[Federal Register Volume 68, Number 224 (Thursday, November 20, 2003)]
[Rules and Regulations]
[Pages 65622-65625]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-28994]



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Part IV





Department of the Interior





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Office of Surface Mining Reclamation and Enforcement



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30 CFR Part 707



Abandoned Mine Land (AML) Reclamation Program; Enhancing AML 
Reclamation; Final Rule

  Federal Register / Vol. 68 , No. 224 / Thursday, November 20, 2003 / 
Rules and Regulations  

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DEPARTMENT OF THE INTERIOR

Office of Surface Mining Reclamation and Enforcement

30 CFR Part 707

RIN 1029-AC07


Abandoned Mine Land (AML) Reclamation Program; Enhancing AML 
Reclamation

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

ACTION: Final rule.

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SUMMARY: We are publishing a final rule in response to the decision by 
the United States Court of Appeals, District of Columbia Circuit, 
remanding the February 12, 1999, Enhancing AML Reclamation Rule for 
further explanation as to the types of government expenses that will 
qualify as government financing under the rule. This rulemaking 
provides the requested explanation and represents a clarification and 
not a substantive change to the Abandoned Mine Land (AML) program 
authorized by the Surface Mining Control and Reclamation Act of 1977 
(``SMCRA'' or ``the Act''). We are also taking this opportunity to 
explain what is meant by the prohibition in the rule against ``in-
kind'' payments being counted towards the government financing of a 
``government-financed'' construction.

DATES: Effective November 20, 2003.

FOR FURTHER INFORMATION CONTACT: Danny Lytton, Chief, Division of 
Abandoned Mine Lands, Office of Surface Mining Reclamation and 
Enforcement, U.S. Department of the Interior, 1951 Constitution Avenue, 
NW., ms 120-SIB, Washington, DC 20240; Telephone: 202-208-2788. E-Mail: 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Background

A. Why are we publishing this rule?
B. What is the exemption for ``government-financed'' construction?
C. What is the AML Reclamation Program?
D. How is AML reclamation funded and how do States and Indian Tribes 
implement their programs?
E. What types of abandoned sites does the Enhancing AML Reclamation 
Rule target?

II. Discussion of the Final Rule

III. Procedural Determinations

I. Background

A. Why Are We Publishing This Rule?

    On March 13, 1979, OSM published rules implementing the exemption 
from SMCRA provisions provided by section 528 of the Act when the 
extraction of coal is an incidental part of Federal, State, or local 
government-financed construction. These regulations, codified at 30 CFR 
part 707 (44 FR 15322), defined ``government-financed construction'' as 
meaning ``construction funded 50 percent or more by [government] funds. 
* * *'' 30 CFR 707.5. On February 12, 1999, we published the Enhancing 
AML Reclamation Rule (``Enhancing AML Rule'') which amended this 
definition of ``government-financed construction to allow less than 50 
percent government financing when the construction project is an 
approved AML project. (64 FR 7470). The Kentucky Resources Council 
(KRC) challenged the rule on several counts. KRC v. Norton, No. 99-
00892 (D.D.C.). In its September 22, 2000 slip opinion, the district 
court granted the government summary judgment. The KRC appealed that 
decision to the United States Court of Appeals for the District of 
Columbia Circuit.
    On May 30, 2002, the court of appeals concluded that the Department 
had not only reasonably interpreted the term ``construction'' to 
include AML reclamation projects that involve the incidental extraction 
of coal but also reasonably determined that, in some circumstances, AML 
projects to which the government provides less than 50 percent of the 
financing may qualify as ``government-financed'' construction. 
Notwithstanding these conclusions, the court remanded the rule for 
further explanation as to which government administrative expenses will 
qualify as ``government financing'' for the purposes of the exemption 
from the provisions of the Act. KRC v. Norton, No. 01-5263, 2002 WL 
1359455 at *2 (D.C. Cir.).
    The court further noted that, even though ``in kind'' payments do 
not qualify as government financing under 30 CFR 707.5, our 1999 
Federal Register notice appeared to accept a commenter's suggestion 
that qualifying government financing includes ``in kind payments such 
as administrative expenses incurred by the AML agency in reviewing and 
approving the project.'' KRC v. Norton at *2.
    We are publishing this rulemaking to provide the explanation 
required by the court as to which government administrative expenses 
qualify as ``government financing'' under 30 CFR 707.5. In addition, we 
are taking this opportunity to explain what the agency has historically 
meant by the prohibition in section 707.5 against ``in-kind'' payments 
being counted towards the government financing of a ``government-
financed'' construction. Further, editorial changes have also been made 
to the definition for clarity.
    The preamble to the February 12, 1999, Enhancing AML Rule should be 
consulted for additional background information. 64 FR 7470.

