Appendix — Drummond Co. v. Hodel
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86 - 10 aia Supreme Court, U.S,
FILED
| DEC 9R 1986
JOSEPH F. SPANIOL, JR.
No. 86- CLERK
IN THE
Siywenw Court of the Wuited States
OCTOBER TERM, 1986
DRUMMOND COMPANY, INC.,
Petitioner,
V.
DONALD P. HODEL,
SECRETARY OF THE INTERIOR,
Respondent.
APPENDIX TO
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Of Counsel: MICHAEL B. BARR
WILLIAM B. LONG (Counsel of Record)
DRUMMOND Co., INC. CHARLES D. OSSOLA
101 Walston Bridge Road DEBORAH S. COLBY
Jasper, Alabama 35501 HUNTON & WILLIAMS
(205) 387-0501 P.O. Box 19230
2000 Pennsylvania Ave., N.W.
Washington, D.C. 20006
(202) 955-1500
Counsel for Petitioner
Drummond Company, Inc.
December 26, 1986
WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001
APPENDIX
TABLE OF CONTENTS
CASES:
Drummond Coal Company v. Hodel, 796 F.2d 503
Eee I saccadic krcndcks Sh cence pdeomdeticeansAanakentoping
Drummond Coal Company v. Hodel, 610 F. Supp.
Se BE Sette kn cicncntniidomealin
Order Denying Petition for Rehearing and Sug-
gestion for Rehearing Hn Bane in Drummond
Coal Company v. Hodel, No. 85-5827 (D.C. Cir.
Sept. 26, 1966) (per curiam) .................................
Drummond Coal Company v. Watt, Civil No. CV82-
H-1838-S (N.D. Ala. May 18, 19838) .....................
Drummond Coal Company v. Watt, 735 F.2d 469
ee: I ah cer a re amtendeacns
United States v. Brook Contracting Corp., 759 F.2d
320 (8rd Cir. 1985) ........ REARS IG SO. Rese PELL BER en
A. J. Taft Coal Company v. United States, 605
F. Supn. 366 GN.D. Ala. 1986) ..............02............
Combs v. Sun-Up Coal, Civil No. CV-80-P-0236-J
(N.D. Ala. Sept. 3, 1980) ............ en ieee iy
A. J. Taft Coal Company v. Connors, Civil No.
CV-86-H-245-S (N.D. Ala. June 18, 1986) ........
Section 401 and 402 of SMCRA, 30 U.S.C. §§ 1231
I an cs ga ssecc bis Aahanssen deoueusibesns
ae yn CD aaa in css
Be i te Oe PI GED nts cepa ensnsencacnncnanse nanan sanen
ee Bis
Memorandum from W. Hord Tipton, Acting Re-
gional Director, Region II, Office of Surface
Mining Reclamation and Enforcement, to J.
Steven Griles, Deputy Director, dated August 6,
1981
Page
la
ii
TABLE OF CONTENTS—Continued
Page
Memorandum from Phyllis Thompson, Chief,
Branch of Fund Management, to Director, re-
garding request for Policy Decision on Excess
Moisture Deduction by Drummond Coal Com-
la
UNITED STATES COURT OF APPEALS
DISTRICT OF COLUMBIA CIRCUIT
No. 85-5827
DRUMMOND COAL COMPANY,
Appellant
v.
DONALD P. HODEL, Secretary of the Interior
Argued March 7, 1986
Decided July 22, 1986
Appeal from the United States District Court
for the District of Columbia
(Civil Action No. 82-02439)
Michael B. Barr, with whom Charles D. Ossola, Wash-
ington, D.C., was on brief for appellant.
Albert M. Ferlo, Jr., Dept. of Justice, with whom
Alfred Ghiorzi, Dirk D. Snel and Beverly Perry, Dept.
of Justice, Washington, D.C., were on brief for appellee.
James T. Hemphill, Washington, D.C., was on brief
for amicus curiae, Mining and Reclamation Council of
America, urging reversal.
2a
Robert F. Stauffer, Washington, D.C., was on brief
for amicus curiae, Nat. Coal Ass’n, urging reversal.
Before MIKVA, STARR, and SILBERMAN, Circuit
Judges.
Opinion for the Court fiied by SILBERMAN, Circuit
Judge.
SILBERMAN, Circuit Judge:
Appellant Drummond Coal Co. challenges a regulation
of the Interior Department’s Office of Surface Mining
(OSM). A full exposition of the facts and procedural
history relating to Drummond’s challenge appears in the
district court’s careful and thorough opinion granting the
agency’s motion for summary judgment. Drummond
Coal Co. v. Hodel, 610 F.Supp. 1489 (D.D.C.1985). For
the reasons stated herein, we affirm the district court’s
judgment.
The Surface Mining Control and Reclamation Act
(SMCRA), 30 U.S.C. §$ 1201 et seg. (1982), upon which
the regulation at issue is premised, creates an Abandoned
Mine Reclamation Fund to finance the restoration of land
and water resources damaged by coal mining. Jd. § 1231
(ec) (1). The Fund’s principal source of revenue is a fee
assessed on each ton of “coal produced” in the United
States. Coal operators are required to pay the Secretary
thirty-five cents per ton of “coal produced” by surface
mining and fifteen cents per ton of coal produced by
underground mining, or ten percent of the value of
the coal at the mine, whichever is less. Jd. § 1232(a).
Through a revised regulation, the Secretary has mandated
that the fee be assessed on the gross weight of coal prior
to sale—including impurities such as water which have
not been removed. 30 C.F.R. § 870.12(b) (3) (i) (1985).
Drummond claims that the revised regulation exceeds
the Secretary’s statutory authority because it includes
within the material taxed “excess” moisture attributable
8a
to post-evacuation rainfall or washing, which Drummond
asserts is not properly regarded as part of “coal.” Drum-
mond also argues, in the alternative, that the regulation
constitutes an arbitrary and capricious deviation from
the Secretary’s past practice. We do not find merit in
either contention.
The Secretary’s initial fee regulations, promulgated in
October 1978, were not entirely clear as to what was
subject to the tax:
(a) The operator shall pay a reciamation fee on each
ton of coal produced for sale, transfer, or use... .
(b) The fee shall be determined by the weight and
value at the time of initial bona fide sale, transfer
of ownershin, or use by the operator.
30 C.F.R § 870.12(b) (1978). In Alabama (though seem-
ingly nowhere else in the country), certain OSM person-
nel and at least six Alabama coal companies interpreted
this regulation as analogous to Alabama’s severance tax.
Alabama law permits coal operators to deduct the weight
of “excess” moisture—moisture in excess of 2.88% of the
total weight of taxable coal.2 See Ala.Code § 40.13-31
‘ With an exception not here relevant, Section 1276(a) (2) of the
SMCRA incorporates the arbitrary and capricious standard of re-
view set forth in the Administrative Procedure Act, 5 U.S.C.
§ 706(2) (A) (1982).
* That percentage represents what Alabama has established as
the “inherent” moisture content of coal in Alabama. Coal in its
unmined state naturally contains some moisture, along with ash
and sulfur. See A.J. Taft Coal Co. v. United States, 605 F.Supp.
366, 871 n. 7 (N.D.Ala. 1984), aff'd mem. 760 F.2d 279 (11th Cir.
1985). This contrasts with “non-inherent” or “excess” moisture,
which accumulates after coal is extracted from the ground as a
result of immersion in water during the washing process or ex- ~
posure to rainfall. See Drummond Coal Co. v. Hodel, 610 F.Supp.
1489, 1493 (D.D.C.1985). The precise percentage of inherent mois-
ture varies widely from one coal seam to another throughout the
United States. See A.J. Taft Coal Co., 605 F.Supp. at 369. Ala-
4a
(1975); State of Alabama Department of Revenue, Coal
Severance Tax Regulation (July 13, 1979). This interpre-
tation, by which “excess moisture deductions” were made
on approximately seventy percent of the coal tonnage re-
ported by Alabama coal companies to OSM, came to the
attention of OSM’s Washington headquarters from a num-
ber of sources in 1980 and 1981. In response, OSM
proposed new regulations in December 1981 to clarify its
position :
(3) The weight of each ton shall be determined by
the actual gross weight of the coal.
(i) impurities, including water, that have not been
removed prior to the time of initial bona fide sale,
transfer of ownership, or use by the operator shall
not be deducted from gross weight.
30 C.F.R § 870.12(b) (3) (i) (1982) (emphasis in origi-
nal).
Drummond, one of the Alabama coal companies that
had been deducting “excess moisture” in its quarterly fee
filings with OSM from 1977 through 1981,° contends that
the revised regulation, by taxing impurities not removed
prior to sale, exceeds the Secretary’s authority under the
Act. According to Drummond, the SMCRA limit: the
Secretary to taxing coal with its inherent impurities, see
bama’s 2.88% figure for inherent moisture in coal is therefore an
approximation that would not hold true even for all coal mined in
that State. (OSM has noted, for example, that Alabama’s Bureau
of Mines found an average inherent moisture of 3.0% for Alabama
coal seams).
’ Drummond inadventently omitted the excess moisture deduc-
tion from the tonnage report for the last quarter of 1981 and
claimed a “refund” in its first quarter 1982 report. OSM denied
the refund claim and disallowed any future deductions, but it has
not, as far as the record shows, sought to recoup from Drummond
the amounts deducted between 1977 and 1981.
5a
supra note 2.‘ The statute does not, in Drummond’s view,
permit the Secretary to tax that portion of the weight of
coal represented by post-extraction added impurities such
as rainwater or debris. Phrased in Gertrude Stein’s
style, Drummond argues that coal is coal is coal.* Con-
gress, however, did not define “coal” in the statute—still
less the term “coal produced,” upon which the fee is levied.
Like the district court, we do not find the ordinary mean-
ing of that term unambiguous: “ ‘Production’ could rea-
sonably be interpreted to include the entire process of
* Drummond's position comes close to advocating a Btu tax, be-
cause the inherent moisture and ash in coal also add nothing to its
value as determined by the Secretary. Yet Con2ress rejected a
Btu tax in the final version of the SMCRA. Its sole concession to a
tax based on the heat value of coal was the provision whereby if
10% of the value of surface-mined coal at the mine, as determined
by the Secretary, is less than 35 cents per ton, then the lesser figure
is paid into the reclamation fund. See 30 U.S.C. § 1232(a); H.R.
Rep. 218, 95th Cong., Ist Sess. 137, U.S.Code Cong. & Admin.News
1977, p. 669. The House Report stated that “only a small propor-
tion of the low-heat sub-bituminous coal wil! be eligible for this
reduced fee.” Jd. The contrast between this provision, based on
heat value as determined by the Secretary, and the weight-based
provision under which Drummond is taxed cuts strongly against
Drummond's position in this case.
* In support of its argument, appellant relies on the reasoning of
A.J. Taft Coal Co., 605 F.Supp. at 366. In that case, the district
court found that the Black Lung Tax on “coal sold by the producer”
required the exclusion from gross weight of moisture in excess of
the Alabama statutory 2.88% limit. Relying upon the “plain mean-
ing” of the word “coal,” the district court adopted the State's 2.88%
severance tax standard. The Taft court distinguished the holding
in Drummond Coal Co. v. Watt, No. CV82-H-1838-S (N.D.Ala. May
18, 1983) [Available on WESTLAW, DCTU database], with whose
reasoning we today agree, by reference to the fact that the agency
administering the Black Lung Tax had issued no clarifying regu-
lations, and that there was “no clear intent in [the Black Lung
Tax statute], as there was in the [revised OSM] regulation, to tax
water or any other ‘impurities.’ ” 605 F.Supp. at 371. To the extent
that Taft’s rationale nevertheless may implicitly contradict our own,
we respectfully disagree with it.
6a
extracting and selling coal, complete from pit to buyer’s
door, or it could refer solely to the process of extraction.
[Nlowhere does the [SMCRA] specify what ele-
ments comprise a ‘taxable’ piece of coal.” 610 F.Supp.
at 1497. Drummond’s “plain meaning” argument is fur-
ther undermined by the prevailing industry practice be-
tween the passage of the SMCRA in 1977 and the final
promulgation of the revised reguiations in 1982. Ac-
cording to the record, the vast majority of U.S. coal
operators, as well as OSM personnel outside of Alabama,
interpreted the phrase “coal produced” as do the revised
regulations.
In view of the ambiguity of the statutory language,
then, unless Congress in the legislative history specifically
disleosed its intent on the question at issue we must defer
to the Secretary’s construction of the Act. Chevron U.S.A.
v. Natural Resources Defense Council, Inc., 467 U.S. 837,
842-43, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984).
Drummond contends that the legislative history indeed re-
veals Congress’ intent on the matter at issue here—an in-
tent inconsistent with the Secretary’s regulations. In sup-
port of this contention, Drummond deploys the Third
Cireuit’s decision in United States v. Brook Contracting
Corp., 759 F.2d 320 (3d Cir.1985). Our review of the
relevant legislative history * leads us respectfully to dis-
agree, with the Third Circuit and agree with the district
court below. See 610 F.Supp. at 1501 n.9. The legislative
history simply does not disclose the requisite specific intent
upon which a court could properly rely to overturn the
Secretary’s regulations.’
®* The House Report states that the legislative history of the
SMCRA would include the legislative history of previously vetoed
versions of the enactment from the two prior Congresses. H.R.
Rep. No. 218, 95th Cong., 1st Sess. 140, reprinted in 1977 U.S.Code
Cong. & Ad.News 593, 672.
7 There is, moreover, reason to doubt that the Third Circuit had
jurisdiction over the suit in Brook. The Eleventh Circuit has held
7a
Congress in fact never addressed the particular issue
that we confront in this case. The House Report reflects
general concern in connection with the level of the recla-
mation fee to be assessed, with the burden placed on the
industry and consumers and with the inflationary impact
of the fee. See H.R.Rep. No. 218, 95th Cong., 1st Sess.
137, reprinted in 1977 U.S.Code Cong. & Ad.News 669;
see also Brook, 759 F.2d at 324-25 (discussing House
Report). Those considerations were explicitly balanced,
however, against the need to raise sufficient funds to meet
program objectives. Jd. In any event, we fail to see how
the general policy concerns relating to the impact on
industry and consumers—even standing alone—could be
dispositive of the issue before us.
In support of its holding the Brook court reviewed oc-
casions, during the three years of legislative deliberations
leading to the 1977 passage of the Act, when Congress
considered estimates of the ultimate cost of the reclama-
tion fee to industrial purchasers of coal and consumers.
Id. at 325-26. These estimates used rough (‘“conserva-
tive”) assumptions about the number of Btu’s per pound
of coal—assumptions that the Third Circuit regarded as
more consistent with “clean” coal than with coal that
includes some amount of non-inherent impurities. Jd. at
325. Congress also considered certain calculations based
on the spot price per ton of coal, in which there was
apparently no indication that the price had been adjusted
to reflect the existence of such impurities. Jd. at 325-26.
that Section 1276(a) (1) of the SMCRA vests exclusive jurisdiction
to review challenges to national regulations, like the regulations at
issue here and in Brook, in the federal courts of the District of
Columbia Circuit. Drummond Coal Co. v. Watt, 735 F.2d 469, 476
(11th Cir.1984). We are not compelled in this case to address this
jurisdictional question. As the district court pointed out, it is
indisputable that Section 1276(a) vests either concurrent or exclu-
sive jurisdiction over suits like this in the United States District
Court of the District of Columbia. Regardless of which interpreta-
tion is correct, the district court properly exercised jurisdiction over
this case, and, therefore, so does this Court. 610 F.Supp. at 1494-95.
eT
8a
Finally, the Brook court cited the arguments of members
of Congress advocating a lower, ten-cents-per-ton fee,
premised on gross revenue calculations for total 1975
coal tonnage which the court thought to be exclusive of
noninherent moisture and debris. Even if the scientific
and mathematical calculations upon which the Brook
court’s analysis is founded are correct,*® they do not estab-
lish, as Chevron requires, a specific congressional intent
as to the interpretation of the words “coal produced.”
The Third Circuit’s opinion appears to us to be based
merely on speculative inferences from the legislative his-
tory harnessed to a conviction that the Secretary’s regula-
tion will cost too much.® Since Congress did not explicitly
8 The calculations reviewed by Congress assume 10,000 Btu’s per
pound of coal, whereas the Brook court cites figures compiled by the
American Society for Testing and Materials (ASTM), the principal
source for industry data, for a range running from 6,300 to more
than 15,500 Btu’s per pound of coal. ‘See 759 F.2d at 325. Congress
may have chosen the 10,000 Btu’s per pound figure rather than a
higher one to take account of the presence of non-inherent moisture
or debris. Similarly, the Third Circuit states that “[t]here is abso-
lutely no indication that Congress sought to include in the spot
price of coal in adjustment for tonnages of non-coal material,” id.
at 326. This seems to assume, without citation of support, that the
1975 spot price was per ton of clean coal rather than for “run-of-
mine” coal, i.e., coal prior to the removal of non-inherent impuri-
ties. Finally, the House Report’s figure for total 1975 coal produc-
tion of 654 million tons which the Brook court cites, see id., multi-
plied by the ten-cents-per-ton fee proposed by the House minority,
would yield $65.4 million; yet the court quotes the minority report
as claiming that the minority’s proposed ten cent fee “could gener-
ate between $60 and $70 million dollars [sic] on an annualized
vasis.” Id. (quoting H.R.Rep.No. 45, 94th Cong., 1st Sess. 168
(1975) ). We cannot say that this differential was not included in
whole or in part to account for the fee falling on certain quantities
of non-inherent moisture or debris.
