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M.L. Johnson Family Properties, LLC v. Zinke

United States District Court, E.D. Kentucky, Southern Division, Pikeville

March 21, 2018




         A plot of land known as Tract 46 in Pike County, Kentucky has valuable coal and two owners who cannot agree on how it should be used. One cotenant, Pike-Letcher Land Company (“PLLC”), has conveyed the right to enter and surface mine coal to its affiliate Premier Elkhorn Coal LLC. The other cotenant, M.L. Johnson Family Properties, LLC, has not consented to mining. Over Johnson LLC's objection, Kentucky has granted Elkhorn a right of entry to surface mine Tract 46. Johnson LLC challenged that decision before the Secretary of the Interior and now seeks review of the administrative decision that permitted Elkhorn to commence mining operations. For the reasons discussed below, the Court affirms the Secretary's decision.

         I. Statutory and Regulatory Framework

         Coal companies must comply with certain minimum requirements before mining a surface estate. Those requirements are set forth in the Surface Mining Control and Reclamation Act of 1977 (“SMCRA”). 30 U.S.C. § 1201 et seq. SMCRA's regulatory requirements are primarily implemented through a permitting regime. 30 U.SC. § 1256(a) (“[N]o person shall engage in or carry out on lands within a State any surface coal mining operations unless such person has first obtained a permit issued by such State pursuant to an approved State program or by the Secretary pursuant to a Federal program . . . .”). As § 1256(a) suggests, regulatory power under SMCRA is not solely vested in the federal government. Instead, states which “wish[] to assume exclusive jurisdiction over the regulation of surface coal mining” are invited to submit to the Secretary a state program “which demonstrates that such State has the capability of carrying out the provisions of this chapter and meeting its purposes.” 30 U.S.C. § 1253(a). This system of “cooperative federalism” sets SMCRA as a national floor for regulation of surface mining, but permits state's to develop more demanding regulatory regimes. Kentuckians for the Commonwealth v. U.S. Army Corps. of Eng'rs, 746 F.3d 698 (citing Hodel v. Va. Surface Mining & Reclamation Ass'n, 452 U.S. 264, 289 (1981)). Once a state submits and receives approval of its state program, SMCRA's grant of “exclusive jurisdiction” means that state law, not federal law, governs surface mining within the state. See Bragg v. W.Va. Coal Ass'n, 248 F.3d 275, 295 (4th Cir. 2001); see also In re Permanent Surface Min. Regulation Litig, 653 F.2d 514, 519 (D.C. Cir. 1981) (en banc) (“[I]t is with an approved state law and with state regulations consistent with the Secretary's that surface mine operators must comply. Administrative and judicial appeals of permit decisions are matters of state jurisdiction in which the Secretary plays no role.”) (internal citations omitted).

         SMCRA's grant of exclusive jurisdiction to state regulatory authorities contains an important exception. The Office of Surface Mining Reclamation and Enforcement (“OSMRE”) retains authority to conduct a federal inspection of an existing mine if (i) there is reason to believe a permitee is in violation of a state program requirement or permit condition, (ii) OSMRE has provided notice of the suspected violation to the state, and (iii) the state fails to take corrective action or show good cause for the failure within ten days.[1] 30 U.S.C. § 1271(a)(1). If, after conducting an inspection, OSMRE determines that a permitee is in violation of a program requirement or permit condition, and that violation “creates an imminent danger to the health or safety of the public, or is causing, or can reasonably be expected to cause significant, imminent environmental harm to land, air, or water resources, ” the Secretary must “immediately order a cessation of surface coal mining” operations. Id. § 1271(a)(2).[2] A cessation order may only remain in effect until OSMRE “determines that the condition, practice, or violation has been abated, or until modified, vacated, or terminated by [OSMRE].” Id.; see 30 C.F.R. § 843.11(f).

         Kentucky received the Secretary's approval of its state program in May 1982 and the Kentucky Department of Natural Resources and Environmental Protection was deemed the Commonwealth's regulatory authority for surface coal mining. 30 C.F.R. § 917.10; see generally Ky. Rev. Stat. Ch. 350; 405 Ky. Admin. Reg. Ch. 1-30. Kentucky's permitting requirements largely mirror those set forth in the federal statute and implementing regulations. See Ky. Rev. Stat. 350.060; 405 Ky. Admin. Regs. 8:001 et seq. Having had its state program approved, changes to Kentucky law or regulations that “affect the implementation, administration, or enforcement of the approved State program” cannot “take effect for purposes of a State program until approved as an amendment” by the Secretary. 30 C.F.R. § 732.17(b), (g).

