[CITE: Jaeco, Inc. v. DNR, 5 CADDNAR 121 (1989)]
[VOLUME 5, PAGE 121]
Cause #: 89-176R
Caption: Jaeco,
Inc. v. DNR
Administrative Law Judge: Teeguarden
Attorneys: Plews, Shadley; Junk, DAG
Date: November 9, 1989
ORDER
It is hereby ordered that the Director's
undated order requiring Jaeco, Inc. to submit
additional bond in the amount of $146,250 be vacated. Jaeco's
Request for Temporary Relief is dismissed because it is moot.
FINDINGS OF FACT
1.
The Department is an agency within the meaning of IC 4-21.5-1-3.
2.
IC 4-2.5, IC 13-4.1, and 310 IAC 12 apply to this
case.
3.
The Director or the Department is the ultimate authority for controversies
involving bond adjustments.
4. Jaeco holds permit number S-00118 issued by the Department
which allows Jaeco to conduct surface mining
activities at the Eel River Mine.
5.
In an undated letter delivered some time in mid
August of 1989, the Director ordered Jaeco to provide
an additional $146,250 in reclamation bonds.
6.
On August 25, 1989, Jaeco filed a timely request for
administrative review of the above order.
7.
On September 6, 1989, the Department agreed to delay the effective date of the
Order to November 13, 1989.
8.
The original reclamation bond rate for the Eel River Mine was $7,500 per acre.
The bond rate was reduced to $5,000 per acre at a later date and eventually
reduced again on October 28, 1989, to $3,250 per acre. (cl. ex. 4)
9.
IC 13-4.1-6-6 states, "The Director shall adjust the amount of the bond or
deposit required... from time to time as:
(1) affected land acreages are increased or decreased;
(2) changes occur in the cost of future reclamation; or
(3) significant changes occur in the history of the mining and
reclamation activities of the applicant."
10.
The language above places an affirmative duty on the Department and Director to
adjust bonds when necessary."
11.
310 IAC 12-4-9 reads similarly and provides for informal conferences of the
type held on April 21, 1989.
12.
The reason given by the Department for the bond adjustment dealt with changes
in the cost of reclamation. (cl. ex. 6 and 7)
13. At
the hearing, the Department also proceeded on the theory of significant changes
having occurred in the history of the mining and reclamation activities of the
applicant.
14.
The Department introduced a two page list of violations dating back to December
of 1984. This list shows 3 violations written in December of 1984, 13
violations in 1985, 10 violations in 1986, 12 violations between October 29,
1988, and March 1, 1989, when the Department began a review of the bond (cl.
ex. 12), and another 15 violations prior to hearing. (resp.
ex. A) (Note- a number of violations are still under administrative or judicial
review.)
15.
When the bond rate was reduced to $3,250 per acre on October 28, 1988, the
Department had the opportunity to consider both reclamation history and mining
history and specifically chose not to add any bond per acre for these two
items. (cl. ex. 4)
16.
Of the types of violations found in Respondent's Exhibit A, as many reclamation
related violations such as topsoil handling, mining off permit property, and
mining non-bonded property occur in l984, 1985, and 1986 as occur at later
date.
17.
The direct costs of reclamation (fill, heavy machinery, fuel, labor,
fertilizer, appropriate vegetation, etc.) have not increased in any appreciable
amount from October of 1988 to date.
18.
The deposition of the informal conference hearing officer and his report
indicates that the calculations leading to the need for increase in total bond
was not based on a massive increase in reclamation costs in general but due to
a re-examination of four hard-to-reclaim areas which would require considerably
more than $3,250 per acre to reclaim. (cl. ex. 18, pp. 117, 118 and cl. ex. 7,
pp. 4 and 5)
19.
The
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mining property in question in this
case totals approximately 130 acres.
20.
The four hard-to-reclaim areas above are referred to a
A, B, C, and D in the hearing officer's report. (cl.
ex. 7)
21.
Area A is the coal processing area. The Department alleges this segment
consists of an area of approximately 6 acres however, the evidence introduced
at hearing indicated this was an eyeball estimate.
22.
Area B is an open pit and ungraded spoil on the Corey Barbour property.
