COALEX State Inquiry Report - 287
June, 1994
Ted Biggs, Esquire
Department of Natural Resources
Division of Reclamation
Indiana Government Center South
402 West Washington Street, Room W-295
Indianapolis, Indiana 46204
TOPIC: EXEMPTION FOR GOVERNMENT-FINANCED CONSTRUCTION
(Updates COALEX REPORTS 115, 133 & 262)
INQUIRY: A city proposes to use a site which had previously been CO'd (for mining without a
permit) as a public park and gym. The original operator will be the contractor. Is this site eligible
for the government-financed construction exemption? Please locate federal, state and
administrative decisions on operations exempted from SMCRA by meeting the government-financed
construction criteria.
SEARCH RESULTS: The existing COALEX State Inquiry Reports on the exemption for government-financed construction were updated using the COALEX Library and LEXIS.
Two additional decisions were identified; these are listed below. The first decision, from the state
court of Alabama is particularly relevant.
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DARTY DEVELOPMENT CO., INC. v OSMRE, 632 F Supp 627 (N D AL 1986).
Darty leased land to the City of Carbon Hill for the purpose of constructing a recreational facility.
The city contracted with Darty to undertake and complete the construction work, with the
contracted price to be paid upon the completion of the construction. The court upheld OSM's
issuance of a CO for mining without a permit, stating that the "exemption granted to Darty,
by its terms, became null and void when the City of Carbon Hill failed to appropriate, from its
budget, fifty-percent or more of the construction costs."
KIMBLE v DIERINGER, 1991 Ohio App LEXIS 2229 (Ohio Ct App 1991).
The state court affirmed the Reclamation Board of Review's finding that "Kimble's extraction of
coal was incidental to a permitted highway project, and was therefore not a coal mining
operations". Kimble cut the property down to grade so that electric, gas and water lines could be
moved onto his property for the highway widening. The coal encountered had to be removed
because it was above grade for drainage for the highway.
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COALEX STATE INQUIRY REPORT - 262, "Non-commercial use of 'other minerals'" (1993).
Two decisions from this report relating to exemption for government-financed construction are
listed below. Only these two decisions are attached.
VICTOR CONTRACTING CORP. v OSM; DICKENSON COUNTY, VA. v OSM, Docket Nos. NX 91-22-R,
NX 91-23-R, NX 91-25-R, NX 91-26-R (1992).
The ALJ upheld the Virginia Division of Mined Lands Reclamation determination that the
Honeycamp Landfill project qualified for the government-financed construction exemption. The
primary purpose of the project was to bring the landfill into compliance with new waste
management regulations and to expand the landfill to increase its use for an additional 10 plus
years. Removal of the previously mined coal beneath the ridge created greater stability and
lessened possible leachate problems.
WILDER COAL CO. v OSM, 112 IBLA 107, IBLA 87-576 (1989).
The Board affirmed the ALJ decision, finding that the augering of coal was performed in order to
finance the grading the airport commission wished done and not because it was necessary to the
construction of the airport. "Although the excavation down to the level of that seam may have been
advisable as a means of assuring the stability of the surface, the extraction of the coal was not
necessary to enable the construction of the airport facilities."
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COALEX STATE INQUIRY REPORT - 133, "Exemption for government-financed construction"
(1989).
The following are the descriptions of the materials included as part of the Report:
LEGISLATIVE HISTORY
119 CONG REC S1357 (daily ed. Jan. 18, 1973)(statement of Sen. Jackson).
"This section [Surface mining operations not subject to the Act] provides specific exemptions for
certain types of activities which might otherwise be construed to fall within the definition of 'surface
mining operations' and thus be subject to the Act. Activities specifically excluded are (1) those
which should not be included because the scope of their impact is so minor; (2) those which have a
few characteristics in common to surface mining but which are primarily for other useful and, in
some cases, public purposes; and (3) those which do not present the environmental or social costs
which regulation under the Act would internalize. Neither the House-passed measure nor the
committee-reported bill in the 92nd Congress provided this exemption. However, it is apparent that
Federal legislation should not, because of ambiguity, address local conditions and the actions of
individuals which have no national, State, or regional significance or which present no important
questions of Federal or State policy."
