                                          No. 02-341

               IN THE SUPREME COURT OF THE STATE OF MONTANA

                                          2002 MT 352


POMPEYS PILLAR HISTORICAL ASSOCIATION,

              Petitioner and Appellant,

         v.

MONTANA DEPARTMENT OF ENVIRONMENTAL
QUALITY, and UNITED HARVEST, LLC,

              Respondents and Respondents.



APPEAL FROM:         District Court of the First Judicial District,
                     In and for the County of Lewis and Clark,
                     The Honorable Dorothy McCarter, Judge presiding.


COUNSEL OF RECORD:

              For Appellant:

                     Gerald J. Neely, Attorney at Law, Billings, Montana

              For Respondents:

                     Norman J. Mullen, Special Assistant Attorney General, Helena, Montana
                     (Department of Environmental Quality)

                     J. Daniel Hoven, Sara B. Stanton, Browning, Kaleczyc, Berry & Hoven, P.C.,
                     Helena, Montana (United Harvest, LLC)


                                               Submitted on Briefs: September 19, 2002

                                                         Decided: December 30, 2002
Filed:


                     __________________________________________
                                       Clerk
Justice Jim Regnier delivered the Opinion of the Court.

¶1     In the summer of 2000, Respondent United Harvest sought to

construct a high speed grain loading terminal east of Billings,

Montana, near Pompeys Pillar National Monument.                        United Harvest

obtained an air quality permit from Respondent Department of

Environmental Quality (“DEQ”) to build the facility. Appellant Pompeys

Pillar Historical Association (“Association”) commenced administrative review proceedings

in an effort to overturn the issuance of the permit. Ultimately, the Board of Environmental

Review (“Board”) affirmed DEQ’s issuance of the permit.

¶2     The Association subsequently petitioned the First Judicial

District Court, Lewis and Clark County, to review the Board’s

decision.      The District Court dismissed the Association’s petition

for lack of subject matter jurisdiction.                  The Association appeals

from the District Court’s order of dismissal.                    We affirm.

¶3     The sole issue on appeal is whether the District Court erred

when it dismissed the Association’s petition for review for lack of

subject matter jurisdiction.

                                    BACKGROUND

¶4     Pompeys     Pillar     is   a   national      historic      monument      located

approximately twenty-eight miles east of Billings, Montana.                           The

Association is a non-profit organization which provides educational

and administrative services to support the monument’s preservation.

¶5     Several years ago, United Harvest purchased land adjacent to

Pompeys Pillar.         United Harvest sought to construct a high speed

grain loading terminal, consisting of silos, grain conveyors, grain

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elevators, truck scales, and a railroad loop track on this land.

United Harvest intended to build this facility approximately one

half to three-quarters of a mile from Pompeys Pillar.

¶6    Toward this end, United Harvest filed an application with DEQ

for an air quality permit in August of 2000.                 In evaluating whether

to issue the permit, DEQ conducted an initial and supplemental

environmental assessment.          The assessment evaluated the proposed

facility’s impact on the surrounding environment.                   DEQ concluded:

(1)   that    the    facility     would       not   detrimentally      impact      the

surrounding environment, more specifically the local air quality;

and (2) that it was not necessary to issue an environmental impact

statement.     Therefore, on September 29, 2000, DEQ issued an air

quality permit to United Harvest.
¶7    In mid October 2000, the Association appealed the issuance of

the permit to an administrative law judge.                   The appeal sought to

overturn the issuance of the permit on the grounds that DEQ erred

in its preparation of the environmental assessment.                 DEQ and United

Harvest filed a motion to dismiss the administrative contested case

hearing.      The motion argued that the administrative law judge

lacked    jurisdiction     to    entertain      the   challenge     and,     instead,

insisted     that   the   Association     should      file    the   appeal    in   the

appropriate district court.          The administrative law judge denied

the motion.

¶8    On June 28, 2001, the administrative law judge concluded that

DEQ “acted arbitrarily and capriciously . . . by issuing a permit

without      conducting     an     [environmental        impact       statement].”



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Therefore, the judge recommended that the matter be remanded to DEQ

for it to conduct the necessary evaluation.                 Notably, the findings

did not address issues of air quality, but, instead, addressed the

adequacy of the environmental assessment.

¶9     On July 12, 2001, United Harvest and DEQ filed exceptions to

the   administrative        law       judge’s    findings   with    the   Board   of

Environmental Review.            On August 9, 2001, the Board declined to

implement    the    administrative         law    judge’s   recommendation     and,

instead,    ordered       DEQ    to   prepare    a   supplemental   environmental

assessment “addressing noise impacts . . . and the historic and

cultural significance of the site.”               On October 24, 2001, following

DEQ’s submission of a supplemental environmental assessment, the

Board concluded that DEQ did not act arbitrarily, capriciously, or

unlawfully in conducting the relevant evaluations.                  Therefore, the

Board affirmed DEQ’s decision to issue the air quality permit.
¶10   On November 26, 2001, the Association petitioned the District

Court to review the Board’s decision.                 On February 14, 2002, DEQ

moved the District Court to dismiss the Association’s petition on

the   grounds      that    the    District       Court   lacked    subject   matter

jurisdiction over the case.             Paralleling the argument it presented

to the administrative law judge, DEQ maintained that the challenge

presented to the administrative arbiters did not contain any air

quality issues.       DEQ contended that the administrative proceedings

addressed environmental assessment issues only, which fall within

the province of the Montana Environmental Policy Act (“MEPA”).

