Opinion ID: 695504
Heading Depth: 5
Heading Rank: 3

Heading: OSM Response and Review

Text: 63 OSM's initial response to the PSC's determination was appropriately deferential; on January 14, 1993, Snyder stated in a letter to North American, Coteau's parent corporation, that he found the PSC determination to be correct, after reviewing the union's complaint and the PSC report. This decision was confirmed in a letter to the local OSM field office on January 19, which stated that [b]oth parties [Coteau and Basin] are only bound by the terms of the [Agreement]. Any determination beyond this shows a lack of understanding of normal business contracts between buyers and sellers. This statement implicitly refers to the AVS Memo, issued prior to Snyder's decision, which characterized the mining plan approval and cost-plus provisions as creating control by Basin of Coteau's operations. The AVS Memo shows no deference to the PSC's interpretation of these provisions, and flatly refuses to consider the commonplace nature of these types of provisions in large-scale utilities contracts, insisting that these provisions would be examined on a case-by-case basis. 9 64 After the change in federal administrations, the new acting director of the OSM withdrew the previous decision and issued a FAD which determined that Coteau was controlled by Basin. The FAD makes no pretense of applying, to the PSC determination, the deferential standard of review mandated by OSM's own regulations. 65 The FAD states that, in coming to a decision, OSM has reviewed all documents which have been submitted to the agency with regard to this lengthy proceeding. In substance, we have conducted a de novo proceeding, taking a fresh look at the issues. After conducting such a review, OSM finds that Basin owns or controls Coteau within the provisions of 30 C.F.R. Secs. 773.5(a)(3) and 773.5(b)(6). OSM FAD at 8. The regulations simply do not permit OSM to conduct a de novo review of the PSC's determination, and in the FAD, OSM states that they are conducting just such a review. Astonishingly, the FAD cites 30 C.F.R. Sec. 842.11(b)(1)(ii)(B) for its authority to determine whether the PSC's response to the ten-day notice was appropriate, but fails to take any notice whatsoever of the paragraph in the very provision cited that defines any action by the state authority that is not arbitrary, capricious, or an abuse of discretion as appropriate. OSM's de novo review thus was not in accordance with law. 66 Further, both the withdrawal of Snyder's decision supporting the PSC and the ensuing reversal of the PSC's determination are arbitrary. The FAD states three reasons for its withdrawal of the previous director's determination: 67 (1) it appeared that the former Director did not consider the entire record available to OSM at the time of the Decision; (2) a preliminary analysis of the information then available to the former Director indicated that his decision was not supported by the weight of the evidence; (3) one day after announcing that he agreed with the PSC's decision, the former Director recused himself from further participation in matters involving specific persons associated with or issues involving North American, among others. 68 OSM Final Agency Decision (Aug. 18, 1993). 69 None of these reasons adequately supports the withdrawal of the former director's decision. The director's initial letter indicated that he had considered the complaint and the PSC's report, which discussed each of the relevant connections between Coteau and Basin. Although the FAD cites the previous director's failure to explicitly rely on the entire record in stating his determination, the FAD itself, in its discussion of the agreements between Basin and Coteau, does not cite any evidence that is not discussed in the PSC's report; there is no smoking gun in the record that the previous director could have overlooked. The letter confirming the director's decision refers explicitly to the agreements as normal business contracts, implying both that the agreements had been considered, and that the AVS Memo had been read. Thus, the previous director had considered and had based his determination on the relevant record. 70 Second, as discussed above, the standard the OSM is to apply to the PSC's decision is not whether it is supported by the weight of the evidence, but whether it was arbitrary or capricious. This standard is considerably more deferential than one determining whether a decision was supported by the weight of the evidence: whether the previous director's decision was supported by the weight of the evidence is immaterial. 71 Third, the FAD cites the previous director's recusal after issuing the determination that the PSC was correct as support for withdrawing the determination, but provides no evidence that impropriety occurred regarding the determination at issue. Without more, a later recusal does not provide reason for invalidating a previous determination. 72 In the FAD, OSM relies on Belville Mining Co. v. United States, 999 F.2d 989 (6th Cir.1993), to support its contention that the withdrawal was appropriate. In Belville, the court found that withdrawal of previous OSM decisions after a change in administrations was not arbitrary because the previous decisions were inadequate. The court cited the brevity of the letter announcing the decisions, and its lack of legal analysis or factual determinations, id. at 999, finding that, because the reason for reconsideration was a legitimate concern that the decisions were inadequate, [t]his case is thus distinguishable from a situation in which an agency uses 'the power to correct inadvertent ministerial errors ... as a guise for changing previous decisions because the wisdom of those decisions appears doubtful in the light of changing policies.'  Id. at 998 (quoting American Trucking Ass'ns, Inc. v. Frisco Transp. Co., 358 U.S. 133, 146, 79 S.Ct. 170, 177, 3 L.Ed.2d 172 (1958)). We find that Belville is inapplicable here, and that OSM indeed decided that the withdrawn decision was doubtful in the light of changing policies. The OSM decisions withdrawn in Belville were original OSM determinations of rights, not based on deferential review of primacy state regulatory determinations. Id. at 991. OSM cites the brevity of Snyder's letter announcing his determination that the PSC was correct as creating a situation analogous to Belville, but fails to recognize that Snyder appropriately relied on the PSC report to provide the legal and factual reasoning behind his determination. Upholding a decision under an arbitrary and capricious standard does not require the enunciation of reasoning that an original determination does: the upheld decision itself provides the reasoning. We therefore find that the withdrawal of Snyder's decision was arbitrary. 73 The FAD also offers no evidence that the PSC's determination was arbitrary or capricious. The determination of ownership and control rests almost entirely on the Agreement's mining plan approval and cost-plus provisions, both considered by the PSC and dealt with in the PSC's report in a reasonable manner. Far from identifying a clear error in judgment in the PSC's report, the FAD consists of flat assertions that the mining plan approval and cost-plus provisions demonstrate control. This contrasts with the PSC's careful analysis of these provisions as designed to allocate risk and protect each party's interests, and with the previous OSM administration's view that these are normal business contracts. 74 Further, the FAD cites as the primary basis for its decision the AVS Memo, which also engaged in a de novo review of the allegations of ownership and control, giving no deference to the PSC's determination. The AVS Memo, too, consists largely of conclusory assertions that the mining plan approval and cost-plus provisions constitute control by Basin. In the AVS Memo, the cost-plus arrangement is criticized as eliminating Coteau's risk as to changes in mining costs. The AVS Memo itself, however, goes on to note that the cost-plus arrangement also benefits Basin by providing a prearranged price that offers predictability and insulation against market fluctuations. AVS Memo at 4. The AVS Memo fails to observe that this arrangement then makes perfect sense as an arm's length exchange between Basin and Coteau, as opposed to an indicator of control, which was the assessment made of the cost-plus arrangement in the PSC's determination. We find that the reversal of the PSC's determination was arbitrary. 75 We find that Coteau has shown a strong likelihood of success on the merits in its action against the enforcement of OSM's Final Agency Decision.