23.
Area C is an open pit and ungraded spoil on Coburn Corp. property.
24.
Area D is an open pit and ungraded spoil on HJL, Inc., property.
25.
310 IAC 12-4-8 sets the maximum bond rate at $10,000 per acre.
26.
The order under appeal is based on the conference report which increases the
bond on area A, B, and C from $3,250 per acre to $10,000 per acre. Area D was
increased to $7,500 per acre.
27.
Area D has been approved as a post-mining water impoundment.
28.
Such an approval decreases the cost of reclamation considerably as the pit need
not be filled.
29. Postmining land use changes have been requested on areas B
and C. (cl. ex. 16) Signed consents from the owners or corporate
representatives have been obtained. (cl. ex. 9 and 10)
30.
310 IAC 12-5-18 deals with postmining land usage and
indicates the Commission has no discretion to deny a postmining
land use change if the owner consents and the list of ten criteria are met.
31.
The written consent form Coburn Corporation requesting a pond be left on the
property was signed in 1985 but no revocation was presented at the hearing and
no one from Coburn testified.
32.
The written consent from Barbour was made to a different corporate entity but
the evidence shows the owner desired the pit in question be reclaimed as a
water impoundment.
33.
Evidence was introduced from another mine owner/operator (Felson
Bowman) that the Department routinely grants these requests for water
impoundments as long as the property owner consents.
34.
The total bond available for reclamation on the Eel River Mine is $432,475.
35.
If Jaeco were to be required to fill the pits in
areas Bond C and return them to their original contours, as much as $400,000
could be added to the cost of reclamation. (cl. ex. 13 and 15)
36.
Sworn testimony of Russell Feuerbach, a reclamation contractor, indicates that
the routine acreage can be reclaimed for no more than $1,650 per acre (cl. ex.
1)
37. Fueurbach's total estimate was approximately $300.000 if
the water impoundments are left and not filled with dirt and restored to
original contours.
38. Felson Bowman testified his men and equipment could perform
reclamation involving grading, contouring and all work not involving vegetation
for $300,000 if the water impoundments remain.
39.
Properly vegetating the area will cost $40,000 to
$80,000.
40.
The Department did not produce any sworn testimony regarding the calculation of
actual reclamation expenses. All such calculations were given in report form to
the informal conference office who relied on them. No
evidence was presented by the Department on the actual cost of reclaiming
acreage not contained in areas A, B, C, or D.
41. Jaeco produced evidence of probative value that area A is
really between 3 and 3.5 acres, not approximately 6 acres, as estimated by the
Department.
42. Jaeco produced evidence of probative value that the crucial
portion of area B is approximately 2 acres and not 5 acres as estimated by the
Department.
43.
The purpose of requiring mines to post bonds prior to mining is to assure the
property is properly reclaimed and the Department is not required to make any
release of bond until reclamation is completed.
44.
The standard form used by the Department for bond adjustments (cl. ex. 8) is a
weighted average per acre depending on the original uses of the entire acreage,
its contour, and the depth of the coal vein.
45.
While this form is the one normally used in setting or adjusting bonds, there
is nothing in the Indiana Code of Administrative Code which requires this
method be used.
46.
Since the purpose of a bond is to assure adequate reclamation, a calculation
based upon the actual cost of restoring each of the disturbed areas is
permissible.
47.
The burden of persuasion is on the Department anytime the Department seeks to
adjust a bond based on actual costs.
48.
This appears to be the first time the Department has attempted to adjust a bond
based on actual costs of reclamation.
49. Jaeco argues that the Department has an improper motive in
being singled out for the first such adjustments.
50.
Somebody has to be the first.
51.
While Deputy Director Bruns' letter of February 27,
1989, (cl. ex. 12) indicated some personal feelings towards Jaeco, it is not
unreasonable for the Department to select a frequent violator as the first
actual cost of
[VOLUME 5, PAGE 123]
reclamation adjustment.
52.
There are three problem areas with the Department's calculations in this case:
A.
The acreage estimates of problem areas are imprecise. While there may not be a
need to actually survey the site, when each .1 acre means $650, some
measurements need to be taken rather than relying on eyeball estimates and
photographs.
