Abandoned Mine Land Reclamation FundBasis for Coal Weight Determination; Notice of Withdrawal

DEPARTMENT OF THE INTERIOR

Office of Surface Mining Reclamation and Enforcement

30 CFR Part 870

RIN 1029-AB68

Abandoned Mine Land Reclamation Fund--Basis for Coal Weight

Determination; Notice of Withdrawal

AGENCY: Office of Surface Mining Reclamation and Enforcement, Interior.

ACTION: Proposed rule; notice of withdrawal.

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SUMMARY: The Office of Surface Mining Reclamation and Enforcement (OSM)

is withdrawing the proposed rule published on December 29, 1992 (57 FR

62116), regarding the determination of coal weight for calculating

Abandoned Mine Land (AML) reclamation fees. That proposal was intended

to allow operators who transfer run-of-mine coal but are paid on a

calculated clean coal basis to also pay their AML fees on that basis.

In lieu of rulemaking, OSM will recognize such transactions and allow

fees to be paid on the calculated clean basis in certain circumstances,

within the scope of the existing regulations. This approach will

provide us greater latitude in determining the tonnage on which the

first sale or transfer of ownership is based.

DATES: This notice is effective June 23, 1997.

FOR FURTHER INFORMATION CONTACT: Jim Krawchyk, Division of Compliance

Management, Office of Surface Mining Reclamation and Enforcement, 3

Parkway Center, Pittsburgh, PA 15220. Telephone 412-921-2676. E-mail:

[email protected],gov.

SUPPLEMENTARY INFORMATION:

I. Background

II. Reason For Agency Action

I. Background

Section 402(a) of the Surface Mining Control and Reclamation Act of

1977 (SMCRA), 30 U.S.C. 1201 se seq., requires all operators of coal

mining operations subject to its provisions to pay a reclamation fee on

each ton of coal produced. In December 1977 OSM first promulgated

regulations to implement this provision (42 FR 62714; Sec. 13, 1977).

The regulations base the fee on the actual gross weight of the coal at

the first sale, use, or transfer of ownership. This regulation has been

in effect basically unchanged since that time.

In 1982 (47 FR 28593; June 30, 1982) we revised the regulatory

language to clarify the point in time of fee determination and to

stress value and weight parameters for fee calculation purposes. We

added at that time 30 CFR 870.129b) (1), (2), and (3) stating that

these provisions merely restate our policy since the initial

implementation of the fee collection program. The preamble to the

regulations, however, did not specifically discuss these three

provisions.

Of importance to OSM's decision to withdraw the proposed rule are

existing sections 870.12(b)(3) (ii) and (iii) providing:

(ii) Operators selling coal on a clean coal basis shall retain

records that show run-of-mine tonnage, and the basis for the clean

coal transaction.

(iii) Insufficient records shall subject the operator to fees

based on raw coal tonnage data.

Operators and OSM personnel now interpret these provisions as

authorizing OSM to allow operators to pay reclamation fees on a clean

coal tonnage basis if that is the basis of the first transaction and

sale. Many small operators are paid on a clean coal basis by purchasers

when they deliver their run-of-mine coals to preparation plants.

[[Page 33785]]

Accordingly, the operators maintain that OSM should allow them to pay

the AML fee based on the actual per ton payment they receive. They

argue that section 870.12(b)(3) (ii) and (iii) authorizes AML fee

payments in this fashion. The operators say that they should not have

to pay on the higher raw coal tonnage figures unless they do not keep

records sufficient to document the basis of the payment they receive on

clean coal tonnage.

In 1991, OSM commenced a review of the rule's application (Notice

of Inquiry; 56 FR 10404; March 12, 1991). Upon examination of the

comments received, OSM found merit in the position advocated by the

coal producers. OSM had deferred billing amounts that would be due on

the higher raw coal tonnage figure pending resolution of the issue.

