OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

Search conducted by: Joyce Zweben Scall Page 1 of 3

COALEX STATE INQUIRY REPORT - 300

October 1994

Fred A. Bee, Esquire

Natural Resources and Environmental Protection Cabinet

Department of Law

Fifth Floor, Capital Plaza Tower

Frankfort, Kentucky 40601

TOPIC: DENIAL OF ADMINISTRATIVE EXPENSES

INQUIRY: A mining operator with a valid permit filed for bankruptcy under chapter 11. 

The operator stopped removing coal and has received a number of NOVs. If the 

operator was still actively mining, the civil penalties would get priority as administrative 

expenses. [See IN RE N.P. MINING CO., INC. and IN RE BILL'S COAL CO., INC.] Are 

there any decisions which find that civil penalties get priority if the operator is not 

actively mining under a valid permit?

SEARCH RESULTS: A search of COALEX and other LEXIS files was unable to 

identify any materials directly on point. Some related cases, law review articles, Federal 

Register preambles and an OSM Directive on administrative expenses and temporary 

cessation were retrieved. These are listed below; copies are attached.

DECISIONS

UNITED STATES DOI v ELLIOTT, 761 F 2d 168 (4th Cir 1985). UNITED STATES DOI 

v ELLIOTT, 40 Bankr 985 (WD Va 1984). 

These cases involving postpetition violations of SMCRA were superseded by statute as 

stated IN RE N.P. MINING. 

IN RE YOUNGER, 165 Bankr 965 (SD Ga 1994).

This case, unrelated to mining, cites to IN RE N.P. MINING and READING CO. v 

BROWN. [See the attached brief.] 

LAW REVIEW ARTICLES

De Wolf, "Strange Things are Afoot at the Circle K: Agency Action Against Leased 

Sites in Environmental Bankruptcy", 21 B C Envtl Aff L Rev 145 (Fall, 1993).
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

Search conducted by: Joyce Zweben Scall Page 2 of 3

Citing to IN RE N.P. MINING:

"Some Agencies with environmental claims against bankrupt [potentially responsible 

parties] have found tremendous success filing for administrative expense priority under 

Section 503 of the Code. Administrative expense priority provides the highest possible 

priority available under the Code for unsecured creditors, qualifying claims to be paid in 

full, ahead of all other unsecured creditors. The rationale behind elevating certain 

expenses to this high priority is to encourage third parties to continue to conduct 

business with the estate, in an effort to rehabilitate the debtor's business and preserve 

the estate's assets. Without a guarantee of first priority, third parties, such as goods and 

service supplies, would not deal with a business in chapter 11 reorganization or chapter 

7 liquidation, thereby greatly hindering administration of the estate."

III. The Agencies Get Tough, B. Administrative Expense Priority, p. 171-172.

Drake and Dilz, "Bankruptcy", 44 Mercer L Rev 1073 (1993). [Excerpts]

IN RE N.P. MINING is discussed under VII. Claims Against the Estate, A. Administrative 

Expense, at 1092.

Losch, "Bankruptcy v. Environmental Obligations: Clash of the Titans", 52 La L 

Rev 137 (September 1991).

This article was included for background.

ADDITIONAL BACKGROUND MATERIAL ON TEMPORARY CESSATION

OSM DIRECTIVE, Subject No. INE-22, Transmittal No. 332, "Temporary cessation 

of operations" (Issued May 8, 1987). 

44 FR 14902 (MARCH 13, 1979). Permanent Program Final Preamble -- Final Rule. 

Sections 816.131 and 816.132 Cessation of operations.

56 FR 60012 (NOVEMBER 26, 1991). Proposed rule. Temporary cessation of 

operations.

57 FR 47431 (OCTOBER 16, 1992). Withdrawal of proposed rules. Temporary 

cessation of operations. 

ATTACHMENTS

A. Brief for the Commonwealth of Kentucky. COMMONWEALTH v KARST 

ROBBINS COAL CO., INC., Case No. 6:94-cv-00335 (September 23, 1994). 

Contains the following cases: 

B. IN RE N.P. MINING CO., INC., 963 F 2d 1449 (11th Cir 1992). 
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

Search conducted by: Joyce Zweben Scall Page 3 of 3

C. IN RE BILL'S COAL CO., INC., 124 B R 827 (D Kan 1991).

READING CO. v BROWN, 88 S Ct 1759 (1968). 

D. UNITED STATES DOI v ELLIOTT, 761 F 2d 168 (4th Cir 1985). 

E. UNITED STATES DOI v ELLIOTT, 40 Bankr 985 (WD Va 1984). 

F. IN RE YOUNGER, 165 Bankr 965 (SD Ga 1994). 

G. De Wolf, "Strange Things are Afoot at the Circle K: Agency Action Against 

Leased Sites in Environmental Bankruptcy", 21 B C Envtl Aff L Rev 145 (Fall, 

1993). 

H. Drake and Dilz, "Bankruptcy", 44 Mercer L Rev 1073 (1993). [Excerpts] 

I. Losch, "Bankruptcy v. Environmental Obligations: Clash of the Titans", 52 La L 

Rev 137 (September 1991). 

J. OSM DIRECTIVE, Subject No. INE-22, Transmittal No. 332, "Temporary 

cessation of operations" (Issued May 8, 1987). 

K. 44 FR 14902 (MARCH 13, 1979). Permanent Program Final Preamble -- Final 

Rule. Sections 816.131 and 816.132 Cessation of operations. 

L. 56 FR 60012 (NOVEMBER 26, 1991). Proposed rule. Temporary cessation of 

operations. 

M. 57 FR 47431 (OCTOBER 16, 1992). Withdrawal of proposed rules. Temporary 

cessation of operations.