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------~--------------~----~--------~ u:s. DEPARTMENT OF THE INTERIO SubiectNumber: G~lT-11 

OFFICE OF SURFACE MINING~-::--~~:-----1 RECLAMATION AND ENFORCEMENT Transmittal Number: 

461 

Date: DIRECTIVES SYSTEM "8/4/88 

Subject: SOAP ANNUAL LIABILITY REVIEWS 

Approval: DIRECTOR 

1. Purpose. This directive provides policy and procedures for 

conducting annual liability reviews and for seeking reimbursement 

from applicants who have received-assistance under the Federal Small 

·operator Assistance Program (SOAP). 

2. Definitions. 

a. :Actual Production. The total amount of coal produced from 

all mining operations owned by the applicant during each year of the 

permit for which assistance was provided. 

b. Applicant. An individual, corporation, or partnership who 

has submitted an application for assistance through the SOAP or who 

has been issued a Surface Mining Control and Reclamation Act (SMCRA) 

permit after receiving SOAP assistance for the permit. 

c. Assistance. Any product or service provided to an 

_.applicant by a qualified laboratory under contract to the Office of 

Surface Mining Reclamation and Enforcement (OSMRE). 

d. Attributed Production. The total amount of coal produced 

during each year of the permit by 1) individuals or business 

entities having a financial interest ip the applicant; 2) operations 

in which the applicant has a financial· interest; 3) members of the 

applicant's family or relatives; and 4) operations owned by persons 

who control the applicant's operation, as prorated and discussed in 

detail at 30 CFR 795.6. 

e. Consecutive 12-Month Period. A period of time that can 

cover any consecutive 12 months without regard to calendar year, 

fiscal year, or any other annual basis. Once the consecutive 12-

month. begins for an applicant, generally through reporting 

·associated with AML fee compliance system, its time limits are 

defined and remain fixed over the period of liability. 

Subsequently, total production for the annual liability reviews is 

tabulated o~ the basis of this consecutive 12-month period. 

f. Good Faith. A determination made by a FOD that a SOAP 

applicant at all times has acted honestly and reasonably and in a 

manner consistent with the intent of the SOAP program. 

g. Liability Criteria. The basis upon.which annual reviews 

of continued applicant eligibility for the SOAP are conducted as 

prescribed in section 3.c.(l)(c) of this directive. 

h. Liability Period. The term of the surface mining permit 

for which assistance was provided or the five years following permit 

issuance, whichever is shorter. 

OSM/103 7/22/86 

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i. Qualified Laboratory. Any public or private firm, i.e. 

contractor, determined by OSMRE to be qualified to provide authorized 

technical services under the SOAP. 

j. Reimbursement. The repayment of SOAP funds expended by OSMRE 

on behalf of a SOAP applicant who has failed to satisfy the SOAP 

liability criteria. 

k. SOAP Funds. Monies appropriated by Congress to the OSMRE for 

the purpose of providing authorized technical services through the 

SOAP. 

1. Total Production. The sum of actual and attributed production 

from the applicant at all operations permitted under SMCRA for any 

consecutive 12-month period of the applicant's liability period. 

3. Policy/Procedures. 

a. Policy. 

(1) An applicant who has received SOAP assistance must 

continue to satisfy all eligibility criteria during the liability 

period or must reimburse OSMRE for SOAP funds expended on his/her 

behalf as set forth in 3.c.{l){c)~. 

(2) OSMRE may waive liability under a good-faith waiver 

provision. 

(3) Liability reviews shall be conducted annually for each 

applicant. 

·. 

(4) Production data (based on sales) from the AML Fee 

Collection System will be used for the liability reviews. 

b. Responsibilities. 

(1) Assistant Director, Program Policy, develops national 

program policies and procedures related to annual liability reviews for 

SOAP. 

(2) Field Office Directors (FOD), conduct annual liability 

reviews, make decisions on liability, and render final agency decisions 

on liability, and maintain records. 

(3) The Chief, Division of Financial Management, is 

responsible for collection of all reimbursements. 

(4) Manager, AML Fee Compliance System, will monitor and 

compile actual and attributed production information for each 

applicant, on the basis of a 12-month consecutive period. 

