Appendix — Kinross Copper Corp. v. Oregon

cout, OS

(>) FILED

00 431 SEP 18200

CLERK

No. OFFICE OF vas

In the Supreme Court

of the United States

October Term, 2000

KINROSS COPPER CORPORATION, a foreign

corporation,

Petitioner,

v.

STATE OF OREGON,

Respondent.

ON PETITION FOR WRIT OF CERTIORARI

TO THE OREGON COURT OF APPEALS

APPENDIX TO

PETITION FOR WRIT OF CERTIORARI

Phillip D. Chadsey*

Jerry R. Fish

Michael R. Campbell

David E. Van’t Hof

James N. Westwood

*Counsel of Record

STOEL RIVES ip

900 SW Fifth Avenue, Suite 2600

Portland, OR 97204-1268

(503) 294-9376

Counsel for Petitioner

September 14, 2000

(000 P

Appendix

i

TABLE OF APPENDICES

Document

5/19/99 Oregon Court of Appeals’ Opinion,

Kinross Copper Corp. v. State of Oregon,

981 P.2d 833 (1999)

10/13/99 Oregon Court of Appeals’ Opinion

on Reconsideration (affirming prior

decision), Kinross Copper Corp. v. State of

Oregon, 988 P.2d 400 (1999)

2/29/00 Oregon Supreme Court’s Order

Denying Review (No. S46982)

6/20/00 Oregon Supreme Court’s Order

Denying Reconsideration (No. 46982)

6/9/97 Multnomah County Circuit Court

Letter Opinion (No. 9609-06900)

6/26/97 Multnomah County Circuit Court

Order of Dismissal and Judgment

(No. 9609-06900)

Appendix

ed 4

Document

11/17/99 Kinross Copper Corp.’s Petition

for Supreme Court Review

3/14/00 Kinross Copper Corp.’s Petition for

Supreme Court Reconsideration

3/27/97 Multnomah County Circuit Court

Stipulated Statement of Facts

40 C.F.R. § 440.104(b)(2)(i) (1999)

43 U.S.C.A. § 1712(c)(8) (West 1986)

Three Basin Rule, Oregon Administrative

Rule, OAR 340-041-470 (as originally

adopted)

Three Basin Rule, OAR 340-041-0470(1)-(7)

as amended

App. A-1

FILED: May 19,1999

IN THE COURT OF APPEALS OF THE

STATE OF OREGON

KINROSS COPPER CORPORATION,

Appellant,

V.

STATE OF OREGON.

Respondent.

(960906900; CA A98316)

Appeal from Circuit Court, Multnomah County.

Henry Kantor, Judge.

Argued and submitted May 13, 1998.

Before Landau, Presiding Judge, Deits, Chief Judge,

and Wollheim, Judge.

LANDAU, P.J.

Affirmed.

App. A-2

DESIGNATION OF PREVAILING PARTY AND

AWARD OF COSTS

Prevailing party: Respondent

[ ] No costs allowed.

[x] Costs allowed, payable by: Appellant

[ ] Costs allowed, to abide the outcome on remand, payable

by:

App. A-3

LANDAU, P. J.

In this inverse condemnation coe: plaintiff Kinross

Copper Corporation seeks compensation for the value of its

unpatented mining claims, which it contends has been

reduced to zero as a result of the state’s denial of a permit to

discharge wastewater that would result from plaintiff's

proposed mining operations. Plaintiff alleged a right to

compensation under the takings clauses of both the federal

and state constitutions. The trial court entered summary

judgment in favor of the state on both claims. We affirm.

The parties stipulated to the relevant facts. In 1975,

Amoco Minerals Company (Amoco) staked unpatented

mining claims in the Cedar Creek Valley of the North

Santiam River Subbasin in the Willamette National Forest.

An “unpatented” mining claim refers to a possessory interest

in minerals only, with the federal government retaining

ownership of the land on which minerals may be located. See

App. A-4

generally 4 American Law of Mining § 110.02(1 )(b) (2d ed

1998). Individuals who hold such claims have the exclusive

right to possession and enjoyment over them, “so long as they

comply with the laws of the United States, and with State,

territorial, and local vigelitlens not in conflict with the laws

of the United States governing their possessory title * * *.”

30 USC § 26 (1994). To acquire an unpatented mining

claim, it is necessary to discover a valuable mineral deposit.

30 USC § 22 (1994). To hold the claim, it is necessary to

establish that the mineral deposit can be extracted, removed,

and marketed at a profit. See generally Chrisman v. Miller,

197 US 313, 322-23, 25 S Ct 468, 49 L Ed 770 (1905). In

1976, Amoco discovered a body of copper ore on its claims.

In 1977, the Oregon Environmental Quality

Commission (EQC) promulgated OAR 340-41-470(1),

commonly known as the “Three Basin Rule.” That

administrative rule prohibits “any new or increased waste

App. A-5

discharges” to the Clackamas, McKenzie, or North Santiam

_ River Subbasins.

In 1989, Amoco leased the unpatented mining claims

to plaintiff. Two years later, plaintiff developed a plan of

operations for a copper ore mining project. The plan required

plaintiff to discharge groundwater pumped from the mine,

along with other wastewater, into the North Santiam River

Subbasin. The plan included obtaining applicable permits,

including a National Pollutant Discharge Elimination System

(NPDES) permit under the applicable state and federal clean

water laws.

In 1992, plaintiff submitted to the Oregon Department

of Environmental Quality (DEQ) an application for an

NPDES permit. DEQ conducted various tests and concluded

that, under the terms of plaintiff's proposed plan of

operations, the discharge would not cause applicable water

quality standards to be violated. DEQ also concluded that

App. A-6

alternatives to discharging wastewater from the proposed

mining operation were not viable and that, without an

NPDES permit, plaintiff would not be able to hove and

operate its proposed copper mine. In 1995, however, DEQ

denied plaintiff's application for an NPDES permit on the

ground that the Three Basin Rule prohibits any new waste

discharges into the North Santiam River Subbasin. Plaintiff

requested a contested case hearing before the EQC on the

denial of the permit application. In 1996, EQC issued a final

order denying plaintiff's application.

Plaintiff then initiated this action for damages.

Plaintiff alleged claims for relief under the takings clauses of

both the state and federal constitutions. Plaintiff moved for

summary judgment on its federal takings claim on the ground

that the denial of its NPDES permit rendered its unpatented

mining claims entirely valueless and thus constituted a per se

taking. The state moved for summary judgment on both

App. A-7

claims on the ground that the denial of the NPDES took no

property right of plaintiff's. According to the state, because

unpatented mining claims are held subject to state regulation,

plaintiff never had the right to develop its claim in violation

of state law.

The trial court denied plaintiff's motion, granted the

State’s motion, and entered judgment for the state on both

claims. In a letter opinion, the trial court explained that,

because holding an unpatented mining claim requires proof

that the claim continues to be marketable, and, because state

regulations render plaintiff's claims unmarketable, plaintiffs

mining claims were “extinguished,” leaving plaintiff with no

property right that could be taken. The extinguishment of the

claim did not amount to a taking, the court held, because

unpatented mining claims constitute a unique form of

property right that--by definition--is subject to state and

federal regulatory authority and is more appropriately

App. A-8

regarded as analogous to a contract right that is subject to a

condition subsequent. The trial court cited as authority for its

conclusion a law review article, Michael Graf, Application of

Takings Law to the Regulation of Unpatented Mining Claims,

24 Ecology L Q 57 (1997).

On appeal, plaintiff assigns error to both summary

judgment rulings. It contends that the trial court erred in

adopting the reasoning of the cited law review article because

it is contrary to nearly a century of takings case law. Amicus

Northwest Mining Association expands on that contention,

arguing that unpatented mining claims have long been

recognized as property subject to the protections of the

federal and state constitutions.

The state concedes that the trial court’s rationale is at

odds with “traditional takings analysis.” It nevertheless

contends that the trial court correctly concluded that plaintiff

lost no property right because, among other things, plaintiff

App. A-9

never had the right to discharge wastewater into a state

waterway. Amicus North Santiam Watershed Council

(Council) expands on that alternative argument and asserts

that holders of unpatented mining claims do not have a

property right to discharge wastes into state rivers.

Plaintiff responds that the argument is not

“preserved” and, in any event, is incorrect. According to

plaintiff, it does indeed have a right to discharge water from

its mining operation, first, because the federal Mining Act of

1866 recognized a miner’s rights through custom and other

laws to use water on federal lands and,-second, because state

law provides that industrial water users have the right to use

up to 5,000 gallons of groundwater per dav without a permit.

In reviewing the trial court’s rulings, viicthlbeaisaen

whether there is a genuine issue of material fact and whether

the prevailing party is entitled to judgment as a matter of law.

ORCP 47 C. In this case, the facts are undisputed; the sole

App. A-10

question before us is whether the trial court correctly

concluded that the state was entitled to judgment as a matter

of law, that is, that plaintiff suffered no taking of property

under the state or federal constitutions.

Article I, section 18, of the Oregon Constitution

provides that “[p]rivate property shall not be taken for public

use, * * * without just compensation[.]” The Fifth

Amendment to the United States Constitution likewise

prohibits the taking of private property for public use without

just compensation. US Const, Amend V.

Identifying the extent to which governmental action

short of outright physical acquisition of private property may

constitute a taking of property under the state or federal

constitutions has proved to be extraordinarily vexing for the

courts. Various--sometimes even conflicting--tests have been

invoked in countless cases over the last 75 years since Justice

Holmes first penned the familiar, albeit cryptic, dictum that

~s

App. A-11

“while property may be regulated to a certain extent, if

regulation goes too far it will be recognized as a taking.”

Penna. Coal Co. v. Mahon, 260 US 393, 415, 43 S Ct 158,

67 L Ed 322 (1922).

But through the years and the cases, a few principles

safely may be asserted as having been settled. Two such

principles pertain to this case. The first is that, regardless of

the difficulty of describing the exact point at which

governmental action is transformed from constitutional

regulation to unconstitutional taking, under both state and

federal constitutions, government action that deprives

property of a// value without compensation is an

unconstitutional taking. The precise formulation varies from

case to case, but the gist is the same. Thus, under the Oregon

Constitution, an action for inverse condemnation may be

maintained to recover damages against a governmental

agency that has taken action that has the effect of depriving

App. A-12

the owner of “all economically viable use” of its property.