B. What Is the Statutory Exemption for ``Government-Financed'' 
Construction?

    Title V of SMCRA, 30 U.S.C. 1251-1279, has regulated surface coal 
mining operations since 1977 though stringent standards regarding the 
permitting, mining, and reclamation of such sites. Title V prescribes 
that ``no person shall engage in or carry out on lands within a State 
any surface coal mining operations unless such person has first 
obtained a permit issued by such State pursuant to an approved State 
program or by the Secretary pursuant to a Federal program.'' 30 U.S.C. 
1256. Applicants for a Title V permit must pay a fee to cover all or 
some of the costs of reviewing, administering, and enforcing the permit 
(30 U.S.C. 1257). They must submit a reclamation plan (30 U.S.C. 1258) 
and, after the permit has been approved but prior to issuance of the 
permit, must file with the regulatory authority a bond to ensure 
performance of the reclamation plan (30 U.S.C. 1259). Congress, 
however, exempted some activities from the Title V requirements by 
providing:

    The provisions of this chapter shall not apply to any of the 
following activities:
    (1) the extraction of coal by a landowner for his own 
noncommercial use from land owned or leased by him; and (2) the 
extraction of coal as an incidental part of Federal, State or local 
government-financed highway or other construction under regulations 
established by the regulatory authority.

30 U.S.C. 1278. (Emphasis added).

C. What Is the AML Reclamation Program?

    Tile IV of SMCRA (30 U.S.C. 1231-1243) established the AML 
Reclamation Program in response to concern about extensive 
environmental damage caused by past coal mining activities. The program 
is funded primarily from a fee collected on each ton of coal mined in 
the country. This fee is deposited into a special fund, the Abandoned 
Mine Land Fund (Fund), and is appropriated annually to address 
abandoned and inadequately reclaimed mining areas where there is no 
continuing reclamation responsibility by any person under State or 
Federal law. Under Title IV, the financing of reclamation projects is 
subject to a priority schedule with emphasis on sites

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affecting public health, safety, general welfare and property.
    In most cases, the implementation of Title IV authority has been 
delegated to States. Currently, 23 States and 3 Indian Tribes (the 
Hopi, the Navajo and the Crow) have authority to receive grants from 
the Fund. They are implementing Title IV reclamation programs in 
accordance with 30 CFR Subchapter R, and through implementing 
guidelines published in the Federal Register on March 6, 1980 (45 FR 
27123), and revised on December 30, 1996 (45 FR 68777). In States and 
on Indian lands that do not have a Title IV program, reclamation is 
carried out by OSM.

D. How Is AML Reclamation Funded and How Do States and Indian Tribes 
Implement Their Programs?

    State and Indian Tribal AML programs are funded at 100 percent by 
OSM from money appropriated annually from the AML Fund. The States and 
Indian Tribes must submit grant applications in accordance with 
procedures established by OSM and existing grant regulations found at 
30 CFR part 886. They may undertake only projects that are eligible for 
financing as described in either section 404 or section 411 of SMCRA 
and that meet the priorities established in section 403 of SMCRA. OSM 
requires that the State Attorney General or other chief legal officer 
certify that each reclamation project to be undertaken is an eligible 
site. Certain environmental, fiscal, administrative, and legal 
requirements must be in place in order for a program to receive grants 
for reclamation. An extensive description of these requirements can be 
found at 30 CFR part 884.

E. What Types of Abandoned Sites Does the Enhancing AML Rule Target?

    As discussed in substantial detail in the February 12, 1999, 
Federal Register notice, the Enhancing AML Rule will facilitate the 
reclamation of certain abandoned mine lands that have little likelihood 
of being remined by the private sector or being reclaimed under the 
current Title IV program because of severely limited program funds. 64 
FR 7471.

