Petition for Writ of Certiorari — Cordova Clay Co. v. United States

~--

Supreme Court, U.S.

FILED

NOV 4 {987

JOSEPH F. SPANIOL, JR.

CLERK

No.

: IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1987

CORDOVA CLAY COMPANY, INC.

Petitioner,

vs.

UNITED STATES OF AMERICA,

Respondents.

On Writ of Certiorari to the United

States Court of Appeals

For the Eleventh Circuit

PETITION FOR WRIT OF CERTIORARI

John E. Medaris

’ Attorney for Petitioner

P.O. Box 766

4 Alabaster, Alabama 35007

(205) 663-1581

Suite 205 Shelby Medical Center

QUESTIONS PRESENTED

1. Whether the Eleventh Circuit

Court of Appeals finding that Cordova

Clay Company, Inc. was

reclamation fees under

1291(28) was erroneous

the legislative intent

of this Act.

not exempt from

30 U.S.C. Section

and violative with

in plain wording

PARTIES TO THE PROCEEDING

I. COUNSEL FOR DEFENDANT/PETITIONER/

CORDOVA CLAY COMPANY, INC.

John E. Medaris

II. DEFENDANT/PETITIONER

Cordova Clay Company, Inc.

III. COUNSEL FOR ORIGINAL PLAINTIFF/

UNITED STATES OF AMERICA

On behalf of the United States

Department of the Interior

Stuart Sanderson, Department of

the Interior

Angie O'Connell, Department of

the Interior

David I.C. Thomason, Attorney

Department of Justice

F. Henry Habicht, II, Assistant

Attorney General

Frank Donaldson, U.S. Attorney

for the Northern District of

Alabama

Robert S. More, & Richard E. O'Neal,

Assistant U.S. Attorneys

IV. ORIGINAL PLAINTIFF AND RELATED

PARTIES

United States of America on behalf

of the United States Department of

the Interior

ii

STATEMENT OF RELATED PARTIES OR

ENTITIES

Beaird Coal Company, Inc., Party

at the trial level, not a Party

under this Writ.

Lil

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW .......i

PARTIES TO THE PROCEEDING ...... seuaeee

TABLE OF COUTENTS cccccccccscceseseeehY

TABLE OF AUTHORITIES ..ccccccccscscccesY

OPINIONS BELOW ......... Perrrrrerrer yy .

JURISDICTION .ncccccsece Ce eccscssesesed

STATUTORY PROVISION INVOLVED .........3

STATEMENT OF THE CASE .ncccccccceseces®

REASONS FOR GRANTING THE WRIT ...... oof

COMCLUSTION .cccccccccsesccccsceccccseehs

APPENDICES ..cccccccccccccsccseccces A-1

Lv

TABLE OF AUTHORITIES

Cases: Page

The Surface Mining Control and

Reclamation Act of 1977,

30 U.S.C. Section 1201,

30 U.S.C. Section 1291(28)...3

No.

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1987

CORDOVA CLAY COMPANY, INC.

Petitioner,

vs.

UNITED STATES OF AMERICA,

Respondents.

On Writ of Certiorari to the United

States Court of Appeals

For the Eleventh Circuit

PETITION FOR WRIT OF CERTIORARI

The petitioner, Cordova Clay

Company, Inc., respectfully prays that a

Writ of Certiorari issue to review the

decision of the United States Court of

Appeals for the Eleventh Circuit entered

in this proceeding on August 6, 1987.

OPINIONS BELOW

The opinion of the Court of Appeals

on original deliverance is reported and

is not published. The Court's original

opinion is attached hereto as Appendix A.

The District’s Court's opinion is

attached hereto as Appendix B.

JURISDICTION

The opinion of the Court of Appeals

was entered on August 6, 1987. This

Petition for Writ of Certiorari was filed

with this Court within Ninety (90) days

provided for by 28 U.S.C. Section

210l(c). This Court's jurisdiction is

invoked under 28 U.S.C. Section 1254(1).

STATUTORY PROVISION INVOLVED

1. The Surface Mining Control and

Reclamation Act of 1977, 30 U.S.C.

Section 1201, et seg.

The applicable portion of said Act

is entitled, “Administrative and

Miscellaneous Provision,” Section

1291(28), “Surface coal mining

operations” means --

"(A) activities conducted on the

surface of lands in connection with a

surface coal mine or subject to the

requirements of section 516 <30 USCS

Section 1266> surface operations and

surface impacts incident to an

underground coal mine, the products of

which enter commerce or the operations of

which directly or indirectly affect

interstate commerce. Such activities

include excavation for the purpose of

obtaining coal including such common

methods as contour, strip, auger,

mountaintop removal, box cut, open pit,

and area mining, the uses of explosives

and blasting, and in situ distillation or

retorting, leaching or other chemical or

physical processing, and the cleaning,

concentrating, or other processing or

preparation, loading of coal for

interstate commerce at or near the mine

Site: Provided, however, That such

activities do not include the extraction

of coal incidental to the extraction of

other minerals where coal does not exceed

16 2/3 per centum of the tonnage of

minerals removed for purposes of

commercial use or sale or coal

explorations subject to section 512 of

this Act <30 USCS Section 1262>; and

(B) the areas upon which such

activities occur or where such activities

disturb the natural land surface. Such

areas shall also include any adjacent

land the use of which is incidental to

any such activities, all lands affected

by the construction of new roads or the

improvement or use of existing roads to

gain access to the site of such

activities and for haulage, and

excavations, workings, impoundments,

dams, ventilation shafts, entryways,

refuse banks, dumps, stockpiles,

overburden piles, spoil banks, culm

banks, tailings, holes or depressions,

repair areas, storage areas, processing

areas, shipping areas and other areas

upon which are sited structures,

facilities, or other property or

materials on the surface, resulting from

or incident to such activities; ..."

