OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

Search conducted by: Joyce Zweben Scall Page 1 of 7

COALEX STATE INQUIRY REPORT - 342

June 1998

Eva Brault

Attorney General's Office

Department of Natural Resources

Fountain Square - Bldg D-2

Columbus, Ohio 43224-1387 

TOPIC: 522(a)(6) - "SUBSTANTIAL LEGAL AND FINANCIAL COMMITMENT"

INQUIRY: Certain lands in Ohio were exempted from being designated as "unsuitable 

for surface mining" due to "substantial legal and financial commitment" (SLFC) which 

was in existence prior to January 4, 1977. The exempted lands were sold. Does the 

exemption transfer to the new owners? How do valid existing rights (VER) relate to 

SLFC - which has priority? Please locate any relevant materials. 

SEARCH RESULTS: Using the COALEX Library and other LEXIS materials, a number 

of relevant items were identified. These include congressional reports and Federal 

Register preambles to proposed and final rules discussing SLFC, VER, the relationship 

between SLFC and VER, and the transferability of VER. Pertinent excerpts, in 

chronological order, follow. Copies of the materials are attached. 

LEGISLATIVE HISTORY

The discussion of SMCRA section 522 (Designating Areas Unsuitable for Surface Coal 

Mining) from the HOUSE OF REPRESENTATIVES REPORT 95-218, 95th Cong. 1st 

Session (April 22, 1977) provides a good description of congressional intent on the 

issues in question. A quotation from the "Elements of Mine Regulation Program" section 

appears below; excerpts from other legislative history material are attached for 

background.

"The designation process is not intended to be used as a process to close existing mine 

operations, although the area in which such operations are located may be designated 

with respect to future mines. The committee recognized that an existing mine might not 

be one actually producing coal, because it was in a substantial stage of development 

prior to coal production. Thus the meaning of existing operations is extended to include 

operations for which there are ‘substantial legal and financial commitments.'
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

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"The phrase ‘substantial legal and financial commitments' in the designation section and 

other provisions of the act is intended to apply to situations where, on the basis of a 

long-term coal contract, investments have been made in powerplants, railroads, coal 

handling and storage facilities and other capital-intensive activities. The committee does 

not intend that mere ownership or acquisition costs of the coal itself or the right to mine 

it should constitute ‘substantial legal and financial commitments.'

"It should be noted that the designation process is structured to be applied on an area 

basis, rather than a site by site determination which presents issues more appropriately 

addressed in the permit application process. The committee believes that the area by 

area approach of section 522 thus serves the industry since such a process may, in 

advance of application, identify lands which are either not open to surface mining or 

where surface mining is subject to restrictions."

REGULATORY HISTORY

43 FR 41662 (SEPTEMBER 18, 1978). Proposed rules. 762.5 Definitions.

The discussion of the proposed definition of SLFC included a definition of the phrase 

"major investments". This definition was omitted from the 1979 final rules because it did 

not accurately reflect the legislative history. (See below)

44 FR 14902 (MARCH 13, 1979). Permanent program final preamble - Final rule. 30 

CFR Part 761 Areas designated by Act of Congress. Definition of VER.

"OSM decided that the VER phrase must be distinguished from the definition of 

substantial legal and financial commitments. See 30 CFR 762.5. The latter exemption 

applies to the petition process under Section 522(a), whereas VER applies to the 

Congressional prohibitions of mining under Section 522(e). This distinction suggests 

that, in order for property owners to qualify for VER and thereby mine in the prohibited 

areas of Section 522(e), they must have a property interest in the mine that is even 

greater than the substantial legal and financial commitments needed to mine despite a 

designation by petition under Section 522(a). Thus, OSM believes that VER must be 

more than ‘significant investments, that have been made on the basis of a long-term 

coal contact, in powerplants, haulroads, coal preparation, extraction, handling and 

storage facilities, and other capital intensive activities,' as substantial legal and financial 

commitments is defined in Section 762.5."

44 FR 14902 (MARCH 13, 1979). Permanent program final preamble - Final rule. 30 

CFR Part 762 Criteria for designating areas as unsuitable for surface coal mining 

operations. 762.5 Definitions.

The definition of SLFC in the final rules deleted some of the language found in the 

proposed rules in order to reflect the legislative history. See the quote from H.R. Rep. 

95-218, above.
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

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45 FR 52467 (AUGUST 7, 1980). Preliminary findings on Mower Lumber Co.'s 

request for determination of VER to conduct underground coal mining operations 

in the Upper Shavers Fork Sub-unit of the Monongahela National Forest, in 

Randolph County, WV.

The Director, in his preliminary decision that Mower Lumber did have VER, cited to the 

1979 final rule defining VER, above, and added:

"[A] finding of valid existing rights will also include a finding of substantial financial and 

legal commitments, and thereby exempt those areas with VER from further 

consideration for designation as unsuitable for mining. However, any finding of [VER 

and SLFC] will in no way affect the responsibility of Mower to comply with the permitting 

and performance standards requirements of the interim and permanent Federal lands 

programs...."

