Arch Mineral Corp. v. Babbitt

• Citation: 104 F.3d 660
• Decision Date: 16 January 1997
• Docket Number: No. 95-2793,95-2793
• Parties: 27 Envtl. L. Rep. 20,696 ARCH MINERAL CORPORATION, a Delaware corporation, Plaintiff-Appellee, v. Bruce BABBITT, Secretary, United States Department of the Interior; Robert Uram, Director, Office of Surface Mining Reclamation and Enforcement, United States Department of the Interior, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

Page 660

104 F.3d 660

27 Envtl. L. Rep. 20,696

ARCH MINERAL CORPORATION, a Delaware corporation, Plaintiff-Appellee, v. Bruce BABBITT, Secretary, United States Department of the

Interior; Robert Uram, Director, Office of Surface Mining

Reclamation and Enforcement, United States Department of the

Interior, Defendants-Appellants.

No. 95-2793.

United States Court of Appeals, Fourth Circuit.

Argued Sept. 27, 1996.

Decided Jan. 16, 1997.

ARGUED: John Thompson Stahr, Environment and Natural Resources Division, United States Department of Justice, Washington, D.C., for Defendants-Appellants. Michael Bruce Victorson, Robinson & McElwee, Charleston, WV, for Plaintiff-Appellee. ON BRIEF: Lois J. Schiffer, Assistant Attorney General, Martin W. Matzen, Richard M. Hall, Environment and Natural Resources Division, United States Department of Justice, Washington, D.C.; Richard N. McNeer, Steven C. Barcley, Office of the Solicitor, United States Department of the Interior, Washington, D.C., for Defendants-Appellants. Christopher B. Power, Robinson & McElwee, Charleston, WV; Blair M. Gardner, Senior Counsel, Arch Mineral Corporation, St. Louis, MO, for Plaintiff-Appellee.

Before ERVIN and HAMILTON, Circuit Judges, and SPENCER, United States District Judge for the Eastern District of Virginia, sitting by designation.

Affirmed by published opinion. Judge ERVIN wrote the opinion, in which Judge HAMILTON and Judge SPENCER joined.

OPINION

ERVIN, Circuit Judge:

Bruce M. Babbitt, Secretary of the Interior, United States Department of the Interior, appeals from a decision of the United States District Court for the Southern District of West Virginia granting summary judgment in favor of Arch Mineral Corporation and granting the company's motion for a permanent injunction. For the reasons hereinafter explored, we affirm.

I.

This case arises from an attempt by the Interior Department's Office of Surface Mining Reclamation and Enforcement ("OSM") to impose penalties upon Arch Mineral Corporation ("Arch") under the OSM's ownership and control rule, 30 C.F.R. § 773.5 (1995). OSM is responsible for issuing the permits necessary for mining companies to operate at particular sites. Pursuant to the Surface Mining Control and Reclamation Act (SMCRA), when a permit applicant owns or controls a company in violation of OSM rules, that applicant can be "permit-blocked" until the violations are corrected or are being corrected. Greendale Coals, Inc. ("Greendale") owes delinquent abandoned mine reclamation ("AML") fees and penalties to OSM. OSM alleges that Arch should be considered an owner or controller of Greendale Coals, Inc. because Greendale entered into a lease agreement with a subsidiary of Diamond Shamrock Coal Company ("Diamond Shamrock") which was subsequently purchased by Arch.

After receiving letters from OSM declaring a presumed link of ownership and control between Arch and Greendale, Arch filed this action for declaratory and injunctive relief to preclude OSM from making this link. On August 1, 1995, the district court granted summary judgment in favor of Arch and entered a permanent injunction "prohibiting OSM from linking Arch to Greendale under the ownership and control rule." Arch Mineral Corp. v. Babbitt, 894 F.Supp. 974, 988 (S.D.W.Va.1995).

II.

Greendale mined coal in West Virginia until its dissolution in 1987 under permits issued by that state's OSM-approved regulatory program. Much of the coal was mined under a mineral lease with Clay-Nicholas Minerals Company, a subsidiary of Diamond Shamrock. This lease was entered into on September 6, 1983. Greendale also entered into a contract known as a "coal sales agency agreement" with Diamond Shamrock Coal Sales Company ("Diamond Shamrock Sales"), another subsidiary of Diamond Shamrock, giving Diamond Shamrock the right to sell coal from the Greendale operation. This agency contract was terminated on December 12, 1985.

Greendale became financially unstable in the early 1980's and failed to pay $58,000.00 in AML fees it owed OSM. OSM issued a cessation order to Greendale and, when the fees were not paid after 30 days, OSM imposed penalties of $22,000.00. When the penalties and fees remained unpaid, OSM brought a civil action in district court and received a judgment for the funds on November 18, 1986. OSM neither joined Diamond Shamrock as a defendant nor filed suit against that company to collect the money.

