[CITE: Musgrave v. Squaw Creek Coal Co. and DNR, 12 CADDNAR 192(2009)]



[VOLUME 12, PAGE 192]


Cause #: 08-034R

Caption: Musgrave v. Squaw Creek Coal Co. and DNR

Administrative Law Judge: Jensen

Attorneys: Racher, Eckerle (Musgrave); Phillips (Squaw Creek); Boyko (DNR)

Date: December 28, 2009







184. The Department’s conduct of the January 3, 2008 public hearing did not violate Musgrave’s due process rights and was conducted in accordance with I/SMCRA.


185.  The Department’s approval of SCCC’s application for Phase I bond release as to 49.39 acres is affirmed.


186.  The Department’s approval of SCCC’s application for Phase II bond release as to 268.25 acres is affirmed.


187.  The Department’s approval of SCCC’s application for Phase III bond release as to 955.37 acres is overturned and such order of the Department is hereby vacated.



I.          CASE SUMMARY:


1.      The instant proceeding was commenced by Bil Musgrave’s (Musgrave) filing of correspondence with the Natural Resources Commission (Commission) on February 15, 2008.


2.      Musgrave alleges that the Department of Natural Resources (Department) failed to consider or review “several issues” before granting a bond release application filed by Squaw Creek Coal Company (SCCC).  Musgrave sought administrative review of “the recent decision of the Indiana Department of Natural Resources to approve the bond release on the S-008 Permit area.”  Musgrave elaborates that (1) the Department’s conduct of the public hearing was inappropriate and (2) an opportunity should be provided for him and others to be heard to ensure that “appropriate measures protective of human health and the environment are taken before any bond reclamation release is granted.”


3.      On February 25, 2008, a prehearing conference was scheduled to occur on March 14, 2008.  The prehearing conference was continued on the motion of SCCC and was rescheduled for March 19, 2008.


4.      SCCC filed its “Trial 12B Motion to Dismiss” and the Department of Natural Resources (Department) filed its “Answer and Affirmative Defenses” on March 13, 2008 and March 14, 2008, respectively. 


5.      The March 19, 2008 prehearing conference was utilized primarily for the purpose of establishing a briefing schedule associated with SCCC’s motion to dismiss.  Following the grant of an extension of time requested by Musgrave to file his response, all briefing was completed on June 30, 2008 with the Department’s filing of its reply brief.


6.      After the parties had fully briefed the matter, SCCC’s motion to dismiss was denied on July 24, 2009.  On August 11, 2009 during a status conference, the administrative law judge offered the following explanation with respect to her denial of SCCC’s motion to dismiss. 

First it is believed that Mr. Musgrave appropriately raised for administrative review, issues relating to alleged procedural defects in the conduct of the public hearings.  Second it is the opinion of the administrative law judge that Mr. Musgrave has sufficiently alleged substantive issues relating to the Department of Natural Resources consideration of the effect Squaw Creek Coal Company’s mining may have had or may have in the future upon the migration of disposed chemicals or related materials or leachate off of the permit area.

Report of Status Conference dated August 15, 2008.


[VOLUME 12, PAGE 193]


7.      During that same status conference, the administrative law judge cautioned however,

…The parties should clearly distinguish between the effects of mining upon those chemicals because any issues surrounding the actual disposal of said chemicals were outside the jurisdictional boundaries of the Natural Resources Commission.



8.      On August 26, 2009, SCCC filed its Answer and Affirmative Defenses.


9.      Following the grant of multiple extensions of time associated with the completion of discovery and the filing of summary judgment motions and related briefs, Musgrave filed his motion for summary judgment on April 3, 2009.  SCCC and the Department (SCCC and the Department are collectively referred to herein as “the Respondents”) filed their responses to Musgrave’s motion and cross motions for summary judgment on June 25, 2009 and June 26, 2009, respectively.  Musgrave’s filing of his response in opposition to the Respondents’ cross motions and reply brief on August 24, 2009, completed all briefing and this proceeding is now ripe for disposition.


10.  Throughout the pendency of the instant proceeding Musgrave has been represented by Counsel, Peter M. Racher and Stephanie L. Eckerle, the Department has been represented by Counsel, Ihor N. Boyko and Counsel, Michael K. Phillips has represented SCCC.


11.  Procedurally, the instant administrative cause is governed by Indiana Code §§ 4-21.5-3, commonly referred to as the Administrative Orders and Procedures Act or AOPA, and 312 IAC 3-1.


12.  Indiana Code §§ 14-34 et seq., commonly referred to as the Indiana Surface Coal Mining and Reclamation Act or I/SMCRA, and 312 IAC 25 et seq., control this proceeding from a substantive posture.


13.  The Respondents’ Affirmative Defenses, as set forth in pleadings filed by the Department on March 14, 2008 and by SCCC on August 26, 2009, include the following issues that will be addressed herein:

1)      Failure to state a claim for which relief can be granted.

2)      Lack of standing.

3)      Lack of subject matter jurisdiction.

4)      The application of the doctrine of collateral estoppel and res judicata, especially to issues related to the role of the Indiana Department of Environmental Management based on the previously adjudicated case of Musgrave v. IDNR and Squaw Creek Coal Co., 10 CADDNAR 178 (2006).

See SCCC’s “Answer and Affirmative Defenses” filed August 26, 2008 and the Department’s “Answer and Affirmative Defenses” filed March 14, 2008.




A.        Lack of Subject Matter Jurisdiction:


14.  The matters presented here relate to the Department’s determination to release bond associated with SCCC’s mine operated under Permit S-008.


15.  Bond release determinations are controlled generally by I/SMCRA, 312 IAC 25, et seq. and more particularly by Ind. Code § 14-34-6-7 and 312 IAC 25-5-16.

