Great Northern Properties, L.p. v. United States

United States Court of Appeals
for the Federal Circuit
______________________
GREAT NORTHERN PROPERTIES, L.P.,
Plaintiff-Appellant
v.
UNITED STATES,
Defendant-Appellee
______________________
2022-2086
______________________
Appeal from the United States Court of Federal Claims
in No. 1:21-cv-02148-EJD, Senior Judge Edward J.
Damich.
______________________
Decided: February 15, 2024
______________________
CHAD E. ADAMS , Browning, Kaleczyc, Berry & Hoven,
PC, Helena, MT, argued for plaintiff-appellant. Also rep-
resented by STEVEN WADE.
AMBER BETH BLAHA, Appellate Section, Environment
and Natural Resources Division, United States Depart-
ment of Justice, Washington, DC, argued for defendant-ap-
pellee. Also represented by D ANIEL HALAINEN, T ODD K IM .
______________________
Before M OORE, Chief Judge, D YK and STOLL , Circuit
Judges.
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GREAT NORTHERN PROPERTIES, L. P. v. US 2
D YK, Circuit Judge.
Great Northern Properties, L.P. (“GNP”) brought suit
against the United States, alleging a Fifth Amendment
taking of its coal leases on the Otter Creek property in
Montana. GNP contended that the federal government
acted through the Montana state regulatory authority to
preclude the necessary permits. GNP’s theory was that ei-
ther Montana’s actions were coerced by the federal govern-
ment or that Montana acted as an agent of the federal
government. The Court of Federal Claims (“Claims Court”)
dismissed for lack of subject matter jurisdiction. In the al-
ternative, the Claims Court dismissed for failure to state a
claim upon which relief could be granted. We agree that
the Claims Court properly dismissed for lack of subject
matter jurisdiction. GNP did not establish that Montana’s
actions were coerced, or that Montana acted as an agent of
the federal government. We affirm.
BACKGROUND
I
Coal mining in Montana has long been subject to state
and federal regulation. Since 1973, Montana has required
operators to obtain permits before engaging in strip min-
ing. MONT . C ODE A NN. § 82-3-104 (1973) (repealed 1979).
Montana’s 1973 statute provided that “[n]o operator may
engage in strip mining without first obtaining approval of
a strip-mining plan from the department.” Id. The law
“recogniz[ed] the importance of natural resources to the
welfare of present and future generations of the people of
Montana.” Id. § 82-3-102.
In 1977, Congress enacted the Surface Mining Control
and Reclamation Act (“SMCRA”). 30 U.S.C. § 1201. The
Act was designed to “establish a nationwide program to
protect society and the environment from the adverse ef-
fects of surface coal mining operations,” and “assure that
surface coal mining operations are so conducted as to
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GREAT NORTHERN PROPERTIES, L. P. v. US 3
protect the environment.” 30 U.S.C. § 1202(a), (d). Under
this law, states can become “primacy” states by enacting
their own state law, which allows them to “assume exclu-
sive jurisdiction over the regulation of surface coal mining
and reclamation operations,” 30 U.S.C. § 1253(a). But the
state law must comply with minimum federal standards.
Id. Alternatively, states can elect not to regulate—in
which case the federal government will regulate instead,
applying federal standards directly. 30 U.S.C. § 1254(a).
Following the enactment of SMCRA, Montana decided
to repeal its existing statute and enact its own state statute
complying with federal standards. See 45 Fed. Reg. 21,560
(Apr. 1, 1980) (codified at 30 C.F.R. pt. 926.10) (“On August
3, 1979, the State of Montana submitted to the Department
of the Interior its proposed permanent regulatory program
under . . . [SMCRA].”). The 1979 enactment replaced the
existing 1973 state statute with The Montana Strip and
Underground Mine Reclamation Act (“MSUMRA”), MONT .