II. Discussion of the Final Rule

    We are publishing this rulemaking in response to the D.C. Circuit's 
remand of our Enhancing AML Reclamation Rule for further explanation as 
to which government expenses will qualify as government-financing under 
the rule. We are doing this to address the concern expressed by the 
court regarding our preamble discussion interpreting the statutory term 
``government-financed construction.'' In our preamble discussion we 
stated that all expenses incurred by the AML agency such as project 
design, project solicitation, project management, and project oversight 
qualify as government financing under the rule. 64 FR 7474. The court 
found that it was ``counter-intuitive'' to suggest that Congress 
intended traditional government functions `` such as ``oversight'' to 
ensure that a contractor complies with the law, or reviewing and 
approving proposed Title IV projects--would qualify as government 
financing. The court continued that even though Sec.  707.5 clearly 
states that ``in kind'' payments do not qualify as government-financed 
construction, our Federal Register notice appeared to accept a 
commenter's suggestion that an agency's administrative expenses were a 
form of ``in kind'' payments.
    Finally, the court posited a permissible interpretation of the rule 
under which the traditional oversight and compliance-review functions 
of an AML agency would not be counted as government financing. The 
court concluded with two scenarios in which agency expenses would 
reasonably count as government financing. KRC v. Norton at *2. It is 
our intent to interpret the rule consistently with this interpretation 
and these two scenarios. Therefore, agency administrative expenses that 
are traditionally attributed to a particular type of government 
construction project will not count towards the ``government 
financing'' of that project. In other words, the only administrative 
expenses incurred by a government agency that can count as part of the 
``government financing'' of a project are those expenses that are 
outside the normal scope of that agency's cost of doing business.
    As an example, most AML agencies accomplish reclamation work 
through contractors. Depending upon an agency's internal procedures, 
some agencies regularly require the contractor to perform all 
engineering and design work. Other agencies may regularly hire an 
outside engineering firm or do the work themselves. Should a government 
agency that regularly requires the contractor to perform project 
engineering and design work decide to do such work itself on a specific 
project, the expense of that project's engineering and design work 
would qualify towards the ``government financing'' of that project. 
This expense qualifies as ``government financing'' because it is a 
government expense not regularly attributable to such projects. In 
contrast, a government agency that regularly does its own engineering 
and design work cannot consider those expenses towards qualifying the 
project as being ``government-financed'' for they are expenses that the 
agency regularly attributes to such projects.
    Critics of the 1999 Enhancing AML Rule were concerned that if the 
expenses of traditional government functions such as oversight and 
project review counted towards ``government financing,'' there might be 
a large number of government-financed construction projects where the 
government would do no actual financing towards the physical 
reclamation of the site. In light of that concern, we reviewed the 
instances where the 1999 rule has been used to allow for less than 50 
percent government financing of approved AML construction projects. 
Thus far, four projects have been completed in three different states. 
In each case, a tremendous savings was realized at relatively little 
cost to the government reclamation authority through the sale of coal 
whose extraction was an incidental part of the required reclamation. 
Reclamation that would have otherwise cost the Title IV authorities an 
estimated $1.5 million was accomplished at a total cost to those 
authorities of somewhat less than $200,000. It is significant that in 
each case, the AML authority paid substantial monies to the contractor 
to physically reclaim the site. While OSM anticipates that other 
projects will be conducted under the Enhancing AML rule, the agency 
does not expect the number of such projects to be large.
    We would next like to take this opportunity to explain what OSM has 
always intended by the regulatory prohibition in 30 CFR 707.5 against 
``in kind'' payments being counted towards the government financing of 
``government-financed'' construction. This prohibition first appeared 
in the March 13, 1979, rulemaking and continued substantially unchanged 
in the 1999 Enhancing AML Reclamation Rule. As discussed above, the 
2002 Circuit Court decision noted that the 1999 preamble appeared to 
accept a commenter's suggestion that qualifying government financing 
includes ``in kind'' payments such as administrative expenses incurred 
by the AML agency in reviewing and approving the project. Id. at *2. 
The cited preamble language response was not, however, intended to 
address the commenter's suggestion that administrative expenses 
incurred by the agency in reviewing and approving a project were ``in 
kind'' payments. Rather, it was OSM's intent to address commenter's 
concern that these

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administrative expenses would not qualify as government financing under 
Sec.  707.5. OSM has never considered the administrative expenses 
attributed by the government to a particular project to be a form of 
``in kind'' payments. Instead, OSM has always considered ``in kind'' 
payments to be contributions to the government by third parties of 
labor, materials, equipment or services that are used by the government 
to accomplish required reclamation. As an example of such ``in kind'' 
payments to the government, a not-for-profit watershed group might 
volunteer to plant trees as part of a reclamation project and a local 
nursery might contribute the trees. Pursuant to OSM's longstanding 
interpretation of the ``in-kind'' payment prohibition of Sec.  707.5, 
neither the value of the contributed planting services nor trees could 
ever count towards the government financing of the project.
    Finally, for clarity, we are also making non-substantive revisions 
to the definition of ``government-financed construction'' at 30 CFR 
707.5. We have substituted the words ``Government financing'' for the 
word ``Funding.'' The definition will then read in pertinent part, as 
follows: ``Government financing at less than 50 percent may qualify if 
the construction is undertaken as an approved reclamation project under 
Title IV of the Act.'' (Revision in italics.) The limitation of the 
provision to government financing is already implicit in the definition 
but now is made explicit.

