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McKown v. United States

United States District Court, E.D. California

November 5, 2012

John H. McKOWN, IV, Plaintiff,
UNITED STATES of America, et al., Defendants.

4,268,307. Cited.

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Joyce Hope Vega, Joyce H. Vega & Associates, Riverside, CA, Moises Alcides Aviles, Aviles & Associates, San Bernardino, CA, for Plaintiff.

Dominika Natalia Tarczynska, Govt., United States Department of Justice, Washington, DC, for Defendants.


SHEILA K. OBERTO, United States Magistrate Judge.


On July 6, 2012, Plaintiff John H. McKown IV (" Plaintiff" ) filed his opening brief, pursuant to the Administrative Procedure

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Act (" APA" ), 5 U.S.C. §§ 701-06, in support of his appeal of the decision issued by the United States Department of the Interior, Interior Board of Land Appeals (" IBLA" ) in United States v. McKown, 181 IBLA 183 (June 30, 2011). (Doc. 59.) On August 13, 2012, Defendant United States of America and the other federal defendants (collectively, " Defendants" or the " Government" ) filed their response brief in opposition to Plaintiff's appeal. (Doc. 62.) Plaintiff filed his reply brief on August 23, 2012, and Defendants' reply brief was filed on September 7, 2012.[1]

Plaintiff appeals the finding by the IBLA that three unpatented mining claims to which he asserts an interest are invalid for lack of discovery of a valuable mining deposit. Defendants assert that the IBLA correctly determined that the evidence submitted by the Government during the administrative hearing was sufficient to establish a prima facie case of invalidity of the mining claims and that Plaintiff failed to meet his burden to rebut the prima facie showing and prove by a preponderance of the evidence that the mining claims were valid.

The Court has reviewed the parties' briefs and supporting documents and determined that this matter is suitable for decision without oral argument pursuant to the Local Rules of the United States District Court, Eastern District of California, Rule 230(g). For the reasons set forth below, Plaintiff's appeal of his APA claims is DENIED.


A. Relevant Mining Law

Under the General Mining Law of 1872, 30 U.S.C. §§ 21-54, (the " Mining Law" ) miners have limited rights for prospecting and mining valuable mineral deposits on federal land. The Mining Law allows private parties to acquire nonexclusive possessory interest on federal land and to assert a claim for mining purposes and ownership. See United States v. Shumway, 199 F.3d 1093, 1098-99 (9th Cir.1999). Further, the Mining Law permits the location of valuable mineral deposits on United States' public land. See 30 U.S.C. § 26. Location refers to a miner's identification of a particular mineral deposit and to his claim of exclusive mineral rights over that deposit. The location system provides that the first mineral claimant who identifies a valuable deposit of a locatable mineral and who fulfills the Mining Law's administrative requirements is entitled to produce all the minerals from the deposit without being required to purchase fee simple title from the United States. See 1 Am. L. of Mining § 30.01 (2d ed.). The Mining Law permits location of valuable mineral deposits on United States public lands. See 20 U.S.C. § 26.

Once a valuable mineral deposit has been located, the unpatented mining claim " is a property right in the full sense, unaffected by the fact that the paramount title to the land is in the United States," Union Oil Co. of Cal. v. Smith, 249 U.S. 337, 349, 39 S.Ct. 308, 63 L.Ed. 635 (1919), and constitutes a property interest " which is within the protection of the Fifth Amendment's prohibition against the taking of private property for public use without just compensation," Skaw v. United States, 740 F.2d 932, 936 (Fed.Cir.1984). The Ninth Circuit, however, has determined that, while a mining claimant may possess a property interest in an unpatented mining claim, " the property right in an

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unvalidated claim ... may permissibly be restricted pending determination of validity, in order to guard against damage to the claim and surrounding land." Clouser v. Espy, 42 F.3d 1522, 1535 n. 15 (9th Cir.1994).

A mining claim's validity is dependent upon the discovery of a valuable mineral deposit. See 30 U.S.C. § 22. " [T]o qualify as valuable mineral deposits, the discovered deposits must be of such a character that a person of ordinary prudence would be justified in the further expenditure of his labor and means, with a reasonable prospect of success, in developing a valuable mine." United States v. Coleman, 390 U.S. 599, 602, 88 S.Ct. 1327, 20 L.Ed.2d 170 (1968) (citation and quotation marks omitted). In applying this " prudent man test," profitability of the claim must be considered. See Hjelvik v. Babbitt, 198 F.3d 1072, 1074 (9th Cir.1999) (citing Coleman, 390 U.S. at 602, 88 S.Ct. 1327). " The supplemental marketability test requires a showing that the mineral deposit can be extracted, removed, and marketed at a profit." Hjelvik, 198 F.3d at 1074; see also Baker v. United States, 613 F.2d 224, 226 (9th Cir.1980).

