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SMCRA Attorney Fees Awarded To Non-Permittee 'Permittee'

October 1999

Co-Author: J. Michael Klise and Tim Means.

Anyone who has struggled with OSM's recent efforts to make the language of its regulations "easy to understand" (for example, OSM's December 1998 proposed revisions to its Applicant Violator System rules) should be gratified by an August 11, 1999 decision by the Interior Board of Land Appeals ("IBLA") upholding an award of SMCRA attorney fees to a coal mine operator. Stated on its own, the ruling - that a mine operator who did not hold a permit was a "person, other than a permittee" - hardly seems remarkable. Yet, ironically, today's avowed champion of clear language - OSM - sought to disprove that simple proposition in the IBLA proceedings.

We will never know for sure, but perhaps it was the nature of the subject matter - reimbursement of a regulated entity's litigation costs, something no agency likes to do - that drove OSM to deny the regulation its plain meaning. The underlying case involved Skyline Coal Company's challenge to OSM's denial of an application for a surface mining permit. The permit application case had been consolidated for hearing with three challenges to OSM enforcement actions against two of Skyline's permitted operations - one adjacent to the site for which Skyline had applied for the new permit, and the other located within that site. When Skyline prevailed in challenging OSM's denial of its permit application, it sought reimbursement of litigation expenses under § 525(e) of SMCRA, which authorizes an award of "all costs and expenses (including attorney fees) as determined by the Secretary [of the Interior] to have been reasonably incurred" in connection with a "person['s]" participation in an administrative proceeding under the Act.

OSM vigorously opposed Skyline's request. OSM claimed that the applicable Interior Department regulation was 43 C.F.R. § 4.1294(c). That provision limits the recovery of costs and fees by a permittee to instances in which the permittee demonstrates that the challenged action was taken against him "in bad faith and for the purpose of harassing or embarrassing the permittee" - a stringent standard indeed. It took some imaginative lawyering to brand Skyline a permittee, considering that the whole basis for the permit application case was OSM's denial of the permit. Nonetheless, OSM argued that even though SMCRA defines "permittee" as "a person holding a permit," OSM's regulatory definition of that term in 30 C.F.R. § 701.5 also encompassed anyone who is "required" to hold a permit. OSM further argued that, according to the legislative history, Congress intended the reimbursement provision of SMCRA to differentiate between private citizens and coal companies, and to award fees to the latter only when the agency acted in bad faith.

Skyline pointed out the legal, logical, and linguistic discrepancies in OSM's arguments. It explained, among other things, that OSM's regulations define "permit applicant" as a "person seeking a permit," which Skyline clearly was. Skyline urged that the applicable standard for reimbursement of its costs and fees to a permit applicant was not the showing of agency bad faith under § 4.1294(c), but the far less stringent test of § 4.1294(b). Under that provision, Skyline need only show that it was a "person, other than a permittee or his representative" and that it had initiated or participated in "any proceeding under the Act, achieving at least some degree of success on the merits."

The Board agreed with Skyline and held that OSM's arguments construing Skyline as a permittee "do not withstand analysis of the Act and the relevant regulatory provisions." The Board explained that the definitions of "permit applicant," "permittee," and "person" in SMCRA "clearly differentiate[ ] between an applicant for a permit and a permittee," and that OSM's arguments would require the Board to ignore those distinctions. The Board explained that, although Congress intended to differentiate between private citizens and coal operators in SMCRA,

[OSM's] conclusion that coal operators can recover fees and expenses only if they prove bad faith is not supported by the legislative history, does not follow from that differentiation and is not supportable in view of the fact that a coal company may be a "person" as well as a "permittee."

As to OSM's tortured interpretation of the regulations, the Board found "no support in the comments attending promulgation, nor anywhere else, for OSM's argument that 43 C.F.R. § 4.1294(b) is reserved for private citizens and that coal operators must present their claims for awards exclusively under 43 C.F.R. § 4.1294(c)."

What's the lesson here? Simply that, in a contest between regulatory muscle and the English language, the latter wins. The law works best and most fairly when those charged with its enforcement honor its terms. It is obvious not only that OSM's definition of "permittee" in a different volume of the Code of Federal Regulations did not control the interpretation of the IBLA's rules, but also that it was intended to reach, not permit applicants, but rather those operators who unlawfully conducted mining operations without the permit SMCRA requires. Instead of concocting arguments about how "permittee" means those who seek but don't yet hold permits (including, in this case, an applicant to whom OSM had denied a permit), OSM could have put its energies into seeking "an amendment of the regulations so that they coincide with OSM's interpretation of the underlying policy of the statute," as Administrative Judge Burski suggested in his concurring opinion in Skyline. While it remains to be seen whether SMCRA § 525(e) would permit an amendment to the Interior Department's rules so as to deny fees to all mine operators (permittees and applicants alike), in the meantime individual operators such as Skyline, who take the regulations at face value, should not be victimized by OSM's Orwellian abuse.

Thomas (Tim) C. Means
Retired Partner – Washington, D.C.