The determination of VER was upheld in IBSMA 81-64, 4 IBSMA 192 (December 10, 

1982).

See, also, 46 FR 36758 (July 15, 1981) and 46 FR 50422 (October 13, 1981). 

Findings and Decision on Greenwood Land and Mining Co.'s request for a 

determination of VER to conduct underground coal mining operations in the Daniel 

Boone National Forest in Pulaski and McCreary Counties, KY. 

47 FR 25278 (JUNE 10, 1982). Proposed rules. Areas unsuitable, etc.

"OSM has been presented with questions regarding the transferability of [SLFC] from 

one coal operator to another, for a given operation and land area. OSM preliminarily 

believes that [SLFC] may be transferred as part of the rights and commitments sold 

along with a business. Once established, this right is similar to others which are 

ordinarily transferred in the sale of businesses and properties. Not to allow such a 

transfer would diminish the value of the property."

48 FR 41312 (SEPTEMBER 14, 1983). Final rule. Areas unsuitable, etc. 

Excerpt from VER's "Relationship to ‘Substantial Legal and Financial Commitments'"

"OSM reexamined the definition of VER and determined that the relationship between 

VER and [SLFC] is not suggested by the legislative history. Both concepts were 

covered repeatedly in the long legislative history. Each was discussed separately in 

every case. Nowhere in the legislative history does Congress compare the two 

concepts. Thus, the two concepts are separate and distinct."

From 762.5 Definitions:
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

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"OSM proposed to revise the definition of [SLFC]. The existing definition requires both 

investments and commitments in capital-intensive activities and a long-term coal 

contract. The proposed revision would have recognized that substantial commitments 

can be made with or without a long-term coal contract.

"Following a review of the legislative history, OSM has decided to retain the existing 

definition."

52 FR 39186 (OCTOBER 20, 1987). Proposed rule. Unsuitability criteria; SLFC.

See below.

53 FR 26582 (JULY 13, 1988). Final rule. Unsuitability criteria; SLFC.

"The proposed rule would revise the definition of [SLFC] to clarify that an existing mine 

is not necessary for SLFC." The revision was proposed in response to the court's ruling 

in In re: Permanent Surface Mining Regulation Litigation II, Civil Action No. 79-1144 

(DDC, July 15, 1985)."

The final rule adopted the "proposal to delete all language describing ‘an existing mine' 

requirement for a finding of [SLFC].

54 FR 11576 (MARCH 21, 1989). Decision on BHP-Utah International Inc. (UII)'s 

request for determination of SLFC for lands in Kane County, UT.

The Director determined that UII did not meet the criteria for SLFC: "the information 

submitted by UII does not state to what extent [the enumerated] expenses and actions 

are attributable solely to lands within the area designated unsuitable for surface mining. 

In addition, the information provided by UII indicates that these actions and investments 

were not made on the basis of a long-term coal contract prior to January 4, 1977".

COALEX STATE INQUIRY REPORT - 283, "TRANSFERABILITY OF VALID 

EXISTING RIGHTS (VER)" (1994).

This Report addresses the question of transferring the permit of a tipple with VER where 

there was a break in the permit. The following Federal Register Notice on VER was 

included as part of the Report:

56 FR 33152 (JULY 18, 1991). Proposed rule. Areas unsuitable for mining; areas 

designated by act of Congress. 

Transferability of VER:

"OSM believes that to interpret SMCRA to impose or authorize a limit on VER 

transferability would not comply with the intent of Congress in enacting SMCRA. Thus, 
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

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the property rights requirement in this proposed section incorporates the concept that 

VER is transferable."

"[I]f a person with a property interest in the coal on the applicable effective date had 

VER, that person could, if permitted by applicable laws and regulations, transfer the 

VER to a successor after the effective date. The transferred right would suffice as the 

basis for a finding of VER for the successor in interest. The determination of VER takes 

into account the nature of the rights applicable on the applicable effective date. 

Subsequent property transactions cannot be used to create VER if it did not exist on the

effective date." 

57 FR 62207 (DECEMBER 30, 1992). Final rule. Approval of amendment to Indiana 

program.

The enclosed excerpt discusses the approval of Indiana's definition of SLFC and how it 

differs from the federal counterpart, e.g., Indiana's proposed rule "provides examples of 

‘other capital intensive activities' which qualify under the proposed definition [of SLFC] 

because they are based on a long term coal contract." 