® Nor could it be argued, as the Brook court seems to suggest,
that under the revised regulation the fee would as a practical matter
be imposed on an unlimited amount of impurities. If the amount of
9a
address the proper meaning of the words “coal produced”
in either the statutory language or the legislative history,
we conclude that the Secretary was authorized to give the
term a reasonable construction. By leaving the operative
statutory terms undefined and delegating broad rulemak-
ing authority to the Secretary, see 30 U.S.C. §§ 1211,
1242(a) (1982), Congress has left a gap in the regulatory
regime for the agency to fill. See Chevron, 467 U.S. at
842-44, 104 S.Ct. at 2781-83; Montana v. Clark, 749 F.2d
740, 745 (D.C.Cir.1984), cert. denied, US. , 106
S.Ct. 246, 88 L.Ed.2d 255 (1985). And in formulating
a definition of “coal produced,” the Secretary is entitled
to balance the countervailing policies at stake. See Chev-
ron, 467 U.S. at 844-45, 104 S.Ct. at 2782-83. We have
no warrant to set aside the Secretary’s interpretation, if
reasonable, merely because we might strike this policy
balance in a different fashion.
One cannot say that the Secretary’s definition is un-
reasonable. The Secretary felt that important adminis-
trative considerations supported his interpretation: “[I]f
moisture deductions were allowed, audit of operator rec-
ords would be further complicated and laboratory analy-
ses required to document moisture content.” 47 Fed.
Reg. 28,578 (1982). Further, he deemed it desirable to
achieve “uniform application of Part 870 and equitable
treatment of all operators.” Jd. Drummond contends
that whatever administratve problems the Secretary would
encounter elsewhere in the country, OSM’s Alabama
regional office would be able to police deductions for non-
inherent post-excavation moisture, presumably because of
the apparatus already in place for administering Ala-
bama’s severance tax, which requires measurement of the
total moisture content of coal for comparison with the
non-inherent moisture or other debris in coal reaches a point where
the portion of the fee ascribable to such impurities exceeds the cost
of “cleaning” the coal, then the operators will of course remove the
impurities rather than pay the fee.
cineca
10a
2.88% figure established in the statute.’? But the Secre-
tary’s desire to employ a national standard that uni-
formly prohibits deductions for post-excavation moisture
is obvious commonsense. The inherent moisture of coal
varies considerably among coal deposits in different parts
of the country. Allowing excess moisture deductions for
producers in all parts of the country would entail either
the considerable burden of setting different inherent mois-
ture levels for different localities or the inaccuracy (and
inequity) of setting a single, approximate nationwide
standard. And even if the percentage of inherent mois-
ture in coal were uniform across the nation, or some ap-
proximate figure were selected, Drummond still has not
suggested how the Secretary could avoid conducting com-
plex and extensive audits to determine the accuracy of
operators’ measurements of non-inherent moisture and
debris.
Drummond further contends that the Secretary’s re-
vised regulation is inconsistent with the definition of coal
as “combustible carbonaceous rock” found elsewhere in
the regulations. See 30 C.F.R. § 700.5 (1985). Appellant
ignores the fact that this definition is prefaced by the
words, “except where otherwise indicated.” Jd. The re-
vised regulation clearly “otherwise indicate[s]” that im-
purities included in the gross weight prior to sale are to
be treated as “coal” for purposes of the tonnage fee. This
argument, moreover, like Drummond’s statutory argu-
ment, overlooks the point that the crucial statutory lan-
guage is “coal produced,” not coal.
a = e
1 Alabama is seemingly unique in the “excess moisture” provi-
sions of its severance tax. Drummond Coal Co. v. Watt, No. CV &2-
H-1838-S, slip op. at 3 (N.D.Ala. May 18, 1983) [Available on
WESTLAW, DCTU database]. Throughout Drummond has ig-
nored the non-inherent debris mixed with the coal, although the
logic of their position would apply to all impurities. See Brook, 759
F.2d 320 (8d Cir.1985). Drummond apparently avoided making
this argument because the Alabama severance tax provides a
mechanism only for calculating excess moisture.
lla
Drummond also maintains that even if the Secretary’s
interpretation would be reasonable if adopted initially, it
is nevertheless arbitrary and capricious because when
promulgated in 1982 it constituted a change of policy
without adequate explanation. See Motor Vehicle Mfrs.
Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29,
103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). Drummond thus
seek to leverage the benefit of the “Alabama interpreta-
tion” it enjoyed for four years into a national policy
which it asserts OSM cannot so easily change. We find
this argument, to put it kindly, insubstantial. There was
certainly no national policy reflecting Drummond’s in-
terpretation of the statute. The Secretary has represented
to us that only twelve of 6000 operators took advantage
of this “policy,” eleven of whom were based in Alabama.
At most, the record reflects some degree of confusion prior
to 1982 at the lower echelons of OSM." At the national
level the agency’s position has been unchanged since 1977.
See 42 Fed.Reg. 62,714 (1977); 610 F.Supp. at 1503.
We do not say that the Secretary is or was forbidden
to adopt Drummond’s suggested definition of “coal pro-
duced.” Rather, we hold that because Congress had no
specific intention on this point, the Secretary, under Chev-
ron, had the authority to fashion a reasonable interpre-
tation. This the Secretary has done. The judgment of the
district court is therefore
Affirmed.
11 Drummond doubts the Secretary’s representation and seeks to
impose a burden on the Secretary to affirmatively “prove” that all
but 12 coal operators followed his policy prior to 1982—which, of
course, would require the Secretary, in order to support his position
here, to conduct an enormously burdensome audit of thousands of
quarterly reports. But the precise number of confused coal oper-
ators is patently irrelevant. Drummond’s position seems to us to
stem from a profound misunderstanding of State Farm’s rationale.
That case does not hold that an agency is restricted in clarifying
an ambiguous regulation that does not precisely convey an agency’s
statutory interpretation.
12a
UNITED STATES DISTRICT COURT
DISTRICT OF COLUMBIA
Civ. A. No. 82-2439
DRUMMOND COAL COMPANY,
Plaintiff,
V.
DONALD P. HopDEL,* Secretary of the Interior,
Defendant.
June 11, 1985
Michael B. Barr, Hunton & Williams, Washington,
D.C., for plaintiff.
Alfred T. Ghiorzi, Land & Natural Resources Div.,
U.S. Dept. of Justice, Washington, D.C., for defendant.
MEMORANDUM OPINION
AND ORDER
JOYCE HENS GREEN, District Judge.
Before the Court are the parties’ cross motions for
summary judgment. The plaintiff, Drummond Coal Com-
pany, seeks declaratory and injunctive relief to prevent
the Department of Interior (DOI) and the Office of Sur-
face Mining (OSM) from enforcing regulations designed
to govern the collection of reclamation fees under the
Surface Mining Control and Reclamation Act of 1977
(SMCRA, the Act), 30 U.S.C. § 1201, et seg. At issue
* Pursuant to Fed.R.Civ.P. 25(d), Donald P. Hodel has been sub-
stituted for William P. Clark as Secretary of the Interior.
13a
is a recently revised regulation that determines the
method by which the plaintiff must calculate the fee it
is required to pay under the Act for each ton of coal
produced. Drummond contends that this revision, under-
taken to clarify existing regulations, is both inconsistent
with the language of section 402 of SMCRA (380 U.S.C.
$ 1232) and contrary to prior administrative practice
and policy. The defendant, in turn, argues that the re-
vised regulation is “not repugnant to the language of the
statute or its underlying purposes” and is consistent with
prior practice. As such, the defendant concludes, the pro-
mulgation of the challenged regulation falls within the
scope of DOI’s broad rulemaking power and is entitled
to “great deference” upon review by this Court.
For the reasons set forth below, the Court concludes
that the Secretary did not exceed his authority in pro-
mulgating the chalienged regulations. Accordingly, the
defendant’s cross-motion for summary judgment shall be
granted.
I. Background
A. Regulatory Framework
In 1977 Congress passed the Surface Mining Control
and Reclamation Act. The purpose of the Act, as stated
by Congress, was in part to “establish a nationwide pro-
gram to protect society and the environment from the
adverse effects of surface coal mining operations.” 30
U.S.C. § 1202(a). It was Congress’ hope that the Act
would “promote the reclamation of mined areas” while
striking a “balance between protection of the environ-
ment ... and the Nation’s need for coal.” 30 U.S.C.
§ 1202 (f).
To achieve this end, Congress included in the Act a
provision establishing an “Abandoned Mine Reclamation
Fund.” 30 U.S.C. § 1231. The terms of the fund pro-
gram, as set out in section 1232(a) of the Act, required
all coal operators subject to the SMCRA to pay into the
l4a
fund a reclamation fee of 35 cents for each ton of coal
produced by surface mining.
In December, 1977 the Secretary of the Interior, acting
through OSM, promulgated national regulations setting
forth the procedures to be used by coal mine operators
in computing their reclamation fees. 42 Fed.Reg. 62715
(1977). The regulations stated in pertinent part that:
(a) The operator shall pay a reclamation fee on
each ton of coal produced for sale, transfer, or use,
including the products of in situ mining.
(b) The fee shall be determined by the weight and
value at the time of initial bona fide sale, transfer
of ownership, or use by the operator.
These regulations,| however, did not explain precisely
how the “weight and value” of the coal at the time of
initial sale or transfer was to be calculated. As a result,
from 1977 to 1981 the regulations were subject to vary-
ing interpretations, both by operators and by certain
OSM officials. In Alabama, for example, coal operators
regularly reduced their “‘taxable” coal tonnage by claim-
ing a deduction for the alleged “excess moisture” content
of the coal.
Faced with evidence of confusion among operators and
inconsistent interpretation by the OSM representatives,
in December, 1981 the Secretary proposed revised regu-
lations for reclamation fee computations. The revised
regulations, ultimately approved in final form and codi-
fied at 30 C.F.R. § 870.12(b) (3) (i) (1982), stated in
relevant part that:
(a) The operator shall pay a reclamation fee on
each ton of coal produced for sale, transfer, or use,
including the products of in situ mining.
1 The regulations promulgated in December, 1977 were incorpo-
rated in the final regulations issued nearly one year later. See 30
C.F.R. 870.12 (b), 43 Fed.Reg. 49940 (1978).
ans eet nanan aaa
15a
(b) The fee shall be determined by the weight and
value at the time of initial bona fide sale, transfer
of ownership, or use by the operator.
(3) The weight of each ton shall be determined by
the actual gross weight of the coal.
(i) Impurities, including water, that have not been
removed prior to the time of initial bona fide sale,
transfer of ownership, or use by the operator shall
not be deducted from the gross weight. |Emphasis
added. ]
It is these 1981 revised regulations that serve as the
focus for the plaintiff’s challenge in this case. Before
turning to the merits of Drummond’s claim, however, a
brief review of the coal company’s involvement in this
litigation is required.
B. Factual and Procedural History
Drummond Coal Company, a Delaware corporation,
mines substantial amounts of coal in Alabama. Begin-
ning in 1977 when the reclamation fee regulations were
first issued, and continuing until June, 1982 when the
revised regulations were promulgated, Drummond rou-
tinely subtracted a deduction for moisture from the ac-
tual tonnage of coal mined, before calculating the recla-
mation fee it believed was owing. The deductions were
approved without exception by the OSM official respon-
sible for the OSM region (“Region II’) in which Ala-
bama was located. Five other Alabama based coal pro-
ducers also followed this practice. The operators insisted
that their calculations were based on an Alabama state
coal severance tax law’ that permitted an excess mois-
ture deduction.
2 Alabama’s excess moisture provision sets a flat figure—2.88%
of the gross weight of mined coal—as the “inherent moisture” con-
tent of the coal. Any moisture content over and above 2.88% may
16a
According to OSM, it was not until March, 1981 that
the Secretary discovered that certain operators were sub-
tracting a deduction for moisture. Drummond’s practice,
in particular, did not come to the attention of the Secre-
tary until March 13, 1982, when Drummond filed its
report with OSM for the first quarter of 1982. In that
report, Drummond explained that it had inadvertently
failed to take a moisture deduction for December, 1981
tonnage, and that it expected to receive a credit for the
“overpaymeit” of reclamation fees.
In March 1981, before Drummond’s practice came to
light, the Deputy Director of OSM ordered an investiga-
tion of the fee collection method used in Region II. (See
Secretary’s Record Supplement, Exhibit D). The results
of that investigation—revealing a unique, albeit accepted,
practice of excess moisture deductions in Alabama—
sparked a policy decision at the highest levels of OSM to
bring Region II and Alabama in line with what the Secre-
tary argues had always been OSM’s nationally accepted
method of fee calculation. Accordingly, in December,
1981 OSM promulgated the revised regulations. OSM
notified Drummond on July 23, 1982, that OSM regula-
tions did not permit an “excess moisture” deduction. Cit-
ing the revised regulations, OSM informed Drummond
that “the deduction claimed . . . for the fourth quarter of
1981 and all subsequent quarters is disallowed. ... Any
future requests for refund of fee payments should...
not [be] ‘offset’ by reduced payments in subsequent quar-
ters.” Secretary’s Record Supp. Exh. C.
Drummond responded immediately to OSM’s decision by
filing two separate actions simultaneously—one in the
Northern District of Alabama, Drummond Coal Co. v.
James Watt, No. CV82-H-1838-S (slip op. May 18, 1983),
and the other before this Court. The complaints, identical
be deducted from the gross taxable tonnage. Ala.Code § 40.13-31.
See Coal Severance Tax Regulations, State of Alabama, Dep’t of
Revenue, Montgomery, Ala., July 9, 1979.
17a
in all substantive respects, sought declaratory relief and
injunctive relief. Specifically, Drummond requested that
the revised 1982 regulations be declared and adjudged
“arbitrary, [and] capricious[,] an ubuse of the Defend-
ant’s discretion[,] and .. . inconsistent with . . . [the]
SMCRA.” Plaintiff’s Complaint at 7. The complaint fur-
ther requested that the defendant be permanently enjoined
and restrained from enforcing or applying the challenged
regulations.
At the heart of Drummond’s objection to OSM’s action
was its belief that a coal operator should not be taxed
for excess moisture added to the coal after severance and
extraction from the ground. According to Drummond,
coal was often exposed to water in the mine, or to rain,
after severance and before sale. Absorption of this water
might add to the gross weight of the coal, but not its
value. It made little sense, Drummond argued, to tax an
operator based on a gross weight that did not reflect the
true quantity of coal removed from the ground.
Insofar as the SMCRA was designed to tax coal and not
water, Drummond insisted, the revised regulations ex-
ceeded the scope of the Act and thus were unlawful. More
importantly, Drummond noted, between 1977 and March,
1982, OSM never objected to a request from a Region II
operator for a moisture deduction. From Drummond’s
perspective, therefore, the 1982 revised regulations repre-
sented a departure from a prior administrative practice
without a “reasoned justification”. Plaintiff’s Motion for
Summary Judgment at 16-17. As such, the Secretary’s
decision to promulgate the regulations was arbitrary and
capricious, and constituted an abuse of discretion. For
these reasons, Drummond argued, the regulations should
be held void.
Shortly after the filing of the complaints, the Secretary
filed a motion in the Northern District of Alabama to
dismiss or transfer the Alabama case on the ground that
the SMCRA provided for exclusive jurisdiction in the
18a
District of Columbia. On January 13, 1983, the Alabama
court denied that motion. One week later, the Secretary
requested a permanent injunction to prevent further pros-
ecution in the Northern District of Alabama. Drum-
mond opposed that motion by moving to stay all proceed-
ings in the District of Columbia pending the outcome of
the suit in the Northern District of Alabama. On Febru-
ary 24, 1983, this Court granted Drummond’s motion to
stay.
In response to Drummond’s challenge on the merits,
the Secretary asserted two central claims. First, the Sec-
retary argued that the revised regulations did not repre-
sent a change from prior administrative practice because
Region II officers—allegedly the only officers to approve
excess moisture deductions *—were never authorized to
grant deductions. Actions, of these “insubordinate” offi-
cials, the Secretary insisted, could neither bind DOI nor
constitute the Department’s official administrative prac-
tice or policy.
Second, the Secretary argued that the regulations were
entitled to “great deference” on review because they were
consistent with the broad, remedial purposes of the
SMCRA, and promoted the twin agency goals of uniform-
ity in application and administrative efficiency. Specific-
ally, the Secretary maintained that the ambiguity of the
1977 regulations permitted certain coal operators to pay
less tax by contracting to sell coal based on its “energy
value” per ton, as opposed to its gross weight. The 1982
revised regulations, the Secretary pointed out, merely en-
sured that all operators would be taxed on the same basis
and at the same point in the coal mining process; the
new regulations, therefore, were national in both purpose
% According to the Secretary, only 12 out of 6000 coal operators
nationwide were permitted to take deductions, and 11 of the 12
were based in Alabama; the other was in Pennsylvania.
|
19a
and design. The decision to promulgate could not be con-
sidered arbitrary or capricious.‘
Subsequently, the United States District Court for the
Northern District of Alabama ruled that the 1982 revised
regulations were valid. That court concluded that the
new regulations did not constitute a “substantive change
in the policy of the agency,” but rather represented a
clarification of the SMCRA “so as to ensure uniform
application of the law.” Drummond Coal Co. v. James
G. Watt, CV 82-H-1838-S (Slip op., N.D.Ala. May 18,
1983 at 6). The Court also found that the regulations
were not inconsistent with the plain language of the Act:
The regulations are invalid, Drummond argues, be-
cause they tax impurities such as water, while the
Act authorizes a tax only on coal. This argument is
not persuasive. The revised regulations are clearly
within the scope of the agency’s authority under the
Act. Congress chose to tax tonnage of “coal.” Obvi-
ously there are impurities mixed with coal—dirt,
sulfur, water, etc. Congress made no attempt to
remove from taxation this small percentage of im-
purities found in the mined coal. Had Congress been
concerned that the inclusion of impurities would
work an undue hardship on the coal operators, the
tax could have been calculated in other ways. For
example, Congress could have taxed the coal on its
BTU content. Since Congress refused to distinguish
coal from its impurities, the regulation requiring the
inclusion of impurities in calculating gross weight at
the time of initial sale, transfer, or use, is within the
* Because the Secretary never attempted to recover the sums de-
ducted by the Alabama operators from 1977 to 1981, Drummond lim-
ited its challenge to the validity of the 1982 revised regulations. As
best as can be determined, the plaintiff has challenged only the
prospective enforcement of the 1982 regulations. Accordingly, this
decision does not purport to address the validity of the 1977 regu-
lations, or the propriety of the Secretary’s actions carried out under
those regulations.
