OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

Search conducted by: Joyce Zweben Scall Page 1 of 4

COALEX STATE INQUIRY REPORT - 269

November 1993

Ted Biggs, Esquire

Department of Natural Resources

Division of Reclamation

402 W. Washington Street

Indianapolis, Indiana 46204

TOPIC: SURETY AS "PERMITTEE" OR "OPERATOR"

INQUIRY: After an operator's permit was revoked, a surety decided to perform the 

required reclamation. The surety was subsequently issued an NOV. The surety claimed 

that an NOV or CO cannot be issued to them because they are not an "operator" or 

"permittee". Are there any cases addressing this issue?

SEARCH RESULTS: A number of relevant administrative and state decisions and one 

Federal Register preamble were identified using the COALEX Library, other LEXIS 

material and prior COALEX Reports. 

The retrieved material finds that sureties opting to reclaim, rather than forfeit the 

performance bond, are under the same obligations to properly fulfill the performance 

standards as the named permittee. Copies of the items listed below are attached. 

INTERIOR ADMINISTRATIVE DECISIONS

IN THE MATTER OF WILLIAM H. PULLEN, 1992 IBLA LEXIS 124, IBLA 88-452 

(1992).

The IBLA upheld OSM's release of Phase I bonds on lands owned by the Pullen family. 

American Standard Coal Co., Inc., a fifty percent owner of Jackson County Mining and 

guarantor on Jackson Mining's reclamation bonds, undertook reclamation when 

Jackson Mining went bankrupt. The Pullens challenged American Standard's application 

for bond release because it was not the named permittee. The IBLA found American 

Standard was "the real party in interest. Moreover, American Standard's involvement 

does not circumvent the regulatory intent to protect the landowner. The bond remains in 

effect until the regulatory requirements are met, regardless of whether the named 

permittee or a fifty percent owner/surety seeks the release."
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

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"The Federal Register comments shed no light on whether the term 'permittee' is to be 

strictly construed in the context of bond release. The Department has liberally 

interpreted the term in the context of enforcement where it is necessary to fulfill the 

legislative intent to place responsibility with those who benefit from the mining 

operations. The Interior Board of Surface Mining Appeals ruled that 'a person who either 

has been granted the right to mine or reclaim an area or who is mining or reclaiming an 

area that would otherwise be subject to regulation is a permittee.' Jewell Smokeless 

Coal Co., 4 IBSMA 211, 218 (1982)* (emphasis added); see also 30 C.F.R. 701.5 . 

Under this broad construction, American Standard is a permittee because it took over 

the bankruptcy. As such, it was entitled to apply for bond release."

* Copy of this decision is attached.

STATE CASE LAW

ALLIED FIDELITY INSURANCE CO. v ENVIRONMENTAL QUALITY COUNCIL, 753 

P 2d 1038 (Wyo 1988).

The court reversed the agency's finding that the right to a hearing did not inure to the 

surety after the operator went bankrupt. It found that the doctrine of legal subrogation 

extended to a surety that wanted "to replace a defunct operator to ask for a bond 

forfeiture hearing for the purpose of determining damages if any, and to assert policy 

defenses."

PERSONAL SERVICE INSURANCE CO. (PSI) v MAMONE, CHIEF, DIV. OF 

RECLAMATION, OHIO DEPT. OF NATURAL RESOURCES, 489 NE 2d 785 (Ohio 

1986).

PSI elected to perform reclamation instead of making payments under its bond when 

Mack Mining, Inc. defaulted on its obligation to reclaim it mined land. Subsequently, an 

NOV was issued to PSI for "committing a violation of the reclamation performance 

standards". The court reversed the lower court's holding "that the proposed civil penalty 

assessment was an unconstitutional impairment of the surety contract".

"The fact that PSI was the surety for the defaulting permit holder in reality has little to do 

with the violation in issue. Once PSI opted to perform the reclamation work itself, it was 

required to undertake the reclamation in a manner consistent with preordained 

reclamation standards. This, it apparently failed to do.... Certainly, PSI qualifies as a 

'person' which can be charged with a civil penalty under [the Ohio] statutory scheme."

