July & August 2006
By Wallace McGregor
Last year marked the 25th anniversary of the passage of the Alaska National Interest Lands Conservation Act (ANILCA). The celebration marked, as well, the fleeting freedom of private property rights as exemplified by the history of the taking of the Orange Hill property without compensation.
Former U.S. Attorney General Edwin Meese III recently commented in a Wall Street Journal article (The Property Rights Test, WSJ, August 2, 2005) that, “Few constitutional protections are less ambiguous than the requirement that private property must not be taken for public use ‘without just compensation.’” Mr. Meese, however, cast his words in the wrong tense. What was once an unambiguous Constitutional protection in the minds of the drafters of the Constitution is today a tenuous right, at best.
The Orange Hill property was a 3603-acre parcel of patented (363 acres) and unpatented (3,280 acres) mining claims enclosed within the Wrangell-St. Elias National Park and Preserve (WRST) which was established by ANILCA. The history of this property illustrates an ambiguity of contemporary law. By every logical standard, the action of the government in denying the owners beneficial use of their property for twenty-five years must be recognized as a “taking.”
When ANILCA was passed, the Orange Hill property was the second largest holding in the WRST, exceeded only by the Kennecott Copper Co. holdings in the vicinity of McCarthy. A one-page document entitled “Lode Values-WRST” made available by the Park Service in 1991 noted that the Orange Hill property contained a high potential for future development. The property constitutes 21% of the total of the more than 17,000 acres of holdings considered of economic significance within the Park.
Orange Hill had been under intensive exploration for the two decades prior to the passage of ANILCA. At the close of 1980, the last year of exploration, U.S. Borax and Chemical Co. reported proven reserves of 115.7 million tons of copper, molybdenum and silver ore with additional values in zinc and gold. The gross metal value of the proven reserves at current metal prices is in excess of $23 billion. The contained copper in the proven reserves, not to mention the probable reserves, placed the deposit well above the median among the 50 largest copper deposits in the world as defined in the Quantitative Analysis of World Class Deposits published in Economic Geology, Volume 90, 1995.
The arbitrary denial of the right to mine this world class mineral deposit is an unambiguous taking. The property was under active exploration by a major mining company under option to purchase. All activity on the property was, however, suspended upon the enactment of ANILCA, so the Exploration and Option to Purchase Agreement was amended to extend the option period to 1995.
In 1985, the National Park Service was enjoined from approving any mining plans of operation in the Park. The parties (to the option to purchase agreement) were thus forced to accept the fact that they were never going to be allowed to mine their property. Therefore, the parties mutually agreed to terminate the Agreement, and the owners allowed the unpatented claims to lapse in 1986. The owners, however, believed that they would be fairly compensated for the loss of their right to mine.
When the Wrangell-St. Elias National Park and Preserve published the Environmental Impact Statement Record of Decision on August 21, 1990, the decision was presented in bold print, “Acquire All Claims.” The owners took that statement to be a good faith commitment on the part of the Federal Government to acquire their claims.
Buoyed in spirits by the belief that the Record of Decision was a commitment of the government to comply with the Fifth Amendment, the owners sent a letter to the Alaska Regional Director requesting a valuation of the patent. By 1992, the owners had offered the claims to the Park Service subject to an appraisal. The Park Service replied that Congress had not appropriated funds with which to conduct appraisals in the WRST. Year after year, thereafter, the Park Service sidestepped the repeated requests to conduct appraisals by citing the decision of Congress to appropriate funds only for property acquisitions in the Denali National Park.
In May 1994, the owners turned to the Pacific Legal Foundation for help but were informed that, “the wording of the Record of Decision had been so written that holding the NPS to that statement would be next to impossible.” In the meantime, the ten-year extension of the statute of limitation to bring inverse condemnation action was ticking away.
In February 1998, the owners received a letter from the WRST inquiring about their interest to sell the Orange Hill property. It was not until June 1999, however, that the Park Service was willing to commit to a mineral appraisal of the Orange Hill Property on the condition that the appraisal be conducted by the Park Service contract appraiser.
The appraisal property examination was to be conducted in mid-July 1999. Prior to going to the property, the appraisal team was given geological information and preliminary data on the proven reserves. The reaction of the appraisers was that, in all likelihood, the Park Service would decline to proceed with the appraisal.
After receiving the full database pertaining to the property in September, the appraiser informed the owners that he did not have a contract to proceed with the appraisal. A letter from the Alaskan Branch Chief of the Land Resources confirmed that decision shortly thereafter. Faced with the pending loss of the right to appeal under the Statute of Limitations, the owners were left with no re-course but to file suit. They informed the Park Service of their need to protect their right to pursue an inverse condemnation action by year-end unless the Park Service proceeded with its commitment to timely complete the appraisal as agreed. The Alaska Regional Resource Officer responded, claiming not to know about a deadline for filing a takings action, and steadfastly refused to proceed with the mineral appraisal.
On December 22, 1999, the owners filed a complaint charging the National Park Service with “committing a compensable taking of its eighteen patented and ninety-nine unpatented mining claims when mining operations having environmental impact were prohibited in the Wrangell-St. Elias National Park.” The filing was made with the offer to withdraw the suit upon the agreement of the National Park Service to conduct the appraisal.
