Graham v. Office of Surface Min. Reclamation and Enforcement

Citation722 F.2d 1106
Decision Date29 November 1983
Docket NumberNo. 83-5103,83-5103
Parties, 82 A.L.R.Fed. 203 Maynard C. GRAHAM and Graham Brothers Coal Co., Appellants, v. OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT, Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Allan E. MacLeod (Argued), Wymard & Dunn, Pittsburgh, Pa., for appellants.

Carol E. Dinkins, Asst. Atty. Gen., Washington, D.C., J. Alan Johnson, U.S. Atty., Joel B. Strauss, Asst. U.S. Atty., Pittsburgh, Pa., David C. Shilton, Kathleen P. Dewey, Donald Hornstein (Argued), Attys., Dept. of Justice, Washington, D.C., for appellee; Mimi Methvin, Dept. of the Interior, Charleston, W. Va., Harold P. Quinn, Dept. of the Interior, Washington, D.C., of counsel.

Before GIBBONS, GARTH and HIGGINBOTHAM, Circuit Judges.

OPINION OF THE COURT

GARTH, Circuit Judge:

Maynard Graham and Graham Brothers Coal Co. (Graham) appeal from an order granting summary judgment in favor of the Office of Surface Mining Reclamation and Enforcement (OSM). The district court upheld the constitutionality of Section 518(c) of the Surface Mining Control and Reclamation Act of 1977, 30 U.S.C. Sec. 1268(c) (Supp. II 1978). Section 1268(c) provides, inter alia, that a mine operator, against whom a civil penalty has been assessed by the OSM, must prepay the proposed amount of the penalty into escrow in order to preserve his right to appeal the penalty through various formal review procedures within the OSM and ultimately through the courts. 1 We agree with the district court that the Surface Mining Act (the Act) provides a mine operator ample opportunity to challenge the proposed penalty without prepayment into escrow, and thus affords due process. We also find that the statute is rationally based and does not offend the equal protection clause. We therefore affirm.

I.

Graham has operated a mine in Clearfield County in Western Pennsylvania under a permit issued by the Commonwealth. By July or August of 1979, however, all coal had been removed from the permitted area. Graham then proceeded to mine in an adjoining ten acre plot for which a permit had not been issued. The Pennsylvania Department of Environmental Resources (DER) ordered Graham's operation shut down in November, 1979.

In January, 1980, Graham resumed mining under an agreement with DER which provided that the first $10,000 of mining receipts would be paid to DER as a bond for a permit amendment. By that time, however, all coal had already been removed from the adjoining ten acre plot. Graham expanded his operations even further to include areas which were not covered by the original permit nor in its amendment. In February, 1980, Graham received a notice from DER to cease mining. He apparently ignored that order. The police then delivered a special injunction to Graham at the site, at which time all coal operations stopped.

On March 21, 1980, a hearing was held before Judge Reilly of the Pennsylvania Court of Common Pleas. Judge Reilly gave Graham ten days to deliver a second mortgage on his own personal property for $60,000. He ruled that such a mortgage would satisfy the conditions and requirements of a permit and Graham could therefore continue operations. The Commonwealth indicated at that time that it would not appeal. Judge Reilly dissolved the special injunction, and Graham subsequently resumed mining. The Commonwealth later decided not to accept Graham's second mortgage, and refused to issue a permit. Graham considered the Commonwealth to be in contempt of court and continued to mine.

On June 10, 1980, inspectors from the OSM issued to Graham a Notice of Violation for mining without a valid state permit. 2 Graham was told that he must either obtain a valid permit or restore the area within ninety days, i.e. by September 8, 1980. An informal review hearing was held on July 8, 1980. App. at 4. The hearing officer took into account the confusion regarding the state permit. Nevertheless, the notice of violation was confirmed.

Graham continued to mine after the September 8, 1980 deadline. On September 11, 1980, OSM served Graham with a Cessation Order for failure to abate the violation. App. at 6. The form of the order mandated that operations cease immediately, and informed Graham that a fine of at least $750 per day would be imposed for each day the violation remained unabated. Graham was entitled to, but apparently did not request review of this order.

On November 16, 1981, a Notice of Proposed Penalty Assessment was sent to Graham. OSM proposed to fine Graham $750 per day for a maximum period of thirty days, i.e. $22,500.00. Graham requested an informal assessment conference concerning the penalty. That conference was held on January 12, 1982. The OSM conference officer upheld the imposition of the fine. App. at 15-16.

