, 2001 UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT NOTICE OF ENTRY OF JUDGMENT ACCOMPANIED BY OPINION OPINION FILED AND JUDGMENT ENTERED: 05/02/01 The attached opinion announcing the judgment of the court in your case was filed and judgment was entered on the date indicated above. The mandate will be issued in due course. [* * *] JAN HORBALY Clerk cc: RAYMOND D. BATTOCCHI KATHERINE BARTON [* * *] RITH ENERGY INC. V. US, 99-5153, CFC-92-CV-480 * * * *k * Appendix B —-- Opinion of the United States Court of Appeals for the Federal Circuit Dated and Entered May 2, 2001 RITH ENERGY, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee. 99-5153 UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT 12a - 247 F.3d 1355; 2001 U.S. App. LEXIS 7986; 52 ERC (BNA) 1400;31 ELR 20603 May 2, 2001, Decided SUBSEQUENT HISTORY: Rehearing Denied November 5, 2001, Reported at: 200] U.S. App. LEXIS 25140. PRIOR HISTORY: Appealed from: United States Court of Federal Claims. Judge John P. Wiese. DISPOSITION: AFFIRMED. COUNSEL: Raymond D. Battocchi, Gabeler, Battocchi & Griggs LLC, of McLean, Virginia, argued for plaintiff- appellant. With him on the brief were John R. Powell and Vicki A. Paisley. Of counsel on the brief was Walter H. Fleischer, of Washington, DC. Katherine J. Barton, Attorney, Environmental and Natural Resources Division, Department of Justice, of Washington, DC, argued for defendant-appellee. With her on the brief were Lois J. Schiffer, Assistant Attorney General; John A. Bryson, Attorney; and Susan V. Cook, Attorney. Of counsel on the brief was Thomas A. Bovard, Attorney, Office of the Solicitor, Department of the Interior, of Washington, DC. Glenn Sugameli, Senior Counsel, National Wildlife Federation, of Washington, DC, for amicus curiae National Wildlife Federation. Nancie G. Marzulla, Defenders of Property Rights, of Washington, DC, for amicus curiae National Mining Association. JUDGES: Before MAYER, Chief Judge, LOURIE, and BRYSON, Circuit Judges. OPINION: BRYSON, Circuit Judge. In 1985, Rith Energy, Inc., purchased two coal mining leases in Tennessee. It subsequently applied for, and obtained, a federal permit to conduct mining operations on the leased property. After Rith had mined for a period of time, the Office of Surface Mining Reclamation and 13a Enforcement of the United States Department of the Interior (OSM) concluded that a portion of the property on which Rith was mining contained high levels of potentially toxic materials that could pollute the groundwater in the area through a process known as "acid mine drainage." OSM therefore suspended Rith's permit and prohibited it from mining most of the coal covered by the mining leases until Rith devised a plan to address the problem of acid mine drainage at its mining site. When Rith was unable to devise a plan that satisfied OSM, Rith's request to revise its mining permit was denied and Rith was unable to conduct any more mining at the site. After several unsuccessful administrative and judicial challenges to OSM's actions, Rith sued the United States in the Court of Federal Claims, contending that its property had been taken without compensation, in violation of the Takings Clause of the Fifth Amendment. The Court of Federal Claims granted summary judgment for the government, and Rith appealed. Because the government's conduct at issue in this case did not result in a categorical taking of Rith's property, and because Rith did not have reasonable investment-backed expectations that it would be permitted to mine in a way that would create a high risk of acid mine drainage, we affirm. I The Surface Mining Control and Reclamation Act of [977 ("SMCRA"), 30 U.S.C. §§ 1201-1328, established a "nationwide program to protect society and the environment from the adverse effects of surface coal mining operations.” 30 U.S.C. § 1202(a). Pursuant to SMCRA, coal mine operators such as Rith must obtain a permit in order to conduct any mining operations. 30 U.S.C. § 1256. Any permit issued under SMCRA must comply with certain environmental performance standards. 30 U.S.C. § 1265. SMCRA also authorizes the Department of the Interior to prohibit mining operations that create an imminent danger to l4a the health and safety of the public or can reasonably be expected to cause significant, imminent environmental harm to land, air, or water resources. 30 U.S.C. § 127]. The environmental performance standards set forth in SMCRA require, among other things, that the mine operator “(10) minimize the disturbances to the prevailing hydrologic balance at the mine-site and in associated offsite areas and to the quality and quantity of water in surface and ground water systems both during and after surface coal mining operations and during reclamation by-- (A) avoiding acid or other toxic mine drainage by such measures as, but not limited to-- (i) preventing or removing water from contact with toxic producing deposits; (ii) treating drainage to reduce toxic content which adversely affects downstream water upon being released to water courses; (iii) casing, sealing, or otherwise managing boreholes, shafts, and wells and keeping acid or other toxic drainage from entering ground and surface waters[.]” 30 US.C. § 1265(b). Acid mine drainage is an environmental problem long associated with mining activity. It occurs when certain types of acidic soil are exposed to air and water. Once acid mine drainage begins, the chemical reaction that creates the toxic product becomes self- sustaining and can continue for years, long after all mining activity has ceased. See Rith Energy, Inc. v. United States, 44 Fed. Cl. 108, 111 n.3 (1999); see also 30 C.F.R. § 701.5 (defining acid mine drainage). The coal leases at issue are located in the Cumberland Plateau region of Tennessee. Prior to April 1984, the State : of Tennessee had administered SMCRA in that region. In the | wake of failures by the State to implement, administer, maintain and enforce the state program adequately, OSM lSa took over the administration of SMCRA in Tennessee. OSM promulgated a federal program for Tennessee in October 1984. See 49 Fed. Reg. 15,496 (Apr. 18, 1984); 49 Fed. Reg. 38,874 (Oct. 1, 1984). In June 1985, long after SMCRA was enacted and shortly after the federal