         SMCRA sets forth the minimum national requirements for establishing a valid right of entry in order to receive surface mining permit approval:

No permit or revision application shall be approved unless the application affirmatively demonstrates . . . that-
(6) in cases where the private mineral estate has been severed from the private surface estate, the applicant has submitted to the regulatory authority--
(A) the written consent of the surface owner to the extraction of coal by surface mining methods; or
(B) a conveyance that expressly grants or reserves the right to extract the coal by surface mining methods; or
(C) if the conveyance does not expressly grant the right to extract coal by surface mining methods, the surface-subsurface legal relationship shall be determined in accordance with State law: Provided, That nothing in this chapter shall be construed to authorize the regulatory authority to adjudicate property rights disputes.
30 U.S.C. § 1260(b)(6)(A)-(C). SMCRA's implementing regulation is substantively identical to the statutory language, but is restated to require the applicant to submit documentation that establishes a right to entry under each provision. 30 C.F.R. § 778.15.[3] Kentucky's analogous regulation is also restated in terms of the documentation requirements for an application. 405 Ky. Admin. Regs. 8:030 Sec. 4(1)-(3) (2014).[4] Most pertinent, subsection (C) requires the following documentation for severed estates:

         If the conveyance does not expressly grant the right to extract the coal by surface mining methods, a copy of the original instrument of severance upon which the applicant bases his right to extract coal by surface mining methods and documentation that under applicable state law, the applicant has the legal authority to extract the coal by those methods. 405 Ky. Admin. Regs. 8:030 Sec. 4(2)(c). The burden to establish compliance with these right of entry provisions falls squarely on the permit applicant. 30 U.S.C. § 1260(a) (“The applicant for a permit, or revision of a permit, shall have the burden of establishing that his application is in compliance with all the requirements of the applicable State or Federal program.”).

         II. Factual and Procedural Background

         The mineral and surface estates of Tract 46 in Pike County, Kentucky have been severed since the early 1900s. The mineral estate is owned by PLLC. The surface estate, which consists of approximately 450 acres, was previously owned by M.L. Johnson, who left an undivided interest to each of his eight heirs. Two of the heirs conveyed their interests to PLLC, while five transferred theirs to Johnson LLC. By fall 2014, the surface estate was owned collectively by Johnson LLC (62.5%), PLLC (25%), and the eighth heir (12.5%) as tenants in common.[5] PLLC entered into an Original Right of Entry Agreement in 1995, and an Amended Right of Entry Agreement in 2013 with its affiliate Elkhorn, granting it the right to enter and conduct surface mining operations. Johnson LLC has not consented to surface mining on Tract 46.

         The Kentucky Cabinet first issued Elkhorn a permit for surface mining operations on Tract 46 in 2003. Elkhorn subsequently sought approval of Amendment #1 to increase the number of acres covered by the permit.[6] The Cabinet determined that Elkhorn had demonstrated a right of entry based upon the consent of PLLC and the holding of the Kentucky Court of Appeals in Johnson v. Envtl. & Pub. Prot. Cabinet, 289 S.W.3d 216 (Ky. Ct. App. 2009). Certain Johnson heirs initially challenged Amendment #1 in Kentucky's Office of Administrative Hearings on the basis that not all cotenants consented to surface mining, but the heirs ultimately dismissed that appeal with prejudice. Instead, Johnson LLC initiated a citizen suit pursuant to 30 U.S.C. § 1270(a) in this Court. That suit sought an injunction to compel the Secretary to inspect Elkhorn's permit, alleging the Cabinet's permit approval violated 30 U.S.C. § 1260(b)(6)(A) because Elkhorn did not have the written consent of all surface cotenants, and a preliminary injunction to stop surface mining operations on Tract 46. Compl., M.L. Johnson Family Properties, LLC v. Jewell, No. 14-CV-78-ART, ECF No. 1 (E.D. Ky. 2014).