Boise Cascade Corp. v. Board of Forestry (S42159), 325 Or

185, 197-98, 935 P2d 411 (1997). Similarly, under the

federal constitution, an action for inverse condemnation may

be maintained for damages against a government agency that

has taken action that has deprived the owner of “all

economically beneficial use” of the property. Lucas v. South

Carolina Coastal Council, 505 US 1003, 112 S Ct 2886, 120

L Ed 2d 798 (1992).

The second settled principle of takings law is that,

even if government action might otherwise constitute a taking

of property, it will not if it is shown that what the government

prohibits does not amount to a private property right in the

first place. Said another way, an owner cannot maintain an

action for loss of a property right that it did not ever have.

Thus, for example, the Oregon Supreme Court held that

owners of “dry sand” areas of the Oregon coast cannot be

App. A-13 r

heard to complain of the loss of the right to exclude the

public fiom those areas, because it is a “right” that they never

possessed. Stevens v. City of Cannon Beach, 317 Or 131,

136-43, 854 P2d 449 (1993), cert den 510 US 1207 (1994);

see also Northwest Natural Gas Co. v. C ity of Portland, 300

Or 291, 312, 711 P2d 119 (1985) (public utility could not

maintain takings claim for costs of relocating utility facilities

to make room for light-rail construction because utilities

never possessed a property right to locate their facilities at

any particular place). Similarly, the United States Supreme

Court explained that even regulation that deprives land of all

economically beneficial use will not give rise to takings

liability “if the logically antecedent inquiry into the nature of

the owner’s estate shows that the proscribed use interests

were not part of his title to begin with.” Lucas, 505 US at

1027.

OT

App. A-14

In this case, plaintiff contends that the denial of its

application for an NPDES permit as a precondition to

conducting a copper mining operation constitutes a taking of

property under both state and federal constitutions. It is

stipulated that the effect of the denial deprives plaintiff's

unpatented mining claims of all of their economic value. The

only question before us is whether, as the United States _

Supreme Court phrased it in Lucas, “the proscribed use

interests were not part of [plaintiffs] title to begin with.”

505 US at 1027.

It bears emphasis that the focus of the inquiry is the

extent to which the “proscribed use” is part of plaintiff's title.

That is to say, the determinative inquiry is whether what the

government has prohibited is itself a property right. The

matter bears emphasis because it is not the principal focus of

plaintiff's briefing and argument. Plaintiff argues that it has

suffered an uncompensated taking, because it has been

App. A-15

deprived of the right to mine copper as otherwise permitted

by its unpatented mining claim. But the decision of the EQC

did not prohibit plaintiff from mining. It prohibited plaintiff

from discharging wastewater into the North Santiam River

Subbasin. In consequence, to maintain its takings claim

against the state, plaintiff must show that the denial of its

NPDES permit application deprived it of a property right;

that is to say, plaintiff must show that it had a right to

discharge its wastewater into a river of the state. If plaintiff

did not have the right to discharge wastewater into the river

basin, it cannot complain that it has suffered an

uncompensated taking.

Plaintiff initially contends that it should not have to

address that question, because it was not the focus of the trial

court’s decision and was not argued by the state below. As

the state correctly asserts, however, a trial court may be “right

for the wrong reason,” that is, we may affirm on grounds

iiss:

App. A-16

different from those on which the trial court based its

decision, so long as there is evidence in the record to support

those alternate grounds. State v. Nielsen, 316 Or 611,

628-32, 853 P2d 256 (1993); State v. Lawson, 127 Or App

392, 395, 872 P2d 986, rev den 320 Or 110 (1994).

In any event, the argument that the state and the

Council raise in support of the trial court’s decision varies

only slightly from what the state asserted below. Before the

trial court, the state asserted that plaintiff suffered no taking,

because no property right had been taken, and it a the

same theory on appeal. See State v. Hitz, 307 Or 183, 188,

766 P2d 373 (1988) (drawing distinction between raising an

issue at trial, identifying a source for a claimed position, and

making a particular argument). We turn, then, to the merits

of the parties’ arguments about whether the denial of an

application for an NPDES permit to discharge mining

App. A-17

wastewater constitutes a deprivation of a private property

right.

At common law, an owner of land possessed a right to

the natural flow of water running through the owner’s land.

The ree was an incident of ownership of the land and did

not depend on the owner’s actual appropriation of the water

for beneficial use. See generally Joseph W. Dellapenna, The

Right to Consume Water Under “Pure” Riparian Rights,

1 WATERS AND WATER RIGHTS 205, 219 (Robert E.

Beck ed 1991).

During the nineteenth century, the federal government

began to permit the mining of public lands in the West.

Because the government retained title to the land itself, the

traditional rules of riparian rights did not readily apply to the

use of waters running through the mining claims. Mining _

customs developed over time, however, to fill the need of the

times. One such custom was that rights to use water in

App. A-18

mining operations could be obtained as an incident of the

mining activity and that competing claims to the use of the

water would be determined by the time of actual

appropriation of the water for that use. See generally John N.

Pomeroy, A Treatise on the Law of Water Rights § 14 (1893)

(“Water was an indispensable requisite for carrying on

mining operations; a permanent right to use certain amounts

of water was as essential as the permanent right to occupy a

certain parcel of mineral land.”). That right included the

right to discharge into a stream, although the right of

discharge did not include mining debris that could wash on to

the land of another. See, e.g., Carson v. Hayes, 39 Or 97,

105-06, 65 P 814 (1901) (“The doctrine of the authorities is

that each mine owner or proprietor must take care of his own

mining debris, and he can acquire no right, by custom or

otherwise, to use the land of his neighbor as a dumping

ground, without his consent, either by carrying and depositing

App. A-19

depositing the debris thereon, or by casting it into the stream,

and allowing it to be washed down by the force of the

current[.]’’).

In time, western states began to adopt the doctrine of

“prior appropriation” as a general rule of water rights. Under

the rule of prior appropriation, water rights are determined

not as an incident of land ownership, but as a function of

actual diversion of water to a recognized beneficial use. See

generally, Wells A. Hutchins, US Dep’t of Agriculture, 1

Water Rights Laws in the Nineteen Western States, 440-42

(1971). Oregon law during the years following statehood

began with adherence to the common law of riparian rights,

but, by the turn of the century, the courts moved toward the

rule of prior appropriation. See generally Janet C. Neuman,

Oregon, 6 WATERS AND WATER RIGHTS 699 (Robert E.

Beck ed 1991); Wells A. Hutchins, The Common-Law

App. A-20

Riparian Doctrine in Oregon: Legislative and Judicial

Modification, 36 Or L Rev 193, 196-97 (1957).

Congress recognized the rule of prior appropriation in

the Mining Act of 1866, 30 USC § 51 (1994), which

provides:

“Whenever, by priority of possession, rights to

the use of water for mining * * * have vested _

and accrued, and the same are recognized and

acknowledged by the local customs, laws, and

the decisions of courts, the possessors and

owners of such vested rights shall be

maintained and protected in the same * * *.”

See also Atchison v. Peterson, 87 US (20 Wall) 507, 514-15,

22 L Ed 414 (1874). Congress reaffirmed that recognition in

the Mining Act of 1870, 30 USC § 52.

The basic grant of unpatented mining claims

originated in the Mining Law of 1872, 30 USC §§ 22-47

(1994). See generally 4 American Law of Mining § 110.02

(1998). The 1872 law effected no change to the preexisting

recognition of the state water rights rules pertaining to

App. A-21

mining claims. A later enactment did, however. The Desert

Land Act of 1877 permits the entry and reclamation of

“desert” land with a proviso that the right to the waters by a

claimant depends on prior appropriation, subject to an

additional proviso:

“[A]ll surplus water over and above such

actual appropriation and use, together with the

water of all lakes, rivers, and other sources of

water supply upon the public lands and not

navigable, shall remain and be held free for

the appropriation and use of the public for

irrigation, mining and manufacturing purposes

subject to existing rights.”

43 USC § 321 (1994).

In Hough v. Porter, 51 Or 318, 95 P 732, 98 P 1083

(1909), the Oregon Supreme Court held that the second

proviso had the effect of severing title to all public land in

states covered by the 1877 Act, not merely “desert” land.

The court reasoned that the first proviso was sufficient to

protect these claiming rights to desert land, and that, by

—s

adding the second proviso, which reserved all water over and

App. A-22

above such desert land appropriations, Congress apparently

intended to protect the public’s right to water on all public

lands in all desert states, including Oregon. /d. at 386-87.

The Oregon court’s construction of the Desert Land Act of

1877 ultimately was upheld in Power Co. v. Cement Co., 295

US 142, 55 S Ct 725, 79 L Ed 1356 (1935), in which the

United States Supreme Court held that, in enacting that

second proviso, Congress effectively severed title to all

public land--not merely “desert” land--from title to the

nonnavigable waters on that land:

“By its terms, not only all surplus

water over and above such use as might be

appropriated and used by the desert-land

entrymen, but ‘the waters of all lakes, rivers,

and other sources of water supply upon the

public lands and not navigable’ were to

remain ‘free for the appropriation and use of

the public for irrigation, mining and

manufacturing purposes.’ If this language is

to be given its natural meaning, and we see no

reason why it should not, it effected a

severance of all waters upon the public

domain, not theretofore appropriated, from the

land itself. From that premise, it follows that

a”

App. A-23

a patent issued thereafter for lands in a

desert-land state or territory, under any of the

land laws of the United States, carried with it

of its own force, no common-law right to the

water flowing through or bordering upon the

lands conveyed.

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, “As the owner of the public domain,

the government possessed the power to

dispose of land and water thereon together, or

to dispose of them separately. The fair

construction of the provision now under

review is that Congress intended to establish

the rule that for the future the land should be

patented separately; and that all

nonnavigable waters thereon should be

reserved for the use of the public under the

laws of the states and territories named.”

Id. at 158-62 (emphasis added; citations omitted). Thus, for

claims granted after 1877, the property granted by the federal

government under the Mining Act of 1872 consists of the

unpatented mining claim itself. No water rights are granted

as part of the claim. Water rights must be obtained as

provided in the water rights laws of the state in which the site

of the claim is located. Jd

App. A-24

As noted, nineteenth-century Oregon case law

reflected a transition from the common law of riparian rights

to the rule of prior appropriation. In 1909, however, the

Oregon legislature enacted a comprehensive statute that

significantly altered the nature of water rights in this state.