"The exempted activities include:...Highway and railroad cuts and other excavations for public
projects where the Federal, State or local government requires reclamation of the affected areas".
"The Secretary may identify other activities not subject to the Act and issue regulations further
defining the exempted activities taking into consideration their magnitude (in tons and acres), their
potential environmental impact, and whether the class, type, or types of activity are already
subject to existing Federal, State, or local regulatory systems. In identifying and defining other
exempted activities, the Secretary is expected to follow a rule of common sense. The purpose of
the Act is to insure that social and environmental costs of surface mining are internalized by
reclamation. Any activity which inflicts significant costs and which should be accompanied by
reclamation should, of course, not be exempted. On the other hand, individual, non-commercial,
extremely localized, activities which do not cause environmental damage should be exempted not
only to insure fairness but also to relieve the administrative burden of the regulatory authorities so
that the authorities can concentrate on those activities which truly require careful regulation."
Regulation of Surface Mining, HEARINGS on HR 3 (and related bills) before the Subcommittee on
the Environment and the Subcommittee on Mines and Mining of the House Committee on Interior
and Insular Affairs, 93rd Cong, 1st Sess (April, 1973).
1. Statement of Dr. Darnell Whitt, Deputy Administrator for Field Services, Soil Conservation
Service, from page 852. Included among the activities which "may be exempted" under these
versions of the Act are: "Excavations by a governmental agency or its authorized contractors for
highway and railroad cuts and fills."
2. Statement of Frank C. Wachter, National Industrial Sand Association, from page 1189. "[T]he
wording of the subparagraph...[regarding exempt excavations] appears to create a competitive
inequity in the construction aggregates industries by creating an exempt category of aggregate
producers...who apparently can avoid the cost of reworking the excavated land. We suggest the
following for clarification of what appears to us to be ambiguous wording: '(2) excavations by an
agency of Federal, State or Local government or its authorized contractors for highway and railroad
cuts if the Federal, State or Local government requires reclamation of the area affected.'"
Surface Mining Control and Reclamation Act of 1977, S REP No 95-128, 95th Cong, 1st Sess 98
(May 10, 1977).
"This section [Surface mining operations not subject to this Act] provides specific exemptions for
three types of coal surface mining which would otherwise be subject to the Act.
"These are (1) the extraction of coal by a landowner for his own noncommercial use from land
owned or leased by him, (2) the extraction of coal where surface mining affects 2 acres or less,
and (3) extraction of coal in the process of highway or other construction.
"The Committee felt that these three classes of surface mining cause very little environmental
damage and that regulation of them would place a heavy burden on both the miner and the
regulatory authority."
Surface Mining Control and Reclamation Act of 1977, HR REP No 95-493, 95th Cong, 1st Sess 112
(July 12, 1977).
"The Senate amendment...included an exemption for all construction. The conferees agreed to a
modified version of the Senate amendment which limits the exemption to extraction of coal as an
incidental part of government-funded construction only, rather than all construction as originally
provided in the Senate language."
IBSMA DECISIONS
HARDLY ABLE COAL CO., 2 IBSMA 270, IBSMA 80-31 (1980).
Hardly Able received a Notice of Violation (NOV) for mining within 100 feet of a county road.
(They subsequently applied for and received a waiver of the 100-foot rule.) In the validity of the
NOV, the Board concluded: "The Act contemplates that a miner obtain permission from the
regulatory authority to mine within 100 feet of a public road before the mining takes place. The ex
post facto approval by the regulatory authority of mining within 100 feet of a county road generally
defeats the purpose of the Act, that is, giving interested parties notice allowing them to protest
before the actual mining takes place."
ALABAMA BY-PRODUCTS CORP. V OSM, 1 IBSMA 239, 86 I.D. 446 (1979).
The Board ruled that the regulatory authority's approval of an exemption under the Act or
regulations (the use of alternative materials in place of topsoil) must be obtained prior to the start
of any action to which the exemption applies.