STATEMENT OF CASE

This case arises out of Cordova Clay

Company, Inc.'s mining operations during

the period of June l, 1980 through June

30, 1982. The United States by and

through the Department of Interior and

the Office of Surface Mining, audited

Cordova Clay Company, Inc. pursuant to

the Surface Mining Control and

Reclamation Act for the purposes of

establishing the amount, if any, due for

reclamation fees, under 30 U.S.C. Section

1201, 1232(a). Cordova Clay Company, Inc.

denied owing reclamation fees because of

the exemption found in the definition of

“surface coal mining operations" as set

forth in 30 U.S.C. Section 1291(28).

Cordova Clay Company, Inc.

successfully contented at trial that it

owed no reclamation fees since the

proportion of coal to other minerals did

not exceed the statutory exemption (16

2/3) of 30 U.S.C. 1291(28). That based

upon this finding the trial court held

that Cordova Clay Company, Inc. owed no

reclamation fees since the proporation of

coal to other minerals mined did not

exceed the statutory exemption. Appendix

B - Page 38 and 39.

The United States appealed and the

Eleventh Circuit Court of Appeals,

reversed and rendered, finding that the

Courts factual determination was

inconsistant with its previous

interpretation of the relevant statute.

Appendix A - Pages 2 - 3, hence this

Writ.

REASONS FOR GRANTING THE WRIT

Cordova Clay Company, Inc.'s

contention that the Eleventh Circuit

Court of Appeals erred in its reversing

and rendering findings by the District

Trial Court. The standard for determining

amounts of coal and other minerals mined

to meet the requirements of 30 U.S.C.

Section 1291(28) should be determined in

accordance with the plain wording of the

statute.

That statute provides that the

Surface Mining Control and Reclamation

Act of 1977 does not apply to mining

operation if "the extraction of coal

incidental to the extraction of other

minerals where coal does not exceed 16

2/3 per centum of the tonnage of minerals

removed for purposes of commercial use of

SALE. sae”

The District Court and the Court of

Appeals both found that Cordova Clay

Company, Inc. was a legitimate clay and

shale mining operation.

The District Court and the Court of

Appeals have noted chet there is a void

of any interpretation of this statute

either by legislature or through case

law. To the extent that this effects

parties similarly situated to Cordova

Clay Company, Inc., the Court of Appeals

decision precipitate a harmful and

unintended enforcement of the Surface

Mining Control and Reclamation Act of

Loy Ts

Cordova Clay Company, Inc. contends

that throughout its Appeal and throughout

the District Court level, it was in

compliance with the 16 2/3 exemption.

That this compliance would not

necessarily be on a day by day basis, but

on an overall basis.

That the auditors for the Department

of Interior in reviewing the coal and

mineral records of Cordova Clay Company,

Inc. did not take into consideration

inventory stockpile or location source of

minerals. Appendix C.

In construing this testimony with

the Court of Appeals decision, it is

apparent to Cordova Clay Company, Inc.,

the Court of Appeals only considered

minerals sold or shipped and did not take

into account said inventory. The District

Court considered the inventory in

determining compliance with the 16 2/3

exemption.

10

In that the Act provides that the

"extraction of coal" is the standard (not

the sale of coal) that the Court of

Appeals decision appears to be based upon

sales figures and royalty figures and

does not consider those minerals mined

which would also mean mineral stockpiles

from the mining operation. Cordova Clay

Company, Inc. requests this Court to note

that the Court of Appeals relied upon

Davis, the government auditor, who

prepared the governments report for

determination of coal mined in relation

to other minerals, who stated that he

relied upon the defendants mineral

distribution ledger in determining the

tons of clay and shale shipped to each of

the Cordova Clay customers. Appendix C.

ll

That the standard is not for

shipping but the extraction. The Court

also notes that possibly Davis, the

government auditor, misunderstood certain

questions, misadded figures and at the

same time they rely on his shipment

figures as a determination of what the

Clay and shale ratio was to coal and

other mineral ratio. Appendix C

It is Cordova Clay Company, Inc.'s

intention that the judgment entered by

the Court of Appeals is erroneous and

misleading and can lead to

misinterpretation of the statute. It is

Cordova Clay Company, Inc.'s contention

that the Court of Appeals relied upon the

government auditor, Davis' records of

shipment and sales and ignored the

auditors further statements that he did

not examine inventory or stockpiles of

any minerals.

12

CONCLUSION

Cordova Clay Company, -Inc. presents

a simple argument. The Courts have never

reviewed or interpreted the 16 2/3

exemption in 30 U.S.C. 1291(28).

Cordova Clay Company, Inc. claims

that the Trial Court ruled properly,

granting Cordova Clay Company, Inc. an

exemption based upon coal extracted in

relation to other minerals. Cordova Clay

Company, Inc. claims the Court of Appeals

excluded inventoried and stockpile

minerals and only relied upon audited

figures of sales and shieeieg records.

This Court should consider this Writ

to enforce the legislatures plain meaning

of the 16 2/3 exemption, of 30 U.S.C.

1291(28) requiring consideration of only

minerals extracted - not minerals sold or

shipped.

L@

RESPECTFULLY SUBMITTED,

Ye. Ee CT ¢£ Lo ata...

Jéhnn E. Medaris

Attorney for Defendant

P.O. Box 766

Alabaster, Alabama 35007

Phone: (205) 663-1581

CERTIFICATE OF SERVICE

I hereby certify that I have served

a copy of the above and foregoing

pleading upon the following attorneys of

record by placing a copy of same in the

U.S. Mail, postage prepaid, on this the

4th day of November, 1987.

