Drummond Coal Co. v. Hodel, 85-5827

• Decision Date: 22 July 1986
• Docket Number: No. 85-5827,85-5827
• Citation: 796 F.2d 503
• Parties: , 254 U.S.App.D.C. 212, 16 Envtl. L. Rep. 20,917 DRUMMOND COAL COMPANY, Appellant v. Donald P. HODEL, Secretary of the Interior.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 503

796 F.2d 503

24 ERC 1673, 254 U.S.App.D.C. 212, 16

Envtl. L. Rep. 20,917

DRUMMOND COAL COMPANY, Appellant v. Donald P. HODEL, Secretary of the Interior.

No. 85-5827.

United States Court of Appeals,

District of Columbia Circuit.

Argued March 7, 1986.

Decided July 22, 1986.

Appeal from the United States District Court for the District of Columbia (Civil Action No. 82-02439).

Michael B. Barr, with whom Charles D. Ossola, Washington, D.C., was on brief for appellant.

Albert M. Ferlo, Jr., Dept. of Justice, with whom Alfred Ghiorzi, Dirk D. Snel, and Beverly Perry, Dept. of Justice, Washington, D.C., were on brief for appellee.

James T. Hemphill, Washington, D.C., was on brief for amicus curiae, Mining and Reclamation Council of America, urging reversal.

Robert F. Stauffer, Washington, D.C., was on brief for amicus curiae, Nat. Coal Ass'n, urging reversal.

Before MIKVA, STARR, and SILBERMAN, Circuit Judges.

Opinion for the Court filed by SILBERMAN, Circuit Judge.

SILBERMAN, Circuit Judge:

Appellant Drummond Coal Co. challenges a regulation of the Interior Department's Office of Surface Mining (OSM). A full exposition of the facts and procedural history relating to Drummond's challenge appears in the district court's careful and thorough opinion granting the agency's motion for summary judgment. Drummond Coal Co. v. Hodel, 610 F.Supp. 1489 (D.D.C.1985). For the reasons stated herein, we affirm the district court's judgment.

The Surface Mining Control and Reclamation Act (SMCRA), 30 U.S.C. Secs. 1201 et seq. (1982), upon which the regulation at issue is premised, creates an Abandoned Mine Reclamation Fund to finance the restoration of land and water resources damaged by coal mining. Id. Sec. 1231(c)(1). The Fund's principal source of revenue is a fee assessed on each ton of "coal produced" in the United States. Coal operators are required to pay the Secretary thirty-five cents per ton of "coal produced" by surface mining and fifteen cents per ton of coal produced by underground mining, or ten percent of the value of the coal at the mine, whichever is less. Id. Sec. 1232(a). Through a revised regulation, the Secretary has mandated that the fee be assessed on the gross weight of coal prior to sale--including impurities such as water which have not been removed. 30 C.F.R. Sec. 870.12(b)(3)(i) (1985).

Drummond claims that the revised regulation exceeds the Secretary's statutory authority because it includes within the material taxed "excess" moisture attributable to post-excavation rainfall or washing, which Drummond asserts is not properly regarded as part of "coal." Drummond also argues, in the alternative, that the regulation constitutes an arbitrary and capricious deviation from the Secretary's past practice. ¹ We do not find merit in either contention.

The Secretary's initial fee regulations, promulgated in October 1978, were not entirely clear as to what was subject to the tax:

(a) The operator shall pay a reclamation fee on each ton of coal produced for sale, transfer, or use....

(b) The fee shall be determined by the weight and value at the time of initial bona fide sale, transfer of ownership, or use by the operator.

30 C.F.R. Sec. 870.12(b) (1978). In Alabama (though seemingly nowhere else in the country), certain OSM personnel and at least six Alabama coal companies interpreted this regulation as analogous to Alabama's severance tax. Alabama law permits coal operators to deduct the weight of "excess" moisture--moisture in excess of 2.88% of the total weight of taxable coal. ² See Ala.Code Sec. 40.13-31 (1975); State of Alabama Department of Revenue, Coal Severance Tax Regulation (July 13, 1979). This interpretation, by which "excess moisture deductions" were made on approximately seventy percent of the coal tonnage reported by Alabama coal companies to OSM, came to the attention of OSM's Washington headquarters from a number of sources in 1980 and 1981. In response, OSM proposed new regulations in December 1981 to clarify its position (3) The weight of each ton shall be determined by the actual gross weight of the coal.

(i) Impurities, including water, that have not been removed prior to the time of initial bona fide sale, transfer of ownership, or use by the operator shall not be deducted from the gross weight.