Or Laws 1909, chs 216 & 221. The legislature began by

declaring--in a provision that survives to this day --that “[alll

water within the state from all sources of water supply

belongs to the public.” ORS 537.110. The legislature then

expressly recognized prior appropriation as the exclusive

means of acquiring water rights in this state and established a

comprehensive permit system for appropriating water. See

generally Hutchins, 36 Or L Rev at 204-05. The details of

the permitting process have been altered many times since

ra See generally Gail L. Achterman and Peter D. Mostow,

Senate Bill 674: Increasing the Flow Rate of Oregon's

Water Rights Permitting Process, 32 Willamette L Rev 187

App. A-25

(1996). But the process continues to be the exclusive

mechanism for permitting use of and establishing property

rights in the waters within the state. See generally ORS

ch 537.

Meanwhile, in 1972, Congress enacted the federal

Clean Water Act, which, among other things, prohibits the

discharges of pollutants--including any industrial wastes--

into the waters of the United States without first obtaining an

NPDES permit. 33 USC §§ 1311(a), 1342(a) (1994). States

are permitted to administer the NPDES permit program, 33

USC § 1342(b) (1994), and Oregon has elected to do so.

ORS 468B.050 expressly provides that, subject to

enumerated exceptions, no person may discharge any waste

into the waters of the state without obtaining a permit from

DEQ. Nothing in either the federal or state laws, however,

confers a property right to obtain a permit or conduct any

activities for which a permit is required.

rad

App. A-26

In the light of the foregoing authorities, it becomes

clear that plaintiff's contention that it has a right to discharge

wastewater into the North Santiam River Subbasin is

untenable. Plaintiff's unpatented mining claims came into

existence in 1976, nearly 100 years after the enactment of the

~ Desert Lands Act of 1877, which severed water rights from

the grant of an unpatented mining claim. As a result, when

the unpatented mining claims came into ‘anna, no water

rights were conferred with them. If plaintiff has a private

property right to discharge wastewater into the publicly

“owned waters of the state, the right must have come into

existence separately wine compliance with state law

regarding the creation and recognition of state water rights.

There is no evidence in the record--and plaintiff makes no

contention that any such evidence exists--that plaintiff has

obtained a water rights permit or certificate after complying

with the requirements of the statutory permit process.

App. A-27

Plaintiff insists that the right to discharge into the

North Santiam River Subbasin was created by common law

and recognized by me Mining Act of 1866. Plaintiff,

however, neglects to address the effect of the Desert Land

Act of 1877, which--at least as to mining claims that were

acquired after the enactment of that statute--severed water

rights from the other rights conferred by the granting of the

mining claims and required that water rights be obtained in

accordance with applicable state water laws. ¥

Plaintiff contends that, in any event, even under

current state water law, it is entitled to use up to 5,000

gallons of ground water without a permit under

ORS 537.545(1). That statute provides that, subject to

exceptions not pertinent to this case:

“(N]o registration, certificate of registration,

application for a permit, permit, certificate of

completion or ground water right certificate

* * * is required for the use of ground water

for:

App. A-28

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“(f) | Any single industrial or

commercial purpose in an amount not

exceeding 5,000 gallons a day[.]”

Plaintiff s contention is easily answered. By its terms, the

statute permits the consumption of ground water. Even

assuming that it applies to a mining operation, the statute

does not permit the discharge of anything into a river of the

state.

In short, plaintiff's takings claim is predicated on the

loss of a right that it never possessed, namely, the “right” to

discharge mining wastes into the waters of the state. It

necessarily follows that, in denying plaintiff's application for

a permit to conduct that activity, the state has not effected a

taking of private property within the meaning of either the

state or federal constitutions. We therefore hold that, in

concluding that the denial of plaintiff's application for an

NPDES permit did not effect an uncompensated taking of

App. A-29

property, the trial court was correct, albeit for a different

reason from the one that the trial court adopted. In so

holding, we express no opinion on the rationale that the trial

court did adopt.

Affirmed.

; App. B-1

FILED: October 13, 1999

IN THE COURT OF APPEALS OF THE

STATE OF OREGON

KINROSS COPPER CORPORATION,

Appellant,

V.

~ STATE OF OREGON,

Respondent.

(960906900; CA A98316)

Appeal from Circuit Court, Multnomah County.

Henry Kantor, Judge.

On appellant’s petition for reconsideration filed June 2, 1999,

and respondent’s response to petition for

reconsideration filed June 9, 1999. Opinion filed

May 19, 1999. 160 Or App 513, 981 P2d 833.

Before Landau, Presiding Judge, and Deits, Chief Judge, and

Wollheim, Judge.

LANDAU, P. J.

Petition for reconsideration allowed; opinion adhered to.

App. B-2

LANDAU, P. J.

Plaintiff Kinross Copper Corporation petitions for

reconsideration of our opinion affirming the trial court’s

entry of summary judgment dismissing plaintiff's state and

federal takings claims based on the denial of a permit to

discharge mining wastewater into a river of the state.

Kinross Copper Corp. v. State of Oregon, 160 Or App 513,

981 P2d 833 (1999). Plaintiff contends that, in our opinion,

we erred in construing or applying the law. ORAP

. 6.25(1)(e). We allow the petition, but adhere to our opinion

for the reasons that follow.

Plaintiff alleged that it suffered an uncompensated

taking of property when the state denied it a permit to

discharge groundwater and other wastewaters from its mining

operation into the North Santiam River Subbasin. Plaintiff

alleged that, without the ability to discharge into the river, its

unpatented mining claim had no value. The trial court

App. B-3

entered summary judgment in favor of the state. On appeal,

plaintiff argued that the trial court erred because it was

undisputed that the denial of the permit deprived its claim of

any use or value. The state argued that the trial court was

correct because, among other things, there can be no taking

of a right that plaintiff nee possessed, and, plaintiff never

possessed the right to discharge wastewater into a river of the

state. Plaintiff replied that, indeed, it did have a right to

discharge wastewater into a river of the state because, under

ORS 537.545(1), plaintiff has the right to discharge up to

5,000 gallons of groundwater per day.

We agreed with the state. We held that ORS

537.545(1) did not have the effect of granting a property right

to discharge wastewater:

“By its terms, the statute permits the

consumption of ground water. Even assuming

that it applies to a mining operation, the

statute does not permit the discharge of

anything into a river of the state.”

aoa

App. B-4

Kinross Copper Corp., 160 Or App at 525 (emphasis in

original). We then concluded that, having lost no property

right, plaintiff suffered no taking. /d. at 525-26.

On reconsideration, plaintiff contends that we

correctly determined that ORS 537.545(1) does not grant a

right to discharge wastewater. Nevertheless, they contend

that they have that right at common law. According to

plaintiff, all property owners have a common-law right of

drainage. In fact, it argues that it does not even need to

obtain a permit to exercise that right. Thus, plaintiff

concludes, although we correctly determined that there can be

no taking of a property right never held, in this case, it does’

possess such a right. |

At the outset, we note that plaintiff did not make that

tipiicnaivsiie

argument in its briefs and previously cited none of the

authorities on which it now relies. Plaintiff argued that it

obtained the right to discharge its wastewater by virtue of its

App. B-5

water rights. We explained why that was incorrect asa

matter of law. Now plaintiff argues that it obtained the right

to discharge its wastewater at common law, independent of

its water rights. If a contention was not raised in the brief,

however, it is not appropriate to assert it on reconsideration.

Bergman v. Holden, 122 Or App 257, 260, 857 P2d 217, rev

den 318 Or 170 (1993) (“Ordinarily, a contention not raised

in the original brief will not be considered on

reconsideration.”),

In any event, plaintiff has failed to demonstrate that

its new argument is correct. According to plaintiff, the owner

of an unpatented mining claim has a right to discharge

wastewater into a river of the state without first obtaining a

permit from the state to do so. Plaintiff bases that assertion

on two opinions: Harbison y. City of Hillsboro, 103 Or 257,

204 P 613 (1922), and Garbarino v. Van Cleave, 214 Or 554,

330 P2d 28 (1958). Neither opinion stands for the

\

App. B-6

proposition for which it is cited. Both concern the-rights of

landowners to allow natural drainage flow onto the property

of another and the extent to which that natural drainage can

be artificially channeled. Neither speaks to the rights of

property owners generally, much less to the rights of owners

of unpatented mining claims particularly, to discharge

wastewater into the waters of the state.

Plaintiff's argument is particularly difficult to

understand given its logical implications. If plaintiff has a

common-law right to discharge wastewater into the rivers of

the state without a permit, then it never needed to apply for a

permit to conduct its mining operation. Plaintiff does not

explain--and we do not understand--how it can be a taking of

property to deny a permit that plaintiff did not need in the

first place.

Petition for reconsideration allowed; opinion adhered

to.

App. C-1

IN 1:iE SUPREME COURT OF THE

STATE OF OREGON

KINROSS COPPER ORDER DENYING

CORPORATION, REVIEW

Appellant/Petitioner

CA A98316

SC $46982

)

)

)

)

)

V. )

)

STATE OF OREGON, |)

)

)

Respondent/Respondent.

The Court has considered the petition for review and

orders that it be denied.

DATE: February 29, 2000.

/S/ WALLACE P. CARSON, JR.

WALLACE P. CARSON, JR.

CHIEF JUSTICE

KULONGOSKI, J. NOT PARTICIPATING

GILLETTE AND VAN HOOMISSEN, JJ.

WOULD ALLOW

App. D-1

IN THE SUPREME COURT OF THE

STATE OF OREGON

KINROSS COPPER ) Multnomah County Circuit

CORPORATION, ) Court No. 960906900

)

Plaintiff-Appellant, ) SC 846982

Petitioner on Review, ) CA A98316

)

V. )

) ORDER DENYING

STATE OF OREGON ) RECONSIDERATION

)

Defendant-Respondent,_)

Respondent on Review. )

Upon consideration by the court.

The Court has considered the petition for

reconsideration and orders that it be denied.

Dated this 20th day of June 2000.

/S/ WALLACE P. CARSON, JR.

WALLACE P. CARSON, JR.

CHIEF JUSTICE

Kulongoski, J., not participating

App. E-1

DISTRICT COURT OF THE STATE OF OREGON

FOR MULTNOMAH COUNTY

June 9, 1997

Re: Kinross Copper v. State of Oregon

Case No. 960906900

Dear Counsel:

Since the hearing in April, I have reread all of your

materials (including those submitted after the hearing),

conducted my own research and cogitated over the more

difficult legal and factual issues presented by your cross-

motions for summary judgment. I have drafted and rejected

relatively lengthy findings of fact and conclusions of law. |

now have decided to give you the rulings you need and to

share my reasoning on a few key issues.

Plaintiffs motion for partial summary judgment is

denied. Defendant’s motion for summary judgment is

granted.