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16.  It is acknowledged that the bond release determination at issue will involve incidental consideration of waste disposal, particularly the disposal of tar and tarry wastewater, spent pot lining and chromium sludge, by Alcoa, Inc. within the permit boundaries of Permit S-008.  The administrative law judge is ever mindful that such discussion and consideration is tangential to the real issue at hand, which is whether the Department’s determination to release SCCC’s bond appropriately complied with I/SMCRA, 312 IAC 25 et seq., Ind. Code § 14-34-6-7 and 312 IAC 25-5-16.


17.  The Commission accepts the Respondents’ position that it is “possessed of only those powers expressly granted by the Indiana General Assembly.”  Musgrave v. IDNR and Squaw Creek Coal Co., 10 CADDNAR 178, (2006), citing Dyer Baptist Church v. Town of Dyer and DNR, 8 CADDNAR 79, (1998) and in rendering its decision in the instant proceeding, the Commission will not exceed its statutory grant of authority.


18.  From this point forward Musgrave v. IDNR and Squaw Creek Coal Co., 10 CADDNAR 178, (2006), will be referred to as “Musgrave I”.


19.  Just as the Commission is disallowed from usurping authority not granted by the General Assembly, the Commission is mandated to act in accordance with its statutory responsibilities.  In that light, as will be discussed further infra, there exists an unavoidable relationship between Alcoa’s disposal of waste and SCCC’s mining within the boundary of Permit S-008.


20.  The Commission, in fulfilling its responsibilities must, as will be discussed infra, consider the impacts of SCCC’s mining upon every aspect of the property within the boundary of Permit S-008.


21.  The Commission is the ultimate authority for the Department except in certain specified circumstances in which the Commission’s administrative law judge serves as the ultimate authority.  Ind. Code § 14-10-2-3  The Commission’s administrative law judge serves as the ultimate authority for the Department with respect to bond release under Ind. Code § 14-34-6-7.  Ind. Code § 14-34-2-2 and 312 IAC 3-1-2(b).

22.  The Commission possesses jurisdiction over the persons of the parties and the subject matter of this proceeding.


B.        Standing:


23.  The Department recognizes the Commission’s precedent that standing in the context of I/SMCRA “is much broader than standing in more traditional cases, and includes injury to aesthetic or recreational interest.”  Musgrave I, at 183.


24.  The Department concludes that while a broadened concept of standing applies to I/SMCRA in the context of aesthetic and recreational interests, that the narrower “personalized harm” standing requirement set forth in Huffman v. Office of Envtle. Adjudication, 811 N.E.2d 806, (Ind. 2004) is applicable to Musgrave’s claims that the Department inappropriately conducted the public hearing associated with the bond release at issue herein.


25.  In acknowledging the broader bases of standing as established in Hoosier Environmental Council v. DNR and Solar Sources, Inc., 7 CADDNAR 85, March 23, 1995, Roberts d/b/a Enterprise Oil & Associates v. DNR & Black Beauty Coal Co., 7 CADDNAR 206, October 26, 1999 and restated in Musgrave I, the Department, however, fails to acknowledge that the broadened concept of standing is not limited to aesthetic or recreational interests.


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26.  The broader concept of standing as applicable in I/SMCRA derives from and must conform to the federal Surface Mine Control and Reclamation Act (F/SMCRA).  30 U.S.C. 1255, Roberts, supra at 209.  In furtherance of that general premise, I/SMCRA, like F/SMCRA, provides that a “person having an interest which is or may be adversely affected by release of a bond” may take action with respect to an application for bond release.  Indiana Code § 14-34-6-10(a)(1).  Again, like F/SMCRA, I/SMCRA provides a definition of a “person having an interest which is or may be adversely affected…” as a person “(1) who uses any resources of economic, recreational, aesthetic, or environmental value that may be adversely affected by coal exploration or surface coal mining and reclamation operations or any related action of the state; or (2) whose property is or may be adversely affected by coal exploration or surface coal mining and reclamation operations or any related action of the state. 312-25-104 (emphasis added).


27.  By application of the foregoing, it is determined that Musgrave possesses standing to institute and pursue the instant proceeding because he alleges that the Department’s determination to approve SCCC’s bond release application will or may adversely affect him as a user of the resources on and around the property contained within permit area of Permit S-008.


28.  The Department’s conduct of the public hearing is an action of the state related to bond release.  As such Musgrave also possesses standing to commence and prosecute this proceeding for administrative review based upon the allegation that the Department’s handling of the public hearing was inappropriate simply because he “may be adversely affected” by the handling of that public hearing.


29.  The Department raises the point that Musgrave maintains standing to complain about matters that “personally affected him and no one else.”


30.  Under I/SMCRA it is sufficient that a person allege merely that he/she may be adversely affected, the Department correctly observes that the alleged potential adverse affect remains personal to the claimant.



C.        Collateral Estoppel and Res Judicata


31.  The Respondents each take the position that Musgrave is collaterally estopped by application of the doctrine of res judicata from raising certain issues in the instant proceeding as a result of previously adjudicating Musgrave I.


32.  The Commission has recognized the application of the doctrine of res judicata in administrative proceedings for the purpose of preventing litigation that would result in “redundancy or in a contrary decision.”  McCulloch v. Day, 12 CADDNAR 85, 87, (2009), see also Dean and Marilyn Ray v. Lukis, et al., 12 CADDNAR 69, (2009).


33.  For a proceeding to be barred by the doctrine of res judicata the consideration is whether a “Particular issue is adjudicated and then is put into issue in a subsequent suit on a different cause of action between the same parties or those in privity with them.”  Ray, supra at 72, citing South Bend Federation of Teachers v. National Education Association South Bend, 389 N.E.2d 23, (Ind. App. 1979).


34.  Of predominant importance to a determination whether the same, previously adjudicated, issue is being put into issue in a subsequent litigation is whether both actions are supported by the same evidence.  Ray, supra at 72.


35.  Applicability of the doctrine of res judicata is also subject to considerations of  whether, 

(1) the issues sought to be estopped were in the statutory jurisdiction of the agency; (2) the agency was acting in a judicial capacity; (3) both parties had a fair opportunity to litigate the issues: and (4) the decision of the administrative tribunal could be appealed to a judicial tribunal. 

