"The Safe Explosives Act: Homeland Security Comes to the Mining Industry," Crowell & Moring Mining Law Monitor, Vol. 20, Issue 2
Co-Authors: Timothy M. Biddle and Edward M. Green.
This past Nov. 25, when President Bush signed the Homeland Security Act of 2002, mining companies, along with other explosives users, suddenly found themselves thrust into the front lines of the Nation's effort to protect its citizens from terrorists, both foreign and domestic. Dramatically expanding federal regulation of every user of explosives, tucked away in that massive legislation are provisions popularly known as "The Safe Explosives Act," or "SEA," which is Title XI, Subtitle C, of The Homeland Security Act.
In brief, the SEA mandates, for the first time, that all users of explosive materials must have a federal permit or license. The SEA also expands the categories of persons who are prohibited from possessing explosives. And the SEA requires that persons "authorized to possess explosive materials" and persons "responsible" for the use and management of explosive materials must be identified by their employers to the federal Bureau of Alcohol, Tobacco, and Firearms and Explosives ("ATF"), so that the ATF can carry out a background check and clearance of each individual to ensure that he or she is not a person prohibited from possessing explosive materials. Theoretically, at least, this nationwide permitting and licensing scheme and its accompanying new background check and clearance system will operate as a screen to prevent explosive materials from falling into the hands of terrorists. While praiseworthy in its purpose, what is perhaps most certain is that the requirements of the SEA will impose complex and costly new burdens upon mining companies and other explosives users.
As the heaviest user of explosives, by far, the mining industry can expect to be under special scrutiny from the ATF. In this regard, it is important to be mindful that knowing or willful violations of the SEA are classified as federal felonies and may result in fines, imprisonment, or both. In addition, violations of the SEA may result in revocation of user permits or manufacturing licenses.
Becoming effective in two phases, SEA imposes short statutory deadlines on regulated parties, as well as on the ATF. Initially, on Jan. 24, 2003, the categories of persons prohibited from possessing explosives were expanded to include: (1) aliens (with certain exceptions); (2) persons dishonorably discharged from the armed forces of the United States; and (3) persons who have renounced their U.S. citizenship. These newly prohibited categories of persons expanded already existing federal law prohibiting certain persons from using explosives. Pre-SEA prohibitions included persons who: (1) are under indictment for, or have been convicted of, a felony; (2) are fugitives from justice; (3) are unlawful users of, or are addicted to, any controlled substance (as defined in the federal Controlled Substances Act); or (4) have been adjudicated as mentally defective or committed to a mental institution.
Thus, if a person employed by a mining company falls within any one of the categories of persons described above, and is in possession of explosive materials, then that person is committing a federal felony. It is important, therefore, that mining companies develop internal checks to make certain that their employees who use or supervise the use of explosives are not persons prohibited from possessing explosives. But care must be taken to assure that these checks do not, themselves, run afoul of labor and employment law requirements. These prohibitions apply right now to all mining companies, even in the case of those companies who have never had to obtain a federal permit or license previously, as well as to pre-SEA permit or license holders.
The most troublesome of the expanded categories of persons who cannot possess explosives is "aliens." Defined by SEA (as derived from the Immigration and Nationality Act definition of "alien" as "any person who is not a citizen or national of the United States"), the purpose of this prohibition is obvious. Numerous aliens are employed in the mining industry, however, and many of these individuals are involved directly or indirectly with the use of explosives. Fortunately, SEA includes exceptions to the general alien prohibition. The exceptions include aliens who are "lawfully admitted for permanent residence," an exception which includes most (but not all) "green card" holders. The exceptions also include those aliens who are "lawful non-immigrants" and who also meet the SEA definition of "responsible persons," as discussed below. To avoid SEA's criminal and other penalties, employers who assign "aliens" to duties involving explosives should be careful to make sure they fall within one of the exceptions to the general prohibition.
Permits or Licenses
Identifying employees who use or supervise the use of explosives and making sure they do not fall under one of these prohibited persons categories is just the beginning of SEA compliance. By May 24, 2003, ATF permits or licenses will be required of all explosives users, including those intrastate users who did not need an ATF permit or license pre-SEA. If explosives are manufactured on site for on-site use, an ATF license is required. Otherwise an ATF user permit is necessary. In addition, as mining companies apply for new permits or licenses or renewals of existing permits or licenses, they will have to submit to ATF: (1) identifying information for all employees "authorized to possess explosive materials"; and (2) identifying information, plus fingerprints and photographs for each "responsible person." In turn, ATF will conduct background checks to ensure that all employees and persons so identified are not "prohibited persons." Thus, it will become the responsibility of each mining company to determine who must be identified to ATF for background checks and clearances.
