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COALEX STATE INQUIRY REPORT - 287

June 1994

Ted Biggs, Esquire

Department of Natural Resources

Division of Reclamation

Indiana Government Center South

402 West Washington Street, Room W-295 

Indianapolis, Indiana 46204

TOPIC: EXEMPTION FOR GOVERNMENT-FINANCED CONSTRUCTION (Updates 

COALEX REPORTS 115, 133 & 262)

INQUIRY: A city proposes to use a site which had previously been CO'd (for mining 

without a permit) as a public park and gym. The original operator will be the contractor. 

Is this site eligible for the government-financed construction exemption? Please locate 

federal, state and administrative decisions on operations exempted from SMCRA by 

meeting the government-financed construction criteria. 

SEARCH RESULTS: The existing COALEX State Inquiry Reports on the exemption for 

government-financed construction were updated using the COALEX Library and LEXIS. 

Two additional decisions were identified; these are listed below. The first decision, from 

the state court of Alabama is particularly relevant.

I. RESULTS OF ADDITIONAL RESEARCH

DARTY DEVELOPMENT CO., INC. v OSMRE, 632 F Supp 627 (N D AL 1986).

Darty leased land to the City of Carbon Hill for the purpose of constructing a 

recreational facility. The city contracted with Darty to undertake and complete the 

construction work, with the contracted price to be paid upon the completion of the 

construction. The court upheld OSM's issuance of a CO for mining without a permit, 

stating that the "exemption granted to Darty, by its terms, became null and void when 

the City of Carbon Hill failed to appropriate, from its budget, fifty-percent or more of the 

construction costs."

KIMBLE v DIERINGER, 1991 Ohio App LEXIS 2229 (Ohio Ct App 1991).
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The state court affirmed the Reclamation Board of Review's finding that "Kimble's 

extraction of coal was incidental to a permitted highway project, and was therefore not a 

coal mining operations". Kimble cut the property down to grade so that electric, gas and 

water lines could be moved onto his property for the highway widening. The coal 

encountered had to be removed because it was above grade for drainage for the 

highway.

II. COALEX STATE INQUIRY REPORT - 262, "Non-commercial use of 'other minerals'" 

(1993).

Two decisions from this report relating to exemption for government-financed 

construction are listed below. Only these two decisions are attached. 

VICTOR CONTRACTING CORP. v OSM; DICKENSON COUNTY, VA. v OSM, Docket 

Nos. NX 91-22-R, NX 91-23-R, NX 91-25-R, NX 91-26-R (1992).

The ALJ upheld the Virginia Division of Mined Lands Reclamation determination that the 

Honeycamp Landfill project qualified for the government-financed construction 

exemption. The primary purpose of the project was to bring the landfill into compliance 

with new waste management regulations and to expand the landfill to increase its use 

for an additional 10 plus years. Removal of the previously mined coal beneath the ridge 

created greater stability and lessened possible leachate problems.

WILDER COAL CO. v OSM, 112 IBLA 107, IBLA 87-576 (1989).

The Board affirmed the ALJ decision, finding that the augering of coal was performed in 

order to finance the grading the airport commission wished done and not because it was 

necessary to the construction of the airport. "Although the excavation down to the level 

of that seam may have been advisable as a means of assuring the stability of the 

surface, the extraction of the coal was not necessary to enable the construction of the 

airport facilities."

III. COALEX STATE INQUIRY REPORT - 133, "Exemption for government-financed 

construction" (1989).

The following are the descriptions of the materials included as part of the Report:

LEGISLATIVE HISTORY

119 CONG REC S1357 (daily ed. Jan. 18, 1973) (statement of Sen. Jackson).
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

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"This section [Surface mining operations not subject to the Act] provides specific 

exemptions for certain types of activities which might otherwise be construed to fall 

within the definition of 'surface mining operations' and thus be subject to the Act. 

Activities specifically excluded are (1) those which should not be included because the 

scope of their impact is so minor; (2) those which have a few characteristics in common 

to surface mining but which are primarily for other useful and, in some cases, public 

purposes; and (3) those which do not present the environmental or social costs which 

regulation under the Act would internalize. Neither the House-passed measure nor the 

committee-reported bill in the 92nd Congress provided this exemption. However, it is 

apparent that Federal legislation should not, because of ambiguity, address local 

conditions and the actions of individuals which have no national, State, or regional 

significance or which present no important questions of Federal or State policy."