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c. Procedures. 

(1) Annual Liability Review. 

(a) Record Keeping. All pertinent SOAP documents shall be 

maintained for each applicant by the appropriate FOD. These shall 

include SOAP applications, contract documents showing award amounts and 

payments needed to support any reimbursement claim, findings of annual 

liability reviews, support for any waiver of liability under the good 

faith provision, and all correspondence related to these documents. 

(b) Liability Reviews. The liability of each SOAP 

applicant will be reviewed and a decision on whether reimbursement is 

warranted shall be rendered in all cases where SOAP funds have been 

expended on behalf of an applicant. 

~ Cases in which SOAP contracts have been completed. 

The FOD will establish an annual liability review cycle for each 

applicant based on production reports for the applicant that are 

available through the AML Fee Compliance System. 

2 Cases in which SOAP contracts have been cancelled. 

In some cases, SOAP contracts may be suspended and/or subsequently 

cancelled at the request of either the applicant or OSMRE. In either 

case, the FOD will conduct a liability review to determine whether 

liability exists. 

(c) Liability Findings. A written finding on liability is 

prepared annually by the appropriate FOD. This finding shall reflect 

consideration of the specific liability criteria listed below. 

1 Submission of Permit Application. Liability for 

reimbursement on the part of the applicant will exist if a permit 

application is not submitted within one year of receipt of the apprbved 

laboratory report, if the applicant does not respond in a timely manner 

to deficiencies identified during the permit review process, or if the 

permit application is denied. 

2 Commencement of Mining. The three-year timeframes 

specified in SMCRA and the permanent program regulations regarding 

commencement of mining following issuance of a permit will apply to all 

SOAP applicants. An applicant will be liable for reimbursement if he 

does not commence mining within this three-year period. 

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3 Total Production. The applicant is responsible f or 

complying with the 100 , 000 ton total annual production limit while 

mining under a permit for which SOAP assistance was received. Total 

production is determined from all properties and interests held during 

mining at the site for which the applicant received SOAP assistance, 

regardless of when they were acquired. Total production for each 

applicant will be monitored by the Manager, AML Fee Compliance System. 

If an applicant exceeds the 100,000 ton annual production limit and has 

several active permits for which he received SOAP assistance, it would 

be unreasonable to seek reimbursement for monies expended on all SOAP 

studies. OSMRE policy ties excess production to the last assistance 

site and would seek reimbursement for contract costs at that site only. 

Production at a site for which reimbursement is sought would no longer 

count toward subsequent calculations of total annual production with 

regard to reimbursement . However, the applicant nonetheless would be 

ineligible for futur~ SOAP assistance as long as total annual 

production from all sites exceeded 100,000 tons. 

~ Sale of Coal Company or Lease. The permanent 

program rules are specific on liability related to the sale or transfer 

of permits for which SOAP assistance is provided . (See section 

795 . 12(a)(3).) This also applies where an applicant receiving SOAP 

assistance sells his lease or company. The applicant and successor in 

interest are jointly and severally liable for reimbursement in cases 

where total annual production from all sites exceeds 100,000 tons. 

5 Submission of False Information. If it is 

demonstrated that an applicant knowingly has submitted false 

information in the SOAP application, such as a failure to disclose all 

attributed production, he is liable for reimbursement of all SOAP funds 

expended. In addition , the FOD shall refer the matter to the Office of 

Inspector General for appropriate action. 

6 Good-Faith Waiver. A decision by the FOD to waive 

liability under the good faith provision of section 79 5 .12(b) will be 

based on a case- by-case evaluation of the circumstances of the 

applicant. The purpose of the good - faith waiver is to provide the FOD 

with the option of waiving liability if the circumstances which would 

otherwis e require reimbursement were outside the applicant 's control. 

OSMRE applies a "reasonableness" standard in evaluating good faith. An 

applicant must react in a reasonable manner by notifying the FOD of 

changing conditions which would affect his or her continued 

eligibility, expectation to seek a permit or mine coal, or ability to 

meet other r equirements related to the completion of the SOAP project. 