20a
scope of the agency’s authority. The fact that the
impurities involved here are “added” to the coal after
it is mined does not change the result. Again, Con-
gress was well aware that after mining and before
sale or use, coal is exposed to water from a variety
of sources.
Drummond, slip op. at 7.
On appeal, the United States Court of Appeals for the
Eleventh Circuit reversed and vacated the Alabama dis-
trict court decision. Although the Court expressed its “be-
lie[f] that Drummond’s challenge to the revised regula-
tions is wholly without merit,” the basis of the decision
to reverse and the actual holding of the case were limited
to the conclusion that section 1276(a) (1) of the SMCRA
“vests in the United States District for the District Court
of Columbia exclusive jurisdiction over th[ej case.”” Drum-
mond Coal Co. v. Watt, 735 F.2d 469 (11th Cir.1984).
With the Alabama litigation complete, this Court lifted
the earlier stay. Thereafter, cross motions for summary
judgment were filed on the very issues that the Eleventh
Circuit found itself without jurisdiction to review. It is
to these motions that the Court now turns.
il. Jurisdiction
Before reaching the merits of Drummond’s claim, a juris-
dictional question need be addressed. 30 U.S.C. § 1276
(a) (1) states that:
Any action of the Secretary to approve or dis-
approve a State program or to prepare or promulgate
a Federal program pursuant to this chapter shall be
subject to judicial review by the United States Dis-
trict Court for the District which includes the capital
of the State whose program is at issue. Any action
by the Secretary promulgating national rules or reg-
ulations including standards pursuant to sections
1251, 1265, 1266, and 1273 of this title shall be sub-
——————
2la
ject to judicial review in the United States District
Court for the District of Columbia Circuit. Any
other action constituing rulemaking by the Secretary
shall be subject to judicial review only by the United
States District Court for the District in which the
surface coal mining operation is located. Any action
subject to judicial review under this subsection shall
be affirmed unless the court concludes that such ac-
tion is arbitrary, capricious, or otherwise inconsistent
with law. A petition for review of any action subject
to judicial review under this subsection shall be filed
in the appropriate Court within sixty days from the
date of such action, or after such date if the petition
is based solely on grounds arising after the sixtieth
day. Any such petition may be made by any person
who participated in the administrative proceedings
and who is aggrieved by the action of the Secretary.
[Emphasis added. ]
Before the Eleventh Circuit, Drummond argued that this
section conferred concurrent jurisdiction over the case on
the United States District Court for the District of Co-
lumbia and on “all other district courts that otherwise
would have jurisdictien. . . .” The Eleventh Circuit dis-
agreed with this interpretation, accepting instead the
Secretary’s argument that Congress intended to vest ez-
clusive jurisdiction over challenges to national regula-
tions in the District Court for the District of Columbia.
The Eleventh Circuit drew support for its conclusion
from a decision by the Fourth Circuit, Tug Valley Re-
covery Center v. Watt, 703 F.2d 796 (1983), but noted
that other circuits had reached the opposite conclusion.
See, e.g., Holmes Limestone Co. v. Andrus, 655 F.2d 732
(6th Cir. 1981), cert. denied sub nom. Watt v. Holmes
Limestone Co., 456 U.S. 995, 102 S.Ct. 2280, 72 L.Ed.2d
1292 (1982).
For the purposes of this suit at this point in the pro-
ceedings, it matters little whether the jurisdictional deci-
22a
sion of the Eleventh Circuit in the “duplicate” case filed
in Alabama would or would not be held appropriate upon
review by the Supreme Court. Regardless whether this
Court has concurrent or exclusive jurisdiction, the statute
plainly provides the District Court for the District of
Columbia with jurisdiction in some form over a challenge
to national regulations. The cross motions for summary
judgment, therefore, are properly before the Court.
III. Consistency, Legislative Purpose,
| and Prior Practice
Under the strict standard established by this Circuit,
a motion for summary judgment may be granted only
when it is shown that there “is no genuine issue as to
any material fact and that the moving party is entitled
to judgment as a matter of law. ... In ruling on a
summary judgment motion, the Court must draw all
inferences from the record in the light most favorable
to the party opposing the motion.” Williams v. Wash-
ington Metropolitan Area Transit Authority, 721 F.2d
1412, 1414-15 (D.C. Cir. 1983). “To warrant summary
judgment the record ‘should show the right of the
[movant] to a judgment with such clarity as to leave no
room for controversy. ...’” Weiss v. Kay Jewelry
Stores, Inc., 470 F.2d 1259, 1262 (D.C. Cir. 1972).
In this instance, neither party disputes the validity of
the evidence contained in the administrative record. The
sole issues that remain for resolution are lega! ones: (1)
whether the decision to promuigate the 1982 revised reg-
ulations constitutes an unlawful abuse of discretion on
the part of the Secretary because the regulations are in-
consistent with the language and purposes of the Act;
and (2) whether the Secretary’s decision to piomulgate
the revised regulations should be held arbitrary and ca-
pricious insofar as it represents a change in prior ad-
ministrative practice for which no reasoned justification
has been offered. Disposition of the suit on summary
judgment, therefore, is proper.
23a
A. Statutory Language and
Legislative History
1. The “Deference” Standard
It is well established that when faced with a problem
or statutory construction, “great deference [must be
shown] to the interpretation given the statute by the
officers or agency charged with its administration.”
Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13
L.Ed.2d 616 (1965). See also EPA v. National Crushed
Stone Ass’n, 449 U.S. 64, 83, 101 S.Ct. 295, 306, 66
L.Ed.2d 268 (1980). Deference becomes all the more
important when the interpretation of an administrative
regulation is involved. Jd. In that instance “ ‘the ulti-
mate criterion is the administrative interpretation, which
becomes of controlling weight unless it is plainly errone-
ous or inconsistent with the regulation.’” Bowles v.
Seminole Rock Co., 325 U.S. 410, 413-14, 65 S.Ct. 1215,
1217, 89 L.Ed.2d 1700 (1945), quoted in Udall, 380
U.S. at 16-17, 85 S.Ct. at 801-802.
To sustain the agency’s interpretation, the Court “need
not find that [the agency’s] construction is the only rea-
sonable one, or even that it is the result [that] would
have [been] reached had the question arisen in the first
instance in judicial proceedings.” Udall, 380 U.S. at 16,
85 S.Ct. at 801. To the contrary, the burden rests with
the party challenging the administrative action to demon-
strate invalidity. “Absent a contrary indication in the
statute,” the Secretary’s judgment must be accepted. Jn
Re: Permanent Surface Mining Regulation, 653 F.2d
514, 522 (D.C. Cir. 1981). As both the Supreme Court
and this Circuit have noted,
it is not a reasonable canon of interpretation [to as-
sume] that the draftsmen of acts delegating agency
powers, as a practical and realistic matter, can or do
include specific consideration of every evil sought to
be corrected.... [This] is precisely one of the rea-
24a
sons why regulatory agencies . . . are created, for
it is the fond hope of their authors that they bring
to their work the expert’s familiarity with industry
conditions which members of the delegating legisla-
tures cannot be expected to possess.
American Trucking Ass’n v. United States, 344 USS.
298, 309-10, 73 S.Ct. 307, 314, 97 L.Ed. 337 (1953),
quoted in In Re: Permanent Surface Mining, 653 F.2d
at 522. See also Miller v. Youakim, 440 U.S. 125, 145
n.25, 99 S.Ct. 957, 969 n.25, 59 L.Ed.2d 194 (1979);
Maryland National Capital Park and Planning Comm’n
v. Lynn, 514 F.2d 829, 834 (D.C. Cir., 1975) (burden
rests on challenging party to overcome presumption of
validity).
Application of the Bowles Court’s “rebuttable defer-
ence” standard of review is particularly appropriate in
this instance because the drafters of the SMCRA clearly
intended to delegate to the Secretary broad rulemaking
power. Section 201(c)(2) (30 U.S.C. $1211) of the
Act states that the Secretary shall “publish and promul-
gate such rules and regulations as may be necessary to
carry out the purposes and provisions of this Act.” Simi-
larly, section 412 (30 U.S.C. § 1242) of the Act provides
that the Secretary “shall have the power and authority,
if not granted it otherwise, to engage in any work and
to do all things necessary or expedient, including pro-
mulgation of rules and regulations, to implement and
administer the provisions of this Subchapter.” 30 U.S.C.
§ 1242(a).®
Even were Congress not to have granted the Secretary
broad d secretion in administering the Act, a “deference”
standard of review would stil! be presumptively appro-
5 Indeed, as the defendant points out, the phrase “all things neces-
sary or expedient” is rarely used by Congress. See Defendant’s
Mera. at 14, n. 11. Congress’ decision to use that phrase in this
instance, therefore, connotes a deliberate effort to delegate broad
discretion to the Secretary for enforcement of the Act.
25a
priate here because the regulatory framework underlying
the SMCRA is the product of a long and complex legisla-
tive process:
Deference to the administering agency is particu-
larly appropriate when a complex regulatory statute
emerges from a process of difficult legislative gesta-
tion. The Surface Mining Act was the result of a
protracted effort, dating back to the Ninetieth Con-
gress, and including presidential veto of bills passed
by the Ninety-third and Ninety-fourth Congresses.
From such a process of compromise and adjustment,
a symmetrical statute containing explicit answers to
every question of administrative implementation is
unlikely to emerge.
In Re: Permanent Surface Mining, 653 F.2d at 522.
OSM’s interpretation of the 1977 regulations, there-
fore, and of the statute as set forth in the revised regula-
tions, must be accorded broad deference unless the record
reflects that the agency’s interpretation is “plainly er-
roneous”, Udall, 380 U.S. at 17, 85 S.Ct. at 801, or
patently “inconsistent” with the earlier regulation. To
determine whether deference should be accorded the Sec-
retary in this instance, two questions must now be ad-
dressed: (1) whether the 1982 regulations are consistent
on their face with the language of the statute and of the
1977 regulations; and (2) whether the 1982 regulations
are reasonably related to the legislative intent and pur-
pose of the SMCRA.
2. Consistency with Statutory Language
30 U.S.C. § 1232 states that a reclamation fee of 35
cents per ton of “coal produced by surface coal mining”
shall be levied on all coal operators. Emphasis added.
The term “produced” is ambiguous. “Production” could
reasonably be interpreted to include the entire process of
extracting and selling coal, complete from pit to buyer’s
26a
door, or it could refer solely to the process of extraction.
The latter interpretation would support the conclusion
that impurities added after extraction, such as moisture,
should not be taxed. The former interpretation would
imply that the gross product sold to the buyer-——even if it
contains impurities and moisture—should serve as the
basis for taxation.
The statute also fails to define the term “coal”. Types
of coal—such as “lignite” coal, surface mined coal, and
underground coal—are distinguished, but nowhere does
the Act specify what elements comprise a “taxable” piece
of coal.
As published in 1978, the 1977 regulations did little
to remedy these ambiguities. The 1977 regulations, see
30 C.F.R. § 870.12(b), 43 Fed. Reg. 49940 (1978), state
only that
(a) The operator shall pay a reclamation fee on
each ton of coal produced for sale, transfer, or use,
including the product of in situ mining.
(b) The fee shall be determined by the weight and
value at the time of initial bona fide sale, transfer
of ownership, or use by the operator.®
The preamble to the 1977 regulations, however, does
provide some insight into OSM’s interpretative intent.
In response to a question from a commentator about
whether the fee was to be paid on “clean coal” or “run
of mine” coal, OSM stressed that the erucial factor was
not the composition of the coal, but the point in the
mining and selling process that “first sale or transfer”
took place:
Section 837.12(a) and (b) of the regulations spec-
ify that the fee be paid on each ton of coal produce
for sale, transfer, or use and that the fee shall be
6 The 1977 regulations also include an “attempted” definition of
coal. See 30 C.F.R. § 700.5, quoted in full infra Part III B, n. 9.
Po ee
27a
determined at the time of initial bona fide sale,
transfer of ownership, or use by the operator. For
example, if the initial transaction is based on the
weight of run-of-mine coal then the reclamation fee
must be paid for each ton of run-of-mine coal sold,
transferred or used. If the initial transaction is
based on the weight of clean coal, then the reclama-
tion fee must be paid on each ton of clean coal sold,
transferred, or used.
42 Fed. Reg. 62714, Dec. 18, 1977 (Dec. 13, 1977). Sig-
nificantly, this interpretation of the 1977 regulations was
reiterated one year later, in 1978, in an OSM Solicitor’s
opinion:
. . . The fee must be determined by the weight and
value of the coal at the time of initial bona fide
sale. More [sic] computations or estimations of the
clean coal weight would not be in compliance. The
coal would actually have to be cleaned prior to sale
or use to meet the conditions in Section 837.12(b).
Advisory Opinion of Apr. 17, 1980, quoted in Plaintiff’s
Supp to Admin. Record, Attachment 3 at 3.
The 1982 revised regulations adopt the first of the two
possible interpretations of section 1232. The regulations
state expressly that the time of sale, and not the value
of the coal, is the determining factor. Impurities that
have not been removed before the time of initial bona fide
sale, transfer of ownership, or use by the owner, will be
taxed.
Both interpretations, however, are potentially consistent
with the Act. The conclusion reached depends upon the
particular objectives that Congress sought to further in
enacting the legislation. If, for example, the Act’s drafters
intended to create a tax mechanism that would promote
administrative efficiency and ensure consistent, evenhanded
enforcement, the first interpretation is reasonable, for it
envisions a flat tax based on a uniform time of sale. If,
28a
however, Congress hoped to tax operators based solely on
the value and quantity of coal extracted, then the latter
interpretation would be most logical.
At one extreme, therefore, the 1982 regulations are not
in consistent with the plain language of the statute or its
supporting regulations. They simply make express what
had been implied. Because the SMCRA does not contain
an express provision to the contrary in the SMCRA, there
is nothing “plainly erroneous” about interpreting ‘“coai
produced” to refer to the condition of the coal at the time
of sale or transfer. At the other extreme, the 1982 regu-
lations may be viewed as consistent with an interpreta-
tion of section 1232 that OSM represented as its own from
1977 until 1981. See Solicitor’s Advisory Opinion of Apr.
17, 1980; preamble to 1977 regulations, 42 Fed.Reg.
62714 (Dec. 13, 1977). That this interpretation was not
the only one possible is of minor consequence. See Udall,
380 U.S. at 16, 85 S.Ct. at 801. For purposes of this
review, what matters is that the 1982 regulations were
potentially consistent with a plausible—indeed, reason-
able—interpretation.
In neither event, therefore, under either of the two
possible interpretations, can the 1982 regulations be con-
sidered clearly inconsistent with the plain meaning and
language of the statute.
3. Consistency With Legislative Purpose
In its 1977 House Report, Congress listed the objectives
of the reclamation program as including
the protection of health or safety of the public; pro-
tection of the environment from continued degrada-
tion and conservation of land and waier resources;
the protection or enhancement of public facilities as
part of reclamation of land and water conservation
projects; the improvement of lands and waters to a
suitable condition useful in economic social develop-
29a
ment; and research and demonstration relating to
the development of surtace mining reclamation and
water quality control program methods.
H.R. Rep. No. 95-218, 95th Cong., 1st Sess. 169; U.S.
Code Cong. & Ad.News 593, 700 (1977). An earlier
House Report that accompanied the SMCRA made clear
that the reclamation fund provisions were designed to be
remedial in purpose and function:
[T]he widespread environmental degradation associ-
ated with coal surface mining—including the indis-
criminate dumping of coal mine waste on the lance
surface and into streams—has resulted in the serious
deterioration of the social and economic climate of
affected regions. Where states have nct accepted the
burden of rehabilitating these regions, the environ-
mental and social costs have devolved upon local resi-
dents. The injustice of requiring persons least able
to shoulder such an enormous burden to do so is
obvious.
H.R.Rep. No. 93-1072, 93d Cong., 2d Sess. 116 (1974).
It was considered critical, therefore, that the fee provi-
sions generate sufficient revenue to fund the Abandoned
Mine Program. See id. at 117. Early reports estimated
that as much as $180 million per year would be needed
to meet “high priority program needs.” Jd.
The bill’s sponsors, however, hoped to find a way to
impose a reclamation fee without “constrain[ing] the de-
velopment or production” of coal:
Several principal considerations form the basis for
the... reclamation fee:
First, to set the fee at such a level that it is not
a burden on the industry;
Third, to structure the fee so it would not exert
an inflationary influence in the economy.
30a
H.R.Rep. No. 95-218, 95th Cong., 1st Sess, 136, 137, U.S.
Code Cong. & Ad.News 5938, 668-69 (1977). To achieve
this end, Congress devised a differential fee based solely
on the genus of coal mined. Types of coal were limited
to three: surface mined coal was to be taxed at 35 cents
per ton; underground mined coal at 15 cents per tor;
and lignite coal at 10 cents per ton. See 30 U.S.C. § 1232
(a). Significantly, Congress expressly rejected an amend-
ment to the reclamation fee provisions that would have
provided for a uniform tax based on the BTU content
(energy value) of the coal, see H.R.Rep. No. 93-1072,
93d Cong., 2d Sess. 116-17 (1974) (proposing fee of 1.23
cents per million BTUs), and rejected proposed amend-
ments that would have permitted credits or deductions
for state severance tax payments that, in turn, either
provided for excess moisture deductions or were based
on BTU value. See 120 Cong.Rec. H25230 (July 25,
1974) (amendment of Congressman Seiberling proposing
a tax of $2.50 per ton of coal mined minus a credit of
$0.01 for each 1000 BTUs “by which the weighted aver-
age BTU value of coal mined... falls below 16,000 BTU
per pound’); 121 Cong.Rec. H6809 (Mar. 17, 1975)
(amendment of Congressman Regula proposing a credit
for “the amount of any reclamation fee or severance tax
... paid to the State during that year.”).