"The exempted activities include:...Highway and railroad cuts and other excavations for 

public projects where the Federal, State or local government requires reclamation of the 

affected areas".

"The Secretary may identify other activities not subject to the Act and issue regulations 

further defining the exempted activities taking into consideration their magnitude (in tons 

and acres), their potential environmental impact, and whether the class, type, or types 

of activity are already subject to existing Federal, State, or local regulatory systems. In 

identifying and defining other exempted activities, the Secretary is expected to follow a 

rule of common sense. The purpose of the Act is to insure that social and environmental 

costs of surface mining are internalized by reclamation. Any activity which inflicts 

significant costs and which should be accompanied by reclamation should, of course, 

not be exempted. On the other hand, individual, non-commercial, extremely localized, 

activities which do not cause environmental damage should be exempted not only to 

insure fairness but also to relieve the administrative burden of the regulatory authorities 

so that the authorities can concentrate on those activities which truly require careful 

regulation." 

Regulation of Surface Mining, HEARINGS on HR 3 (and related bills) before the 

Subcommittee on the Environment and the Subcommittee on Mines and Mining of 

the House Committee on Interior and Insular Affairs, 93rd Cong, 1st Sess (April, 

1973). 

1. Statement of Dr. Darnell Whitt, Deputy Administrator for Field Services, Soil 

Conservation Service, from page 852. Included among the activities which "may be 

exempted" under these versions of the Act are: "Excavations by a governmental agency 

or its authorized contractors for highway and railroad cuts and fills."

2. Statement of Frank C. Wachter, National Industrial Sand Association, from page 

1189. "[T]he wording of the subparagraph...[regarding exempt excavations] appears to 

create a competitive inequity in the construction aggregates industries by creating an 

exempt category of aggregate producers...who apparently can avoid the cost of 
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reworking the excavated land. We suggest the following for clarification of what appears 

to us to be ambiguous wording: '(2) excavations by an agency of Federal, State or Local 

government or its authorized contractors for highway and railroad cuts if the Federal, 

State or Local government requires reclamation of the area affected.'"

Surface Mining Control and Reclamation Act of 1977, S REP No 95-128, 95th 

Cong, 1st Sess 98 (May 10, 1977). 

"This section [Surface mining operations not subject to this Act] provides specific 

exemptions for three types of coal surface mining which would otherwise be subject to 

the Act.

"These are (1) the extraction of coal by a landowner for his own noncommercial use 

from land owned or leased by him, (2) the extraction of coal where surface mining 

affects 2 acres or less, and (3) extraction of coal in the process of highway or other 

construction.

"The Committee felt that these three classes of surface mining cause very little 

environmental damage and that regulation of them would place a heavy burden on both 

the miner and the regulatory authority."

Surface Mining Control and Reclamation Act of 1977, HR REP No 95-493, 95th 

Cong, 1st Sess 112 (July 12, 1977). 

"The Senate amendment...included an exemption for all construction. The conferees 

agreed to a modified version of the Senate amendment which limits the exemption to 

extraction of coal as an incidental part of government-funded construction only, rather 

than all construction as originally provided in the Senate language."

IBSMA DECISIONS

HARDLY ABLE COAL CO., 2 IBSMA 270, IBSMA 80-31 (1980).

Hardly Able received a Notice of Violation (NOV) for mining within 100 feet of a county 

road. (They subsequently applied for and received a waiver of the 100-foot rule.) In the 

validity of the NOV, the Board concluded: "The Act contemplates that a miner obtain 

permission from the regulatory authority to mine within 100 feet of a public road before 

the mining takes place. The ex post facto approval by the regulatory authority of mining 

within 100 feet of a county road generally defeats the purpose of the Act, that is, giving 

interested parties notice allowing them to protest before the actual mining takes place." 