To address the matter, OSM proposed a rule revision on December 29,

1992 (57 FR 62116), allowing payment on a calculated clean tonnage

basis if and when the coal was sold to a preparation plant for

cleaning. The preparation plant owner would have assumed some

responsibility for paying AML fees. That rule, however, was never

finalized and is being withdrawn by this notice.

II. Reason for Agency Action

In examining the public comments, our regulations, and past agency

practice with regard to their implementation, it is evident that we

have allowed operators to use calculations and other records to

substantiate their AML fee liability where necessary and reasonable.

For example, in section 870.12(c), if underground and surface mine coal

are mixed prior to the first sale or use, this regulation provides that

the higher surface rate must be used unless the operator can

demonstrate by ``acceptable engineering calculations or other reports''

the amount of coal attributed to surface mining.

Based upon these findings, we believe sections 870.12(b)(3) (ii)

and (iii) allow an operator to pay on a clean coal tonnage basis if the

operator transfers run-of-mine tonnage to an unrelated second party who

cleans the coal, and the operator is paid on only the clean coal

tonnage. The difference in the tonnage amounts must be attributed to

materials extraneous to the coal removed in the cleaning process, such

as dirt and clay, and not to impurities inherent in the coal. This

action is designed to address and accommodate a common business

practice among small coal operators in a segment of the industry, and

does not authorize operators to make arbitrary reductions in the

tonnage to be reported. We expect that the majority of the coal tonnage

will continue to be reported based on the actual weight at the time of

initial sale, transfer, or use as the regulations require. The

following scenarios are provided to illustrate the rule's application:

Example 1: An operator delivers 100 tons of coal to a preparation

plant owner who determines through accepted standard industry analysis

that only 90 tons of coal will be recovered after cleaning. The

preparation plant owner pays the operator for 90 tons. The operator is

liable for fees on 90 tons because that is the basis on which he was

paid.

Example 2: An operator delivers 100 tons of coal to a preparation

plant owner who pays the operator for 100 tons. The operator determines

that the coal if cleaned would have a reject factor of 10 percent and

therefore pays fees on only 90 tons. This would be incorrect and

disallowed. The operator should pay fees on 100 tons because that is

the basis on which he was paid by the preparation plant owner.

Example 3: An operator delivers 100 tons of coal to a preparation

plant owner who determines through accepted standard industry analysis

that only 90 tons will be recovered after cleaning. The preparation

plant owner pays the operator for only 90 tons. The operator determines

that the coal contains 5 tons of ash and therefore pays fees on 85 tons

(90 tons of clean coal minus 5 tons of ash). This would be incorrect

and disallowed. The operator must pay on the tonnage for which he was

paid. No deductions are allowed for matter that is intrinsic to the

coal. The correct tonnage for calculating fee payment would be 90 tons.

We believe that basic market forces coupled with proper

recordkeeping and review will ensure the integrity of the reclamation

fee collection process. A regulatory change is therefore considered

unnecessary at this time.

We would point out that the ability to pay on a clean coal basis,

however, is predicted on the operator maintaining the proper records.

Failure to maintain these records, as specified in 30 CFR

870.12(b)(3)(ii) and 30 CFR 870.16, would result in a fee assessment

based on raw coal tonnage figures.

We recognize that a small number of companies have paid fees on raw

tonnage amounts even though the sales transaction was based on a clean

coal tonnage figure. We will move swiftly to correct inconsistencies

that have occurred in the past, provided that any claims for refunds

are in accord with the limitations proscribed by 28 U.S.C. 2401(a)

(statute of limitations) and the necessary records are available to

substantiate them.

If you have questions concerning this notice, please contact Jim

Krawchyk at the address and telephone number listed above under FOR

FURTHER INFORMATION. If necessary, we will arrange for an audit of the

company's reclamation fee payments.

Dated: May 9, 1997.

Bob Armstrong,

Assistant Secretary, Land and Minerals Management.

[FR Doc. 97-16304 Filed 6-20-97; 8:45 am]

BILLING CODE 4310-05-M