By Christopher Hopkins, The Saint Consulting Group
As with the preceding years 2013 has been an exciting and interesting one in the world of land use politics. Large development projects some successful, some not, have dominated headlines across the country. Depending on the industry sector, development is either beginning to take off for the first time since 2007 or in some cases, such as mineral mining, the sector is mired in a continuing recession if not outright depression. There are some sectors which should see vast improvements in their short-term outlook during 2014 and others which share a grim short term outlook through 2014.
As always, the courts made headlines in 2013 with several United States Supreme Court decisions that will have a significant impact on the development community going forward. In 2013 the court addressed a wide variety of issues from refining the definition of a land taking, the apportionment of water rights to specifics surrounding the enforcement of the federal Clean Water Act.
First Up; The Courts
Koontz v. St. John’s Water Management District
In June, the United States Supreme Court issued a decision that further defined the meaning of land taking and to what extent mitigation can be demanded during a governmental approval process.
Coy Koontz was required to get approval from Florida’s St. Johns River Water Management District, (SJRWMD) in his request to develop 3.7 acres of wetlands under the SJRWMD’s jurisdiction. Mr. Koontz offered for his wetland mitigation, a conservation easement over 11 acres of adjacent land.
SJRWMD declined the offer and countered by asking that Koontz either reduce the size of his development to one acre, or pay for improvements to unrelated property owned by the SJRWMD, located miles away. Koontz filed a suit against the SJRWMD in a Florida state court.
The case was initially dismissed but was reviewed on appeal by the Florida Circuit Court where that court ruled that the SJRWMD’s demand for offsite mitigation violated Nollan v. California Coastal Commission, a 1987 Supreme Court decision that ruled that unreasonable governmental mitigation demands equaled a form of land taking.
The Supreme Court of Florida reversed the circuit court ruling, holding that Nollan did not apply because Mr. Koontz’s permit was turned down as opposed to being granted as was the case with Nolan. They also ruled that the SJRWMD sought money rather than real property as a condition of issuing the permit
In a 5-4 decision the United States Supreme Court held that conditions imposed upon the issuance of a land-use permit must conform to the requirements of Nollan even when the permit is denied for failure to comply with the conditions. The court also ruled that Nollan applies when, as in this case, the condition was a requirement to pay money, rather than to give up an easement over the property.
The Koontz case could have significant ramifications over the next few years as cities, towns, counties and regional wetland authorities re-assess what mitigation conditions can be applied to land use applications.
Los Angeles County Flood Control District V. Natural Resources Defense Council & Santa Monica Bay Keepers.
In January the United States Supreme Court issued a decision that affected the definition of “navigable waters”. The case was drawn from a California case where the Los Angeles County Flood Control District, (LACFCD) was sued by multiple environmental groups who accused them of disobeying regulations of the Federal Clean Water Act by discharging pollutants into a navigable water, the waters being the Los Angeles and San Gabriel Rivers. The issue stemmed from the LACFCD constructing through part of the river a concrete pipe to control storm water runoff. As it turned out, there were “thousands” of other entities discharging into the rivers upstream of the defendant’s concrete pipe, but the plaintiffs offered that since the discharge was coming from the end of the LACFCD concrete pipe, they were responsible for what others were putting into the river up stream that just happened to flow through their pipe.
The District Court in Los Angeles County issued a summary judgment in favor of the LACFCD, this was appealed by the environmental groups to the Federal 9th Circuit Court of Appeals. The 9th Circuit overturned the District Court’s decision and ruled that since the LACFCD owned the “Concrete Channel” portion of the river, they were responsible for what was discharged from the channel regardless if the pollutants entered their channel from polluters upstream.
There were two significant questions that the Supreme Court addressed in its ruling:
1. Do “navigable waters of the United States” include only “naturally occurring” bodies of water so that when construction of man-made improvements to a river as part of municipal flood and storm control does it render the improved portion of the river no longer a “navigable water” under the Clean Water Act?
2. When water flows through a man-made improvement of a navigable river within a storm water control effort, and that water flows into a lower portion of the same river, can there be a “discharge” from an “outfall” under the Clean Water Act?
The Supreme Court in a 9-0 opinion, overturned the 9th Circuit’s decision and ruled in favor of the LACFCD.
Several parties asked why the court had decided to hear the case at all rather than just overturning the 9th Circuits’s ruling. The reversal of the Ninth Circuit’s judgment against the LACFCD in the case implies that local water quality advocates will continue to pressure the local regulator, the Regional Water Quality Control Board, to ensure that the new municipal storm water permit effectively implements its water quality improvement measures.
The court failed to address the first of the imposing questions, thus passing up on the opportunity to define further the meaning of “navigable waters”.
Development Projects in the News
The Pebble Partnership
On the major project front, some developers have a very good year while others did not. The mining industry has been hard hit as of late as the price of minerals continues to decline. This has resulted in a recession within the industry with a vast reduction of capital investment available for the further exploration of mineral mines.
What is likely the largest mineral mining development in the world, The Pebble Partnership in Bristol Bay, Alaska took many hits this past year but none was heard more loudly throughout the industry than the September decision of partner Anglo American Mining to withdraw from the project. Anglo American had already spent over $500 million on the project and chose to walk away without seeing a return, leaving their partner in the project, Northern Dynasty Ltd. to go it alone.
It was clear that Anglo American was the major money behind the project, Northern Dynasty itself has significant partners with the largest being Rio Tinto, which owns 19% of Northern Dynasty. The question that remains is that given the incredible level of opposition that this project has encountered, is there another partner out there willing to invest the estimated $300 million that is needed to complete the exploration and approval processes?
