Opinion ID: 1119416
Heading Depth: 3
Heading Rank: 3

Heading: Validity of the Regulations

Text: In 1982, DNR promulgated regulations setting a standard royalty rate on noncompetitive coal leases. 11 AAC 85.220 (1996); 11 AAC 85.225 (1996). UCM argues that the legislature neither expressly nor impliedly granted DNR authority to adjust royalty rates on existing leases, but rather reserved that power to itself. [11] The State counters that the regulations were validly promulgated by DNR within its rule-making authority. This question is one of statutory interpretation. In addressing questions of statutory interpretation, the court substitutes its independent judgment for that of the agency. Fairbanks N. Star Borough Sch. Dist. v. NEA-Alaska, Inc., 817 P.2d 923, 925 (Alaska 1991). Even under the independent judgment standard, however, the court gives some weight to what the agency has done, especially where the agency interpretation is longstanding. Id. (citation omitted). The Alaska Land Act (AS 38.05.005.990) was enacted in 1959. The Act contains no express delegation of authority to DNR to fix or adjust coal lease royalty rates. [12] However, a grant of rulemaking authority can be either express or implied. AS 44.62.030. Therefore, we must determine whether a delegation of authority is implied in this case. See Chevron U.S.A. Inc. v. LeResche, 663 P.2d 923, 928 (Alaska 1983) (holding that a section of a statute implied agency authority to adopt regulations); Boehl v. Sabre Jet Room, Inc., 349 P.2d 585, 587-88 (Alaska 1960) (holding that a grant of generalized power to effectuate and carry out the purpose of an act was an implied delegation of authority to adopt the regulations in question). [13] In Chevron, we considered a challenge to the validity of DNR regulations which required that a miscellaneous land use permit be obtained from DNR for all oil and gas exploration on state lands. 663 P.2d at 924. In exchange for the permit, explorers had to agree to submit to the Department certain geological and geophysical data and information derived from exploration. Id. In determining whether the legislature delegated rule-making authority to the Department, we considered two sections of the Alaska Land Act. Id. at 928. Alaska Statute 38.05.020(b)(1) authorizes DNR to establish reasonable procedures and adopt reasonable rules and regulations necessary to carry out the Alaska Land Act. Id. Alaska Statute 38.05.180(a), (b), (c), (e), and (f) imposes on DNR the responsibility to maximize State return from State owned oil and gas resources through careful planning, including presale analysis of tracts proposed for lease. Id. We held that these two statutes, considered together, implied the authority to adopt the challenged regulations. Id. We explained that the planning and pre-sale analysis with which DNR was charged required that it have access to the most reliable geological and geophysical data available. Id. Thus, the regulations were reasonably necessary to insure that the planning process is carried out responsibly. Id. In this case, we consider AS 38.05.020(b)(1), AS 38.05.145(a), and AS 38.05.150(d) in determining whether the challenged regulations are impliedly authorized. Alaska Statute 38.05.020(b)(1) gives DNR the power to adopt regulations necessary to carry out the Alaska Land Act. It provides that the commissioner may establish reasonable procedures and adopt reasonable regulations necessary to carry out this chapter and, whenever necessary, issue directives or orders to the director to carry out specific functions and duties; regulations adopted by the commissioner shall be adopted under the Administrative Procedure Act (AS 44.62).... This is a broad grant of rulemaking authority. See Warner v. State, 819 P.2d 28, 32 n. 3 (Alaska 1991) (noting cases in which the court evaluated the scope of an agency's implied authority under statutes conferring broad grant of rulemaking authority). Alaska Statute 38.05.145(a) gives DNR the authority to promulgate regulations for the disposition of coal deposits under the leasing procedure. [14] It provides in relevant part: Deposits of coal, phosphates, oil shale, sodium, potassium, oil, gas, geothermal resources and state land containing these deposits are subject to disposition under regulations, recommended by the director and adopted by the commissioner, and the provisions of AS 38.05.145  38.05.181. The disposition of these deposits is limited by the application of AS 38.05.150(d), which specifies maximum terms and minimum rents and royalties for coal leases. When considered together, these statutes impliedly authorize DNR to promulgate regulations regarding coal royalty rates and adjustments to those rates. The authority to adjust royalty rates is reasonably necessary to DNR's discharge of its statutory mandate to lease coal deposits on state lands. Fixing and adjusting royalties is an integral part of this disposition, and is essential to effective administration of coal leasing on state lands. Consequently, we find that the regulations promulgated to effectuate the purpose of these statutes are valid.