Stuart Sanderson

Department of the Interior

Washington, D.C. 20530

Angie O'Connell

Department of the Interior

Washington, D.C. 20530

David I.C. Thomason

Attorney, Department of Justice

Washington, D.C. 20530

F. Henry Habicht, II

Assistant Attorney General

14

a =

Robert S. More

Richard E. O'Neal

U.S. Department of the Interior

P.O. Box 150065

Knoxville, Tennessee 37901

Frank W. Donaldson

U.S. Department of the Interior

P.O. Box 150065

Knoxville, Tennessee 37901

[SS ho en

OF” COUNSEL

15

APPENDIX A

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

NO. 86-7402

UNITED STATES OF AMERICA,

Plaintiff-Appellant,

versus

BEAIRD COAL COMPANY, INC., and CORDOVA

CLAY COMPANY, INC.,

Defendants-Appellees.

Appeal from the United States District

Court for the Northern District of

Alabama

(August 6, 1987)

Before TJOFLAT and ANDERSON, Circuit

Judges, and HENDERSON, Senior Circuit

Judge.

PER CURIAM:

The United States brought this

action in the United States District

Court for the Northern District of

Alabama against the defendants Beaird

Coal Company (Beaird Coal) and Cordova

Clay Company (Cordova Clay) seeking

reclamation fees on coal extracted by the

defendants' mining operations in Walxer

County, Alabama during the first quarter

of 1979 through the second quarter of

1982. Following a bench trial, the

district-—court entered judgment against

Beaird Coal for reclamation fees,

interest and penalties.l The court also

held that Cordova Clay owed no

reclamation fees since the proportion of

coal to other minerals mined did not

exceed the statutory exemption. Finding

lThe judgment against Beaird Coal is not

challenged 'on appeal.

A-2

the court's factual determination

inconsistent with its orevious

interpretation of the relevant statute,

we reverse.

The Surface Mining Control and

Reclamation Act of 1977, 30 U.S.C. 1201,

et. seq. (SMCRA), requires the Secretary

of the Interior to establish an

"Abandoned Mine Reclamatin Fund," 30

U.S.C. Section 1231 (Fund), for the

restoration of lands ravaged by past coal

mining activity. The Fund is financed by

a reclamation fee assessed on each ton of

coal produced by current surface or

underground coal mining operations. 30

U.S.C. Section 1232(a). The statutory

definition of “surface coal mining

Operations" contained in 30 U.S.C.

Section 1291 (28) provides a de minimus

exception for coal extracted incidentally

to the mining of other minerals. That

section provides in pertinent part:

orovided, however, that such

activities do not include the

extraction of coal incidental

to the extraction of other minerals

where coal does not exceed

16-2/3rds per centum of the tonnage

of minerals removed for purposes

of commercial use of sale ....

Therefore, a mining operation may

avoid the payment of any reclamation fee

by proving that the coal produced is less

than or equal to 16-2/3rds per cent of

the total mineral tonnage extracted. Once

the tonnage of coal exceeds that

percentage, however, the reclamation fee

required by Section 1232(a) is due for

every ton of coal removed.

The controversy in the district

court revolved around the applicability

of this exemption to the coal mining

operations conducted by Cordova Clay. The

facts presented at the trial were largely

without dispute. Gail Beaird, president

of both defendant corporations, testified

to the long history of his family's

involvement in the Alabama clay business.

Beaird joined the family company in 1959

and Cordova Clay has since grown into one

of the most prominent suppliers of clay

and shale in the southeast.

Beaird also testified that the

terrain in Alabama where he mines clay

and shale is interlaced with seams of

coal. This coal is extracted along with

the other minerals and sold on the spot

market. In 1975, Beaird decided to

incorporate his operations separately

because of the high labor costs

associated with coal Mining. Beaird Coal

employed union workers to mine coal while

Cordova Clay's non-union workers

extracted clay. In 1980, Beaird dissolved

Beaird Coal due to unprofitability and

A-5

Cordova Clay continued the mining of

coal, clay, and shale.

During the time period covered by

this litigation, Cordova Clay conducted

mining activities at two main sites in

Walxer County. The Argo pit to the east

of Mulberry Fork of the Warrior River

provided the source of all coal extracted

oy the company. Clay and shale were mined

at Argo and also at the Riceton pit on

the west side of the river, some three

miles distant. The clay mined Argo

differs in its physical prooerties from

the clay extracted from the Riceton pit.

Argo clay is more suitable for face brick

while Riceton clay, which has a lower

sand content, is used in the manufacture

of refractory brick. Beaird stated that

many of his customers require clay from

either one side of the river or the

other. Therefore, Cordova Clay could not

meet its buyers' demands without clay

from both mineral sites.

Before the trial, the parties

Stipulated as to the tonnage of coal

mined by Cordova Clay at the Argo site

during the calendar quarters covered oy

this litigation. It was further agreed

that the tonnage of clay and shale mined

at Argo and Riceton corresponded to that

contained in the aefendants' answer to

the government interrogatories.

Apparently, the parties selected this set

of figures because it divided the tonnage

of clay and shale poroduced according to

the origin of the minerals at either Argo

Or Riceton. Whether or not the clay and

shale from the west side of the river

could be aggregated with the Argo

minerals for purposes of computing the

A-7

exemption was a major dispute at trial.

Despite the stipulation, the

district court oermitted the defendants

to introduce different production figures

through the testimony of Beaird and the

government's auditor, Jessie Ray Davis.

Davis testified about two audit reports,

introduced into evidence, prepared by him

from the records of Cordova Clay.