PERSONAL SERVICE INSURANCE CO. (PSI) v MAMONE, CHIEF, DIV. OF 

RECLAMATION, OHIODEPT. OF NATURAL RESOURCES, No. 412, slip op. (Ohio 

Ct. App 1985).
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

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PSI chose to undertake reclamation on behalf of the permittee, Allied Coal Sales, rather 

than forfeit the performance bond. An NOV was issued to PSI for violation of 

reclamation provisions. The court reversed the Reclamation Board of Review's finding 

that imposition of civil penalties on PSI, based on an amendment to the state 

regulations which took effect after PSI executed a reclamation performance bond, was 

an "invalid retroactive application of the law".

"In the case at bar, the availability to appellant of an additional penalty to be used 

against a surety's improper performance under the reclamation statutes would promote 

public health and welfare ends."

Two additional cases are enclosed for review:

RIGHT OF WAY PAVING COMPANY, INC. v COMMONWEALTH OF PENN., DEPT. 

OF ENVIRONMENTAL RESOURCES, Penn. Environmental Hearing Board Docket No. 

86-079-G, 1986 Pa. Envirn. LEXIS 105 (1986).

COMMONWEALTH OF PENN., DEPT. OF ENVIRONMENTAL RESOURCES AND 

YODER, et al. v PBS COALS, INC. AND FETTEROLF MINING, INC., 534 A 2d 1130 

(Pa Commonw Ct 1987).

FEDERAL REGISTER PREAMBLE

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

806.12 Terms and conditions of the bond. 

In discussing the need for regulatory authority's approval for a surety's cancellation of a 

performance bond, the Secretary states:

"The surety's co-guarantee for reclamation work on lands that have been disturbed 

cannot be canceled because, even if the operator fails in business, the regulatory 

authority must be able to look to a financially stable and secure guarantor for 

performance of the reclamation obligations under the permit, including collection at the 

time of bond forfeiture, if necessary.

. . .

"This restriction [against cancellation of the bond] is based on the first principle of surety 

law, i.e., the surety undertakes the obligation to stand in the shoes of the principal, and 

his obligation may not be rescinded or terminated without the consent of the party to 

whom the duty is owed."

[NOTE: Part 806 was removed and replaced with Part 800. 49 FR 32932 (July 19, 

1983).]

ATTACHMENTS
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

Search conducted by: Joyce Zweben Scall Page 4 of 4

A. IN THE MATTER OF WILLIAM H. PULLEN, 1992 IBLA LEXIS 124, IBLA 88-452 

(1992). 

B. JEWELL SMOKELESS COAL CO., 4 IBSMA 211, 218 (1982). 

C. ALLIED FIDELITY INSURANCE CO. v ENVIRONMENTAL QUALITY COUNCIL, 

753 P 2d 1038 (Wyo 1988). 

D. PERSONAL SERVICE INSURANCE CO. (PSI) v MAMONE, CHIEF, DIV. OF 

RECLAMATION, OHIO DEPT. OF NATURAL RESOURCES, 489 NE 2d 785 

(Ohio 1986). 

E. PERSONAL SERVICE INSURANCE CO. (PSI) v MAMONE, CHIEF, DIV. OF 

RECLAMATION, OHIO DEPT. OF NATURAL RESOURCES, No. 412, slip op. 

(Ohio Ct. App 1985). 

F. RIGHT OF WAY PAVING COMPANY, INC. v COMMONWEALTH OF PENN., 

DEPT. OF ENVIRONMENTAL RESOURCES, Penn. Environmental Hearing 

Board Docket No. 86-079-G, 1986 Pa. Envirn. LEXIS 105 (1986). 

G. COMMONWEALTH OF PENN., DEPT. OF ENVIRONMENTAL RESOURCES 

AND YODER, et al. v PBS COALS, INC. AND FETTEROLF MINING, INC., 534 

A 2d 1130 (Pa Commonw Ct 1987). 

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

Rule. 806.12 Terms and conditions of the bond.