ALABAMA BY-PRODUCTS CORP. V OSM, 1 IBSMA 239, 86 I.D. 446 (1979).
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The Board ruled that the regulatory authority's approval of an exemption under the Act 

or regulations (the use of alternative materials in place of topsoil) must be obtained prior 

to the start of any action to which the exemption applies. 

FEDERAL DECISIONS

MONONGAHELA POWER CO. v MARSH, 809 F2d 41 (D D C 1982).

The Appeals Court reversed the District Court ruling and determined that the 

Monongahela Power was required to obtain a permit from the Army Corps of Engineers 

in order to "discharge fill material into navigable waters during construction of a 

hydroelectric facility previously licensed by the Federal Power Commission."

"Section 404 [of the Clean Water Act] transmits a crisp and unwavering message: all 

significant discharges, whether or not exempt from the permit requirement, must be 

subjected to Section 404(b)(1) scrutiny or its equivalent."

FEDERAL REGISTER ENTRIES

53 FR 5430 (FEBRUARY 24, 1988).

This is a notice of reopening of the comment period on proposed regulations pertaining 

to the "exemption for coal extraction incidental to the extraction of other minerals", 

SMCRA Sec. 701(28), 30 CFR Part 702. 

"Under Sec. 702.11(a), new operations would be required to file a complete application 

for exemption which would require an administrative decision by the regulatory authority 

before the operator would be allowed to commence coal extraction based upon the 

exemption. Requiring operators to apply for and receive exemptions is a procedure 

OSMRE successfully used earlier with regard to the special small operator exemption in 

30 CFR 710.12." 

IV. COALEX STATE INQUIRY REPORT - 115, "Exemption for government-financed

construction" (1989).

The following are the descriptions of the materials included as part of the Report: 

AIRPORT CONSTRUCTION

WILDER COAL CO. v. OSM, Docket No. NX 5-86-R (1987) [Virginia] 

The ALJ determined that "the extraction of coal by the use of auger mining" was not 

necessary in order for the airport expansion project to be accomplished. "Necessary" 
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was defined as "an engineering necessity, not an economic necessity." This distinction 

was made because, as one witness testified, the airport commission had "...encouraged 

[the] surface mining activity in order to produce revenues which were used to defray the 

costs of the airport improvements." Since Wilder Coal failed the first criterion (mining is 

"incidental"), the ALJ did not rule on the percentage of government financing of the 

construction.

CONCORD COAL CORP. v OSM, 3 IBSMA 92 (1981); CONCORD COAL CORP. v 

OSM, Docket Nos. CH 0-314-R, CH 0-335-R, CH 0-249-R (1980) [West Virginia]

The Board affirmed the ALJ's finding that the funds used to construct the airport "cannot 

be characterized as government funds". The Board determined that the Airport Authority 

was a "third party" to the coal lease, therefore, it did not "own the coal being mined by 

Concord" or the revenue being generated by the sale of the coal which was to 

"ultimately constitute the predominate source of compensation for the airport 

construction." The Board elaborated on the meaning of the phrase "the extraction of 

coal which is necessary to enable construction" by defining "necessity" as "a function of 

engineering--not cost--constraints." 

ROAD CONSTRUCTION

LEROY SEXTON v OSMRE, Docket No. NX 7-89-R (1987) [Tennessee]

Here, the ALJ determined that the coal operator failed to meet the required criteria for 

an exemption: The use of contour surface mining was not required in rebuilding of the 

road. The ALJ felt that the rebuilding effort was a stratagem to engage in mining 

"without having to observe... reclamation responsibilities." Nor was the 50% 

government-financing criterion met: Neither the coal operator nor his contractor 

"received any monetary compensation". Recovery of operational expenses and any 

profit was to be derived from the "sale of the coal which they removed in the course of 

performing" the road construction.

LITTLE GOOSE COAL CO. v OSM, Docket No. NX 2-23-R (1985); LITTLE GOOSE 

COAL CO. v OSM, Docket No. NX 2-23-P (1982) [Kentucky]

In both hearings, the ALJs found that the county failed to "provide the required 

financing" for the construction of a county road. In the earlier hearing, the ALJ found that 

the building of the road was "incidental to the extraction of coal" -- the Little Goose 

company had built a road with a bench width of 100 feet, while a width of "only 40 feet 

was necessary to build a county road...." In addition, there was a "likelihood of 

significant imminent environmental harm to land, air or water resources" due to the lack 

of sediment control.