takeover of SMCRA enforcement in Tennessee, Rith acquired the mineral leases at issue in this case. The two leases covered 250 acres in Bledsoe County, Tennessee, and cost Rith approximately $33,500. The leases included warnings regarding the uncertainties of obtaining mining permits and removing coal. After acquiring the leases, Rith applied to OSM for a permit to surface mine coal from two coal seams within the leased property, the Sewanee and Richland seams. At the time, there was extensive evidence that acid mine drainage was endemic to the Sewanee coal seam. That coal seam is situated above the Sewanee Conglomerate aquifer, a source of drinking water for area residents. Rith planned to mine the leased property in three stages, with the first stage to cover the 89-acre area identified in the permit application. Rith estimated that a total of 385,000 tons of coal was located within the 250-acre leasehold; of that amount, Rith stated in its permit application that it anticipated obtaining 250,000 tons of coal from the 89-acre area covered by the permit. As required by SMCRA, Rith submitted a determination of the probable hydrologic consequences of mining and reclamation operations in the subject area, supported by soil test results. The test results showed that the sampled materials were of low acidity and that the surrounding soils had buffering capabilities, thereby greatly reducing the risk of acid mine drainage. Based in part on those test results, OSM issued Rith a permit to mine in January 1986. In response to several complaints, OSM visited Rith's mine site in March 1986 and obtained additional soil samples. Those samples showed the presence of a thick zone of acidic l6a material in the shale overburden of the Sewanee coal seam. The OSM samples indicated that the potential acidity of the overburden at Rith's site was some 250 percent greater than had been represented by Rith, and that the neutralization capacity of the soil was near zero. OSM directed Rith to provide further soil samples. Based on those samples, OSM concluded that the overburden posed a threat to the hydrological balance outside the permit area. In light of the "diametrically opposite" test results and what it characterized as a greatly heightened risk of acid mine drainage, OSM suspended Rith's permit in June 1986. Rith did not appeal OSM's decision to suspend its permit. OSM invited Rith to submit a toxic materials handling plan that would take into account the heightened risk of acid mine drainage at the Sewanee coal seam. Rith submitted a number of plans in an effort to have the suspension lifted, but none satisfied OSM that Rith had adequately addressed the concerns OSM had raised. From shortly after the issuance of the suspension order until May 1987, however, Rith was permitted to continue mining portions of the Richland coal seam where the risk of acid mine drainage was not as great. Rith ultimately extracted approximately 35,700 tons of coal from the Sewanee and Richland coal seams, which resulted in a profit of approximately $14 per ton. In September 1988, OSM rejected Rith's final proposed toxic materials handling plan and denied a permit to resume mining in the disputed area. Rith then filed an administrative appeal pursuant to 30 U.S.C. § 1264. In the administrative appeal, Rith challenged OSM's actions on a number of grounds, including its contention that acid mine drainage was unlikely to occur at the mine site and that its toxic materials handling plan was sufficient to prevent hydrologic damage outside the permit area if acid mine drainage did occur. After a hearing, an administrative law judge from the Interior Department's Office of Hearings and Appeals 17a sustained OSM's rejection of Rith's plan. The administrative law judge concluded that "the overburden on the north side of [Rith's] permit was undeniably of a highly acidic nature" and that it "had a high propensity to produce acid mine drainage." Absent an adequate toxic materials handling plan, the administrative law judge found, there was "a high probability that there would be acid mine drainage into the Sewanee Conglomerate aquifer." Finally, the administrative law judge concluded that Rith's toxic materials handling plan “would not accomplish the necessary reclamation of the site, nor would it prevent damage to the hydrologic balance." Rith appealed the decision of the administrative law judge to the Interior Board of Land Appeals (IBLA), which upheld the administrative law judge's findings and affirmed his ruling. Both before and after the conclusion of the administrative proceedings, Rith instituted several actions in the United States District Court for the Eastern District of Tennessee challenging OSM's conduct with respect to Rith's mining permit, including an action seeking review of the IBLA ruling. In August 1990, Rith moved to dismiss the action in which it sought review of the IBLA decision. The district court granted that motion and dismissed the appeal with prejudice. After most of the claims in the other proceedings were dismissed on jurisdictional grounds, the only remaining claim from the various district court actions was Rith's claim for damages of $5 million against the United States. The district court transferred that claim to the United States Court of Federal Claims in May 1992. In the Court of Federal Claims, Rith filed an amended complaint that included a takings claim. On cross-motions for summary judgment, the court ruled that no taking had occurred and accordingly entered judgment for the United States. The court found that "OSM's denial of a mining permit to plaintiff, because of the high probability of acid mine draining into the Sewanee Conglomerate aquifer, 18a represented an exercise of regulatory authority indistinguishable in purpose and result from that to which plaintiff was always subject under Tennessee nuisance law." Rith Energy , 44 Fed. Cl. at 115. The fact that Rith was granted a surface water discharge permit by the state regulatory body was not persuasive evidence that Rith's mining activities were consistent with state law, the court explained, because “the information plaintiff submitted to the state officials no more informed them of the high probability of harm to the Sewanee