Ray, supra at 72, citing Weiss v. Indiana Family and Social Services Administration, Division of Disability, Aging and Rehabilitative Services, 741 N.E.2d 398, 401, (Ind. App. 2000).


36.  The Respondents’ position that Musgrave I should be given res judicata effect with respect to portions of the instant proceeding misses the mark for the simple reason that the issues presented in Musgrave I involved bond release related to SCCC’s Permit S-009, not Permit S-008.   See Musgrave I at 183, Finding #32, which states “the bond release at issue herein does not involve the permit area included in Permit # S-008 but is restricted solely to the permit area included in Permit # S-009.”


[VOLUME 12, PAGE 196]


37.  There are hugely significant differences between the land areas contained within the boundaries of the two permits in that Alcoa disposed of its wastes within the permit boundaries of Permit S-008, not Permit S-009.  See Musgrave I at 184, Finding #37.


38.  Because the issues presented in the instant proceeding do not even relate to the same SCCC Permit, it cannot reasonably be concluded that both actions could be supported by the same evidence.


39.  Consequently, the Respondents’ request that portions of the instant proceeding be barred by application of res judicata is denied.


40.  Notwithstanding the determination that Musgrave I does not have res judicata effect to terminate any portion of the instant adjudicatory proceeding, the administrative law judge observes that legal precedent established in or relied upon in Musgrave I, will be applicable to the facts established in the instant proceeding in the same manner as any other indexed final order of the Commission.


41.  Indiana Code § 4-21.5-3-32 requires agencies to index final orders that may then be relied upon in determining subsequent adjudications.  CADDNAR was established by the Commission for the purpose of indexing the Commission’s final orders.

Establishment of Division of Hearings; Index of Final Adjudicative Agency Decisions; Transcript Fees; Natural Resources Commission, 26 Ind. Reg.1375 (Jan. 1, 2003).


42.  Consequently, just as it was determined in Musgrave I at 185 (Finding 39) that “the Department’s approval of Permit # S-009 and its reclamation plan constitutes an ‘order’ that became a final order after the expiration of the statutory time for taking administrative review” was based upon precedent established in Bell v. Department of Natural Resources and Solar Sources, Inc., 7 CADDNAR 54, (1994), precedent from previous Commission adjudications, including Musgrave I, may be relied upon in determining the instant proceeding.  Ind. Code § 4-21.5.3-32.

D.        Failure to State a Claim Upon Which Relief May be Granted:


43.  Beyond their claims that Musgrave lacks standing to initiate and pursue the instant proceeding, is collaterally estopped by Musgrave I from pursuing certain issues raised in the instant proceeding, and/or has alleged matters that are outside the subject matter jurisdiction of the Commission, the Respondents have failed to further support their claim that Musgrave has failed to state a claim upon which relief may be granted.


44.  With each of the Respondent’s particular grounds having been determined negatively in Sections II A through C, additional consideration is unnecessary with respect to the Respondents’ allegation that Musgrave fails to state a claim upon which relief may be granted.



E.        Respondents’ Cross Claims for Summary Judgment:


45.  Within “Claimant Bil Musgrave’s Response In Opposition to DNR’s and Squaw Creek Coal Company’s Cross-Motions for Summary Judgment and Reply in Support of Claimant’s Motion for Summary Judgment”, Musgrave alleges that the Respondents’ cross motions for summary judgment were not timely filed and for that reason alone should be denied.

Pg. 1, FN 1.


46.  The administrative law judge may apply the Indiana Trial Rules to the extent those Rules are not inconsistent with AOPA. 

312 IAC 3-1-10.


[VOLUME 12, PAGE 197]


47.  As appropriate, the administrative law judge is required or authorized to give parties the “opportunity to file pleadings, motions and objections and submit offers of settlement.” 

Ind. Code 4-21.5-3-7(a) and (b).


48.  As was aptly pointed out by the Department, “Indiana Trial Rule 56(B) states:

…. When any party has moved for summary judgment, the court may grant summary judgment for any other party upon the issues raised by the motion although no motion for summary judgment is filed by such party.

Indiana Trial Rule 56(B), see also Wheeler, et al. v. Peabody, DNR, and Town of Zionsville (Intervenor), 9 CADDNAR 193, (2004).


49.  Indiana Trial Rule 56(B) is not inconsistent with Ind. Code 4-21.5-3-23, which governs summary judgment in the context of AOPA.


50.  Musgrave properly observes that the order of the administrative law judge issued on March 27, 2009 setting the schedule for filing dispositive motions was applicable equally to all parties, including the Respondents.


51.  Musgrave does not allege that the Respondents filing of their cross-motions for summary judgment on a date later than April 3, 2009 prejudiced him in any way and there is no evidence of such actual prejudice to Musgrave.


52.  The circumstances presented in this case, combined with the reality that summary judgment could be granted in favor of either one or both of the Respondents even if they had failed entirely to file any pleading, lends itself to a determination that the Respondents’ motions, while untimely under the March 27, 2009 order, are not subject to denial on procedural grounds.


53.  The administrative law judge denies Musgrave’s request that the Respondents’ cross-motions for summary judgment be denied as being untimely filed. 



F.         Summary Judgment Standard:


54.  “Summary judgment should be granted to terminate unnecessary litigation, when a moving party has sufficiently proved the non-existence of a genuine issue of material fact establishing entitlement to judgment as a matter of law.”    DNR v. Scope Operating Co., and Capitol Indemnity Corp., 11 CADDNAR 159, (2007), citing Indiana Department of Environmental Management v. Schnippel Construction, Inc., 778 N.E.2d 407 (Ind.App. 2002), Travelstead v. Vigo Coal Company and DNR, 10 CADDNAR 302 (2006), Reed v. Department of Natural Resources, 9 CADDNAR 65, (2002).


