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Swallow Tail, LLC v. Missouri Department of Conservation

Court of Appeals of Missouri, Western District, First Division

March 7, 2017

SWALLOW TAIL, LLC, Appellant,
v.
THE MISSOURI DEPARTMENT OF CONSERVATION, Respondent.

         APPEAL FROM THE CIRCUIT COURT OF COLE COUNTY, MISSOURI THE HONORABLE JON E. BEETEM, JUDGE

          Before James E. Welsh, Presiding Judge, Anthony Rex Gabbert, Judge and Edward R. Ardini, Jr., Judge.

          EDWARD R. ARDINI, JR., JUDGE.

         Swallow Tail, LLC ("Swallow Tail") filed a Petition for Damages and Injunctive Relief in the Circuit Court of Cole County, asserting multiple claims against the Missouri Department of Conservation ("Conservation Department") and the Missouri Conservation Heritage Foundation ("Heritage Foundation") relating to the Conservation Department's alleged design, support, and operation of a compensatory mitigation program sponsored by the Heritage Foundation and known as the Stream Stewardship Trust Fund ("SSTF"). All claims brought against the Heritage Foundation were dismissed by the trial court. A bench trial was held, and the trial court entered findings of fact, conclusions of law, and judgment in favor of the Conservation Department and against Swallow Tail on all remaining claims. Swallow Tail appeals.

         In its first point on appeal, Swallow Tail alleges that the trial court misapplied article III, section 38(a) of the Missouri Constitution. The trial court concluded that the Conservation Department's activities did not violate this section because they had the primary public purpose of preserving or enhancing the state's natural resources. Swallow Tail alleges in its second point on appeal that the trial court misapplied article IV, section 43(b) of the Missouri Constitution. The trial court rejected Swallow Tail's broad construction of this constitutional provision and found no violation, noting that its argument was inconsistent with almost forty years of section 43(b) jurisprudence. We find no error of the trial court and affirm the judgment.

         I. STATEMENT OF FACTS[1]

         When a project is proposed that requires a permit under section 404 of the Clean Water Act, 33 U.S.C. § 1344, or similar laws ("404 permit") because it will have a negative environmental impact to rivers, streams, or wetlands in a particular ecological drainage unit ("EDU"), the Army Corps of Engineers ("Corps") may authorize the 404 permit with the provisional requirement that the party proposing the project purchase credits from a mitigation bank or an in-lieu fee program to compensate for environmental damage. The Corps usually requires that these credits be purchased from a mitigation bank or an in-lieu fee program in the same EDU as the project that is expected to cause the environmental harm. A permitee may use either in-lieu fee program credits or mitigation bank credits, which are equal to each other, to fulfill the credit purchase requirement when both types of credits are available for purchase in an EDU.

         Entities that sponsor mitigation banks or in-lieu fee programs receive credits from the Corps in exchange for completing or agreeing to complete mitigation projects. The Corps uses the Missouri Stream Mitigation Method to measure the benefit of a particular mitigation project to streams or other natural resources, and credits are released or awarded based on that determination. Project criteria and credit allocation and valuation are outlined in instruments approved by the Corps that govern the operation of the mitigation bank or in-lieu fee program.

         Although both receive credits in exchange for mitigation projects, in-lieu fee programs and mitigation banks operate differently. A mitigation bank earns credits from the Corps by attaining specific ecological performance goals in a particular EDU as outlined in the mitigation bank instrument. The Corps does not set or regulate the price of credits sold by mitigation banks, and mitigation banks are not restricted in how they may use the funds generated from the sale of those credits. Swallow Tail is a Missouri limited liability company that sponsors for-profit mitigation banks.

         The Corps also issues credits to in-lieu fee programs, which are operated by non-profits or governmental entities. An in-lieu fee program is granted a certain amount of advanced credits in its instrument as a way for the program to raise funds for future mitigation projects. An in-lieu fee program may also earn additional credits from the Corps when it completes a project that meets certain ecological goals. The credit prices, agreed on by the in-lieu fee program and the Corps, reflect the actual cost of each project, and in-lieu fee programs are required to include full cost accounting in their instruments. Unlike mitigation banks, funds generated through the sale of credits by in-lieu fee programs are restricted by federal regulations and may only be used for future mitigation projects with a limited exception relating to administrative fees.

         The Heritage Foundation is a non-profit that is "organized exclusively for the benefit of the Conservation Commission of the State of Missouri ["Commission"] and the Missouri Department of Conservation" and sponsors the SSTF, an in-lieu fee program that operates pursuant to an instrument approved by the Corps. The purpose of the SSTF is to facilitate stream mitigation. Because permitees may purchase credits from any in-lieu fee program or mitigation bank within an EDU, the SSTF and Swallow Tail compete in the sale of credits.

         The Conservation Department is a subdivision of the Missouri state government, directed by the Commission, and constitutionally vested with the "control, management, restoration, conservation, and regulation of the bird, fish, game, forestry, and all wildlife resources of the state. . . ." Mo. Const. art. IV, sec. 40(a). One goal of the Conservation Department is to engage partners in order to enhance natural resources and the effective delivery of conservation services, which allows the Conservation Department to accomplish more in furtherance of its mission. The promotion of water quality and quantity for healthy fish, forest, and wildlife is within the Conservation Department's mission.[2]

         The Conservation Department staff is provided with specific guidelines for deciding when to undertake a project within a particular watershed area. These guidelines have been approved by the Conservation Department director and were developed in an effort to most effectively use the Conservation Department's limited resources on priority projects. After being contacted by a landowner, the Conservation Department staff follows a decision tree guided, in part, by whether the landowner's issue is located in a high-priority watershed. The Conservation Department staff assists landowners in finding the best source of funds to accomplish priority watershed projects by consulting the guidelines, which lists the Heritage Foundation and SSTF as well as other funding sources such as the U.S. Department of Agriculture, Missouri Department of Natural Resources, and the Conservation Department's own funds. The staff is also encouraged to inform potential partners about priority projects, and the guidelines specifically list stakeholders that work with the Conservation Department within priority watersheds, such as other agency staff, city or county governments, not-for-profits, and other individuals and groups. The Conservation Department does not typically partner with for-profit entities.

         If a landowner contacts the Conservation Department with a watershed project that the Conservation Department has determined to be a priority, the Conservation Department staff will next consider whether the project fits the criteria for SSTF or other funding. Projects that fit the SSTF criteria generally include (1) preservation projects, (2) stream bank stabilization projects, or (3) span structure bridges, each of which has an ecological benefit. If the project fits the criteria for SSTF funding, then the Conservation Department staff will put together a grant application on behalf of the landowner. The grant application must be approved by the Conservation Department's director before being sent to the Heritage Foundation for its consideration and approval. Pursuant to the in-lieu ...


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