Prompt notification on the part of the applicant may allow OSMRE to 

cancel a project and minimize unnecessary expenditures . OSMRE would 

not be inclined to support a finding of good faith if the review 

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indicates that the applicant failed to notify the regulatory authority 

of any changes that had an impact on the original SOAP project, 

including its purpose and the eligibility requirements for it. 

OSMRE requires reimbursement in those cases where the operator has 

exceeded 100,000 tons of actual and attributed production under a 

permanent program permit. Since the applicant is in control of 

production of the mining operation, liability in these cases is 

straightforward. An applicant controls production and thus would be 

able to adjust production and remain below the 100,000 ton annual limit 

or to knowingly exceed the limit and incur the responsibility for 

reimbursement. (Section 507(c) of the SMCRA covering Small Operator 

Assistance does not provide for averaging production over two or more 

years.) 

(2) Final Agency Decision on Liability. 

For those annual liability reviews which indicate 

potential liability, the FOD shall notify the applicant of the 

potential liability using certified mail. The letter should also 

state the following: 

(a) the reason for the liability; 

(b) the amount of money involved; 

(c) that a final agency decision will be rendered in 30 

days from the date of the letter; and 

(d) the applicant has the opportunity to respond in writing 

or request a meeting with the FOD within this 30 day period, if the 

applicant believes there have been 

extenuating circumstances or wishes to provide any other information 

that may have a direct bearing on the final agency decision. 

Following the 30 day period, the FOD will render a final agency 

decision considering any relevant information provided by the 

applicant. The final agency decision will declare either1 the applicant's liability is waived based on the 

good faith provision, or 

2 the applicant is not liable based on information 

which showed the-FOD finding to be based on inaccurate data, or 

3 . the applicant is liable. 

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(e) Any final agency decision must be conveyed to the 

applicant in writing. The FOD shall notify the applicant for those 

cases where liability has been waived or determined to not exist. For 

cases where the final agency decision finds the applicant liable, the 

FOD shall write a letter to the Chief, Division of Financial 

Management. A copy of that letter will be sent to the Manager, Small 

Operator Assistance Program. The letter shall contain: 

1 a statement of the final agency decision; 

2 a request to bill the applicant for the debt; and 

3 attachments that represent all 

documents and correspondence related to the case. 

initiates the reimbursement process. 

(3) Reimbursement Process. 

pertinent SOAP 

This letter 

Within 20 days of receipt of the FOD letter, the Chief, 

Division of Financial Management, shall notify the applicant of the 

final agency decision and will seek reimbursement following established 

debt collection procedures consistent with the Department of Interior 

Manual, Part 344, Debt Collection (SO FR, March 1, 1985). These 

procedures among other things provide for administrative remedies 

through the Interior Board of Land Appeals, and notice of interest, 

penalties and administrative costs. 

The Chief, Division of Financial Management shall ensure that 

recovered Federal SOAP funds are reflected as recoveries against the 

contract through which the authorized services were provided to the 

applicant. 

(4) Oversight of State Programs. 

This directive is not intended to serve as a basis for the 

oversight of State SOAPs. When evaluating a State's implementation of 

its approved regulatory program, OSMRE personnel shall adhere to all 

requirements and policies contained in that program. 

4. Reporting Requirements. The Manager, AML Fee Compliance System, 

will provide total production data for each applicant to the 

appropriate FOD. The total production data will be based on a 

consecutive 12-month period. 

The Chief, Division of Financial Management will provide monthly 

status reports to the Manager, Small Operator Assistance Program for 

each applicant referred to him/her for action by a FOD. 

5. References. Sections 506(c) and 507(c) of SMCRA and 30 CFR 

section 773.19(e) and Part 795. 

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6. Effect on Other Documents. This directive supersedes the July 30, 

1985, memorandum signed by the Director, subject: ··use of Good-Faith 

Waiver in the Small Operator Assistance Program, .. and the November 7, 

1983, memorandum signed by the Assistant Director, Program Operations 

and Inspection, subject: ''Clarification on Reimbursement and Contract 

Mining Related to the Small Operator Assistance r=:rogram ... 

7. Effective Date. Upon issuance. 

8. Contact. Chief, Division of Technical Services, 343-1480 and 

Manager, Small Operator Assistance Program, 343-1507. 

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