A Texas appeals court Thursday said the government is correct: Mexican national cement maker Cemex must pay the Lone Star State its due – potentially half a billion dollars or more – for mining a quarry outside of El Paso.
The appeals panel left it to the trial court to come up with an exact figure, but Texas claims it is owed $558 million in unpaid royalties dating back to the 1940s.
Cemex, which bought the 1,400-acre quarry from a predecessor in 2005, said it “will continue to vigorously defend itself against the state’s claim for royalties.”
(Cemex holds federal permits to mine 56 million tons of sand and gravel in the Soledad Canyon region of the Santa Clarita Valley. Cemex, together with Sen. Barbara Boxer and the cities of Santa Clarita and Victorville, are working on a plan to void the mining permits in exchange for a swap of land and cash. But if the deal falls through and mining commences, Cemex would be required to pay royalties to the federal government, the state of California and other jurisdictions – but not to the city of Santa Clarita, even though the city owns the surface rights to the land.)
The Texas case centers around Cemex’s operations in McKelligon Canyon, in the Franklin Mountains just north of the border city of El Paso.
The state sued the mining company for unlawful land conversion, breach of contract and trespass. In a post-ruling statement Friday, Texas Land Commissioner Jerry Patterson said the state “never authorized Cemex to take its minerals.”
He said after independence from Mexico in 1836, the Texas constitution required vacant land to remain in the public domain, and after Texas joined the Union, surface rights were gradually sold off for ranching and agricultural purposes. But the state “retained all valuable materials on, in and under the state’s lands for the benefit of public education,” he said.
“These Permanent School Fund lands in El Paso’s McKelligon Canyon were sold under the Land Sales Acts of 1895 and 1907, which expressly state all mineral wealth on the land remained property of the school fund,” he said.
He said the Texas School Fund holds about $25 billion in stocks, bonds and real estate investments. Patterson’s office leases surface acreage and charges royalties for exploitation rights to produce oil, gas and other minerals. Earnings fund K-12 education.
Cemex argued that sand and gravel aren’t “minerals” reserved to the state, and moreover, the state never pursued 60 years of past-due royalty payments before Cemex took over operations.
In Thursday’s decision, appellate Justice Guadalupe Rivera opined that under the Texas Mining Act of 1895, “title to all deposits of granite, limestone, gravel, sand and any other mineral substances of whatever kind or character having commercial value located on the McKelligon Canyon lands … are reserved to the State of Texas.”
The appeals court determined that the trial court erred because it “improperly relied upon attorney general opinions interpreting statutes inapplicable to these properties (and) ignore(d) the reservation of minerals and materials to the state” under the 1895 mining law. No public official – not even the state’s attorney general – can give away state property, the justices added.
“Cemex does not own the minerals and building materials at issue,” the court concluded.
“The gist of this case is simple,” said Patterson. “You just can’t take what’s not yours without a fight in Texas.”