CODE A NN. §§ 82-4-201–82-4-255 (1979). The permitting
requirements in the new law were made more specific to
conform with the federal statute, including requiring the
state agency “to prohibit mining which would destroy the
essential hydrologic functions of alluvial valley floors
[(AVF)],” and requiring a “more detailed analysis of the hy-
drologic effects of mining” for the purposes of deciding
whether a permit should be granted. Hearing on S.B. 515
Before the S. Comm. on Nat. Res., 46 Leg. Sess., at 2 (Mont.
1979).
The legislative history of the amended Montana law
shows no objection to the federally mandated provisions.
Legislators noted that “Montana’s [prior] act is for the most
part as stringent as the federal act” and that “many federal
provisions were taken from [Montana’s] act.” Id. The Mon-
tana Department of Environmental Quality (“MDEQ”), the
state regulatory authority, was given the authority to re-
view permit applications and to issue the required mining
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GREAT NORTHERN PROPERTIES, L. P. v. US 4
permits. Following federal approval of the state regulatory
scheme, Montana was granted “primacy” status in 1982.
II
Plaintiff GNP has an ownership interest in the Otter
Creek coal property in Powder River County, Montana.1 In
2009, GNP entered into a coal lease with Arch Coal. Arch
Coal agreed to mine the coal and to pay GNP a 12.5% roy-
alty on every ton of coal. In 2012, Otter Creek Coal, LLC,
a subsidiary of Arch Coal, filed an application for a surface
mining coal permit with the MDEQ. Under Montana’s law,
before approving a strip or underground coal mining per-
mit, an applicant must show that the proposed operation
“would not interrupt, discontinue, or preclude farming on
alluvial valley floors,” MONT . CODE ANN. § 82-4-227(3)(b)(i)
(1979), nor would it “materially damage the quantity or
quality of water in surface water or underground water
systems that supply [alluvial] valley floors,” id. § 82-4-
227(3)(b)(ii). In 2017, the MDEQ “determined that an AVF
significant to agriculture was present on Tract 2” of the
proposed Otter Creek Mine. Compl. ¶ 20. The MDEQ later
determined that, due to the presence of the AVF, the coal
reserves underlying the AVF “cannot be considered for
mining.” Compl. ¶ 21. In 2020, the MDEQ further deter-
mined that additional coal deposits adjacent to Tract 2 of
the Otter Creek Mine were also precluded from mining by
the presence of an AVF. Compl. ¶ 22.
GNP alleges that the fair market value of the coal in-
terests, if not precluded by the MDEQ AVF determination,
would be at least $1,310,872,932.00, but the denial of the
permit has deprived GNP of all economically viable use of
its interest in the coal property.
1 The State of Montana also owns a share of the prop-
erty. Montana’s ownership interest is not relevant to the
takings issue.
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GREAT NORTHERN PROPERTIES, L. P. v. US 5
III
In 2021, GNP brought suit against the United States
in the Claims Court seeking compensation for an alleged
Fifth Amendment taking. Under A & D Auto Sales v.
United States, a showing that the federal government’s in-
fluence over the MDEQ was “coercive rather than merely
persuasive” or that the MDEQ was “acting as the [federal]
government’s agent” is required to hold the federal govern-
ment responsible for the MDEQ’s actions. 748 F.3d 1142,
1154 (Fed. Cir. 2014). GNP’s contention was that the tak-
ing was properly attributed to the federal government un-
der both theories. The implementation of the AVF
standards in Montana was alleged to be coercive because
“Montana had no option but to have such regulation imple-
mented within its state borders” and to deny the permits
and that the MDEQ was acting as an agent of the federal
government in deciding not to issue the mining permits.
Appellant Br. 15–16.
The Claims Court dismissed the case for lack of subject
matter jurisdiction. It concluded that there was no federal
coercion nor was Montana acting as an agent of the federal
government. The Claims Court alternatively dismissed for
failure to state a claim, relying on much the same reason-
ing, and also on the theory that the takings claims would
have been barred because of state nuisance law (there be-
ing no categorical taking) and because the regulatory tak-
ings claims failed under the Penn Central test. Penn Cent.
Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978).
GNP timely appealed. We have jurisdiction pursuant
to 28 U.S.C. § 1295(a)(3).
D ISCUSSION
We review the Claims Court’s decision to dismiss a
claim for lack of subject matter jurisdiction de novo.
Trusted Integration, Inc. v. United States, 659 F.3d 1159,
1163 (Fed. Cir. 2011). Under the Tucker Act, the Claims
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GREAT NORTHERN PROPERTIES, L. P. v. US 6
Court only has jurisdiction over claims “against the United
States.” 28 U.S.C. § 1491(a)(1).
GNP alleges that its injuries result from the two deci-
sions of the MDEQ that effectively denied the permits nec-
essary for mining. The claim is not that a taking of the
Otter Creek property occurred when the federal statute,
SMCRA, was enacted or when the federal regulations were
adopted.2 The theory instead is that a taking occurred
when Montana implemented the federal program by deny-
ing the requested permits.
I. Alleged Federal Coercion
GNP first contends that the federal government is re-
sponsible for the permit denial because Montana was co-
erced to enact its own regulatory program following the
passage of SMCRA. Coercion by the federal government of
state or private authority can create federal liability for a
taking. See A & D Auto Sales, 748 F.3d at 1154; see also
Tex. State Bank v. United States, 423 F.3d 1370, 1377 (Fed.
Cir. 2005) (“[W]here, as here, the government command to
a third party results in the transfer of alleged private prop-
erty to the United States, we think that the United States
must bear responsibility . . . .”); Turney v. United States,
126 Ct. Cl. 202, 214 (1953). In A & D Auto Sales, termi-
nated GM and Chrysler dealers alleged that the federal
government had effected a regulatory taking of their dealer
franchises by “coerc[ing]” the automakers to terminate the
dealers as a condition of federal financial assistance that
2 “GNP further clarifies that the mere enactment of
SMCRA did not affect a taking . . . .” Great N. Props., L.P.
v. United States, No. 21-2148, 2022 WL 2903359, at *5
(Fed. Cl. July 22, 2022). Indeed, in Hodel v. Indiana, the
Supreme Court held that SMCRA did not effect an uncon-
stitutional taking of private property by its “mere enact-
ment.” 452 U.S. 314, 334–35 (1981).
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GREAT NORTHERN PROPERTIES, L. P. v. US 7
“the automakers could not survive without.” 748 F.3d at
1154. On the basis of the record at that stage of the pro-
ceeding, we declined to find whether coercion existed, not-
ing that “[t]he line between coercion (which may create
takings liability) and persuasion (which does not create
takings liability) is highly fact-specific and hardly simple
to determine.” Id.3
Plaintiff does not allege that Montana would have suf-
fered any ill effects if it had decided to not enact its own
state statute. The federal statute simply provided that if a
state did not enact its own state law, a separate federal
regulatory scheme would be applicable.
As noted, the legislative history of MSURMA, the 1979
state law that repealed Montana’s prior mining regulation
to bring Montana state law in conformity with SMCRA,
shows no objection to the federal statute, recognizing that
the federal law was modeled on Montana’s own statute.
Hearing on S.B. 515 Before the S. Comm. on Nat. Res., 46
Leg. Sess., at 2 (Mont. 1979). The legislative history fur-
ther explained that a “federally-run program” would not be
in the best interests of Montana because it would mean
3 After our remand, the Claims Court determined
that the government’s action did not amount to coercion
and that the plaintiffs failed to establish that “their fran-
chise agreements would have had value in a ‘but for world’
without government assistance.” Colonial Chevrolet Co.,
Inc. v. United States, 145 Fed. Cl. 243, 322 (2019). On fur-
ther appeal, we held that the Claims Court “committed no
reversible error in determining that the dealers failed to
prove a positive value that their franchise agreements
would have had but for the challenged government ac-
tions.” Taylor & Sons, Inc. v. United States, 841 F. App’x
205, 208 (Fed. Cir. 2020) (non-precedential). Because that
conclusion was sufficient to affirm the Claims Court, we
did not reach the issue of coercion. Id.