Defendants' Exhibit 2 provides a

breakdown of the clay and shale shipped

to each of Cordova Clay's individual

customers during the relevant quarters.

Exhibit 4 compares the tonnages of coal,

clay and shale on which Cordova Clay paid

mineral royalties during that time

period. Neither document indicates the

source of the minerals.

Following the hearing, the district

court issued a well reasoned order

A-8

resolving several issues of first

impression concerning the interpretation

of the 16-2/3rds exemption. Most

important, the court expressly held that

Cordova Clay could not aggregate the clay

and shale produced at Riceton where no

coal was extracted, with the clay and

shale taken from the coal producing Argo

pit. In the absence of relevant precedent

or illuminative legislative nistory, the

court relied on common sense in reaching

this conclusion. The court noted that the

Single operation method urged by the

defendants could result in anamolous

applications of the reclamation fee

statute:

Mr. Beaird's approach in an

extreme case could lead to a

conclusion that a strip mine

from which nothing but coal is

mined is exempt because it is

conducted in coordination with

another mine several miles distant

where a different mineral is

extracted.

Therefore, the court held that “all of

the pits to the east of the river...

constituted a single operation, but that

within the meaning of the exemption the

Riceton pit on the other side of the

river constituted a separate operation."

The court found that Cordova Clay

extracted 73,770.86 tons of coal during

the pertinent calendar quarters as

Stipulated.2 With respect to the amount

of clay and shale produced, however, the

court noted a "troublesome inconsistency”

in the stipulated tonnages and therefore

credited the auditor's figures introduced

at trial. Without stating the total clay

and shale tonnage or otherwise evidencing

2The parties did not stipulate as to the

tonnage of coal extracted from Argo

during the fourth quarter of 1981. The

district court credited the defendant's

figures for this time period.

A-10

the relevant calculations, the district

court held that Cordova Clay met the

16-2/3rds per cent exemption. Thus, the

defendant owed no reclamation fee on the

coal extracted.

On appeal, the government argues

that the ruling of the district court

directed to the liability of Cordova Clay

is fatally inconsistent. Since the clay

and shale extracted at Riceton could not

be aggregated with the Argo minerals in

computing the exemption, the government

contends that the district court

committed clear error in relying on the

audit reports since neither distinquished

the minerals according to their source.

Cordova Clay concedes that if the

minerals from the two pits may not be

combined as a matter of law, the court's

factual finding that the company met the

A-11

i

exemption based on the mineral production

at Argo is erroneous.

Although the defendants did not file

a cross-appeal, we must give

consideration to whether, as a matter of

Statutory interpretation, the district

court erred in refusing to aggregate the

mineral output from both sites for

purposes of the exemption. See Greenwood

Utilities Commission v. Hodel, 764 F.2d

1459, 1465 (llth Cir. 1985) (Court of

Appeals may affirm district court for any

reason supported by law despite lack of

cross-appeal). As the district court

noted, there is a complete dearth of case

law, agency regulation, or legislative

history which might provide a key to

construing the somewhat cryptic language

A-12

of the 16-2/3rds per cent exemption.3 [In

the absence of any evidence of

congressional intent to the contrary, we

endorse the trial court's logically sound

mine-by-mine approach as the best means

of effectuating the broad remedial

purposes of SMCRA.

3Cordova Clay urges that we apply the

rationale of two-acre exemption from the

requirements of SMCRA provided in 30

U.S.C. Section 1278(2) (1986). The

regulation promulgated pursuant to that

statute exempts commercial coal

extraction operations where the “surface

coal mining and reclamation operation,

together with any related operations, has

or will have an affected area of two

acres or less.” 30 C.F.R. Section

700.11(b) (1986). Mining operations are

deemed related if drainage from both

Flows into the same watershed within five

aerial miles of either operation or if

the operations are under common ownership

Or control. While these sweeping

regulatory definitions serve to narrow

the two-acre exemption, engrafting these

precepts onto the 16-2/3rds per cent

exemption would have the opposite effect.

We decline to extend the 16-2/3rds per

cent exemption so far.

A-13

By affirming this interpretation of

the statute, we are forced to conclude

that the court based its calculations on

incorrect figures. After a painstaking

examination of the record, it is clear

that the trial judge relied upon the

audit figures contained in Defendant's

Exhibit 2, a breakdown of the total

tonnage of clay and shale shipped to the

customers of Cordova Clay during the

significant time period. We base this

conclusion in large part upon a footnote

in the court's order stating that the

audit figures utilized by the court

correspond to the figures relied upon by

the defendant at the trial except for the

last two quarters which were misread by

the defendants. The record indicates that

the auditor and defendants' counsel did

indeed total the incorrect column of

A-14

figures for the last two relevant

calendar quarters when discussing Exhibit

2 at the trial.

The record indicates that the

figures contained in Exhibit 2 relating

to the clay and shale shipped to Cordova

Clay's customers must necessarily have

included clay and shale extracted at

Riceton. A representative of General

Shale, one of the defendant's largest

consumers listed on the audit report,

testified at the trial that the clay

extracted from the Argo pits did not meet

the needs of his company. Davis, the

government auditor who prepared the

report, stated that he relied upon the

defendant's mineral distribution ledger

in determining the tons of clay and shale

shipped to each of Cordova Clay's

customers. Several times during the

A-15

OE

hearing, Davis claimed that he did not

consider whether the minerals reflected

in the ledger had been extracted from

different sites.4 This evidence mandates

4The district court may have been

inadvertently misled by Davis' response

on cross-examination to the following

question:

Q. So if in order to fill a clay and

shale order to Bickerstaff Clay or

to General Shale, it was necessary

for Mr. Beaird to extract clay and

shale from a lease hold where coal

was also extracted and yet it was

also necessary for them to go to

another site where there was not

coal, you considered for in your

purposes only the extraction of

the site where the coal was located?