III. Procedural Determinations

1. Executive Order 12866--Regulatory Planning and Review

    This document is a significant rule and has been reviewed by the 
Office of Management and Budget under Executive Order 12866.
    a. This rule will not have an effect of $100 million or more on the 
economy. It will not adversely affect in a material way the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local, or Tribal governments or communities.
    b. This rule will not create a serious inconsistency or otherwise 
interfere with an action taken or planned by another agency.
    c. This rule does not alter the budgetary effects or entitlements, 
grants, user fees, or loan programs or the rights or obligations of 
their recipients.
    d. This rule does raise legal or policy issues.
    These determinations are based on the analysis performed for the 
Enhancing AML Reclamation Rule (RIN 1029-AB89) published on February 
12, 1999, at 64 FR 7470.

2. Regulatory Flexibility Act

    The Department of the Interior certifies that this rule will not 
have a significant economic impact on a substantial number of small 
entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
    This determination is based on the analysis performed for the 
Enhancing AML Reclamation Rule (RIN 1029-AB89) published on February 
12, 1999, at 64 FR 7470. At that time it was determined that the rule, 
when implemented, would slightly improve business opportunities for all 
entities, small and large, by increasing the likelihood that additional 
reclamation projects would be undertaken each year. Further, the 
economic impact of the rule on small businesses was determined to be 
minimal. This determination was based on the facts that:

--the rule would not increase the cost or burden on businesses 
reclaiming sites eligible under the existing regulations;
--the rule makes it possible for businesses to undertake the 
reclamation of areas not previously remined or reclaimed under existing 
regulations;
--the undertaking of the reclamation projects opened up by the rule is 
entirely voluntary; and
--the only increase in cost due to these new projects will be that for 
documentation related to the removal and sale of coal as an incidental 
part of the reclamation project. This incremental cost will be factored 
into the cost of the project bid submitted to the Title IV governmental 
authority and should prove to be an insignificant percentage of the 
total bid. Those who do participate and bid on reclamation projects 
resulting from the rule will do so to reap an economic benefit in the 
form of a profit on the sale of coal incidentally mined during the 
reclamation of the site. The total amount of Federal money that will be 
available each year for AML projects will neither increase nor decrease 
as a result of this rule.

3. Small Business Regulatory Enforcement Fairness Act

    This rule is not a major rule under 5 U.S.C. 804(2), the Small 
Business Regulatory Enforcement Fairness Act. This rule:
    a. Does not have an annual effect on the economy of $100 million or 
more. It would allow AML agencies to work in partnership with 
contractors to leverage finite AML Reclamation Fund dollars to 
accomplish more reclamation. To offset the reduction in government 
financing, the contractor would be allowed to sell coal found 
incidental to the project and recovered as part of the reclamation. 
Participation under the rule change is strictly voluntary and those 
participating are expected to do so because of the economic benefit.
    b. Will not cause a major increase in costs or prices for 
consumers, individual industries, Federal, State, or local government 
agencies, or geographic regions because the rule does not impose any 
new requirements on the coal mining industry or consumers, and State 
and Indian AML program administration is funded at 100 percent by the 
Federal government.
    c. Does not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
U.S.-based enterprises to compete with foreign-based enterprises for 
the reasons stated above.
    These determinations are based on the analysis performed for the 
Enhancing AML Reclamation Rule (RIN 1029-AB89) published on February 
12, 1999, at 64 FR 7470.

4. Unfunded Mandates

    This rule does not impose an unfunded mandate on State, local, or 
Tribal governments or the private sector of more than $100 million per 
year. The rule does not have a significant or unique effect on State, 
local or Tribal governments or the private sector. The administration 
of the AML program by a State or Indian Tribe is funded at 100 percent 
by the Federal Government and the decision by a State or Indian Tribe 
to participate is voluntary. A statement containing the information 
required by the Unfunded Mandates Reform Act (1 U.S.C. 1531, et seq.) 
is not required.