30 C.F.R. Sec. 870.12(b)(3)(i) (1982) (emphasis in original).

Drummond, one of the Alabama coal companies that had been deducting "excess moisture" in its quarterly fee filings with OSM from 1977 through 1981, ³ contends that the revised regulation, by taxing impurities not removed prior to sale, exceeds the Secretary's authority under the Act. According to Drummond, the SMCRA limits the Secretary to taxing coal with its inherent impurities, see supra note 2. ⁴ The statute does not, in Drummond's view, permit the Secretary to tax that portion of the weight of coal represented by post-extraction added impurities, such as rainwater or debris. Phrased in Gertrude Stein's style, Drummond argues that coal is coal is coal. ⁵ Congress, however, did not define "coal" in the statute--still less the term "coal produced," upon which the fee is levied. Like the district court, we do not find the ordinary meaning of that term unambiguous: " 'Production' could reasonably be interpreted to include the entire process of extracting and selling coal, complete from pit to buyer's door, or it could refer solely to the process of extraction.... [N]owhere does the [SMCRA] specify what elements comprise a 'taxable' piece of coal." 610 F.Supp. at 1497. Drummond's "plain meaning" argument is further undermined by the prevailing industry practice between the passage of the SMCRA in 1977 and the final promulgation of the revised regulations in 1982. According to the record, the vast majority of U.S. coal operators, as well as OSM personnel outside of Alabama, interpreted the phrase "coal produced" as do the revised regulations.

In view of the ambiguity of the statutory language, then, unless Congress in the legislative history specifically disclosed its intent on the question at issue we must defer to the Secretary's construction of the Act. Chevron U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984). Drummond contends that the legislative history indeed reveals Congress' intent on the matter at issue here--an intent inconsistent with the Secretary's regulations. In support of this contention, Drummond deploys the Third Circuit's decision in United States v. Brook Contracting Corp., 759 F.2d 320 (3d Cir.1985). Our review of the relevant legislative history ⁶ leads us respectfully to disagree with the Third Circuit and agree with the district court below. See 610 F.Supp. at 1501 n. 9. The legislative history simply does not disclose the requisite specific intent upon which a court could properly rely to overturn the Secretary's regulations. ⁷

Congress in fact never addressed the particular issue that we confront in this case. The House Report reflects general concern, in connection with the level of the reclamation fee to be assessed, with the burden placed on the industry and consumers and with the inflationary impact of the fee. See H.R.Rep. No. 218, 95th Cong., 1st Sess. 137, reprinted in 1977 U.S.Code Cong. & Ad.News 669; see also Brook, 759 F.2d at 324-25 (discussing House Report). Those considerations were explicitly balanced, however, against the need to raise sufficient funds to meet program objectives. Id. In any event, we fail to see how the general policy concerns relating to the impact on industry and consumers--even standing alone--could be dispositive of the issue before us.

In support of its holding the Brook court reviewed occasions, during the three years of legislative deliberations leading to the 1977 passage of the Act, when Congress considered estimates of the ultimate cost of the reclamation fee to industrial purchasers of coal and consumers. Id. at 325-26. These estimates used rough ("conservative") assumptions about the number of Btu's per pound of coal--assumptions that the Third Circuit regarded as more consistent with "clean" coal than with coal that includes some amount of non-inherent impurities. Id. at 325. Congress also considered certain calculations based on the spot price per ton of coal, in which there was apparently no indication that the price had been adjusted to reflect the existence of such impurities. Id. at 325-26. Finally, the Brook court cited the arguments of members of Congress advocating a lower, ten-cents-per-ton fee, premised on gross revenue calculations for total 1975 coal tonnage which the court thought to be exclusive of noninherent moisture and debris. Even if the scientific and mathematical calculations upon which the Brook court's analysis is founded are correct, ⁸ they do not establish, as Chevron requires, a specific congressional intent as to the interpretation of the words "coal produced." The Third Circuit's opinion appears to us to be based merely on speculative inferences from the legislative history harnessed to a conviction that the Secretary's regulation will cost too much. ⁹ Since Congress did not explicitly address the proper meaning of the words "coal produced" in either the statutory language or the legislative history, we conclude that the Secretary was authorized to give the term a reasonable construction. By leaving the operative statutory terms undefined and delegating broad rulemaking authority to the Secretary, see 30 U.S.C. Secs. 1211, 1242(a) (1982), Congress has left a gap in the regulatory regime for the agency to fill. See Chevron, 467 U.S. at 842-44, 104 S.Ct. at 2781-83; Montana v. Clark, 749 F.2d 740, 745 (D.C.Cir.1984), cert. denied, --- U.S. ----, 106 S.Ct. 246, 88 L.Ed.2d 255 (1985). And in formulating a definition of "coal produced," the Secretary is entitled to balance the countervailing policies at stake. See Chevron, 467 U.S. at 844-45,...