A. Yes, sir.

Although Davis responded affirmatively,

the auditor's other responses indicate

that he misunderstood the question. Davis

asserts repeatedly that he did not

consider whether the figures in the

mineral distribution ledger came from a

Single or multiple sites. Viewing the

record as a whole, we are left with "a

definite and firm conviction that a

mistake has been committed." Lincoln v.

Board of Regents of University System of

Georgia, 697 F.2d 928 (llth Cir.), cert.

denied, 464 U.S. 826, 104 S.Ct. 97, 78

L.Ed.2d 102 (1983).

A-16

a determination that the district court

erroneously relied upon figures which

included the minerals produced at Riceton

despite an earlier interpretation of the

exemption forbidding aggregation of the

output of the two mines.

In light of Cordova Clay's candid

admission that the company cannot meet

the statutory exemption without including

the minerals produced at Riceton, a

remand in this case for a correct

calculation of the clay and shale

produced at the Argo mine would

constitute a mere intellectual exercise.

In the interests of judicial economy, we

reverse the factual finding of the

district court that Cordova Clay is

exempt from reclamation fees on the coal

extracted by surface mining and render

judgment for the government in the amount

A-17

of $25,819.80 plus applicable

pre-judgment interest and late payment

penalties.5

REVERSED AND RENDERED.

5This figure is the product of the

73,770.86 tons of coal produced by

Cordova Clay at the Argo site during the

relevant period times the 35-cent

reclamation fee assessed on each ton of

coal extracted by strip mining in

accordance with 30 U.S.C. Section

1232(a).

A-18

APPENDIX B

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

JASPER DIVISION

UNITED STATES OF AMERICA )

Plaintiff, )

Vv. ) CIVIL ACTION NO.

BEAIRD COAL COMPANY, INC. ) CV 84 V-0850-J

and CORDOVA CLAY COMPANY

INC.» )

Defendants. )

QPINION, FINDINGS OF FACT AND

CONCLUSIONS OF LAW

OPINION

ze

Plaintiff United States of America

sued defendants for reclamation fees,

interest and penalties under 30 U.S.C.

Section 1232(a) in connection with various

amounts of coal produced by defendants

from the first quarter of 1979 through the

second quarter of 1982. Plaintiff also

Claims an $1100 civil penalty which was

finally imposed by the Office of Surface

A-19

Fr |

Mining Reclamation and Enforcement in

January 1980 in connection with a

violation for which defendant Beaird Coal

Company, Inc. (Beaird Coal) was cited in

1979.

Defendants deny owing the reclamation

fees because of the exemption found in the

definition of surface coal mining

operations in 30 U.S.C. Section 1291(28)

to the effect that such operations "do not

include the extraction of coal incidental

to the extraction of other minerals where

coal does not exceed 16 2/3 per centum of

the tonnage of minerals removed for the

purposes of commercial use or sale ...."

There is almost no case law on the

meaning and operation of the exemption. We

are cited to only two cases, both of which

involved defendant Cordova Clay Company,

A-20

Inc. (Cordova Clay).1 The first is a case

decided by the Alabama Court of Civil

Appeals, Alabama Surface Mining

Reclamation Commission v. Cordova Clay

Co.,, 434 So. 2d 283 (Ala. Civ. App.

1983). The second is the appended decision

of an administrative law judge in an

administrative proceeding before the

United States Department of the Interior

styled Cordova Clay Co. v. Office of

Surface Mining Reclamation & Enforcement,

Docket No. NX 5-3-R. Plaintiff objects to

consideration of both opinions -- both

favored defendant -- arguing strenuously

that they do not constitute legal

precedent. They are considered\ by this

court, however, to have as much persuasive

effect as the power of their logic and

lThe Alabama state case cited in text also

involved defendant Beaird Coal.

A-21

a

ae

analysis justifies.

Most of the facts in the present case

appear without dispute. Mr. Gail Beaird,

the owner of both defendant corporations,

has been in the clay and shale mining

business for about 25 years. His father

preceded him in that business by about 12

years and began working for his father as

a teenager. He is now the most or at least

one of the most prominent suppliers of

clay and shale in this region. He supplies

those products to manufacturers of brick,

Clay tile and clay pipe. Mr. Beaird's

operation or operations during the period

in question were in Walker County,

Alabama, and included the Argo and Benoit

pits east of the Warrior River in the Argo

area and the Riceston pit west of the

river near Cordova.

When Mr. Beaird began mining clay,

before the period in question, he

A-22

extracted the clay from abandoned coal

mines. In the Argo-Cordova area a 36 inch

or more seam of marketable fire clay lies

directly beneath a 36 to 60 inch seam of

Mary Lee coal. Above the coal is 28 to 30

feet of blue shale, which has no present

market, an 1l inch seam of New Castle

coal, 18 to 25 feet of weathered shale,

part of which has commercial value, and a

thin layer of top soil. Mary Lee coal can

be extracted by either deep mining or

strip mining. After its extraction the

fire clay is readily available. It is for

this reason that Mr. Beaird followed the

coal miners, extracting the clay after

other mine operators had removed the Mary

Lee.

In time, however, Mr. Beaird's supply

of clay produced by such methods became

inadequate. He acquired leases on which he

A-23

or his companies could conduct the entire

operation necessary to extract the clay.

Most of the lands covered by his leases

had already been “mined out" by

underground mines and the only remaining

Mary Lee coal consisted of the pillars

that were left in place to support the

mine roof.

