NORANDA EXPLORATION, INC., a Delaware corporation, Plaintiff-Respondent-Petitioner, v. M.E. OSTROM, State Geologist, Bronson C. La Follette, Attorney General, and Carroll D. Besadny, Secretary of Department of Natural Resources, Defendants-Appellants.†
No. 81-236
Supreme Court of Wisconsin
Argued February 28, 1983.----Decided July 1, 1983.
Motion for reconsideration denied, without costs, on September 19, 1983.
335 N.W.2d 596
For the defendants-appellants the cause was argued by Raymond Roder, assistant attorney general, with whom on the brief was Bronson C. La Follette, attorney general.
LOUIS J. CECI, J. This is a review of a decision of the court of appeals, Noranda Exploration, Inc. v. Ostrom, 107 Wis. 2d 205, 320 N.W.2d 530 (Ct App. 1982), which reversed a judgment of the circuit court of Oneida county, HONORABLE TIMOTHY L. VOCKE, presiding, declaring
The plaintiff, Noranda Exploration, Inc. (Noranda), is engaged in the business of mineral exploration. Noranda began exploring in Wisconsin in 1972. Companies such as Noranda typically go through several stages in the process of mineral exploration. After examining data in the public records, the explorer will make aerial electromagnetic studies, looking for subsurface anomalies. The explorer must then acquire land position in the area where it has determined that magnetic anomalies exist, by obtaining leases for the property from the landowners. The explorer then does ground surveys to eliminate cultural anomalies. Finally, the explorer drills one or more exploration holes toward the anomalies that have been located by the ground men. These exploration holes yield detailed geologic information about the location, size, and quality of mineral deposits. This final phase of exploration is at the center of the controversy in the case before us. From 1972 to October 31, 1979, Noranda drilled 192 exploratory holes in Wisconsin. During this time, Noranda spent $3,763,478 in Wisconsin. Approximately one-third of this amount was
In 1977, the Wisconsin legislature enacted
Noranda commenced this action in the circuit court on July 2, 1979. In its complaint, Noranda alleged that it had vested title to the information obtained during the course of the exploration activities, that the information was of extreme value to Noranda, and that the value of the information would be substantially reduced if it were disclosed to other persons. The complaint alleged that, in its effect,
The statutory scheme involved is somewhat complex. The purpose of
“. . . The purpose of this section is to further the public interest in informed decision-making by appropriate state agencies, including the office of the state geologist, which are responsible for mineral, geologic and other earth-related sciences by ensuring that those agencies have as much geological information as possible where such information is relevant to their functions and at the same time protecting proprietary rights in such information.”
“[a] noninterpretive lithologic description6 of all portions of core samples and, of all drill cuttings if any noninterpretive lithologic descriptions of drill cuttings are prepared, excluding mention of metalliferous minerals found in the samples and cuttings.”
Section 107.15(4)(a)(7), Stats. (1977) .
This data is to be submitted to the state geologist on or before July 1 of the year following each year in which
In addition,
“The state geologist may require that designated representative and reasonable quantities of soil, rock, core or drill cutting samples obtained by a licensee during exploration be retained by the licensee and released to the state geologist for purposes of geologic study. The state geologist shall designate the samples and the quantities to be retained by the licensee and shall notify the licensee by December 31 of the year in which a report under par. (a) is submitted. The licensee shall release the samples no later than July 1 of the year following the year in which an exploration lease for the site where the samples were obtained has expired, but release shall be no later than 10 years after the commencement of drilling at the site.”
Following the six-day trial which took place in January and February of 1980, the trial court declared
The trial court concluded that, beyond a reasonable doubt, the statute deprived Noranda of its property without due process of law and impaired Noranda‘s contract obligations to property owners whose land Noranda was exploring.
The trial court made several findings. It found that the information obtained by the process of exploration had value to the explorer and to the landowner from whom the explorer obtains a lease and that the person doing the exploring expects to have a proprietary right in the information obtained. The court found that the intrinsic value of the core sample extends indefinitely, and the period of exploration may legitimately be longer than thirteen and one-half years. It also found that even though a reading of a truly nondescriptive lithologic log would only indicate that a particular area‘s environment was favorable for minerals, it was clear that the value of the information to the company acquiring it would dissipate upon the disclosure of the information to competitors. The court found that the state had other means of obtaining the information which it felt was necessary to protect the public health and welfare and that the information required under
The trial court noted that the burden of proof is on the party who attacks the constitutionality of a statute and that to prevail, the plaintiff must show that there is no rational relationship between the law and a legitimate government interest. Nevertheless, the court concluded:
“[B]ased upon the testimony, beyond any reasonable doubt it has been shown that the operation of s. 107.15 Wis. Stats. is, in fact, a taking of property and that the State acquires, seizes, takes into possession, gains and
assumes ownership of the property developed by and owned by a private corporation.” (Emphasis supplied.)