FEDERAL DECISIONS
MONONGAHELA POWER CO. v MARSH, 809 F2d 41 (D D C 1982).
The Appeals Court reversed the District Court ruling and determined that the Monongahela
Power was required to obtain a permit from the Army Corps of Engineers in order to "discharge fill
material into navigable waters during construction of a hydroelectric facility previously licensed by
the Federal Power Commission."
"Section 404 [of the Clean Water Act] transmits a crisp and unwavering message: all significant
discharges, whether or not exempt from the permit requirement, must be subjected to Section
404(b)(1) scrutiny or its equivalent."
FEDERAL REGISTER ENTRIES
53 FR 5430 (FEBRUARY 24, 1988).
This is a notice of reopening of the comment period on proposed regulations pertaining to the
"exemption for coal extraction incidental to the extraction of other minerals", SMCRA Sec. 701(28),
30 CFR Part 702.
"Under Sec. 702.11(a), new operations would be required to file a complete application for
exemption which would require an administrative decision by the regulatory authority before the
operator would be allowed to commence coal extraction based upon the exemption. Requiring
operators to apply for and receive exemptions is a procedure OSMRE successfully used earlier with
regard to the special small operator exemption in 30 CFR 710.12."
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COALEX STATE INQUIRY REPORT - 115, "Exemption for government-financed construction"
(1989).
The following are the descriptions of the materials included as part of the Report:
AIRPORT CONSTRUCTION
WILDER COAL CO. v. OSM, Docket No. NX 5-86-R (1987) [Virginia]
The ALJ determined that "the extraction of coal by the use of auger mining" was not necessary in
order for the airport expansion project to be accomplished. "Necessary" was defined as "an
engineering necessity, not an economic necessity." This distinction was made because, as one
witness testified, the airport commission had "...encouraged [the] surface mining activity in order
to produce revenues which were used to defray the costs of the airport improvements." Since
Wilder Coal failed the first criterion (mining is "incidental"), the ALJ did not rule on the percentage
of government financing of the construction.
CONCORD COAL CORP. v OSM, 3 IBSMA 92 (1981); CONCORD COAL CORP. v OSM, Docket Nos.
CH 0-314-R, CH 0-335-R, CH 0-249-R (1980) [West Virginia]
The Board affirmed the ALJ's finding that the funds used to construct the airport "cannot be
characterized as government funds". The Board determined that the Airport Authority was a "third
party" to the coal lease, therefore, it did not "own the coal being mined by Concord" or the revenue
being generated by the sale of the coal which was to "ultimately constitute the predominate source
of compensation for the airport construction." The Board elaborated on the meaning of the phrase
"the extraction of coal which is necessary to enable construction" by defining "necessity" as "a
function of engineering--not cost--constraints."
ROAD CONSTRUCTION
LEROY SEXTON v OSMRE, Docket No. NX 7-89-R (1987) [Tennessee]
Here, the ALJ determined that the coal operator failed to meet the required criteria for an
exemption: The use of contour surface mining was not required in rebuilding of the road. The ALJ
felt that the rebuilding effort was a stratagem to engage in mining "without having to observe...
reclamation responsibilities." Nor was the 50% government-financing criterion met: Neither the
coal operator nor his contractor "received any monetary compensation". Recovery of operational
expenses and any profit was to be derived from the "sale of the coal which they removed in the
course of performing" the road construction.
LITTLE GOOSE COAL CO. v OSM, Docket No. NX 2-23-R (1985); LITTLE GOOSE COAL CO. v OSM,
Docket No. NX 2-23-P (1982) [Kentucky]
In both hearings, the ALJs found that the county failed to "provide the required financing" for the
construction of a county road. In the earlier hearing, the ALJ found that the building of the road
was "incidental to the extraction of coal" -- the Little Goose company had built a road with a bench
width of 100 feet, while a width of "only 40 feet was necessary to build a county road...." In
addition, there was a "likelihood of significant imminent environmental harm to land, air or water
resources" due to the lack of sediment control.
