U.S. v. Beaird Coal Co., Inc., 86-7402

• Decision Date: 06 August 1987
• Docket Number: No. 86-7402,86-7402
• Citation: 825 F.2d 1471
• Parties: , 17 Envtl. L. Rep. 21,283 UNITED STATES of America, Plaintiff-Appellant, v. BEAIRD COAL COMPANY, INC., and Cordova Clay Company, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1471

825 F.2d 1471

26 ERC 1517, 17 Envtl. L. Rep. 21,283

UNITED STATES of America, Plaintiff-Appellant, v. BEAIRD COAL COMPANY, INC., and Cordova Clay Company, Inc. Defendants-Appellees.

No. 86-7402.

United States Court of Appeals, Eleventh Circuit.

Aug. 6, 1987.

Frank W. Donaldson, U.S. Atty., Richard E. O'Neal, Asst. U.S. Atty., Birmingham, Ala., Robert S. More, Sp. Asst. U.S. Atty., U.S. Dept. of Interior, Knoxville, Tenn., David I.C. Thomson, Environmental Enforcement Section, U.S. Dept. of Justice, Washington, D.C., for plaintiff-appellant.

Phillip A. Laird, Laird & Wiley, P.C., Jasper, Ala., for defendants-appellees.

Appeal from the United States District Court for the Northern District of Alabama.

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 Walker 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. ¹ 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 the court's factual determination inconsistent with its previous 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 Reclamation Fund," 30 U.S.C. Sec. 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. Sec. 1232(a). The statutory definition of "surface coal mining operations" contained in 30 U.S.C. Sec. 1291(28) provides a de minimus exception for coal extracted incidentally to the mining of other minerals. That section provides in pertinent part:

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 2/3rds per centum of the tonnage of minerals removed for purposes of commercial use or 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 Sec. 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 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 Walker County. The Argo pit to the east of Mulberry Fork of the Warrior River provided the source of all coal extracted by 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 at Argo differs in its physical properties 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 by this litigation. It was further agreed that the tonnage of clay and shale mined at Argo and Riceton corresponded to that contained in the defendants' answer to the government interrogatories. Apparently, the parties selected this set of figures because it divided the tonnage of clay and shale produced 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 exemption was a major dispute at trial.

Despite the stipulation, the district court permitted 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 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 history, 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 anomalous 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...