aquifer than did that same data when presented to the federal officials. We can justifiably assume, however, that even as the federal officials were persuaded to reexamine the validity of the permit they initially had issued, so too would the state officials. A high probability of pollution of an aquifer is not within the tolerances of either regulatory scheme--the Tennessee Water Quality Control Act or SMCRA.” Id. In an order denying a motion for reconsideration, the trial court added that the property use that was denied in this case--"the conduct of a surface mining operation that held out a ‘high probability’ of introducing acid mine drainage into the Sewanee Conglomerate aquifer"--is not a property use that Rith "could legitimately claim it had a right to pursue in consonance with relevant state property and nuisance principles." Rith Energy, Inc. v. United States, 44 Fed. Cl. 366, 367 (1999). Il Rith asserts that by preventing it from mining on the property covered by its coal leases, the government took its property without compensation, in violation of the Fifth Amendment. The Court of Federal Claims rejected Rith's takings claim on the ground that under Tennessee nuisance law, Rith had no right to mine in a way that was likely to | 19a produce acid mine drainage, and that its property right in the coal leases therefore did not include the right to mine the Sewanee seam in the way that it wanted to. The court's analysis was based on the so-called "nuisance defense" to takings claims described by the Supreme Court in Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 120 L. Ed. 2d 798, 112 S. Ct. 2886 (1992), where the Court held that to avoid constituting a taking, a regulatory restraint that prohibits all economically beneficial use of land "must inhere in the title itself, in the restrictions that background principles of the State's law of property and nuisance already place upon land ownership." /d. at 1029. The Court in Lucas explained that when a regulation "that declares off-limits’ all economically productive or beneficial uses of land goes beyond what the relevant background principles would dictate, compensation must be paid to sustain it." Jd. at 1030. Rith argues that its activities would not have been contrary to Tennessee nuisance law and that OSM's restraint on Rith's mining activities, which deprived Rith of all economic value in the coal leases, therefore constituted a compensable taking of its property interest in those leases. We need not reach the question whether Rith's mining activities would have been prohibited by Tennessee nuisance law, however, because we conclude that when Rith purchased its coal leases it did not have any reason to expect that it would be permitted to mine in a way that was likely to produce acid mine drainage. A Under the current state of takings law, it is often important to determine at the outset whether a particular claimed taking was "categorical" or not. A categorical taking has been defined as one in which "all economically viable use, i.e., all economic value, has been taken by the regulatory imposition." Palm Beach Isles Assocs. v. United States, 23] F.3d 1354, 1357 (Fed. Cir.), modifying 208 F.3d 1374 (Fed. Cir. 2000). A categorical taking is distinct from a taking "that is the consequence of a regulatory imposition that 20a prohibits or restricts only some of the uses that would otherwise be available to the property owner, but leaves the owner with substantial viable economic use." Id. In Palm Beach Isles, this court held that one significant difference between a categorical taking and a non-categorical taking is that in the former case, analyzing whether compensation is due does not require an inquiry into whether the plaintiff had reasonable investment-backed expectations that were defeated by the regulatory measure that gave rise to the takings claim. We agree with the government that the regulatory restraint at issue in this case did not result in a categorical taking. During the period that Rith was permitted to mine coal under the permit that OSM issued in January 1986, it extracted approximately 15,900 tons of coal from the leased property. Even after OSM suspended Rith's permit in June 1986, OSM permitted Rith to continue mining coal from one of the two coal seams on the property, and Rith extracted an additional 19,800 tons of coal from that seam. Although Rith stated in its permit application that it expected to extract a total of approximately 250,000 tons of coal from the property covered by the permit (and later stated that it expected to extract approximately 385,000 tons of coal from the entire | 250-acre area), Rith acknowledges that the 35,700 tons of coal that it extracted before it terminated its mining activities produced a profit of approximately $14 per ton, or a total profit of approximately $500,000, for Rith's investors. Because Rith purchased the coal leases for a total of $33,500, it was able to recover its investment and considerably more in spite of the permitting restrictions imposed by OSM. Rith argues that in determining whether the government action in this case constituted a categorical taking, the loss to Rith must be measured as of September 1988, when OSM refused to accept Rith's last version of its toxic materials handling plan. After that date, Rith was unable to mine any 2la more coal from the leased property, and Rith contends that as of that time it was deprived of all remaining economic value in the coal leases. In measuring the regulatory burden on Rith's mining activities, it is appropriate to look at the extent to which Rith was able to exploit its leases throughout the permitting period. By focusing on its inability to mine any coal under its permit after September 1988, Rith ignores the fact that it was allowed to extract a substantial amount of coal under its mining permit prior to that date. If the permit had provided at the outset that Rith could mine 35,700 tons of coal on the 89 acres that were covered by its permit, it would not be accurate to characterize the regulatory restraint as categorical. The analysis is not different simply because OSM imposed a condition on the permit during the course of Rith's mining activities that had the effect of preventing