62 FR 4836 (JANUARY 31, 1997). Proposed rule. Valid existing rights.

7. Transferability of VER

"As in 1991, OSM is proposing to reaffirm that VER are transferable, primarily because 

the proposed definition of VER includes a property rights component. In essence, OSM 

is proposing to consider VER as being attached to the property to which those rights 

pertain rather than as being valid only for the person claiming such rights or, with the 

exception of VER under the needed for and adjacent standard, for a specific operation. 

(VER under the needed for and adjacent standard would attach jointly to both the 

property and a specific surface coal mining operation.) Once attached to the property, 

VER would become subject to whatever State property law exists concerning rights of 

alienation as an element of property ownership. SMCRA (especially section 510(b)(6)) 

generally defers to State property law.

"The VER exemption is analogous to a zoning variance, which, in the interest of equity, 

allows an otherwise prohibited use to occur under certain fact-specific circumstances 

even though that use was not in existence on the land in question at the time the zoning 

ordinance took effect. Like VER under the proposed rule, zoning variances typically 

convey with the title to the property even if the rights conferred by the variance have not 

been exercised.

"However, the alienation or transfer of property is not an absolute right. Certain interests 

in real property, such as leases, licenses or profits a prendre, may be inherently 

nontransferable or of limited transferability, either by their terms or by operation of State 

law. If a person's coal property interests are of this nature, then any VER resting on 
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

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those interests would also be nontransferable. Furthermore, it is possible that a State 

could designate VER under SMCRA as nontransferable as a matter of law.

"In the rule being published today, OSM is proposing to reaffirm the transferability of 

VER to the extent that the underlying property rights are transferable under State law. 

Therefore, to the extent that State law allows the sale or other transfer of the underlying 

coal rights or other pertinent property rights, a person with VER may sell or transfer the 

VER to another person as an appurtenance to the coal or other property rights. Nothing 

in this rule is intended to create rights that do not already exist in State law or expand 

upon those that do. Individual States may prohibit VER transfers to the extent that they 

have the authority to do so under State law."

ATTACHMENTS

A. Legislative History 

1. H. R. REP. 95-218, 95th Cong., 1st Sess. pp 94-95, 156-157(April 22, 

1977). 

2. H.R. REP. 95-128, 95th Cong., 1st Sess. pp 78-79 (May 10, 1977). 

3. 123 CONG. REC. S8083 (May 20, 1977). 

4. HEARING (House), 94th Cong., 1st Sess. pp 91-92 (June 3, 1975). 

5. H.R. REP. 93-1072, 93rd Cong., 2nd Sess. (May 30, 1974).

B. 43 FR 41662 (SEPTEMBER 18, 1978). Proposed rules. 762.5 Definitions. 

C. 44 FR 14902 (MARCH 13, 1979). Permanent program final preamble - Final rule. 

30 CFR Part 761 Areas designated by Act of Congress. Definition of VER. 

D. 44 FR 14902 (MARCH 13, 1979). Permanent program final preamble - Final rule. 

30 CFR Part 762 Criteria for designating areas as unsuitable for surface coal 

mining operations. 762.5 Definitions. 

E. 45 FR 52467 (AUGUST 7, 1980). Preliminary findings on Mower Lumber Co.'s 

request for determination of VER to conduct underground coal mining operations 

in the Upper Shavers Fork Sub-unit of the Monongahela National Forest, in 

Randolph County, WV. 

F. IBSMA 81-64, 4 IBSMA 192 (December 10, 1982). 

G. 46 FR 36758 (JULY 15, 1981) and 46 FR 50422 (OCTOBER 13, 1981). Findings 

and Decision on Greenwood Land and Mining Co.'s request for a determination 

of VER to conduct underground coal mining operations in the Daniel Boone 

National Forest in Pulaski and McCreary Counties, KY. 

H. 47 FR 25278 (JUNE 10, 1982). Proposed rules. Areas unsuitable, etc. 

I. 48 FR 41312 (SEPTEMBER 14, 1983). Final rule. Areas unsuitable, etc. 

J. 52 FR 39186 (OCTOBER 20, 1987). Proposed rule. Unsuitability criteria; SLFC. 

K. 53 FR 26582 (JULY 13, 1988). Final rule. Unsuitability criteria; SLFC. 

L. 54 FR 11576 (MARCH 21, 1989). Decision on BHP-Utah International Inc. (UII)'s 

request for determination of SLFC for lands in Kane County, UT. 

M. COALEX STATE INQUIRY REPORT - 283, "TRANSFERABILITY OF VALID 

EXISTING RIGHTS (VER)" (1994). 
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

Search conducted by: Joyce Zweben Scall Page 7 of 7

1. 56 FR 33152 (JULY 18, 1991). Proposed rule. Areas unsuitable for 

mining; areas designated by act of Congress. 

N. 57 FR 62207 (DECEMBER 30, 1992). Final rule. Approval of amendment to 

Indiana program. 

O. 62 FR 4836 (JANUARY 31, 1997). Proposed rule. Valid existing rights.