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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1988
- **Citation:** 484 U.S. 1009

## Text

~--

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_1141%3A1. Public record. Not legal advice.