WEST VIRGINIA ENERGY, INC., 3 IBSMA 301 (1981); OSM v WEST VIRGINIA ENERGY, INC., 4
IBSMA 120 (1982); WEST VIRGINIA ENERGY, INC. v OSM, Docket Nos. CH 0-5-R, CH 0-11-R, CH
0-72-R, CH 0-63-P, CH 0-94-P (1980) [West Virginia]
The Board reversed the ALJ decision in finding that West Virginia Energy (Energy)'s road
improvement project did not "fall within the definition of 'government-financed' construction." It
determined that: "[a]lthough the State did provide some material to Energy and although it
expended a considerable amount of effort on its part of the project, no State funds were used to
complete Energy's part of the project."
In anticipation that it would be removing coal in the conduct of the road rehabilitation project,
Energy had inquired whether a permit was necessary. The State replied: "...no permit was
necessary insofar as there was an agreement covering the project and that there was a
performance bond (which Energy had posted for completion)."
MOUNTAIN ENTERPRISES COAL CO. v OSM, Docket Nos. CH 1-88-R, CH 1-109-R (1981) [Virginia]
Under contract to the county, Mountain Enterprises relocated a road which OSM agreed
improved "the quality of life in the area". The ALJ stated that: "the removal of the coal, under the
circumstances, was necessary in order to obtain the quantity of material necessary to construct the
relocated road."
However, the ALJ ruled that the county had "contributed no financing to the operation" and
therefore, "the activities of [Mountain Enterprises] are subject to the Act...."
MISCELLANEOUS CONSTRUCTION
H.C. BOSTIC COAL CO. v OSM, Docket Nos. NX 4-78-R, NX 5-26-P (1986) [Virginia]
Bostic was given the right to "haul coal across school property" in return for "work in building [an
elementary school] playground." The ALJ determined that the arrangement constituted an "in-kind
payment" and "[t]hus, this project cannot be considered 'government-financed construction'...."
CLAYPOOL CONSTRUCTION CO. v OSM, Docket Nos. CH 9-9-R, CH 9-22-R (1979) [West Virginia]
Claypool Construction extracted coal in the process of transforming a previously mined area,
which had become a dump site, into a trailer park. The ALJ found that: "[t]he mere fact that
[Claypool] was improving the property while at the same time removing over 10,000 tons of coal
and selling it into commerce does not alter the requirement of the Act since the Act does not
consider the beautification of real estate as an exemption."
CASES WITH CONTRARY FINDINGS
DENNIS R. PATRICK, 1 IBSMA 158 (1979) [Kentucky]
The Board held that Patrick, in a privately financed operation, did not require a strip mining
permit to excavate coal in the process of creating a "level bench for a housing development",
stating: "...under the initial regulatory program, OSM has no jurisdiction over a surface coal mining
operation which occurs on state land and which is not subject to existing state regulation within the
scope of any of the initial federal performance standards."
SQUIRE BAKER v OSM, Docket No. NX 9-25-R (1979) [Kentucky]
In the process of excavating basements of new homes in the area of previous deep mining, a
coal seam was exposed. All work ceased while Squire Baker applied to Kentucky for a permit to
remove and sell the coal. No coal was mined and there was no intention to mine without a permit,
therefore, the ALJ ruled that Squire Baker had "done no act which is presently subject to the
Surface Mining Control and Reclamation Act of 1977."
FEDERAL REGISTER ENTRY
On the April 25, 1988, Interior published its "Semiannual agenda of rules scheduled for review or
development" (53 FR 13896). Interior announced that action to revise the "government-financed
construction" exemption regulations relating to Abandoned Mine Lands programs was withdrawn.
ATTACHMENTS
1. DARTY DEVELOPMENT CO., INC. v OSMRE, 632 F Supp 627 (N D AL 1986).
2. KIMBLE v DIERINGER, 1991 Ohio App LEXIS 2229 (Ohio Ct App 1991).
3. COALEX STATE INQUIRY REPORT - 262, "Non-commercial use of 'other minerals'" (1993).
VICTOR CONTRACTING CORP. v OSM; Dickenson County, VA. v OSM, Docket Nos. NX 91-22-R, NX 91-23-R, NX 91-25-R, NX 91-26-R (1992).
