20140727 Ver 1_Memo to NCDENR_20150313

attorneys +counseL'ors @Law
imi Haynes Street, Suite ror.
Raleigh, North Carolina 27604
gig.600.6270
StyersKenierait.com
mpkelley @StyersKcrnerait .corn
9rcp.600.6277
M. Cray Styers, Jr.
Karen M. Keinerait
Adam H. Steele
Mary Penny Kelley, of Counsel
101010 117.7..71►!D1-Il , 9,41
To: Craig 13romby, Assistant General Counsel, NC DENR
Katie E. Mills, Legal Intern, NC DENR
From: Mary Penny Kelley, Of Counsel, Styers & Kemerai
representing Hanson Aggregates
Date: March 13, 2015
Re: Vested Rights at Hanson Aggregates' Crabtree Quarry
At the conclusion of our February 13, 2015 meeting, Hanson
Aggregates and I felt the matter had been resolved in favor of
recognizing vested rights since there were no serious outstanding
questions, concerns or objections voiced after an hour -long
presentation and discussion. Tom Reeder set a deadline to provide the
vested rights opinion by February 20, 2015 and we left the meeting in
an optimistic mindset that the remaining design details could be
finalized without the buffer mitigation cost of 1 Million Dollars. It is
with true dismay that we now find out that your opinion is that vested
rights do not apply.
However, as I consider your opinion, it appears to me there are still
matters that, if clarified, could change your opinion to one favorable to
recognizing vested rights.
Background
In discussing vested rights for this matter, we always jump right into
the case law without exploring some of the context that should infori
our interpretations. With this thought, I reviewed NC DENR's
Mission Statement and was reminded that it's fundamental philosophy
is to be a "resource of invaluable public assistance, rather: than a
bureaucratic obstacle of resistance" and that "an economic cost/benefit
analysis is an integral component of DENR's public service
endeavor."
Although this mission statement was adopted in January 2012, . it
reflects principles of fairness and consideration of economic interests .
that are a critical component of vested rights. To alleviate harsh
consequences from the strict application of the buffer rules, the
Department began providing relief under: a vested rights theory,
elevating what had been almost exclusively a local government zoning
remedy to a state government buffer mitigation remedy. As the
Department grew more comfortable applying the equitable remedy of
vested rights, it adopted guidance for staff to implement in June 2003.
{sK016092.17aCX ]

Memorandum Re: Vested Rights at Hanson Aggregates Crabtree Quarry
March 13, 2015
Page 2of9
As the guidance states and your opinion quotes, the concept of vested rights is "a test of fairness
to determine whether a project has proceeded to such degree that it would be unreasonable to
impose new changes in the law upon it."
Mining as Unique Endeavor
Mining is a unique business endeavor in that the property owned not only functions as a location,
but as a consumable resource that is excavated until it is exhausted. It differs from a subdivision
because it camrot adjust its design, intensity or structures to offset costs. It is a long -term
business with typical active excavation surpassing a person's lifetime. For this reason, mining
operations assemble larger tracts of land than needed in the short term and stage operations
across the property until the resource is fully extracted. As one court put it, "The very nature and
use of an extractive business contemplates the continuance of such use of the entire parcel of
land as a whole, without limitation or restriction to the immediate area excavated at the time the
ordinance was passed." Hansen Bros. Enterprises., Inc. v. Bd. Of Supervisors, 907 P.2d 1324,
1336 -37 (Cal. 1996) (internal citations omitted). After reviewing this opinion and several others,
a City of Raleigh attorney summarized case law on this topic by stating, "[T]he overwhelming
weight of authority holds that the unique nature of extractive industry necessarily contemplates
the use of the contiguous parcels of land as a whole, without limitation or restriction to the
immediate area excavated at the time of enactment of the restrictive ordinance." Settlement
Agreement' dated 4 February 2014, Exhibit 2 "Memorandum of Opinion on City of Raleigh's
Code Interpretation Request" by Dorothy K. Lepley, Deputy City Attorney (hereinafter "Raleigh
Zoning Interpretation"), p. 3.