WEST VIRGINIA ENERGY, INC., 3 IBSMA 301 (1981); OSM v WEST VIRGINIA 

ENERGY, INC., 4 IBSMA 120 (1982); WEST VIRGINIA ENERGY, INC. v OSM, 
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

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Docket Nos. CH 0-5-R, CH 0-11-R, CH 0-72-R, CH 0-63-P, CH 0-94-P (1980) [West 

Virginia]

The Board reversed the ALJ decision in finding that West Virginia Energy (Energy)'s 

road improvement project did not "fall within the definition of 'government-financed' 

construction." It determined that: "[a]lthough the State did provide some material to 

Energy and although it expended a considerable amount of effort on its part of the 

project, no State funds were used to complete Energy's part of the project."

In anticipation that it would be removing coal in the conduct of the road rehabilitation 

project, Energy had inquired whether a permit was necessary. The State replied: "...no 

permit was necessary insofar as there was an agreement covering the project and that 

there was a performance bond (which Energy had posted for completion)."

MOUNTAIN ENTERPRISES COAL CO. v OSM, Docket Nos. CH 1-88-R, CH 1-109-R 

(1981) [Virginia]

Under contract to the county, Mountain Enterprises relocated a road which OSM agreed 

improved "the quality of life in the area". The ALJ stated that: "the removal of the coal, 

under the circumstances, was necessary in order to obtain the quantity of material 

necessary to construct the relocated road."

However, the ALJ ruled that the county had "contributed no financing to the operation" 

and therefore, "the activities of [Mountain Enterprises] are subject to the Act...."

MISCELLANEOUS CONSTRUCTION

H.C. BOSTIC COAL CO. v OSM, Docket Nos. NX 4-78-R, NX 5-26-P (1986) [Virginia]

Bostic was given the right to "haul coal across school property" in return for "work in 

building [an elementary school] playground." The ALJ determined that the arrangement 

constituted an "in-kind payment" and "[t]hus, this project cannot be considered 

'government-financed construction'...." 

CLAYPOOL CONSTRUCTION CO. v OSM, Docket Nos. CH 9-9-R, CH 9-22-R (1979) 

[West Virginia]

Claypool Construction extracted coal in the process of transforming a previously mined 

area, which had become a dump site, into a trailer park. The ALJ found that: "[t]he mere 

fact that [Claypool] was improving the property while at the same time removing over 

10,000 tons of coal and selling it into commerce does not alter the requirement of the 

Act since the Act does not consider the beautification of real estate as an exemption."

CASES WITH CONTRARY FINDINGS
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DENNIS R. PATRICK, 1 IBSMA 158 (1979) [Kentucky]

The Board held that Patrick, in a privately financed operation, did not require a strip 

mining permit to excavate coal in the process of creating a "level bench for a housing 

development", stating: "...under the initial regulatory program, OSM has no jurisdiction 

over a surface coal mining operation which occurs on state land and which is not 

subject to existing state regulation within the scope of any of the initial federal 

performance standards."

SQUIRE BAKER v OSM, Docket No. NX 9-25-R (1979) [Kentucky]

In the process of excavating basements of new homes in the area of previous deep 

mining, a coal seam was exposed. All work ceased while Squire Baker applied to 

Kentucky for a permit to remove and sell the coal. No coal was mined and there was no 

intention to mine without a permit, therefore, the ALJ ruled that Squire Baker had "done 

no act which is presently subject to the Surface Mining Control and Reclamation Act of 

1977."

FEDERAL REGISTER ENTRY

On the April 25, 1988, Interior published its "Semiannual agenda of rules 

scheduled for review or development" (53 FR 13896).

Interior announced that action to revise the "government-financed construction" 

exemption regulations relating to Abandoned Mine Lands programs was withdrawn. 

ATTACHMENTS

1. DARTY DEVELOPMENT CO., INC. v OSMRE, 632 F Supp 627 (N D AL 1986).

2. KIMBLE v DIERINGER, 1991 Ohio App LEXIS 2229 (Ohio Ct App 1991).

3. COALEX STATE INQUIRY REPORT - 262, "Non-commercial use of 'other 

minerals'" (1993). 