In October the Partnership announced that it was laying off numerous staff members and suspending contracts. Of Pebble’s 70 or so direct employees, an untold number were let go in October. Pebble won’t provide specifics on how many people were cut or the overall hit to this year’s budget. “It’s a pretty somber time, unfortunately,” Pebble spokesperson Mike Heatwole stated.
Pebble had been one of the main employers in the Bristol Bay region nearly a decade,
The Pebble Partnership is not abandoning the project, just stepping back to reassess, according to both Heatwole and Sean Magee, Northern Dynasty spokesman.
Northern Dynasty has invested $180 million into the project and still had $22 million to spend as of October.
The Environmental Protection Agency is finalizing an assessment of the Bristol Bay watershed that it began in February 2011. Nine Alaska Native tribal groups had petitioned EPA to block the mine using its Clean Water Act power. Instead, EPA began studying the watershed.
The value of the deposits in the mining area is estimated anywhere from $250 billion to $400 billion, that estimate has fluctuated over the years with the rise and fall of mineral prices. The primary minerals to be excavated are gold, copper and moly.
There has been widespread opposition to the project on a local and national level. The local opposition is being funded by a billionaire with a hunting lodge nearby who so far has contributed an estimated $12 million to the opposition efforts. The general argument of the opponents is that the mining could have an adverse impact on the salmon industry, which is currently the primary industry in Bristol Bay.
The opposition has gotten a lot of attention on the national level with noted environmentalists such as Robert Redford advocating against the issuing of the permits to operate. Several large companies such as Tiffany’s and Target have taken out full-page advertisements assuring their customers that they will not use any precious metals mined from the Pebble project.
Massachusetts Casino Wars
2013 saw the introduction of two unlikely dance partners, the casino gaming industry and the Commonwealth of Massachusetts. For years the Massachusetts Legislature had rebuffed any attempts by the gaming industry to open a gaming casino within the borders of Massachusetts. The gaming act that was passed by the Massachusetts legislature in 2011 put an end to that.
2013 saw a series of applicants to the newly established Massachusetts Gaming Commission for approval and several local referendums to approve host agreements in several communities. The legislation set aside three areas for a gaming casino in Massachusetts. There would be one for the western part of the state, a second for the “Metro Boston” area and a third for the southeastern part of the state. Originally the plan was that casino in the southeast would be dedicated for the Wampanoag Tribe of Mashpee once they received their federal recognition.
Western Massachusetts saw three applications and three host agreements that were ultimately voted on by local residents. Host agreements in Palmer and West Springfield were defeated by residents with casino moguls Mohegan Sun and Hard Rock Café being rebuffed. The Palmer effort lost in an extremely close vote with only 94 votes separating the two sides out of the 5,220 cast. The West Springfield/Hard Rock effort was defeated resoundingly with 55% of the residents rejecting the agreement.
The City of Springfield partnered with MGM Grand has come out of the skirmishes with the only viable option in Western Massachusetts having had their host agreement approved by a 58% to 42% margin. The Springfield/MGM effort is now awaiting word from the Mass Gaming Commission for the finalization of their application.
The Boston area licensing process was no less interesting then the western part of the state. Again there were three companies partnered with three communities vying for one license. One of the biggest surprises came when three weeks before an East Boston/Revere vote on the Suffolk Downs/Caesars Palace agreement, Caesars Palace withdrew itself from consideration. There were ongoing doubts that Caesars would pass the state background checks of all applicants wishing to be granted a gaming license.
The vote in East Boston was held without an identified partner for Suffolk Downs and was defeated by the voters by a 56% to 44% margin. Revere who also had a vote on the Suffolk Downs host agreement passed their agreement with 61% of the vote. 2013 ended with Revere taking over the entire Suffolk Downs project, moving the casino location from East Boston to Revere, readjusting their host agreement with Revere and recruiting Mohegan Sun to be their partner. A vote on the Revere only host agreement is expected in early 2014.
Mohegan Sun was freed up to pursue the partnership in Revere after their proposal to build a casino in Milford was overwhelming defeated by voters with 64% voting no.
The clearest victor in the Boston area licensing efforts has been Steve Wynn’s proposed $1.2 billion resort along the Mystic River in Everett. When the host agreement his company negotiated with the city went before Everett voters, it was approved in an epic landslide with 87% of the residents voting yes. After passing the background check that is required, the Wynn proposal is now before the Mass Gaming Commission for final approval.
The strangest and most fluid of the three regional processes has been the Southeastern Massachusetts efforts. When the bill was passed in 2011, the Southeastern Region was dedicated to a tribal casino by the Mashpee Wampanoag Tribe. The tribe, still trying to pass federal muster, could not submit an application and therefore in April, the gaming commission opened the bidding process to private corporations. There have been several proposals bantered about including a Wampanoag Casino in the town of Aquinnah on Martha’s Vineyard.
The tribe maintains that it has secured their federal recognition and is seeking a casino outside of the Massachusetts Gaming Commission process. The Commonwealth of Massachusetts has filed suit to stop this effort.
Meanwhile rumors are rampant about possible casino efforts in Fall River, Bridgewater and Taunton.
These and other land use projects and issues will be sorted out in 2014 making it another exciting year in land use politics. Stay tuned.
Christopher Hopkins is senior vice president of The Saint Consulting Group, email Hopkins@tscg.biz