Identifying a person "authorized to possess explosive materials" hinges on the meaning of "possession." It is clear that "possession" under SEA includes "actual" as well as "constructive" possession. ATF, which uses the shorthand term "employee-possessor" for "persons authorized to possess explosive materials," says that "actual" possession exists when a person is in immediate possession or control of explosive materials - e.g., an employee who physically handles explosive materials, or an employee, such as a blaster, who uses explosive materials. That is straightforward enough, but complications arise in trying to determine the meaning of "constructive" possession. "Constructive" possession, according to the ATF, exists when an employee lacks direct physical control over explosive materials, but knowingly has the power and intention to exercise dominion and control over the explosive materials either directly or indirectly through others. While it is beyond the scope of this article to delve into the many nuances of the term "possession," it is readily apparent that the term "employee-possessor" may cover a substantial number of employees. Indeed, so many mining industry employees (not to mention other users of explosives) are potentially covered as employee-possessors, that ATF may not be able to timely conduct the necessary background checks.
The legislative history of the SEA addresses the identification of employees authorized to possess explosive materials in significant detail. Congress has stated that it intends and expects the ATF to work closely with regulated industries to develop guidance as to which employees are considered to be in "possession of explosive materials" in the course of their employment. For example, according to the legislative history, applicants are not required to list every single employee of the business but only those who are expected to possess explosive materials as part of their duties. Further, in working with industry to develop "standards," Congress stated that the ATF should be guided by the case law interpreting the term "possession" under the Gun Control Act of 1968, as amended. Under that Act, according to the legislative history, it is well established that possession may be demonstrated through either actual or constructive possession. Thus, in instances where direct physical contact is lacking a person may, nonetheless, have constructive possession where he knowingly has the power and the intention at a given time to exercise dominion and control over the explosives, either directly or through others.
The term "responsible person" is defined by the SEA to mean "an individual who has the power to direct the management and policies of the applicant pertaining to explosive materials." In the case of corporations, what is particularly troublesome about this definition is that the ATF maintains that it covers corporate directors, officers, and stockholders who have the power to direct the management and policies of the corporation pertaining to explosive materials. The breadth of this interpretation is likely to lead to differences of opinion between the regulated industry and the ATF, especially since "responsible persons" often will be senior corporate officials or others who may balk at being identified to ATF, much less being fingerprinted and photographed.
Many mining companies use independent contractors to carry out blasting operations. Independent contractors using explosives at such operations must have their own ATF license or permit and must otherwise be in compliance with SEA. Mining companies should make sure that such independent contractors have their own ATF licenses or permits. But it appears that mining companies need not, themselves, obtain an ATF license or permit as long as all aspects of the use of explosives at the operation are under the direct control of the independent contractor.
As is apparent from the above summary, the new SEA requirements are complicated and burdensome. In the near future, expect the ATF to be overwhelmed with demands for background checks and clearances. And expect confusion. ATF has published "interim final" regulations for implementation of the SEA, but the regulations are oftentimes more complex and confusing than SEA itself. In addition, ATF is developing informal solutions as it grapples with SEA's short statutory deadlines - and those informal policies may differ from ATF region to region. ATF officials promise that the Agency will work cooperatively with those regulated entities exercising good faith efforts to comply with SEA. But if "cooperation" fails, and a mining company's or other user's permit or license application or request for renewal is denied, the rejected applicant has a right to an ATF hearing. Furthermore, final ATF decisions on permit or license denials or revocations are reviewable, within 60 days after their receipt, in an appropriate U.S. Court of Appeals.
The war on terrorism is being fought on many fronts. Compliance with SEA puts the mining industry on one of those fronts. To avoid becoming a victim of that war, the penalties associated with the SEA noncompliance make it imperative that mining companies carefully monitor their compliance activities and stay abreast of ATF's SEA implementation efforts.
[Editors' Note: This article originally appeared in slightly different form in the June 2003 issue of the Mining Committee Newsletter published by the American Bar Association Section of Environment, Energy, and Resources.]