West Virginia Div. of Environmental Protection v. Kingwood Coal Co.

• Decision Date: 16 July 1997
• Docket Number: No. 23876,23876
• Citation: 490 S.E.2d 823,200 W.Va. 734
• Court: West Virginia Supreme Court
• Parties: WEST VIRGINIA DIVISION OF ENVIRONMENTAL PROTECTION, Plaintiff Below, Appellant v. KINGWOOD COAL COMPANY, Defendant Below, Appellee.

Page 823

490 S.E.2d 823

200 W.Va. 734

WEST VIRGINIA DIVISION OF ENVIRONMENTAL PROTECTIONPlaintiff Below, Appellant v.KINGWOOD COAL COMPANY, Defendant Below, Appellee.

No. 23876.

Supreme Court of Appeals of West Virginia.

Submitted April 29, 1997.

Decided July 16, 1997.

Syllabus by the Court

1." 'The primary object in construing a statute is to ascertain and give effect to the intent of the Legislature.'Syllabus Point 1, Smith v. State Workmen's Compensation Commissioner, 159 W.Va. 108, 219 S.E.2d 361(1975)."Syl. pt. 2, Farley v. Buckalew, 186 W.Va. 693, 414 S.E.2d 454(1992).

2.Appeals of a final agency decision issued by the director of the division of environmental protection shall be heard de novo by the surface mine board as required by W.Va.Code, 22B-1-7(e)[1994].The board is not required to afford any deference to the DEP decision but shall act independently on the evidence before it.

3." ' "Upon judicial review of a contested case under the West Virginia Administrative Procedure[s] Act, Chapter 29A, Article 5, Section 4(g), the circuit court may affirm the order or decision of the agency or remand the case for further proceedings.The circuit court shall reverse, vacate or modify the order or decision of the agency if the substantial rights of the petitioner or petitioners have been prejudiced because the administrative findings, inferences, conclusions, decisions or order are '(1) In violation of constitutional or statutory provisions; or (2) In excess of the statutory authority or jurisdiction of the agency; or (3) Made upon unlawful procedures; or (4) Affected by other error of law; or (5) Clearly wrong in view of the reliable, probative and substantial evidence on the whole record; or (6) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.' "Syl. Pt. 2, Shepherdstown Volunteer Fire Department v. State ex rel. State of West Virginia Human Rights Commission, 172 W.Va. 627, 309 S.E.2d 342(1983).'Syllabus Point 1, St. Mary's Hospital v. State Health Planning and Development Agency, 178 W.Va. 792, 364 S.E.2d 805(1987)."Syl. pt. 1, HCCRA v. Boone Memorial Hospital, 196 W.Va. 326, 472 S.E.2d 411(1996).

4.Under 38 C.S.R. 2-2.84(b)(6)(1996), promulgated pursuant to the West Virginia Surface Coal Mining and Reclamation Act, W. Va.Code, 22-3-1 et seq., 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 mining operation is presumed to constitute ownership or control.In order to rebut this presumption of ownership and control, the person subject to the presumption must demonstrate, by a preponderance of the evidence, that it does not in fact have the authority directly or indirectly to determine the manner in which the relevant surface mining operation is conducted.Whether a person has successfully rebutted a(b)(6) presumption is a factual determination to be resolved on a case-by-case basis.

Christopher D. Negley, Assistant Chief Office of Legal Services, West Virginia Division of Environmental Protection, Charleston, for Appellant.

Leonard Knee, Benjamin L. Bailey, Bowles Rice McDavid Graff & Love, P.L.L.C., Charleston, for Appellee.

Robert G. McLusky, James R. Snyder, Jackson & Kelly, Charleston, for Amicus Curiae West Virginia Coal Association and West

Virginia Mining and Reclamation Association.

McHUGH, Justice:

This case is before this Court on an appeal by the West Virginia Division of Environmental Protection(hereinafter "DEP") of a May 24, 1996 order of the Circuit Court of Kanawha County, affirming an August 28, 1995 final order of the West Virginia Surface Mine Board.The issues in this appeal concern whether Kingwood Coal Company(hereinafter "Kingwood")"owned or controlled"T & T Fuels, Inc.(hereinafter "T & T") within the meaning of West Virginia's Surface Coal Mining and Reclamation Act, W. Va.Code, 22-3-1 et seq.(hereinafter "SCMRA"), and its corresponding rule, 38 C.S.R. 2-2.84(b)(6)(1996).For the reasons discussed herein, the circuit court's order is affirmed.