UCM argues that even if the delegation of authority can be implied, it is not attended by the statutory standards and procedural safeguards necessary for the valid exercise of agency authority. DNR responds that statutory standards and procedural safeguards do not need to be explicitly listed in the authorizing statute, and that sufficient standards and procedures are present. We have adopted a sliding-scale approach in analyzing the validity of a delegation of authority to an administrative agency. State v. Fairbanks N. Star Borough, 736 P.2d 1140, 1143 (Alaska 1987) (per curiam opinion expressly adopting superior court's opinion and sliding scale approach). [T]he constitutionality of a delegation is determined on the basis of the scope of the power delegated and the specificity of the standards to govern its exercise. `When the scope increases to immense proportions ... the standards must be correspondingly more precise.' Id. (quoting Synar v. United States, 626 F. Supp. 1374, 1387 (D.D.C.), aff'd on other grounds, 478 U.S. 714, 106 S.Ct. 3181, 92 L.Ed.2d 583 (1986)). These standards may be either explicit, or implicit. [15] Municipality of Anchorage v. Anchorage Police Dep't Employees Ass'n, 839 P.2d 1080, 1086 (Alaska 1992). In Fairbanks North Star Borough, a delegation doctrine challenge was brought against a statute endowing the Governor with the power to reduce appropriations when anticipated revenues appeared inadequate to meet appropriation levels. 736 P.2d at 1142. This court upheld the superior court's finding that the legislature ha[d] articulated no principles, intelligible or otherwise, to guide the executive. Id. at 1143. Because it authorize[d] the exercise of sweeping power over the entire budget with no guidance or limitation, we held that the statute was an unconstitutional delegation of legislative power. [16] Id. at 1142-43. In Municipality of Anchorage, we applied a sliding-scale analysis to the Anchorage Municipal Assembly's delegation of power to a private arbitrator to make final and binding determinations in certain labor contract disputes. 839 P.2d at 1080. This is a fairly narrow area, albeit an important one, and because a panoply of implied standards created an elaborate and detailed structure which guides the arbitrator's decisions and guards against arbitrary action, we upheld the delegation as a valid delegation of authority. Id. at 1086-89. In this case, the legislature has delegated authority to DNR to regulate in the field of coal leases on state land. Because coal leasing on state lands is a narrow area or field, this is a delegation of broad authority to an agency with expertise to regulate a narrowly defined field Fairbanks N. Star Borough, 736 P.2d at 1143 (citing Boehl, 349 P.2d at 588). Consequently, there is less need for explicit, detailed standards to guide agency action. See Walker v. Alaska State Mortgage Ass'n, 416 P.2d 245, 254 (Alaska 1966) (holding that a statute which stated its purposes and specified its powers and limitations permissibly delegated power to a public corporation); DeArmond v. Alaska State Dev. Corp., 376 P.2d 717, 723 (Alaska 1962) (holding that the statement of purpose and the general limitations on loans provided sufficient standards to guide the corporation in adopting regulations and procedures for loan policy); Boehl, 349 P.2d at 590 (holding that it is not essential ... that the legislature circumscribe administrative discretion by express standards of action in order to sustain a delegation of broad, generalized power when [t]he exercise of [administrative] powers is hedged about by substantial safeguards). There are also a number of standards and safeguards pertaining to DNR's adjustment of royalty rates, both express and implied. Alaska Statute 38.05.150(d) requires that royalty terms not exceed twenty years, thus setting an outer time limit in which royalties must be adjusted. It also requires a five cent per ton minimum royalty. This requirement sets a floor for regulations adjusting royalties. Further standards include the constitutional mandate to encourage development consistent with the public interest [17] and to provide for the utilization, conservation, and development of the state's natural resources for the maximum benefit of the people. [18] These broad constitutional mandates guide DNR's promulgation of regulations pursuant to AS 38.05.020,.145(a), and .150(d). [19] See Kenai Peninsula Fisherman's Coop. Ass'n v. State, 628 P.2d 897, 907 (Alaska 1981) (The extent of the Commissioner's power ... should ... be interpreted in light of the overall purpose of the constitutional and legislative scheme of management of state resources prescribed by other provisions of the law.). These standards sufficiently mark[] the field within which the administrator is to act so that it may be known whether he has kept within it in compliance with the legislative will. [20] Fairbanks N. Star Borough, 736 P.2d at 1143 (quoting Synar, 626 F. Supp. at 1387). Consequently, we hold that there are sufficient standards and procedural safeguards to ensure the valid exercise of agency authority in this case.
UCM argues that 11 AAC 85.220 and 11 AAC 85.225 are invalid because they are inconsistent with the plain meaning of AS 38.05.150(d), and are beyond the scope of DNR's authority to issue regulations. UCM argues that AS 38.05.150(d) must be construed together with the other mineral leasing sections of the Alaska Land Act because they are in pari materia  enacted at the same time and dealing with the same subject matter. UCM reasons that because sections of the Alaska Land Act relating to minerals expressly provide for percentage-based royalties, and AS 38.05.150(d) does not contain any such provision, the legislature did not intend percentage-based royalties to be applied to coal leases. DNR counters that a percentage-based royalty is consistent with AS 38.05.150(d); it also asserts that the mineral leasing sections of the Alaska Land Act are not in pari materia with AS 38.05.150(d), because they do not conflict; they do not affect one another; they simply do not interact. Therefore, 11 AAC 85.220 and 11 AAC 85.225 are not inconsistent with the plain meaning of AS 38.05.150(d). We construe statutes that are in pari materia together. Underwater Constr., Inc. v. Shirley, 884 P.2d 150, 155 (Alaska 1994). Statutes are deemed to be in pari materia when they relate to the same purpose or thing or have the same purpose or object. State v. Eluska, 724 P.2d 514, 517 (Alaska 1986) (Compton, J., dissenting). While coal leasing and other mineral leasing sections share the same general purpose of providing for the disposition of minerals on state lands, this is not sufficient to render them in pari materia, as they do not deal sufficiently with the same subject matter. Consequently, we find that the percentage-based royalty contained in 11 AAC 85.220 does not conflict with the plain terms of AS 38.05.150(d). As the superior court noted, the statute does no more than set a minimum royalty, so that the establishment of a royalty of 5% of adjusted gross value is consistent with the statute as long as it exceeds 5 [cents] a ton. Finally, as the superior court also observed, if the legislature had desired to restrict the royalties to either a flat fee or a percentage rate, we assume that it would have incorporated that requirement into the statute. Consequently, we hold that 11 AAC 85.225 and 11 AAC 85.220 do not conflict with the plain meaning of AS 38.05.150(d).