App. E-2

As a preliminary, I have concluded that, for purposes

of these motions, the law governing both the federal and state

takings claims is the same on all essential issues. See Lucas

v. South Carolina Coastal Council, 505 US 1003, 1116

(1992), and Boise Cascade Corp. v. Board of Forestry, 325

Or 185, 197-99 (1997).

The issue, or rather concept, I have struggled with

most is whether plaintiff's unpatented mining claim is the

type of interest which is subject to constitutional takings

analysis. In general, unpatented mining claims are protected

property interests. United States v. Locke, 471 US 84, 86

(1985). At the same time, an unpatented mining claim is

nowhere close to a fee simple, as it appears to have a variety

of conditions precedent and subsequent attached. Until

recently, I have been unable to articulate what it is about

plaintiff's unpatented mining claim which makes it, in my

App. E-3

view, a property interest which is not subject to constitutional

takings protection.

With the assistance of a borrowed law clerk, I came

across Graf, “Application of Takings Law ‘o the Regulation

of Unpatented Mining Claims,” 24 Ecology L Q 57 (1997)

(“Graf”). The author of this law review article put into words

what I already had been thinking.

In my judgment, plaintiff's unpatented mining claim

is conditioned upon compliance with authorized and

applicable federal and state regulations. This is true for

regulations which exist prior to the initial discovery as well

as for some regulations which come into existence after

discovery but before any mining is done. I qualify the second

group of regulations because I believe that only regulations

which are within the reasonable expectations of a reasonable

owner of a mining claim (an objective test) necessarily attach

App. E-4

to the claim and become part of the property interest. Lucas

at 1027.

It has been agreed between the parties that one of the

elements of an unpatented mining claim is a “valuabie

discovery.” I conclude that whether a discovery is valuable

depends on the cost of complying with applicable regulations

(as discussed above). In this case, the state’s clean water

regulations make plaintiff's predecessors’ discovery far from

valuable, “thereby extinguishing the ‘property interest’

necessary to bring a Fifth Amendment action.” Graf at 113.

I could discuss the authorities you each presented as

well as the authorities discussed in Graf. Instead, I refer you

to primarily to the discussion at Graf at 112-28.

If my analysis of plaintiff's unpatented mining claim

is in error, | would deny both parties’ motions, although |

might have made a few rulings which could have guided the

trial judge. I recognize that this is inconsistent with my letter

App. E-5

ruling of December 24, 1996. However, I became convinced

after rereading Del Monte Dunes at Monterey, Ltd. v. City of

Monterey, 95 F3d 1422, 1428-34 (9th Cir 1996), that several

jury questions would be presented.

Ms. Fjordbeck shall submit an order and a judgment

after compliance with the applicable uniform and local rules.

Very truly yours,

/s/_ Henry Kantor

Henry Kantor

District Court Judge

i, — ee

App. F-1

CIRCUIT COURT OF OREGON -

MULTNOMAH COUNTY .

KINROSS COPPER )

CORPORATION, )

a Plaintiff, ) No. 9609-06900

)

V. ) ORDER

)

STATE OF OREGON, | )

Defendant. )

This matter came before the court on Plaintiff's s

Motion for Partial Summary Judgment and Defendant’s

Motion for Summary Judgment. The court has considered

the motions, memoranda, and supporting documents, as well

as the arguments of counsel for the parties and the amicus,

North Santiam Watershed Council.

It is hereby ordered as follows:

1. Defendant’s Motion for Summary Judgment is

granted.

2. Plaintiff's Motion for Partial Summary

Judgment is denied.

App. F-2

a This matter is dismissed.

Dated this 25th day of June, 1997.

/S/ Henry Kantor

Henry Kantor

Circuit Judge pro tem

App. F-3

CIRCUIT COURT OF OREGON

MULTNOMAH COUNTY

KINROSS COPPER

CORPORATION,

Plaintiff, No. 9609-06900

v. JUDGMENT

STATE OF OREGON

Defendant.

Nee Ne Ne Ne we wae owe GS

This court has granted Defendant’s Motion for

Summary Judgment. It is therefore ordered, adjudged, and

decreed as follows:

Judgment is entered in favor of the Defendant, the

State of Oregon, and aiaa the Plaintiff, Kinross Copper

Corporation.

Defendant may file its cost bill in accordance with

ORCP 68.

Dated this 25th day of June, 1997.

/S/ Henry Kantor

Henry Kantor

Circuit Judge pro tem

App. G-1

IN THE SUPREME COURT OF THE

STATE OF OREGON,

Circuit Court)

TC No. 9609-06900

STATE OF OREGON

KINROSS COPPER —_)_— Supreme Court

CORPORATION, ) No. 546982

)

Plaintiff-Appellant, ) Court of Appeals

Petitioner on Review, ) No. A98316

)

v. ) (Multnomah County

)

)

)

Defendant-Respondent/_ )

Respondent on Review. )

PETITIONER ON REVIEW KINROSS

COPPER CORPORATION’S

PETITION FOR REVIEW

Petition for Review of the Opinion of the

Court of Appeal

s Affirming the Judgment

Entered in Multnomah County Circuit Court

on June 25, 1997 by the Honorable Henry Kantor

Opinion Filed: May 19, 1999

Reconsideration Allowed and

Opinion Adhered to: October 13, 1999

Author of Opinions: Landau, J.

Joined by: Deits, P.J., Wollheim, J.

ee

App. G-2

A. PRAYER FOR REVIEW

Petitioner Kinross Copper Corporation (“Petitioner”

or “Kinross”) seeks review by this Court of the Opinion of

the Oregon Court of Appeals dated May 19, 1999 and the

Opinion on Reconsideration dated October 13, 1999.

(Opinions are appended to this petition.)

B. LEGAL QUESTIONS PRESENTED

1. Did the court of appeals err in holding that

Petitioner has no proprietary interest that was

taken under either the Oregon or U.S.

constitutions by a state regulation that prohibits

Petitioner from discharging mining water into a

neighboring stream to Petitioner’s unpatented

mining claim where the undisputed effect of the

regulation is to prevent Petitioner from mining the

claim and where mining undisputedly is the only

App. G-3

economically viable use of the unpatented mining

claim?

2. a. Did the court of appeals err in holding that

Petitioner has no right at common law to

discharge or drain water from its unpatented

mining claim into a neighboring stream where

the discharge or drainage would not be

deemed a common law nuisance?

b. If Petitioner does have that common law

drainage or discharge right, and loss of the

right takes away all economically beneficial

use of the mining claim, does the state effect a

taking when by regulation it prevents

Petitioner from exercising that right?

a NR

App. G-4

3. If enforcement of the state regulation in this case does

not effect a permanent taking under the Oregon or

U.S. constitutions, is the state regulation preempted

by federal law and, if so, does Petitioner have a right

to compensation for a temporary taking?

c. PROPOSED RULES OF LAW

1. When state regulation of water discharge has the

effect of preventing a holder of an unpatented

mining claim from mining the claim, that

regulation causes a taking of the holder’s property

interest in the claim under both the Oregon and

U.S. constitutions. This is true whether or not the

claim holder has a separate property interest in

discharging water into a neighboring stream.

App. G-5

2. a. A holder of an unpatented mining claim has a

common law right to discharge mining water

into a neighboring stream provided such

discharge does not constitute a nuisance.

b. A state regulation that bars all such

discharges, so as to deprive the claim holder

of all beneficial use of the claim, is a taking

for which the claim holder must be

compensated.

3. Ifno taking occurred under either the Oregon or

- U.S. constitutions, the state regulation as applied

in this case is preempted by federal mining and

land use law and Petitioner may recover for a

temporary taking during the period in which the

state regulation was wrongfully imposed.

App. G-6

D. REASONS FOR REVERSAL

An unpatented mining claim may only be used for

mining. Consequently, a regulation that has the effect of

making mining impossible and that is enacted after a

proprietary interest in an unpatented mining claim has been

established effects a taking of that proprietary interest. See

Skaw v. United States, 740 F2d 932 (Fed Cir 1984), cert den

488 US 854 (1988). Skaw should be dispositive in this case.

However, the court of appeals attempted to dodge Skaw' and

the meat of the state and federal takings questions in this case

by applying a legal theory not argued by the state:* that

Kinross does not have a proprietary right or interest to

\ ' In fact, despite numerous citations to and

discussion of Skaw in Kinross’ appellate brief, the court

of appeals never even mentioned Skaw in either of its

opinions.

> The closest the state came to asserting this legal

theory was to note in a footnote in its Respondent’s Brief

(page 21) in the court of appeals that Kinross had not

established a right to use water at all (as opposed to

discharge or drain water). The state conceded that it had

failed to raise even that legal theory in the trial court.

App. G-7

discharge mining water into a stream of the North Santiam

River subbasin and, consequently, that Kinross could not

have had its property interest in an unpatented mining claim

taken by a state regulation prohibiting such discharge.

Kinross respectfully submits that the question whether

Kinross has a proprietary right to discharge water into the

North Santiam River subbasin misses the point. It is

undisputed in this case that the effect of the regulation was to

prevent Kinross from mining its leased unpatented mining

claim. It also is undisputed in this case that mining the

unpatented mining claim is its only economically viable use.

Under well-established federal and state takings analysis, that

is all that is necessary to establish a compensable taking.

The court of appeals opinion creates a new takings

criterion never before applied in either Oregon or any other

state or federal jurisdiction. Namely, the court of appeals

suggests that if a state (or local) law or regulation is drafted

App. G-8

in such a way that it does not expressly prohibit a landowner

or lessee’s use of property, and instead-the law or regulation

merely has the effect of making such use impossible, then no

constitutional taking can occur. Such a conclusion welcomes

state and local jurisdictions to draft creative laws that only

have the effect of eliminating all economically beneficial use

of property without expressly doing so. The court of appeals

cited to no existing case law to support its novel legal theory.

Nor does any exist. It is contrary to established takings

principles; the issue is one of causation. Armstrong v. United

States, 364 US 40, 46-48, 80 S Ct 1563, 4 L Ed 2d 1554

(1960) (“The total destruction by the Government of all value

of [the property interest] has every possible element of a Fifth

Amendment ‘taking’ and is not a mere ‘consequential

incidence’ of a valid regulatory measure. Before the

[property interest was] destroyed, the [plaintiffs] admittedly

had compensable property. Immediately afterwards, they had

App. G-9

none. This was not because their property vanished into thin

air. It was because the Government for its own advantage

destroyed the value of the [property] * * *.”). Both this

Court and other courts have found takings under either state

or federal constitutions under circumstances analogous to this

case.