I.Factual and Procedural Background

On or about December 15, 1971, T & T entered into a lease agreement with Kingwood Mining Company(hereinafter "KMC") which granted to T & T the exclusive mining rights to certain tracts of land in Preston County, West Virginia.¹ This lease agreement corresponds to the mine referred to as T & T MineNo. 2.Also on that date, the parties entered into a coal sales agreement in which KMC agreed to purchase T & T's entire production of coal from tracts leased from KMC.

On or about March 25, 1977, T & T and KMC amended the 1971 lease agreement to include the mineral rights to adjacent tracts of land for the mine referred to as T & T MineNo. 3.Also on that date, KMC and T & T entered into a new coal sales agreement, intended to supersede and replace the coal sales agreement previously entered into.

In 1990, KMC sold to Kingwood, the appellee herein, substantially all of its assets, including a preparation plant located in Albright, West Virginia, where the coal mined from MineNos. 2 and 3 was "washed" to make it saleable to KMC's customers.Kingwood also obtained the rights in the leases for MineNos. 2 and 3, as well as the coal sales agreements relative thereto.

In 1992, T & T completed coal removal in MineNo. 2 and, in 1993, coal removal in MineNo. 3 was likewise completed.Though T & T had installed a mine seal in MineNo. 2 in 1993, a blowout of acid mine drainage (hereinafter "amd") occurred at that mine in 1994, causing millions of gallons of amd to discharge into the Cheat River.²According to the DEP, it is currently spending $60,000 per month ³ to treat the amd discharged from the mines.⁴

Soon after, the DEP learned that Kingwood not only leased the mining rights to T & T but that it also had the exclusive right to receive the coal after mining.The DEP subsequently requested and obtained documentation from Kingwood which ultimately established the presumption that Kingwood owned or controlled MineNos. 2 and 3 under 38 C.S.R. 2-2.84(b)(6)(1996) of the SCMRA.⁵38 C.S.R. 2-2.84(b)(6)(1996)(hereinafter also referred to as "(b)(6)" or "(b)(6) presumption") provides:

2.84 Owned or Controlled and Owns or Controls--means any one or a combination of the relationships specified in paragraphs (a) and (b) of this definition:

....

(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 the authority directly or indirectly to determine the manner in which the relevant surface 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 mining operation.⁶

(emphasis and footnote added)

Also pursuant to (b)(6), Kingwood was advised that it would have the opportunity to rebut the presumption that it owned or controlled T & T. 38 C.S.R. 2-2.84(b)(6)(1996)⁷("(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 the authority directly or indirectly to determine the manner in which the relevant surface mining operation is conducted [.]"Id.(emphasis added)).In an effort to do so, Kingwood submitted various documents, affidavits and arguments to the DEP ⁸ over a period of several months.SeeDiscussion, infra.

The Director of the DEP issued a Final Agency Decision(hereinafter "DEP-FAD") on April 25, 1995, in which it was ultimately concluded, based upon the various documentation obtained from Kingwood, that KMC, whose assets were purchased by Kingwood in 1990, "not only had the authority to directly or indirectly determine the manner in which T & T conducted their underground mining, but KMC did directly control T & T's mining activity."(emphasis provided).In so concluding, the DEP-FAD referred to "memoranda between KMC employees, where the employees of KMC discuss which T & T mine should mine certain coal, where T & T should place their headings, whether or not to mine in existing headings, where to put the next panel, to stop mining in a certain area because of poor quality coal, etc."The DEP-FAD thus found that the evidence showed that "KMC was at the least highly involved [i]n determining where and how T & T would mine, this direction of T & T's activities by KMC is not evidence of the independent relationship advanced by [Kingwood] in their rebuttal."

The DEP-FAD further found there to be evidence that upon the sale of KMC's assets, Kingwood "intended to carry on, at least in terms of their relationship with T & T, where KMC left off.As has been shown, KMC exerted direct control of the activities of T & T relative to its deep mines."⁹(footnote added)The DEP-FAD found that the documents that governed KMC and T & T's relationship also governed Kingwood's relationship with T & T and "that there was no change through the transition to [Kingwood] in the management that was with KMC ... [Kingwood] certainly had the authority directly or indirectly to determine the manner and method of mining on the permits in question."(emphasis provided).

It was expressly stated in the DEP-FAD that the determinative element in evaluating the evidence submitted by Kingwood was not whether it actually exercised control over T & T, but whether it had the authority to exercise control.The DEP-FAD concluded that there were "many indicia of control present in T & T's relationship with KMC and [Kingwood], so DEP finds...