This decision to base the fee on the weight of the coal
at a given time during the coal production process, and
not on the value or “inherent content” of the coal, was not
an arbitrary choice unsupported by logic or reason; to
the contrary, by focusing on uniformity of application
rather than value Congress furthered three legitimate
and itiportant governmental interests.
First, the time-based tax ensured that the Abandoned
Mine Reclamation Fund provisions would be enforceable.
Clearly, a BTU tax, or any tax requiring a determination
of moisture content, possesses the inherent liability of
entangling federal authorities in the complicated process
3la
of overseeing testing for impurities. A tax based on gross
weight at a definable point of time in the production
process, however, avoids this problem because it elimi-
nates the need to test. Second, by selecting an enforceable
tax, Congress ensured that the funds necessary to con-
duct the program would be available. Given Congress’
concern that the cost of rehabilitating environmentally
degraded areas not fall upon the shoulders of those [citi-
zens| least able to afford it, see supra, H.R.Rep. No. 93-
1072, 93d Cong., 2d Sess. 116 (1974), the mine program’s
financial health was of critical importance. Third, by
selecting a time-based tax Congress avoided the need to
“choose [arbitrarily] between impurities”. If excess mois-
ture were a deductible impurity, operators might argue,
why not also deduct the weight of other impurities, such
as sulphur, dust, or debris. Once caught in a technica!
debate over the “true” elements of “pure” coal, there
might, conceivably, be no end to the deductions claimed.
To permit such a situation would jeopardize efforts to
meet the costly, remedial purposes of the Act without im-
posing new taxes—clearly an “inflationary influence,’—
on other sectors of the economy. See H.R.Rep. No. 95-
218, U.S.Code Cong. & Ad.News at 668-69.
The 1982 revised regulations are based on precisely
these policy concerns. As discussed supra, although the
preamble to the 1977 regulations and the Advisory Opin-
ion of April 17, 1980, attempted to clarify the confusion
surrounding the 1977 regulations and establish the recla-
mation fee as time, not value, based, the 1977 regulations
continued to create uncertainty among operators. In 1980
OSM completed a review of the Abandoned Mine Recla-
mation Fund Fee Collection Program. The review cov-
ered enforcement activities from October 1977 through
June 1980, and concluded that inconsistencies in the 1977
regulations had resulted in disparate treatment of coal
operators. Specifically, OSM found that the wording of
the preamble to the 1977 regulations had created a tax
loophole that was currently being exploited by operators
|
32a
in Region II. The preamble stated that the reclamation
fee was to be computed “on the weight on which the
initial transactions was based.” Secretary’s Record Supp.,
Exh. A at 12. The regulations themselves stated only that
the fee was to be “based on the weight at the time of
initial bona fide sale, transfer of ownership, or use by op-
erator.” Jd. By devising contractual terms that permit-
ted the operator to be paid at a higher rate for fewer
tons of “clean” or “pure” coal, an operator would pay
significantly less under the preamble interpretation be-
cause the “weight on which the transaction was based”
would be the weight of the anticipated clean coal. The-
oretically, therefore, two operators could tender the same
gross weight of coal for sale, and depending on the con-
tractual terms used, one might pay considerably less than
than the other. Secretary’s Record Supp., Exh. A at
11-13."
7OSM identified three possible ways of interpreting the regula-
tions:
“1. The fee has been based on real weight of the coal (either
run-of-mine or cleaned) at the time of sale.
“2. The fee has been based on the ‘calculated’ reduced weight
(supported by lab analysis), for which the operator was paid.
“3. The fee has been based on the ‘calculated’ reduced weight
(supported by lab analysis), even when the operator was not paid
on the basis of fewer tons.”
Secretary’s Record Supp. Exh. A at 16. Drummond, OSM concluded,
followed the third approach, and in so doing exploited a lucrative
loophole:
“Drummond fits into the third category. Drummond sells coal by
the ton and gets paid more or less per ton, according to the BTU’s
per ton. If the coal has more moisture, it has fewer BTU’s per ton,
and Drummond gets paid less per ton. (Note that Drummond does
not get paid for fewer tons; they get paid less per ton.) Drummond
is not the only company to be allowed this deduction; the IG report
estimates that such a deduction reduced fees in Alabama by $304,811
over the 33-month period examined, and the FCO estimated that
approximately 70 percent of the tonnage reported by operators in
that State included an adjustment for excess moisture.” Jd. at 16-
17.
| seein tiie leanne eat
|
83a
In addition to this loophole, the OSM report also found
that some operators in Region II were reading the plain
language of the regulations to permit excess moisture
deductions. Secretary’s Record Supp., Exh. A at 10-11.
Fearful that these interpretations would significantly and
critically deplete the revenues needed to fund the Aban-
doned Mine Program,*® thereby jeopardizing the broad,
remedial purposes of the Act, OSM moved quickly to draft
revised regulations unequivocally defining the fee as
time, not value, based.
Viewed against this background, it is apparent that
the 1982 regulations were promulgated out of a need
to ensure uniform enforcement, a workable administra-
tive framework, and adequate, “inflation free” funding.
As a direct response to those parts of the 1977 regula-
tions that failed to enforce effectively the remedial pur-
poses of the SMCRA, the 1982 revisions are patently con-
sistent with the legislative intent of the Act.
Finally, even were it not possible to identify the origi-
nal purposes of the Act or analyze their relationship to
the stated justifications for the 1982 regulations, the re-
vised regulations would still survive judicial review be-
cause the explanation tendered by OSM reflects a “ra-
tional connection between the facts found and the choice
made.” Burlington Truck Lines, Inc. v. United States,
371 U.S. 156, 168, 83 S.Ct. 239, 246, 9 L.Ed.2d 207
(1962).
Under the standard established by the Supreme Court,
an agency’s action will be found arbitrary and capricious
if, inter alia, the agency has
entirely failed to consider an important aspect of the
problem, offered an explanation for its decision that
runs counter to the evidence before the agency, or
is so implausible that it could not be ascribed to a
difference in view or the product of agency expertise.
8 See supra, n. 7.
34a
Motor Vehicle Manufacturers Ass’y v. State Farm Mut.
Auto Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2867, 77
L.Ed.2d 443 (1983), quoted in Nat’l Ass’n of Patents
on Hemodialysis and Transplantation, Inc. v. Heckler, 588
F. Supp. 1108 (D.D.C. 1984). In this instance, the rec-
ord does not support the conclusion that OSM entirely
failed to consider an aspect of the problem. The rationale
tendered to support the 1982 regulations is both reason-
able and logical given the evidence of administrative con-
fusion before the agency. More important, one cannot
reasonably conclude, in the absence of express statutory
language or legislative history to the contrary, that it
was “implausible” for the Secretary to assume that Con-
gress was aware of the importance of creating an ad-
ministratively enforceable tax mechanism—one that would
meet the funding needs of the Abandoned Mine Program
without requiring overly-intrusive regulation of local op-
erators. To the contrary, it is fair to assume that had
Congress wanted to ensure that impurities added during
the coal mining process, but not part of the “inherent con-
tent” of the coal, would not be taxed, it would fave chosen
one of the value-based amendments. Congress was free
to strike a different type of balance between the needs of
compliance and the nature of the tax burden on the coal
operator.
In short, the 1982 regulations are neither patently “in-
consistent” with nor plainly erroneous in their interpre-
tation of the legislative purposes of the SMCRA.° Indeed,
®In support of its poeition Drummond cites a recent decision by
the Third Circuit, United States v. Brook Contracting Corp., 759
F.2d 320 (3rd Cir.1985). In Brook the Third Circuit held that the
1982 regulations could not serve as a basis for including “rock,
clay, dirt, and other debris in the computation of the reclamation
fee.” Brook, at 327. The court ruled that “[t]o the extent that the
government interprets § 870.12(b) [the 1982 regulations} to auth-
orize imposition of the reclamation fee on noncoal material mined
by appellants here, we hold this regulation exceeds the scope of 30
U.S.C. § 1232(a) and is therefore invalid.” Brook, at 327.
[Continued }
a
35a
the revised regulations reflect governmental and agency
interests which, in the absence of express language to
the contrary, stand on their own as legitimate bases for
agency action. As such, the agency’s decision to promul-
® [Continued ]
In reaching its conclusion the Third Circuit relied heavily on leg-
islative history indicating that:
“Congress was very much concerned about economic burdens to the
economy in general, and the coal industry in particular. Congres-
sional research went to great pains to project costs to the consum-
ers and the industry that would result from implementation of the
reclamation fees. These projections strongly suggest that Congress
intended to impose the fee on combustible coal only, and not... on
additional tonnages of rock, clay and dirt.”
Brook, at 325. The legislative excerpts cited in Brook refer to cost
studies contemplated, or actually undertaken, by Congress. Signi-
ficantly, however, none of the excerpts noted by the court actually
discuss the cost studies in the context of the question at issue here,
and at issue in Brook. More important, Brook curiously ignores
the legislative history underscoring Congress’ equally pressing con-
cern for the remedial purposes of the Act. As the Brook court
points out, Congress’ purpose in establishing the reclamation fund
was to avoid burdening the coal industry and exerting inflationary
pressures on the economy, as well as “providing sufficient funds for
meeting program objectives within a reasonable time frame.” H.R.
Rep. No. 218, 95th Cong., 1st Sess., 170, reprinted in 1977, U.S.Code
Cong. & Ad.News 593, 672; see supra at Part III A 3. Congress’s
goal was to satisfy all of these concerns. An objective analysis,
therefore, must consider all of the legislative history. Because Con-
gress did not expressly discuss whether the fee actually agreed
upon (35 cents per ton) would constitute an undue burden on the
coal industry or the economy if based on a definition of coal that
included impurities, we respectfully disagree with the conclusion
that legislative history focusing solely on a “concern for costs” is
either persuasive or dispositive of the issues involved in this case.
To the contrary, it would appear that had a concern for “burdens
to the industry” been of paramount concern to Congress, proposed
amendments basing the fee on the BTU content of the coal would
not have been rejected in favor of the current “flat tax” approach.
Viewed in this light, then, the legislative history suggests that
the remedial purposes of the Fund, and the need to rehabilitate
those regions unable to absorb the costs associated with surface
a 86a
gate the 1982 regulations is entitled to substantial defer-
ence,
B. Prior Practice
The Supreme Court has held that if an agency
“chang[es] its course by rescinding a rule[,] [it] is obli-
gated to supply a reasoned analysis for the change beyond
that which may be required when an agency does not act
in the first instance.” Motor Vehicles, 463 U.S. at 42, 103
S.Ct. at 2866. The Court has also pointed out, however,
that “ ‘regulatory agencies do not establish rules of con-
mining, were the focus of Congress’ concern. The 1982 regulations
are reasonably consistent with this purpose.
In reaching its conclusion, Brook also relied on the definition of
coal as promulgated by the Secretary in 30 C.F.R. § 700.5:
“As used throughout this chapter, the following terms have the
specified meaning except where otherwise indicated—-
“Coal means combustible carbonaceous rock, classified as anthracite,
bituminous, subbituminous, or lignite by ASTM Standard D 388-77,
referred to and incorporated by reference in the definition of “an-
thracite” immediately above.” Because this definition does not ex-
pressly include impurities, the court reasoned that impurities could
not reasonably be included in the term “coal produced by surface
mining.” 30 U.S.C. §§ 1201.
The Secretary correctly points out, however, that the definition
of “coal” is irrelevant to the question at issue here. The regulatory
scheme challenged in this instance assesses the reclamation fees
based on weight at a given time, not based on value. The focus of
this Court’s analysis need only address the reasonableness of that
scheme. If valid reasons exist to support the Secretary’s decision
to base this tax on “time” rather than “value”, the manner in which
coal is defined in section 700.5 clearly is not dispositive of the cen-
tral issue. Of course, precisely the opposite would be true if Con-
gress had in fact intended to base the tax on the inherent value of
the coal mined. Cf. A.J. Taft Coal Co. v. United States, 605 F.Supp.
866 (N.D.Ala.1984), aff'd without opinion, 760 F.2d 280 (11th Cir.
1985) (distinguishing Drummond as a case that, unlike Taft,
(1) does not involve the interpretation of a “statute and regulation
which make reference only to coal”, and (2) does not involve a tax
based on the coal’s BTU value).
37a
duct to last forever.” Jd. quoting American Trucking
Ass’ns v. Atchinson, T. & S.F.R. Co., 387 U.S. 397, 416,
87 S.Ct. 1608, 1618, 18 L.Ed.2d 847 (1967). “[A]n
agency must be given ample latitude to ‘adapt their rules
and policies to the demands of changing circumstances.’ ”
Motor Vehicles, 463 U.S. at 42, 103 S.Ct. at 2866, quoting
Permian Basin Area Rate Cases, 390 U.S. 747, 784, 88
S.Ct. 1344, 1368, 20 L.Ed.2d 312 (1968). When faced
with “new developments”, an agency “may alter its past
interpretation and overturn past administrative rulings
and practice.” American Trucking, 387 U.S. at 416, 87
S.Ct. at 1618. Regulatory agencies “are supposed, within
the limits of fair and prudent administration, to adapt
their rules and practices to the Nation’s needs in a vola-
tile, changing economy. They are neither required nor
supposed to regulate the present and the future within
the inflexible limits of yesterday.” Id.
Drummond contends that the 1982 revised regulations
represent a change in OSM’s “policy and practice” for
which a reasoned justification is required. It is Drum-
mond’s position that the Secretary has failed to provide
the necessary “reasoned analysis.” Motor Vehicles, 463
U.S. at 42, 103 S.Ct. at 2866.
Based on the record before the Court, there is little evi-
dence to support the claim that the 1982 regulations repre-
sented a change in OSM policy on the national level. In
the preamble to the 1977 regulations, discussed at length,
supra, OSM clearly stated that the reclamation fee would
be based on the gross weight of the coal in its current
condition—with or without impurities—at the time of
initial sale, transference, or use. Subsequent policy ex-
planations released between 1978 and 1980 were largely
consistent with this basic position. See e.g. Solicitor’s
Opinion of Apr. 17, 1980, cited in Drummond’s Supp. to
Admin. Record, Attachment 3 at 3 (discussed supra, Part
III A 2). No official statement dealing with OSM’s na-
38a
tional policy may be found to the contrary in the adminis-
trative record.
OSM’s practice and policy at the local level, however, is
more complicated. According to the Secretary, only 12 of
approximately 6000 coal operators nationwide claimed a
moisture deduction. Defendant’s Mem. at 4. Of those
who claimed deductions, all but one were located in Re-
gion II. Affidavit of Jane S. Robinson, Secretary’s Record
Supp., Exh. E."° The Secretary cannot be bound, the de-
fendant argues, by the action of maverick officials in
Region II.
Drummond correctly points out that the 1981 Inspector
General’s report, drafted for the Assistant Secretary of
the Interior and the Associate Solicitor, however, specifi-
cally found that “(t]he [1977] regulations concerning
reclamation for computations are subject to various inter-
pretations” and that “[a]s a result, the regulations have
not been applied consistently by both the coal industry and
OSM fee compliance personnel. . . .” Secretary’s Record
Supp., Exh. A at 10. See also Drummond’s Supp. to
Admin. Record Attachment 1 at 4. Other reports drafted
by OSM personnel concede that “OSM has never disal-
lowed . . . a deduction [for excess moisture] ; we simply
never gave it to anyone who did not ask for it.” Drum-
mond’s Supp. to Admin. Record, Attachment 8 at 4. It is
Drummond’s position that the defendant’s admitted fail-
ure to deny a single request for a deduction amounted to
a prior practice or policy to permit deductions when asked.
Insofar as the 1982 regulations altered this “prior policy”,
without justification, Drummond concludes, the Secretary’s
decision to issue the revised regulations was arbitrary
and capricious.
Drummond’s argument is flawed in several respects.
First, on the basis of the record here it is difficult to con-
According to the affidavit, a fee compliance officer in Pennsyl-
vania permitted an operator to take a deduction on one occasion. Af-
fidavit of Jane E. Robinson, Secretary’s Record Supp., Exh. E at 2.
oe ene
pe —«
39a
clude that OSM knowingly and deliberately altered a prior
practice. All but one of the excess moisture deductions
were authorized by fee compliance officers in a single
region—Region II. There is no indication that either
senior OSM officials or the Secretary’s Office learned that
the deductions had been authorized for Alabama operators
by the Region II Compliance Chief until well into 1981
when Steven Griles, Deputy Director of OSM, requested
W. Hord Tipton, Acting Regional Director of Region II,
to investigate the treatment of moisture deductions in
Region II. See Drummond Supp. to Admin. Record, At-
tachment 2, Tipton letter of Aug. 6, 1981, at 1. Upon
learning of Region II’s policy and discovering general
uncertainty over the proper interpretation of the 1977
regulations, OSM moved quickly to correct Region II’s
deviation and clarify the regulations. In short, once
OSM was made aware of the problem, remedial action
was taken relatively promptly. The record does not sup-
port the conclusion that senior OSM officials in Washing-
ton knowingly endorsed'a policy of permitting moisture
deductions.
Indeed, as a matter of law, the activities of insubordi-
nates or misinformed government officials generally will
not bind the government. See Federal Crop Ins. v. Merrill,
332 U.S. 380, 384, 68 S.Ct. 1, 3, 92 L.Ed. 10 (1947)
(“anyone entering into an arrangement with the Govern-
ment takes the risk of having accurately ascertained that
he who purports to act for the Government stays within
the bounds of his authority’) ; Schweiker v. Hansen, 450
U.S. 785, 101 S.Ct. 1468, 67 L.Ed.2d 685 (1981) (gov-
ernment not estopped from enforcing regulation where
social security claimant given erroneous information by
government field representative); cf. Boggs v. Regan,
Civil Action No. 79-1090 (D.D.C., decided Sept. 18, 1981)
(Hansen distinguished on grounds that plaintiffs made
“every effort to obtain information from all sources in-
cluding the responsible decisionmakers.” Slip op. at 5
(emphasis added) ). In this instance, therefore, the activi-
40a
ties of OSM officials in Region II cannot properly be at-
tributed to the Secretary. Because Drummond and the
other Alabama operators who requested moisture deduc-
tions did not seek advice from the highest levels of OSM,
they were in effect charged under the law with knowledge
of the proper meaning and intent of the 1977 regulations.