In Boise Cascade Corporation v. Board of Forestry

(S42159), 325 Or 185, 197, 935 P2d 411 (1997), this Court

held that, under the state takings clause, a taking is

established when a property owner shows that “the

application of the government’s particular choice deprives

the owner of all economically viable use of the property.”

That test did not exclude from takings those governmental

regulations (choices) that indirectly prohibit all economic use:

of a landowner’s property. To the contrary, the governmental

regulation at issue in Boise Cascade protected spotted owl

and its habitat, in part, from “‘disturbances resulting from

App. G-10

[logging] operation{s].’” /d. at 188 n 5 (citation omitted).

The regulation did not directly prohibit logging in that

context, it merely prohibited activities that would disturb the

spotted owl. Nonetheless, because logging cannot be done

without eliminating its habitat, including the prey necessary

for its survival, the effect of the regulation was to prevent the

timber company from being able to log its property. This

Court had no difficulty in concluding that the timber

company stated a claim for relief under Article I, section 18,

of the Oregon Constitution. See also Stoddard v. Western

Carolina Regional Sewer Auth., 784 F2d 1200 (4th Cir

1986) (holding under South Carolina constitution that

municipality’s discharge of noxious odors that created awful

smell on landowner’s property constituted taking and not

inquiring into whether landowner had proprietary interest in

air).

App. G-11

Similarly, the Federal Circuit has held that a denial of

a permit to fill wetlands can effect a taking of a landowner’s

property under the Fifth Amendment. Florida Rock

Industries, Inc. v. U.S., 18 F3d 1560 (Fed Cir 1994); see also

Palm Beach Isles Associates v. U.S., 42 Fed Cl 340

(1998) (applying federal takings analysis to denial of dredge

and fill permit); Plantation Landing Resort, Inc. vy. U.S., 30

Fed Cl 63 (1993) (same; concluding that no taking occurred

because denial of permit did not deny all economically

beneficial use of property). The Florida Rock court did not

inquire into whether the property owner had a proprietary

interest in the wetlands, which are classified as waters of the

United States. In Holden vy. U.S., 38 Fed Cl 732 (1997), the

court indicated that the closure of a road that has the effect of

preventing access to an unpatented mining claim can

constitute a taking of the property right in the mining claim

even though the miner has no property interest in the road

App. G-12

itself. There simply is no requirement under either state of

federal takings analysis that a state or local regulation must

expressly prohibit one’s use of a proprietary interest in order

to effect a taking. Where the effect of the regulation is to

make impossible any economic use of a property interest, a

taking can result, and a taking did result in this case.

Assuming arguendo that the court of appeals correctly

looked to whether Kinross had a proprietary right to

discharge mining water into a river or stream of the state, the

court of appeals reached the wrong conclusion. As Kinross

argued first in its Opening Brief (page 19)’ and later in its

Petition for Reconsideration, a property owner has a common

law right to discharge or drain water (including mine

> The court of appeals is either too demanding or

simply mistaken to say that Kinross failed to argue the

point in its Opening Brief. (Opinion on Reconsideration

at 2.) In any event, since the court of appeals decided the

case on a legal theory not raised by the parties, Kinross

should be allowed to respond to the legal theory on

reconsideration and before this Court.

App. G-13

water) from his or her property into a watercourse, so long as

such action does is constitute a nuisance to other property

owners. See Provolt v. Bailey, 62 Or 58, 121 P 961

(1912) (mining discharge); Carson v. Hayes, 39 Or 97, 65 P

814 (1901) (same); Harbison, et Ux. v. City of Hillsboro, 103

Or 257, 204 P 613 (1922) (stormwater discharge); Garbarino

v. Van Cleave et al, 214 Or 554, 330 P2d 28 (1958) (same);

see also Atuhinson v. Peterson, 87 US (20 Wall) 507, 22 L

Ed 414 (1874) (mining discharge); see generally Lindley on

Mines § 841 (3d ed 1914).* It is undisputed that the proposed

* Of course, this common law right can be

limited by enactments of state and federal water quatity

standards (i.e., regulations that may limit but do not

prohibit uses of land) enacted before to a person's

acquisition of a property right. In this case, the Clean

Water Act and its clean water standards predated Kinross’

property interest in the unpatented mining claim.

Consequently, Kinross’ common law right to discharge

mining water into a stream is limited by the requirement to

meet those water quality standards. The court of appeals

erroneously interpreted Kinross’ position in its Petition for

Reconsideration to be that its common law right to

discharge mining water somehow negated the need to

secure an National Pollutant Discharge Elimination

System permit. (Court of Appeals Opinion on

Reconsideration at 3.) Kinross does not assert such a

App. G-14

discharge of water from Kinross’ property would meet all

state and federal water quality standards, and it is clear that

the discharge would not constitute a nuisance at common

law. In fact, it is undisputed that the mining discharge would

have been undetectable 2,000 feet downriver of the discharge

point. Consequently, the court of appeals erred in concluding

that Kinross did not have a protected proprietary interest to

discharge water from its unpatented mining claim into a

stream. Because the court of appeals erred in concluding that

Kinross did not have a proprietary interest in the discharge of

mining water, it never carried out the necessary takings

analysis under state and federal law.’ Kinross relies on its

claim.

> Under federal takings analysis, state nuisance

law is the parameter by which a state regulation is to be

evaluated. Where the state regulation is within the bounds

of what could have been deemed a common law nuisance,

then no taking can be established. But where the state

regulation goes beyond the scope of common law

nuisance, a taking may be found, provided the other

takings criteria are met. Lucas v. South Carolina Coastal

Council, 505 US 1003, 112 S Ct 2886, 120 L Ed 2d 798

_

App. G-15

briefing in the court of appeals to support its claim that

enforcement of the state regulation resulted in a taking of

Kinross’ proprietary interest in the unpatented mining claim.°

If review is allowed, Kinross will elaborate on this analysis.

Finally, even assuming arguendo that the court of |

appeals correctly concluded that the state regulation as

applied in this case did not effect a taking because Kinross

does not have a proprietary interest in discharging mining

water into a neighboring stream, the state regulation would be

preempted under federal law. The case law is clear that state

(1992); Loveladies Harbor, Inc. v. U.S., 28 F3d 1 171,

1182 (Fed Cir 1994) (question is whether state’s

“regulatory imposition goes beyond the [state’s] powers

under common law nuisance doctrine * * *.”); Creppel v.

U.S., 41 F2d 627, 631 (Fed Cir 1994) (“If state nuisance

law does not justify the restraint, the court must proceed to

the remaining [takings] criteria.”).

° As was mentioned above, an unpatented

mining claim may only be used for mining. Consequently,

a regulation that has the effect of making mining

impossible and that is enacted after a proprietary interest in

an unpatented mining claim has been established effects a

taking of that proprietary interest. See Skaw v. United

States, 740 F2d 932 (Fed Cir 1984), cert den 488 US 854

(1988).

—

App. G-16

and local laws and regulations that prevent mining on federal

lands are preempted by federal mining and land use laws.

See Elliott v. Oregon International Mining Co., 60 Or App

474, 654 P2d 663 (1982) (holding that county land use

ordinance prohibiting surface mining on certain federal

mining claims was preempted by Stock Raising Homestead

Act). More recently, the Eighth Circuit held that a county

ordinance that prohibited the issuance of any new or amended

_permits for surface metal mining within a certain area was

preempted by the Federal Mining Act. South Dakota Mining

Assn, Inc. v. Lawrence County, 155 F3d 1005 (8th Cir 1998).

During the time in which the state has applied the

Three Basin Rule in such a way as to prevent mining on

Kinross’ unpatented mining claim, there would have been a

temporary taking under the principles discussed by this Court ,

in Boise Cascade.

App. G-17

E. FACTS RELEVANT TO REVIEW

The following facts are derived from the Stipulated

Statement of Facts that the parties agreed to as part of their

cross-motions for summary judgment and from additional

facts that were stated in Kinross’ Opening Brief in the court

of appeals and were undisputed.

In 1989, Kinross (under its former name, Plexus.

Inc.) acquired by lease the right to mine an unpatented

mining claim in the Cedar Creek Valley of the North Santiam

River subbasin in the Willamette National Forest. The

unpatented mining claim was staked in 1975 by Cyprus

Metals Exploration Corporation (“Cyprus”) (formerly Amoco

Minerals Co.), and Cyprus subsequently made a discovery of

high-grade copper ore on the claims in 1976. Cyprus as the

lessor of the subject claims retained the right to receive a

royalty based upon the production from the mine.

App. G-18

In 1977, the Environmental Quality Commission (the

“EQC”) adopted OAR 340-041-470(1), which is commonly

referred to as the Three Basin Rule. It prohibited wastewater

discharges in the McKenzie, Clackamas, and North Santiam

River subbasins. After promulgation of the Three Basin Rule

and until the rule was amended in 1995, the Department of

Environmental Quality (“DEQ”) developed an administrative

interpretation of the rule that allowed nonmajor discharges

and issued at least 75 National Pollutant Discharge

Elimination System (“NPDES”) permits for what were

deemed to be nonmajor discharges within the three rivers’

subbasins. In 1991, Kinross received an NPDES permit for a

discharge associated with its initial mine construction

activities.

In 1992, Kinross applied for an NPDES permit to

carry out its mining activities. DEQ worked with Kinross for

more than a year with the intent of issuing the permit, until a

App. G-19

DEQ staff member questioned whether the Three Basin Rule

did not prohibit issuance of the NPDES permit. DEQ sought

advice from the Attorney General’s office and was instructed

that the Three Basin Rule prohibited all discharges, even

those deemed to be nonmajor.’ In a memorandum dated

December 10, 1993, DEQ advised the EQC that an NPDES

permit for Kinross’ mining project could be issued under

conditions where “there would be no measurable impact on

the North Santiam River or the Little North Santiam River”

but, nonetheless, DEQ concluded that it was prohibited from

issuing the permit by the Three Basin Rule because the rule

“prohibits development requiring a discharge permit, -

regardless of the impact on water quality.” DEQ noted that

“[a] few thousand feet downstream of the mixing zone, the

” The state’s counsel before the trial court

acknowledged that the Three Basin Rule would prevent

even the discharge of distilled water. (Transcript on

Hearing on Summary Judgment Motions at 57 (Apr. 19,

1997).)

