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PEABODY COAL CO. v. WATT

December 3, 1982

PEABODY COAL COMPANY, Plaintiff,
v.
JAMES WATT, Secretary of Interior, Defendant; NATIONAL COAL ASSOCIATION and AMERICAN MINING CONGRESS, Plaintiffs, v. JAMES WATT, Secretary of Interior, Defendant; NATIONAL WILDLIFE FEDERATION, et al., Plaintiffs, v. JAMES G. WATT, et al., Defendants; ILLINOIS DEPARTMENT OF MINES & MINERALS, Plaintiff, v. UNITED STATES DEPARTMENT OF INTERIOR, et al., Defendants.



The opinion of the court was delivered by: FLANNERY

MEMORANDUM OPINION

 This matter comes before the court on cross-motions for summary judgment by plaintiffs Peabody Coal Company, American Mining Congress, National Coal Company, and defendant James Watt, Secretary of the Interior, and defendant-intervenor National Wildlife Federation. *fn1" Plaintiffs seek to have this court find that regulations for surface coal mining on prime farmlands promulgated on January 23, 1981, and amended on September 29, 1981 and July 30, 1982 by the Secretary of the Interior pursuant to the Surface Mining Control and Reclamation Act of 1977, 30 U.S.C. § 120l et seq., (Supp. IV 1980) are arbitrary, capricious or otherwise inconsistent with law. The court therefore must determine whether two separate regulations that limit statutory language exempting surface miners from certain permit and reclamation requirements of the prime farmlands provisions of the Surface Mining Act are reasonable and consistent with the Act.

 The Structure of the Act

 The Surface Mining Control and Reclamation Act was passed in the 95th Congress and signed into law on August 3, 1977. The Act is a comprehensive statute designed to "establish a nationwide program to protect society and the environment from the adverse effects of surface coal mining operations." 30 U.S.C. § 1202(a). The Act's many requirements for the preservation and reclamation of land subject to surface mining reflect a recognition on the part of Congress that:

 
Surface mining and reclamation technology are now developed so that effective and reasonable regulation of surface coal mining operations by the States and by the Federal Government in accordance with the requirements of this chapter is an appropriate and necessary means to minimize as far as practicable the adverse social, economic, and environmental effects of such mining operations.

 30 U.S.C. § 1201(e).

 Title II of the Act, 30 U.S.C. § 1211, creates an Office of Surface Mining Reclamation and Enforcement (OSM) within the Department of the Interior, and the Secretary of the Interior acting through OSM is charged with primary responsibility for administering and implementing the Act by promulgating regulations and enforcing its provisions. 30 U.S.C. § 1211(c).

 The primary regulatory and enforcement provisions of the Act are found in Title V. That title establishes a two-tiered regulatory program. The two tiers consist of an interim, or initial, regulatory program and a permanent regulatory program. 30 U.S.C. § 1251(a). Section 501(a) of the Act 30 U.S.C. § 1251(a) requires the Secretary to promulgate interim regulations within ninety days of the enactment of the statute. The second tier of regulation required by the Act, the permanent phase, is provided for in section 501(b), 30 U.S.C. § 1251(b). That section requires the Secretary to promulgate, within one year of the statute's enactment, a permanent regulatory program establishing procedures and requirements for preparation and approval of state programs and for development and implementation of federal programs. In addition, the permanent regulations must require adherence to all provisions of Title V of the Surface Mining Act, including all performance standards set forth in 30 U.S.C. § 1265.

 Several of the provisions of the Act are known collectively as "prime farmlands provisions." *fn2" These sections establish special requirements for surface mining operations that are to be conducted on land that qualifies as prime farmland. For instance, a permit for surface coal mining on such lands may be granted only if the surface miner can demonstrate its "technological capability to restore such mined area, within a reasonable time, to equivalent or higher levels of yield as non-mined prime farmland in the surrounding area under equivalent levels of management." 30 U.S.C. § 1260(d)(1). The operator must also show that it can meet "the soil reconstruction standards" for prime farmland as provided in 30 U.S.C. § 1265(b)(7). That section requires that the separate soil layers on prime farmlands be segregated, stockpiled and protected from erosion or contamination, and then properly replaced and regraded. Furthermore, 30 U.S.C. § 1269(c)(2) seeks to ensure compliance with these rigorous requirements by providing that upon completion of its mining activities on prime farmland, a mine operator can have its performance bond released only on a showing that soil productivity has returned to equivalent levels of yield as non-mined land of the same soil type in the surrounding area under equivalent management practices. 30 U.S.C. § 1269(c)(2).

 The intent of the prime farmlands provisions of the Act is to ensure that applicants for surface mining permits have the technical capacity to return the soil to the same productive capacity as the soil had prior to being mined. However, the Act "grandfathers" certain surface coal mining operations, and provides an exemption from the permit requirements of 30 U.S.C. § 1260 and certain reclamation standards found in 30 U.S.C. § 1265(b)(7). Prime farmland found to fall within the grandfather provision of the Act is subject merely to topsoil removal and replacement requirements which are not as rigorous as the prime farmlands handling requirements. *fn3" The grandfather clause, found in § 510(d)(2), 30 U.S.C. § 1260(d)(2), exempts from the prime farmlands requirements three types of operations. It provides:

 
Nothing in this subsection shall apply [1] to any permit issued prior to August 3, 1977, or
 
[2] to any revisions or renewals thereof, or
 
[3] to any existing surface mining operations for which a permit was issued prior to August 3, 1977.

