High court largely sides with DPL in termination of JG Sablan’s permit

On Friday, March 30, 2012, the Commonwealth Supreme Court issued a ruling in J.G. Sablan Rock Quarry, Inc. v. Department of Public Lands, addressing the challenge by J.G. Sablan Rock Quarry Inc. to the Department of Public Lands’ termination of a permit to mine pozzolan and basalt on the northern island of Pagan.

The permit at issue was issued to Sablan in 1995 by the Marianas Public Land Corp. In 2004, Commissioner Henry Hofschneider of the Marianas Public Lands Authority issued a notice of violation to Sablan, which detailed numerous alleged violations of the mining permit. The notice of violation provided Sablan 60 days to cure the violations and gave Sablan an opportunity to request a hearing regarding the violations within 60 days of receiving the notice. Although Sablan attempted to have the notice of violation withdrawn, MPLA did not withdraw the notice prior to the agency’s abolition.

In May 2006, Secretary John S. DelRosario of the newly created DPL issued a notice of termination of the mining permit. This notice of termination listed several grounds for termination, including: (1) failure to generate revenue; (2) failure to provide DPL with a development plan for Sablan’s proposed mining activities; (3) “conducting, or seeking to conduct, mining and related activities in areas of Pagan not covered by the permit”; and (4) failure to pay royalties owed under a previous mining permit totaling $345,914.17. DelRosario presided over a reconsideration hearing regarding the mining permit and ultimately affirmed DPL’s termination of the mining permit.

On appeal, the Supreme Court analyzed the fairness of the procedures afforded to Sablan by DPL under the Commonwealth Constitution, the Commonwealth Administrative Procedure Act, and the terms of the mining permit. The high court held that prior to terminating the mining permit, DPL was required by all three sources of law to provide Sablan with notice of the alleged violations of the permit. Because of this holding, the court reversed the trial court’s finding that Sablan had received adequate notice regarding an alleged failure to generate revenue because Sablan did not receive notice regarding this ground for termination until the day that DPL terminated the permit. As for the other three grounds for termination on appeal, the high court held that DPL provided adequate pre-termination notice through the 2004 notice of violation issued by the MPLA.

The high court then reviewed the merits of DPL’s termination decision. The court upheld DPL’s decision to revoke the mining permit on two grounds: (1) Sablan’s failure to submit a detailed development plan; and (2) Sablan’s failure to pay royalties owed under the previous mining permit. Regarding the development plan, the high court noted that the only evidence in the record was a table of contents submitted by Sablan at the reconsideration hearing that purported to be the table of contents for a development plan Sablan had previously submitted to DPL. Since neither party could produce the development plan, the high court upheld DelRosario’s determination that Sablan’s testimony lacked credibility and that no development plan had ever been submitted.

As for the failure to pay royalties, Sablan argued that it had received an oral agreement to defer payment of the royalties. The high court upheld DelRosario’s decision that, since there was no evidence apart from self-serving testimony from Sablan of any deferral agreement, no deferral agreement existed and this constituted a ground to terminate the permit.

The Supreme Court’s full opinion is J.G. Sablan Rock Quarry, Inc. v. Department of Public Lands, 2012 MP 2, and can be found at http://www.cnmilaw.org/supreme_12.htm. [B][I](CNMI Judiciary)[/I][/B]