App. G-20 ~

Kinross discharge would not be measurable” and that “the

discharge load would not cause water quality standards to be

violated.” DEQ also noted that “[a] non-discharge alternative

such as spray irrigation is not viable because of the steep

terrain” and that “[djue to heavy precipitation in the area and

the potential for encountering high volumes of groundwater

during the mining operation, Kinross would not be able to

develop and operate the mine without an NPDES waste

discharge permit.”

On March 21, 1995, DEQ denied Kinross’ application

for an NPDES permit. On April 7, 1995, Kinross requested a

contested case hearing on the denial. The EQC issued a final

wieihiliiaiian the application on August 30, 1996.

Kinross filed an inverse condemnation action in

Multnomah County Circuit Court and the court granted the

state’s motion for summary judgement on June 26, 1997.

The trial judge relied primarily on a law review article by

App. G-21

Michael Graf, titled “Application of Takings Law to the

Regulation of Unpatented Mining Claims.” That article

argued, contrary to established law, that unpatented mining

slates should be deemed a lesser property interest than is fee

title and consequently that unpatented mining claims should

not be compensated for a taking when after-enacted laws or

regulations take away the opportunity to mine the claim.

Kinross appealed to the court of appeals on July 3,

1997. The court of appeals issued an opinion May 19, 1999

upholding the circuit court decision on different grounds.

The court of appeals concluded that Kinross did not have a

proprietary interest in discharging water that could have been

taken by application of the Three Basin Rule and the

resulting denial of Kinross’ NPDES application. That legal

theory had not been argued by the state or amicus below.

On June 2, 1999, Kinross petitioned for

reconsideration in the court of appeals. Kinross asserted that

App. G-22

it does have a common law right to discharge water from its

unpatented mining claim provided that such discharge does

not constitute a nuisance. On October 13, 1999, the court of

appeals allowed reconsideration and adhered to its prior

opinion. In doing so, the court of appeals rejected Kinross’

assertion and concluded that no such common law right

exists.

F. IMPORTANCE OF REVIEW

This case presents an important issue concerning the

takings clauses of both the Oregon (Article 1, section 18) and

U.S. (Fifth Amendment through application of Fourteenth

Amendment) constitutions. It also appears to conflict with

prior decisions by this Court and by federal courts. See

discussion above concerning Boise Cascade, 325 Or at 197,

Florida Rock, 18 F3d 1560 and related cases.

App. G-23

The issue presented by this case will have widespread

significance and will arise repeatedly in different contexts.

The court of appeals opinion logically supports the

proposition that a state or local regulation that does not

directly prohibit any specific use of property cannot effect a

taking under either state or federal law, even when the effect

of the regulation is to prohibit a landowner from exercising

any economically viable use of its property. For instance,

under the court of appeals analysis, and contrary to existing

case law, a state regulation prohibiting the fill of wetlands or

the discharge of material into waters of the state under any

and all circumstances could never effect a taking on the

theory that a landowner does not have a proprietary interest in

the waters of the state or of the United States. Similarly, a

state regulation prohibiting all discharges into the air within a

specific geographical area, even if such discharge meets all

federal, state and local air quality standards, apparently could

App. G-24

not constitute a taking under any circumstance, because a

landowner does not have a proprietary interest in the air or in

discharging matter into the air.

The court of appeals decision if unaltered by this

Court will also modify the common law. Henceforth, the

long-established right of miner at common law to

nonnuisance discharge or drainage of water into a stream will

be subject to elimination not by legislative act but by

administrative reinterpretation of an administrative rule. The

court of appeals’ justification of the regulation on the basis

that a miner never had the right to discharge nonpolluting

mine waters, in itself, constitutes a taking and a violation of

due process. See Hughes v. State of Washington, 389 US

290, 296-97, 88 S Ct 438, 19 L Ed 2d 530 (1967) (Justice

Stewart concurring, in which he stated, “[A] State cannot be

permitted to defeat the constitutional prohibition against

taking property without due process of law by the simple

App. G-25

device of asserting retroactively that the property it has taken

never existed at all.”); see also Stevens v. City of Cannon

Beach, 510 US 1207, 114 S Ct 1332, 1334, 127 L Ed 2d 679

(1994) (Justices Scalia and O’Connor dissenting from the

court’s denial to grant certiorari in 317 Or 131, 854 P2d 449

(1993)); Barton H. Thompson, Jr., “Judicial Takings,” 76 Va

L Rev 1449 (1990); David J. Bederman, “The Curious

Resurrection of Custom: Beach Access and Judicial Takings,

96 Column L Rev 1375, 1438-42 (1996). Such a result

should not stand.

Also supporting review in this case is that amicus

curiae supporting both Kinross and the state have appeared

below and are available to advise the court.

Finally, the issues at hand are properly presented in

this case, and there are no factual disputes or procedural

obstacles that might impede this Court’s review. It is

undisputed that the Three Basin Rule, as applied in this case,

App. G-26

barred Kinross from a discharge of water that otherwise

would have met all state and federal water quality standards.

In fact, it is undisputed that the proposed discharge in this

case would not have been detectable more than a few

thousand feet beyond the mixing zone. It also is undisputed

that the effect of prohibiting such discharge prevented

Kinross from mining its leased unpatented mining claim,

which was the only economically viable use of the property

interest. The issue presented to this Court is a legal one.

There is no reason to defer review to allow for further

exploration of the issue or development of additional facts in

the trial court or the court of appeals. The question is concise

and is here as fully framed as it could be in any adjudication.

App. G-27

G. CONCLUSION

This petition for review should be granted.

Dated this 17th day of November, 1999.

Respectfully submitted,

/S/ Phillip D. Chadsey

Philip D. Chadsey, OSB No. 66028

Jerry R. Fish, OSB No. 82255

James N. Westwood, OSB No. 74339

David E. Van’t Hof, OSB No. 96185

Attorneys for Petitioner on Review

Kinross Copper Corporation

App. H-1

IN THE SUPREME COURT OF THE

STATE OF OREGON

KINROSS COPPER Supreme Court

CORPORATION, No. 846982

Plaintiff-Appellant, Court of Appeals

Petitioner on Review, No. A98316

V. (Multnomah County

STATE OFOREGON

Defendant-Respondent

Respondent on

Review.

Circuit Court)

TC No. 960906900

i i a a a a eee

KINROSS COPPER CORPORATION’S

PETITION FOR RECONSIDERATION

Petition for Review of the Order of the

Supreme Court Denying Review of the

Decision of the Court of Appeals

Date of Order: February 29, 2000

App. H-2

This case has national significance. The highest court

in Oregon should have the opportunity to be heard on the

issues raised here. They will come before this Court and

others again (and again) in the future. The issues arise here

in the plainest and most timely context possible, allowing a

clean and efficient analysis of fundamentally important

questions. This Court has narrowly missed (by a single

vote) the opportunity it should now reconsider and grasp.

These are the issues:

1. Can an unpatented mining property right

granted by federal law be abrogated by a state regulation that

prevents the mine from discharging nonpolluting mine water,

which meets state and federal drinking water standards,

without requiring the state to pay just compensation for a

“taking” under the Fifth Amendment’s Taking Clause?

This question involves two subissues. The first is

whether, because an unpatented mining claim has no

App. H-3

economic value unless it can be mined, petitioner is entitled

to just compensation for its loss under Lucas v. South

Carolina Coastal Council, 505 US 1003, 112 S Ct 2886, 120

L Ed 2d 798 (1992). The court of appeals decision in this

case is in direct conflict with Skaw v. United States, 740 F2d

932 (Fed Cir 1984) (taking of unpatented mining claim), cert

den 488 US 854 (1988), and Florida Rock Industries. Inc. v.

United States, 791 F2d 893, 896, 904 (Fed Cir 1986) (taking

of mining interest because federal government would not

issue Clean Water Act permit when only harm to water

quality was “short term” turbidity).

The second subissue is whether the subject regulation

is preempted by federal law and, therefore, invalid under

California Coastal Com’n v. Granite Rock Co., 480 US 572,

586-87, 107 S Ct 1419, 94 L Ed 2d 577 (1987) (state law

cannot prohibit operation of mining claim on federal lands).

If the subject regulation is preempted, petitioner is entitled to

App. H-4

just compensation for a temporary taking for the period it has

been prohibited from mining its claim. First English Evan.

Luth. Ch. v. Los Angeles Cty., 482 US 304, 107 S Ct 2378,

96 L Ed 2d 250 (1987).

a Does takings jurisprudence require a property

owner to show that it has a property interest in the very thing

the state seeks to regulate, rather than merely showing that

the effect of the regulation as applied to petitioner denies it

all economic use of a federally recognized property right?

As pointed out in petitioner’s petition for review, the

issue is one of causation. Armstrong v. United States, 364

US 40, 46-48, 80 S Ct 1563, 4 L Ed 2d 1554 (1960). It is

“the effect of the denial” that gives rise to a taking. United

States v. Riverside Bayview Homes, Inc., 474 US 121, 127,

106 S Ct 455, 88 L Ed 2d 419 (1985); see also Jan G. Laitos,

Law of Property Rights Protection: Limitations on

Governmental Powers § 10.07[A][2] at 10-48 (Supp

App. H-5

2000) (“The plaintiff can establish adequate linkage between

the government--defendant’s actions and harm incurred if the

government defendant authorized the act that brought about

the taking, and the taking was the natural consequence, or

cause, of the government-approved acts.”). Or as Professor

Laitos also states, courts use a “but for” test. Id. § 10.07[A]

at 10-44. In this case, but for the state’s refusal to grant an

NPDES permit, petitioner would not have been denied all

economic use of its mining claim.

3. Does the statement in Lucas that “‘the

proscribed use interests were not part of [plaintiff s] title to

begin with[]’ 505 US at 1027” allow the court of appeals to

redefine the common law of this state to hold that a property

owner never had the right to discharge nonpolluting mine

water into a stream? Kinross Copper Corp. v. State of

Oregon, 160 Or App 513, 519, 981 P2d 833 (1999).

App. H-6

There is no doubt that under the common law of this

state a miner has always had the right to discharge

nonpolluting mine waters into a stream. Provolt v. Bailey, 62

Or 58, 121 P 961 (1912); Carson v. Haves, 39 Or 97, 65 P

814 (1901). That right is a part of the bundle of property

rights on federal lands that predate statehood. Atchison v.

Peterson, 87 US (20 Wall) 507, 22 L Ed 414 (1874). This

Court needs to make clear that the test of whether a property

interest is a part of a landowner’s “bundle of rights” to ita

with is determined by whether the property owner’s proposed

activity could have been enjoined at common law as either a

private or public nuisance. Lucas, 505 US at 1029-30. The

test is not, as the court of appeals held, whether in order to

discharge nonpolluting mine water the petitioner must first

show a right to appropriate the water for a beneficial use.

