ELR Citation: ELR 20843
No(s). 93-3948 (6th Cir. Oct 27, 1994)

The court holds that the amount of shale a mining operator extracted as part of its coal mining operations counts toward the total tonnage of minerals it removed for "purposes of commercial use" thus enabling the operator to qualify for Surface Mining Control and Reclamation Act (SMCRA) §701(28)(A)'s exemption from the requirement to pay reclamation fees. Under SMCRA §701(28)(A), mine operators are exempt from paying reclamation fees when the amount of coal they extract does not exceed one-sixth of the total tonnage of materials extracted for "purposes of commercial use or sale." The mining operator sued the federal government for a refund of the reclamation fees it paid as a result of an administrative proceeding before the U.S. Department of the Interior's Office of Surface Mining that found the operator liable for failing to report a portion of the tonnage of coal it mined.

The court first holds that the district court properly asserted jurisdiction over the case under 28 U.S.C. §1346(a)(1). The court holds that the term "internal revenue tax" in §1346(a)(1) broadly refers to revenue generated within U.S. boundaries, not just Title 26 Internal Revenue Code taxes as the government contends. The court rejects the government's argument that the term only refers to Title 26 taxes, because that would result in a nonsensical requirement that the operator first exhaust its administrative remedies under 26 U.S.C. §7422(a) by appealing the assessment of "any internal revenue tax" to the Secretary of the Treasury, before the United States Court of Federal Claims could assume jurisdiction under 28 U.S.C. §1491(a)(1). It would be irrational to expect the operator to make a demand on the Secretary of the Treasury in an effort to recover a tax the Secretary of the Interior levied. And this result only arises if the phrase "any internal revenue tax" contained in §7422(a) is construed to include non-Title 26 taxes. The court holds that such a construction cannot be sustained, because the dictates of §7422(a) apply only to taxes imposed under Title 26.

The court holds that collateral estoppel does not bar the federal government from litigating the operator's compliance with the one-sixth requirement, because it was not a party or in privity with a party to the state administrative proceeding in which the state found that the operator had satisfied the requirement. The court disagrees with the district court's conclusion, based on 30 U.S.C. §§1232 and 1235, that since neither the state nor the federal government have exclusive jurisdiction over the enforcement of reclamation fees, that the state's determination that the operator owed no reclamation fees settled the question on whether the operator met the one-sixth requirement. The court interprets §§1232 and 1235 to mean that the federal government has ultimate authority over issues relating to reclamation fees, and that §1235 does not allow operators to use favorable factual findings procured through state administrative proceedings to avoid the assessment of such fees. The court also holds that collateral estoppel is inappropriate in this case because the state and the federal government do not rely on the same criteria when determining compliance with the one-sixth requirement. In calculating reclamation fees, the state must take into account the estimated future production of coal and other minerals from the mine, while the federal government need only determine whether coal production at the mine exceeded one-sixth of the total tonnage extracted for commercial use in any 12-month period. To collaterally estop the government under these circumstances would make little sense because the predicate factual issues on which the ultimate legal conclusion depends are not identical from one proceeding to the next.

The court holds that the operator's use of the shale it extracted in its coal mining operations for improving the property's resale value by preparing it for use as a sanitary landfill constitutes a "commercial use" within SMCRA §701(28)(A). Congress' choice of the broad and general term "commercial use" implies that an operator need not sell extracted minerals to be entitled to the exemption. Nor does the phrase commercial use suggest that the operator must attempt to put those minerals to a commercial use that generates an immediate return or that reflects the value of those minerals as minerals.

The court holds that there is no constitutional, contractual, or statutory basis for awarding interest on the reimbursed reclamation fees. The court also holds that the operator's reliance on 28 U.S.C. §2411 as entitling it to interest is unavailing, because although that provision broadly refers to any internal revenue tax and provides that overpayments may entitle the payee to interest, it requires that the Commission of Internal Revenue take action to effect the interest payment. Thus, the court interprets §2411 as governing interest payments only for Title 26 taxes. The court also notes that SMCRA does not contain a section requiring the payment of interest on reimbursed reclamation fees. Nor can the company recover interest on its reclamation fees under 30 U.S.C. §1268(c) to that portion of the refund representing civil penalties, because the government assessed the penalties under 31 U.S.C. §3717, not §1268(c).

Counsel for Plaintiff
J. Douglas Drushal
Critchfield, Critchfield & Johnston
224 N. Market St., P.O. Box 599, Wooster OH 44691
(216) 264-4444

Counsel for Defendant
Jacques B. Gelin
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Before: GUY and BATCHELDER, Circuit Judges; and McKEAGUE, District Judge.^*