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Prepared by Crowell & Moring LLP
MSHA Updates Joseph A. Main, President Obama's nomination for Assistant Secretary of Labor for Mine Safety and Health, was confirmed by the Senate on October 21, 2009. With his confirmation, Mr. Main becomes the official head of the Mine Safety and Health Administration (MSHA). The Assistant Secretary position had been vacant since the resignation of Richard Stickler, coinciding with the change of administrations in January 2009, although Gregory Wagner, the Deputy Assistant Secretary for Policy, had been acting in the head capacity. According to his biography posted on the MSHA website, Mr. Main's mining background dates to at least the late 1960s where he worked in coal mines and became an advocate for miners' safety and health. He was hired by the United Mine Workers of America (UMWA) in 1974, and joined the UMWA's safety division in 1976. In 1982, Mr. Main became the administrator of UMWA's occupational health and safety department, and remained in that position for 22 years. For the past five years, Mr. Main has worked as an independent mine safety consultant. Obama Announces Nominee for Review Commission On November 30, President Obama announced his intention to nominate Patrick K. Nakamura to the fifth and vacant seat on the Federal Mine Safety and Health Review Commission (Commission). If confirmed, it will be the first time since 2004 that all five seats on the Commission have been filled. The other four sitting Commissioners are Mary Lu Jordan (Chair), Michael F. Duffy, Michael G. Young, and Robert F. Cohen, Jr. Mr. Nakamura is currently a senior partner at the law firm of Nakamura, Quinn, Walls, Weaver & Davies, a Birmingham, Alabama law firm specializing in labor law. According to his firm biography, Mr. Nakamura received his law degree in 1978 from Georgetown and has spent the past 25 years as a litigator in private practice, focusing on black lung cases, as well as employee benefits, occupational safety and health, and work-place injuries. Prior to going into private practice, Mr. Nakamura spent his first four years following graduation from law school at Legal Services in South Alabama, where he counseled indigent clients. IRS Issues Interim Guidance on Refined Coal Tax Credit On December 7, the Internal Revenue Service (IRS) published interim guidance (Notice 2009-90) on the tax credit for refined coal under tax code Section 45. The IRS plans to follow-up on and supersede this guidance with a rulemaking. According to the guidance, the credit is allowed for qualified refined coal (i) produced by the taxpayer at a refined coal production facility during the 10-year period beginning on the date the facility is originally placed into service and (ii) sold by the taxpayer to an unrelated person during that same 10-year period. "Refined coal" is defined by the guidance as a liquid, gaseous, or solid fuel produced from coal or high-carbon fly ash that is sold by the taxpayer or producer to an unrelated person with the reasonable expectation that the product will be used to produce steam, and that is certified by the taxpayer as resulting in a qualified emission reduction (when used, as expected, to produce steam). To be considered a "qualified emissions reduction," the burning of the product must - at facilities placed in service after December 31, 2008 - result in at least a 20 percent emissions reduction of nitrogen oxide and 40 percent emissions reduction of either sulfur dioxide or mercury, as compared to the emissions released when burning the feedstock coal predominantly available in the marketplace as of January 1, 2003. At facilities placed in service before January 1, 2009, the respective emissions reductions must be at least 20 percent for nitrogen oxide and 20 percent for either sulfur dioxide or mercury. Go to the link to see the complete text of the guidance, which defines relevant terms, explains the process for calculating emissions reductions, and notes various limitations on the credit. Oil and Gas Drilling Can Resume in National Forest The oil and gas industry obtained a significant victory in federal court in Pennsylvania on December 15 when the court enjoined the United States Forest Service (Forest Service) from subjecting new proposals for oil and gas drilling in the Allegheny National Forest (ANF) to further analysis under the National Environmental Policy Act (NEPA). According to the court in Minard Run, the Forest Service's NEPA analysis - adopted earlier in the year pursuant to a settlement agreement with the Sierra Club and other environmental groups, which had sued the Forest Service in a different case over the Forest Service's failure to subject proposed drilling activities to NEPA review - would unlawfully abridge the right of the owners of the mineral interests to access and develop the mineral estate. The dispute is the product of the split-estate nature of property ownership in the ANF, where 93 percent of the mineral estates are privately owned. The United States owns the surface estate, having acquired the lands pursuant to the 1911 Weeks Act, which authorized the Forest Service to acquire much of what now constitutes the eastern National Forests on behalf of the United States. Under well-established principles of property law, the mineral estate is dominant, meaning the holder of the mineral estate has the right to enter onto the surface estate to access and develop the subsurface minerals. The central