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GREAT NORTHERN PROPERTIES, L. P. v. US 8
“less effective reclamation, less efficient use of tax dollars,
and no state input into the program.” Id. These are not
the type of considerations that rise to the level of coercion.
In any event, federal law does not dictate the result in
individual permitting cases. State law governed the per-
mitting process,4 and while Montana’s own regulatory pro-
gram, according to GNP, did not go beyond the federal
requirements, there are differences between SMCRA and
the Montana state law. For example, Montana focused its
mining program on “circumstances unique to Montana.”
45 Fed. Reg. 21,560, 21,563. And, as discussed below, the
state makes individual permitting decisions tailored to the
facts of individual cases without federal input.
The Supreme Court’s decisions upholding the constitu-
tionality of SMCRA confirm that state regulatory programs
were not coerced by the federal government. In a pre-en-
forcement challenge to the statute, when discussing the
4 See, e.g., Mont. Env’t Info. Ctr. v. Westmoreland
Rosebud Mining, LLC, 2023 WL 8103553, ___ P.3d ___
(Mont. 2023) (Montana state court considering an appeal
of an MDEQ permitting decision); see also Bragg v. W. Va.
Coal Ass’n, 248 F.3d 275, 289 (4th Cir. 2001) (discussing
SMCRA and its implementation in West Virginia, which
granted “West Virginia ‘primacy’ status,” the court held
that “because the regulation is mutually exclusive, either
federal law or State law regulates coal mining activity in a
State, but not both simultaneously. Thus, after a State en-
acts statutes and regulations that are approved by the Sec-
retary, these statutes and regulations become operative,
and the federal law and regulations . . . ‘drop out’ as oper-
ative provisions.”); Haydo v. Amerikohl Min., Inc., 830 F.2d
494, 497–98 (3d Cir. 1987) (“In order to allow the individual
states to retain this primary responsibility, the statute pro-
vided for state jurisdiction over its own operators to be ex-
clusive once the state plan has been approved.”).
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GREAT NORTHERN PROPERTIES, L. P. v. US 9
constitutionality of the “steep-slope” provision of the Act,
the Court noted that “the States are not compelled to en-
force the steep-slope standards, to expend any state funds,
or to participate in the federal regulatory program in any
manner whatsoever.” Hodel v. Va. Surface Min. & Recla-
mation Ass’n, Inc., 452 U.S. 264, 288 (1981). In fact, the
Court held that:
[T]here can be no suggestion that the Act comman-
deers the legislative processes of the States by di-
rectly compelling them to enact and enforce a
federal regulatory program. The most that can be
said is that the Surface Mining Act establishes a
program of cooperative federalism that allows the
States . . . to enact and administer their own regu-
latory programs.
Id. at 288–89 (internal citations omitted).
So too in other cases, the Supreme Court has held that
the enactment of an overall federal framework does not co-
erce a particular result in individual cases. For example,
in Griggs v. Allegheny County, Allegheny County owned
and maintained the Greater Pittsburgh Airport. 369 U.S.
84, 85 (1962). A takings claim was asserted against the
county on the theory that the state authorization of low fly-
ing flights over the claimant’s home had taken an air ease-
ment over the property. Id. at 87. The county defended on
the theory that the federal government, not the county, was
liable for the taking. Id. at 89. The airport was designed
“in conformity with the rules and regulations of the Civil
Aeronautics Administration [(‘C.A.A.’)] within the scope of
the National Airport Plan provided for in 49 U.S.C. § 1101.”