A. VICTOR CONTRACTING CORP. v OSM; Dickenson County, VA. v OSM, 

Docket Nos. NX 91-22-R, NX 91-23-R, NX 91-25-R, NX 91-26-R (1992). 

B. WILDER COAL CO. v OSM, 112 IBLA 107, IBLA 87-576 (1989).

4. COALEX STATE INQUIRY REPORT - 133, "Exemption for government-financed 

construction" (1989). [with attachments] 

A. Excerpts from 119 CONG REC S1357 (daily ed. Jan. 18, 1973)(statement 

of Sen. Jackson). 
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

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B. Excerpts from Regulation of Surface Mining, HEARINGS on HR 3 (and 

related bills) before the Subcommittee on the Environment and the 

Subcommittee on Mines and Mining of the House Committee on Interior 

and Insular Affairs, 93rd Cong, 1st Sess 852 (April, 1973)(statement of Dr. 

Darnell Whitt, Deputy Administrator for Field Services, Soil Conservation 

Service). 

C. Excerpts from Regulation of Surface Mining, HEARINGS on HR 3 (and 

related bills) before the Subcommittee on the Environment and the 

Subcommittee on Mines and Mining of the House Committee on Interior 

and Insular Affairs, 93rd Cong, 1st Sess 1189 (April, 1973)(statement of 

Frank C. Wachter, National Industrial Sand Association). 

D. Excerpts from Surface Mining Control and Reclamation Act of 1977, S 

REP No 95-128, 95th Cong, 1st Sess 98 (May 10, 1977). 

E. Excerpts from Surface Mining Control and Reclamation Act of 1977, HR 

REP No 95-493, 95th Cong, 1st Sess 112 (July 12, 1977). 

F. HARDLY ABLE COAL CO., 2 IBSMA 270, IBSMA 80-31 (1980). 

G. ALABAMA BY-PRODUCTS CORP. v OSM, 1 IBSMA 239, 86 I.D. 446 

(1979). 

H. Excerpts from MONONGAHELA POWER CO. v MARSH, 809 F2d 41 (D 

D C 1982). 

I. 53 FR 5430 (FEBRUARY 24, 1988). Notice of reopening of public 

comment period on all issues of "Exemptions for Coal Extraction Incidental 

to the Extraction of Other Mineral", 30 CFR 702.

J. COALEX STATE INQUIRY REPORT - 115, "Exemption for governmentfinanced construction" (1989). 

A. WILDER COAL CO. v OSM, Docket No. NX 5-86-R (1987) 

B. CONCORD COAL CORP. v OSM, 3 IBSMA 92 (1981) 

C. CONCORD COAL CORP. v OSM, Docket Nos. CH 0-314-R, CH 0-

335-R, CH 0-249-R (1980) 

D. LEROY SEXTON v OSMRE, Docket No. NX 7-89-R (1987) 

E. LITTLE GOOSE COAL CO. v OSM, Docket No. NX 2-23-R (1985) 

F. LITTLE GOOSE COAL CO. v OSM, Docket No. NX 2-23-P (1982) 

G. WEST VIRGINIA ENERGY, INC., 3 IBSMA 301 (1981) 

H. OSM v WEST VIRGINIA ENERGY, INC., 4 IBSMA 120 (1982) 

I. WEST VIRGINIA ENERGY, INC. v OSM, Docket Nos. CH 0-5-R, 

CH 0-11-R, CH 0-72-R, CH 0-63-P, CH 0-94-P (1980) 

J. MOUNTAIN ENTERPRISES COAL CO. v OSM, Docket Nos. CH 1-

88-R, CH 1-109-R (1981) 

K. CLAYPOOL CONSTRUCTION CO. v OSM, Docket Nos. CH 9-9-R, 

CH 9-22-R (1979) ,/ 

L. DENNIS R. PATRICK, 1 IBSMA 158 (1979) 

M. SQUIRE BAKER v OSM, Docket No. NX 9-25-R (1979) 

N. 53 FR 13896 (APRIL 25, 1988)