         While Johnson LLC's citizen suit was pending, the Cabinet approved Minor Revision #1, updating the surface ownership information for Tract 46, and Minor Revision #2, finding that the application contained sufficient documentation to satisfy the right of entry requirements of 405 Ky. Admin. Regs. 8:030 Sec. 4(2)(c) and 30 U.SC. § 1260(b)(6)(C). On June 13, 2014, then District Judge Amul Thapar issued a preliminary injunction order in the citizen suit, finding that Johnson LLC had demonstrated a likelihood of success on the merits that 30 U.S.C. § 1260(b)(6)(A) required the consent of all surface owners. M.L. Johnson Family Properties, LLC v. Jewell (Johnson I), 27 F.Supp.3d 767, 773 (E.D. Ky), vacated as moot, No. 14-5867, Order, ECF No. 29-2 (6th Cir. Oct. 31, 2014). In compliance with the preliminary injunction, OSMRE conducted a federal inspection of Elkhorn's permit and, applying this Court's interpretation of 30 U.S.C. § 1260(b)(6)(A), found that Elkhorn's permit was non-compliant because Johnson LLC did not consent to mining. Elkhorn's alternative claim that its permit was valid under 30 U.S.C. § 1260(b)(6)(C), as approved by Minor Revision #2, was rejected as procedurally flawed due to the lack of adequate notice and opportunity to object. OSMRE concluded that Elkhorn lacked a valid permit and issued a cessation order.

         Seeking to abate the cessation order, Elkhorn submitted (1) copies of the original severance, deed which did not expressly grant the right to surface mine, (2) chain of title documents, and (3) the Original and Amended Right of Entry Agreements. Elkhorn's application also cited to the Kentucky Court of Appeals decision in Johnson, 289 S.W.3d 216, holding that consent of one cotenant could satisfy the right of entry requirement. The Cabinet approved Minor Revision #3. Johnson LLC filed an objection with the Cabinet to the proposed revision, but did not pursue a state administrative appeal.

         OSMRE determined that Minor Revision #3 abated the violations and moved to terminate the cessation order. The Hearings Division issued a decision upholding the issuance of the cessation order and granting OSMRE's motion to terminate the order. Premier Elkhorn v. OSMRE, NX-2014-01-R Consolidated (Dec. 19, 2014). Following an unsuccessful appeal to the Interior Board of Land Appeals (“IBLA”) by Johnson LLC, OSMRE's Lexington Field Office issued the termination order. Johnson LLC filed an application for review of that order with the Hearings Division, which was heard by Administrative Law Judge (“ALJ”) Harry C. Sweitzer. On October 30, 2015, the ALJ issued a decision upholding OSMRE's termination of the cessation order. Johnson LLC now appeals from that decision and has filed a motion for summary judgment. (DE 46). Defendant Ryan Zinke, Secretary of the Interior, and Defendant-Intervenor Elkhorn have filed responses in opposition and cross-motions for summary judgement. (DE 62, DE 63). All parties have filed replies (DE 68, DE 71, DE 75) and this matter is now ripe for a decision.

         III. Standard of Review

         Johnson LLC seeks review of the ALJ's decision under SMCRA, 30 U.S.C. § 1276(a)(2), and the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 702-703. Because there are no factual disputes, this matter is appropriate for disposition on summary judgment. Fed.R.Civ.P. 56(a). (“The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”). SMCRA limits this Court's review to whether the Secretary's action was arbitrary, capricious, or otherwise inconsistent with law. 30 U.S.C. 1276(a)(2); see Drummond Coal Co. v. Hodel, 796 F.2d 503, 504 n.1 (D.C. Cir. 1986) (“With an exception not here relevant, Section 1276(a)(2) of the SMCRA incorporates the arbitrary and capricious standard of review set forth in the Administrative Procedure Act, 5 U.S.C. § 706(2)(A) (1982).”).

         This Court reviews questions of law de novo, but, in doing so, “deference may be owed where the agency is reasonably interpreting the statutes it is charged with administering.” R/T/ 182, LLC v. F.A.A., 519 F.3d 307, 309 (6th Cir. 2008). If a statute is silent or ambiguous with respect to a specific issue, this Court must uphold the agency's interpretation if it is “based on a permissible construction of the statute.” Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843 (1984). An agency's interpretation of its own regulations are also owed deference by a reviewing court. Auer v. Robbins, 519 U.S. 452, 461-62 (1997).

         IV. Analysis

         Johnson LLC brings a number of challenges to the ALJ's decision upholding termination of the cessation order and allowing Elkhorn to surface mine Tract 46 pursuant to Minor Revision #3. For the reasons set forth below, the Court finds that the ALJ's decision was not arbitrary or capricious.

         A. Elkhorn has a valid right of entry based on ...

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