Id. at 85. Allegheny County executed agreements with the
Administrator of Civil Aeronautics “in which it
agreed . . . to abide by and adhere to the Rules and Regula-
tions of [the] C.A.A.” Id. at 86. The Supreme Court held
that the fact-specific decisions of the “promoter, owner, and
lessor of the airport” created the consequences which
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GREAT NORTHERN PROPERTIES, L. P. v. US 10
constituted the taking. Id. at 89. Allegheny County “de-
cided . . . where the airport would be built, what runways
it would need, their direction and length, and
what . . . navigation easements would be needed.” Id. De-
spite the extensive federal regulation and approval of the
county’s plan, “[t]he Federal Government [took] nothing.”
Id. The actions of Allegheny County were of the county
alone, even where there was federal regulation and a fed-
eral statutory framework.
To be sure, this court held that the SMCRA’s enact-
ment was a taking in the unusual circumstance where the
statute on its face was designed to reach a certain property
specifically. Whitney Benefits, Inc v. United States, 926
F.2d 1169, 1170 (Fed. Cir. 1991) (“A key element in this
case is that SMCRA expressly precluded a permit for sur-
face mining an AVF described in the statute in terms pre-
cisely applicable to, and known to be applicable to, the AVF
overlying the Whitney coal property.”). GNP suggests that
the facts here are analogous to those considered in Whitney
Benefits. Oral Argument 1:17–1:38. But there is no evi-
dence here that Congress designed the statute to reach the
Otter Creek property specifically—or that Congress was
even aware of the existence of the Otter Creek property
when it enacted the law in 1977. The Claims Court cor-
rectly held that GNP had not established federal coercion.
II. Allegation that the MDEQ is an Agent of the Federal
Government
GNP alternatively alleges that the existence of federal
standards created an agency relationship between the fed-
eral government and Montana. Appellant Br. 11, 15. To
create an agency relationship, a principal must “manifest[]
assent to another person (an ‘agent’) that the agent shall
act on the principal’s behalf and subject to the principal’s
control.” RESTATEMENT (T HIRD ) O F AGENCY § 1.01 (2006);
see also Hollingsworth v. Perry, 570 U.S. 693, 713 (2013)
(noting that “[a]n essential element of agency is the
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GREAT NORTHERN PROPERTIES, L. P. v. US 11
principal’s right to control the agent’s actions”) (quoting
RESTATEMENT (T HIRD) OF AGENCY § 1.01, Comment f
(2006)). GNP alleges that the federal government main-
tained sufficient control over Montana because of its re-
quired federal approval of the overall Montana program.
In similar circumstances, our court has found a lack of
agency relationship. B&G Enters., Ltd. v. United States,
220 F.3d 1318, 1325 (Fed. Cir. 2000).
B&G Enterprises concerned a regulatory takings claim,
where B&G alleged that the United States was liable for a
taking of B&G’s property rights in tobacco vending ma-
chine contracts when it provided grant funding for states
that enacted regulations restricting vending machine
sales, and California enacted such a statute. Id. at 1322.
We held that California was not acting as an agent of the
United States when it enacted its own state law. Id. at
1323–25. Because California “is an independent sovereign,
which itself possess the authority to enact legislation,” id.
at 1324, passing its own state law, pursuant to its author-
ity to do so as an independent sovereign, did not make the
state an agent of the federal government. The Claims
Court similarly and correctly found that GNP failed to es-
tablish an agency relationship.
GNP has failed to allege facts that would establish that
the federal government exercised day-to-day control over
the fact-based determinations of the MDEQ. Some cases
have found agency based on the existence of control when
a party acts pursuant to a federal order. See Preseault v.
United States, 100 F.3d 1525, 1550–51 (Fed. Cir. 1996) (en
banc); Hendler v. United States, 952 F.2d 1364, 1378–79
(Fed. Cir. 1991). But there is no contention that the MDEQ
was acting pursuant to a federal order, and GNP admits
that there was no federal order in place. Great N. Props.,
No. 21-2148, 2022 WL 2903359, at *4 (“GNP acknowledges
that ‘the State of Montana was not acting pursuant to a
federal agency order in making its AVF determination.’”).