55.  AOPA provides for summary judgment at Ind. Code § 4-21.5.-3-23 and specifies that judgment “shall be rendered immediately if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits and testimony, if any, show that a genuine issue as to any material fact does not exist and that the moving party is entitled to a judgment as a matter of law. 

Ind. Code 4-21.5-3-23(b).


56.  “Any doubt as to the existence of an issue of material fact, or an inference to be drawn from the facts, must be resolved in favor of the nonmoving party.”  Travelers Indem. Co. of America v. Jarrells, 906 N.E.2d 912, 915 (Ind. Ct. App. 2009).


57.  “A genuine issue of material fact exists when facts necessary to a determination of a proceeding are in dispute, or are not in dispute but are capable of supporting at least two differing inferences.”  Travelstead v. Vigo Coal Co. and DNR, 10 CADDNAR 302, (2006) citing Indiana Department of Environmental Management v. Schnipple Construction, Inc., 778 N.E.2d 407 (Ind. App. 2002).


58.  Summary judgment is appropriate where the court is required to make an interpretation.   Ancich v. Mobile Oil Corporation, 422 N.E.2d 1320 (1981).



III.       FINDINGS OF FACT:       

A.        Mining, Reclamation and Bond Release Associated with Squaw Creek Mine’s North Field


59.  Established in 1960, SCCC is a joint venture of Alcoa, Inc. (Alcoa) and Peabody Coal Company (Peabody). 

Musgrave Exhibit A, pg. 1-1 & Musgrave Exhibit B.


[VOLUME 12, PAGE 198]


60.  Squaw Creek Mine’s “North Field” (SCM) was opened in 1965 before I/SMCRA was fully approved.  Approval of I/SMCRA occurred on August 19, 1983. 

Respondent DNR’s Cross Motion for Summary Judgment and Response to Claimant’s Motion for Summary Judgment, pg 7-8.


61.  Alcoa Generating Corporation owns the land and mineral rights associated with SCCC’s mining operations. 

Musgrave Exhibit B, pg. 1.


62.  From 1965 to 1979 Alcoa disposed of certain wastes in SCM. 

SCCC Exhibit 1[1], pg 4 and Musgrave Exhibit E. pg 4.


63.  Wastes known to have been disposed of by Alcoa in SCM include approximately 69 million gallons of tarry waste and wastewater, between 2.2 million and 7.9 million cubic feet of chromium hydroxide sludge, which included a trace constituent of chromic acid, and 34,800 tons of spent potlining. 

Musgrave Exhibit A, pgs1-5, 1-9, 1-10, 1-12 & 1-13.


64.  Alcoa’s waste disposal in the SCM occurred before the implementation of the Resource Conservation and Recovery Act (RCRA) and ceased when RCRA was implemented.

Id. at pg 1-9.


65.  Alcoa’s disposal of the spent potlining and chromium hydroxide sludge was completed with the approval of the Indiana State Board of Health, the predecessor to the Indiana Department of Environmental Management.

Id. at pgs. 1-9 & 1-12.


66.  The spent potlining contains cyanides and fluorides and was listed as a hazardous waste by the State of Indiana in 1992.

Id at pgs. 1-10 & 1-12.


67.  Because the tarry waste may have been fluoride enriched through industrial processes, in 1967 Alcoa proposed adding 100 pounds of lime to each drum to neutralize the fluoride.  In 1979 it was discovered that for “several years” this neutralization effort was omitted from the disposal process.  The neutralization effect of lime on fluorides is, in any event, unproven. 

Id. at pgs. 1-8 & 1-11.


68.  Alcoa has not accounted for waste disposals occurring during a 34-month period between January 1968 and October 1970 or during a 57-month period between April 1972 and January 1977. 

Musgrave Exhibit C, pg. 2.


69.  SCCC employees reported during the public hearing conducted by the Department on January 3, 2008 that “from 1974 to 1979”, during a portion of the interval that Alcoa and SCCC records of waste disposal have not been provided, wastes from Alcoa were “dumped in front of the shovel … and the shovel would spoil those barrels of chemicals.” 

SCCC Exhibit 7, pg. 56.


70.  Within a surface coal mine the wide haul roads are inclined ramps used by heavy equipment to transport coal from the working area of the mine to the surface.  Alcoa and SCCC have identified locations where wastes were disposed of at the terminus of abandoned haul roads[2].


71.  SCCC was issued Permit S-008 on March 28, 1984 following the implementation of I/SMCRA.



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72.  Active mining at SCM concluded in 1987.  

SCCC Exhibit 1, pg 4.


73.  At issue in this proceeding is SCCC’s application for release of Phase III bond for 955.37 acres as well as Phase I and II bond release on 49.39 acres and 268.25 acres, respectively. 

SCCC Exhibits 2, 3 & 4, Musgrave Exhibit N.


74.  The SCM is located approximately five miles northwest of Boonville, Indiana and 15 miles southwest of Evansville, Indiana. 

Musgrave Exhibit A, pg. 2-2.


75.  The SCM is located approximately 12 miles north of the Ohio River and is within the drainage area of the Ohio River. 

Musgrave Exhibit A, pg 2-3.


76.  SCM lies between Squaw Creek to the west and Cypress Creek to the east.

SCCC’s Exhibit 1, Figure 5.


77.  The mining operation at SCM involved the removal of both Millersburg Coal Seams the second of which was underlain by a layer of shale, referred to as “underclay” that formed the mine’s working floor.  

SCCC’s Exhibit 1, pg. 8 & Musgrave Exhibit A, pg. 2-5.


78.  The material lying above the first Millersburg Coal Seam and also between the first and second Millersburg Coal Seams was silty shale, fine silty sandstone, thin limestone beds, loess and till that was removed by blasting and stripping with heavy equipment. Id.  The stripped material is commonly referred to as overburden or spoil.


79.  The overburden material at SCM, in its post-mining form, consists of particles ranging from clays, silts and sands, blasted rocks to very large rocks that form essentially a “structureless pile of debris.”