160 Or App 522-25. The right to discharge and the right to

appropriate water are governed by different sets of rules.

App. H-7

The state is now regularly taking the position in

takings cases that based on Lucas “the proscribed use

interests were not part of [plaintiff's] title to begin with,” no

matter how frivolous its position may be, when it is clear that

the conduct that has been proscribed could not have been

enjoined at common law as a nuisance. See Boise Cascade

Core. v. Board of Forestry, 164 Or App 114, 127, 991 P2d

563 (1999) (as the court stated: “The state offers no authority

for the proposition that knocking down a bird’s nest on one’s

property has ever been considered a public nuisance.”).

Boise Cascade is presently still before the court of appeals on

the state’s motion for rehearing; that case will shortly be

before this Court on a petition for review, since the court of

appeals has already denied a motion for rehearing from the

plaintiff.

The retroactive holding of the court of appeals that

plaintiff never had the right to discharge nonpolluting mine

App. H-8

water into a stream, to avoid finding a taking, is in itself a

judicial taking that this Court should not let stand. Hughes v.

State of Washington, 389 US 290, 296-97, 88 S Ct 438, 19 L

Ed 2d 530 (1967) (Stewart, J, concurring). This Court needs

to make clear to the lower courts of this state that property

rights cannot be taken away without the sevens of just

compensation by merely reinterpreting the common law of

property to avoid a taking. See Stevens v. City of Cannon

Beach, 510 US 1207, 114 S Ct 1332, 1334, 127 L Ed 2d 679

(1994) (Scalia and O’Connor, JJ, dissenting). The issue of

judicial takings by means of reinterpreting, or in this case

ignoring, common law precedents is an important one that

has seldom been addressed by the courts. See Robinson v.

Ariyoshi, 753 F2d 1468, 1474 (9th Cir 1985) (Goodwin, J),

(change in rules governing state’s water law cannot divest

real property rights that were vested before state supreme

court announced new law without constituting taking

App. H-9

requiring payment of compensation), cert granted, rev’d on

other grounds 477 US 902 (1986); see also Laitos, supra, §

8.02[E];' Barton H. Thompson, Jr., “Judicial Takings,” 76 Va

' Professor Laitos gives the following example

of a judicial taking that closely parallels the reasoning of

the court of appeals in this case: ~

“For example, assume that a property

owner discovers that his land has been

inundated by water released by a

neighbor whose land is uphill from the

owner’s land. The downhill owner

brings a common law trespass action

against the uphill neighbor. A court -

rules, as a matter of common law, that

the downhill owner never had property

in the now-flooded land because thiat

land was a wetland. The court further

rules that if wetlands exist on private

land, they are public property due to

their ecological and environmental

importance, and are not part of the title

of the private owner’s land. Since the

downhill owner does not, as a result of

this court decision, have common law

private ‘property’ in his flooded land, he

cannot bring a trespass action against the

uphill neighbor. The downhill owner

can then allege that the court ruling has

worked judicial taking of his land, as it

has made his private property become

public property without compensation.”

Jan G. Laitos, Law of Property Rights

Protection: Limitations on Governmental

Powers § 802[E] at 8-23 to 8-24 (Supp

2000) (emphasis added).

App. H-10

L Rev 1449 (1990); David J. Bederman, “The Curious

Resurrection of Custom: Beach Access and Judicial

Takings,” 96 Colum L Rev 1375, 1438-42 (1996).

Dated this 14th day of March, 2000.

Respectfully submitted,

/S/ Phillip D. Chadsey

Phillip D. Chadsey, OSB No. 66028

James N. Westwood, OSB No. 74339

Jerry R. Fish, OSB No. 82255

Charles F. Adams, OSB No. 75402

David E. Van’t Hof, OSB No. 96185

Attorneys for Petitioner for Reconsideration

Kinross Copper Corporation

App. I-1

IN THE CIRCUIT COURT OF THE

STATE OF OREGON FOR THE

COUNTY OF MULTNOMAH

KINROSS COPPER

CORPORATION, a

foreign corporation, Case No. 9609-06900

)

)

)

)

Plaintiff, ) STIPULATED STATEMENT

) OF FACTS

Vv. )

)

STATE OF OREGON, | )

)

Defendant. )

Except as noted, the parties hereby stipulate to the

accuracy and relevancy of the following facts:

l. Plaintiff is the lessee of mining claims located

in the Cedar Creek Valley of the North Santiam River

Subbasin in the Willamette National Forest, which it leased

under its former name, Plexus, Inc. (“Plexus”), from Cyprus

Metals Exploration Corporation (“Cyprus”). That lease

occurred in 1989. Under its terms plaintiff is required to pay

Cyprus an annual rental fee and once the mine went into

App. I-2

operation a production royalty based on the net value of the

ore mined. It is anticipated that the mine would produce

approximately 360,000 tons annually and have a productive

life of eight years.

a Cyprus was formerly known as Amoco

Minerals Co. (“Amoco”), which in 1975 staked the subject

claims. Amoco through the use of several methods for

geological exploration discovered a high grade copper ore

body on the claims in 1976. ;

3. Effective January 22, 1977, defendant,

through its Environmental Quality Commission (“EQC”),

adopted OAR 340-41-470(1), which is now known as the

Three Basin Rule, that prohibited wastewater discharges in

the McKenzie, Clackamas, and North Santiam River

subbasins.

4. In 1991, Plexus submitted a Plan of

Operations for what was called the “Bornite [a copper ore]

App. I-3

Project” to USFS for approval. On April 22, 1993, the Forest

Supervisor of the Willamette National Forest adopted a ROD

and FEIS. The ROD and FEIS recognized that to operate the

mine, plaintiff would be required to obtain from defendant a

National Pollutant Discharge Elimination System (“NPDES”)

permit. The obtaining of applicable state permits, including a

NPDES permit, was made a condition by USFS’s final

approval of the Plan of Operations for the Bornite Project.

a. While the Bornite Project was undergoing

review by USFS, on July 22, 1992, Plexus submitted to

Department of Environmental Quality (“DEQ”) applications

for an NPDES permit and for a Water Pollution Control

Facility (“WPCF”) permit that would allow it to discharge

groundwater pumped from the mine and other wastewater

from the Bornite Project. Subsequently, the DEQ returned

the application for an WPCF permit on the basis that all

App. I-4

discharges from the Bornite Project would be included in the

NPDES permit.

6. (Defendant admits the accuracy, but disputes

the relevancy of the following facts.) In a memorandum

dated December 10, 1993, DEQ advised EQC that an NPDES

permit for the Bornite Project could be issued under

conditions where “there would be no measurable impact on

the North Santiam River or the Little North Santiam River”

but that it was prohibited from doing so because of the

“Three Basin Rule” contained in OAR 340-41-470(1). In

that same memorandum, DEQ als: advised EQC that

plaintiff required an NPDES permit to proceed with the

mining project but that it could not do so under literal reading

of the Three Basin Rule because

“the rule language is broad and effectively

prevents the issuance of permits for any new

facilities (including new facilities requiring

storm water permits) regardless of the impact

of the discharge. The rule may effectively

preclude development and other activities in

App. I-5

these areas that were not intended to be

affected by the rule.”

EQC was further advised that the Three Basin Rule

“prohibits development requiring a discharge

permit, regardless of the impact on water

quality. No exceptions are allowed. This rule,

together with the requirements for storm water

permits, may have the effect of precluding

activities and land uses in these subbasins that

were never intended to be precluded.”

7. (Defendant admits the accuracy, but disputes

the relevancy of the following facts.) On January 21, 1994,

DEQ in a second memorandum to EQC made the following

findings:

“OAR 340-41-470(1) is more stringent

than required by the Clean Water Act or

federal rules because it prohibits any new or

increased discharges into the Clackamas,

North Santiam and McKenzie river sub

basins. This is more than is required to meet

water quality standards and protect beneficial

uses and more than what is required by the

federal anti-degradation rule, 40 CFR 13 1.12.

“All of the rule amendment

alternatives included in this staff report, while

allowing various levels of relaxation of the

App. I-6

current rule, would still result in a rule, if

adopted, that is more stringent than required

by federal law or rules.”

8. (Defendant admits the accuracy, but disputes

the relevancy of the following facts.) Referring to the

Bornite Project, DEQ specifically found:

A. “The Department conducted a mass

balance analysis to determine whether the

existing level of water quality will be

‘maintained and protected’ (Attachment C).

The analysis indicates that the discharge, after

mixing with the stream, would be well below

the most stringent water quality standards,

chronic toxicity. Therefore, water quality

standards would not be violated and beneficial

uses would be protected. However, there

would be a measurable increase in background

levels [of substances] at the downstream edge

of the mixing zone for some parameters. A

few thousand feet downstream of the mixing

zone, the Kinross discharge would not be

measurable.

B. “As required by section (3)(a) of OAR

340-41-026, the Department has determined

that (A) the new discharge load would not

cause water quality standards to be violated;

(B) the new discharge load would not

unacceptably threaten or impair any

recognized beneficial uses; (C) the new

App. I-7

discharged load is not to a water quality

limited stream; and (D) the activity is

consistent with acknowledged local land use

plans as evidenced by submission of a land

use compatibility statement to the Department.

C. “A non-discharge alternative such as

spray irrigation is not viable because of the

steep terrain and because irrigation would be

during the wet weather season. Since the

proposed mine is located on a steep hill side in

the Willamette National Forest, installing a

irrigation system may not be practicable and

may negatively impact both surface water and

groundwater quality. Furthermore, spray

irrigation would primarily be during the wet

weather season when the capacity of the soil

to assimilate the waste water is at a minimum.

Irrigating under these conditions would

increase run-off and impact surface waters.

These conditions would not lend themselves

to a non-discharge alternative such as spray

irrigation.

D. “[D]ue to the heavy precipitation in the

area and the potential for encountering high

volumes of groundwater during the mining

operation, Kinross would not be able to

develop and operate the mine without a

NPDES waste discharge permit.”

9. (Defendant denies both the accuracy and the

relevancy of the following facts.) In February 1995, EQC

App. 1-8

amended the Three Basin Rule to permit some types of

nonindustrial wastewater discharges but added a new

provision to the rule making it applicable to WPCF permits

and prohibiting discharges from industrial sources that have

any measurable effect on surface water.

OAR 340-41-470(7)(b)(B).