Where a mining claim is located on land withdrawn from mineral entry under the Wilderness Act, 16 U.S.C. §§ 1131-36, the claimant must prove discovery of a valuable mineral deposit at the time of a withdrawal. See Wilderness Soc'y v. Dombeck, 168 F.3d 367, 375 (9th Cir.1999); United States v. Mavros, 122 IBLA 297, 301 (1992) (" When land is withdrawn from the operation of the mining laws the existence of a discovery on the date of withdrawal is critical to a validity determination." ) (citing Cameron v. United States, 252 U.S. 450, 456, 40 S.Ct. 410, 64 L.Ed. 659 (1920)). The claimant must also demonstrate that the mining claim is valid at the time of the contest hearing. See Hjelvik, 198 F.3d at 1074; Lara v. Sec'y of Interior, 820 F.2d 1535, 1542 (9th Cir.1987) (" Because the right to prospect for minerals ceases on the date of withdrawal, a discovery must have existed at the date of withdrawal as well as at the date of the hearing." ) (internal citation omitted). As such, a claim must be shown to be valid at both the time of the withdrawal and at the time of the contest hearing.

When the Government contests a mining claim, the Government bears the burden of establishing a prima face case that the claim is invalid. Hjelvik, 198 F.3d at 1074-75. Once the Government establishes a prima facie case, the burden of proof devolves to the claimant who must refute by a preponderance of the evidence the Government's case. Id. at 1075 (citation omitted). The claimant must establish " that a valuable mineral deposit has been discovered." Lara, 820 F.2d at 1542. Thus, while the Government bears the initial burden, it is the claimant, not the Government, who bears the ultimate burden of persuasion concerning the validity of the claims. See id.

B. Factual and Procedural Background

1. Plaintiff's Initial Claims

Plaintiff alleges in his first amended complaint (" FAC" ) that Plaintiff's family has held title to the quartz mining claims known as White Cap Nos. 1-3 (the " mining claims" ), located in Kern County, California, since 1969, and that the mining claims have been in Plaintiff's family since the turn of the 20th century. (Doc. 48, ¶¶ 58, 69.) Plaintiff indicated in his opening brief that he inherited the mining claims from his uncle. (Doc. 59, 7:3-4.)

On October 28, 1993, Plaintiff filed Lode Mining Claim Notices with the U.S. Department of the Interior, Bureau of Land Management (" BLM" ), California State

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Office, identifying the three mining claims, White Cap Nos. 1-3, that are the subject of this action. (Administrative Record (" AR" ) 2342-50; see also McKown, 181 IBLA at 185.) The White Cap Nos. 1-3 claims are located within the northeast quarter of Section 17, Township 27, Range 36E. (AR 2342, 2345, 2348.) Defendants contend that the White Cap Nos. 1-3 claims are located within the boundaries of both the Sequoia National Forest and the Kiavah Wilderness. (Doc. 62, 10:2-4 (citing AR 1218 and McKown, 181 IBLA at 186 (affirming the Defendants' contention)).) Plaintiff, however, apparently contends that the White Cap Nos. 1-3 claims are (or may be) located outside of the Kiavah Wilderness. ( See Doc. 48(FAC), ¶ 31, 61; Doc. 59, 30:9-13.)

On October 31, 1994, Congress enacted the California Desert Protection Act of 1994 (" CDPA" ), Pub. L. No. 103-433, 108 Stat. 4471 (codified in part at 16 U.S.C. §§ 410aaa to 410aaa-83). Among the provisions of the CDPA was the establishment of the Kiavah Wilderness as part of the National Wilderness Preservation System, and subject to the restrictions imposed by the Wilderness Act, 16 U.S.C. §§ 1131-36. See CDPA § 102(31), 108 Stat. at 4476. These restrictions include the proscription of commercial enterprise, permanent roads, and the use of motorized equipment within wilderness areas. See 16 U.S.C. § 1133(c). Subject to valid existing rights, the CDPA expressly withdraws lands within the Kiavah Wilderness " from location, entry, and patent under the United States mining laws." CDPA § 104(c), 108 Stat. at 4483.