Musgrave Exhibit A, pg. 2-5.


80.  The SCM site is now “covered by mine spoil ranging in depths between 25 to 80 feet.”


81.  The spoil is essentially broken shale, sandstone and limestone that is behaving as an unconfined aquifer. 

Musgrave Exhibit B, pg. 2.


82.  Precipitation either runs off to surface drainage, is contained within on site water bodies or moves through the spoil until it reaches the underclay. 

Musgrave Exhibit A, pg. 2-7 & SCCC Exhibit 1, pg. 9.


83.  The unconfined aquifer existing above the underclay allows groundwater flows laterally above the “underclay” to the lowest discharge points.  SCCC Exhibit 1, pg. 10, see also Musgrave Exhibit A, pg. 2-7.  The discharge points “may be surface water bodies on-site or toward stream drainages off-site such as Cypress Creek.”  Department Exhibit 2, Appendix C, pg. ii.


84.  Several ponds exist within the SCM.  Many of them are perennial but have widely varying water levels that are “closely tied to local groundwater elevations.” 

SCCC Exhibit 1, pg. 9, Department Exhibit 2, Appendix C, pg. iv.


85.  The topography maps reveal that there is a natural high point in the underclay running north and south through SCM causing general groundwater flows toward Squaw Creek located to the west and Cypress Creek located to the east. 

SCCC Exhibit 1, pg. 9 and Figure 3.


86.  Alcoa’s wastes are subject to 2 potential exposure pathways that involve “subsurface instrusive activities, and potential migration to groundwater.” 

SCCC’s Exhibit 1, pg. 10 & Musgrave Exhibit A, pg. 2-8.


87.  Alcoa’s wastes were reportedly buried but prior to Engineering Science Inc.’s preparation of its 1993 “Work Plan Squaw Creek Mine Environmental Assessment” (Phase 1 Report) (Musgrave Exhibit A) those wastes had been exposed due to incomplete burial or erosional forces.  Musgrave Exhibit A, pg. 2-8.  As is reported in BHE Environmental’s “2006 Site Conceptual Model” (SCCC’s Exhibit 1) Alcoa has “repaired erosive areas to maintain the integrity of the surface cover.”  SCCC Exhibit 1, pg. 10.


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88.  In 2006, BHE Environmental, Inc. reported that the constituents of the wastes disposed of by Alcoa that “could partition to the groundwater….appear to be “anthracene, Benzo (a) anthracene, Benzo (a) pyrene, Benzo (b) fluoranthene, Benzo (g, h, i) perylene, Benzo (k) fluoranthen, chromium, Chrysene, Cyanide, Fluoranthene, Fluorene, Fluroide, Paenanthrene, Phenols, Total and Pyrene.”  SCCC’s Exhibit 1, pg. 11.  Previously, in 1994 and 1997, Engineering-Science, Inc. and Environmental Consultants, Inc., respectively, reported that the parameters used as indicators of the Alcoa wastes were “aluminum, arsenic, chromium, cyanide, fluoride, chloride, phenols, polynuclear aromatic hydrocarbons (PAHs), and total petroleum hydrocarbons (TPH).” 

Musgrave Exhibit H, pg. 71; Department Exhibit 1, Appendix C, pg. iii.


89.  Alcoa has voluntarily engaged in activities designed to evaluate the environmental impacts of the waste disposal at SCM. 

SCCC Exhibit 1, pgs. 3-4.


90.  The investigations conducted by Alcoa began with the Phase 1, broad-based review conducted in 1993 by Engineering-Science, Inc., which included a review of Alcoa’s available records, a review of mining records, an examination of aerial photographs to identify changes in topographic surfaces, as well as interviews with Alcoa and SCCC personnel.  SCCC Exhibit 1, pg. 6.  Through that data it was determined that “there are ten areas where such disposal activities occurred” within the SCM.  Based upon interviews with SCCC personnel it was further concluded “that disposal may have occurred at other, nearby locations at the mine that have not been previously identified.”  Musgrave Exhibit A, pg. 1-1.


91.  A disposal area will hereinafter be referred to as “Site”.


92.  The Phase 1 Report also sets out that the full environmental assessment will be completed through two additional phases.  “Phase 2, entitled Initial Field Investigation, will be conducted to develop more data on the disposal sites within the mine and guide future investigations.  Phase 3, entitled Detailed Field Investigation, will be used to define disposal sites and groundwater conditions in more detail so that risks can be better evaluated.” 

Musgrave Exhibit A, pg. 3-1.


93.  Engineering-Science, Inc.’s Phase 2 Initial Field Investigation Report (Phase 2 Report) was completed in September 1994.  

Musgrave Exhibit H.


94.  Discovery of two additional sites resulted from the Phase 2 Field Investigation.

Mugrave Exhibit H, pg. 1.


95.  The Phase 3 Detailed Field Investigation was conducted between 1996 and 1997 by Civil & Environmental Consultants, Inc. with a “Report of Findings Phase III Environmental Assessment Squaw Creek Mine” being completed on February 20, 1997. 

Department Exhibit 1, Appendix C.


96.  In 1996, as part of the Phase 3 investigation, surface water from 13 ponds and three seeps (points of surface discharge), from 14 installed shallow monitoring wells and two deep monitoring wells was sampled and analyzed. Id. at v.  The shallow monitoring wells were drilled to depths ranging from 21 to 87 feet and the deep monitoring wells ranged from 81 to 150 foot depths. 

Musgrave Exhibit B, pg. 2.