Crabtree Quarry began in the 1940's, is still under active excavation today over 70 years later,
and anticipates continuing excavation through 2042 (the date agreed upon in settling its zoning
lawsuit with the City of Raleigh). As we discussed in our February 13, 2015 meeting, the mining
boundary for the quarry north of Crabtree Creek has remained nearly identical to the one
depicted in its first permit in 1972.2 During the meeting, Tracy Davis, Director of the Division
of Energy, Mineral and Land Resources, explained that a mining permit confirms the intent to
mine up to the permitted boundary, but that active excavation typically starts at one point and
then proceeds in phases across the entire site. In these respects, Crabtree Quarry is like other
mining operations that commits substantial time, costs and energy into extracting its resources
and should be given consideration to the unique circumstances surrounding mining that may not
be present in other types of land use.
Equal Treatment of Competitors
When NC DENR decides to grant relief to one quarry, it should be willing to grant the sarne
relief to other quarries in the state if they meet the same criteria. To do otherwise would offend a
sense of fair play and run contrary to NC DENR's mission statement that "an economic
cost /benefit analysis is an integral component of DENR's public service endeavor." In 2005, NC
DENR recognized vested rights from application of buffer rules to Wake Stone Corporation's
' Settlement Agreement between Hanson Aggregates Southeast and City of Raleigh with full copy of exhibits
submitted with my earlier memorandum dated February 18, 2015 and notebook and is located at Tab 9.
2 1972 Application for Mining Permit and other permit documents are included in notebook at Tab 5.
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quarry in Nash County.3 The Wake Stone legal opinion found that the four factors for common
law vested rights were satisfied: (1) substantial expenditures by capital investment, (2) good faith
by obtaining a Mining Permit before the buffer rules became effective, (3) reliance by initiating
mining activities, and (4) detriment from the limits to fully develop. And, although the 404/401
authorizations addressed stream impacts in one area, vested rights were recognized for the entire
site.
Through our materials submitted to date it is undisputed that Crabtree Quarry has (1) capital
investment as well as operational costs, (2) Mining Permit and modifications before the buffer
rules became effective, (3) mining activities conducted under the Mining Permit and
modifications, and (4) detriment in buffer costs of $1M and a topography that makes it difficult
to relocate existing streams. Since Crabtree Quarry mirrors the Wake Stone legal opinion's
factors for vested rights, NC DENR should give it the same vested rights recognition that it
granted to Wake Stone, including recognizing vested rights across the entire site. To do
otherwise, creates an uneven application of environmental regulatory burdens to direct
competitors in the mining business.
Clarifications on Common Law Vested Rights Analysis
Under common law, vested rights apply if the project has proceeded to such degree that it would
be unreasonable to impose new changes in the law upon it. A case decided in the same year that
the buffer rules were adopted, Browning - Ferris Industries, summarizes the criteria for vested
rights.
A party's common law right to develop and /or construct vests when:
(1) the party has made, prior to the amendment of a zoning ordinance,
expenditures or incurred contractual obligations substantial in amount, incidental
to or as part of the acquisition of the building site or the construction or
equipment of the proposed building,
(2) the obligations and/or expenditures are incurred in good faith,
(3) the obligations and /or expenditures were made in reasonable reliance on and
after the issuance of a valid building pennit, if such permit is required,
authorizing the use requested by the party.
Browning- Ferris Industries of South Atlantic, Inc. v. Guilford Co. Bd. Of Adjustment, 126 N.C.
App. 168, 171, 484 S.E.2d 411, 414 (N.C. App 1997) (internal citations omitted and text
reformatted for ease of reading). To analogize this local government zoning test to a state
government buffer rule test, it is necessary to substitute state terms for local government terms.
When that has been done, the correct test is evaluated against the timeframe of the state rule
change for a project authorized by a valid state permit.