In January 29, 1982, Graham sought formal review of the penalty before the Office of Hearings and Appeals of the Department of the Interior. App. at 17. Because Graham had not placed the amount of the proposed fine ($22,500) in an escrow deposit as required by 30 U.S.C. Sec. 1268(c), see supra note 1, OSM successfully moved for dismissal of the appeal. On May 21, 1982, Graham appealed to the Board of Surface Mining and Reclamation Appeals. The Board denied discretionary review on June 9, 1982. App. at 39.

On July 9, 1982, Graham filed a petition for review in the District Court for the Western District of Pennsylvania. The OSM filed a motion to dismiss the action, or in the alternative for summary judgment, since Graham had not yet paid the proposed fine into escrow. Graham responded that he was unable to raise $22,500 and therefore could not comply with the statute's requirements. He argued that the statute which requires operators of mines to deposit the proposed amount of the fine into escrow as a condition to a review hearing, violated due process and equal protection.

The district court granted summary judgment in favor of OSM. The district court concluded that the statutory provision which precluded appeals without the prepayment of the proposed penalty passed constitutional muster under the equal protection and due process clauses. This being so, the court held that Graham had not exhausted the administrative remedies prescribed by statute, and that failure precluded judicial intervention at this point. The district court opinion stated that:

We find that the procedural safeguards embodied within the Act to be constitutionally sound. Moreover, plaintiff's failure to deposit the proposed penalty into escrow transgressed the statutory scheme, bypassed the administrative safeguards and constituted a waiver of their right to contest the notice of violation, the cessation order, and the penalty in this district court.

II.

The only question which is properly before this court, and which was properly before the district court, is whether 30 U.S.C. Sec. 1268(c) is constitutional. 3 It is undisputed that Graham did not pay the proposed penalty into escrow. Thus, we must determine whether the statute with its companion provisions, which precludes Graham from contesting the charged violation or the amount of the assessed penalty because of a failure or inability to satisfy the escrow payment, violates Graham's guarantees of due process and equal protection.

The Statutory Scheme

The various provisions concerning review of OSM decisions are somewhat complex. There are three stages in the process: (1) the Notice of Violation, (2) the Cessation Order, and (3) the Proposed Assessment of the Penalty.

The Notice of Violation, listing an operator's appeal rights, is issued by an OSM inspector on the site of the mine when he deems there to be a violation of statute but when there is no imminent danger to the public safety nor risk of environmental harm. 30 U.S.C. Sec. 1271(a)(3) (Supp. II 1978). Upon receipt of the Notice, the mine operator may submit written information about the violation to the OSM and to the inspector who issued the Notice, which information must be considered in determining the amount of the penalty assessment. 30 C.F.R. Sec. 723.16(a) (1977) (now codified at 30 C.F.R. Sec. 723.17(a) (1982)). In this case, as we have previously noted, an informal review was held on July 8, 1980, after which the Notice of Violation was confirmed.

An operator may also ask for a formal public hearing before an administrative law judge without prepayment. 30 U.S.C. Sec. 1275(a) (Supp. II 1978). At such a hearing, the burden of showing a prima facie case would be on the OSM, but the ultimate burden of persuasion is placed on the operator. 4 42 C.F.R. Sec. 4.1171 (1982). An operator may also request temporary relief from an administrative law judge pending a formal hearing.

A Cessation Order is issued whenever the inspector deems there to be an imminent danger to public safety or risk of environmental harm, or when the mine operator has not abated a violation described in a Notice of Violation within the time allotted. After the Cessation Order is served, the operator is also entitled to a formal review hearing before an administrative law judge. 5 Provision is made in the regulations for an informal review of a Cessation Order within thirty days of issuance. 30 C.F.R. Sec. 722.15 (1982). 6

After the operator has been served with a Notice of Proposed Penalty Assessment, he is entitled to an informal assessment review conference. Up to this point, all review procedures are available to an operator without prepayment of the penalty. If, after an informal assessment review conference, the operator wishes to appeal the matter further before an administrative law judge, then, and only then, must the amount of the proposed fine be paid into an escrow account before a further challenge to the violation or the amount of the penalty may be entertained. If the operator does not forward the amount within thirty days of the Notice of Proposed Assessment, all rights to contest the...

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