97.  In 1994 and again in 1997, aluminum was identified as an indicator of Alcoa’s waste disposal at SCM.  Musgrave Exhibit H, pg. 71; Department Exhibit 1, Appendix C, pg. iii.  In 1994, surface and groundwater analysis indicated high concentrations of aluminum, frequently exceeding drinking water standards, in the vicinity of Sites 1, 3, 4, 7 and 8, as well as Site 5’s “significant” “outflow toward the Cypress Creek” and in the drainage swales west of Sites 11 and 12. Musgrave Exhibit H, pgs. 73-74, 77 & 80.  However those analytical results were discounted as having potentially been affected by suspended solids in the samples.  In 1994, the samples were not analyzed for total suspended solids rendering it impossible to based conclusions upon the aluminum concentrations. Musgrave Exhibit H, pg. 86.  In 1996, aluminum was once again a constituent that was being analyzed in the surface and groundwater sampling but the analysis also included field turbity tests and laboratory total suspended solids (TSS) analysis.  In all instances of elevated aluminum concentrations there also existed high TSS values, which is indicative of the conclusion that particulate matter in the samples results in artificially elevated aluminum concentration.  Department Exhibit 1, Appendix C, pg. 62.  This conclusion was bolstered by the analysis of samples obtained from different water sources in the same vicinity that showed no elevated TSS levels and also showed no elevation in aluminum concentrations.  Id.


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98.  Deep groundwater monitoring was performed in 1996 and reported in 1997 from monitoring wells MW7D and MW14D, drilled through the underclay to a depth of 150.0 feet and 81.0 feet, respectively.  Department Exhibit 1, Appendix C, Table 5.  Analysis of deep groundwater samples from monitoring well MW14D were focused upon impacts from Sites 7 and 8 while monitoring well MW7D addressed Sites 1 and 2.  Department Exhibit 1, Appendix C Figures 30 & 32.


99.  Sites 1 and 2 are located within 800 feet of each other in the southeast section of SCM, approximately 1,300 to 1,500 feet north of North 400 Road.  Musgrave Exhibit H, pgs. 10, 11 & Figure 2.1.  Site 2 is located approximately 700 feet west of a road that marked SCM’s eastern perimeter boundary.  Id.  Peabody memoranda indicate that “neutralized acid waste” was disposed of at Sites 1 and 2 and that Site 2 also received coal processing waste.  Musgrave Exhibit H, pgs. 11 & 13.  Geophysical evaluation of Sites 1 and 2 were not conducted for completion of the Phase 2 report but chemical analysis of samples collected in March 1994 from a pond within Site 1 and from a seep east of Site 2 revealed the existence of no waste constituents.  Musgrave Exhibit H, pgs. 43, 66 & 73.  The Phase 3 environmental assessment reveals that Site 1 covers approximate one surface acre that lies within a closed watershed.  Department Exhibit 1, Appendix C, pgs. 44 & 49.  Site 2  approximates 0.8 surface acres in size that drains surface water eastward in the direction of a small pond lying outside SCCC’s permit boundary that may be partially sustained by surface water from Site 2.  Id.  It is possible that the small pond lying outside SCCC’s boundary may “represent a discharge area for groundwater” from Site 1 and Site 2.  Department Exhibit 1, Appendix C, pg. 49.  Surface water sampling and analysis conducted in May 1996 revealed no evidence of waste constituents above background limits or above Federal drinking water Maximum Contaminant Levels (MCLs) or Secondary Maximum Contaminant Levels (SMCLs).  Department Exhibit 1, Appendix C, pgs. 59-64.  The Phase 3 Report concludes that waste impacts are not revealed in groundwater sample analysis associated with Sites 1 or 2, however, a detailed review of the reported analyses reveals elevated Chloride levels of 8.6 mg/l in monitoring well MW5S and 5.6 mg/l in monitoring well MW4S that lie to the east and west of Site 1.  The Chloride concentrations exhibited at MW4S and MW5S exceed background ranges.  Department Exhibit 1, Appendix C, pg. 82 & 85, Figure 30.  Water samples obtained from deep monitoring well, MW7D, showed a fluoride level of 2.0 mg/l when background samples resulted in ranges between 0.36 – 0.45 mg/l.  Department Exhibit 1, Appendix C, pgs. 82-23, 92.  While the samples from this monitoring well are from the No. 5 coal seam, which may explain “reducing conditions and high chloride concentrations as well as the presence of trace metals” the Report provides no explanation for the increased fluoride concentration.  Id.


100.          Sites 6, 7 and 8 are located in the northeast section of SCM, again near the mine’s perimeter boundary.  Musgrave Exhibit H, pgs.13-14 & Figure 3.1.  Sites 7 and 8 are believed to be “primary sites of waste disposal in the 1974-1975 time period”,  Musgrave Exhibit H, pg. 27, while Site 6, if used for waste disposal at all, was likely only used for four months.  Musgrave Exhibit H, pg. 14 & 25; Department Exhibit 1, Appendix C, pg. 2.  No surface water sampling was conducted in 1996 as part of the Phase 2 Environmental Assessment with respect to Site 6.  Musgrave Exhibit H, pg. 73.