1. Valid Government Permit
In the case of Crabtree Quarry, the quarry obtained a valid state permit when it obtained its first
mining permit. No mining may occur in the State unless pursuant to a valid operating permit
issued by DENR. See N.C. Gen. Stat. § 74.50(a). Your memorandum of law acknowledges that
the NC DENR mining permit is a valid governmental permit. You also took notice that the
s Wake Stone Corporation Nash County Quarry materials are included in notebook at Tab 2.
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Crabtree Quarry received its first mining permit in 1972 as required after the North Carolina
Mining Act became law and that it has been renewed every 10 years since then. We believe this
NC DENR permit satisfies the requirement that the quarry needed to obtain a valid govermnent
permit and that expenditures proceeded upon that permit prior to adoption of the buffer rules.
Your opinion then focuses on three statements about buffers that were included in a permit
modification that did not impact streams. The three conditions are generally that (1) any mining
activity along water will comply with EMC rules, (2) a sufficient buffer will be maintained to
prevent erosion and sedimentation of waters, and (3) an undisturbed buffer zone will be
maintained along to protect adjoining property. Although the term "buffer" is used throughout
these statements, they do not all relate to the Neuse River Riparian Buffer Rules from which
Crabtree Quarry seeks relief. The last one refers to adjoining property buffers and not stream
buffers at all. The second one echoes language from the Sedimentation Control Act that requires
measures to prevent erosion and sedimentation. Of the three, the first one is closest in that it
refers to EMC requirements and regulations, but I would contend that having a vested right from
strict application of buffer rules is a means of acting in accordance with the rules.
Later in your opinion, when you compare Wake Stone to Crabtree Quarry, you note a large
component missing from Crabtree Quarry, specifically a 404/401 approval. You noted that
Wake Stone's mining permit incorporated a 401 certification, as well as a 404 (Nationwide 26)
permit for impacts. To remove your concern, Hanson Aggregates' consultants researched
whether the quarry had any past stream impacts that would have required such permitting. If no
permit was required, then I would ask you to take note of case law that a permit is not required
for vesting if a permit was not required under the law in effect a the time of expenditures. See In
re Campsites Unlimited, 287 N.C. 493, 501, 215 S.E.2d 73, 77 (1975) (and cited for this
proposition in Browning- Ferris Industries of South Atlantic, Inc. v. Guilford County Bd. of
Adjustment, 126 N.C.App. 168, 171, 484 S.E.2d 411, 414 (N.C. App. 1997)).
By reviewing historical aerial photos of the quarry and onsite evidence of such work, it was
determined that sometime between October 19, 1987 and the end of year 1988, the quarry
relocated and rock - armored the primary stream in question along the western boundary of the
quarry. This includes upwards of 2,100 feet of stream totaling approximately' /2 acre of
jurisdictional waters. At that time, the Water Quality Certification program in North Carolina
was very young and there were no General Certifications. However, there were federal
regulations that permitted certain activities with impacts to jurisdictional waters, commonly
referred to as Nationwide Permits. The 1986 Nationwide Permits included Nationwide Permit
No. 26 that allowed upwards of 10 acres of impacts to jurisdictional waters.4 Impacts greater
than one acre required notification to and written approval from the U.S. Army Corps of
Engineers. Because the relocation was less than one acre, neither notification nor written
approval were required to do the work. Despite the absence of documentation, the work was
authorized by the existing permits at the time. It should also be noted that this previously
relocated stream makes up a large percentage of the total stream length that Hanson Aggregates
now proposes to relocate. As such, a vast majority of the new impacts are to a stream that was
4 Attached is a copy of the Federal Register for the "Final Rule for Regulatory Programs of the Corps of Engineers"
issued November 13, 1986. Part 330 addresses Nationwide Permits and begins on page 41254. Nationwide 26 is
actually the subparagraph numbered (26) under the Nationwide permits section 330.5 and is found at page 41256.