Viewed from this perspective, it is difficult to find that
OSM ever altered its practice, for without knowledge or
legal responsibility for Region II’s activities the Secretary
could not have authorized excess moisture deductions."!
Yet, even if Region II’s activities can be attributed to
the higher levels of OSM, Drummond’s argument remains
flawed for a second reason. In cases where a reasoned
justification for a policy change has been required, the
agency involved made a distinct and decisive break from
an affirmatively established rule or regulation. See, e.g.,
Motor Vehicles (rescinding an agency rule requires rea-
soned justification) ; Farmers Union Central Exchange,
Inc. v. FERC, 734 F.2d 1486 (D.C.Cir.1984) (agency
decision to return to old ICC rate base requires reasoned
justification).
11 In support of its argument that the Secretary’s interpretation
of the Act is not entitled to deference, Drummond argues that the
Secretary’s interpretation is not “contemporaneous with enactment
of [the] SMCRA.” Plaintiff’s Mem. at 15. Judicial deference to an
agency interpretation, Drummond concludes, is “not warranted
where [t]he interpretation is not contemporaneous with enactment
of the statute [citing General Electric v. Gilbert, 429 U.S. 125, 142-
43, 97 S.Ct. 401, 411, 50 L.Ed.2d 343 (1975); Northern Colorado
Water Conservancy District v. FERC, 730 F.2d 1509, 1519-20 (D.C.
Cir. 1984) ]j”. Zd.
To the extent that the Court now concludes OSM’s current inter-
pretation of the Act does not conflict with the prior administrative
practice “begun when that statute became law,” id., Drummond’s
“contemporaneous” argument is essentially moot. Even were the
Court less convinced that Region II’s activities cannot be attributed
te the OSM’ national policy, the absence of any clear or consistent
policy at the local level would militate against overturning the
agency’s decision on the grounds that the interpretation was “con-
temporaneous” with the enactment of the SMCRA.
4la
In this case, however, there is no distinct, affirmative
policy from which the 1982 regulations may be said to
have deviated. OSM concedes that it never denied a deduc-
tion when requested, but it is also apparent that OSM
never asserted in regulations, comments, or policy state-
ments, that moisture deductions were permissible. Indeed,
all of OSM’s official pronouncements implied the opposite.
In short, the lack of a consistent practice at the local level
argues not for the conclusion that OSM had a prior prac-
tice different from that required by the 1982 revised regu-
lations, but rather that OSM had no real policy at all at
the local level.
Third and finally, even if the actions of OSM officials
in Region II can be held to constitute a “prior practice”
that may be imputed to the Secretary, the promulgation
of the 1982 regulations represented a legitimate, justifi-
able response to the “demands of changing circumstances.”
Permian Basin, 390 U.S. 747, 88 S.Ct. 1844, 20 L.Ed.2d
312 (1968). It is clear from the record that the confusion
which developed in Alabama over the 1977 regulations
represented an unexpected but serious threat to the Aban-
doned Mine Reclamation Fund Program. Given the broad,
remedial purposes of the Act, the need to insure continued
funding for the program, and Congress’ clear intent to
establish an administratively enforceable regulatory
scheme that would not be based on a BTU or impurities-
credit fee system, it was not unreasonable for OSM to
promulgate new regulations designed to clarify the old.
All of these reasons for the 1982 revisions—discussed at
length supra—are contained in the administrative record.
See Inspector General’s Report, Secretary’s Record Supp.,
Exh. A; Drummond’s Supp. to Admin. Record, Attach-
ments 1, 3.
IV. Conclusion
After a “careful and searching inquiry into the record
... to assure itself that the agency has examined the
relevant data and articulated a reasoned explanation for
42a
its action,” Farmers Unions, 734 F.2d at 1499, the Court
concludes that a rational connection exists between “the
facts found and the choice made.” Burlington Truck
Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239,
246, 9 L.Ed.2d 207 (1962).
Because the revised regulations are consistent with the
plain language and purpose of the SMCRA, and because
the challenged regulations do not constitute a change from
a prior administrative policy or practice, the Secretary’s
interpretation of the SMCRA and the 1977 regulations is
entitled to broad deference. Based on this record, the
plaintiff has not met its burden of establishing that the
challenged agency action was arbitrary and capricious.”
Aceordingly, for the reasons set forth above, summary
judgment must be granted in favor of the defendant. A
separate Judgment accompanies this Memorandum
Opinion and Order.
12 The Court notes that as a practical matter this decision need
not work an undue hardship on the plaintiff. As the District Court
in Alabama pointed out, there is nothing in the new regulations
that would prevent an operator from removing impurities before
the initial bona fide sale, transfer, or use. If Drummond chooses to
clean or dry the coal before the coal is treated, there will be no tax
on excess moisture or other impurities.
43a
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
SEPTEMBER TERM, 1986
CA No. 82-02439
No. 85-5827
DRUMMOND COAL COMPANY
Vv.
DONALD P. HODEL, Secretary of the Interior
[Filed Sept. 26, 1986]
BEFORE: Wald, Chief Judge; Robinson, Mikva, Ed-
wards, Ginsburg, Bork, Starr, Silberman,
Buckley and Williams, Circuit Judges
ORDER
Appellant’s suggestion for rehearing en banc has been
circulated to the full Court. No member of the Court
requested the taking of a vote thereon. Upon considera-
tion of the foregoing, it is
ORDERED, by the Court en bane, that appellant’s
suggestion is denied.
Per Curiam
FOR THE COURT:
GEORGE A. FISHER
Clerk
By: /s/ Robert A. Bonner
ROBERT A. BONNER
Chief Deputy Clerk
44a
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
CV82-H-1838-S
DRUMMOND COAL COMPANY,
Plainttff,
VS.
JAMES G. WATT,
Defendant.
[Filed May 18, 1983]
MEMORANDUM OF DECISION
On August 27, 1982, plaintiff Drummond Coal Com-
pany (Drummond) filed in this court a petition for re-
view and complaint for declaratory and injunctive relief.
Drummond requests that the court review revised na-
tional regulations promulgated by defendant James G.
Watt, Secretary of the Department of the Interior (Sec-
retary), acting through the office of Surface Mining
Reclamation and Enforcement (OSM), pursuant to the
Surface Mining Control and Reclamation Act of 1977,
30 U.S.C. §§ 1201, et seq. (the Act). Drummond is peti-
tioning the court to declare invalid and enjoin the en-
forcement of the Secretary’s revision of 30 C.F.R.
§ 870.12 on the ground that it is arbitrary, capricious,
and inconsistent with the law. The Act imposed a recla-
mation fee (the fee) on all coa! produced for sale, trans-
fer or use in the United States. The fee is imposed by
Section 402(a) of the Act in the following manner:
45a
All operators of coal mining operations subject to
the provisions of this Act shall pay to the Secretary
of the Interior, for deposit in the fund, a reclama-
tion fee of 35 cents per ton of coal produced by sur-
face coal mining and i5 cents per ton of coal pro-
duced by underground mining or 10 per centum of
the value of the coal at the mine, as determined by
the Secretary, whichever is less, except that the recla-
mation fee for lignite coal shall be at a rate of 2 per
centum of the value of the coal at the mine, or 10
cents per ton, whichever is less.
Section 201(c) (2) of the Act empowers the Secretary to
“publish and promulgate such rules and regulations as
may be necessary to carry out the purposes and provi-
sions of this Act.” More particularly, Section 412(a) of
the Act empowers the Secretary “to engage in any work
and do all things necessary or expedient, including pro-
mulgation of rules and regulations, to implement and
administer” the abandoned mine land program.
On December 13, 1977, under the authority delegated
by the Secretary, OSM promulgated regulations which
established procedures for the computation of reclama-
tion fees. 30 C.F.R. Part 837 (42 Fed. Reg. 62713).
These regulations, which were incorporated in the final
regulations issued by OSM on October 25, 1978, provide
in Section 870.12(b) that:
The reclamation fee shall be determined by the
weight and value [of the coal] at the time of initial
bona fide sale, transfer of ownership or use by the
operator.
30 C.F.R. § 870.12(b) (43 Fed. Reg. 49940).
These regulations attempted to establish a _ simple
method. of determining when the coal should be weighed
and the value that should be used when establishing the
amount owed by the operator. The regulations were uni-
formly applied in all states but Alabama. In Alabama,
46a
Drummond and perhaps several other Alabama producers,
with the knowledge of the Secretary, deducted “excess”
moisture when calculating the weight of coal for purposes
of computing the fee. Drummond defines “excess” mois-
ture as water which is added to coal after it has been
severed from the ground. This moisture, Drummond ex-
plains, is absorbed by coal when it is immersed in water
during the washing process or when it is exposed to rain-
fall or other water that collects in the mine or pit. Since
water adds weight but not value to the coal, Drummond
argues that this added weight should not be subject to
taxation.
These Alabama operators apparently had become ac-
custom to taking this deduction when computing their
tax under the Alabama Coal Severance Tax. See Ala.
Code § 40-13-1, et seq. (1975). From the evidence before
the court, it appears that Alabama has the only state
severance tax which allows for such an “excess” moisture
deduction in computing state severance taxes on coal.
The Secretary states that OSM has never interpreted
its regulations to permit coal operators to deduct mois-
ture content from the weight of their coal when calculat-
ing the reclamation fees which become due under the
Act. But contrary to agency policy, the OSM fee com-
pliance officer for Alabama permitted the “excess” mois-
ture deduction to those Alabama operators who requested
it. Elsewhere in the United States the fee was uniformly
calculated without a deduction for moisture, excess or
otherwise.
Due to the inconsistent application of the first set of
regulations, the Secretary opted to promulgate a new
set of regulations. On December 11, 1981, the Secretary
published in the Federal Register proposed revisions to
the Abandoned Mine Reclamation Program, including
regulations for fee computations. 46 Fed. Reg. 6077
(1981). The preamble to the new regulations set forth
the purpose for the revision to § 870.12: “T{o] clarify
ee
47a
the point in time of fee determination, as well as the
weight parameters for calculating reclamation fees.”
47 Fed. Reg. 28577, col. 3 (June 30, 1982).
The new pertinent part of the 1982 revised regulations
including the clarifying provisions provides as follows:
(a) The operator shall pay a reclamation fee on
each ton of coal produced for sale, transfer, or use,
including the products of in situ mining.
(b) The fee shall be determined by the weight and
value at the time of initial bona fide sale, transfer
of ownership, or use by the operator.
. * * *
(3) The weight of each ton shall be determined by
the actual gross weight of the coal.
(i) Impurities, including water, that have not
been removed prior to the time of initial bona fide
sale, transfer of ownership, or use by the operator
shall not be deducted from the gross weight.
47 Fed. Reg. 28594 (June 30, 1982).
Both the 1977 and 1982 regulations implement Section
402 of the Act and have national applicability to all
operators of coal mining operations subject to the Act.
Both regulations require computation of the reclamation
fee on the basis of the weight and value of the coal at
the time of initial bona fide sale, transfer or use by the
operator. But most importantly for this present litiga-
tion, the revised regulations expressly prohibit coal opera-
tors from taking an “excess” moisture deduction. The
issue before this court is whether the promulgation of
these new regulations is within the scope of the Secre-
tary’s authority.
The standard of judicial review of the Secretary’s gen-
eral rulemaking authority to promulgate national rules
or regulations is clearly established in Section 526(a) (1)
of the Act which provides, in relevant part, the following:
ee eee
48a
Any action subject to judicial review under this sub-
section shall be affirmed unless the court conc!:des
that such action is arbitrary, capricious, or otherwise
inconsistent with law.
The “arbitrary or capricious” standard of review is a
limited one. The Supreme Court has stated the following
concerning this standard:
[T]he court must consider whether the [agency’s]
decision was based on a consideration of the relevant
factors and whether there has been a clear error of
judgment. . . . Although this inquiry into the facts
is to be searching and careful, the ultimate standard
of review is a narrow one. The court is not em-
powered to substitute its judgment for that of the
agency.
Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402,
416 (1971).
The arbitrary and capricious standard reflects two
basic principles of judicial review of administrative ac-
tion: that agency actions are presumed valid, United
States v. Southern Ry. Co., 364 F.2d 86 (5th Cir. 1966).
cert. denied, 386 U.S. 1031 (1967), and that the burden
is on the challenger to show that the agency’s action vio-
lates the standard. Maryland-National Capital Park and
Planning Comm’n v. Lynn, 514 F.2d 829, 834 (D.C. Cir.
1975).
Drummond contends that the June 30, 1982 clarifica-
tions to 30 C.F.R. 870.12 are arbitrary and capvicious.
However, the case law is clear that an agency’s inter-
pretation of a statute will be upheld so long as the inter-
pretation is part of a range of reasonable interpretations.
After a thorough review of the record presented in this
action, this court finds that Drummond has failed to
carry its burden of showing that the regulations are
arvitrary or capricious.
49a
Drummond argues that the new regulations amount to
a substantive change in the policy of the agency without
a rational explanation. This court views the new regula-
tions as a clarification of the statute by the agency so as
to ensure uniform application of the law. Drummond, in
its own brief, cites an intra-agency memo which observes
that the initial regulations were subject to varying inter-
pretations and applications. See Memorandum in Opposi-
tion to Defendant’s Motion for Summary Judgment, p. 5.
Because the initial regulations were not being interpreted
uniformly, the agency was acting responsibly by seeking
to clarify its position. The preamble to the revised regu-
lations states that one of the purposes of the regulations
was to “clarify the weight parameters for calculating
reclamation fees.” This court views the action of the
agency as reasonable and within the scope of its authority.
A pam RA gee eal te reel
Drummond also contends that the new regulations are
inconsistent with the plain language of the Act. The
regulations are invaiid, Drummond argues, because they
tax impurities such as water, while the Act authorizes
a tax only on coal. This argument is not persuasive.
The revised regulations are clearly within the scope of
the agency’s authority under the Act. Congress chose to
tax tonnage of “coal.” Obviously there are impurities
mixed with coal—dirt, sulfur, water, etc. Congress made
no attempt to remove from taxation this small percentage
of impurities found in the mined coal. Had Congress
been concerned that the inclusion of impurities would
work an undue hardship on the coal operators, the tax
could have been calculated in other ways. For example,
Congress could have taxed the coal on its BTU content.
Since Congress refused to distinguish coal from its im-
purities, the reguiation requiring the inclusion of im-
purities in calculating gross weight at the time of initial
sale, transfer, or use, is within the scope of the agency’s
authority. The fact that the impurities involved here are
“added” to the coal after it is mined does not change the
SES TAROS IER TURNS Ye
50a
result. Again, Congress was well aware that after min-
ing and before sale or use, coal is exposed to water from
a variety of sources.
Finally, there is nothing in the new regulations which
will prevent the coal operators from removing the im-
purities prior to the initial bona fide sale, transfer or
use. If the operator chooses to clean or dry the coal be-
fore the initial sale, transfer or use, there will be no tax
on water or other impurities, as Drummond contends.
For these reasons, this court is of the opinion that the
challenged regulations are valid and not arbitrary or
capricious. A separate order will be entered in accord-
ance with this memorandum.
DONE this 18th day of May, 1983.
/s/ James H. Hancock
United States District Judge
5la
UNITED STATES COURT OF APPEALS
ELEVENTH CIRCUIT
No. 83-7366
DRUMMOND COAL COMPANY,
Plaintiff-Appellant,
. Cross-A ppellee,
JAMES G. WATT,
Defendant-Appellee,
Cross-Appellant.
July 2, 1984
Fournier, J. Gale, III, Birmingham, Ala., for plaintiff-
appellant, cross-appellee.
Kathleen P. Dewey, Robert L. Klarquist, U.S. Dept.
of Justice, Washington, D.C., Frank W. Donaldson, U.S.
Atty., Herbert J. Lewis, III, Asst. U.S. Atty., Birming-
ham, Ala., Glenda Hudson, Div. of Surface Mining, Dept.
of Interior, George R. Hyde, Dept. of Justice, Land and
Natural Resources Div., Washington, : D.C., for defendant-
appellee, cross- -appellant.
Appeals from the United States District Court
for the Northern District of Alabama
Before RONEY and JOHNSON, Circuit Judges, and
MORGAN, Senior Circuit Judge.
52a
JOHNSON, Circuit Judge:
Drummond Coal Company (“Drummond”) appeals the
judgment of the United States District Court for the
Northern District of Alabama, denying Drummond’s peti-
tion for review and its complaint for injunctive and
declaratory relief from regulations promulgated by the
Secretary of the Interior (“the Secretary”), acting
through the Office of Surface Mining Reclamation and
Enforcement (“OSM”), pursuant to the Surface Mining
Control and Reclamation Act of 1977, 30 U.S.C.A.
$$ 1201 et seq. (“the Act”). The regulations at issue ©
govern the reclamation fund created under the Aban-
doned Mine Land Reclamation Program established by
the Act. Specifically, the challenged regulation deter-
mines the method by which Drummond must calculate
the fee it is required to pay into the fund on each ton of
coal it produces.
The Secretary filed a cross-appeal, challenging the
denial of his motion to dismiss the case for lack of juris-
diction, pursuant to Federal Rule of Civil Procedure
12(b) (3)... The Secretary maintains that Section 526
(a) (1) of the Act, 30 U.S.C.A. § 1276(a) (1), vests the
United States District Court for the District of Colum-
bia with exclusive jurisdiction to hear challenges to na-
tional regulations promulgated under the Act, and thus
the district court here should have dismissed this case.