 (Numeration added).

 The Secretary of the Interior, through the Office of Surface Mining Reclamation and Enforcement, has made several efforts to incorporate this exemption into the interim and permanent regulatory programs implementing the Act. On December 13, 1977, the Secretary promulgated interim regulations for the grandfather exemption. 42 Fed. Reg. 62659-61 (1977). Section 716.7(a)(2) of the regulations specified the permit revisions and renewals for surface mining operations covered by the grandfather exemption. This section of the regulations provided as follows:

 Permit renewals or revisions shall include only those areas that--

 
(1) Were in the original permit area or in a mining plan approved prior to August 3, 1977; or
 
(2) Are contiguous and under State regulation or practice would have normally been considered as a renewal or revision of a previously approved plan.

 30 C.F.R. § 716.7(a)(2) (1978).

 After the promulgation of these and other regulations, twenty-two plaintiffs, including the instant plaintiffs Peabody Coal Company and the National Coal Association, brought suit in the United States District Court for the District of Columbia challenging the regulations as arbitrary and capricious and otherwise inconsistent with law. These cases were consolidated for hearing and decision before this court.

 On May 13, 1978, this court reviewed the original interim regulations and, as to the grandfather provision, found the regulation a reasonable exercise of the Secretary's discretion in implementing the statute. In re Surface Mining Regulation Litigation, 452 F. Supp. 327, 340 (D.D.C. 1978). Plaintiffs appealed. Considering the question of the extent of the grandfather exemption for surface mining on prime farmlands and the District Court's interpretation of these interim regulations, the Court of appeals held invalid § 716.(a)(2) insofar as it improperly reduced the prime farmlands grandfather rights established by § 1260(d)(2) of the Act. In Re Surface Mining Regulation Litigation, 201 U.S. App. D.C. 360, 627 F.2d 1346, 1360-63 (D.C. Cir. 1980). The court of appeals found that the Act grandfathers pre-enactment permits, revisions or renewals of such permits, and "existing surface mining operations" for which a pre-enactment permit was issued. 627 F.2d at 1362. However, the court found section 716.7(a)(2) of the interim regulations extended the grandfather exemption only to areas included in pre-enactment permits or mining plans and areas that "would have normally been considered as a renewal or revision of a previously approved plan." Id. In addition, the court noted, in those states that do not permit renewals or revisions, the regulation provided grandfather protection only to areas covered by pre-existing permits. Id. The court reached this conclusion premising that it was impossible to determine what would normally have been considered a renewal or revision in states that do not formally renew or revise mining permits. Examining the Act's legislative history, however, the court of appeals concluded that the third category under the Act's grandfather clause, exempting "existing surface mining operations", was added to the Senate Amendment for the very purpose of insuring the exemption of surface coal mines in states like Indiana that issue permits for one or more years but do not issue renewed or revised permits. Id. The court found that the third category of lands entitled to grandfather exemptions under the Act must be defined as existing surface mining operations based on a pre-enactment permit but which were neither explicitly covered by permit nor any renewal or revision thereof. Accordingly, the court found that the Secretary had impermissibly curtailed the Surface Mining Act's grandfather clause in § 716.7(a)(2) of the interim regulations because he rendered the third phrase of the exemption "inoperative" and "superfluous". Id.

 The court of appeals also addressed the arguments of the Secretary, and the conclusion of the District Court, that the narrowed interpretation of the grandfather clause found in 30 C.F.R. § 716.(a)(2) was needed to prevent operators from claiming that mining "on all adjacent and nearby areas constituted continuances of the existing mine to such an extent that an entire portion of a state might be grandfathered even though it was not originally contemplated that the areas would be part of the same mine." 627 F.d 1362 quoting Brief for Appellee (Secretary of Interior) at 77 & n.79 and 452 F. Supp. at 340. The court of appeals noted that the Surface Miners had described this fear as an absurdity, because they are only claiming grandfather exemption for the continued and contiguous operation of the same ongoing mine along its seam. 627 F.2d 1362. The court of appeals was persuaded by the Surface Miners response stating, "We believe that the anxiety of the Secretary and the District Court is unfounded and that the Surface Miners' interpretation of the grandfather clause is reasonable and in keeping with the intent of Congress." 627 F.2d at 1362.