Both the Mary Lee coal and the New

Castle coal are readily marketable.

Although subject to market and price

fluctuations they were sold during the

period in question for prices around $25 a

ton while fire clay was selling for $6 a

ton or a little more and shale was worth

about $3.25 a ton.

Before the first quarter of 1979 Mr.

Beaird incorporated Beaird Coal as an

entity to contract with the United Mine

Workers. His operation then included

A-24

reer ll

removal of the coal and shale above the

clay as well as the clay itself. As it is

difficult in Walxer County to mine coal

without a union contract, Beaird Coal was

formed to be the contracting party.

According to Mr. Beaird, however, the

operation of Beaird Coal proved to be

unprofitable because of the union wage

scale. He therefore shut it down at the

end of May 1980 and returned to his prior

status as a non-union operator through his

other corporation, Cordova Clay. For

purposes of this case only, Cordova Clay

agrees that it is liable for any

obligation of Beaird Coal.

Il.

This case turns primarily on four

questions:

A-25

(1) In the context of this case, what are

the geographical limits of an

"operation" within the meaning of 30

U.S.C. Section 1291(28)?

(2) Over what period of time is the 16

2/3 percent limit provided in 30

U.S.C. Section 1291(28) to be

computed?

(3) Does the word “incidental" in that

section involve considerations other

than the 16 2/3 percent and, if so,

what are they and how do they operate

in this case?

(4) Should defendant's stockpile or

inventory of shale be counted in the

mathematical computation?

The fourth question is primarily an issue

of fact. The first three, however, involve

construction of the statute. The language

provides no answer to the questions and

there is a paucity of information

concerning the legislative intent as it

bears on these issues now before this

court. For the most part the court is

called on to make an intelligent quess

concerning what Congress would have

thought if it had thought about something

A-26

aaa i

it probably didn't think about. Because a

decision must be made, however, and armed

primarily with its own notion of common

sense, the court will apply its reading of

the statute to the facts before it.

(1)

Mr. Beaird insists that his mining

activity, both east and west of the river,

constituted a single operation for

purposes of the exemption. He points to

the fact that his customers' requirements

included clay from both sides. In

extracting the minerals he operated for

all purposes as a single entity, using

only one set of machinery and one work

force, and affecting a single watershed.

The court recognizes that from Mr.

Beaird's point of view this single

Operation concept is entirely reasonable.

It is not nearly so reasonable, however,

A-27

|

from the point of view of a court

attempting to apply a reclamation statute.

Mr. Beaird's approach in an extreme case

could lead to a conclusion that a strip

pit from which nothing but coal is mined

is exempt because it is conducted in

coordination with another mine several

miles distant where a different mineral is

extracted.

Mr. Beaird's Argo and Cordova

operations are more than three miles apart

as the crow flies. By road the distance is

much farther. His coal extraction was from

the Argo location. The court is reasonably

satisfied that all of the pits to the east

of the river were essentially one

continuous pit and constituted a single

operation, but that within the meaning of

the exemption the Riceton pit on the other

side of the river constituted a separate

operation.

A-28

(2)

At about the end of this audit period

the Office of Surface Mining issued

regulations establishing a specific

timeframe of “twelve consecutive calendar

months" for application of the exemption.

30 C.F.R. Section 870.11(d). With this

rule OSM did not purport to be

interpreting the statute. Rather, it was

an express exercise of the Secretary's

authority to implement the statute. See 47

Fed. Reg. 28,577 (1982). The comment

Suggests that the only alternative is a

quarterly determination. Id. The court

does not perceive that this proposed new

rule is entitled to retroactive

application and disagrees that a quarterly

determination is the only alternative.

Defendants urge that the entire audit

period be considered, and it is equally

A-29

reasonable that a calendar year might be

used. Attributing to the statute a choice

between these alternatives is not

necessary, however, because this court's

result would be the same regardless of

whether the time frame is a rolling four

quarter period (treating fractional

quarters as full quarters),2 a calendar

year, the entire audit period, or the

total production of each defendant

considered separately. It is only if

individual calendar quarters are used that

any difference in result is achieved.

Because minerals are extracted from a

2This court could not compute the

percentage of coal extracted for all

twelve month periods because only

quarterly production figures are in

evidence. Neither Cordova Clay nor Beaird

Coal exceeded the 16 2/3 percent threshold

for any four consecutive quarters, nor was

the threshold exceeded for any

four-quarter period during which both

companies were operating.

A-30

ee

——

Li kowli aces babes

Pac 5 eis 1

strip mine layer by layer a short

timeframe would tend to produce extreme

variations, a result that is less

reasonable in the court's view than any of

the other alternatives.

(3)

The plaintiff argues that extraction

of coal by the defendants was too

important financially to be merely

incidental to its clay and shale

extraction activities. In the appended

decision, the administrative law judge

rejected the same argument for a monetary _

impact test. He pointed to the meager

legislative history of a comparable

predecessor proposal for the statement

that the exception is designed to exclude

operations “where coal is found but is not

the mineral being sought." S. Rep. No. 28,

94th Cong., lst Sess (1975)(emphasis

A-31

added). This court agrees that this

statement, which is also found in the

legislative history of the Senate version

of the bill actually adopted., See S. Rep.

No. 128, 95th Cong., lst Sess. 98 (1977),

is a more reasonable explanation of the

"incidental" requirement than an absolute

monetary limitation would be. The latter

would have been quite easy for Congress to

formulate if it had been intended. We

therefore hesitate to assume it was

intended in the absence of such a

formulation.