,SK015091DOCX 1

essentially previously certified for impacts under Nationwide 26. In addition, this brings us as
close in alignment with Wake Stone as possible on permitting. Further, we believe our long-
standing history of operating a mine on this site provides us more evidence that we had
substantial expenditures made in good faith reliance upon a mining permit and any required
404/401 permits with a detriment of $1 Million Dollars and difficult topography if the buffer
rules were imposed.
2. Substantial Expenditures
Since obtaining its state permits, substantial expenditures and progress of activity has occurred
under the permits' authorization. A non - exhaustive list is set out below for ease of reference:
® acquisition of land
excavation of mining pit
® construction of berms
• construction of settling ponds
• construction of stockpile areas
• landscaping
• buffering along property line
• installation of equipment
In reviewing this element, it does not appear that you dispute that the expenditures for mining
were substantial, just whether they were made in good faith. Since the substantial nature of the
expenditures is not in question, I will not address it further.
3. Good Faith
As noted above, when you analogize the zoning case law to environmental regulatory law, then
the appropriate time frame is the change in environmental regulations. The Neuse River
Riparian Buffer rules went into effect in 1997 and that should be the date upon which we
evaluate whether the project proceeded to such degree that it would be unreasonable to impose
new changes in the law upon it.
In 1969, our North Carolina Supreme Court examined the question of good faith in vested rights.
In Stowe v. Burke, the defendants received a permit from the city to construct
apartment houses on 7 July 1961 and on 17 July 1961 the city passed a zoning
ordinance prohibiting the use of the defendants' property for apartment purposes.
During this 10 -day period the defendants spent some $55,000 for foundation work
on the property. The Court held, for the first time in North Carolina, that in order
for a party to acquire a vested right to complete construction of a nonconforming
use, expenditures made prior to the enactment of the zoning ordinance must have
been made in good faith.
Town of Hillsborough v. Smith, 4 N.C. App. 316, 321 -322, 167 S.E.2d 51, 55 (N.C. App. 1969)
(internal citations omitted). In the Stowe case, the court observed that there were only 10 days
between receipt of the permit and the new ordinance and that the expenditures were made in a
race to beat implementation of the new ordinance. Unlike Stowe, the expenditures made at
Crabtree Quarry have not been in a race to beat the buffer rules from going into effect. In fact,
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expenditures were made on mining activities for 25 years, from 1972 to 1997, before the buffer
rules went into effect. Even if you were inclined to discount the land acquisitions made prior to
permitting, you still have the ongoing expenses of operating an active mine by authority of the
mining permit. Similarly, even if you were inclined to exclude expenditures made prior to the
4041401 approval, you would still have a decade's worth of expenditures in operating an active
mine.
A twist in the facts of this case makes it unique, distinguishes it from other mining operations,
and justifies how good faith can still apply 17 years after the buffer rules went into effect. That
twist occurred in 1985 when the City of Raleigh communicated its intention to take action
against the Crabtree Quarry as an illegal non - conforming use. This action suspended expansion
of the quarry. The North Carolina Mining Act clearly states that it does not "supersede or
otherwise affect or prevent the enforcement of any zoning regulation or ordinance ...." N.C.
Gen. Stat. § 74 -65. In 1985, no one had an inkling that buffer rules would be promulgated and
implemented 12 years later. It was equally unknown that the litigation over the issue would not
be resolved until February 2014, 17 years after the 1985 City of Raleigh action. But for this
suspension by another government entity, the Crabtree Quarry would have sought and obtained
the water quality pen-nits it needed long before the buffer rules went into effect. Even if you roll
back the good faith deadline to 1985, it remains clear that the ongoing expenses of running an
active excavation would be considered substantial expenditures made in timely reliance on a
valid NC DENR permit.