On December 27, 1994, by letter recorded in Kern County, California, Plaintiff submitted to the United States Forest Service (" Forest Service" ) a Notice of Intent (" NOI" ), asserting that there was a " proven reserve" in the White Cap Nos. 1-3 claims of 36,450 metric tons of quartz " visible in the open intrusive veins." (AR 1130-32; McKown, 181 IBLA at 186.) Plaintiff's NOI indicated that the mineral rights met the " validity regulations" to justify extraction. ( See AR 1130.) Based on testing performed by Plaintiff's consultant, Robert J. Michel, Ph.D.[2], Plaintiff asserted that the " conservative estimate" of the value of the mineral deposit was over $65 million. (AR 1131, McKown, 181 IBLA at 186.) The NOI indicated that Plaintiff would be escorting potential buyers to the site, likely taking small samples of the quartz, and potentially drilling two holes on the claims in the spring of 1995 to more accurately estimate the volume of the quartz deposit. (AR 1130-31; McKown, 181 IBLA at 186.)

On February 16, 1995, the District Ranger for the Forest Service informed Plaintiff that before any work could be performed, Plaintiff would " need to file a detailed Plan of Operations ... regarding [the] proposed operations." (AR 1137-38; McKown, 181 IBLA at 186.) The District Ranger advised Plaintiff that the Forest Service would evaluate " whether the materials on [Plaintiff's] claims are considered to be locatable minerals" and that, " [i]f the determination is made that these materials are indeed locatable minerals, then work can proceed on the Plan of Operations." (AR 1137; McKown, 181 IBLA at 186.) However, the District Ranger also informed Plaintiff that if the proposed work in the Plan of Operations " includes any activities which would cause a significant disturbance that would not be in keeping with the intent of the wilderness designation," then a " Valid Existing Rights Determination

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must be conducted on the claims" before any proposed operations would be approved. (AR 1137; McKown, 181 IBLA at 186.)

Jim Voss, a geologist and Forest Service Certified Mineral Examiner, conducted a review of the report entitled " Survey and Evaluation of the Quartz Mining Company Called White Cap Owned by John McKown" and submitted by Dr. Michel on behalf of Plaintiff. (AR 1143-51; see also AR 1047-53; McKown, 181 IBLA at 187.) Voss noted that Dr. Michel " collected rock chip samples from the exposed mineralization for analysis" and " later composited the chips into one sample and analyzed that composite by wet chemical methods." (AR 1144.) However, Voss observed that Dr. Michel's report did not identify Dr. Michel as a certified chemist or assayer, did not identify who performed the chemical testing upon which Dr. Michel's results were based, and did not state what methodology was used to test the samples. (AR 1144; McKown, 181 IBLA at 187.) As such, Voss found that " [t]here is no statistical basis for concluding that the deposit is suitable for any specific industrial use based on only one or two analyses." (AR 1144.) Voss concluded that, " [o]verall, the [Dr. Michel] report does not make a conclusive argument for the quality and quantity of the quartz present in the White Cap claims." (AR 1146.) Voss noted that a locatable mineral " must be suitable and used" in an identified market and determined that " [t]here is no substantial data to support the presence of any specific markets for this quartz material in [Dr. Michel's] report." (AR 1145; McKown, 181 IBLA at 187.)

On April 5, 1995, the District Ranger informed Plaintiff via letter of the findings of Voss' report and reiterated that if Plaintiff " propose[d] any work on [his] claims which would cause surface disturbance," he was required to " file a detailed plan of operations." (AR 1153, McKown, 181 IBLA at 187.) Plaintiff was also informed that the Forest Service's mineral examiner would need to meet with Plaintiff concerning the claims " to evaluate [Plaintiff's] proposal, to discuss any markets [Plaintiff] ... had or may have for the materials from [his] claims and to conduct a ‘ Valid Existing Rights Determination’ if necessary." (AR 1153; McKown, 181 IBLA at 187.) On September 8, 1995, Voss also sent a letter to Plaintiff, stating that he would " meet with [Plaintiff] and [Plaintiff's] prospective purchaser in the field sometime in the near future to explain further to both [of] them the requirements for demonstrating valid existing rights." (AR 1156, McKown, 181 IBLA at 187.)

Plaintiff did not file a Plan of Operations with the U.S. Forest Service until March 10, 2000, almost five years after being informed that such a plan was necessary. (AR 1159-71; McKown, 181 IBLA at 187.) On June 30, 2000, the District Ranger requested a validity examination of Plaintiff's claims, which was performed by Defendant Michael D. Dunn (" Dunn" ), a geologist and Certified Mineral Examiner with the Forest Service, and by geologist Tracy V.L. Parker (the " Mineral Examiners" ). (AR 1212, 1220; McKown, 181 IBLA at 187.)