question presented was what right, if any, the Forest Service had to subject the mineral owners to additional regulatory burdens. According to the environmental groups who sued the Forest Service, the Forest Service has a duty under NEPA and the authority under various statutes and the Property Clause of the U.S. Constitution to require all oil and gas drilling proposals to be analyzed under NEPA. The Forest Service agreed in an early 2009 settlement agreement to do just that. Following that settlement, the Forest Service published notice in the Federal Register that it would comply with the agreement by preparing a forest-wide environmental impact statement ("EIS"), and that all new drilling proposals would be shelved until the EIS was complete. Industry plaintiffs then sued to enjoin the settlement agreement and resulting drilling ban on the ground that the settlement agreement and NEPA review program were inconsistent with well-established principles of property law and the Forest Service's own historical practices, and that the Forest Service lacked statutory authority to restrict drilling activities or, consequently, to subject them to a NEPA analysis. Although, as the surface owner, the United States (like other surface owners) was entitled to notice of drilling activities and a period to review and comment on the proposed activities, it had no discretion to deny or delay drilling operations beyond the customary period established by use and precedent (60 days). The plaintiffs also argued that to the extent the Forest Service was authorized to regulate the industry as called for in the settlement agreement, the agency was obligated to follow the notice-and-comment rulemaking procedures of the Administrative Procedure Act (APA). Given the lengthy period associated with the preparation of the EIS, the Forest Service's actions caused severe economic hardship to operators who could not move forward with drilling operations: revenues fell and workforces were reduced. In its December 15 decision, the court agreed with the industry plaintiffs, finding that the settlement agreement between the Forest Service and the environmental groups constituted a "fundamental sea change" in the manner by which the Forest Service dealt with oil and gas drilling activities, and that the plaintiffs were likely to succeed on the merits of their claims. The court found that the plaintiffs would likely prevail in showing that the Forest Service lacked the discretion to prevent or limit drilling activities in the ANF. Thus, because the rights of the drillers could not lawfully be abridged by the Forest Service, NEPA was not triggered, inasmuch as NEPA does not apply to an action that the agency is without discretion to regulate. The court also found that the plaintiffs would likely prevail in showing that the Forest Service violated the APA when it implemented the terms of the settlement agreement without conducting notice-and-comment rulemaking. In light of economic hardships resulting from the implementation of the settlement agreement, and after balancing the equities, the court preliminarily enjoined the Forest Service from banning new drilling activities until the EIS was prepared and the NEPA analysis finalized. Accordingly, oil and gas drilling operations may resume pursuant to the established customs in place prior to the settlement agreement. Federal Court in West Virginia Remands 404 Permits A federal district court in the Southern District of West Virginia remanded two permits issued by the U.S. Army Corps of Engineers (Corps) under Section 404 of the Clean Water Act (CWA). The Corps had issued the permits for Loadout, LLC's Nellis Surface Mine and Fola Coal Company, LLC's Ikes Forks mines. The court held that the Corps, in issuing those permits, violated the CWA, the National Environmental Policy Act (NEPA) and the Administrative Procedure Act (APA), because it failed to provide adequate public notice of the projects' environmental impacts and failed to provide sufficient opportunity for public involvement in the permitting process. Specifically, the court held that a 404 permit application and the Corps' public notice of that application must contain some substantive information about compensatory mitigation. The court found that the Corps violated the CWA because the public notices for the permits did not contain substantive information about the project's compensatory mitigation plans. The court explained that the CWA guidelines require a public notice to provide sufficient information to allow the public to have a clear understanding of the project activity and to make meaningful comments. In determining how much information was necessary to allow for sufficient comment, the court looked to the APA's standard for informal rulemaking. Agencies engaged in informal rulemaking must make available the information that they rely upon in making their final decisions. Such information was similarly necessary in a 404 permit context to elicit meaningful public comment. Because the Corps relied significantly on the compensatory mitigation plans in determining the projects would not cause significant degradation to U.S. waters, the absence of any compensatory mitigation information from the public notices made it impossible for the public to make meaningful comments. The court found that the Corps also violated NEPA by issuing a finding of no significant impact ("FONSI") without making information about the compensatory mitigation available to