Rith from extracting any more than the 35,700 tons it had already mined. If, for example, OSM's restraints had been made eilective after Rith had removed half the coal from the icased property, it could hardly be said that the restraint gave rise to a categorical taking because OSM's prohibition on further mining took the entire remaining value of the leases as of that time. See Concrete Pipe & Prods. v. Constr. Laborers Pension Trust, 508 U.S. 602, 643-44, 124 L. Ed. 2d 539, 113 S. Ct. 2264 (1993) ("a claimant's parcel of property could not first be divided into what was taken and what was left for the purpose of demonstrating the taking of the former to be complete and hence compensable"); Keystone Bituminous Coal Co. v. DeBenedictis, 480 U.S. 470, 498-99, 94 L. Ed. 2d 472, 107 S. Ct. 1232 (1987). Because Rith applied for a permit to mine all of the coal within the 89-acre area identified in the application, the impact of OSM's action must be measured, at minimum, by the entire coal reserve covered by the permit, not the portion that remained at the time Rith was forced to stop mining. The regulatory program began with the issuance of the 22a permit in January 1986, extended through the period in which the permit was suspended, starting in June 1986, and ended when Rith abandoned further efforts to devise a satisfactory toxic materials handling plan in September 1988. During the first six months of that period, Rith was able to mine under the authority of the permit, and even during the period following the permit suspension, Rith was allowed to continue mining coal from one of the two seams on the leased property. Viewing the impact of the regulatory program as a whole, OSM's restraints significantly limited Rith's rights to mine, but even within those limits Rith was able to mine a significant amount of coal that earned Rith a substantial profit on its investment in the leases. In determining whether a taking is categorical, "the owner's opportunity to recoup its investment or better, subject to the regulation, cannot be ignored." Florida Rock Indus., Inc. v. United States, 791 F.2d 893, 905 (Fed. Cir. 1986); see Forest Props., Inc. v. United States, 177 F.3d 1360, 1367 (Fed. Cir. 1999) (the fact that, despite the challenged regulatory restraint, the value of the subject property increased more than three-fold in 11 years "itself undermines Forest's contention that its property was taken"). While the $500,000 in profit that Rith earned on the extracted coal was far less than it hoped to earn from the coal leases, the sum was considerably more than the $33,500 that Rith invested in the leases. Thus, the 35,700 tons, although only about 14 percent of the amount Rith hoped to extract under its permit, cannot be regarded as merely a "nominal" recovery, see Florida Rock Indus., Inc. v. United States, 18 F.3d 1560, 1567 (Fed. Cir. 1994), reflecting the "total wipe-out" that accompanies a categorical taking, see Palm Beach Isles, 208 F.3d at 1380. For that reason, it is not appropriate to characterize OSM's restraints as "a prohibition of all economically viable use" of the property in question, see Florida Rock, 18 F.3d at 1564-65. The restraint in this case therefore did not result in one of “the relatively rare 23a situations where the government has deprived a landowner of all economically beneficial uses." Lucas, 505 U.S. at 1018. B Under this court's decision in Palm Beach Isles, the consequence of concluding that there was no categorical taking in this case is that in order to establish that OSM's regulatory restraints constituted a compensable taking, Rith must show that it had a reasonable investment-backed expectation that it would not be subject to such restraints when it acquired the coal leases. Our precedents make clear that Rith could not have had such expectations. SMCRA was enacted eight years before Rith purchased the coal leases. Its provisions include environmental performance standards that directly address acid mine drainage and make clear that surface mining will not be permitted unless the permittee minimizes the "disturbances to the prevailing hydrologic balance at the mine-site and in associated offsite areas and to the quality and quantity of water in surface and ground water systems . . . by avoiding acid or other toxic mine drainage .. . ." 30 U.S.C. § 1265 (b)(10). In light of that statutory provision, Rith could not reasonably have expected that it would be free from regulatory oversight with regard to the potential for acid mine drainage, and it could not reasonably have expected that it would not be required to adopt potentially expensive measures to avoid acid mine drainage if OSM determined that its mining activities could result in the release of those or other toxins. As this court explained in M & J Coal Co. v. United States, 47 F.3d 1148, 1154 (Fed. Cir. 1995), at the time Rith acquired its mining rights, "it knew or should have known that it could not mine in such a way as to endanger public health or safety and that any state authorization it may have received was subordinate to the national standards that were established by SMCRA. and enforced by OSM." See generally Good v. United States, 189 F.3d 1355, 1362 (Fed. Cir. 1999) (holding that the 24a property owner had no reasonable investment-backed expectations because he "had both constructive and actual knowledge that either state or federal regulations could ultimately prevent him from building on the property"); Creppel v. United States, 41 F.3d 627, 632 (Fed. Cir. 1994) (stating that one who buys with knowledge of regulatory restrictions on the use of property "assumes the risk of economic loss. In such a case, the owner presumably paid a discounted price for the property. Compensating him for a ‘taking’ would confer a windfall."). Section 521(a)(2) of SMCRA, 30 U.S.C. § 1271(a)(2), provides that when the Secretary determines that any condition exists that creates "an imminent danger to the health or safety of the public or is causing, or can reasonably be expected to cause significant, imminent environmental harm to land, air, or water resources," the Secretary may order the immediate cessation of surface coal mining operations relating to that condition. Although OSM did not explicitly