According to DEQ, MEPA does not provide for administrative review



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of challenges to MEPA compliance.                    DEQ argued that challenges to

MEPA compliance must be brought in district court.                        Therefore, as

the administrative law judge and Board did not have jurisdiction to

preside over the Association’s appeal, DEQ asserted that the

District Court lacked jurisdiction to review the administrative

proceedings.

¶11    Following a hearing on the matter, the District Court issued

its Decision and Order on April 18, 2002.                             Pursuant to the

rationale      offered     by    DEQ,    the       District   Court    dismissed        the

Association’s petition for review for lack of subject matter

jurisdiction.        On May 28, 2002, the Association filed a notice of

appeal from the District Court’s order of dismissal.
                                 STANDARD OF REVIEW

¶12    A district court’s determination that it lacks jurisdiction is

a conclusion of law.            Threlkeld v. Colorado, 2000 MT 369, ¶ 7, 303

Mont. 432, ¶ 7, 16 P.3d 359, ¶ 7.                     We review a district court’s

conclusions of law to determine whether the court’s interpretation

of the law is correct.             Carbon County v. Union Reserve Coal Co.,

Inc. (1995), 271 Mont. 459, 469, 898 P.2d 680, 686.

                                        DISCUSSION

¶13    Did the District Court err when it dismissed the Association’s petition for review for

lack of subject matter jurisdiction?

¶14    The Association maintains that § 75-2-211, MCA, authorizes an

adversely affected party to appeal the approval or denial of an air quality

permit to the Board of Environmental Review. Since the Association contends that it was


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entitled to an administrative contested case proceeding, it argues that it was subsequently

entitled to judicial review of the administrative decision, pursuant to § 2-4-702, MCA.

¶15    According      to     the    Montana      Administrative        Procedure      Act

(“MAPA”), an administrative agency must afford all parties a trial-

type hearing in a “contested case.”                   See §§ 2-4-601, -612, MCA.

MAPA provides that a “contested case” is “a proceeding before an

agency    in   which     a   determination       of   legal    rights,      duties,       or

privileges of a party is required by law to be made after an

opportunity for hearing.”                 Section 2-4-102(4), MCA.             District

courts     maintain      jurisdiction       to    review     such     contested      case

proceedings.       See §§ 2-4-701-702, MCA.            Therefore, for purposes of

this case, the critical inquiry is whether the Association was

entitled by law to raise its specific challenge to the issuance of

the air quality permit in a contested case proceeding.

¶16    The Clean Air Act of Montana, found at Title 75, Chapter 2,

Parts 1-4, MCA, governs the issuance of air quality permits.

Section      75-2-111(2),          MCA,   provides      that     “[t]he     board     [of

environmental review] shall . . . hold hearings relating to any

aspect of or matter in the administration of this chapter at a

place designated by the board.”                 “This chapter,” referenced in §

75-2-111(2), MCA, refers to the Clean Air Act of Montana and the

Asbestos Control Act, not MEPA.                  Further, § 75-2-211(10), MCA,

provides:

            When [DEQ] approves or denies the application for a
       permit under this section, a person who is jointly or
       severally adversely affected by [DEQ’s] decision may
       request a hearing before the board [of environmental
       review]. . . . The contested case provisions of the


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       Montana Administrative Procedure Act, Title 2, chapter 4,
       part 6, apply to a hearing before the board [of
       environmental review] under this subsection.

Clearly, had the Association challenged DEQ’s decision in regard to

issues of air quality, it would have been entitled to pursue

contested case proceedings.          However, it did not do so.

¶17    The   Legislature       enacted    MEPA      to    prevent     or    eliminate

environmental damage as well as protect the right to use and enjoy

private property free from undue governmental regulation.                        See §

75-1-102,     MCA.      MEPA     requires      that      state   agencies     conduct

environmental reviews when state action will significantly affect

the    quality   of   the   human    environment.             Rule   17.4.607,    ARM.

“Environmental        review”     means       any   environmental          assessment,

environmental impact statement, or other written analysis conducted

by a state agency to examine the impact of a proposed action on the

quality of the human and physical environment.                        Section 75-1-

220(4), MCA.     State action encompasses a state agency’s issuance of

a lease, permit, license, certificate, or other entitlement for use

or permission to act.           Rule 17.4.603(1), ARM.           Therefore, United

Harvest’s application for an air quality permit implicated state

action and, thus, required DEQ to conduct an environmental review

prior to its issuance.
¶18    Notably, the environmental review process is governed by MEPA

and its corresponding administrative rules, not the Clean Air Act

of Montana.      As stated in the District Court’s order of dismissal,

“The    environmental       assessment         .    .    .,    although     conducted

contemporaneously with the air quality review for the air quality



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permit, was not part of the air quality permit process itself . . .

