I provided the following paper at the recent CalCIMA conference in Monterey, California.
The Office of Mine Reclamation’s (OMR) decision to list or delist a mine from its list of “good mines” maintained under Public Resources Code Section 2717 (the AB 3098 list) effectively precludes a mine from selling to public agencies, critical customers in an economic environment where private-party purchases are at a historically low level. This presentation reviews the requirements for listing a mine under Public Resources Code Section 2717, and the actual prohibitions on providing mined material to state and local agencies, as contained in Public Contract Code Sections 10295.5 and 20676. The presentation also covers the delisting criteria used by OMR and reviews the due process problems with OMR’s current delisting procedures. The presentation also will examine the status of the State Mining and Geology Board’s (Board) current efforts to develop due process regulations for delisting decisions.
AB 3098 Requirements
Public Resources Code Section 2717(b) requires that, for the purposes of complying with the Public Contract Code, OMR must publish a list identifying the following:
1. Surface mining operations for which a report has been submitted pursuant to Section 2207 indicating:
(a) The reclamation plan and financial assurance have been approved.
(b) Compliance with state reclamation standards pursuant to Section 2773.
(c) Compliance with the financial assurance guidelines developed pursuant to Section 2773.1.
(d) The annual reporting fee has been submitted to the Department.
2. Surface mining operations for which an appeal has been submitted pursuant to Section 2770(e), provided the appeal has not been pending before the Board for more than 180 days.
3. Surface Mining operations for which an inspection is required and for which an inspection notice has been submitted by the lead agency indicating compliance with the reclamation plan and sufficient financial assurances.
Utilizing this list of “good mines,” Public Contract Code Section 10295.5 requires that no state agency shall acquire or use minerals from mines subject to SMARA unless the operation is identified on the list published pursuant to Public Resources Code Section 2717 as having either: (1) an approved reclamation plan and financial assurances covering the affected mining operations or (2) an appeal pending before the Board pursuant to Public Resources Code Section 2717(b) with respect to the reclamation plan or financial assurances.
Likewise Public Contract Code section 20676, mining operators and contractors are prohibited from selling mined minerals to local agencies unless the mine is not subject to SMARA or unless the operator “certifies under penalty of perjury, that the minerals are from a mining operation identified in the list published pursuant to Section 2717(b)).”
Issues Raised By OMR’s Delisting Decisions
OMR has historically kept a single list. To be listed the mining operation had to meet all of the requirements set out in Section 2717, or have an appeal on a reclamation plan or financial assurances pending before the Board with SMARA.
OMR’s manner of maintaining the AB 3098 list is problematic. To be on the list maintained by OMR, the mining operation has to meet all of the requirements of Section 2717. Thus, a mining operation could have a reclamation plan and financial assurances, thereby meeting the requirements to sell to a State Agency under Public Contract Code section 10295.5, and yet be removed from the list because an inspection report reflected a problem with its operations.
Dennis O’Bryant’s February 2010 testimony before the Board as to how the program has been implemented also reflects other problems. In particular, OMR did not rely solely on lead agencies’ inspection reports, but appears to have made independent decisions with regard to whether a mining operation met the requirements of SMARA. In some instances OMR has taken the position that a mining operation that has a reclamation plan with a minor deviation no longer has an “approved” reclamation plan. Also, it appears that OMR would remove mining operations from the list when complaints were made to OMR about the operation, while other mining operations with problematic inspection reports remained on the list essentially because no one complained to OMR. Finally, OMR appears to have required that an inspection report indicate “full compliance” with SMARA, while the law suggests that “compliance” can mean “substantial” compliance.
Moreover, OMR’s historic interpretation of its responsibilities creates problems for mining operations that are committed to coming into compliance with SMARA. For example, a mining operation may overshoot their mining boundary and require a minor amendment to its CUP and reclamation plan. The operator may agree an amendment is needed, post financial assurances to ensure reclamation of the area, and diligently pursue a reclamation plan amendment. However, compliance with legal provisions such as environmental review under CEQA may delay the necessary approval for months. Other factors may make the situation even more complicated. For example, the deviation may have occurred on property not owned by the mine operator. Despite its best efforts the mining operation may be precluded from selling to state and local agencies during the time it takes to resolve all of these issues.
The Due Process Issue
In our opinion previous delisting actions by OMR have failed to provide legally required due process protections. California courts have held that actions by government agencies that exclude a person from doing business with a government entity must be accompanied by procedural safeguards, such as notice of the violation, an opportunity to rebut those violations and, under most circumstances, a hearing. The courts have further held that basic fairness in these circumstances requires establishing written standards for debarment, the right to cross-examine witnesses, and the development of administrative findings and conclusions based on the record.
Debarment of a government contractor requires procedural due process as such an action implicates a constitutionally protected liberty interest. The courts also have stated that the hearing must take place before an impartial arbiter or tribunal. Typically, due process would prohibit a government official that was involved in investigating and prosecuting a case from participating as an adjudicator.
For example, in the case of Golden Day Schools, Inc. v. State Department of Education, the court stated that “Disqualification from bidding or contracting . . . directs the power and prestige of government at a particular person and . . . may have a serious economic impact on that person. Such debarment cannot be left to administrative improvisation on a case-by-case basis.” (2000) 83 Cal.App.4th 695, 706.
SMGB Proposed Regulations
The State Mining and Geology Board has attempted to remedy this problem by proposing regulations that would, in part, provide procedures for removing mines from the AB 3098 List. The proposed regulations have been opposed by CalCIMA on the grounds that: 1) the Board lacks authority to enact the proposed regulations; and 2) the regulations go far beyond what is needed to fix the current problems with OMR’s delisting decisions. In particular, CalCIMA has noted that the regulations set out stringent requirements for listing decisions, including requirements that local agencies are likely to find onerous, and provides that third parties may challenge listing decisions.
Tom Henry and Mike Mills are partners at Stoel Rives LLP in the Sacramento, California office. They may be reached via email at firstname.lastname@example.org and email@example.com, respectively. Their business address is 500 Capitol Mall, Sacramento, CA 95814; telephone: 916-447-0700.