101.          Sites 7 and 8 are each approximately 50 feet deep and received waste “at the bottom of the pit.”  Site 7 covers approximately 3.4 surface acres while Site 8 covers approximately 2.8 surface acres with surface drainage at Site 7 being from north to south and at Site 8 tending toward the southeast.  Department Exhibit 1, Appendix C, pg. 45, 51-52.  The watershed of Site 7 approximates 30 acres and Sites 7 and 8 are located in an open watershed with drainage to Cypress Creek.  Department Exhibit 1, Appendix C, pg. i, 51-52.  Geophysical investigations involving Site 7, conducted as part of the Phase 2 Environmental Assessment, resulted in increased conductivity near “the center of a broad depression which remains at the pit” with a “sharp peak” that corresponds in location to a ditch at the bottom of the Site.  Musgrave Exhibit H, pg. 49.  An increase in conductivity is an expected indicator of the presence of chromium hydroxide sludge and drums containing tarry waste.  Musgrave Exhibit H, pg. 43.  Land depressions that collect water that is believed to be “perched above the waste” exist at Site 8.  Department Exhibit 1, Appendix C, pg. 2.  Surface water sampling and analysis conducted in March 1994 “shows definite waste contamination (aluminum, chromium, ammonia, COD) in seeps and surface water immediately downgradient” from Sites 7 and 8.  Musgrave Exhibit H, pg 85.  The surface water analysis conducted in 1996 is reported as revealing no indication of waste impacts for any of the Sites except for samples collected from pond 7B, which lies southeast of Sites 7 and 8, Department Exhibit 1, Appendix C, pgs. 67.   With respect to groundwater monitoring at Sites 7 and 8, Chloride and fluoride concentrations all exceeded background conditions at both monitoring wells MW11S and MW13S, which are located north of Site 8 and northwest of Site 7, respectively.  Department Exhibit 1, Appendix C, pgs. 82-83, 86, Figure 32.  MW11S also exceeded background ranges for ammonia.  Id.  Analysis of samples from MW12S and MW 14S reveal no waste indicators are present.  Department Exhibit 1, Appendix C, pg 87 & Figure 32.  At depths of 52.8 feet and 86.9 feet, respectively, MW 11S and MW13S are the deepest of the four shallow monitoring wells drilled to assess Sites 7 and 8.  Department Exhibit 1, Table 5.  And the remaining two monitoring wells associated with Sites 7 and 8, MW12S and MW14S are only 29.6 feet and 39.5 feet deep, respectively.  Id.  The waste associated with Sites 7 and 8 were disposed at a depth of approximately 50 feet so it is not unexpected that groundwater samples taken from monitoring wells with depths above the waste disposal depth would reveal little or no indication of waste while those samples obtained from below the disposal depth would reveal contamination associated with the wastes.  In 2006, soil samples collected from MW016 found “8 PAH compounds and chromium – plant waste material” associated with Sites 7 and 8.  Department Exhibit 1, Appendix F, pg. 13.


[VOLUME 12, PAGE 202]


102.          Sites 5, 9 and 10 are located in the north central portion of SCM.  Musgrave Exhibit H, pg. 10 & Figure 3.1.  The size of Site 5 was not identified but Site 9 is approximately 0.7 acres and Site 10 covers approximately 2.1 surface acres.  Department Exhibit 1, Appendix C, pg. 45.  All drainage associated with Site 9 collects within a pond near the northern end of the Site.  Department Exhibit 1, Appendix C, pg. 54.  Site 10’s runoff primarily travels to the south where it collects in a pond, the overflow of which ultimately exits SCM “eastward beneath Bateman Road.”  Department Exhibit 1, Appendix C, pgs. 54 – 55.  Photographic evidence reveals that site 5 received only “insignificant quantities of waste” that is believed to be solely “mining waste (commonly referred to as gob)”.  Musgrave Exhibit H, pg. 27, Department Exhibit 1, Appendix C, pg. 3.  Alcoa reported that the spent potlining was disposed of only at Site 9.  Musgrave Exhibit H, pg. 85.  The geophysical investigation of Site 9 revealed a “large anomaly with very sharp boundaries that correspond very closely with the boundaries of the waste as determined from the aerial photograph analysis.”  Musgrave Exhibit H, pg. 49.  Site 10 underwent geophysical investigation using two different electromagnetic instruments.  Musgrave Exhibit H, pgs. 49 & 58.  The instruments consistently revealed higher conductivity within certain boundaries of Site 10 with one instrument, the EM-34 that measures conductivity at deeper penetrations, indicating the existence of a potentially higher volume of material.  Musgrave Exhibit H, pgs. 49, 57 – 58.  In any event, the geophysical investigation of Site 10 revealed outcomes similar to conclusions reached through the aerial photography review.  Id.  Geophysical investigation was not conducted with respect to Site 5.  Musgrave Exhibit H, pg. 43.  Surface water sampling conducted in March 1994 indicated no elevated waste constituents with respect to Site 5, which lies in an open watershed.  Musgrave Exhibit H, pg. 76 – 77.  This determination resulted in the conclusion that “ there is little surface water risk originating from this part of the mine.”  Id.  Surface water samples analyzed in 1996 also revealed no evidence of waste constituents in the vicinity of Site 5.  Department Exhibit 1, Appendix C, pgs. 68 – 70.  The 1994 surface water sampling evidenced ammonia and fluoride at Site 9, “which is consistent with the spent potlining disposal…” reported to have occurred at that location.  Musgrave Exhibit H, pgs. 77 & 85.  Surface water sample analysis conducted in 1996 did not reveal evidence of waste constituents at Site 9.  Department Exhibit 1, Appendix C, pgs. 70 – 71.  The 1994 results as to Site 9 are consistent with the discovery of fluoride levels exceeding IDEM’s default closure levels in 2006. Musgrave Exhibit E, pg. 14, Department Exhibit 1, Appendix F, pg. 13.  There was no evidence of waste constituents associated with Site 10 in surface water sampling and analysis completed in March 1994, although lead concentrations exceeded “USEPA MCLs for drinking water”, Musgrave Exhibit H, pg. 77 & 85.  In 2006 “(6 PAH compounds and Chromium) – plant waste material…” was identified in soil sample analysis as “exceeding the default closure levels” for Site 10.  Musgrave Exhibit E, pg. 13, Department Exhibit 1, Appendix F, pg. 13.  In 1996 groundwater sampling and analysis was conducted with respect to Sites 9 and 10 by virtue of monitoring wells MW8S, MW9S and MW10S, which are 67.4 feet, 55.0 feet and 59.1 feet in depth, respectively.  Department Exhibit 1, Appendix C, pg. 89 & Table 5.  All three monitoring wells reported Chloride levels that exceed background levels by as much as 0.5 – 4.6 mg/l and report ammonia values exceeding background levels by as much as 1.5 mg/l.  Department Exhibit 1, Appendix C, pg. 82 – 83, 89 – 90.  The Phase 3 Report’s conclusion that that groundwater samples do not indicate waste impacts from Sites 9 and 10 is questionable in light of the elevated concentrations of “waste indicator parameters” identified in those samples.  Department Exhibit 1, Appendix C, pg. 90.