the public, stating that the compensatory mitigation of adverse environmental impacts is the "centerpiece" of a FONSI and is therefore "truly significant." Finally, the court held that the Corps violated the APA because its rationale for not addressing or considering the plaintiffs' comments - lack of specificity - was arbitrary and capricious in light of the lack of information made available to the public for comment in the first instance. The court remanded Loadout's and Fola's 404 permits and ordered the Corps to re-issue the notice for each permit application, receive and respond to comments on each notice, and "reconsider each permit with any new comments in mind." To reduce hardship to the mining companies, who had not themselves caused the procedural deficiency, the court stayed the order for 60 days during which the mining companies were allowed to continue their mining activities in accordance with existing agreements and court orders. The 60-day stay also provided the parties with an opportunity to seek other relief or appeal the order. Industry Defendants Ask Fifth Circuit to Reconsider Climate Change Decision In late November 2009, industry defendants asked the Fifth Circuit for a rehearing of its decision of October 16, 2009 overturning the dismissal of tort claims brought by residents of Mississippi against dozens of companies in the energy, fossil fuel production, and chemical industries, including ten coal companies, seeking money damages for injuries allegedly sustained as a result of Hurricane Katrina in 2005. In 2007, the district court had granted the defendants' motions to dismiss, finding that the plaintiffs lacked standing and holding that the complaint raised only nonjusticiable political questions. In reversing, the Fifth Circuit followed a recently decided Second Circuit decision (Conn. v. Am. Elec. Power Co., 582 F.3d 309 (2d Cir. 2009)(AEP)) in allowing tort claims alleging wide-ranging damages from climate change to proceed to discovery. The court held the plaintiffs had standing to bring their four state common law claims (public and private nuisance, trespass, and negligence), and that the claims did not present nonjusticiable political questions, and remanded to the trial court for further proceedings. In its standing analysis, the Fifth Circuit found the causal chain alleged by the plaintiffs to be plausible, based as it was on "only the predictable effects of the defendants' past actions on the natural environment, and the resulting harm to the plaintiffs' property." Relying primarily on the Supreme Court's decision in Massachusetts v. EPA, 549 U.S. 497 (2007), as well as a series of Clean Water Act cases decided by the Third and Fourth Circuits, the court concluded that the plaintiffs properly pleaded some "contribution" by the defendants to the plaintiffs' alleged injuries, and thus had standing. The Fifth Circuit rejected the defendants' political question defense on the ground that the defendants had not identified a constitutional provision or federal law that commits to Congress or the President what it described as the plaintiffs' state common law tort claims for damages. The court emphasized that Comer was a private suit for damages and that such suits rarely if ever give rise to political questions. The Comer plaintiffs filed their response to the defendants' petitions for rehearing on December 14. EPA Finds Greenhouse Gases Endanger Public Health and Welfare On December 7, 2009, the Environmental Protection Agency (EPA) announced the agency's findings under the Clean Air Act (CAA) that greenhouse gas ("GHG") emissions, including carbon dioxide and methane, endanger public health and welfare and that new motor vehicles and their engines contribute to that endangerment. The findings were published in the Federal Register on December 15, 2009. In particular, EPA found that GHG emissions pose a danger through their contribution to global climate change, which the agency projects is expected to contribute to adverse impacts such as increased drought, more intense storms, more flooding, more frequent and intense heat waves and wildfires, and decreased air quality. EPA's findings follow the Supreme Court's decision in Massachusetts v. EPA, 549 U.S. 497 (2007), in which the Court held that GHGs are "air pollutants" under the CAA and that EPA had improperly denied a petition to regulate GHG emissions from vehicles under section 202 of the CAA. The Court directed EPA to make a determination regarding whether emissions of GHGs from new motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare, or whether the science is too uncertain to make a reasoned decision. EPA's findings do not impose GHG controls on their own, but the findings are necessary prerequisites to taking further regulatory action under the CAA to control GHG emissions from sources, in particular mobile sources. EPA has indicated that it expects to issue final greenhouse gas emission standards for light-duty vehicles in March 2010, based on a joint proposal with the Department of Transportation's Corporate Average Fuel Economy standards (commonly referred to as the CAFE standards) on September 15, 2009. But that is not all. Once EPA's mobile source rules are finalized, and actual GHG regulatory controls have been promulgated, another CAA program - the prevention of significant deterioration ("PSD") program - will automatically apply to GHGs. The PSD program requires certain stationary sources to obtain permits prior to construction