The court of appeals reversed the trial court and dissolved the injunction barring the enforcement of the statute. The court concluded that
The court of appeals rejected Noranda‘s impairment of contract claim, stating:
“Contracts ‘will be subject to a law of the state enacted after the bargain if it is in the public interest, under the police power, to attach subsequent conditions to the contract.’ State ex rel. Building Owners & Managers Ass‘n of Milwaukee, Inc. v. Adamany, 64 Wis. 2d 280, 294, 219 N.W.2d 274, 281 (1974).” 107 Wis. 2d at 213.
The court also rejected procedural due process and equal protection arguments advanced by Noranda.
The general rule has evolved from United States Supreme Court decisions since the turn of the century that compensation is required for a governmental “taking” of property and not for losses occasioned by mere governmental regulation. See, e.g., Penna. Coal Co. v. Mahon, 260 U.S. 393 (1922); Penn Central Transp. Co. v. New York City, 438 U.S. 104 (1978); Goldblatt v. Hempstead, 369 U.S. 590 (1962); United States v. Causby, 328 U.S. 256 (1946). However, a regulation may be so
The problem of how to distinguish between an unconstitutional taking and a police power regulation is a difficult one, and the decisions of the Supreme Court have not made it less difficult. Decisions in this area of the law must necessarily be made on an ad hoc basis. As the U.S. Supreme Court has stated:
“The question of what constitutes a ‘taking’ for purposes of the Fifth Amendment has proved to be a problem of considerable difficulty. While this Court has recognized that the ‘Fifth Amendment‘s guarantee . . . [is] designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole,’ Armstrong v. United States, 364 U.S. 40, 49 (1960), this Court, quite simply, has been unable to develop any ‘set formula’ for determining when ‘justice and fairness’ require that economic injuries caused by public action be compensated by the government, rather than remain disproportionately concentrated on a few persons. See Goldblatt v. Hempstead, 369 U.S. 590, 594 (1962). Indeed, we have frequently observed that whether a particular restriction will be rendered invalid by the government‘s failure to pay for any losses proximately caused by it depends largely upon the particular circumstances [in that] case.’ United States v. Central Eureka Mining Co., 357 U.S. 155, 168 (1958); see United States v. Caltex, Inc., 344 U.S. 149, 156 (1952).” Penn Central v. New York City, 438 U.S. at 123-24.
At the outset, it is necessary to address the state‘s contention that Noranda did not have a property right in the exploration data and core, the “taking” of which would be a violation of substantive due process. The state argues that since
“Whether a right is a property right afforded protection by the Constitution of the United States is primarily dependent upon whether the right or interest has been recognized and protected by state law.” Riedy v. Sperry, 83 Wis. 2d 158, 164, 265 N.W.2d 475 (1978).
We believe that this threshold concept is satisfied in the case before us. It is clear that a mineral explorer in Wisconsin has a protectible property right in the core samples and information it has gathered; the legislature has explicitly recognized such a property interest in the language of
“The purpose of this section is to further the public interest in informed decision-making by appropriate state agencies. . . and at the same time protecting proprietary rights in such information.” (Emphasis added.)
Nevertheless, the state argues that the scope of this property right is also limited by the statute to the extent that when the exploration data and drill core samples are acquired by the state, there is no “taking” in the constitutional sense, even though Noranda‘s exploration was done on privately owned rather than state-owned land. We disagree. As the U.S. Supreme Court stated in Loretto v. Teleprompter Manhattan CATV Corp., 102 S. Ct. 3164, 3178 (1982), “government does not have unlimited power to redefine property rights.”7 In Loretto, the state of New York argued that a statute had amended property rights by requiring that building owners allow a cable television company to physically locate wires on their buildings. Even though Loretto
Having determined that Noranda has a protectible property right, the first question to be addressed in deciding the constitutionality of the public disclosure requirements of
To be a valid exercise of the state‘s police power, a statute must have a reasonable and rational relationship to the furtherance of a proper legislative purpose. State v. Jackman, 60 Wis. 2d 700, 704-05, 211 N.W.2d 480 (1973); Chicago & N.W. Ry. v. LaFollette, 43 Wis. 2d 631, 646-47, 169 N.W.2d 441 (1969). Under the police power analysis,
This court must first examine the purposes of the legislation. The stated purpose of
“to further the public interest in informed decision-making by appropriate state agencies . . . and at the same time protecting proprietary rights in such information.”