Former Secretary of the Interior, Cecil Andrus, on whose watch ANILCA had been passed, took note of the injustice and, in a letter to Director Stanton, urged him to proceed with the appraisal. Director Stanton replied to Andrus indicating his determination to proceed with an appeal of the taking action while refusing to proceed with the appraisal. Previous decisions in similar cases had turned on the premise that, if a plan of operation had not been submitted and denied, a taking had not occurred. Thus, the government moved to dismiss by maintaining that the owners must have submitted a plan of operation that the Park Service could not approve. According to the government, in the absence of this formalistic process, the court has no jurisdiction to address the owners’ cause of action. The government prevailed in its argument. The case was dismissed on the grounds that it was not ripe for adjudication. Under the standard set by the court, it is the failure of a property owner to take a formal act that absolves the government of its responsibility to provide just compensation for a property taken for public use.
Having lost on its inverse condemnation suit, the owners continued to press for an appraisal but at the same time turned their efforts to gain Congressional support for appraisal and acquisition funding for the WRST. Cecil Andrus once again urged Director Stanton to follow through on the appraisal of the Orange Hill property and made note that the owners were pursuing support for an appropriation of $3.8 million for acquisitions of inholdings within the Wrangell-St. Elias National Park. Director Stanton’s reply to Andrus in a letter dated October 26, 2000, gave assurance that the appraisal would be completed and that an offer would be made to the owners.
In a meeting arranged for the purpose of coming to mutual agreement on the parameters of an appraisal, an owner representative accompanied by counsel met with NPS Chief Appraiser Gerald Stoebig and Chief Realty Officer Eugene Repoff and staff in Washington, D.C. on March 5, 2001. In opening the meeting, counsel for the owners referred to the language of the FY 2001 appropriations bill that instructed the National Park Service to set a “purchase price that is objectively fair and equitable.” He asked for their view of the term “fairness.” The gist of the response of the National Park Service participants was that the basis for judging fairness was an unknown. The comment was made, “never heard of basis for fairness.” The discussion set the tenor of the meeting.
Typical of the unyielding stance was the position expressed by Appraiser Stoebig to the effect that the mineral rights had not been diminished by enclosure within the Park. It proved to be impossible to achieve mutual agreement on any parameter. As the negotiations came to a close without agreement, Realty Officer Repoff observed that without a mutual agreement on the proposed parameters, the need for an appraisal was moot. The silence that followed was broken by the Alaska Regional Resource Officer’s mention that a fair market appraisal had been completed.
The Park Service would argue that the appraisal had been conducted with the approval of the owners, but the fact is, no such approval had been given and the appraisal had been conducted unbeknownst to the owners. When earlier reported to the owners, they refused disclosure and responded with a reaffirmation of their decision to refuse acceptance of a real estate appraisal without the mineral appraisal. The meeting closed on the note of irreconcilable differences.
After the meeting, at the recommendation of counsel, the owners relented on their decision not to accept the release of the real estate appraisal. It was learned that the Park Service had commissioned the appraisal on November 29, 2000. In the appraisal report dated December 29, 2000, with an opinion date of December 5, 2000, the appraiser reported that, “the fair market value of the fee simple estate less the mineral estate, in the subject property, is one hundred forty-six thousand dollars ($146,000).” The per acre value of $401.87 was the lowest per acre value of all WRST appraisals with one known exception, a property described as “rocky talus slopes.”
Still determined to gain just compensation, the owners turned their efforts to negotiating a mutually approved appraiser, while also attempting to gain Congressional help to resolve the impasse. The owners turned to the guidance of new Washington, D.C.-based counsel. (It was assumed that dealing with the bureaucracy would change for the better under a Republican administration, but that proved not to be the case.) As negotiations progressed, what were thought to be agreements on the selection of an appraiser proved temporary and subject to the same intransigence on the part of the Park Service management that had plagued the effort to mutually agree on appraisal parameters.
After two more years of stonewalling by the Park Service it became apparent that the burden lay on the shoulders of Congress to address the issue of compensation for the Orange Hill property taking. The effort achieved securing appropriations for the WRST in three annual budgets but never to the extent of earmarked appropriations dedicated to compensation for the Orange Hill property.
When the 2005 appropriations bill passed as an omnibus bill in the closing sessions of Congress in December 2004 with no specific instructions to acquire the Orange Hill property appended to the WRST appropriation, and with Senator Ted Stevens no longer being chairman of the Senate Appropriations Committee, there remained no further venue for relief.
The taking of Orange Hill without just compensation slipped into the annals of history.
The Orange Hill experience stands as a classic illustration of the contributing factors that the writers and signers of the Fifth Amendment to the Constitution sought to anticipate and protect against. For all the good that the ANILCA may have accomplished, it will be remembered as well for a most serious blemish: ANILCA has played a significant role in diminishing the constitutional right of freedom from governmental taking of private property without just compensation.
ANILCA’s legacy, an unambiguous taking
The Orange Hill story
Photo courtesy Wallace McGregor
Alaska Nabesna Corp. crew picture,1928. The second from the left is Bud Sargent, who sold his claims to the Alaska Nebesna Corp. He was a well known figure in the Slana area for years.
The third man from the right is Jim Dulin, President of Alaska Nabesna.
The location of the picture is at the mouth of California gulch looking north. Over the years of Mr. McGregor’s experience with the property, 1953 to the present, the cabin became totally covered by the build up of gravel, and then more recently was exhumed by the natural cutting down of the the gulch.
The third man from the right is Jim Dulin, President of Alaska Nabesna.
The location of the picture is at the mouth of California gulch looking north. Over the years of Mr. McGregor’s experience with the property, 1953 to the present, the cabin became totally covered by the build up of gravel, and then more recently was exhumed by the natural cutting down of the the gulch.
July & August 2006