WILDER COAL CO. v OSM, 112 IBLA 107, IBLA 87-576 (1989).
4. COALEX STATE INQUIRY REPORT - 133, "Exemption for government-financed construction"
(1989). [with attachments]
A Excerpts from 119 CONG REC S1357 (daily ed. Jan. 18, 1973)(statement of Sen.
Jackson).
B. Excerpts from Regulation of Surface Mining, HEARINGS on HR 3 (and related bills)
before the Subcommittee on the Environment and the Subcommittee on Mines and
Mining of the House Committee on Interior and Insular Affairs, 93rd Cong, 1st Sess
852 (April, 1973)(statement of Dr. Darnell Whitt, Deputy Administrator for Field
Services, Soil Conservation Service).
C. Excerpts from Regulation of Surface Mining, HEARINGS on HR 3 (and related bills)
before the Subcommittee on the Environment and the Subcommittee on Mines and
Mining of the House Committee on Interior and Insular Affairs, 93rd Cong, 1st Sess
1189 (April, 1973)(statement of Frank C. Wachter, National Industrial Sand
Association).
D. Excerpts from Surface Mining Control and Reclamation Act of 1977, S REP No 95-128, 95th Cong, 1st Sess 98 (May 10, 1977).
E. Excerpts from Surface Mining Control and Reclamation Act of 1977, HR REP No 95-493, 95th Cong, 1st Sess 112 (July 12, 1977).
F. HARDLY ABLE COAL CO., 2 IBSMA 270, IBSMA 80-31 (1980).
G. ALABAMA BY-PRODUCTS CORP. v OSM, 1 IBSMA 239, 86 I.D. 446 (1979).
H. Excerpts from MONONGAHELA POWER CO. v MARSH, 809 F2d 41 (D D C 1982).
I. 53 FR 5430 (FEBRUARY 24, 1988). Notice of reopening of public comment period
on all issues of "Exemptions for Coal Extraction Incidental to the Extraction of Other
Mineral", 30 CFR 702.
J. COALEX STATE INQUIRY REPORT - 115, "Exemption for government-financed
construction" (1989).
A. WILDER COAL CO. v OSM, Docket No. NX 5-86-R (1987)
B. CONCORD COAL CORP. v OSM, 3 IBSMA 92 (1981)
C. CONCORD COAL CORP. v OSM, Docket Nos. CH 0-314-R, CH 0-335-R, CH 0-249-R (1980)
D. LEROY SEXTON v OSMRE, Docket No. NX 7-89-R (1987)
E. LITTLE GOOSE COAL CO. v OSM, Docket No. NX 2-23-R (1985)
F. LITTLE GOOSE COAL CO. v OSM, Docket No. NX 2-23-P (1982)
G. WEST VIRGINIA ENERGY, INC., 3 IBSMA 301 (1981)
H. OSM v WEST VIRGINIA ENERGY, INC., 4 IBSMA 120 (1982)
I. WEST VIRGINIA ENERGY, INC. v OSM, Docket Nos. CH 0-5-R, CH 0-11-R,
CH 0-72-R, CH 0-63-P, CH 0-94-P (1980)
J. MOUNTAIN ENTERPRISES COAL CO. v OSM, Docket Nos. CH 1-88-R, CH 1-109-R (1981)
K. H.C. BOSTIC COAL CO. v OSM, Docket Nos. NX 4-78-R, NX 5-26-P (1986)
L. CLAYPOOL CONSTRUCTION CO. v OSM, Docket Nos. CH 9-9-R, CH 9-22-R
(1979)
M. DENNIS R. PATRICK, 1 IBSMA 158 (1979)
N. SQUIRE BAKER v OSM, Docket No. NX 9-25-R (1979)
O. 53 FR 13896 (APRIL 25, 1988)
Research conducted by: Joyce Zweben Scall