Greendale filed for bankruptcy on February 27, 1987, and was dissolved under state law. OSM filed a proof of claim for the uncollected funds but received no money from the bankruptcy estate. Again, OSM did not attempt to collect the delinquent fees or penalties from Diamond Shamrock.

On April 17, 1987, Arch purchased the outstanding stock of Diamond Shamrock. At that time, Diamond Shamrock Sales and Clay-Nicholas Minerals Company were still wholly-owned subsidiaries of Diamond Shamrock. The parties stipulate that Arch had no interest in these companies prior to this transaction, and that OSM had notice of the acquisition by October 1987. Diamond Shamrock's name was changed to Arch Mineral Coal Company and it was dissolved in June 1988. There is no evidence in the record to indicate that Arch knew that OSM would attempt to hold it responsible for Greendale's violations until Arch received notification from OSM on May 21, 1993.

On October 3, 1988, OSM promulgated its regulations defining "ownership and control." See 53 Fed.Reg. 38877 (Oct. 3, 1988). This regulation determined when a person could be linked to a violator and thus "permit-blocked" from obtaining new mining permits or having currently issued permits revoked.

In a May 1993 letter, OSM notified Arch that it was presumed to be linked to Greendale through the ownership and control regulation, 30 C.F.R. § 773.5(b)(6). The agency explained in a September 30, 1994 letter that Arch was linked because Diamond Shamrock both controlled the coal which Greendale mined, as lessor of the mineral interest, and had a right to receive the coal pursuant to the agency agreement, both of which are prerequisites to an assertion of control under the ownership and control rule. Id.

After OSM's initial correspondence with Arch concerning the link, Arch responded with information to rebut the presumption of ownership and control. In its September 30, 1994, reply, OSM stated that the presumption had not been rebutted and that if no response was received within 30 days, Arch would be entered into the Applicant/ Violator System ("AVS"). Arch wrote again to OSM on October 18, 1994, further attempting to refute its link to Greendale. On January 13, 1995, Arch filed this action.

III.

SMCRA was enacted in 1977, and Title II of the Act created OSM within the Department of the Interior to administer and enforce the Act. See 30 U.S.C. § 1211(c). Title V sets out the enforcement provisions to be used by OSM. No entity is allowed to enter into surface mining operations without first obtaining a permit from OSM. Id. at § 1256. If any entity is in violation of SMCRA, and if remedial measures are not taken after the entity is notified of the violation by OSM, OSM will order the operations to cease. Id. at § 1271(a). Penalties are then assessed against the party for continuing the violation. Id. at § 1268(h).

SMCRA requires that permit applications contain information about the applicant's corporate structure, those entities controlled by or under common control with the applicant, the holders of interests in the property to be mined, and the mining operator (if different from the applicant). SMCRA § 507(b), 30 U.S.C. § 1257(b). In addition, § 510(c) of SMCRA requires that applicants file a schedule listing all notices of violation of SMCRA, and the final resolution of each such notice. 30 U.S.C. § 1260(c). Where that schedule, or other information, indicates that any surface mining operation "owned or controlled by the applicant" is currently in violation of SMCRA, the permit shall not be issued until the applicant submits proof that the violation has been or is being corrected. Id. Further, where OSM or a state regulatory authority determines that an existing permit was improvidently issued because of an unabated violation, that authority may impose permit conditions to abate the violation, or may suspend or rescind the permit. See 30 C.F.R. § 773.20(a), (c) (1995).

The ownership and control rule, 30 C.F.R. § 773.5(b)(6), is the primary language at issue in this case and is used by OSM to establish a link between Arch and Greendale. The rule reads as follows:

(b) The following relationships are presumed to constitute ownership or control unless a person can demonstrate that the person subject to the presumption does not in fact have authority directly or indirectly to determine the manner in which the relevant surface coal mining operation is conducted:

. . . . .

(6) Owning or controlling coal to be mined by another person under a lease, sublease or other contract and having the right to receive such coal after mining or having authority to determine the manner in which that person or another person conducts a surface coal mining operation.

30 C.F.R. § 773.5(b)(6).

OSM has set up a computer network to "identify ownership and control links involving permit applicants, permittees, and persons cited in violation notices." 30 C.F.R. § 773.5 (1995). This system is known as the AVS. OSM enters ownership or control links into the AVS, and this information bank is then used to evaluate permit applications or review whether current permits were improvidently issued. If linked on the AVS, an entity is said to be permit-blocked.

IV.

OSM challenges the jurisdiction of the district court over Arch's claims. We are not persuaded by the agency's arguments and find that the district court acted properly in exercising jurisdiction. Since we find below that the statute of limitations, 28 U.S.C. § 2462, bars OSM's enforcement actions, we need...