(CN) - A looming decision by a federal appeals court may take the wind out of the sails of an Italian energy company that owns and operates 84 wind turbines in Osage County, Oklahoma.

Although the blades of those turbines have been spinning for more than a decade, powering some 50,000 rural homes, the federal government claims the Enel Group never secured proper mineral rights from the Osage Nation for their construction.

In a lower court, U.S. District Judge Jennifer Choe-Groves found that Enel's wind farm continues to operate despite the ongoing trespass onto sovereign property. She issued a permanent injunction requiring removal of the turbines, along with an award of attorney fees, $245,000 in conversion damages, plus $50,000 annually in ongoing trespass damages.

On appeal at the 10th Circuit Court of Appeals in Denver Tuesday, Enel's attorney Miguel Estrada conceded the construction of the turbines included limited "mining" operations to accommodate the foundations, but insisted any resulting trespass is not ongoing.

"My fundamental point today is that the retention today of crushed rock that was severed from the mineral estate years ago is not a continuing trespass, nor a trespass of any kind," Estrada said. 

He described the rock material as "personal property" after mining, which would support only the government's conversion claims, not trespass. 

"We concede a conversion for which we have accepted liability and for which the court awarded damages of $245,000 that we are willing and ready to pay," Estrada said.

U.S. Circuit Judges Allison Hartwell Eid and Holly L. Teeter, both Donald Trump appointees, pressed Estrada about the lower court's finding that the rock material mined from the site and converted to backfill for the turbine's foundations constitutes an "exploitation." Estrada replied that it does, but argued the exploitation only occurred when the material was mined more than 10 years ago, not on a continuing basis.

The Gibson, Dunn & Crutcher attorney also argued against the lower court's injunction and its requirement to dismantle the wind farm, which would cost hundreds of millions of dollars. 

"Under no theory could there be an injunction that ejects us from the surface estate, where we have every right to be under the Osage Act and this court's 2017 ruling," he said, referencing a prior decision of the 10th Circuit finding Enel's excavation activities during turbine construction did constitute "mining" under federal regulations, therefore requiring a lease from the Osage Minerals Council.

Estrada also emphasized that federal mining regulations do not permit retrospective leases to authorize past conduct, as they are structured for prospective licensing of entry followed by royalty payments. Finally, he maintained that even assuming a continuing trespass, the harm to the Osage Nation was compensable by money damages - pointing to the District Court's own award of ongoing annual payments. 

Teeter pivoted to the Osage Nation's sovereignty, as the lower court explicitly tied the need for a permanent injunction to Enel's ongoing refusal to obtain a mining lease, even years after the 10th Circuit's 2017 ruling that one was required. Estrada separated the issues, arguing no injunction can eject Enel from the surface estate, where it has rights, and regulations do not allow retrospective leases. 

"The government has never given any support for the proposition that the regulation contemplates that a lease can be obtained retrospectively," he said, invoking the Supreme Court's 1982 decision in Merrion v. Jicarilla Apache Tribe and dismissing the Osage Nation's sovereign interest as simply a "commercial partnership."

Nolan Fields, assistant U.S. attorney for the Northern District of Oklahoma, defended the lower court's decision.

"Absolutely" there is still mining, as the backfill remains "under the foundation, beside the foundation and on top of the foundations" of the operating turbines, Fields said. Citing the 2017 10th Circuit opinion, Field quoted, "Osage Wind did not merely dig holes in the ground. It went further. It sorted, it crushed, and then exploited the crushed rocks as structural support, and there is no dispute that that exploitation continues."

Fields stressed the Osage Nation's sovereignty, distinguishing the case from Merrion because Enel never entered a lease. The company's refusal to enter into a lease undermines Osage control over minerals, he said.

"This is not a simple commercial transaction between the parties. ... This is the scale of a trespass that would be the equivalent of 84 wind turbines across 8,400 acres," Fields said. "That's literally the height equivalent of 84 statues of liberty across 10 times the size of New York's Central Park. That's also half the size of Boulder, Colorado. The volume of the [backfill] at issue is over 300,000 tons."

Fields noted Enel was never a commercial partner with the United States and called the company a "bad faith trespasser." Without a lease, rocks are not "legally severed" and violate trust duties, he emphasized.

The third panelist, U.S. Circuit Judge Michael Roland Murphy, a Bill Clinton appointee, asked Fields if backfill removal could abate trespass without full ejection. Fields noted the 2017 opinion confirmed the backfill's structural role but said Enel provided no evidence at summary judgment that its removal was even feasible.

Fields stated that in the government's view, mining only ends two ways: if Enel secures a lease or if it is ejected from the property.

Representing Osage Mineral Council, attorney Jeffrey Rasmussen echoed Fields, saying Enel admitted to continually exploiting extracted minerals because it is using them as backfill for the foundations. He said the case has festered for nearly 15 years because Enel has acted in bad faith and has an interest in prolonged litigation.

"Enel goes for their big win, and when they lose, they go back on appeal and say let me try this one again," Rasmussen said. "What they're trying to do now is remand. And that's what Enel wants. Because then they get another five years of operating this wind farm before it can be removed."

Rasmussen noted that after the order on appeal, Enel offered to replace the extracted backfill with rock brought from off-site, but he rejected the option as untimely.

In rebuttal, Estrada insisted the backfill is now Enel's personal property and not part of the mineral estate after severance. He also reiterated that even if continuing trespass were found, the harm is fully compensable by money, so no irreparable injury justifies an injunction. 

"You can't have a continuing trespass for the possession of the property that you converted," he said.

The panel did not indicate when it would render a ruling.

Source: Courthouse News Service