 The opinion of the court of appeals was entered on May 2, 1980. Following the decision, the Secretary and the National Wildlife Federation filed a petition for rehearing and a suggestion for rehearing en banc. The motions of the Secretary and the National Wildlife Federation contended that the court of appeals' adoption of the Surface Miners' interpretation of the scope of the grandfather clause could be interpreted to create an unrestricted exemption for all time for companies working large coal seams in Ilinois. In response to the motions, the court of appeals in a sua sponte unpublished order, filed June 30, 1980, deleted the sentence which concluded that the "Surface Miner's interpretation of the grandfather clause is reasonable," and substituted the following paragraph:

 
The issue essentially is whether under the Section 502(d) exclusion from the Act's more rigorous reclamation requirements of "any surface mining operations for which a permit was issued prior to August 3, 1977," there can be any ongoing operations on land that, although contiguous, was not covered by the permit. We believe that, if the quoted statutory provision is to have any meaning at all, there can be; and that the legislative history of the last-minute addition to the Act of the words quoted above, disclosed a Congressional purpose that there can be. The Secretary's interim regulation to the contrary was thus in conflict with the statute. [emphasis in original] [footnotes omitted].

 In Re Surface Mining Regulation Litigtion, No. 78-2190 (D.C. Cir. June 30, 1980).

 On April 16, 1980, several weeks prior to the court of appeals' decision, the Secretary proposed new permanent and interim regulations. *fn4" On June 10, 1980, the period for conment on the April proposals was extended in light of the May decision of the court of appeals. On August 25, 1980, the period for comment was further extended, ultimately to September 4, 1980. 45 Fed. Reg. 39448, 56364 (1980). Finally, on January 19, 1981, the Secretary promulgated a final rule defining the extent of the prime farmlands exemption, and it was published on January 23, 1981. 416 Fed. Reg. 7894 (1981). The new regulations included two provisions wbich lie at the heart of the instant action: (1) a provision that in order to qualify for the prime farmlands exemption the permittee must have had a legal right to mine the lands prior to August 3, 1977, and (2) a provision that all grandfather exemptions terminate on August 3, 1982. *fn5" Before the regulations would have become effective, the Secretary postponed the effective date of the regulations, in a series of published orders, until September 29, 1981. 46 Fed. Reg. 10707 (1981); 46 Fed. Reg. 18023 (1981); 46 Fed. Reg. 20211 (1981); 46 Fed. Reg. 23924 (1981); 46 Fed. Reg. 31258 (1981); 46 Fed. Reg. 41046 (1981).

 In March, 1981, within the sixty days provided by the Act for judicial review of challenged regulations, plaintiffs filed suit in this court seeking summary judgment enjoining defendants from implementing the final rules, and declaring the rules to be arbitrary, capricious and contrary to law.

 On September 29, 1981, the regulations made final on January 19, 1981 were adopted and made immediately effective except that the provision for a uniform cut-off date for the grandfather clause was deleted pending further rulemaking. *fn6" 46 Fed. Reg. 47720 (1981). The Office of Surface Mining observed that the termination provision had produced considerable controversy and that further rulemaking was required in "order to provide maximum public participation and to enable OSM and commenters to gather additional information on potential solutions to this issue." 46 Fed. Reg. 47720 (1981).

 On July 30, 1982, the Secretary promulgated interim final regulations reinstating the cutoff date. 47 Fed. Reg. 32939 (1982). The regulations added 30 C.F.R. 716.7(a)(2) (iv) and 785.17(a)(5) imposing an April 3, 1983 cutoff for the prime farmlands grandfather exemption. On August 13, 1982, Industry plaintiffs filed a new motion for summary judgment challenging the reinstatement of the cutoff date as arbitrary, capricious, and otherwise inconsistent with law.

 I. The "Legal Right to Mine" Limitation

 Congress ezpressly chose not to apply the special environmental protection measures generally applicable to strip mining on prime farmlands to all coal mining operations on such land. Rather Congress sought to exempt certain mine operations from the Act's strict reclamation and soil handling measures. Specifically, Congress sought to exempt, in addition to other categories of operations, "existing surface mining operations for which a permit was issued prior to the date of enactment of this Act." Section 510(d)(2) of the Surface Mining Control and Reclamation Act. This clause, exempting "existing surface mining operations" for which a permit was issued prior to August 3, 1977, has generated the litigation history chronicled earlier, and the present action. The fundamental issue with respect to that clause is whether mines existing at the time of the Act can be allowed to expand beyond the boundaries of any pre-Act permit (without meeting the special prime farmlands standards) and, if so, how extensive an expansion is permitted by statute. The court of appeals held that the clause at issue did exempt some land not covered by the initial permit, yet shed no light on the present inquiry: the extent of lands not covered by a pre-enactment permit or any extension or revision thereof, which are nevertheless exempt as "existing surface mining operations."

 The Secretary's interpretation of the grandfather's exemption found it properly limited to cases where:

 
The permittee had a legal right to mine the lands prior to August 3, 1977, through ownership, contract, or lease but not including an option to buy, lease, or contract;

 30 C.F.R. § 785.17(a)(3)(ii); 30 C.F.R. § 716.7(a)(2)(iii)(B) (emphasis added). Plaintiffs argue that the Secretary's interpretation is contrary to the intent of Congress and the express language of the statute. They argue that the Secretary's imposition of a "legal right to mine" limit is invalid, and raise two general objections to the agency's actions. First, the industry argues that the regulation is contrary to the express language of and legislative history surrounding the grandfather exemption. Second, the industry asserts that, although some area limits on the exemption are permissible, the geographical limits of each ...


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