The court is reasonably satisfied

that Cordova Clay's mining activities

primarily sought clay and a Beaird

Coal, however, was incorporated for the

purpose of mining coal and did so through

its Life under a contract with the United

Mine Workers that was entered into for the

A-32

ch WT ee Belt AS RAS ; ‘

mining of coal. It did not claim otherwise

at the time of the audit. Indeed, at the

conclusion of its first audit in December,

1979 it acknowledged liability for the

reclamation fee and entered into an

installment agreement for its payment. The

plaintiff argues that inclusion of clay

sales figures in the books of Beaird Coal

is a sham. This is not an issue that the

court must resolve, however, because the

court is not reasonably satisfied that the

mining of coal by that entity was

incidental to its extraction of other

mineral, even though its coal production

did not exceed the 16 2/3 percent limit.

(4)

The inventory question is not free of

difficulty. The court credits defendants'

evidence that Cordova Clay's shale

stockpiles are suitable for making brick,

A-33

clay tile and clay pipe and were

maintained during the relevant period as

inventory- because of their commercial

value. The court also credits the records

maintained by defendant that reflect

quantities. Plaintiff's criticism of

defendants' lack of a verification

procedure is not well taken. Defendant's

practices conformed to the usual practices

in the industry. In addition, plaintiff

had ample opportunity to check the

inventory quantities. It did not do so

because at the time of its audits of

defendants plaintiff's representative

erroneously thought inventory to have no

significance.

Except for the fourth quarter of 1981

for which the court credits defendant's

figures and explanation, there seems to be

no dispute as to coal production figures.

A-34

|

a ee Re SR FY: RIT IL

The evidence presents a troublesome

inconsistency, however, in the clay and

shale figures. The court credits the

figures provided by plaintiff's auditor,

Davis.3

iif.

The government introduced evidence at

trial showing that as of August 30, 1982,

Beaird Coal owed $8156.47 in reclamation

fees and $2392.82 in interest on those

fees for the first, second and fourth

quarters of 1979 and the first and second

quarters of 1980. In addition, defendants

3For all but two quarters these were the

figures relied upon by defendants at

trial. Upon this court's examination of

Davis's audit sheets, which were

introduced as evidence, it became clear

that defendants and Davis had, at trial,

misread the clay and shale figures for the

first and second quarters of 1982. For

those quarters, the court used the figures

From the audit sheets.

A-35

acknowledged at trial that Beaird Coal

mined 6929.78 tons of coal in the third

quarter of 1979 for which the reclamation

fee of $2425.42 also has not been paid. As

of the end of August 1982 the interest

owed on that unpaid fee was $848.90,

making Beaird Coal's total liability as of

that date $10,581.89 in fees and $3241.72

in interest.

Since then, 42 months and 10 days

have passed, during which Beaird Coal's

interest liability has increased at the

rate of one percent a month, see 30 C.F.R.

Section 870.15. It now stands at $7721.39.

Since September of 1985, a late payment

penalty of one-half percent per month has

also been accumulating. See id. The

penalty stands at $335.09.4

4Defendants do not contest the method of

computing interest and penalties used here.

A-36

To the extent that the foregoing

contain factual statements they constitute

findings of fact within the meaning of Fed. -

R. Civ. P. 52. In addition, the court makes

the following specific findings.

FINDINGS OF FACT

1. On January 16, 1980 OSM issued a

) Final Order of Civil Penalty Assessment in

the amount of $1,100 against Beaird Coal

which has not been paid.

2. During all four quarters of 1979

and the first two quarters of 1980 Beaird

Coal produced a total of 32,186.14 tons of

coal by ner Sees coal mining on which the

reclamation fee of 35 cents per ton

required by 30 U.S.C. Section 1232 has not

been paid in full. The extraction of such

coal was not incidental to the extraction

of other minerals. The unpaid fee is

$10,581.89.

A-37

3. During the last three quarters of

1980, all four quarters of 1981 and the

first two quarters of 1982 Cordova Clay

produced a total of 73,770.86 tons of coal

Sy surface mining, but extraction of all

of said coal was incidental to extraction

of other minerals and the tonnage of said

coal did not exceed 16 2/3 percent of the

tonnage of minerals removed for purposes

of commercial use or sale.

CONCLUSIONS OF LAW

1. This court has jurisdiction of |

this case under 30 U.S.C. Sections

1232(e) & 1268(d) and 28 U.S.C. Sections

1345 & 1355.

2. Beaird Coal owes to the plaintiff

a penalty of $1,100 assessed under 30

U.S.C. Section 1268.

3. Beaird Coal owes to the plaintiff

reclamation fees under 30 U.S.C. Section

A-38

fr hE ened ne onde ie,

1232 in the amount of $10,581.89 together

with interest int he amount of $7721.39

and a penalty of $335.09 under 36 C.F .R.

Section 870.15 for a total of $18,638.37.

4. Cordova Clay does not owe to the

Plaintiff any reclamation fee on its own

production during the suit period but is

liable for amounts owed by Beaird Coal as

set forth in Conclusions of Law 2 and 3,

above.

A-39

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

JASPER DIVISION

UNITED STATES OF AMERICA )

Plaintiff, )

Vv. ) CIVIL ACTION NO.

BEAIRD COAL COMPANY, INC. ) CV 84 V-0850-J

and CORDOVA CLAY COMPANY

INC., )

Defendants. )

QRDER

It is ORDERED that judgment be

entered for the plaintiff and against

defendants in the amount of $19,738.37

together with costs.

Done and Ordered this 10th day of

March, 1986.