Section 107.15(1), Stats.
In Chicago & N.W.R. Co. v. La Follette, 27 Wis. 2d 505, 529, 135 N.W.2d 269 (1965), we stated:
“ ‘When the result is reached, if it is found the statutory protection is of such slight consequence, or is so incidental as to cause the provisions of the [statute] to be wholly impractical, and not in promotion of the safety it seems to strive for, then its operation would be unreasonable and arbitrary.’ (Citing Pennsylvania R. Co. v. Driscoll, 330 Pa 97, 104, 198 A. 130 (1938).)”
We conclude that the disclosure of the confidential information to the public at large bears no reasonable relationship to:
“. . . informed decision-making by appropriate state agencies . . . which are responsible for mineral, geologic and other earth-related sciences by ensuring that those agencies have as much geologic information as possible . . .”
Section 107.15(1), Stats.
Moreover, this lack of rational relationship between the legislation’s means and its goals is not cured by the periods of confidentiality provided for. As the trial court found, the information that is obtained by the explorer has a continuing value as a reference material in the explorer’s “library,”9 and:
“the information obtained by the explorer will have a negative value if turned over to the explorer‘s competition; that is, disclosure will make the information available to the competitor who will have to expend virtually no money to receive the information; and by receipt of the disclosed information the competitor will be at a substantially more competitive level without making a substantial outlay of capitol [sic].”
The nature of the industry is such that neither the three-year nor the thirteen-year period of confidentiality is adequate to ensure that the explorer retains the benefits which result from the confidentiality of the information. The intrinsic value of the core extends indefinitely, and the period of exploration may legitimately be longer than thirteen and one-half years. One reason for this is that the value of mineral discoveries depends largely upon the world‘s mineral market; even though a company may have found a mineral deposit in an area, it may not be economically feasible to mine for it immediately.
As we have previously noted, courts engage in “essentially ad hoc, factual inquiries” in determining whether a governmental regulation or restriction is a valid exercise of the police power or is an unconstitutional taking without just compensation. Penn Central v. New York City, 438 U.S. at 124. A taking may more readily be found when the interference with property can be characterized as a physical invasion by government. Id.; see, e.g., United States v. Causby, 328 U.S. 256. At the other end of the spectrum are cases in which courts have concluded that the public health, safety, morals, or general welfare would be promoted by prohibiting particular contemplated uses of land. In such situations, regulations
However, the case before us is not a zoning case, nor is the state geologist regulating mineral exploration by
“ ‘a separate question . . . whether an otherwise valid regulation so frustrates property rights that compensation must be paid.’ 102 S. Ct. at 3170-71.”
Under the court of appeals’ rationale, almost any infringement upon private property rights would be upheld so long as there existed any possible reasonable relationship between the governmental activity and a patently permissible legislative goal. This, we believe, is an unduly expansive interpretation of the state’s police power.
By the Court. ----The decision of the court of appeals is reversed.
SHIRLEY S. ABRAHAMSON, J. (dissenting). The majority declares unconstitutional the public disclosure provisions of
I acknowledge that the information subject to disclosure in this case3 can be classified as property, and I agree with the majority that the question of what constitutes taking is a problem of considerable difficulty which “the decisions of the Supreme Court have not made . . . less difficult.” Supra, p. 624.4 Although the test for
This court has discussed this balancing test in similar terms. In Just v. Marinette County, 56 Wis. 2d 7, 15, 201 N.W.2d 761 (1972), we said that the distinction between a permissible regulation and an unconstitutional taking is not a “bright line,” but turns on the degree of damage that the property owner suffers because of the regulation; “[t]he loss caused the individual must be weighed to determine if it is more than he [or she] should bear.”
The circuit court‘s 48-page decision and the extensive record consisting of several boxes of transcripts and exhibits from the seven-day trial of this case reveal that the parties and the circuit court recognized that resolu-
The circuit court found that the intrinsic value of the core sample extends indefinitely; that the period of exploration may legitimately be longer than thirteen and one-half years; that the value of the information to the company acquiring it could dissipate upon the disclosure of the information to competitors; that although the disclosure of the information reduces its value to the exploration company, it does not entirely eliminate its value to them; and that even after disclosure, the information will still be more valuable to the company that originally produced it than to the competitor.