Although we believe that Drummond’s challenge to the
revised regulations is wholly without merit, we do not
here reach that issue because we agree with the Secre-
tary that Section 1276(a) (1) vests in the United States
1 The district court refused to certify the jurisdictional question
for interlocutory appeal. The district court also denied the Secre-
tary’s motion to transfer the case to the United States District
Court for the District of Columbia, pursuant to 28 U.S.C.A. § 1404,
where Drummond concurrently had filed another action challenging
the same regulation on the same grounds. On appcal, the Secretary
does not challenge the denial of his motion to transfer the case.
—
53a
District Court for the District of Columbia exclusive juris-
diction over this case. Consequently, we reverse the dis-
trict court’s decision on the jurisdictional question, vacate
its decision on the merits, and remand the case with in-
structions to the district court to dismiss the action.
I.
Congress in 1977 enacted the Surface Mining Control
and Reclamation Act for the purpose of, among other
things, establishing “a nationwide program to protect so-
ciety and the environment from the adverse effects of
surface coal mining operations,” 30 U.S.C.A. § 1202(a),
and promoting “the reclamation of mined areas left with-
out adequate reclamation . . . which continue, in their
unreclaimed condition, to substantially degrade the qual-
ity of the environment, prevent or damage the beneficial
use of land or water resources, or endanger the health
or safety of the public.” 30 U.S.C.A. § 1202(h). Title IV
of the Act created the Abandoned Mine Reclamation
Fund, 30 U.S.C.A. § 1231, and enacted a requirement
that all coal operators subject to the statute pay into the
fund a reclamation fee on every ton of coal they produce,
30 U.S.C.A. § 1232.
On December 13, 1977, the Secretary first promulgated
regulations governing the payment of the reclamation
fee. 42 Fed.Reg. 62713 (codified at 30 C.F.R. Part 870
(1981) ). These regulations, which were incorporated in
the final regulations issued on October 25, 1978, 43 Fed.
Reg. 49940, provided that the fee was “determined by
the weight and value [of the coal] at the time of the
initial bona fide sale, transfer of ownership, or use by
the operator.” 30 C.F.R. § 870.12(b) (1981). The regu-
lations did not prescribe the elements that define the
weight and value of the coal.
The Secretary later discovered that some coal opera-
tors in Alabama, before calculating their fees, were sub-
a
54a
tracting from the actual tonnage mined a deduction for
the moisture content of the coal. The Secretary in June
1982 published revised regulations prohibiting such de-
ductions. 47 Fed.Reg. 28593 (1982). The revised regula-
tions stated that “(t]he weight of each ton shall be deter-
mined by the actual gross weight of the coal,” 30 C.F.R.
§ 870.12 (b) (3) (1983),? and specified that “[i]mpurities,
2 The revised regulation provides in full:
§ 870.12 Reclamation fee.
(a) The operator shall pay a reclamation fee on each ton of
coal produced for sale, transfer, or use, including the products
of in situ mining.
(b) The fee shall be determined by the weight and value at
the time of initial bona fide sale, transfer of ownership, or use
by the operator.
(1) The initial bona fide sale, transfer of ownership, or use
shall be determined by the first transaction or use of the coal
by the operator immediately after it is severed, or removed
from a reclaimed coal refuse deposit.
(2) The value of the coal shall be determined F.O.B. mine.
(3) The weight of each ton shall be determined by the actual
gross weight of the coal.
(i) Impurities, including water, that have not been removed
prior to the time of initial bona fide sale, transfer of ownership,
or use by the operator shall not be deducted from the gross
weight.
(ii) Operators selling coal on a clean coal basis shall retain
records that show run-of-mine tonnage, and the basis for the
clean coal transaction.
(iii) Insufficient records shall subject the operator to fees
based on raw tonnage data.
(c) If the operator combines surface mined coal, including
reclaimed coai, wit] underground mined coal before the ccal is
weighed for fee purposes, the higher reclamation fee shall
apply, unless the operator can substantiate the amount of coal
produced by surface mining by acceptable engineering calcula-
tions or other reports which the Director may require.
30 C.F.R. § 870.12 (1983).
55a
including water, that have not been removed prior to the
time of initial bona fide sale, transfer of ownership, or
use by the operator shall not be deducted from the gross
weight.” 30 C.F.R. § 870.12(b) (3) (i) (1983).
In August 1982, Drummond filed this suit challenging
30 C.F.R. § 870.12 on the ground that it was arbitrary,
capricious and inconsistent with the Act. The Secretary
in October 1982 moved the court to dismiss the case for
lack of jurisdiction, arguing that Section 1276(a) (1)
conferred exclusive jurisdiction to hear challenges to na-
tional regulations on the federal district court for the
District of Columbia. The district court denied the mo-
tion in January 1983, concluding that the Act provided
the District of Columbia district court with concurrent
jurisdiction in cases involving national regulations. In
May 1983, the district court entered judgment for the
Secretary on the merits of Drummond’s challenge, con-
cluding that the regulations promulgated by the Secre-
tary were valid and not arbitrary or capricious. Drum-
mond filed its notice of appeal, and the Secretary cross-
appealed from the May judgment and the January order
insofar as they determined that the United States Dis-
trict Court for the Northern District of Alabama had
jurisdiction to hear challenges to national regulations
promulgated under the Act.
Il.
We address first the jurisdictional question raised by
the Secretary. The statutory provision governing juris-
diction, 30 U.S.C.A. § 1276(a) (1), states that:
Any action of the Secretary to approve or dis-
approve a State program or to prepare or promul-
3 Drummond at the same time filed an action in the United States
District Court for the District of Columbia. See n. 1 supra. On
February 24, 1983, the district court in the District of Columbia
entered an order suspending proceedings in that action until all
proceedings, including appeals, in this case are completed.
Maine
56a
gate a Federal Program pursuant to this chapter
shall be subject to judicial review by the United
States District Court for the District which includes
the capital of the State whose program is at issue.
Any action by the Secretary promulgating national
rules or regulations including standards pursuant to
sections 1251, 1265, 1266, and 1273 of this title shall
be subject to judicial review in the United States
District Court for the District of Columbia Circuit.
Any other action constituting rule-making by the
Secretary shall be subject to judicial review only by
the United States Court for the District in which
the surface coal mining operation is located. Any
action subject to judicial review under this subsec-
tion shall be affirmed unless the court concludes that
such action is arbitrary, capricious, or otherwise in-
consistent with the law. A petition for review of
any action subject to judicial review under this sub-
section shall be filed in the appropriate Court within
sixty days from the date of such action, or after such
date if the petition is based solely on grounds aris-
ing after the sixtieth day. Any such petition may be
made by any person who participated in the admin-
istrative proceedings and who is aggrieved by the
action of the Secretary.
Id. (emphasis added).
The Secretary maintains that the plain language of the
statute reveals Congress’ intent to vest exclusive jurisdic-
tion over challenges to national regulations in the Dis-
trict Court for the District of Columbia. In addition, the
Secretary contends that the legislative history and pur-
pose of the Act, as well as case law interpreting this
statute and others and a survey of jurisdictional statutes,
support the Secretary’s conclusion. Drummond argues
that the language of the statute and its legislative history
support the conclusion reached by the court below that
the statute confers concurrent jurisdiction on the District
57a
of Columbia district court and all other district courts
that otherwise would have jurisdiction of the case.
Only two other circuits have addressed this question,
and they have not agreed on the answer. In Holmes
Limestone Co. v. Andrus, 655 F.2d 732 (6th Cir.1981),
cert. denied sub nom. Watt v. Holmes Limestone Co.,
456 U.S. 995, 102 S.Ct. 2280, 72 L.Ed.2d 1292 (1982),
the Court reversed the district court’s determination that
the statute vested exclusivse jurisdiction in the District of
Columbia district court. Jd. at 733. The Fourth Circuit,
in Tug Valley Recovery Center v. Watt, 703 F.2d 796
(1983), without citing Holmes Limestone and with little
discussion, disagreed.* Id. at 799 n. 3.
“It is elementary that the meaning of a statute must,
in the first instance, be sought in the language in which
the Act is framed.” Caminetti v. United States, 242 U.S.
470, 485, 37 S.Ct. 192, 194, 61 L.Ed. 442 (1917). If the
language is plain and does not lead “to absurd or wholly
impracticable consequences, it is the sole evidence of the
ultimate legislative intent.” Jd. at 490, 37 S.Ct. at 196.
When the “legislative purpose is expressed in ‘plain and
unambiguous language, . . . the . . . duty of the courts
is to give it effect according to its terms’.” United States
v. Rutherford, 442 U.S. 544, 551, 99 S.Ct. 2470, 2475, 61
L.Ed.2d 68 (1979) (quoting United States v. Lexington
Mill & Elevator Company, 232 U.S. 399, 409, 34 S.Ct. 337,
340, 58 L.Ed. 658 (1914) ).
Section 1276(a)(1) states that national regulations
“shall be subject to judicial review in the United States
* District courts also have decided the question both ways. Con-
cluding that the statute confers exclusive jurisdiction are: Virginia
Mining & Reclamation Ass’n v. Watt, No. 82-2799 (D.D.C. June 8,
1983) (unpublished opinion) ; Reading Anthracite v. Office of Sur-
face Mining Reclamation and Enforcement, No. 80-0667 (E.D.Pa.
October 8, 1980) (unpublished opinion); Union Carbide Corp. v.
Andrus, 13 E.R.C. 1481 (S.D.W.Va. 1979). Concluding that the
statute confers concurrent jurisdiction is: Utah International, Inc.
v. Department of the Interior, 553 F.Supp. 872 (D.Utah 1982).
58a
District Court for the District of Columbia Circuit.” °
The language that Congress chose for this provision indi-
cates its intent. The word “shall” is a mandatory, not
permissive, form * and indicates a congressional i::tent to
require that judicial review of regulations having nation-
wide application occur in the federal district court in the
District of Columbia. This result is neither absurd nor
wholly impracticable. A rational basis can be conceived
for centralizing review of national regulations. Congress
may have had a particular desire to foster uniformity in
the interpretation of these regulations.’ Congress’ provi-
sion in other statutes of a single avenue for judicial re-
® No party challenges here the assertion that the regulation under
review is a national regulation.
® The word “shail” has been defined as follows:
Shail. As used in statutes, contracts, or the like, this word is
generally imperative or mandatory. In common or ordinary
parlance, and in its ordinary signification, the term “shall” is
a word of command, and one which has always or which must
be given a compulsory meaning; as denoting obligation. It has
a peremptory meaning, and it is generally imperative or man-
datory. It has the invariable significance of excluding the idea
of discretion, and has the significance of operating to impose
a duty which may be enforced, particularly if public policy is in
favor of this meaning, or when addressed to public officials, or
where a public interest is involved, or where the public or
persons have rights which ought to be exercised or enforced,
unless a contrary intent appears. People v. O’Rourke, 124
Cal.App. 752, 13 P.2d 989, 992.
But it may be construed as merely permissive or directory
(as equivalent to “may”), to carry out the legislative intention
and in cases where no right or benefit to any one depends on
its being taken in the imperative sense, and where no public or
private right is impaired by its interpretation in the other
sense. Wisdom v. Board of Sup’rs of Polk County, 236 Iowa
669, 19 N.W.2d 602, 607, 608.
Black’s Law Dictionary 1233 (rev. 5th ed. 1979).
7 See text accompanying nn. 11 & 12 infra.
59a
view * and its subsequent enactment of this statute sug-
gest that limiting review to one court is not impracticable.
Even if we were not to rely on the plain meaning of
the statute, we would reach the conclusion that we do on
the basis of the Act’s legislative history and purpose, ap-
plicable case law, and Congress’ treatment of other juris-
dictional statutes. In so doing, we explicitly reject the
reasoning and conclusions reached by the district court in
this case and by the Sixth Circuit in Holmes Limestone.
The court below compared the Senate and House ver-
sions of the bill considered by the Conference Committee
with the bill that emerged from Conference. The court
noted that the House and Senate bills both provided that
review of national regulations would occur only in the
Court of Appeals for the District of Columbia, that review
of actions by the Secretary to approve or disapprove a
state program would occur only in the federal court of
appeals for the circuit that contains the state whose pro-
gram is at issue, and finally that review of any other
action by the Secretary would occur only in the district
court (House bill) or court of appeals (Senate bill) for
the district in which the mining operation at issue is
located. The district court noted that the bill that emerged
from Conference omitted the word “only” in the sentences
regarding the review of national regulations and state
programs but retained the word in the sentence providing
for the review of other actions by the Secretary. (It also
changed the court in which review would occur from the
circuit to the district.) The court concluded that the omis-
8 See, e.g., 42 U.S.C.A. §1973c (Voting Rights Act) (certain
states seeking to impose new voter qualifications may institute an
action in the United States District Court for the District of
Columbia); 42 U.S.C.A. § 7607 (Clean Air Act) (certain regula-
tions subject to review only in the United States Court of Appeals
for the District of Columbia) ; 47 U.S.C.A. § 402(b) (Federal Com-
munications Act) (certain orders of the FCC may be reviewed by
the United States Court of Appeals for the District of Columbia).
60a
sion of the word “only” from the sentence providing for
review of nationa: regulations was purposeful and indi-
cated Congress’ intent to create concurrent jurisdiction.
The court found this conclusion bolstered by the retention
of “only” in the sentence involving other actions by the
Secretary. The majority in Holmes Limestone, supra,
adopted essentially the same reasoning. 655 F.2d at 737.”
We cannot agree. The Conference Committee Report
did not explain the reason, if any existed, for omitting the
word “only” from the Conference bill. H.R.Rep. No.
95-493, p. 111 (1977), reprinted in 1977 U.S.Code Cong.
& Ad.News 728, 743. Unexplained changes made in com-
mittee are not reliable indicators of congressional intent.
See Trailmobile Company v. Whirls, 331 U.S. 40, 61, 67
S.Ct. 982, 992, 91 L.Ed. 1328 (1947). Although the omis-
sion may represent an intention to vest concurrent juris-
diction, as the government notes, it may represent instead
a congressional! recognition of the force of the word “shall”
and an intention to avoid redundancy. Alternatively, as
Justice White suggested in his dissent from the denial of
certiorari in Holmes Limestone, the omission may have
been completely inadvertent. 156 U.S. 995, 996, 102 S.Ct.
2280, 2281, 72 L.Ed.2d 1292 (1982) (White, J., with
Blackmun, J., dissenting) ."°
*In a separate opinion, Judge Merritt rejected the reasoning of
the majority, but concurred in the result. See Holmes Limestone
Co. v. Andrus, 655 F.2d 732, 739-41 (6th Cir. 1981) (Merritt, J.,
concurring), cert. denied sub nom. Watt v. Holmes Limestone Co.,
456 U.S. 995, 102 S.Ct. 2280, 72 L.Ed.2d 1292 (1982). Judge Merritt
concluded that the language of Section 1276(a)(1) is unclear and
the legislative history inconclusive on the matter of congressional
intent.
1 In support of its argument that the omission was intentional,
Drummond suggests that without the explicit provision for judicial
review in the District of Columbia district court, that court might
not have venue over an action challenging national regulations
promulgated under the Act, and thus inclusion of the provision
merely indicates Congress’ intention to ensure that the D.C. court
6la
Legislative history reveals the purposes behind the Act
and supports our conclusion. In enacting the Surface
Mining Control and Reclamation Act, Congress sought to
establish uniform national standards for the surface min-
ing of coal and reclamation of lands damaged by past
mining practices. Congress expressly found that uniform
federal standards were essential “to insure that competi-
tion in interstate commerce among sellers of coal produced
in different States will not be used to undermine the abil-
ity of the several States to improve and maintain adequate
standards... .” 30 U.S.C.A. §$1201(g). “The [House
and Senate] Committees also explained that inadequacies
in existing state laws and the need for uniform minimum
nationwide standards made federal regulations impera-
tive.” Hodel v. Virginia Surface Mining & Reclamation
Association, 452 U.S. 264, 280, 101 S.Ct. 2352, 2362, 69
L.Ed.2d 1 (1981) (citing S.Rep. No. 95-128, at 49; H.R.
Rep. No. 95-218, at 58, reprinted in 1977 U.S.Code Cong.
& Ad.News 593, 596). Although Congress also intended
to provide the flexibility required by the widely differing
local conditions under which mining occurs throughout the
country," its concern for minimum national standards ap-
would have venue. The government correctly points out that under
28 U.S.C.A. § 1391(e) (1), except as otherwise provided by law,
actions to review federal administrative decisions properly lie in the
United States District Court for the District of Columbia.
11 See 30 U.S.C.A. § 1201(f) (“because of the diversity in terrain,
climate, biologic, chemical, and other physical conditions in areas
subject to mining operations, the primary governmental responsi-
bility for developing, authorizing, issuing, and enforcing regulations
for surfac’ mining and reclamation operations subject to this Act
should rest with the States”), 30 U.S.C.A. § 1202(g) (a purpose of
the Act is to “assist the States in developing and implementing a
program to achieve the purposes of this Act”); 30 U.S.C.A. § 1253
(“Each State in which there are or may be conducted surface coal
mining operations on non-Federal lands, and which wishes to assume
exclusive jurisdiction over the regulation of surface coal mining
and reclamation operations . . . shall submit to the Secretary . . .
a State program which demonstrates that such State has the capa-
62a
plicable to all is abundantly clear in the legislative his-
tory. A provision establishing one forum in which judicial
review of nationally applicable regulations must occur is
entirely consistent with this expressed concern.” It was
on this basis that the Fourth Circuit in Tug Valley, supra,
determined that jurisdiction to review national regulations
promulgated under the Act was vested exclusively in the
United States District Court for the District of Columbia.
703 F.2d at 799 n.3.
Our reading of the statute is further supported by the
case law interpreting other jurisdictional statutes. “It is
well settled that if Congress, as here, specifically desig-
nates a forum for judicial review of administrative ac-
tion, that forum is exclusive. And this result does not
depend on Congress using the word “exclusive” in the
statute providing for a forum for judicial review.” Gard-
ner v. Alabama, 385 F.2d 804, 810 (5th Cir.1967), cert.
denied, 389 U.S. 1046, 88 S.Ct. 773, 19 L.Ed.2d 839
(1968) (construing Civil Rights Act of 1964 and Social
Security Act) (citations omitted) (citing Whitney Na-
tional Bank in Jefferson Parish v. Bank of New Orleans
bility of carrying out the provisions of this Act”); 30 U.S.C.A.