Later in your opinion, you analyze the Crabtree Quarry facts as a nonconforming use to City of
Raleigh ordinances. You note that Raleigh's Uniform Development Ordinance prohibits
extension, expansion, enlargement or intensification of a non - conforming use. However in
Raleigh's own Zoning Interpretation it acknowledged that when the zoning changed in 1981, the
northern portion of Crabtree Quarry became a lawful nonconforming use. It stated, "[B]ecause
the Crabtree Quarry — which, as described above, consists of parcels of real property north of
Crabtree Quarry assembled to provide a source of reserves — was in operation as a lawful use
prior to the City's assignment of the zoning classification, the Crabtree Quarry is a lawful
nonconforming use." Raleigh Zoning Interpretation at p. 6.
In discussing zoning law, your opinion also addresses the doctrine of diminishing assets and
concludes that it does not support recognition of vested rights at Crabtree Quarry. You note that
no appellate court has considered the doctrine in North Carolina. I would point out that,
although the doctrine has not been published in a North Carolina court opinion, it was utilized by
the very local government with jurisdiction over the quarry, the City of Raleigh, and considered
at length in the Raleigh Zoning Interpretation. Although several cases are cited, Raleigh took
particular note of one of the cases also cited in your opinion, Moore v. Bridgewater, as
advancing the broader theory of diminishing assets in a state committed to a narrow theory of
nonconforming uses, quoting,
[A]ny other view would be unrealistic and of questionable constitutional validity. It
is quite obvious that an owner intending to carry on a quarrying operation acquires
more land than he thinks he will need so that he will not be a source of nuisance to his
neighbors. For practical and economical reasons he must begin operations at one
,SK015092.DOCX )

given point and continue from there to a point on his lands where his natural resource
ends or at his boundary line. For the same reasons, it is not feasible for him to quarry
at different locations at the same time.
Moore v. Bridgewater Township, 173 A.2d 430 (N.J. 1961). In our meeting of February 13,
2015, we discussed the McDowell cases since it contrasted Moore, a case allowing mining
expansion, with Likanchuk ,6 a case prohibiting mining expansion. In Moore, the mining activity
was allowed to expand from an active 6 acres to the entire 20 acres because there was fencing of
the property, a contract for dirt removal, and a slow and steady increase of mining activity. In
Likanchuk, mining was not allowed to expand because the activity was confined to one of four
lots, there was no systematic expansion and the primary use of the property was for an auto
salvage yard, not a mine. Crabtree Quarry's circumstances more closely align with Moore than
Likanchuk. Crabtree Quarry has fences its property and operates an active and deep pit,
stockpiles, roads, and accessory structures all for the purpose of mining since the 1940's. There
is no other primary business on the site like the auto salvage business in Likanchuck. For these
reasons, Crabtree Quarry fits the doctrine of diminishing assets that would allow vested rights to
continue its operation without imposition of new buffer rules.
Your opinion also concluded that there was no outward manifestation of intent to mine. We
strongly disagree on this point. The land was assembled as a urine. It was permitted as a mine.
The mining boundary within the permit provides a depiction of the full extent to which the
quarry will be mined. In addition, I provided examples of statements made prior to 1997 when
the buffer rules were adopted showing intent to mine the full site. Despite these concrete pieces
of evidence, you characterize them as "mediocre at best." In our meeting, Tracy Davis, the
Director of the division that administers mining, confirmed that the mining boundary within the
permit is taken as an intent to mine up to the boundary. Also in our meeting, we discussed the
litigation with the City of Raleigh as another example of intent to mine since Hanson Aggregates
aggressively pursued its rights to mine for almost 20 years and was successful in settling to allow
mining on the northern portion. It is hard to fathom why anyone would assemble property
containing mineral reserves, obtain a mining permit to quarry the resource, establish a mining
boundary at the full extent of the property and litigate over its right to mine the full extent of the
property, except as an intent to mine.