B.
The analysis involved in increasing the bond on the problem areas was not
countered with an analysis that at least 80 acres can be reclaimed for under
$2,000 per acre. This leaves over $100,000 in bond available to reclaim other
acreage.
C.
All of the evidence of significantly increased costs submitted by the
Department at hearing was hearsay evidence submitted in the form of reports and
studies. While these are admissible as records of the Department, Jaeco challenged the numbers involved with sworn testimony
of two persons having reclamation experiences. Under the circumstances, it is difficult
for the Department to sustain its burden of persuasion.
53.
The administrative law judge concludes that at this time it is more likely than
not that the post-mining land use change on areas B and C will be approved.[FOOTNOTE 1] Accordingly, the administrative law
judge concludes that the evidence shows the actual cost of reclamation of this
site at this time with areas B and C becoming water impoundments does not
exceed $400,000 and thus the present bond is adequate.
54. Jaeco raises two other issues which need to be addressed:
a.
Since the letter of the Director states that the reason for the increase deals
with increased costs of reclamation at the Eel River Mine, Jaeco
argues that this is the only issue before the administrative law judge, thus
violator history is not relevant even though the same statute allows
adjustments made on the basis of changes in mining and reclamation activities.
b.
Even if prior history of the mining activity is considered, there has not been
a significant change.
55.
The Director's undated letter to Jaeco received in
mid August of 1989 (cl. ex. 6) cites IC 13-4.1-6-6 as the authority for the
adjustment. While it may be better practice to have specifically included past
mining history and practices as a factor, the administrative law judge
concludes that the letter sufficiently advises Jaeco
and its counsel of the various criteria on which the Department relied. Also,
the report of the conference officer served with the letter makes reference to
mining history.
56.
The evidence shows that the general cost of reclamation has not increased in
any appreciable amount recently. While there is some evidence that the actual
cost of reclamation at the Eel River mine may have increased, having decided
that the current bond total is adequate at this time disposes of this issue.[FOOTNOTE 2]
57.
Normally, under IC 13-4.1-6-6, the mine's past history would be highly
relevant.
58.
Without doubt, Jaeco's prior mining history is a
disgrace.
59. In
this particular case, however, on October 28, 1988, the Department reduced Jaeco's bond. (cl. ex. 4)
60.
The Department at that time had every opportunity to add in a factor for
reclamation history and for mining history and voluntarily chose to place
"0"s in the appropriate columns. (cl. ex. 4)
61.
Less than four months later, a Deputy Director issued a memo ordering Jaeco's bond reviewed in part based on mediocre reclamation
activities. (cl. ex. 8)
62.
No evidence was produced to show a major change in mining history or
reclamation activity between late October of 1988 and mid February of 1989.
63.
While the administrative law judge is hesitant to apply the doctrine of estoppel to a state agency in a matter as important to the
state as surface mine reclamation, in this particular case the administrative
law judge believes it applies. The Department had every opportunity to leave
the bond at $5,000 per acre by factoring in mining history problems and it did
not do so. A mine operator has a right to expect his bond to remain somewhat
stable and not subject to massive increases shortly after a Department approved
adjustment.
64.
Finally, the Department occasionally made reference to overburden problems. The
form used for the October 28 adjustment down to $3,250 contains a factor which
accounts for potential overburden problems. (cl. ex. 8) overburden problems can
add $2,000 to $4,000 per acre to the bond. Clearly in October of
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1988,
the Department was not concerned about the overburden and its effect on
reclamation.
65.
For all the above reasons, the administrative law judge finds for Jaeco in its appeal. Having reached this decision prior to
November 13, 1989, Jaeco's request for Temporary
Relief is moot and therefore dismissed.
FOOTNOTES
1.
See McIntyre and Bryant v. DNR and
Northern Coal, 5 CADDNAR 45 (1989)
2.
This is not to say that if areas B and C must be returned to their original
contours and/or the topsoil found to be woefully inadequate that those facts
would not constitute a significant increase in reclaiming the Eel River Mine in
the future. The Department hinted at topsoil problems but did not take borings
or in any way prove that large amounts of imported topsoil will be needed.