§ 1255 (State laws are not preempted by the Act unless incon-
sistent with it).
#2 Justice White adverted to another congressional purpose that
supports the conclusion we reach here.
. . « §526(a)(1) provides that regulations with a national
impact be reviewed in the District of Columbia, those with a
statewide impact in the district court for the district of the
capital of the State involved, and all other regulations only in
the district where the surface mining operation at issue is
located. By allowing a national regulation to be challenged in
federal courts other than those in the District of Columbia, the
Court of Appeals here arguably frustrated Congress’ carefully
devised plan for judicial review.
Watt v. Holmes Limestone Co., 456 U.S. 995, 996, 102 S.Ct. 2280,
2281, 72 L.Ed.2d 1292 (1982) (White, J., with Blackmun, J., dis-
senting from denial of certiorari).
63a
& Trust Co., 379 U.S. 411, 85 S.Ct. 551, 13 L.Ed.2d 356
(1965)).1* See also Denberg v. United States Railroad
Retirement Board, 696 F.2d 1193, 1195 (7th Cir.1983)
(construing Railroad Retirement Act of 1974) (“if there
is a special statutory review proceeding, it is exclusive’) ;
Aminoil U.S.A., Ine. v. California State Water Resources
Control Board, 674 F.2d 1227, 1235 (9th Cir.1982) (con-
struing Clean Water Act) (“when interpreting a | detailed
regulatory] statute .. ., the remedies provided are pre-
sumed to be exclusive absent clear contrary evidence of
legislative intent”); City of Rochester v. Bond, 603 F.2d
927, 935 (D.C.Cir.1979) (construing the Federal Aviation
Act of 1958 and the Federal Communications Act)
(“ ‘even where Congress has not expressly conferred ex-
clusive jurisdiction, a special review statute vesting juris-
diction in a particular court cuts off other courts’ origina!
jurisdiction in all cases covered by the special statute’ ”)
(quoting Investment Company Institute v. Board of Gov-
ernors of the Federal Reserve System, 551 F.2d 1270,
1279 (D.C.Cir.1977) ).
Finally, we note that when Congress has intended to
provide litigants with a choice of fora, it has done so ex-
pressly. See, e.g., 12 U.S.C. § 1818(i) (2) (iv) (FDIC Act)
(agency action may be reviewed in the United States
Court of Appeals for the circuit in which the home office
of the insured bank is located or in the United States
Court of Appeals for the District of Columbia Circuit) ;
12 U.S.C.A. § 1848 (Bank Holding Company Act of 1956)
(Federal Reserve Board action may be reviewed in the
United States Court of Appeals within any circuit wherein
the aggrieved party has its principal place of business or
in the Court of Appeals for the District of Columbia) ; 29
13 The Eleventh Circuit Court of Appeals has adopted the cass
law of the former Fifth Circuit handed down as of September 20,
1981, as its governing body of precedent, which is binding unless
and until overruled or modified by this Court en banc. Bonner °
City of Prichard, 661 F.2d 1206, 1209 (J1th Cir. 1981) ‘(en bane
64a
U.S.C.A. § 660(a) (Occupational Safety and Health Act
of 1970) (OSHA Review Commission order may be re-
viewed in any United States Court of Appeals for the cir-
cuit in which a violation of the statute is alleged to have
occurred or where the employer has its principal office or
in the Court of Appeals for the District of Columbia) ; 49
U.S.C.A. §$1486(a) (Federal Aviation Act of 1958)
(agency action may be reviewed by the courts of appeals
of the United States or the United States Court of Ap-
peals for the District of Columbia). The counter-
argument that if Congress intended to confer exclusive
jurisdiction it could do so expressly has already been re-
jected by the cases previously cited, which hold that
explicit designation of a forum implies exclusive jurisdic-
tion in that forum.
Thus, we conclude from the language of the statute, the
legislative history and purpose of the statute, as well as
from case law and other jurisdictional statutes, that Sec-
tion 526(a) (1) of the Surface Mining Control and Recla-
mation Act of 1977, 30 U.S.C.A. § 1276(a) (1), confers
exclusive jurisdiction on the United States District Court
for the District of Columbia to hear challenges to national
regulations promulgated under the Act.
Il.
For the foregoing reasons, we REVERSE the district
court’s decision on its jurisdiction under 30 U.S.C.A.
§$ 1276(a) (1), VACATE its decision on the merits of
Drummond’s challenge to the revised regulations, and
REMAND the case with instructions to dismiss the action.
65a
UNITED STATES COURT OF APPEALS
THIRD CIRCUIT
No. 84-5607
U.S.A.
Ve
BROOK CONTRACTING CORP.
(D.C. Civil No. 82-1362)
UNITED STATES OF AMERICA
V.
TRI-COUNTY LAND AND COAL COMPANY
(D.C. Civil No. 83-0171)
Appeal of Brook Contracting
Corporation and Tri-County
Land and Coal Company
Argued March 25, 1985
Decided April 18, 1985
Rehearing Denied July 10, 1985
Leon H. Kline (Argued), Sharon T. Walsh, Phila-
delphia, Pa., for appellants.
David Dart Queen, U.S. Atty., James J. West, First
Asst. U.S. Atty., Harrisburg, Pa., Stuart A. Sanderson.
66a
Office of the Sol., Beveriy Perry (Argued), U.S. Dept.
of the Interior, Washington, D.C., for appellee.
Before ALDISERT, Chief Judge, SLOVITER, Circuit
Judge, and MANSMANN, District Judge.*
OPINION OF THE COURT
ALDISERT, Chief Judge.
In this appeal by two coal producing companies from
summary judgment in favor of the government, we must
decide what is meant by the expression “coal produced
by surface mining” under the Surface Mining Control
and Reclamation Act (SMCRA or the Act), 30 U.S.C.
$$ 1201-1328. This is not mere semantic exercise, be-
cause upon our decision depends the extent of tonnage
upon which a reclamation fee of 35 cents per ton may
be levied by the Secretary of the Interior. The govern-
ment argues, and the district court found, that tonnage
of “coal produced” includes the weight of rock, clay.
dirt and other debris mined with the “coal” that was
delivered by the companies to a coal washing and sizing
plant. The companies seem to borrow from Gertrude
Stein’s “a rose is a rose is a rose’ and argue that coal
is coal and it means a mineral that is combustible. We
conclude that we have jurisdiction to hear this appeal,
and that the district court erred in determining that
all the material mined by appellants was subject to the
reclamation fee. Accordingly, we reverse the judgment
of the district court.
i,
Consolidated actions for collecting reclamation fees
were brought by the United States against Brook Con-
tracting Corporation and Tri-County Land and Coal
Company in the district court. The complaints alleged
* Honorable Carol Los Mansmann, of the United States District
Court for the Western District of Pennsylvania, sitting by desig-
nation.
67a
that the companies, which have identical corporate offices
and are represented by the same counsel, owed $73,930.98
and $24,378.67 respectively in delinquent reclamation
fees under the SMCRA. The companies had paid only
for the combustible coal that was mined; the government
concluded that they owed additional fees for the rock,
clay, dirt and other debris that was unearthed in the
surface mining process. The district court granted the
government’s motion for summary judgment and the
companies’ appeal followed.
Il.
The SMCRA states in relevant part:
All operators of coal mining operations subject to
the provisions of this chapter shall pay to the Secre-
tary of the Interior, for deposit in the fund, a recla-
mation fee of 35 cents per ton of coal produced by
surface coal mining and 15 cents per ton of coal
produced by underground mining or 10 per centum
of the value of the coal at the mine, as determined by
the Secretary, whichever is less, except that the
reclamation fee for lignite coal shall be at a rate of
2 per centum of the value of the coal at the mine,
or 10 cents per ton, whichever is less.
30 U.S.C. §1232(a) (emphasis supplied}. The com-
panies contend that the district court accorded an overly
expansive meaning to the language “coal produced by
surface coal mining.” In construing the Act, the district
court relied in part on 30 C.F.R. § 837.12 (now codified
at 30 C.F.R. § 870.12) :
(a) The operator shall pay a reclamation fee on
each ton of coal produced for sale, transfer, or use,
including the products of in situ mining.
(b) The fee shall be determined by the weight and
value at the time of initial bona fide sale, transfer
of ownership, or use by the operator.
* * * *
a
68a
The companies argue that application of this regulation
to support imposition of the reclamation fee on the total
tonnage of material mined is an improper extension of
the scope of 30 U.S.C. § 1232 (a).
Because resolution of this case turns on statutory
construction involving the interpretation and applica-
tion of legal precepts, our standard of review is plenary.
University Minerals, Inc. v. C.A. Hughes & Co., 669
F.2d 98, 102 (3d Cir.1981).
ITI.
As a preliminary matter we decide that we have juris-
diction, properly based on the final judgment rule of 28
U.S.C. § 1291. The government argues that the order
appealed from is not final, relying on UGI Corp. v. Clark,
747 F.2d 893 (3d Cir. 1984). In UGIJ, a mining com-
pany sought a declaratory judgment that it did not owe
reclamation fees and in a separate action the government
sued the company to collect delinquent fees. The actions
were consolidated and the district court awarded sum-
mary judgment in favor of the government on the declar-
atory judgment action. We dismissed the mining com-
pany’s appeal from this order because there was no
disposition of the consolidated collection case. The re-
quirements of Rule 54(b), Federal Rules of Civil Pro-
cedure, were not satisfied and, therefore, there was no
final judgment. Jd. at 894. The UGI case differs from
the case before us in which the only underlying action—
the government’s collection case—has been disposed of in
favor of the government.
The government argues, however, that the judgment
entered below is not final because the district court did
not specify in its order the exact amount of fees owed
by appellants. We find this argument unpersuasive. The
government alleged in its complaint against Brook Con-
tracting Corporation that “defendant owes the Secretary
the total of $73,930.98 in delinquent reclamation fees
69a
plus interest at the rate of one percent per month com-
mencing thirty (30) days after the end of the calendar
quarter for which reclamation fees are due... .” App.
at 9a. The government alleged that Tri-County Land
and Coal Company “owes the Secretary $24,378.67 in
delinquent fees, plus such additional amounts as may be
determined upon review of defendant’s records,” plus
interest computed in the manner alleged in the Brook
Contracting Corporation complaint. App. at 16a. In its
motion for summary judgment the government stated:
[T]he United States of America respectfully re-
quests the Court grant summary judgment in favor
of the Plaintiff and against the Defendants Tri-
County Land and Coal Company and Brook Con-
tracting Corporation in the amounts, plus interests
and costs, set forth in the respective complaints filed
in this matter and supported by the affidavits filed
with this motion.
App. at 22a (emphasis supplied). The order of July 6,
1984 granted the government’s motion for summary
judgment. The exact amount of fees that the district
court adjudged were owed by the companies can be read-
ily determined by reading the complaint, the motion for
summary judgment, and the July order in conjunction
with one another.
We refuse to adopt a mechanistic and overly technical
view of the final judgment rule contained in 28 U.S.C.
$1291. In Hattersley v. Bollt, 512 F.2d 209 (8d Cir.
1975), we held that a judgment of contribution against
a general contractor in favor of a building owner arising
out of a personal injury action was final and appealable
notwithstanding the fact that the judgment did not spec-
ify a precise amount owed the building owner. /d. at
213. The building owner had been adjudged liable to the
plaintiffs in an amount of $500,000. The judgment of
contribution provided that the contractor would be liable
for any amount in excess of $250,000 paid by the build-
ing owner to the plaintiffs. We stated:
70a
[Bjecause the judgment fixes [the contractor’s| ulti-
mate liability and clearly estabiishes the parameters
of that liability, it is a final, appealable order. The
Supreme Court of the United States has emphasized
that “the requirement of finality is to be given a
‘practical rather than a technical construction.’ ”
Gillespie v. United States Steel, 379 U.S. 148, 152,
85 S.Ct. 308, 311, 138 L.Ed.2d 199 (1964).
Where the practical effect of a judgment or order
is final and only requires a ministerial act to imple-
ment it, such judgment or order is appealable under
28 U.S.C. § 1291. Since the effect of this district
court judgment settles “the primary issue then ex-
isting between the parties,” Massachusetts Casualty
Ins. Co. v. Forman, 469 F.2d 259, 260 (5th Cir.
1972), and determines the rights and equities be-
tween the parties, it is a final judgment, notwith-
standing any provision for future determination of
the actual amount of recovery.
Id. at 213-214 (footnote omitted). We have no difficulty
in holding, based on the language in the government’s
complaints, its motion for summary judgment and the
district court order, and on the strength of Hattersley,
that the order appealed from is final and that we have
jurisdiction under § 1291. We turn now to the merits.
IV.
The government urges that we need not go beyond
United States v. Devil’s Hole, Inc., 747 F.2d 895 (3d
Cir.1984), because that case qualifies as “the elusive case
on all fours.” To trace this metaphor to its original form,
“the case runs on all four feet,” we conclude that the
government has added a leg or two to the facts in that
case. In Devil’s Hole, we affirmed the district court’s
factual finding that anthracite silt was “coal” and the
removal and sale of the silt was “surface mining” and
thus subject to the reclamation fee imposed by § 1232(a).
7la
The government relies heavily on our affirmance of the
Secretary’s position that the noncombustible portion of
the silt was properly included in calculating the weight
upon which the reclamation fee was imposed. The gov-
ernment reasons that the noncombustible rock, clay, dirt
and other non-coal material at issue in this case should
likewise be included in the weight calculations. The case
now before us, however, differs significantly.
In Devil’s Hole, the district court’s finding that anthra-
cite silt was “coal,” 548 F.Supp. 451 at 454 (E.D.Pa.
1982) was supported in the record by expert testimony
and other evidence that anthracite silt was combustible
and qualified as “coal” under American Society for Test-
ing and Materials (ASTM) standard 388-77 based on
its fixed carbon and BTU content. Numerous tests, in-
cluding a reflectant’s analysis and a point count analy-
sis, also established that anthracite silt was coal. /d.
This court affirmed the finding as not being clearly er-
roneous. 747 F.2d at 897. In the case before us now,
however, there is no factual finding supported by expert
testimony or any other evidence that the aggregate of
material mined by appellants qualifies as coal under the
ASTM standards. Accordingly, Devil’s Hole does not sup-
port the government’s position.
Were this simply a matter of comparing this case
with Devil’s Hole, our work would be at an end. But
the master Cardozo has taught us that deciding cases
is much more than a “color-matching” procedure.’ Ap-
1 [Some judges believe that adjudication] is a process of search,
comparison, and little more. Some judges seldom get beyond
that process in any case. Their notion of their duty is to match
the colors of the case at hand against the colors of many sample
cases spread upon their desk. The sample nearest in shade
supplies the applicable rule. But, of course, no system of living
can be evolved by such a process, and no judge of a high
court, worthy of his office, views the function of his place so
narrowly.
B. Cardozo, The Nature Of The Judicial Process 20 (1921).
72a
pellants argue that the government interpreted and ap-
nlied the SMCRA too broadly. Acccrdingly, we turn our
attention to the Act’s construction.
V.
Our review of the district court’s interpretation of
the critical phrase in § 1232(a) is plenary.
As in all cases involving statutory construction,
“our starting point must be the language employed
by Congress,” Reiter v. Sonotone Corp., 442 US.
330, 337 [99 S.Ct. 2326, 2330, 60 L.Ed.2d 931]
(1979), and we assume “that the legislative pur-
pose is expressed by the ordinary meaning of the
words used.” Richards v. United States, 369 U.S. 1,
9 (82 S.Ct. 585, 591, 7 L.Ed.2d 492] (1962). Thus,
“lalbsent a clearly expressed legislative intention
to the contrary, that language must ordinarily be
regarded as conclusive.” Consumer Product Safety
Comm'n v. GTE Sylvania, 447 U.S. 102, 108 [100
S.Ct. 2051, 2056, 64 L.Ed.2d 766] (1980).
American Tobacco Co. v. Patterson, 456 U.S. 63, 102
S.Ct. 1534, 71 L.Ed.2d 748 (1982). It therefore devolves
upon us to ascertain the legislative intent. “In the inter-
pretation of statutes, the function of the court is easily
stated. It is to construe the language so as to give effect
to the intent of Congress. There is no invariable rule
for the discovery of that intention.” United States v.
American Trucking Association, 310 U.S. 534, 542, 60
S.Ct. 1059, 1063, 84 L.Ed. 1345 (1940). But here we
will take as our starting point the legislative history,
because it is extensive and extremely relevant. See Mc-
Caughn v. Hershey Chocolate Co., 283 U.S. 488, 51 S.Ct.
510, 75 L.Ed. 1183 (1931).
A.
In discerning this history, we are not limited to the
Report accompanying the final Act. We are informed by
- ——— e+
73a
this Report that “[t]he legislative history of H.R. 2
[the SMCRA] includes the history of H.R. 25 ..., S.
425..., H.R. 9725 ..., and H.R. 13950 ....” H.R.Rep.
No. 218, 95th Cong., Ist Sess. 140, reprinted in 1977
U.S.Code Cong. & Ad.News 593, 672. These bills, vir-
tually identical to H.R. 2, were passed by Congress in
1975 and 1976 but vetoed by the President. We have
examined that history in detail and conclude that it
counsels against an expansive interpretation of the term
“coal” and a broad-based imposition of the reclamation
fee, as urged by the government. Congress evinced con-
cern that the provisions of the Act—particularly imposi-
tion of the reclamation fee—not be burdensome on the
coal industry nor fuel inflation in the national economy.
