Colorado Appeals Court reversal holds Glenwood quarry owners accountable for back royalty payments

Work continues at the RMI quarry adjacent to the Transfer Trail on Wednesday.
Peter Baumann / Post Independent

Owners of the limestone quarry on Transfer Trail that’s the subject of a controversial expansion plan are obligated to pay back royalties to a previous longtime owner, following a recent Colorado Court of Appeals reversal.

The amount Rocky Mountain Industrials (RMI, a.k.a. Rocky Mountain Resources, or RMR) owes Pitkin Iron Corp. will now need to be determined in 9th District Court in Glenwood Springs.

In a decision announced June 25, but rendered earlier this year, the appellate court reversed a previous ruling in favor of RMI by District Judge Denise Lynch in the 2018 case.

The reversal means RMI is obligated to pay 50 cents per ton of limestone mined and sold from claims transferred by Pitkin Iron in 2009. The royalty agreement was included in Pitkin Iron’s sale of the quarry to CalX Minerals, “for so long as the mine remains in existence,” according to the lawsuit.

RMI, which bought the quarry from CalX in 2016, had challenged the royalty, saying the agreement made between Pitkin Iron and CalX was not binding on the new owners. Pitkin Iron had also originally sued CalX for breach of the contract regarding the royalty agreement, according to the appellate ruling.

“We think it is a well reasoned decision and reaches the correct result,” Pitkin Iron representative Diane Delaney said. “We are pleased with the decision.”

While the ruling applies to claims Pitkin Iron first sold in 2009, it would not come into play with RMI’s proposed major expansion of the quarry area.

RMI is looking to expand the open pit quarry, located a mile north of Glenwood Springs along Transfer Trail, from about 16 acres to 447 acres. That proposal is currently before the U.S. Bureau of Land Management, but the BLM said earlier this year it would not resume its review and begin the public comment process until 2021.

“What remains to be determined [in the Pitkin Iron case] is what amount of tons RMR produced from those claims, on which they owe a royalty to Pitkin Iron Corp.,” Delaney said. “They have not previously given us that information, as they took the position the royalty did not apply to them. The Court of Appeals said it does.” 

Representatives from RMI did not respond to an emailed request for comment on the Appeals Court ruling.

In the reversal opinion by Appeals Court Judge John Dailey, it was ruled that the royalty agreement “is a covenant running with the land, binding on RMR.”

Read the opinion:

Among his determinations in citing case law on the matter of royalty agreements was that the value of the quarry is ultimately affected by the agreement in perpetuity.

“Without a royalty agreement burdening the owner of the mine, the owner could keep all monies gained by the sale of the limestone,” Dailey wrote. “But the existence of the Royalty Agreement here requires that the owner of the quarry must remit a portion of profits gained on the sale of limestone, thereby decreasing the value of the mine for its owner.”

The Post Independent previously reported that RMI’s financial situation is far from solid, according to a recent federal finance disclosure.

“(RMR) does not have sufficient cash or other current assets, nor does it have an established and adequate source of revenues, to cover its operating costs and to allow it to continue as a going concern,” the first-of-the year filing on Jan. 3 stated.

As a publicly-traded company, RMR Industrials (now known as RMI, Inc.) has lost $35 million since 2014.

In another recent legal filing related to RMI and the Glenwood quarry, Garfield County has moved to intervene in the Glenwood Springs Citizens Alliance lawsuit against the BLM over its continuing to allow RMI to sell certain types of limestone products that are not allowed under its federal mining permit. The court has not yet ruled on the county’s motion.

RMI has also filed a separate lawsuit against Garfield County in response to the county’s efforts to enforce the quarry’s county special use permit.

Editor’s note: This story has been revised from the original version to correct the years the quarry was sold from Pitkin Iron to CalX Minerals in 2009 and then from CalX to RMI in 2016, and to correct details related to the Glenwood Citizens Alliance lawsuit against the BLM and RMI’s lawsuit against Garfield County.

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