5. Executive Order 12630--Takings

    In accordance with Executive Order 12630, the rule does not have 
significant takings implications. The rule would allow AML agencies to 
work in partnership with contractors to leverage finite AML Reclamation 
Fund dollars to accomplish more reclamation. To offset the reduction in 
government financing, the contractor would be allowed to sell coal 
found incidental to the project and recovered as part of the 
reclamation.

6. Executive Order 13132--Federalism

    In accordance with Executive Order 13132, the rule does not have 
significant Federalism implications to warrant the preparation of a 
Federalism Assessment for the reasons discussed above.

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7.Executive Order 12988--Civil Justice Reform

    In accordance with Executive Order 12988, the Office of the 
Solicitor has determined that this rule does not unduly burden the 
judicial system and meets the requirements of sections 3(a) and 3(b)(2) 
of the Order.

8. Executive Order 13175--Consultation and Coordination With Indian 
Tribal Governments

    In accordance with Executive Order 13175, we have evaluated the 
potential effects of this rule on Federally-recognized Indian tribes 
and have determined that the rule does not have substantial direct 
effects on one or more Indian tribes, or on the distribution of power 
and responsibilities between the Federal Government and Indian Tribes. 
As previously stated, three tribes will be affected by the rule, the 
Hopi, the Navajo and the Crow. The administration of the AML program by 
a State or Indian Tribe is funded at 100 percent by the Federal 
Government and the decision by a State or Indian Tribe to participate 
is voluntary.

9. Executive Order 13211--Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    This rule is not considered a ``significant energy action'' under 
Executive Order 13211. The administration of the AML program will not 
have a significant effect on the supply, distribution, or use of 
energy.

10. Paperwork Reduction Act

    This rule does not contain a collection of information requiring 
clearance under the Paperwork Reduction Act by the Office of Management 
and Budget.

11. National Environmental Policy Act

    OSM prepared an environmental assessment (EA) for the Enhancing AML 
Reclamation Rule (RIN 1029-AB89) published on February 12, 1999, at 64 
FR 7470 and made a Finding of No Significant Impact (FONSI) on the 
quality of the human environment under section 102(2)(C) of the 
National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4332(2)(C). 
The EA and FONSI are on file in the OSM Administrative Record for the 
rule. That determination is valid for the publication of this rule.

12. Administrative Procedure Act

    This final rule has been issued without prior public notice or 
opportunity for public comment. The Administrative Procedure Act (APA) 
(5 U.S.C. 553) provides an exception to the notice and comment 
procedures when an agency finds there is good cause for dispensing with 
such procedures on the basis that they are impracticable, unnecessary 
or contrary to the public interest OSM has determined that under 5 
U.S.C. 553(b)(3)(B) good cause exists for dispensing with the notice of 
proposed rulemaking and public comment procedures for this rule. 
Specifically, this rulemaking clarifies the implementation of existing 
regulatory language and does not add or remove any substantive 
requirements. For the same reasons, OSM has good cause under 5 U.S.C. 
553(d) of the APA to have the regulation become effective on a date 
that is less than 30 days after the date of publication in the Federal 
Register.

List of Subjects in 30 CFR Part 707

    Highways and roads, Incidental mining, Reporting and recordkeeping 
requirements, Surface mining, Underground mining.

    Dated: November 3, 2003.
Rebecca W. Watson,
Assistant Secretary, Land and Minerals Management.
    For the reasons given in the preamble, 30 CFR part 707 is amended 
as set forth below:

PART 707--EXEMPTION FOR COAL EXTRACTION INCIDENT TO GOVERNMENT-
FINANCED HIGHWAY OR OTHER CONSTRUCTION

0
1. The authority citation for part 707 continues to read as follows:

    Authority: Secs. 102, 201, 501, and 528 of Pub. L. 95-87, 91 
Stat. 448, 449, 467, and 514 (30 U.S.C. 1202, 1211, 1251, 1278).

0
2. In Sec.  707.5, the definition of Government-financed construction 
is revised to read as follows:


Sec.  707.5  Definitions.

* * * * *
    Government-financed construction means construction funded at 50 
percent or more by funds appropriated from a government financing 
agency's budget or obtained from general revenue bonds. Government 
financing at less than 50 percent may qualify if the construction is 
undertaken as an approved reclamation project under Title IV of the 
Act. Construction funded through government financing agency 
guarantees, insurance, loans, funds obtained through industrial revenue 
bonds or their equivalent, or in-kind payments does not qualify as 
government-financed construction.

[FR Doc. 03-28994 Filed 11-19-03; 8:45 am]
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