.”    As   for    the    requisite    environmental      review   process,    Rule

17.4.607, ARM, provides:

      In order to determine the level of environmental review
      for each proposed action that is necessary to comply with
      75-1-201, MCA, the agency shall apply the following
      criteria:

           (1)   The agency shall prepare an [environmental
      impact statement] as follows:

           (a) whenever an [environmental assessment] indicates
      that an [environmental impact statement] is necessary; or
           (b) whenever, based on the criteria in ARM 17.4.608,
      the proposed action is a major action of state government
      significantly affecting the quality of the human
      environment.

Therefore, the environmental assessment acts, in part, as an

initial evaluation to determine whether an agency must prepare an

environmental impact statement.               Rule 17.4.607(2)(c), ARM.

¶19         Here,       DEQ   conducted   an     environmental    assessment    in

contemplation of the proposed facility’s impact on the surrounding

environment.      Upon completion of the environmental assessment, DEQ

deemed it unnecessary to issue an environmental impact statement.

It is the issues surrounding the environmental assessment that the

Association sought to challenge through contested case proceedings,

i.e., the sufficiency of the environmental assessment and the

decision not to issue an environmental impact statement.                In fact,

the Association requested the following relief from the District

Court:     “The   Court       is   requested     to   remand   the   case    under

instructions to order [DEQ] to conduct an Environmental Impact

Statement concerning the planned project of United Harvest . . . .”



                                          8
 Further, on appeal, the Association admits that it sought to

challenge    primarily   “the   sufficiency   of   [the]   Environmental

Assessment” throughout the administrative proceedings.        Therefore,

as the environmental review process is governed by MEPA, we must

look to the appellate procedures contained therein to determine

whether the Association was entitled to administrative review of

the issues presented.

¶20         Section 75-1-201(3), MCA (1999), provides:

           (a) In any action challenging or seeking review of
      an agency’s decision that . . . [an environmental impact
      statement] is not required or that the statement is
      inadequate, the burden of proof is on the person
      challenging the decision.       Except as provided in
      subsection (3)(b), in a challenge to the adequacy of a
      statement, a court may not consider any issue or evidence
      that was not first presented to the agency for the
      agency’s consideration prior to the agency’s decision. A
      court may not set aside the agency’s decision unless it
      finds that there is clear and convincing evidence that
      the decision was arbitrary or capricious or not in
      compliance with the law.
           (b) When new, material, and significant evidence is
      presented to the district court that had not previously
      been presented to the agency for its consideration, the
      district court shall remand the new evidence back to the
      agency for the agency’s consideration and an opportunity
      to modify its findings of fact and administrative
      decision before the district court considers the evidence
      within the administrative record under review. . . . The
      district court shall review the agency’s findings and
      decision to determine whether they are supported by
      substantial, credible evidence within the administrative
      record under review. [Emphasis added.]

Ironically, the Legislature amended this provision in 2001 to add,

in part, the following language: “A challenge to an agency action

under this part may only be brought against a final agency action

and may only be brought in district court or in federal court,

whichever is appropriate.”      Section 75-1-201(6)(a), MCA.     One of


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the representatives indicated that this provision was added to

clarify the review process.       Nevertheless, both parties agree that

the 1999 version of the statute applies to the case at bar.

¶21   Section 75-1-201(3), MCA (1999), clearly envisions challenges

to MEPA compliance before a “court” or “district court.”            MEPA does

not contain a corollary to § 75-2-211(10), MCA, the contested case

provision in the Clean Air Act of Montana.             Had the Association

simply challenged air quality issues, it would have been entitled

to administrative proceedings.          However, the Association admits

that its challenge contemplated only those issues which pertained

to the environmental assessment.        Since MEPA governs environmental

review, and since MEPA requires a party to bring a compliance

challenge before a “court” or “district court,” the administrative

law   judge   and   Board   did   not   have    jurisdiction   to   hear   the

Association’s challenge.      As such, the District Court did not have

jurisdiction to review the Board’s determination.              Consequently,

the District Court did not err when it dismissed the Association’s

petition for review for lack of subject matter jurisdiction.

¶22   Affirmed.

                                          /S/ JIM REGNIER


We Concur:

/S/ KARLA M. GRAY
/S/ PATRICIA COTTER
/S/ JIM RICE




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Justice Terry N. Trieweiler concurs.

¶23          Based on the arguments presented by the parties, I concur

with the majority Opinion.             However, in doing so, I do not express

any opinion about the adequacy of the procedural due process

provided      for    in   the    Montana        Environmental   Policy   Act   for

challenging decisions made by the Department of Environmental

Quality.      Furthermore, I assume that because there was no time

limit within which to commence a direct action pursuant to § 75-1-

201(3), MCA (1999), that a direct action in district court can

still be filed by Pompeys Pillar Historical Association challenging

the adequacy of the environmental assessment prepared by the DEQ

and that the merits of the Association's claims, as well as the

adequacy of the due process afforded, can ultimately be resolved in

that manner.

¶24          For these reasons, I concur with the majority Opinion.



                                                      /S/ TERRY N. TRIEWEILER




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