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Attorneys argue about campaign contributions from coal interests to PSC members in lawsuits seeking federal intervention

BISMARCK -- Environmental groups sparred with state and federal regulators in court here Friday over whether North Dakota should be stripped of its authority to regulate the coal-mining industry, raising questions about campaign contributions from coal company officials to the elected Public Service Commission members who oversee the industry.

"We need an untainted commission," said Carrie La Seur, the attorney representing the Dacotah Chapter of the Sierra Club and the Dakota Resource Council, a group made up mostly of landowners and small-business owners.

Attorney Paul Seby, who argued on behalf of the PSC, called La Seur's statement "inflammatory." He stressed repeatedly that campaign contributions accepted since 2006 by commissioners Brian Kalk and Kevin Cramer were legal donations from individuals who, while maybe affiliated with coal companies, did not constitute corporations.

"But in order to avoid the appearance of impropriety, it's probably not prudent," U.S. District Judge Daniel Hovland interjected, prompting Seby to reply that "nowhere is that the test" of law.

Cramer is now North Dakota's lone U.S. congressman; Kalk remains on the PSC.

Hovland heard arguments on two separate cases filed by the Sierra Club and Dakota Resource Council in May 2012 in federal court in Bismarck.

Their case against U.S. Secretary of the Interior Sally Jewell stems from a dispute that dates back to 2008 and involves opponents of a proposed coal mine near South Heart, about 10 miles west of Dickinson.

The opponents claimed that thousands of dollars in campaign contributions to Kalk and Cramer from coal company owners, directors, employees and their spouses violated a conflict-of-interest provision in federal law.

Their lawsuit asks the judge to compel Jewell to withdraw approval of North Dakota's surface mining program until it's brought into full compliance with the Surface Mining Control and Reclamation Act of 1977. The act allows states to assume responsibility for regulating coal mining as long as their regulations are at least as stringent as federal regulations. North Dakota began regulating coal mining operations in the state in 1983.

Joanna Brinkman, a lawyer for the Interior Department, said the federal Office of Surface Mining Reclamation and Enforcement has never found that a state program failed to meet federal standards. It has removed a state program and replaced it with federal jurisdiction only once, in Tennessee, where lawmakers repealed the state's entire surface mining program, she said, calling it an "extreme" and "extraordinary" measure.

La Seur acknowledged that temporarily replacing the state program with the federal one "may be a severe remedy," but she said the plaintiffs could find no other language in federal law to require the Interior secretary to correct the PSC's actions.

Wayde Schafer, organizer of the Sierra Club's North Dakota chapter, said the lack of response from the federal agency to the conflict-of-interest concerns raised by club members in 2011 forced their hand.

"We tried. They ignored us. What are you going to do?" he said after the hearing.

Brinkman said Office of Surface Mining's response may have gotten a bit "bogged down" in bureaucracy, but she said a response was "in process" when the agency received the Sierra Club's notice of intent to sue.

The surface mining act's conflict-of-interest provision states employees can't solicit or accept "directly or indirectly" anything of monetary value from a coal company regulated by the state regulatory authority or that "has interests that may be substantially affected by the performance or non-performance of the employee's official duty."

La Seur said that to argue the campaign gifts were from coal company officials and not the coal companies themselves "reads the word 'indirectly' out of the rule."

Brinkman said the federal agency concluded that the contributions didn't violate the surface mining act, and she noted the lawsuit doesn't challenge the legality of the contributions but rather seeks to have the Interior secretary withdraw approval of the state program.

"In doing so, plaintiffs have assumed the truth of their own allegations," she said.

Brinkman and Seby also argued that the plaintiffs missed the statute of limitations for raising their legal challenges and that there has been no injury to the plaintiffs because the South Heart Mine hasn't been permitted.

They asked that the case be dismissed, and they're seeking the same outcome for the other case argued Friday. In that case, the Dakota Resource Council contends that memorandums, or "guidance documents," approved by the PSC over the past three decades should have been submitted to the Office of Surface Mining for review to determine if they required an amendment to the state program, which would open them up to public scrutiny and judicial review. Seby argued that such memos are "merely elaborative" of existing regulations and are a common practice among administrative agencies.

Seby has billed the state for about $150,000 in legal fees so far to defend against the lawsuits, according to PSC records. The state has reserved the right to seek attorney fees if it prevails, he noted.

"This is a tremendous drain and distraction from the state, and the state doesn't intend to lose these cases," he said.

Hovland took both cases under advisement and said he expects to rule on them within a month. His rulings may be appealed.

"One side or the other is not going to be pleased with my decision," he said.