invoke section 521(a)(2) when it suspended Rith's permit in June 1986, that was the apparent source of its authority to issue the suspension order. Because Rith did not appeal the suspension of its permit, it was not necessary for the administrative law judge to address directly whether the standard of section 521(a)(2) was satisfied, but the administrative law judge's findings in the appeal from the denial of the revision to Rith's permit support the suspension--particularly his findings that absent an effective toxic materials handling plan, there was "a high probability that there would be acid mine drainage into the Sewanee Conglomerate aquifer" resulting in damage to the hydrologic balance. In support of his findings, the administrative law judge cited testimony from an OSM employee that Rith's mine site "contained one of the highest levels of acid material that he had ever seen, nationwide, in nine years of looking at hundreds of permits." The Court of Federal Claims, moreover, noted that it is well known that acid mine “> ee eee 25a drainage can destroy aquatic life and create serious problems for domestic and public water supplies, and that acid mine drainage can continue for years, even after mining operations have been halted. Rith Energy , 44 Fed. Cl. at /11 n.3. For those reasons, the court agreed with the administrative law judge that if OSM had failed to act, there was a high probability that acid mine drainage would have occurred, severely polluting the Sewanee Conglomerate and endangering domestic and public water supplies. Although Rith attacks the lawfulness of OSM's rejection of its toxic materials handling plan, that challenge is not properly before us. Like the coal mine operator in M & J Coal, Rith had the opportunity to challenge the lawfulness of OSM's actions, including the suspension of its permit, the rejection of its toxic materials handling plan, and the ultimate denial of its permit in administrative proceedings and through judicial review in a United States district court. In fact, Rith challenged the rejection of its toxic materials handling plan administratively, and lost. Like the coal mine operator in M & J Coal, Rith appealed that decision to the IBLA. After losing before the IBLA, Rith sought judicial review in federal district court, but dismissed that action. In a similar setting, we held in M & J Coal that "neither the Court of Federal Claims nor this court may entertain a collateral challenge to the validity of OSM's actions," id. at 1154, and we see no reason to depart from that holding here. Cc Citing Del-Rio Drilling Programs, Inc. v. United States, 146 F.3d 1358 (Fed. Cir. 1998), Rith argues that it should be given an opportunity to challenge the lawfulness of OSM's Suspension and permit denial in this action. Del-Rio, however, does not authorize such a challenge. In Del-Rio, we held that the plaintiff could bring a takings claim without first challenging the lawfulness of the government's action, or establishing the scope of its property interest, in an administrative proceeding. That is so because a takings 26a claim lies, as long as the government's action was authorized, even if the government's action was subject to legal challenge on some other ground. We explained that an uncompensated taking and an unlawful government action constitute "two separate wrongs [that] give rise to two separate causes of action," and that a property owner is free either to sue in district court for asserted improprieties committed in the course of the challenged action or to sue for an uncompensated taking in the Court of Federal Claims. Id. at 1364. To proceed on the second cause of action does not require that the plaintiff first litigate, and lose, on the first. Nor is the plaintiff required to use the administrative review proceeding to establish the scope of the property right that it contends was taken. See id. To the extent that Rith suggests that Del-Rio entitles it to- argue in the Court of Federal Claims that OSM's permit denial was unlawful under SMCRA, or to relitigate in the takings action its unsuccessful statutory challenge to the permit denial, it reads too much into Del-Rio. The question whether OSM violated SMCRA by its ruling on a permit application in a particular case was assigned by Congress to the administrative process within the Department of the Interior, subject to judicial review in a district court. Del-Rio does not give the Court of Federal Claims authority to adjudicate that issue de novo. Thus, if the plaintiff claims that its property was taken regardless of whether the agency acted consistently with its statutory and regulatory mandate, Del-Rio stands for the proposition that the takings claim can be litigated in the Court of Federal Claims without the need first to litigate the issue of lawfulness in administrative proceedings before the agency. On the other hand, to the extent that the plaintiff claims it is entitled to prevail because the agency acted in violation of statute or regulation, Del- Rio does not give the plaintiff a right to litigate that issue in a takings action rather than in the congressionally mandated administrative review proceeding. 27a In this case, having forgone its challenge to OSM's administrative actions, Rith is not free to renew its challenge to those actions under the cover of a takings claim in the Court of Federal Claims. Rith is thus required to litigate its takings claim on the assumption that the administrative action was both authorized and lawful. On the facts of this case, the consequence of assuming the lawfulness of OSM's actions, i.e., that OSM was correct in concluding that Rith's mining activities constituted an unacceptable threat of acid mine drainage and the consequent pollution of groundwater in the area surrounding the mine operations, is to limit the issue before us to whether prohibiting Rith from mining under those circumstances constitutes a taking. And on that issue, as we have explained, the absence of a reasonable investment-backed expectation on Rith's part that it would be permitted to mine while producing acid mine discharge in violation of SMCRA defeats its takings claim. We therefore uphold the judgment of the Court of Federal Claims. AFFIRMED. — 