/s/ Robert S. Vance

United States Circuit Judge

Sitting by designation

A-40

APPENDIX C

IN THE UNITED STATES DISTRICT COURT FOR

THE NORTHERN DISTRICT OF ALABAMA

JASPER DIVISION

SS

UNITED STATES OF AMERICA

Plaintiff, ) CASE NO,

Vv. ) CV 84-V-0850-J

BEAIRD COAL COMPANY, INC. ) 2/18/86

and CORDOVA CLAY COMPANY, 10:00 A.M.

Defendants. 7 Record for Appeal

) The Honorable

Robert S. Vance

) Circuit Judge,

Eleventh Circuit

) United States

Court of Appeals

APPEARANCES:

FOR THE PLAINTIFF: MR. ROBERT S. MORE,

AUSA

MR. RICHARD E.

O'NEAL, AUSA

U.S. Department

of the Interior

P.O. Box 150065

Knoxville, TN 37901

FOR THE DEFENDANT: MR. PHIL LAIRD

MR. HANK WILEY

Attorneys at Law

1816 Third Avenue

Suite C

Bankhead Byars Bldg.

Jasper, Alabama

35502-0498

A-41

JESSIE RAY DAVIS 3 10 33

(EXAMINATION BY COURT) 34-38

DEPO OF MR. BEAIRD READ

INTO EVIDENCE PAGE 40

EVIDENCE ON BEHALF OF DEFENDANT

D C RD RC

GAYLE BEAIRD 41 95 114 118

(EXAMINATION BY COURT) 102-114

WALTER BANYAS 123 148

(EXAMINATION BY COURT) 149

JERRY BURTON Awe «439

(EXAMINATION BY COURT) 159-161

JESSIE DAVIS 162 167

GAYLE BEAIRD

(EXAMINATION BY COURT) PAGE 169-172

CLOSING ARGUMENTS PAGE 172

A-42

PAGE 13

A. The mineral distribution ledger,

royalty statements, sub stock reports, I

believe that's all I recall at this point

in time. Oh, I looked at as far as other

records are concerned, I looked at leases,

contracts, I --that type of record.

Q. Okay. You did not examine any record

relative to clay inventory, did you, sir?

A. Regarding clay inventory, no, clay

shipped, yes.

Q. Okay. You did not review any records

relative to shale inventory, did you, sir?

A. No, sir.

Q. Did you go out --you testified

previously that you did not go out to the

pits. Did you go out on any property of

Beaird Coal and use any inventories of any

Clay or any shale that might be

accumulated there?

A. No, sir.

A-43

Q. Okay. Now, what type of records did you

review relative to clay and shale being

shipped?

A. That was from your mineral distribution

ledger.

Q. Okay. Now, this is not the only audit

that you have conducted in this case, is

it, Mr. Davis? _

A. I did three quarters for Beaird Coal

Company and the audit for Cordova Clay.

Q. Okay. Now, do you have with you,

please, sir, your audit records of Cordova

Clay Company?

| I do not have.

PAGE 14

Q. Okay. Have you given those to counsel?

A. Counsel has all the records we have.

Q. If I give you -- furnish you with

photostatic copies of your records of the

Cordova Clay audit, would you recognize

A-44

eaten

those?

A. Yes.

THE CLERK. Defendant's Exhibit Number 2

marked for identification.

Q. Mr. Davis, if I may, please sir, let me

ask you just to look at and familiarize

yourself with the Defendant's Exhibit

Number 2 and ask if you recognize that and

I'll have the Clerk mark this on the

chart. Have you had an opportunity to look

at that?

A. Yes.

Q. Now, Mr. Davis, is that a part of the

audit which you performed?

A. Yes, sir.

Q. Relative to Cordova Clay Company?

A. Cordova Clay, that's correct.

Q. And it is true, is it not, sir, that

the audit period was actually I think it's

just one month in the second quarter of

"80 through the second quarter of '82?

A-45

niall

A. Yes.

Oo. Is that correct?

A. June 1980 through June of 1982.

PAGE 15

Q. Could you tell me what that exhibit is

that you have in your hands there, please?

A. This is a summary of sales or shipment

of shale and clay to the various

companies.

Q. Okay. And those are the figures that

you obtained as a result of the audit

which you performed for Cordova Clay

Company?

A. It's my review of the mineral

distribution ledger.

Q. Now, when did you perform the audit of

Cordova Clay Company?

A. I believe that was between October the

5th and October the 8th, 1982.

Q. And what type of records did you review

A-46

relative to this audit in addition to the

mineral distribution ledger?

A. The royalty statement ledgers,

severance tax reports, looked at the

contracts, leases.

Q. Okay. Now, again, as with Beaird Coal

Company, when you went to Cordova Clay

Company, did you have what I think you've

referred to as an opening conference or a

beginning conference with Mr. Beaird or

Mr. Garganus?

A. Yes.

Q. And they furnished you with all the

records that you requested during that

audit?

A. I believe so, yes.

PAGE 22

MR. WILEY: Judge, we would move to strike

that as nonresponsive. I believe my

question was if he ever considered shale

A-47

or clay in either one of these instances

and I think the issue would invade the

province of the Court.

THE COURT: Well, I don't Know about that,

but I think you can say just yes or no in

answer to that particular question.

A. Would you restate the question, please.

Q. Of course. ts neither one of these

audits did you consider shale inventory or

clay inventory?

A. No, although that's true, I did not.

Q. And as a matter of fact, in the Cordova

Clay audit, a part of the records which

you reviewed were mineral leases which

were held by Cordova Clay; is that

correct?

A. Yes.

Q. Okay. And in determining during your

audit whether Mr. Beaird was entitled to

the 16 and 2/3 exemption, you considered

only clay and shale shipments that were

A-48

extracted from lease holds where coal was

also extracted?

A. There was a final determination based

on that, yes, sir.

A-49