The majority, without close analysis of the facts, concludes that the facts show that the statutory confidentiality periods “are not adequate to ensure that the explorer retains the benefits which result from the confidentiality of the information,” supra, p. 628, implying that disclosure totally destroys the value of the property because it is like a “permanent physical occupation of property, which the U.S. Supreme Court has held is always compensable.” Supra, p. 629. I am not convinced. Disclosure after the period of confidentiality may diminish the value of property but diminution in value does not necessarily constitute a taking.
The majority also holds that the disclosure provisions are unconstitutional because they are not a valid police power regulation. I agree with the majority that “to be a valid exercise of the state‘s police power, a statute must have a reasonable and rational relationship to the furtherance of a proper legislative purpose.” Even Noranda concedes that the statute has a proper legislative purpose and that “[i]t cannot be seriously contested that the statute does serve some state interests. . . .” Noranda‘s only contention is that the statute “does not substantially
The majority, following Noranda’s arguments, implicitly evaluates the statute to determine how well the legislature has met its goals. This court, however, has rejected this approach, stating that the court does “not sit as judges of the merits of the controversy. . . . Courts are not concerned with the overall merits or wisdom of statutes.” Chicago & N.W.R. Co. v. La Follette, 27 Wis. 2d 505, 521, 135 N.W.2d 269 (1965).
The principle controlling judicial review under the rational basis test is that the court determine whether there may be facts which the legislature could have deemed to exist and which would form a reasonable basis upon which the statute may constitutionally rest. Sometimes the facts are such that the court may take j udicial notice of them. Where economic regulation is involved, it may be necessary for the facts to be presented to the trial court in an evidentiary hearing. Chicago & N.W.R. Co. v. La Follette, 27 Wis. 2d 505, 523-24 (1965) ; Hurst, Dealing with Statutes 95-98 (1982).
I am not persuaded, beyond a reasonable doubt,5 that the disclosure provisions of this statute violate due process. I would affirm the decision of the court of appeals.
I am authorized to state that JUSTICE NATHAN S. HEFFERNAN joins in this dissent.
Notes
“107.15 Requirements for mineral exploration. (1) LEGISLATIVE PURPOSE. The purpose of this section is to further the public interest in informed decision-making by appropriate state agencies, including the office of the state geologist, which are responsible for mineral, geologic and other earth-related sciences by ensuring that those agencies have as much geological information as possible where such information is relevant to their functions and at the same time protecting proprietary rights in such information.
“(2) DEFINITIONS. In this section:
“(a) ‘Exploration’ means the onsite geologic examination from the surface of an area by core, rotary, percussion or other drilling, where the diameter of the hole does not exceed 18 inches, for the purpose of searching for metallic minerals or establishing the nature of a known metallic mineral deposit, and includes associated activities such as clearing and preparing sites or constructing roads for drilling.
“(b) ‘Licensee’ means any person registered to conduct exploration as provided under sub. (3) or licensed to conduct exploration activities by the department of natural resources. If the person is a corporation, ‘licensee’ includes the parent and any subsidiary or affiliates of the corporation engaged in mining or activities related to mining in this state.
“(c) ‘Metalliferous minerals’ means naturally occurring minerals which contain metal.
“(d) ‘Mining’ or ‘mining operation’ means all or part of the process involved in the mining of metallic minerals, other than for exploration or prospecting, including commercial extraction, agglomeration, benefieiation, construction of roads, removal of overburden and the production of refuse.
“(e) ‘Prospecting’ means engaging in the examination of an area for the purpose of determining the quality and quantity of minerals, other than for exploration but including the obtaining of an ore sample, by such physical means as excavating, trenching, construction of shafts, ramps and tunnels and other means, other than for exploration, which the depatment, by rule, identifies, and the production of prospecting refuse and other associated activities.
“(3) REGISTRATION. Every person who desires to engage in exploration shall register with the state geologist on forms provided by him or her prior to commencing the exploration unless the person has been licensed to conduct exploration activities by the department of natural resources under ch. 144.
