In a major decision on a California environmental battle that attracted national attention, the 9th U.S. Circuit Court of Appeals has ruled against the Drakes Bay Oyster Co. in its efforts to continue operating at Point Reyes National Seashore in an opinion released Tuesday morning.
The case, which pitted environmentalists against each other, and attracted food leaders like Chez Panisse chef Alice Waters, raised key questions about the federal government's ability to regulate private businesses operating in national parks.
A three-judge panel heard arguments in May as the oyster company sought an injunction to halt closure. The court ruled 2-1 Tuesday against the Marin County oyster operation, however, which means the facility will likely have to close unless the full court or the U.S. Supreme Court overturns the ruling.
Drakes Bay owner Kevin Lunny said he was absorbing the news and pondering next steps.
"We are not sure what the next step is; we have to look at it," Lunny said. "It was a split decision; we are encouraged by that."
On Nov. 29, U.S. Interior Secretary Ken Salazar announced he would allow a 40-year lease with the National Park Service -- originally negotiated with the Johnson Oyster Co. in 1972 and taken on by Drakes Bay -- to expire.
In 1972, the federal government bought the land from Johnson for $79,200 and provided the lease. Lunny took over the lease in 2004, and although he knew it was set to expire in 2012, he sought an extension, enlisting the support of Sen. Dianne Feinstein and others.
Salazar wrote in his decision in November that Lunny was explicitly informed "no new permit will be issued" after the 2012 expiration date.
When Lunny's company purchased the oyster farm, "it did so with eyes wide open to the fact that the permit acquired from its predecessor owner was set to expire just seven years later, in 2012," the court wrote. "Drakes Bay's disagreement with the value judgments made by the (interior) secretary is not a legitimate basis on which to set aside the decision."
Conservation leaders who want the area permanently protected as federal wilderness applauded the 9th Circuit Appeals Court ruling.
"The court rightly decided that former Interior Secretary Ken Salazar had full discretion to let the oyster operation permit expire and to honor the 1976 wilderness designation for Drakes Estero," said Amy Trainer, executive director of the Environmental Action Committee of West Marin. "We are very grateful for this decision, which supports the Estero's full wilderness protection."
The case over a single oyster farm grew and took on national dimensions. It became a cause célèbre for conservative groups who wanted the farm to stay. For a while, the oyster farm accepted legal help from Cause of Action, a nonprofit whose executive director, Dan Epstein, worked for the foundation of Charles Koch, a conservative billionaire who has spent millions trying to weaken environmental laws.
Prominent Bay Area food leaders, including Waters and writer Michael Pollan, sided with the oyster farm also, saying that the federal government was bullying a local food producer.
In February, however, the oyster farm's fortunes began to fade, when U.S. District Judge Yvonne Gonzalez Rogers rejected a preliminary injunction to halt the federally ordered closure.
The 9th circuit court agreed to hear the case and review Rogers' decision.
In its ruling Tuesday, the panel upheld the district court.
The 9th Circuit ruled that while it had jurisdiction to review whether the interior secretary violated legal mandates, it lacked jurisdiction to review the Salazar's discretionary decision whether to issue a new permit.
"We have long stated and the court has now confirmed that the expiration of the oyster operation permit was a well-established matter of contract and NPS policy that Mr. Lunny was fully aware of before he bought the last few years of operating rights," said Gordon Bennett, president of Save Our Seashore.
During the May hearing in front of the court, an attorney for Lunny and the government had 30 minutes each to argue their cases before the three-judge panel -- justices M. Margaret McKeown, Paul J. Watford and Algenon L. Marbley -- in a packed courtroom.
McKeown and Marbley ruled to uphold the lower court's ruling, while Watford dissented, holding that Drakes Bay was likely to prevail on its claim that the secretary's decision was arbitrary, capricious or otherwise not in accordance with law. Watford wrote the injunction should have been granted.
Mercury News staff writer Paul Rogers contributed to this report.