28a Appendix C —— Opinion and Order of the United States Court of Federal Claims Dated and Filed July14, 1999 RITH ENERGY, _INC., Plaintiff, v. THE UNITED STATES, Defendant, No. 92-480 L UNITED STATES COURT OF FEDERAL CLAIMS 44 Fed. Cl. 370; 1999 U.S. Claims LEXIS 192 July 14, 1999, Filed OPINIONBY: John P. Wiese OPINION: ORDER DENYING MOTION FOR RECONSIDERATION The restrictions imposed by Tennessee's Water Quality Control Act with regard to use of the State's water resources do not represent a set of newly- proclaimed tenets of public nuisance law. To the contrary, activities that cause the pollution of domestic waters have long been recognized by the courts of Tennessee.to be contrary to the public's health and safety and therefore enjoinable as a nuisance. Nunnelly v. Southern Iron Co., 94 Tenn. 397, 29 S.W. 361 (Tenn. 1895); H.B. Bowling Coal Co. v. Ruffner, 117 Tenn. 180, 100 S.W. 116 (Tenn. 1907); Love v. Nashville Agricultural and Normal Institute, 146 Tenn. 550, 243 S.W. 304 (Tenn. 1922). And whether the enforcement of these restrictions is accomplished by the state regulatory body or by federal officials acting under the authority of SMCRA is not an issue relevant to the takings analysis. Under the holding of Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1029, 120 L. Ed. 2d 798, 112 S. Ct. 2886 (1992), the test is whether the property use that is proscribed is based on "restrictions that background principles of the State's law of a 29a property and nuisance already place upon land ownership." Where that condition is met, no compensation is owed. The property use that was denied here, the conduct of a surface mining operation that held out a "high probability” of introducing acid mine drainage into the Sewanee Conglomerate aquifer, is not a property use plaintiff could legitimately claim it had a right to pursue in consonance with relevant state property and nuisance principles. The motion for reconsideration is denied. John P. Wiese, Judge 30a Appendix D —— Opinion of the United States Court of Federal Claims Dated and Filed June 25, 1999 RITH ENERGY, INC., Plaintiff, v. THE UNITED STATES,Defendant. No. 92-480 L UNITED STATES COURT OF FEDERAL CLAIMS 44 Fed. Cl. 108; 1999 U.S. Claims LEXIS 146; 48 ERC (BNA)1951; 146 Oil & Gas Rep. 193; 29 ELR 21389 June 25, 1999, Filed COUNSEL: Raymond D. Battocchi, McLean, Virginia, for plaintiff. John R. Powell and Vicki Ann Paisley, of counsel. Susan V. Cook, with whom were Assistant Attorney General Lois J. Schiffer, Deputy Chief James E. Brookshire, Environment & Natural Resources Division, Department of Justice, Washington, D.C., for defendant. Tom Bovard, Department of Interior, of counsel. OPINION: WIESE, Judge. The question presented in this case is whether the Government's rejection of plaintiff's proposed mining plan, combined with the prohibition on all mining operations that that rejection occasioned, effected a taking of plaintiff's property for which just compensation is now owing under ‘the Fifth Amendment of the United States Constitution. The issue is before us on cross-motions for summary judgment. Based on the parties' written and oral presentations, we conclude that no compensable taking has occurred and accordingly direct the entry of judgment in the Government's favor. 3la BACKGROUND The Surface Mining Control and Reclamation Act of 1977, Title 30 of the United States Code, section 1201(c)(1994), sets forth Congress’ finding that: “(c) many surface mining operations result in disturbances of surface areas that burden and adversely affect commerce and the public welfare by destroying or diminishing the utility of land for commercial, industrial, residential, recreational, agricultural, and forestry purposes, by causing erosion and landslides, by contributing to floods, by polluting the water, by destroying fish and wildlife habitats, by impairing natural beauty, by damaging the property of citizens, by creating hazards dangerous to life and property by degrading the quality of life in local communities, and by counteracting governmental programs and efforts to conserve soil, water, and other natural resources . . ” In recognition of these many concerns, Congress enacted the Surface Mining Control and Reclamation Act of 1977 ("SMCRA") with the express objective, among others, of establishing "a nationwide program to protect society and the environment from the adverse effects of surface coal mining operations." 30 U.S.C. § 1202(a). Towards this end, SMCRA charges the Office of Surface Mining Reclamation and Enforcement ("OSM") with the task of regulating the surface coal mining industry by prohibiting mining operations that endanger public health and safety or harm the environment. SMCRA provides in relevant part as follows: 32a _ “When, on the basis of any Federal inspection, the Secretary [of Interior] or his authorized representative determines that any condition or practices exist, or that any permittee is in violation of any requirement of this [Act] or any permit condition required by this [Act], which condition, practice, or violation also creates an imminent danger to the health or safety of the public, or is causing, or can reasonably be expected to cause significant, imminent environmental harm to land, air, or water resources, the Secretary or his authorized representative shall immediately order a cessation of surface coal mining and reclamation operations or the portion thereof relevant to the condition, practice, or violation. . . . Where the Secretary finds that the ordered cessation of surface coal mining and reclamation operations, or any portion thereof, will not completely abate the imminent danger to health or safety of the public or the significant imminent environmental harm to land, air, or water resources, the Secretary shall, in addition to the cessation order, impose affirmative obligations on the operator requiring him to take whatever steps the Secretary deems necessary to abate the imminent danger or the significant environmental harm.” 30 U.S.C. § 1271(2) (1994). The Regulatory Process On June 29, 1985, almost eight years after the passage of SMCRA, plaintiff, Rith Energy, purchased two leases to surface-mine coal on about 250.acres of land situated along the Sewanee and Richland coal seams in Tennessee. At the time it acquired these leases, plaintiff was aware that its ~ 33a mining operations would invade the rock strata overlying the aquifer that supplies the local community with its drinking water - those geologic formations known as the Sewanee Conglomerate, the Newton Sandstone, and the Whitewell Shale. In August 1985, plaintiff, pursuant to SMCRA, applied for a surface-mining permit.' SMCRA required plaintiff to obtain soil samples to determine the level of toxicity in the soil to be mined, and to prepare a Toxic Materials Handling Plan ("handling plan") explaining how it would treat any overburden’ that exhibited a potential to cause acid mine drainage (“AMD").’ With the assistance of a mining ' In addition to its mining permit, plaintiff was also required to apply for, and obtain, a permit under the Federal Water Pollution Control Act, 33 U.S.C. §§ 1311-1387 (1994 & Supp. III 1997). That act requires the issuance of a National Pollutant Discharge Elimination System ("NPDES") permit by the cognizant state regulatory body -- in this case the Tennessee Division of Water Quality Control -- prior to the discharge of any effluent into a state's waters. NPDES permits require compliance with all applicable federal and state water quality standards. An NPDES permit was issued to plaintiff on January 17, 1986. ? Overburden refers to the soils lying above the coal deposits. > AMD is defined by federal regulations as "water with a pH of less than 6.0 and in which total acidity exceeds total alkalinity, discharged from an active, inactive or abandoned surface coal mine and reclamation operation or from an area affected by surface coal mining and reclamation operations." 30 C.F.R. § 701.5 (1998). AMD occurs when certain types of acidic soil are exposed to air and water. Once AMD begins, the chemical reaction that creates the toxic product becomes self-sustaining and can continue for years, even after all mining activity has ceased. 34a consultancy firm, plaintiff obtained and submitted three soil samples, two showing a pH level of approximately 5.2 and one showing a pH level of 3.4, thus indicating a relatively low potential for AMD. Along with these samples, plaintiff also submitted a handling plan which explained that any overburden exhibiting the potential to produce AMD would be mixed and regraded with a much larger volume of non- toxic material in order effectively to buffer the potential for AMD. The plan further indicated that all surface drainage from the disturbed areas of the mine-site would be passed through a sediment pond for treatment before discharge from the property. AMD can adversely affect the quality of surface water by, inter alia, lowering its pH level, reducing its natural alkalinity, increasing its total hardness, and adding undesirable amounts of iron, manganese, aluminum, sulfates, and other elements and suspended materials. AMD also adversely affects groundwater by introducing contaminants and by changing pH levels, thereby threatening local residential drinking-water supplies. The lower pH levels associated with AMD also have been demonstrated to have a lethal and pathological effect on fish and aquatic life. As AMD lowers the water's pH level, the water becomes more toxic, thereby interfering with the metabolic processes by which bacteria, aquatic insects, and fish utilize oxygen for respiration. The neutralization of the acidity via dilution can cause manganese sludge to precipitate out, which then physically degrades benthic habitat, smothers fish eggs, and physically damages gill tissue. These processes affect both the organisms themselves and other aquatic life, such as fish, which rely on these organisms as a source of food. Aquatic life is also destroyed by the toxicity of the chemicals in AMD, and by the iron precipitates and other suspended materials which cloud the water and coat the sides and the bottoms of water bodies, thereby destroying a stream's aesthetic qualities and preventing the growth of aquatic life. 35a Based on these several representations, on January 3, 1986, OSM issued a "Finding of No Significant Impact," meaning that plaintiff's mining operations were expected to "produce little or no adverse change in the prevailing hydrologic balance . . . ." OSM then issued plaintiff a five- year permit to mine the Sewanee and Richland coal seams, with plaintiffs mining operations beginning immediately thereafter. On March 25, 1986, OSM, acting in response to complaints both from local area residents and a regional environmental protection group, decided to re-sample the overburden in plaintiff's permit area. The test results obtained from these new soil samples revealed an overburden that was approximately 250% more acidic than indicated by the pH levels recorded in the test data that had accompanied plaintiff's permit application. Further, the potential neutralization factor of the soil, i.e., the soil's Capacity to offset the acidic overburden, was found to be nearly zero, thus indicating a roughly 500% variance from the earlier-reported data. On the basis of these changed findings, OSM concluded that the potential for AMD posed a significantly greater danger to the environment and to the public health and safety than first thought. Accordingly, on June 27, 1986, OSM suspended plaintiff's permit to mine the Sewanee seam pending submission of a new handling plan -- a plan sufficient to address the increased AMD hazards evident in the soil chemistry as well as satisfy the requirements for an acceptable reclamation of the mine-site. In July 1986, while the re-permitting process was underway, plaintiff received approval to mine a portion of the Richland seam -- an area where mining could occur without disturbing the overburden above the Sewanee seam. Rith continued to mine this section of its property until May noassseateneieeyineesaptaniseieretieranre ania ee ASEH Shee. aha: 3 ae ie RS mama ay erence eee cee eee 36a 1987, when OSM firally ordered plaintiff to cease all mining operations.* Between June 1986 and September 1988, plaintiff submitted a series of handling plans to OSM. Each resulted in the issuance of a Technical Deficiency Letter indicating OSM's rejection of the plan for lack of technical adequacy. Eventually, plaintiff was advised by OSM that, due to the high acidity of the Sewanee overburden, an acceptable handling plan would have to incorporate the use of impermeable pods.’ On September 6, 1988, OSM denied plaintiff's Significant Revision No. 10 -- plaintiff's final attempt to obtain a permit revision. This final rejection was based on the fact that, in reviewing plaintiffs submission, OSM was unable to make a finding that the application was complete and accurate, or that reclamation could be accomplished as required by SMCR The Administrative Appeals Upon receiving notice of the rejection of its final revision, plaintiff filed an appeal with the Department of Interior's Office of Hearing and Appeals. A six-day hearing on the denial of Significant Revision No. 10 was conducted in January 1989. On March 28, 1989, the Office of Hearings and Appeals issued a decision sustaining OSM's denial of * From January 1986 to the end of plaintiff's mining operation, plaintiff extracted a total of 35,665.11 tons of coal or, roughly, 9.3% of the approximately 385,000 tons of minable coal existing within the boundaries of the two leases. 5 Impermeable pods completely isolate toxic and acid- producing materials, thereby preventing contact with water and air, and thus insuring that AMD in fact is never produced. 37a Revision No. 10. In his opinion, Administrative Judge Torbett noted the following: “The undersigned finds that the overburden on the north side of Applicant's permit was undeniably of a highly acidic nature. Unless Applicant could demonstrate that the pod concept would work, there would have been a high probability that there would be acid mine drainage into the Sewanee Conglomerate aquifer. Given the importance of particle size to the issue of permeability of the pods, the undersigned finds that Respondent's concerns for damage to the hydrology from Applicant's proposed toxic material handling plan were legitimate. Rith Energy, Inc., No. NX 89-1-PR at 26 (March 1989). The opinion concluded by saying: “The evidence proves that that overburden had a high propensity to produce acid mine drainage. The clear weight of the evidence also shows that Applicant's plan would not accomplish the necessary reclamation of the site, nor would it prevent damage to the hydrologic balance. The undersigned therefore holds that the Respondent properly denied Significant Revision No. 10 and its subsequent revisions. Id. at 27. On October 24, 1989, the Interior Board of Land appeals affirmed Judge Torbett's decision stating in part: "Based on our review of the record we find that the evidence supports Judge Torbett's decision that OSMRE properly denied Rith's application for permit revision." Rith Energy, Inc., 111 IBLA 239, 244 (1989). 38a Judicial Proceedings Plaintiff's dissatisfaction with the administrative process led to its filing of three suits against the United States in the United States District Court for the Eastern District of Tennessee. The first, filed August 31, 1988, alleged that the June 27, 1986 permit suspension was an arbitrary and capricious action that violated Rith's rights to procedural and substantive due process and to equal protection of the law. Additionally, it was claimed that the action constituted a taking of Rith's property. The second action, filed January 25, 1989, sought judicial review of OSM's September 6, 1988 decision (the decision rejecting Significant Revision No. 10), as well as damages of $5 million. The third action, filed November 22, 1989, sought judicial review of the two administrative decisions -- the March 28, 1989 decision of the Office of Hearing and Appeals and the October 24, 1989 decision of the Interior Board of Land Appeals. The three suits were subsequently consolidated by the district court. On August 6, 1990, Rith moved for and obtained the dismissal of its last-filed action. As to the remaining actions, these the district court dismissed on the ground that Rith had not exhausted its administrative remedies. On appeal, the United States Court of Appeals for the Sixth Circuit vacated the dismissal and remanded to the district court with instructions to determine whether it would be in the interests of justice to transfer the case to the Claims Court (now the Court of Federal Claims) pursuant to 28 U.S.C. § 163] (1994). On May 12, 1992, the case was transferred to this court. Following the transfer, on August 17, 1992, plaintiff filed an amended complaint alleging a taking of its property as well as various other claims for relief that essentially ee ee 39a repeated what had been alleged in the suits before the district court. Without objection from plaintiff, all claims except the taking claim have been dismissed. DISCUSSION The Fifth Amendment to the United States Constitution concludes with the clause: "nor shall private property be taken for public use, without just compensation." The purpose of the clause -- as the much-quoted language from Armstrong v. United States, 364 U.S. 40, 49, 4 L. Ed. 2d 1554, 80 S. Ct. 1563 (1960) explains -- is "to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." Thus, in every case alleging a taking, the essential inquiry is whether the Government has caused a loss of private property for which considerations of fairness dictate the payment of appropriate compensation. Traditionally, this fairness inquiry has been conducted through a three-factor analysis. Courts have examined the character of the governmental action that gave rise to the claimed loss, the extent to which that action interfered with an owner's reasonable investment-backed expectations, and the extent of the economic harm occasioned by the Government's action. Penn Central Transp. Co. v. New York City, 438 U.S. 104, 124, 57 L. Ed. 2d 631, 98 S. Ct. 2646 (1978). When "regulation goes too far it will be recognized as a taking." Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415, 67 L. Ed. 322, 43 S. Ct. 158 (1922). Not every taking case, however, requires application of this three-factor analysis in order to determine whether the alleged preperty loss at issue demands the payment of just compension. Some cases are governed by [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386009_1153%3A1. Public record. Not legal advice.