[Federal Register Volume 62, Number 120 (Monday, June 23, 1997)]
[Proposed Rules]
[Pages 33784-33785]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16304]


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DEPARTMENT OF THE INTERIOR

Office of Surface Mining Reclamation and Enforcement

30 CFR Part 870

RIN 1029-AB68


Abandoned Mine Land Reclamation Fund--Basis for Coal Weight 
Determination; Notice of Withdrawal

AGENCY: Office of Surface Mining Reclamation and Enforcement, Interior.

ACTION: Proposed rule; notice of withdrawal.

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SUMMARY: The Office of Surface Mining Reclamation and Enforcement (OSM) 
is withdrawing the proposed rule published on December 29, 1992 (57 FR 
62116), regarding the determination of coal weight for calculating 
Abandoned Mine Land (AML) reclamation fees. That proposal was intended 
to allow operators who transfer run-of-mine coal but are paid on a 
calculated clean coal basis to also pay their AML fees on that basis. 
In lieu of rulemaking, OSM will recognize such transactions and allow 
fees to be paid on the calculated clean basis in certain circumstances, 
within the scope of the existing regulations. This approach will 
provide us greater latitude in determining the tonnage on which the 
first sale or transfer of ownership is based.

DATES: This notice is effective June 23, 1997.

FOR FURTHER INFORMATION CONTACT: Jim Krawchyk, Division of Compliance 
Management, Office of Surface Mining Reclamation and Enforcement, 3 
Parkway Center, Pittsburgh, PA 15220. Telephone 412-921-2676. E-mail: 
jkrawchy@osmre,gov.

SUPPLEMENTARY INFORMATION:

I. Background
II. Reason For Agency Action

I. Background

    Section 402(a) of the Surface Mining Control and Reclamation Act of 
1977 (SMCRA), 30 U.S.C. 1201 se seq., requires all operators of coal 
mining operations subject to its provisions to pay a reclamation fee on 
each ton of coal produced. In December 1977 OSM first promulgated 
regulations to implement this provision (42 FR 62714; Sec. 13, 1977). 
The regulations base the fee on the actual gross weight of the coal at 
the first sale, use, or transfer of ownership. This regulation has been 
in effect basically unchanged since that time.
    In 1982 (47 FR 28593; June 30, 1982) we revised the regulatory 
language to clarify the point in time of fee determination and to 
stress value and weight parameters for fee calculation purposes. We 
added at that time 30 CFR 870.129b) (1), (2), and (3) stating that 
these provisions merely restate our policy since the initial 
implementation of the fee collection program. The preamble to the 
regulations, however, did not specifically discuss these three 
provisions.
    Of importance to OSM's decision to withdraw the proposed rule are 
existing sections 870.12(b)(3) (ii) and (iii) providing:

    (ii) Operators selling coal on a clean coal basis shall retain 
records that show run-of-mine tonnage, and the basis for the clean 
coal transaction.
    (iii) Insufficient records shall subject the operator to fees 
based on raw coal tonnage data.

    Operators and OSM personnel now interpret these provisions as 
authorizing OSM to allow operators to pay reclamation fees on a clean 
coal tonnage basis if that is the basis of the first transaction and 
sale. Many small operators are paid on a clean coal basis by purchasers 
when they deliver their run-of-mine coals to preparation plants.

[[Page 33785]]

Accordingly, the operators maintain that OSM should allow them to pay 
the AML fee based on the actual per ton payment they receive. They 
argue that section 870.12(b)(3) (ii) and (iii) authorizes AML fee 
payments in this fashion. The operators say that they should not have 
to pay on the higher raw coal tonnage figures unless they do not keep 
records sufficient to document the basis of the payment they receive on 
clean coal tonnage.
    In 1991, OSM commenced a review of the rule's application (Notice 
of Inquiry; 56 FR 10404; March 12, 1991). Upon examination of the 
comments received, OSM found merit in the position advocated by the 
coal producers. OSM had deferred billing amounts that would be due on 
the higher raw coal tonnage figure pending resolution of the issue.
    To address the matter, OSM proposed a rule revision on December 29, 
1992 (57 FR 62116), allowing payment on a calculated clean tonnage 
basis if and when the coal was sold to a preparation plant for 
cleaning. The preparation plant owner would have assumed some 
responsibility for paying AML fees. That rule, however, was never 
finalized and is being withdrawn by this notice.