2. The Validity Examination and the Mineral Report

On May 5, 2006, the Forest Service completed a comprehensive Mineral Report and Validity Examination (the " Mineral Report" ) of the White Cap Nos. 1-3 claims. (AR 1212-1410.) The report indicates that on October 24 and 25, 2000, Forest Service personnel, including Dunn, and Plaintiff and Plaintiff's representative Rick Miller conducted an initial field examination. (AR 1237-39; McKown, 181 IBLA at 187.) During this field work,

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initial discovery points were identified by Plaintiff and his representatives, the mineral deposits were investigated, mapped and measured, samples were taken for analysis, and the claims were searched for additional discovery points. (AR 1237-38; McKown, 181 IBLA at 187.) With the exception of the exposed quartz deposit on White Cap No. 1, no additional exposed outcrops of quartz were identified on any of the claims. (AR 1238; McKown, 181 IBLA at 188.)

A second site inspection was made by Dunn and his associate Parker on May 30 and 31, 2001, to locate the remaining claim corners, map the rest of the claim geology, and dig pits below the quartz outcrop to determine if there was a continuation of quartz down the slope of White Cap Nos. 1 and 3. (AR 1238-39; McKown, 181 IBLA at 187-88.) The Mineral Examiners dug fourteen exploratory pits to bedrock, which was granodiorite and not quartz; unsuccessfully searched the claims for additional quartz outcrops; and gathered samples for comparison and analysis. (AR 1239; McKown, 181 IBLA at 188.)

On May 23, 2002, the Mineral Examiners made a third site visit at the request of Plaintiff's representative Miller after Plaintiff hired the consulting company of David Brown and Associates (" Brown" ) to independently sample the claims. (AR 1239; McKown, 181 IBLA at 188.) The Mineral Examiners were asked to monitor the investigation of Brown and to answer questions. (AR 1239; McKown, 181 IBLA at 188.) On June 26, 2002, Brown submitted a Preliminary Evaluation to Miller indicating that " [t]he silica appears to be either a hydrothermal alteration product of preexisting wall rock or roof pendant; or is a massive, pervasive bull quartz vein ..." (AR 1182; McKown, 181 IBLA at 188.) The Brown report recommended that Plaintiff seek approval by the Forest Service to begin " test drilling ... as soon as possible" to more accurately determine the volume of the quartz. (AR 1183; McKown, 181 IBLA at 188.)

Dunn completed the 191-page Mineral Report on May 5, 2006, which was approved by the Forest Service management on March 5, 2007. (AR 1212-1410; McKown, 181 IBLA at 188.) Based on the results of field examinations and sampling of the claims, the Mineral Report concluded that White Cap No. 1 " has a milky white quartz outcrop in the center of the claim that warranted further evaluation" and that White Cap Nos. 2 and 3 " did not have any significant quartz resources and were eliminated from further consideration." (AR 1218; McKown, 181 IBLA at 188.) The Mineral Report conducted an economic analysis of the silica in the White Cap No. 1 claim and concluded that the only potentially viable market as of October 31, 1994 (the time of the removal as a Wilderness designation) was for manufacturing flatglass and/or fiberglass. (AR 1247-60; McKown, 181 IBLA at 188.)

While the Mineral Report considered the " Dr. Michel process" that Plaintiff " purported [would] produce a .9999% silica (silicon dioxide) material from .0% silica for use in any application where high-purity silica is required," the Report concluded that the process " would be utilized at an independent processing facility that purchases material and not a processing procedure to be considered an integral part of the proposed White Cap mining operation." (AR 1252, 1254; McKown, 181 IBLA at 189.) Although the Mineral Examiners were unwilling or unable to enter into a confidentiality agreement regarding Dr. Michel's process, which was purportedly in the patenting stage, they were provided with a general description of the process. (AR 1253; McKown, 181 IBLA at 188-89, n. 7.) The Mineral Report concluded that Dr. Michel's

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process " is not in use and has not been demonstrated to be viable" and that the process " could be [used] by a potential buyer of occasional loads of quartz for test purposes but the value of this quartz as lump silica would be no more than the value of silica sand in the glass manufacturing industry, and possibly less because lump silica would require more processing than would sand." (AR 1254; McKown, 181 IBLA at 189.)