However, in addition to the above evidence, the City of Raleigh included additional statements in
its Zoning Interpretation. The Deputy City Attorney interviewed John Graham, a former
employee of Martin Marietta, a predecessor owner of Crabtree Quarry, about the intent of
activities in the 1960's. The salient points were as follows:
Mr. Graham told Ms. Leapley that when he arrived in Raleigh in 1961, Martin
Marietta did not have an adequate supply of land for long -term operation of the
Crabtree Quarry. Long -terns planning was a part of Mr. Graham's job duties, and
he set about acquiring land for the quarry. According to Mr. Graham, Martin
Marietta's intent in 1961 was to fully develop the pit on the land owned or leased
McDowell, Inc. v. Bd. of Adjustment of Township of Wall, 334 N.J. Super. 201, 757 A.2d 822 (N.J. Super., 2000)
included in notebook at Tab 4.
Township of Fairfield v. Likanchuk's, Inc., 274 N.J. Super. 320, 644 A2d 120 (N.J. App. Div. 1994)
tSK,015092.DOCx )

to the north of Crabtree Creek and to use property to the south of Crabtree Creek
solely to operate the plant. The remainder of the southern land was to serve as a
buffer.
Raleigh Zoning Interpreation at p. 5. Further, the Raleigh Zoning Interpretation cites other
activities that evidenced intent to mine on the northern portion of the property.
Between 1961 and 1981, Hanson predecessors took action evidencing intent to
mine the entirety of the Northern Assemblage. For example, in 1964, an appraisal
of the Crabtree Quarry was commissioned in which the quarry life was assessed
by way of measurement of reserves located on the Northern Assemblage. In
addition, on March 10, 1970, as required by North Carolina law, then -owner of
the Crabtree Quarry filed its application for registration under the North Carolina
Mining Act. In 1972, then -owner was issued a permit by the State of North
Carolina authorizing the mining of 233 acres.
Raleigh Zoning Interpretation at p. 6. Based on this evidence, we urge you to revise your
opinion and recognize that there has always been an outward manifestation of intent to mine the
Crabtree Quarry to the full extent of the mining boundary as it existed prior to the change in
buffer rules in 1997.
The intent to mine coupled with the unique nature of the extractive business of mining as
described by the doctrine of diminishing assets and the ongoing activity of mining from 1940's
until the buffer rules went into effect show that all expenditures were made in good faith reliance
upon a valid governmental ruining permit.
4. Detriment
Hanson Aggregates contends that a detriment arises from strict application of the buffer rules not
only because of the topography and geology noted in your opinion, but because of an
unnecessary cost of approximately $1 Million Dollars in buffer mitigation. We believe the high
cost of mitigation on this site results in a significant detriment.
Although you raise an option of piping the stream as a means of avoiding the mitigation, we
contend that merely shifts the costs from mitigation to construction and fails to answer the legal
question of vested rights. At the end of your opinion, you also state that the land has other uses
including residential development and additional greenways on the property. These other uses
are not of equal value to the continued extraction of granite that Hanson Aggregates reasonably
expected as return from its investment. In addition, since the property is destined to become a
lake in 2042, neither a subdivision nor a greenway would make much sense in the long term and,
in the short term, would be limited by the existence of the currently active pit, roadways and
dangerous activities unsuitable to either residences or recreational activities. Of course, none of
these options need to be analyzed until we answer the legal question of vested rights.
Cnnelucinn
The spring construction season is upon us and it is beyond time to resolve this matter which we
first began to explore last year in May. Please keep in mind that recognition of vested rights is a
tSK015092.DOCX ,

remedy in equity, based upon fairness. There is ample evidence of substantial expenditures
made in good faith reliance on the mining permit and associated Nationwide 26 permit that was
permitted by rule and a detriment from the strict application of the rules both from the
topography and geology of the site and the $1 Million Dollar price tag of mitigation. NC DENR
has already issued a vested right from buffer rules based on less evidence in the case of Wake
Stone, a competitor only a few counties away. Crabtree Quarry has met all the factors for vested
rights, as Wake Stone did, and should be granted the same consideration. The fact that the
quarry was held hostage in litigation by another government heightens the urgency for you to
confirm vested rights and allow the next steps of design and permit submittal proceed. For all
these reasons, please reconsider your opinion and issue one that recognizes vested rights.
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