States’ Primary Authority to Regulate Coal Mining Pursuant to SMCRA Under Assault

As suggested in a “Guidance Memorandum” issued by the Obama Administration in November 2009, and solidified through a Memorandum issued by the U.S. Department of Interior’s Office of Surface Mining (“OSM”) in November 2010, the meaning of state “primacy” under the federal Surface Mining Control and Reclamation Act of 1977 (“SMCRA”) has been greatly diminished in recent years. Indeed, the concept of exclusive state jurisdiction to regulate coal mining (as clearly intended by Congress in passing SMCRA) remains under attack. The pending Ninth Circuit Court of Appeals case involving a challenge to the authority of the Montana Department of Environmental Quality (Montana Environmental Information Center, et al. v. Stone-Manning, et al., discussed in our separate Client Alert) is only the latest manifestation of this trend.

At the core of OSM’s efforts to eviscerate primacy is the OSM Directive INE-35, addressing “Ten Day Notices” (or “TDNs”). TDNs are the primary tool that OSM uses in initiating oversight action in a primacy state, when a state agency has declined to take action at a mine site to enforce what OSM has “reason to believe” is a violation of the state program. INE-35, which was developed based upon OSM’s regulations governing its oversight of state programs, was revised yet again effective Jan. 31, 2011, to set the groundwork for routine OSM review of primacy state permitting decisions -- under the pretense that “permit defects” constitute “violations” of the approved state program. Prior to this most recent revision of INE-35, OSM had issued two versions of that directive and three change notices since promulgation of its oversight regulations. All previous versions of the directive and changes notices were rescinded with the issuance of the Jan. 31, 2011 INE-35.

The issuance of the revised INE-35 Directive seemed to be partly in support of OSM’s response to a dispute that arose in Oklahoma (a primacy state) concerning permit issues. In late November 2011, OSM issued two TDNs that claimed the Oklahoma Department of Mines (“ODM”)’s approval of reclamation plans in two of Farrell-Cooper Mining Company’s permits was in error. Prior to the issuance of the TDNs, OSM and ODM had been engaged in discussions for some time regarding the state program’s definition of “approximate original contour,” including the issues raised with respect to the Farrell-Cooper permits. Thus, in responding to the TDNs, ODM took the position that OSM’s determination of a “violation” of the state regulations was premature. OSM disagreed, and relying on the recently-revised INE-35, it found that ODM’s response was arbitrary and capricious. Ferrell-Cooper thereafter filed a federal court lawsuit in Oklahoma, seeking to overturn the TDNs and avoid issuance of federal notices of violation (“NOVs”). Despite the suit, OSM issued two NOVs to Farrell-Cooper for failing to comply with SMCRA requirements to achieve approximate original contour. In order to preserve its rights, Farrell-Cooper filed administrative appeals of both NOVs with the Interior Department’s Office of Hearings and Appeals.

In May 2012, the federal district court dismissed Ferrell-Cooper’s lawsuit, concluding that “the essence of plaintiff’s claim is an attack on … the [Department of Interior’s] regulations.” Since a challenge to federal regulations must be filed in the U.S. district court for the District of Columbia within a prescribed time following promulgation of those rules, the district court in Oklahoma determined that it had no jurisdiction over the case.

On Sept. 5, 2013, the Tenth Circuit Court of Appeals issued its decision on appeals from the district court’s ruling that were brought by Farrell-Cooper and ODM. In its opinion, the Tenth Circuit did not address the district court’s rationale for dismissing the action, but instead concluded that the appeal was not ripe for adjudication due to the pending administrative appeals. Accordingly, Farrell-Cooper’s and ODM’s appeals were dismissed.

In another permitting-related matter, in February 2012 a citizens complaint was filed with OSM’s Charleston, West Virginia Field Office (“CFO”), complaining about the West Virginia Department of Environmental Protection’s (“WVDEP”) failure to rescind a mining permit under which operations had not commenced within the three-year deadline generally established under SMCRA and West Virginia law. In addition to providing certain substantive responses, the WVDEP responded to OSM’s TDN by questioning OSM’s authority to issue TDNs for such permit defects. The CFO found the WVDEP’s response to be an abuse of discretion under West Virginia’s approved program. Upon informal review, on Aug. 20, 2013, OSM Deputy Director Glenda H. Owens reversed the CFO’s determination and found that WVDEP’s actions were appropriate, based upon a detailed analysis of the substantive law addressing statutory interpretation and automatic forfeitures. However, in that determination the Deputy Director clearly affirmed the federal agency’s view that “OSM has TDN and enforcement authority relative to state permitting issues …”

Though it does not deal with state permitting, on March 12, 2013, OSM’s CFO issued six (6) TDNs in a context that (again) does not seem permissible under SMCRA. Specifically, the TDNs were based upon nearly identical citizen complaints concerning the WVDEP’s failure to cite certain mine operators (and the owner of a former mining site) for causing violations of selenium water quality standards, when the respective National Pollutant Discharge Elimination System (“NPDES”) permits for those operations did not contain selenium effluent limits.

When the complainants first raised the issue with the WVDEP, that agency thoroughly explained its decision not to issue violations, and informed the complainants of the administrative and other appeal avenues available under state law. Instead of doing that, the complainants filed citizens complaints with OSM, leading to the issuance of the TDNs. Thus, although SMCRA requires that actions of a state regulatory agency in a primacy state be subject to administrative and judicial review by state courts, in this case the complainants chose not to avail themselves of that remedy. Instead, they sought to have OSM intervene in the matter in the guise of purported “violations” of the approved state program under SMCRA.

The WVDEP’s response to the six TDNs was submitted on April 22, 2013. On July 2, 2013, the CFO determined that the WVDEP had taken appropriate action to cause the potential violations to be abated, because the WVDEP issued orders to the permittees under the West Virginia Water Pollution Control Act, requiring that they take certain steps to address the need for imposition of selenium effluent limits. However, the CFO’s decision rejected the position that citizen complainants should be required to follow state administrative channels before filing complaints with OSM, and the CFO noted that if the WVDEP had allowed the complainant’s representatives to be a part of the agency’s inspections of the sites in question (as they had requested), the CFO would not have issued the TDNs. The CFO also noted that OSM had the right to evaluate actions taken under the water pollution control statutes in evaluating the sufficiency of a WVDEP action under SMCRA, because the programs are inter-related in some ways and on that basis OSM provides funding for NPDES permitting staff employed by the WVDEP. On July 15, 2013, WVDEP appealed those parts of the CFO’s response.

In short, any coal mine operator or permittee that believes the approved state agency has exclusive, primary jurisdiction to administer SMCRA in a primacy state should think again. Where OSM or outside interests believe the state’s approach to enforcement – or even the permitting requirements of state law – is insufficient, an operator is likely to find itself caught in the middle of a jurisdictional dispute at best or subject to federal enforcement actions at worst.