The Mineral Report noted that Plaintiff and his associates " provided little detail of their proposed mining operations and they did not have a specific market identified for the quartz to help determine a suitable milling and processing operation." (AR 1260; McKown, 181 IBLA at 189.) On September 25, 2001, the Mineral Examiners requested that Plaintiff provide detailed mining and processing information. (AR 1260, 1327-29; McKown, 181 IBLA at 189.) Plaintiff " provided no additional specifics" but instead provided correspondence from a mining contractor, Mel Adams, who indicated that " he would do the job from start to finish for $27 per ton." (AR 1260, 1387-88; McKown, 181 IBLA at 189.) However, the Mineral Examiners concluded that Adams " only provided brief generalities on how he intended to accomplish this task and stated that it was impossible to break costs down to specific pieces of equipment." (AR 1260, see also AR 1387-88; McKown, 181 IBLA at 189.)

Accordingly, to evaluate the validity of the White Cap claims, the Mineral Examiners " determined what [they] thought would be the most reasonable methods of mining and processing." (AR 1260; McKown, 181 IBLA at 189.) The Mineral Examiners considered and set forth methods for drilling and blasting; loading and hauling; milling and transportation; mining equipment; mobilization; road construction and repair; pre-mining clearing; and reclamation. (AR 1260-76.) Based on those methods, the Mineral Report determined the costs for mining the quartz claims in 1994 and at the time of the validity examination. The total mining costs in 2005 were $41.71 per ton and in 1994 would have been between $31.09 and 33.38 per ton; however, the market average price of silica sand for flatglass or fiberglass manufacture ranged between $14.82 and $20.04 per ton at these times. (AR 1279-80; McKown, 181 IBLA at 189.)

The Mineral Report therefore concluded that " [a]fter a comprehensive analysis of the potential markets, we determined that due to the limited size, chemical composition, and distance from potential markets, there are no locatable minerals of sufficient quality and quantity exposed within the subject claims to constitute a discovery of a valuable mineral deposit." (AR 1219; 181 IBLA at 188.)

3. The Filing of Complaints

The Mineral Report was approved by the BLM on March 5, 2007. (AR 1212, McKown, 181 IBLA at 189.) On July 23, 2007, the BLM issued a Contest of Mining Claims Complaint pursuant to 43 C.F.R. § 4.451-1, challenging the validity of Plaintiff's mining claims as of October 31, 1994. (AR 2057-62.) On August 23, 2007, Plaintiff filed an answer to the BLM's complaint.

Plaintiff also filed a complaint in the instant action on May 7, 2009, alleging causes of action for (1) declaratory and injunctive relief, requesting that the Forest Service be precluded from regulating his use of three mining claims, designated as the White Cap Nos. 1-3, under the California Desert Protection Act of 1994; (2) quiet title, requesting that the Court identify him as the owner of the White Cap Nos. 1-3; (3) civil rights violations under

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Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), alleging that the Forest Service officials deprived him of constitutional rights; and (4) illegal restraint of interstate commerce due to actions by officials with the Forest Service and the BLM. (Doc. 1.)

On May 18, 2009, Plaintiff filed an additional action in the United States Court of Federal Claims (" CFC" ), alleging claims related to the facts in this action. See McKown v. United States, Case No. 09-371 L (Fed.Cl.).

On October 19, 2009, Defendants filed a motion to stay proceedings in the instant case, pending the resolution of the administrative dispute before the United States Department of Interior's Office of Hearing and Appeals (" OHA" ) regarding the determination of Plaintiff's three mining claims. (Doc. 24.) Defendants contended that the administrative agency's resolution of whether Plaintiff had a valid property interest in the White Cap Nos. 1-3 would likely resolve the remaining issues in this litigation. On December 14, 2009, the Court granted Defendants' motion and the action was stayed pending the OHA's ruling on Plaintiff's White Cap Nos. 1-3 mining claims. (Doc. 30.) Plaintiff's CFC case was also stayed to allow the parties to complete the administrative proceedings. ( See Doc. 24, p. 3, n. 2.)

4. The Administrative Review and Decision of the OHA

A hearing was scheduled before Administrative Law Judge (" ALJ" ) James H. Heffernan to consider Plaintiff's mining claims. On December 28, 2010, Plaintiff filed a motion to exclude the Government's evidence and a motion to take core samples at the claim site. (AR 1618-35.) On January 7, 2010, the ALJ denied both motions. (AR 1559-70.) Regarding Plaintiff's motion to take core samples, the ALJ found that the motion failed to properly specify a site or location. (AR 1560-61.) The ALJ noted that core drilling is only permitted to confirm a pre-existing discovery where there has been a prior exposure of valuable minerals and may not be conducted for the purpose of exploration. (AR 1560.) The ALJ determined that, because Plaintiff's proposal lacked any ...

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