“(4) RELEASE OF GEOLOGIC DATA. (a) The licensee shall submit to the state geologist a report containing the following information on or before July 1 of the year following each year in which soil, rock, core or drill cutting samples are obtained by the licensee:
“1. The name and address of the person conducting exploration and, if the person is a corporation, the names and addresses of the parent and any subsidiaries or domestic affiliates of the corporation engaged in exploration activities in this state;
“2. The names and addresses of the owners of the lands in this state on which exploration activities have been conducted;
“3. The specific location, inclination and the collar azimuth of completed drill holes;
“4. The date core samples and drill cuttings which have been collected or prepared, were obtained;
“5. The approximate elevation of the collars of drill holes;
“6. The percent core recovery log; and
“7. A noninterpretive lithologic description of all portions of core samples and, of all drill cuttings if any noninterpretive lithologic descriptions of drill cuttings are prepared, excluding mention of metalliferous minerals found in the samples and cuttings.
“(b) The state geologist may require that designated representative and reasonable quantities of soil, rock, core or drill cutting samples obtained by a licensee during exploration be retained by the licensee and released to the state geologist for purposes of geologic study. The state geologist shall designate the samples and the quantities to be retained by the licensee and shall notify the licensee by December 31 of the year in which a report under par. (a) is submitted. The licensee shall release the samples no later than July 1 of the year following the year in which an exploration lease for the site where the samples were obtained has expired, but release shall be no later than 10 years after the commencement of drilling at the site.
“(c) The state geologist or his or her designee may visually examine, at reasonable hours mutually agreed upon by the licensee and the state geologist, core samples or drill cuttings which are reported on under par. (a), except for those core samples or drill cuttings or portions of core samples or drill cuttings which the licensee deems proprietary or confidential.
“(d) No later than upon the termination of mining or the abandonment of a site subsequent to prospecting, or 10 years from the date core samples or drill cuttings were originally obtained, the licensee shall submit to the state geologist, if not previously submitted, the following noninterpretive geologic information and samples:
“1. The name and address of the person conducting exploration and, if the person is a corporation, the names and addresses of the parent and any subsidiaries or domestic affiliates of the corporation engaged in exploration, prospecting or mining in this state;
“2. The names and addresses of the owners of the lands in this state on which exploration activities have been conducted;
“3. The specific location, inclination and the collar azimuth of completed drill holes;
“4. A noninterpretive lithologic description of all portions of core samples and, of all drill cuttings if any noninterpretive lithologic descriptions of drill cuttings are prepared, excluding mention of the quantity of metalliferous minerals found in the samples and cuttings;
“5. Geologic maps of a lithologic nature of a scale smaller than one inch equals 200 feet normally prepared as a permanent record of an exploration, prospecting or mining operation;
“6. The date core samples and drill cuttings were obtained;
“7. The approximate elevation of the collars of drill holes;
“8. The percent core recovery log; and
“9. Upon the request of the state geologist, a representative sample of any core samples or drill cuttings which have been collected.
“(e) The information submitted to the state geologist under par. (a) or (d) may not be used by any person as the basis for any claim of civil liability which is unrelated to metalliferous mineral mining. Any person submitting information in good faith and in compliance with this section shall not be held responsible for any consequences of the use or reliance upon such information.
“(f) Exploration data and samples submitted under par. (a) or (b), or both, shall be kept confidential until December 31 of the 3rd year following the date of submission. The confidentiality of the data and samples obtained during prospecting or mining shall extend to the time of the abandonment of a site subsequent to prospecting, the termination of mining if mining occurs, or 10 years after the core samples or drill cuttings were obtained, whichever is earliest.
“(5) FEES. The state geologist shall charge a reasonable fee to persons requesting copies of any written information collected or prepared under this section. A person employed by a state agency shall not be charged for such information if the information requested is necessary for the performance of the person‘s duties.
“(6) PENALTIES. (a) Any person who knowingly or willfully fails to comply with the reporting requirements of this section shall be fined up to $50,000.
“(b) In addition to the penalty prescribed in par. (a), any person who fails to submit information which is required to be submitted under this section shall forfeit $10 for each day after the date on which the information should have been submitted until the information is provided.
“(c) Any person who knowingly or wilfully violates the confidentiality requirements of this section shall be fined not less than $50 nor more than $50,000, or be imprisoned for not less than one month nor more than 6 months, or both. This paragraph shall not prevent the use of the confidential information:
“1. For assessment purposes under s. 36.25(6); or
“2. By the secretary of the department of natural resources for purposes of specific environmental analysis and permit application evaluation and by the secretary of the department of revenue provided that the confidential information shall not be released by either the department of revenue or the department of natural resources, that the departments of revenue and natural resources shall establish procedures to keep any confidential information confidential, and that the responsible person or persons in each department shall be subject to the penalty specified under this paragraph for the unauthorized release of confidential information.”
The