Several principal considerations form the basis
for the Title IV reclamation fee:
First, to set the fee at such a level that it is not
a burden on the industry;
Second, to provide at the same time sufficient
funds for meeting program objectives within a rea-
sonable time frame; and
Third, to structure the fee so it would not exert
an inflationary influence in the economy.
ld. at 137, reprinted in 1977 U.S.Code Cong. & Ad.News
at 669. Notwithstanding these explicitly stated consid-
erations, the government urges upon us an expansive
interpretation of the reclamation fee provision that is
not consistent with the stated “principal considerations”.
B.
The legislative history instructs us that Congress was
very much concerned about economic burdens to the
economy in general, and the coal industry in particular.
Congressional research went to great pains to project
costs to the consumeis and the industry that would
result from implementation of the reclamation fees.
74a
These projections strongly suggest that Congress intended
to impose the fee on combustible coal only, and not, as
urged by the government, on additional tonnages of rock,
clay and dirt. For example, the House Report explained
the effect that imposition of reclamation fees, passed on
to the consumer by the coal producers, would have on
the manufacturers or distributors of electric power, an
industry conceded to be a primary large scale customer
of coal producing companies:
When [the increase caused by imposition of the
reclamation fee is] translated into power costs per
kilowatt hour—assuming conservative figures of 10,-
000 Btu’s/lb. and a conversion rate of 10,000
Btu’s/kWh—it is less than 0.015 cents per kWh of
electricity. The consumer is utilizing 250 kWh per
month, this represents an increase of 4 cents per
month on his utility bill. The committee does not
consider this small increase a burden on current
coal consumers or inflationary in nature.
Id. The compelling conclusion is that the “conservative
figure” of 10,000 BTU’s per pound of coal was based
on combustible coal, not on some unspecified combina-
tion of coal and rock, clay or dirt. This is clear because
the ASTM has classified mineral matter-free coals by
rank according to BTU content, ranging from 6,300
BTU’s per pound to greater than 15,500 BTU’s per
pound. Appendix to Appellants’ Brief at 4. Absent a
valid factual finding to the contrary, and there is no
such finding in the record before us, we will not conclude
as a matter of law that the aggregate of material mined
by appellants would have a sufficient BTU rating te
qualify as coal.
C.
Still another aspect of the cost studies set forth in the
legislative history of the SMRCA suggests that the ap-
pellants’ proffered interpretation of the reclamation fee
provision is correct. Detailed analyses were made to as-
Tda
certain the cost burden on the producers that, of course,
would immediately be passed on to the consumers. As
indicated, Congress projected the tonnage costs with pro-
duction of heat, and came to the conclusion that there
would be 10,000 BTU’s per pound of coal, and that the
conversion rate to electricity was approximately 10,000
BTU’s/kWh. These figures can be transformed into the
equation: 1 pound of coal = 1 kWh. Hence, in project-
ing the increase in electric utility bills that H.R. 25 would
cause—increased coal costs resulting from both the rec-
lamation fee and compliance with SMCRA’s regulatory
provisions—Congress reported that a $1.00 increase in
a ton of coal translates into a .05 cent increase per kilo-
watt hour of electricity. H.R.Rep. No. 896, 94th Cong.,
2d Sess. 148 (1976) (appendix). It is readily apparent
that this figure was computed by assuming that 1 pound
of coal == 1 kWh and then merely dividing the 1.00
increase ‘ton by 2000 to arrive at .05 cents. (1.00 /2000 =
.0005). Obviously this projected increase would be sub-
stantially higher if the underlying premise—that one
pound of coal is required to produce one kilowatt hour—
were rendered incorrect by the imposition of the reclama-
tion fee on significant amounts of non-energy producing
matter.
D.
But there were even additional cost studies made. Con-
gress compared the increased costs in coal caused by
enactment of the SMCRA to the total price of coal per
ton. Again, in language reflecting congressional concern
that the SMCRA not be financially burdensome on the
coal industry, consumers and the general economy, the
House Report states:
The Library of Congress analysis concluded that
even using overgenerous estimates of reclamation
costs, the price of reclamation is small. If one adds
the 35-cent-a-ton reclamation fee to an 85-cent-per-
ton reclamation cost, the reclamation cost of $1.20 is
76a
only 6 percent of the spot price of $21.49 for 1976.
The Library study concluded that the price of coal is
not expected to be increased by this amount because
coal prices are more reflective of the unusual situa-
tion in the energy markets than of small changes in
production costs.
H.R.Rep. No. 218, 95th Cong., 1st Sess. 149, reprinted in
1977 U.S.Code Cong. & Ad.News 593, 681. There is ab-
solutely no indication that Congress sought to include in
the spot price of coal an adjustment for tonnages of non-
coal material.
VI.
Then, too, the views of those members of Congress who
dissented from passage of H.R. 25 are relevant. They
opposed the Act because they believed 35 cents per ton
was too high, and opted for a reclamation fee of 10 cents.
They based their argument on the basis that the total
tonnage of coal produced in 1975 was 654,000,000 tons.
See id. at 72, reprinted in 1977 U.S.Code Cong. & Ad.
News at 610. The dissenting report to H.R. 25 contended
that the reclamation fee of 35 cents per ton was too high,
“extracting unneeded cash from the consumer and the
money supply... .” H.R.Rep. No. 45, 94th Cong., Ist
Sess. 168 (1975). The dissenters advocated a fee of 10
cents per ton, stating that this “could generate between
$60 and $70 million dollars on an annualized basis.” Id.
at 169. This is a computation based on the tonnage of
combustible coal produced. Had these legislators been
proceeding on the basis that the reclamation fee of 35
cents was to be applied to more tonnage than the 654
million tons of actual coal produced, that figure would
have been included in their argument as an a fortiori
proposition.
In sum, Congress’s analysis of costs associated with
imposition of the reclamation fee supports appellants’
argument that Congress intended to impose the fee on ton-
nages of combustible coal only.
77a
VIL.
The definition of coal promulgatec by the Secretary
likewise militates against the expansive construction
adopted by the district court. Title 30, C.F.R. § 700.5
states in pertinent part:
As used throughout this chapter, the following
terms have the specified meaning except where other-
wise indicated—
Coal means combustible carbonaceous rock, classi
fied as anthracite, bituminous, subbituminous, or
lignite by ASTM Standard D 388-77, referred to and
incorporated by reference in the definition of ‘“‘anthra-
cite” immediately above.
We note that the provisions dealing with the imposition
of the reclamation fee do not explicitly “otherwise indi-
cate” an alternative definition of “coal,” although 30
C.F.R. § 870.12(b)* seemingly permits reclamation fee
230 C.F.R. § 870.12(b) states in pertinent part:
(b) The fee shal! be determined by the weight and value at
the time of initial bona fide sale, transfer of ownership, or use
by the operator.
(1) The initial bona fide sale, transfer of ownership, or use
shall be determined by the first transaction or use of the coal
by the operator immediately after it is severed, or removed
from a reclaimed coal refuse deposit.
(2) The value of the coal shal’ be determined F.O.B. mine.
(3) The weight of each ton shall be determined by the actual!
gross weight of the coal.
(i) Impurities, including water, that have not been removed
prior to the time of initial bona fide sale, transfer of ownership,
or use by the operator shall not be deducted from the gross
weight.
(ii) Operators selling coal on a clean coal basis shal! retain
records that show run-of-mine tonnage, and the basis for the
clean coal transaction.
78a
liability to be determined in the basis of the gross weight
of all mined material at the time of the initial bona fide
sale. To the extent that the government interprets
§ 870.12(b) to authorize imposition of the reclamation fee
on the noncoal material mined by appellants here, we hold
this regulation exceeds the scope of 30 U.S.C. § 1232 (a)
and is therefore invalid.
The government relies on Combs v. Hawk Contracting,
Inc., 543 F.Supp. 825 (W.D.Pa.1982). At issue in Combs
was the meaning of a provision in the Coal Wage Agree-
ment obligating employers to pay royalties into the Miners
Pension Fund based on the amount of “coal produced by
each employer for use or sale.” Jd. at 827. The district
court rejected the company’s argument that it could deduct
the coal’s ash content in computing its royalty payment,
reasoning that any coal mine production scld or used as
fuel qualifies for inclusion in calculating royalties. Id.
Combs does not compel us to adopt the government’s posi-
tion here. First, and most obviously, Combs dealt with
construction of a contract between the employers and the
union. The court’s task in that case was to determine the
intent of the parties to the agreement. We scarcely need
mention that a statute and a contract with similar pro-
visions need not be construed identically because con-
gressional intent may differ from the intent of parties to
the contract. Second, the company’s argument in Combs
that the ash content be deducted from the coal weight is
qualitatively different from appellants’ argument here.
Appellants do not seek a reduction in the coal tonnage
based on impurities within the combustible coal itself.
Rather they seek a reduction based on the weight of the
overburden that is mixed with the coal prior to the wash-
ing and sizing operations. Much of this debris is loose
material that is inadvertently “scooped” from the mine
and loaded with the coal. App. at 41a-42a.
Gromer.
79a
VIII.
We therefore hold as a matter of law, that as used in
the statute, “coal produced by surface coal mining” means
combustible coal that would qualify as such under ASTM
standards and excludes the weight of rock, clay, dirt and
other debris in the computation of the reclamation fee.’
The judgment of the district court will be reversed with
a direction to enter judgment in favor of the appellants.
8 Appellants also argue that the reclamation fee provisions as
applied violate the equal protection component of the due process
clause of the 5th amendment. Because we have disposed of this
case on statutory grounds, we do not meet this issue.
80a
UNITED STATES DISTRICT COURT
N.D. ALABAMA
JASPER DIVISION
Civ. A. No. CV82-PT-2145-J
A.J. TAFT COAL COMPANY,
i: Plaintiff,
UNITED STATES OF AMERICA,
Defendant.
June 14, 1984
On Application for Attorney Fees
Aug. 22, 1984
Charles A. Powell, III, Stephen A. Rowe, Lange, Simp-
son, Robinson & Somerville, Birmingham, Ala., for plain-
tiff.
Frank W. Donaldson, Sharon Lovelace, Caryl P.
Privett, Asst. U.S. Attys., Birmingham, Ala., Karl L.
Kellar, Tax Div., Dept. of Justice, Washington, D.C., for
defendant.
Fournier J. Gale, III, Roy J. Crawford, Cabaniss,
Johnston, Gardner, Dumas & O’Neal, Birmingham, Ala.,
amici curiae for Alabama By-Products Corp., Drummond
Coal Co., McWane Coal Co. and Mulga Coal Co.
FINDINGS OF FACT AND
CONLUSIONS OF LAW
PROPST, District Judge.
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UNDERLYING FACTS
During the years in question, April 1, 1978 through
June 30, 1980, A.J. Taft Coal Company (Taft) was en-
gaged in the business of surface mining coal in Walker
County, Alabama (RT. 22). Taft’s only customer was
Alabama Power Company, which also owned the mineral
rights to the land mined by Taft (Plaintiff’s Exhibit
[hereinafter “P.Ex.”] 3; RT. 22, 25).
Taft sold coal on a washed and on an unwashed basis
during the audit period (RT. 22). Coal to be sold on a
washed basis was hauled by Taft trucks to the Bankhead
washer where the trucks were weighed, loaded and un-
loaded, to determine tons of raw, unwashed coal (RT.
22). The Bankhead washer was neither owned nor oper-
ated by Taft, but rather was an independent facility
(RT. 23). Alabama Power Company paid approximately
$2.00 per ton to have Taft’s coal washed (RT. 124).
After the coal reached the washer, a float-sink test was
performed on the Taft coal to determine the ratio of coal
to refuse (RT. 24). Using this ratio, Alabama Power
Company estimated the tons of coal that would remain
after washing, for which it paid Taft (RT. 128). Taft
was paid nothing for the refuse separated from the coal
in the washing process and the Internal Revenue Service
(hereinafter “I.R.S.”) does not here seek to tax the ref-
use (RT. 50, 54).
Taft was paid based on the BTU content of the washed
coal (RT. 82). The amount of BTU’s per ton of coal is
a measure of the quality of said coal; coal having a
higher number of BTU’s per ton is of better quality than
coal with a lower number of BTU’s per ton. (Transcript,
83; 122-23). The quality of coal, and its ability to release
BTU’s, is determined by the purity of said coal; the
greater the amount of impurities in the coal, the fewer
BTU’s will be produced per ton of coal. (Transcript 122-
123; 138-139; 141-143). Sulfur, ash, dirt, rocks, and ref-
82a
use are all considered to be impurities which reduce the
quality of coal. Water has no BTU content. (Transcript
122-123; 224-225; 226; 292-294; 56; 60). In paying its
Black Lung Tax, Taft reported to the I.R.S. based on the
ealeulated dry tons of coal which it sold to Alabama
Power Company (RT. 50). Raymond Clemmons, the
I.R.S. agent who audited Taft’s records, adjusted the
tonnage reported by Taft for washed coal sold by increas-
ing the tonnage by six percent (RT. 13, 51). Clemmons
arrived at the six percent figure by estimation (RT. 13,
78).1 The six percent gross up of the weight of washed
coal resulted in the addition of 1325.68 tons to the
22,094.68 tons of coal already reported (RT. 308-311;
P.Ex. 21). The addition of these tons caused an addi-
tional tax of $331.43 to be assessed against Taft (RT.
308; P.Ex. 21).
Coal sold on an unwashed basis was delivered to the
Gorgas Steam Plant or the Segeco Mine where it was
weighed and sampled by Alabama Power Company (RT.
58, 55). Taft was paid for this coal on the basis of the
BTU value of the coal determined by Alabama Power
Company, the purchaser (RT. 55). The unwashed coal
was not processed by Taft before delivery and was sam-
pled and analyzed in its raw, as-received state (RT. 56).
The contract under which the coal in question was sold
provides, in reference to the unwashed coal, that
. .. Trucks delivering coal hereunder shall be
weighed both loaded and empty, and the difference
in weight shall be the governing weight hereunder.
... The aggregate weights determined during any
payment period shall be accepted as the quantity of
coal sold and purchased during such period for which
invoices are to be rendered and payments to be
made. . . . (emphasis supplied).
1The six per cent figure is not at issue per se. The plaintiff
disputes that any percentage should be added.
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The as-delivered weight of coal, as opposed to the dry
weight, was used in determining the price paid Taft for
unwashed coal (RT. 145). Taft paid its Black Lung Tax
by eliminating, by mathematical calculation, all moisture
in excess of 2.88%, which it estimated to be the inherent
or bed moisture of the coal it mined (RT. 64). For pur-
poses of the Federal excise tax, Taft originally reported
gross tons of coal sold, without any adjustment for mois-
ture. Only after learning that the State of Alabama had
decided to allow for severance tax purposes a “moisture
adjustment” for all moisture in excess of 2.88 percent,
did Taft attempt to claim an equivalent adjustment for
federal tax purposes. (Transcript, 91). Agent Clem-
mons added back the 2.88% which Taft eliminated and
recalculated the tax due (RT. 66). This adjustment re-
sulted in the addition of 3,557.83 tons to the tons of coal!
previously reported by Taft and in the imposition of an
additionai tax due of $889.46 (P.Ex. 21).
The total tax adjustment resulting from Agent Clem-
mons’ changes was $1,220.89 (RT. 310). The difference
between the Excise Tax Examination changes and the
$1,400.80 additional excise tax levied against Taft is a
result of the addition of interest.
Both the washed and unwashed coal in question was
mined in the Warrior Basin coal field from the Pratt,
America, Nickel Plate and Cob seams. Harry Raykes,
Principal Mining Engineer for Southern Company Serv-
ices, testifying as an expert witness, testified that these
seams have been mined since the beginning of mining
in Alabama (RT. 263). The seams cover an extensive
area and have reasonably consistent bed moisture (RT.
264).* Based on Mr. Raykes’ experience in the Warrior
Basin coal field, it was Mr. Raykes’ testimony that bed
moisture in the seams in question would vary from
* There was no evidence that this characteristic likely changed
between 1980 and 1982.
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1.75% to 2.75% with an average moisure of 2.25% (RT.
249, 264-265). Mr. Raykes also testified that he per-
formed a study for Alabama Power Company of the re-
serves later mined by Taft (RT. 265). Based on this
study, it was Mr. Raykes’ opinion that the coal mined
by Taft and involved in the audit in question had an
average bed or inherent moisture of 2.25% (RT. 265).
Jack Davis of Tuscaloosa Testing testified that he ana-
lyzed core samples from the Taft mine in question for
total moisture (RT. 195). Mr. Davis utilized test proce-
dures prescribed by ASTM, which is a reasonable stand-
ard accepted in the coal industry (RT. 192-193, 279).
The analysis of 123 samples resulted in an average total
moisture of 2.30% (RT. 199; P.Ex. 20).
The samples taken by Mr. Davis were obtained from
the same seams from which the coal in question was
mined. However, the samples were taken from different
sections of the mine, since the coal in question had al-
ready been mined and sold at the time the samples were
taken (RT. 175, 181-185). Harry Raykes testified that
the prior mining would not affect the average bed mois-
ture of the unmined coal remaining in the area (RT.
272). Likewise, Mr. Raykes testified that the analysis
on the remaining coal seams, performed by Jack Davis
and Tuscaloosa Testing, would yield a reliable measure
of the bed or inherent moisture of the coal involved in
this case (RT. 271-272).
Coal lying in an undisturbed state contains inherent
or bed moisture (P.Ex. 4, para. 2). The testimony of
expert witnesses Raykes and Davis was to the effect
that the Pratt, America, Nickel Plate, and Cobb seams
are consistent in general with regard to bed moisture
and could be expected to have an average bed moisture
of 2.25% (RT. 200, 264). Test results performed by
Tuscaloosa Testing of the specific coal seam in question
showed an average total moisture of 2.30%. Bed mois-
ture or inherent moisture is a component of ‘total mois-
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ture (RT. 256, 302). Reynold Shotts testified that Ala-
bama coals contain, on the average, 2.88% inherent or
bed moisture (P.Ex. 4). Taft utilized this average when
calculating its Black Lung Tax (RT. 66). Taft reported
washed coal based on a removal of all moisture including
bed moisture."
Harry Raykes and Dan Thornburgh testified that it
is the custom and practice in
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