and modification and to implement best available control technology. In another, related rulemaking, the so-called "tailoring rule," EPA has proposed to give regulatory relief to thousands of stationary sources by limiting the reach of the PSD program for GHG emissions to sources that emit more than 25,000 tons of carbon dioxide equivalent, rather than to sources that emit 100 or 250 tons per year according to statutory limits. At the same time, EPA is proposing to limit the reach of the CAA's Title V permitting program to sources that emit 25,000 tons of carbon dioxide equivalent per year, rather than 100 tons per year, as set forth under the statute. EPA's proposal relies primarily on the judge-made doctrines of "administrative necessity" and "absurd results" to develop regulatory limits that expressly conflict with statutory mandates. EPA's GHG endangerment finding is significant because it may serve as precedent for future agency decisions concerning regulation of GHG emissions from large stationary sources under other provisions of the CAA, such as section 111 of the CAA, which governs new source performance standards for a many categories of stationary sources, or under section 109 and 110 of the CAA, which govern the promulgation and attainment of national ambient air quality standards and currently apply only to six common air pollutants. On June 11, 2009, the Department of Interior (DOI), U.S. Army Corps of Engineers (Corps) and the Environmental Protection Agency (EPA) issued a Memorandum of Understanding (MOU) setting forth an Interagency Action Plan on Appalachian Surface Coal Mining to "significantly reduce the harmful environmental consequences of Appalachian surface coal mining operations, while ensuring that future mining remains consistent with federal law." These agencies have recently engaged in a series of major actions affecting surface coal mining to implement the MOU, discussed below. Although the MOU is specifically directed at surface coal mining in six Appalachian states, the impacts of these nationally-applicable actions may be felt on mining operations far outside of Appalachia. Office of Surface Mining Reclamation and Enforcement (OSM) On November 30, 2009, OSM published a notice of proposed rulemaking in the Federal Register, announcing its intent to revise the Stream Buffer Zone (SBZ) rule published in December 2008, stating that such revision was "necessary to implement the interagency action plan" set forth in the MOU. The rulemaking process is the required outgrowth of litigation over the December 2008 rule, in which OSM sought to have the court vacate the rule. In the face of opposition by the National Mining Association, the court rejected OSM's request and held that rulemaking was required if the agency wished to amend the December 2008 rule. The November 30, 2009 notice seeks comments on ten regulatory alternatives that OSM is considering for revising the SBZ rule and related rules: (1) repealing the existing SBZ rules and replacing them with the 1983 version of the rule, along with necessary conforming revisions; (2) applying the prohibitions and restrictions of the rule to all segments of all perennial and intermittent streams and buffer zones, including a variation which would establish a rebuttable presumption that the placement of spoil or mining waste in a stream is prohibited because it would create an unacceptable level of environmental damage; (3) revising the regulations to provide that the regulatory authority may authorize mining activities in a stream or buffer zone only if they would not violate the Clean Water Act (CWA) or significantly degrade the stream's water quantity, quality, or other environmental resources, and would minimize adverse environmental impacts; (4) establishing numerical limits on fill size, percentage of watershed disturbed, or total stream miles filled in each watershed, if sufficient scientific information is now available to support such limits; (5) establishing quantitative or qualitative thresholds of allowable damage to water quality or aquatic life in any particular watershed; (6) adopting a watershed approach for selection decisions described in the preamble to the 2008 rule, which would maintain and improve the quantity and quality of the watershed's aquatic resources and ensure water quality standards are met in downstream waters; (7) adopting a definition of the term "material damage to the hydrologic balance," which by statute the regulatory agency must find a proposed operation is designed to prevent, and which is currently undefined; (8) requiring that a SMCRA permit applicant submit concurrently its application to the SMCRA authority, the NPDES permitting agency, the Army Corps of Engineers, EPA, and the agency responsible for certification under section 401 of the CWA, which "would facilitate coordinated permitting under SMCRA and the Clean Water Act"; (9) requiring more detailed permit application requirements and standards for stream-channel diversions and stream restoration, and for pre-mining stream condition surveys and monitoring or bond release requirements; (10) adopting specific requirements for mountaintop removal and steep slope operations, and modifying the provision applicable to mountaintop removal operations to apply the prohibition of damage to natural watercourse to all natural watercourses, not just to those "below the lowest seam mined." Comments are due on or before December 30, 2009. -- Interim Stream Protection Measures