II. Reason for Agency Action

    In examining the public comments, our regulations, and past agency 
practice with regard to their implementation, it is evident that we 
have allowed operators to use calculations and other records to 
substantiate their AML fee liability where necessary and reasonable. 
For example, in section 870.12(c), if underground and surface mine coal 
are mixed prior to the first sale or use, this regulation provides that 
the higher surface rate must be used unless the operator can 
demonstrate by ``acceptable engineering calculations or other reports'' 
the amount of coal attributed to surface mining.
    Based upon these findings, we believe sections 870.12(b)(3) (ii) 
and (iii) allow an operator to pay on a clean coal tonnage basis if the 
operator transfers run-of-mine tonnage to an unrelated second party who 
cleans the coal, and the operator is paid on only the clean coal 
tonnage. The difference in the tonnage amounts must be attributed to 
materials extraneous to the coal removed in the cleaning process, such 
as dirt and clay, and not to impurities inherent in the coal. This 
action is designed to address and accommodate a common business 
practice among small coal operators in a segment of the industry, and 
does not authorize operators to make arbitrary reductions in the 
tonnage to be reported. We expect that the majority of the coal tonnage 
will continue to be reported based on the actual weight at the time of 
initial sale, transfer, or use as the regulations require. The 
following scenarios are provided to illustrate the rule's application:
    Example 1: An operator delivers 100 tons of coal to a preparation 
plant owner who determines through accepted standard industry analysis 
that only 90 tons of coal will be recovered after cleaning. The 
preparation plant owner pays the operator for 90 tons. The operator is 
liable for fees on 90 tons because that is the basis on which he was 
paid.
    Example 2: An operator delivers 100 tons of coal to a preparation 
plant owner who pays the operator for 100 tons. The operator determines 
that the coal if cleaned would have a reject factor of 10 percent and 
therefore pays fees on only 90 tons. This would be incorrect and 
disallowed. The operator should pay fees on 100 tons because that is 
the basis on which he was paid by the preparation plant owner.
    Example 3: An operator delivers 100 tons of coal to a preparation 
plant owner who determines through accepted standard industry analysis 
that only 90 tons will be recovered after cleaning. The preparation 
plant owner pays the operator for only 90 tons. The operator determines 
that the coal contains 5 tons of ash and therefore pays fees on 85 tons 
(90 tons of clean coal minus 5 tons of ash). This would be incorrect 
and disallowed. The operator must pay on the tonnage for which he was 
paid. No deductions are allowed for matter that is intrinsic to the 
coal. The correct tonnage for calculating fee payment would be 90 tons.
    We believe that basic market forces coupled with proper 
recordkeeping and review will ensure the integrity of the reclamation 
fee collection process. A regulatory change is therefore considered 
unnecessary at this time.
    We would point out that the ability to pay on a clean coal basis, 
however, is predicted on the operator maintaining the proper records. 
Failure to maintain these records, as specified in 30 CFR 
870.12(b)(3)(ii) and 30 CFR 870.16, would result in a fee assessment 
based on raw coal tonnage figures.
    We recognize that a small number of companies have paid fees on raw 
tonnage amounts even though the sales transaction was based on a clean 
coal tonnage figure. We will move swiftly to correct inconsistencies 
that have occurred in the past, provided that any claims for refunds 
are in accord with the limitations proscribed by 28 U.S.C. 2401(a) 
(statute of limitations) and the necessary records are available to 
substantiate them.
    If you have questions concerning this notice, please contact Jim 
Krawchyk at the address and telephone number listed above under FOR 
FURTHER INFORMATION. If necessary, we will arrange for an audit of the 
company's reclamation fee payments.

    Dated: May 9, 1997.
Bob Armstrong,
Assistant Secretary, Land and Minerals Management.
[FR Doc. 97-16304 Filed 6-20-97; 8:45 am]
BILLING CODE 4310-05-M