10. On March 21, 1995, DEQ denied plaintiff an

NPDES permit because OAR 340-41-470 (the Three Basin

Rule) does not allow for the discharge of any industrial

process water within the waters of the North Santiam River

Subbasin. On April 7, 1995, plaintiff requested a contested

case hearing before EQC on the denial of its application. On

August 30, 1996, EQC issued a final order denying plaintiff's

application for an NPDES permit.

11. To date plaintiff and its predecessors have

spent a substantial amount of money on exploration,

App. I-9

development, and permitting costs for the Bornite Project

since the claims were staked in 1975.

12. (Defendant denies both the accuracy and

relevancy of the following, unless the words “as designed”

are inserted after the word mine.) DEQ’s denial of the

NPDES permit application prevents plaintiff from developing

the mine and has deprived plaintiff of all economically

beneficial or productive uses of its mining claims.

/S/ Phillip D. Chadsey

Phillip D. Chadsey, OSB No. 66028

- Of Attorneys for Plaintiff

Dated: March 27, 1997

/S/ Denise G. Fjordbeck

Denise G. Fjordbeck, OSB No. 82257

Of Attorneys for Defendant

Dated: March 27, 1997

App. J-1

CLEAN WATER ACT

40 CFR §440.104(b)(2)(i) (1999)

New source performance standards (NSPS)

(2)(i) In the event that the annual precipitation falling on the

treatment facility and the drainage area contributing surface

runoff to the treatment facility exceeds the annual evaporation,

a volume of water equal to the difference between annual

precipitation falling on the treatment facility and the drainage

area contributing surface runoff to the treatment facility and

annual evaporation may be discharged subject to the limitations

set forth in paragraph (a) of this section.

a7

al)

a aoe

er

ve

Shean

ee

mae,

>

App. K-1

LAND USE PLANS

43 USC §1712(c)(8) (West 1986)

(c) Criteria for development and revision.

In the development and revision of land use plans, the

Secretary shall:

(8) provide for compliance with applicable pollution control

laws, including State and Federal air, water, noise, or other

pollution standards or implementation plans.

App. L-1

THREE BASIN RULE (as originally adopted)

OAR 340-41-470

(1) In order to preserve the existing high quality water for

municipal water supplies and recreation, it is the policy of the

EQC to prohibit any further waste discharges to the waters of:

(a) The Clackamas River Subbasin;

(b) The McKenzie River Subbasin above the Hayden

Bridge (river mile 15);

(c) The North Santiam River Subbasin.

(2) The Environmental Quality Commission _ shall

investigate, together with any other affected state agencies, the

means of maintaining at least existing minimum flow during the

summer low flow period.

ey eer a a

App. M-1

THREE BASIN RULE (as amended) ~

OAR 340-041-0470(1)-(7)

(1) In order to preserve or improve the existing high quality

water for municipal water supplies, recreation, and preservation

of aquatic life, new or increased waste discharges shall be

prohibited, except as provided by this rule, to the waters of:

(a) The Clackamas River Subbasin;

(b) The McKenzie River Subbasin above the Hayden

Bridge (river mile 15):

(c) The North Santiam River Subbasin.

(2) Except as otherwise provided for in this rule, this rule

becomes effective and applies to all permits pending or applied

for after the date of filing with the Secretary of State. For

purposes of sections (1) through (7) of this rule, the following

definitions apply:

. (a) “Waste Discharges” are defined to mean any

discharge that requires and NPDES permit, WPCF permit, or

401 Certification. Individual on-site sewage disposal systems

subject to issuance of a construction-installation permit;

domestic sewage facilities that discharge less than 5,000 gallons

per day under WPCF permit; biosolids land applied within

agronomic loading rates pursuant to OAR Chapter 340,

Division 50; and reclaimed domestic waste water land applied

at agronomic rates pursuant to OAR Chapter 340, Division 55

are excluded from this definition;

App. M-2

(b) “Existing Discharges” are defined as _ those

discharges from point sources which existed prior to

January 28, 1994;

(c) “Existing Facilities” are defined as those for which

construction started prior to January 28, 1994. Where existing

facilities are exempted from requirements placed on new

facilities, the exemption applies only to the specific permit(s)

addressed in the subsection which allows the exemption;

(d) “New” NPDES and WPCF permits are defined to

include permits for potential or existing discharges which did

not previously have a permit, and existing discharges which

have a permit, but request an increased load limitation;

(e) “Agronomic Loading Rate” means the application

of biosolids or reclaimed effluent to the land at a rate which is

designed to:

(A) Provide the quantity of plant nutrients, usually

nitrogen, needed by a food crop, feed crop, fiber crop, cover

crop or other vegetation grown on the land; and

(B) To minimize the quantity of nitrogen or other

nutrients from the land applied materials that passes below the

root zone of the crop or vegetation grown on the land to

groundwater.

(f) “Biosolids” means solids derived from primary,

secondary, or advanced treatment of domestic wastewater

which have been treated through one or more controlled

processes that_ significantly reduce pathogens and reduce

volatile solids or chemical stabilize solids to the extent that they

do not attract vectors. This term refers to domestic wastewater

App. M-3

treatment facility solids that have undergone adequate treatment

to permit their land application;

(g) “Reclaimed Wastewater” means treated effluent

from a domestic wastewater treatment system which, as a result

of treatment, is suitable for a direct beneficial purpose or a

controlled use that could not otherwise occur.

(3) To respond to emergencies or to otherwise avoid

imminent serious danger to public health or welfare, the

Director or designee may allow lower water quality on a short-

term basis.

(4) The Director or a designee may renew or transfer

NPDES and WPCF permits for existing facilities. Existing

facilities with NPDES permit may not be granted increases in

their permitted mass load limitations. The following

restrictions and exceptions apply:

(a) The Department shall conduct an inspection prior to

permit renewal. Existing sources with general permits who are

found not to qualify for a general permit, and who wish to

continue discharging, shall be required to apply for an

individual permit;

(b) Fish hatcheries (General Permit 300) and log ponds

(General Permit 400) shall be required to apply for an

individual permit at the time of permit renewal:

(c) Additional industrial, confined animal feeding

operations, or domestic waste loads that are irrigated on land at

agronomic rates or that otherwise meet the conditions of section

(7) of this rule shall not be considered an increase in the

permitted wasteload.

App. M-4

(5) The Director or a designee may issue the following

General Permits or Certifications subject to the conditions of

the Permit or Certification:

(a) Storm water construction activities (General Permits

1200C and 1200CA);

(b) Underground storage tank cleanups using best

available treatment technology (General Permit 1500);

(c) Non-contact cooling water (General Permit 100);

(d) Filter backwash (General Permit 200);

(e) Boiler blowdown water (General Permit 500);

(f) Suction dredging (General Permit 700) only in

portions of the basins that are not designated as Scenic

Waterways under ORS 390.805 to 390.925;

(g) Federal Clean Water Act Section 401 water quality

certifications; |

(6) Long-term general and individual storm water permits

may be allowed as required by State and/or Federal law. The

following requirements apply:

(a) New storm water discharge permittees shall

maintain a monitoring and water quality evaluation program

which is effective in evaluation of the in-stream water quality

impacts of the discharge; and

App. M-5

(b) When sufficient data is available to do so, the

Department shall assess the water quality impacts of storm

water discharges. Within a subbasin, if the proportion of total

degradation that is contributed by the storm water is determined

to be significant compared to that of other permitted sources, or

if the Department determines that reducing degradation due to

storm water is cost-effective when compared to other available

pollution control options, the Department may _ institute

regulatory mechanisms or modify permit conditions to require

control technologies and/or practices which result in protection

that is greater than that required statewide.

(7) Industrial waste discharge sources, confined animal

feeding operations, and domestic sewage treatment facilities

shall meet the following conditions:

(a) No NPDES permits for new industrial or new

confined animal feeding operation waste discharges, or new

domestic sewage treatment facilities shall be issued, except as

allowed under section (3), (4), (5), and (6) of this rule;

(b) The Department may issue WPCF permits for new

industrial or confined animal feeding operation waste

discharges provided;

(A) There is no waste discharge to surface water;

and

(B) All groundwater quality protection

requirements of OAR 340-040-0030 are met. Neither the

Department nor the Commission shall grant a concentration

limit variance as provided in OAR 340-040-0030, unless the

Commission finds that all appropriate groundwater quality

protection requirements and compliance monitoring are met and

App. M-6

there will be no measurable change in the water quality of the

surface water that would be potentially affected by the proposed

facility. For any variance request, a public hearing shall be held

prior to Commission action on the request.

(c) The Department may issue WPCF permits for new

domestic sewage treatment facilities provided there is no waste

discharge to surface water and provided:

(A) All groundwater quality protection

requirements of OAR 340-040-0030 are met. Neither the

Department nor the Commission shall grant a concentration

limit variance as provided in OAR 340-040-0030, unless the

Commission finds that all appropriate groundwater quality

protection requirements and compliance monitoring are met and

there will be no measurable change in the water quality of the

surface water that would be potentially affected by the proposed

facility. For any variance request, a public hearing shall be held

and the permit application will be evaluated according to

paragraphs (B) and (C) of this subsection;

(B) The Commission finds that the proposed, new

domestic sewage treatment facility provides a preferable means

of sewage collection, treatment and disposal as compared to

individual on-site sewage disposal systems. To be preferable,

the Commission shall find that one of the following criteria

applies:

(i) The new sewage treatment facility will

eliminate a significant number of failing individual on-site

sewage disposal systems that cannot be otherwise reliably and

cost-effectively repaired; or

App. M-7

_ (it) The new sewage treatment facility will

treat domestic sewage that would otherwise be treated by

individual on-site sewage disposal systems, from which the

cumulative impact to groundwater is projected to be greater

than that from the new facility; or

(iii) Ifan individual on-site sewage disposal

system, or several such systems, would not normally be utilized,

a new sewage treatment facility may be allowed if the

Commission finds that the social and economic benefits of the

discharge outweigh the possible environmental impacts.

(C) Applicants for domestic wastewater WPCF

permits must meet the following requirements:

(i) Application must be for an individual

permit; and

{ii) The proposed discharge must not include

wastes that incapacitate the treatment system; and

(ili) The facility must be operated or

supervised by a certified wastewater treatment plant operator as

required in OAR 340-049-0015, except as exempted by ORS

448.430; and

(iv) Annual written certification of proper

treatment and disposal system operaticn shall be obtained from

a qualified Registered Sanitarian, Professional Engineer, or

certified wastewater treatment system operator.