On December 13, 2013, Andrew A. Irvine, now with Andrew A. Irvine, P.C., and Walter F. Eggers, III, of Holland & Hart, LLP, won a significant case for Wyodak Resources Development Corporation (Wyodak) against the United States Office of Surface Mining, Reclamation and Enforcement (OSM) in the United States Court of Appeals for the Federal Circuit. Wyodak Resources Development Corp. v. United States, 737 F.3d 760 (Fed. Cir. 2013). The case turned on the statutory interpretation of the reclamation fee provision of the Surface Mining Control and Reclamation Act (SMCRA). The reclamation fee provision imposes a tax on coal producers based on the type of coal produced from a coalmine. The tax imposed on coal produced by surface coal mining is 28 cents per ton of coal and the tax imposed on coal produced by underground mining is 12 cents per ton of coal. However, the reclamation fee provision provides that the tax imposed on lignite coal shall be 8 cents per ton of coal.
Wyodak produces coal by surface coal mining at its mine near Gillette, Wyoming. The coal at the mine consists of both subbituminous and lignite coals. For years, Wyodak paid reclamation fees at the higher rate applicable to coal produced by surface coal mining. However, in 2006, Wyodak sought credit for the lignite coal produced at the mine and paid its reclamation fees at the higher rate applicable to coal produced by surface coal mining for the subbituminous coal it produced and its reclamation fees at the lower rate applicable to lignite coal produced for the lignite coal. OSM rejected Wyodak’s approach and required Wyodak to pay reclamation fees for both the subbituminous and lignite coals produced at the mine at the higher rate. OSM reasoned that because the two types of coal were mixed during the mining process, and the end product sold contained more subbituminous coal than lignite coal, the entire coal mixture should be taxed at the higher rate.
Wyodak disagreed and argued that the plain language and intent of the reclamation fee provision of SMCRA was to tax lignite coal at a lesser rate than other types of coal, regardless of whether or not the end product coal mixture contained more subbituminous coal than lignite coal. Wyodak believed that it should not be taxed at a higher rate on the percentage of coal in the coal mixture that was known to be lignite coal.
After seven years, making its case in the United States District Court for the District of Wyoming, the United States Court of Appeals for the Tenth Circuit, the United States Court of Federal Claims, and, eventually, the United States Court of Appeals for the Federal Circuit, Wyodak’s argument prevailed. The United States Court of Appeals for the Federal Circuit concluded that OSM’s application of SMCRA’s reclamation fee provision to the lignite coal produced at the Wyodak mine was legally incorrect. Instead, and according to the plain language and intention of SMCRA’s reclamation fee provisions, the Court ruled that coal known to be lignite coal should be taxed at the reclamation fee applicable to lignite coal, regardless of whether it is mixed with other types of coal prior to sale.
The Court remanded the case to the United States Court of Federal Claims to decide whether Wyodak’s methods of testing and raking the lignite coal at the Wyodak mine were reliable, and whether Wyodak was entitled to a refund on the amount of reclamation fees it overpaid.
A summary of the Court’s decision is also available from Andrew Scurria at Law360, “Fed. Circ. Endorses Lower Mining Fees on ‘Blended Coal,’” — http://www.law360.com/appellate/articles/495775?utm_source=shared-articles&utm_medium=email&utm_campaign=shared-articles.
The full text of the Court’s decision is available here.