HELENA - A five-year legal showdown over Montana's historic ban on cyanide leach mining ended Wednesday when the Montana Supreme Court unanimously ruled that the ban did not deprive an out-of-state mining company of property or profit.
The high court ruled 6-0 that Canyon Resources Corp., the principal player behind the hoped-for large open pit cyanide leach mine slated for Lincoln, did not have a mining permit when voters approved the cyanide ban in November 1998. Consequently, the company had no right to mine and lost nothing when Initiative 137 passed by a 52 percent to 48 percent margin.
"This should finally put to rest any assertion about Montana's ability to protect its waters by banning the process of cyanide heap leach mining," said Attorney General Mike McGrath, whose office defended the state in the suit.
Canyon Resources President James Hesketh said he was disappointed, but not surprised by the decision. He also said the high court's ruling may not be the last word on the matter.
"At the end of the day, it's going to be the federal courts that make the decision as to whether they'll hear it or not and what the outcome is," he said.
The Helena law firm Gough Shanahan Johnson & Waterman, which is representing the company, issued a press release saying Canyon now intends to pursue the matter in federal court and will seek compensation for the value of the mine from Montana. Canyon had previously estimated the mine's lost profits at around half a billion dollars.
"The company believes that I-137 violates the U.S. Constitution and should be invalid as applied to the company," the release reads.
Justice Jim Rice, a former Republican lawmaker from Helena, wrote the majority opinion. Justice Jim Nelson wrote a stronger, concurring opinion, while Justice Brian Morris was not involved in the decision as he was the lawyer who argued the case for the state.
Cyanide leach mining uses cyanide to extract small pieces of gold diffused in large amounts of ore. Montana voters first passed the ban in 1998 and overwhelmingly rejected a Canyon-led effort to repeal the ban in 2004.
I-137 exempted operating cyanide leach mines. Canyon did not have a mining permit when voters approved the ban. Instead, the company had a 10-year mineral lease with the state and was working toward a permit. But in 1998, Canyon ran out of money and stopped making payments to the state for the exhaustive environmental study required to get a mining permit. A few months later, the state called off the study, stalling Canyon's permit application. Additionally, the Department of Natural Resources and Conservation alerted the company that it had only 17 months to open the mine or the 10-year lease of state mineral rights would expire.
Canyon's lawyers argued that before the ban passed, the company had the opportunity to mine. The cyanide ban took away that opportunity and the state can't do that without paying the company for it.
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Lawyers for the state countered that a mineral lease is not a guarantee of mining anything.
Rice concluded that because the company clearly could not mine without a permit and the state has wide leeway in issuing such permits including denying them altogether, the mere opportunity to mine is not property.
Rice further wrote that since the right to a clean and healthful environment is guaranteed in the Montana Constitution, voters were not out of line when they banned a mining method that uses a toxic substance like cyanide.
Canyon also argued that the state should not have canceled its leases to the would-be mine. Under state law, Montana offers mineral leases in 10-year segments. After that, companies have to be actually mining and paying royalties to the state to keep them. Canyon had a deal with the state that temporarily suspended the 10-year term as long as the company was actively working toward a permit. Canyon argued that fighting I-137 in court amounted to actively working toward a permit and that the company should still have the leases, which have since expired.
The top court rejected that argument, writing, "We are hard pressed to conclude that judicially challenging a voter initiative … constitutes administrative action in pursuit of the permitting process."
Canyon earlier tried to overturn I-137 outside the courts. The company lobbied the 2003 Legislature in an unsuccessful attempt to reverse the ban. Later, Canyon spent $3.5 million supporting Initiative 147, which also would have overturned the ban. Voters rejected I-147 by a 58 percent to 42 percent margin last November.
Former Canyon President Dick DeVoto announced shortly after the election that the company was looking at cyanide-free ways to open the mine.
The company's stock closed at 79 cents a share Wednesday, down from a year high of $4.82 last July. The company lost $2.3 million in the first three months of this year, documents filed with the U.S. Securities and Exchange Commission show.
Jim Jensen, executive director of the Montana Environmental Information Center and author of I-137, said the decision "vindicates Montanans' wisdom in realizing that there are some methods of mining that are simply not reasonable or acceptable."
He also said the fact that Rice relied so heavily on older federal cases to support his decision against Canyon signals that the case may not fare well at the federal level.
"If gives me an optimistic view that the federal challenges, if pursued, will be defeated, also," he said.