On November 18, 2009, OSM announced a series of measures it will implement immediately, until the revisions to the SBZ rule are finalized. These measures include (1) mandatory coordination of review and approval of SMCRA permits with those required under the CWA; (2) meetings in each state with appropriate state and federal agencies to discuss the coordination of SMCRA and CWA permitting and authorization, with a particular eye toward identifying the applicable water quality standards in each state; and (3) specific direction to OSM inspectors to focus on particular standards and permit conditions when conducting oversight inspections, including, among other things, verifying sections 401, 402, or 404 of the CWA were complied with prior to the initiation of mining activities, ensuring excess spoil fills and waste disposal facilities have been constructed in accordance with permit-approved designs, and ensuring sediment control measures are in place and comply with permit requirements. The MOU indicated that by the end of 2009, OSM would "reevaluate and determine how it will more effectively conduct oversight of State permitting, State enforcement, and regulatory activities under SMCRA." OSM recently identified a number of actions it will take to make oversight more effective, and sought public comments on its proposed oversight improvement actions. In a statement issued on its oversight review, the agency specifically noted that while the MOU applies only to six Appalachian states, any changes it makes to its oversight policy will apply nationwide. Among the immediate actions OSM plans to take are more oversight inspections, articulation of OSM authority to conduct inspections without prior notification to the state, evaluation of oversight data collection, analysis, and reporting requirements and methodologies, review of more state-issued permits and state permitting procedures, and development of a national geographic information system with data on coal mining and reclamation activities. OSM will also change its policy guidance and procedures, and revise its directive on the oversight of state programs, to "improve [its] oversight process." OSM has extended the public comment period on its new oversight initiatives to January 19, 2010. -- No Ban on Mountaintop Removal Notably, the newly-confirmed OSM Director, Joe Pizarchik, recently told the Charleston, WV Gazette that he would not seek a ban on mountaintop removal mining. According to Pizarchik, because a federal statute specifically authorizes the practice, any action to outlaw it would have to be made by Congress, not the executive branch. -- OSM Denies Petition to Take Over Enforcement of West Virginia's Surface Mine Program In a December 8, 2009 letter, the OSM Appalachian Regional Director rejected a request that OSM take over enforcement of West Virginia's SBZ regulation. The August 10, 2009 petition by the Appalachian Center for the Economy and the Environment and several other environmental groups claimed that the state has refused to apply the SBZ rule, and that its "systematic failure to apply the rule to those activities that are most harmful to the streams the rule was intended to protect defies logic." But OSM "found no indication that West Virginia does not apply its SBZ rules consistent with its historic application of the SBZ requirements, as approved by OSM." However, OSM's letter did note that OSM expedited its rulemaking process to revise the SBZ rule "to provide better environmental protections from the impacts of Appalachian surface coal mining" and the agency's immediate stream protection measures, and stated that concerns raised in the petition "may be resolved through [OSM's] new SBZ rulemaking initiative." EPA: Status of Enhanced EPA Permitting Review for Surface Coal Mining Projects The June 11, 2009 interagency MOU also announced Enhanced Coordination Procedures for the CWA review of applications for section 404 permits for surface coal mining activities in Appalachia. In September, EPA identified 79 projects that required further, detailed environmental review of their pending permit applications under these procedures. To date, review of five projects has been initiated and has been completed for only one of those, whose applicant agreed to additional stream and wetlands preservation, mitigation, and biological monitoring measures. Three permit applications have been withdrawn by the applicants. GAO Issues Report on Surface Coal Mining The Government Accountability Office (GAO) recently issued a report to Congress on the characteristics of surface coal mining in Kentucky and West Virginia, dated December, 2009. The report makes no recommendations, but instead makes a series of findings about mining and reclaimed lands in the two states, based on permits issued between 1990 and 2008. Examples of the report's findings: the number of acres under open permits increased by an average annual rate of about 2 percent; the number of acres under open permits became more geographically concentrated and in West Virginia, 28 contiguously permitted areas contained nearly half of the permitted acres (in July 2008); most permits required operators to reclaim land to its approximate original contour; and the most common type of approved post-mining land use was fish and wildlife habitat in Kentucky and forestland in West Virginia. DOI and the states' mining agencies generally agreed with the report's findings.
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