State of Alaska, Dept. of Natural Resources v. Alaska Riverways, Inc., and Tanana River Properties, L.L.C.

This case deals with whether the State of Alaska has the authority to require private parties who construct wharves into adjacent navigable waters to enter into leases, and, if so, what is the permissible lease amount under federal law related to navigable waters.

Alaska Riverways Inc. was incorporated in 1953 and operates paddlewheel tour boats on the Chena River in Fairbanks. Tanana River Properties, L.L.C. owns riverside property utilized in the operation. (Hereinafter collectively Riverways)  Since 1972 Riverways has owned the riverside property subject to this dispute and in about 1980 built a system of floating docks and bulwarks secured to the property for mooring boats and loading passengers. Because the Chena River is navigable, the State of Alaska owns the riverbed below the ordinary high water mark. This riverbed land is referred to as shoreland and the adjoining property owner is known as a “riparian landowner”.

In 1979 Riverways applied for a lease of the shoreland from the State. Intermittent discussions went on for almost three decades with the primary issues being the authority of the State to require a lease, whether payments should be retroactive, and whether the lease payment should be a fixed amount based on appraised value or a variable amount based on passenger count. In 2006 DNR issues a final finding and decision for a twentyfive year lease to Riverways for $1,000 a year or 25 cents a passenger whichever is greater. Riverways appealed and the superior court reversed holding that the State does not have the authority to require a lease by Riverways. For completeness, the superior
court held that if the State had authority for a lease, the proposed fee structure was legally permissible.

The Supreme Court first examines pre-statehood law and determines that prior to statehood, a riparian owner, while having no right or title to the shoreland, had a common-law right to wharf out that, once vested, could not be taken without
compensation. The exercise of this right had to be reasonable; the wharf could be constructed only to the extent necessary to reach navigable waters, with reference to its intended use. After discussing the public trust doctrine, the Court concludes that DNR’s authority to require riparian owners to enter into leases for the use of shoreland arises, if at all, independent of the public trust doctrine.

In considering the Alaska Constitution, the Court states that Article VIII placed control of all state land, including shoreland, in the legislature. While that Article authorized the legislature to provide for the leasing of any part of the public domain, including submerged land, it did not itself grant DNR authority to require riparian owners who construct wharves to enter into leases for their use of state shoreland.

The Court then discusses the Alaska Lands Act, adopted by the first state legislature, particularly AS 38.05.070. It concludes that the result is that persons who had constructed improvements over submerged land prior to statehood were granted special preference rights to purchase or lease those lands, but those rights would expire if unused. DNR was authorized to enter into leases with all other parties, including upland owners, for their occupancy of state lands either directly if the lease was appraised at $250 or less, or after public auction. To this extent it restricted the common-law right to wharf out when it was passed in 1959. The Supreme Court also discusses the amendments to AS
38.05.075(c) in 1984 and 1997 which gave greater preference to upland owners in the negotiation of submerged land leases with the DNR. The Court also rejects the constitutional arguments that DNR’s leasing decision is an impermissible taking, violates equal protection, or is an improper retroactive application of the law.

Riverways finally wins a point regarding DNR’s attempt to base the lease fee on the number of paying passengers. 33 U.S.C. 5(b) prohibits taxes, tolls, fees and other charges on vessels, passengers, or crew by any non-Federal interest for operating on navigable waters unless it reasonably approximates the benefit conferred or the cost incurred by the State. Although the per passenger fee fails, the Court approves the lease amount of
$1,000 per year since it was determined as fair market value by appraisal.

This entry was posted in 2010 Law Updates. Bookmark the permalink.