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GNP points to the SMCRA’s “Inadequate State En-
forcement” provision “as a clear example of the control re-
tained by the United States.” Appellant Br. 18 (citing 30
U.S.C. § 1271(b)). Under the Act, the Department of the
Interior can intervene in a state regulatory program if
there is a failure of a state program to follow federal re-
quirements, but there is no provision for advance federal
agency review of individual decisions of the Montana state
agency or other state agencies for compliance. Sec-
tion 1271(a)(1) provides that, if “the Secretary has reason
to believe that any person is in violation of any requirement
of this chapter or any permit condition required by this
chapter, the Secretary shall notify the State regulatory au-
thority.” If “the State regulatory authority fails within ten
days after notification to take appropriate action,” the fed-
eral government will begin a federal inspection. 30 U.S.C.
§ 1271(a)(1). If the Secretary determines that state en-
forcement is inadequate, “the Secretary shall enforce, in
the manner provided by this chapter, any permit condition
required under this chapter, shall issue new or revised per-
mits in accordance with requirements of this chapter, and
may issue such notices and orders as are necessary for com-
pliance therewith.” Id. § 1271(b). But this is not a situa-
tion where each permitting decision is individually
reviewed or controlled by the federal government prior to
issuance. Nor is it a situation in which the Montana per-
mitting process was found to be inadequate, leading to fed-
eral intervention. Indeed, there is no evidence that the
MDEQ decision here regarding the Otter Creek coal prop-
erty was even reviewed by the federal Department of the
Interior.
As described by the Third Circuit in the context of an
issue of sovereign immunity, this regulatory scheme is one
where the federal law “is geared to the initial development
of a state program and state law is geared to the admin-
istration and regulation under that program. In a nutshell,
the Secretary steps back and lets an approved program
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GREAT NORTHERN PROPERTIES, L. P. v. US 13
run.” Pa. Fed’n of Sportsmen’s Clubs, Inc. v. Hess, 297 F.3d
310, 317 (3d Cir. 2002). Far from controlling each individ-
ual decision of a state agency, the federal government, by
its own statutory design, intends to “step[] back and let[]
an approved program run.” Id. Under these authorities,
there is no basis for finding federal control of permitting
decisions or to find that Montana was acting as an agent of
the federal government.
In short, the federal government provided no input as
to whether or not the permits should be issued. There is
extensive evidence of the specific, fact-based analysis of the
property undertaken by the MDEQ, applying state law.
Before issuing a determination on Otter Creek Coal’s per-
mit application, the MDEQ “conducted on-the-ground test-
ing, including ‘use of maps, field geology and monitoring
well and piezometer drill logs.’” Appellee Br. 8; J.A. 30.
Additionally, the MDEQ “interviewed the four ranching op-
erators in the area, three in person and one by phone.” Ap-
pellee Br. 8; J.A. 43. The MDEQ issued these
determinations after these fact-intensive surveys of the
proposed mining sites, and interviews with nearby ranch
owners and examination of geologic and hydrologic criteria.
As the Claims Court found, “[M]DEQ’s decision—based on
the site-specific and individualized assessment of the Otter
Creek coal property—is sufficiently discrete and removed
from the federal government’s action in creating these re-
quirements that there is no direct causation that would ex-
pose the government to liability.” Great N. Props., No. 21-
2148, 2022 WL 2903359, at *6.5
5 GNP also argues that the potential remedy of a fed-
eral coal exchange, providing for the exchange of private
coal precluded under the Act with federal coal that is not
precluded, “implicitly acknowledges that compensation is
due from the federal government when application of AVF
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GREAT NORTHERN PROPERTIES, L. P. v. US 14
CONCLUSION
The Claims Court properly determined that there is a
lack of subject matter jurisdiction because GNP has not es-
tablished that Montana was coerced or that the MDEQ was
acting as an agent of the federal government when it pre-
cluded mining on the Otter Creek property. The decision
of the Claims Court to dismiss is affirmed.
AFFIRMED
regulations precludes mining of private coal.” Appellant
Br. 32–33. We do not agree.
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