Posted by: Patricia Salkin | January 13, 2013

MT Supreme Court Holds Mining Company Not Subjected to Illegal Spot Zoning When Special No-Mining Zoning District Was Created Around It by Citizen Zoning Petition But Remands Takings Issue

Helena Sand and Gravel, Inc. owns 421 acres of land near East Helena, Montana, in a transitional area. The company obtained a Montana Department of Environmental Quality (MDEQ) permit to mine 110 of those acres in 2008. Before MDEQ issued the 2008 permit, a citizens’ group filed a petition with Lewis and Clark County requesting creation of a Special Zoning District to encompass Helena Sand and Gravel’s remaining 311 acres, as well as a number of neighboring properties. Approximately 70 percent of the residents of the proposed district signed the petition. The purpose of the district was, according to the citizens’ group, “to accommodate and protect the use of single-family dwelling units and associated agricultural land uses while promoting and preserving the rural residential atmosphere of the area and enhancing the aesthetic character and property values of the area.” In effect, the creation of such a district would prohibit industrial and mining activities there, barring Helena Sand and Gravel from using its remaining 311 acres for sand and gravel mining purposes in the future. The property for which the MDEQ permit was issued was unaffected by the change. Montana law provides that upon receipt of a petition of at least 60 percent of the landowners demanding that the board of county commissioners create a special zoning district, the board is authorized to create said district unless, within 30 days of the petition, the owners of at least 50 percent of the property in the district file a protest. During the Lewis and Clark Board of County Commissioners’ (the Board’s) consideration of the petition, Helena Sand and Gravel had objected to what it termed “gerrymandering” of the district by shaping it in a way which was “specifically and unreasonably drafted to benefit the [neighbors],” to the mining company’s detriment. However, since there was no formal protest by the owners of 50 percent of the land in the district within 30 days of the petition, the Board approved creation of the special district in April 2008.

The Lewis and Clark County Planning and Zoning Commission (the Commission)–which was required by statute to adopt a development pattern for the new district, as well as recommend regulations to the Board–took up the issue next. In June 2008, the Commission held a hearing on the matter, at which Helena Sand and Gravel reiterated its concerns. Helena Sand and Gravel also proposed that sand and gravel mining activities be permitted in the district pursuant to a conditional use permit. After investigating whether the new zoning comported with the surrounding uses and the county’s Growth Plan, the Commission adopted regulations in July 2008 and referred them to the Board for its approval. The Board approved the regulations.

In July 2008, Helena Sand and Gravel filed suit against the County alleging that the zoning district was improperly created and that the creation of the district constituted a taking of Helena Sand and Gravel’s property. On cross-motions for summary judgment, the District Court found in favor of the County on a both counts. The District Court held that the zoning district did not single out Helena Sand and Gravel for disparate treatment because it barred the same activity on any and all land contained within the district. Further, the District Court declined to find any property right of plaintiff’s which had been taken by the creation of the district, since the company did not have any mining permits to mine sand or gravel on any of the acres impacted by the district change. Helena Sand and Gravel here appeals.

On appeal, Helena Sand and Gravel renewed its challenge to the zoning pattern and regulations on two grounds, arguing that the county’s decision was unreasonable and an abuse of discretion, and asserting that the county had engaged in illegal spot zoning. Helena Sand and Gravel also challenged the lower court’s holding that it did not have a property right which might give rise to a takings claim against the County.

First, the Court took up the question of whether the County abused its discretion in adopting the zoning district and associated regulations without ensuring that the changes substantially complied with the County’s Growth Policy. Helena Sand and Gravel argued that the changes failed to substantially comply with the Growth Policy because the Board, in passing them, had failed to acknowledge the existing sand and gravel mining in the district, and instead had characterized the district as “primarily residential.” The Board then based its decision on the fact that the new zoning district was primarily residential/transitional, and that mining was preferred mainly in rural areas. The company argued that Ash Grove Cement Co. v. Jefferson County, 283 Mont. 486, 943 P2d 85 (Mont. 1997)—which had involved the creation of a local zoning plan which did not comply with the county Growth Plan and disregarded the actual uses of property in the area to which it applied; a zoning plan which the Ash Grove Court had rejected as improper — demanded that the court overturn the new zoning district and associated regulations. The Court distinguished the Ash Grove holding, clarifying that, unlike in Ash Grove, this zoning district had been properly created pursuant to citizen zoning petition procedures, which are authorized and encouraged by Montana law. Since the County had followed the procedural requirements for creation of a zoning district via citizen petition, and since the County had reasonably relied on information provided by planning department staff that the new district was primarily residential, the Court declined to find that the County’s decision was in any way unreasonable or an abuse of discretion.

Next, Helena Sand and Gravel claimed the adoption of the new zoning district was an act of reverse spot zoning designed to target the sand and gravel mining operation unlawfully. The Montana Supreme Court noted that it had not previously considered reverse spot zoning, but that it had taken up the issue of spot zoning before, and had employed a three part test to evaluate “whether (1) the requested use is significantly different from the prevailing use in the area, (2) the area in which the requested use is to apply is rather small, and (3) the requested change is more than the nature of special legislation.” The Court had also found illegal spot zoning where the zoning does not comply with a comprehensive plan. Since only one landowner would be affected by the creation of the new zoning district, Helena Sand and Gravel argued it passed the second prong of the test and had been subjected to spot zoning. The Court agreed that the gravel company had shown it was the only landowner impacted, but noted that the zoning at issue was done pursuant to a Growth Plan which had stated that mining should occur in the rural areas of the County, and probably not in transitional areas such as the one in which the district was located. For those reasons, and the reasons discussed above, the Court found that Helena Sand and Gravel failed the first and third prongs of the spot zoning test, and held that the County had not engaged in illegal spot zoning.

Finally, the Court took up the question of whether Helena Sand and Gravel had any cognizable property interest for which a takings claim could be made in this case. The mining company argued it had a protected property interest in eventually expanding its mining permit to mine additional acres, as well as an interest in the overall value of its 421-acre property which should be protected from regulatory takings.  With regard to future permits, the Court noted that Montana courts will find a constitutionally protected property right in the opportunity to obtain a permit only where the permit-issuing agency has no discretion to deny the permit in question. Here, the Montana Department of Environmental Quality has complex and lengthy procedures for considering mining permits; Helena Sand and Gravel’s ability to obtain a permit to mine the additional acres was by no means the kind of foregone conclusion which would give the company a constitutionally protectable property interest in eventually obtaining that permit. With the zoning change, DEQ would be unable to issue any permit to mine land in the district. Thus, there was no cognizable property interest at play with regard to a future permit.

However, on the regulatory takings question, the Court noted Montana has allowed takings claims in cases where regulatory actions deprive property owners of significant economically beneficial use of land. Yet the lower court did not apply the Penn Central takings test to this case. Therefore, the Court remanded the matter to the district court to consider the economic impact of the regulations and the extent to which the new zoning interferes with Helena Sand and Gravel’s legitimate property interests.

The Montana Supreme Court affirmed the lower court’s decision on all matters except the takings question, which was remanded.

Helena Sand and Gravel, Inc. v. Lewis and Clark County Planning and Zoning Commission, 2012 WL 5986785 (Mont. Supreme Ct. 11/30/12)

The opinion can be accessed at:{36CEF38D-0E43-4C42-B6C3-FE199998DB4B}&impersonate=true&objectStoreName=PROD%20OBJECT%20STORE&objectType=document


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