103.          Sites 3, 4, 11 and 12 are generally located in the northwest portion of SCM.  Musgrave Exhibit H, pgs. 10, 20, 25 and Figure 2.4.  The dimension of Site 4 is not reported but Sites 3, 10 and 12 cover 1.8, 1.4 and 1.0 acres, respectively.  Department Exhibit 1, Appendix C, pgs. 44 – 45.  All sites in this group drain in an easterly direction and exist within closed watersheds.  Department Exhibit 1, Appendix C, pg. 55.  Disposed of waste was found at Site 3, but the quantity of waste disposed of at this site is believed to be insignificant.  Musgrave Exhibit H, pgs. 20, 25, 27, 84 and Figure 2.4.  Similarly, the lack of photographic evidence combined with the location of Site 4 being in the center of a haul road indicates that if this site were used for waste disposal, only “insignificant quantities of waste” would have been disposed at this site.  Musgrave Exhibit H, pgs. 20, 25, 27, 84 and Figure 2.4.  Geophysical investigation was conducted with respect to Sites 3 and 11 but not 4 and 12.  Musgrave Exhibit H, pg. 43.  Both Site 3 and 11 reveal conductive anomalies consistent with conclusions reached through aerial photograph review.  Musgrave Exhibit H, pgs. 45 & 58.  Surface water samples taken from a pond situated to the west of Sites 3, 4, 11 & 12 are the only two sample locations throughout SCM to reveal total chromium concentrations above detection limits.  Department Exhibit 1, Appendix C, pg. 72.  While the total chromium concentrations were only slightly above detection limits it is significant that of all sample analysis completed at SCM up to 1996 no other total chromium levels exceeded detection limits.  No groundwater sampling was conducted with respect to this grouping of Sites for purposes of the Phase 3 Environmental Assessment.  Department Exhibit 1, Appendix C, pgs. 74 – 93.


[VOLUME 12, PAGE 203]


104.          Post mining drainage has left Sites “2, 5, 7 and 8 “in ‘open” watersheds that eventually lead off the North Field (SCM) to Cypress Creek.”  The remaining Sites exist in “closed” watersheds with surface water draining to on site “local depressions with surface water outlet.” 

Department Exhibit 1, Appendix C, pg. i.


105.          The Indiana Department of Environmental Management (IDEM) has considered the Phase 1, Phase 2 and Phase 3 Reports and in a letter dated October 29, 2003  determined specifically that a more direct method of identifying wastes, such as drilling, should be undertaken to facilitate the establishment of a reliable ground and surface water monitoring program.  Musgrave Exhibit B, pg. 3.  IDEM further concluded that surface and groundwater sampling “should be conducted quarterly for two years and then semiannually until fate and migration of the contaminants of concern can be reasonable predicted.”  Musgrave Exhibit B, pg. 4.


106.          IDEM identifies concerns raised by the United Mine Workers of America (UMWA) and local citizens that Alcoa’s wastes were “scattered throughout the stipped mine area.”  Id. Despite the concerns of local citizens and the UMWA, BHE Environmental, Inc., in preparing the 2006 Site Conceptual Plan for Alcoa, discounted these allegations based solely upon the statements of waste haulers and the speculative belief that waste disposal along the working face of the mine would have caused unwanted traffic and mining inefficiencies. 

Musgrave Exhibit I, Musgrave Exhibit E, pg. 5.


107.          In its preparation of the 2006 Site Conceptual Model, BHE did investigate six locations identified by IDEM, some of which were identified based upon the reports of former mine workers.  No wastes “were found in any of the soil borings and the groundwater samples did not contain any of the indicator parameters at concentrations exceeding IDEM’s industrial default closure RISC values.”


108.          In response to IDEM’s October 29, 2003 correspondence, Alcoa acknowledged that waste disposal occurring between 1968 and October 1970 is unaccounted for and that mine maps for this period of time have not been provided.  Further Alcoa acknowledges that waste disposed of over a 57 month period beginning in April 1972 and ending January 1977 are also unaccounted for.  The fact that SCCC would logically be in possession of the missing mine maps and Alcoa, a partner in SCCC, would reasonably be assumed to have possession of the missing waste disposal records, the failure to account for waste disposal activities during these particular periods of time is curious.


109.          The inability of SCCC or Alcoa to account for waste disposal occurring during certain extended periods erodes the confidence that all waste disposal sites or methods have been identified.  It further calls into question the conclusion by BHE Environmental, Inc. that wastes were not likely disposed of by means of scattering throughout the SCM.


110.          In 2004, IDEM concluded that groundwater sampling did not “indicate alarming concentrations of Chromium or other heavy metals.” However, IDEM also noted that “historical disposal records provided to date are insufficient to determine whether the twelve waste pits established by Alcoa are the only excavations with the 3000 – 5000 acres of the North Field that received waste…” 

Musgrave Exhibit C, pg. 4.


111.          It is particularly important that as of 2003, IDEM did not believe that the fate and migration of the waste constituents could be reasonably predicted without more sampling and analysis. 

Musgrave Exhibit B, pg. 4. 


112.          Fate and migration of the waste and waste constituents are logically impacted by SCCC’s mining activities.


113.          BHE Environmental, Inc. (BHE) prepared a 2006 Site Conceptual Model after conducting Groundwater and Surface Water Sampling, and Geophysics and Trenching Investigations in 2004 and completing a Targeted Subsurface Investigation in 2006.  SCCC Exhibit 1, pg. 3.  The additional sampling, in both soil and water as well as the visual inspection of waste and other material contained within trenches and soil borings is consistent with the findings reported in 1993, 1994 and 1997.


114.          Generally, waste disposal and the existence of waste constituents can be confirmed at Sites 3, 7, 8, 9, 10 & 11.  SCCC Exhibit 1, pg. 4.  The confirmation of wastes at these six specific sites should not be construed as a determination that wastes do not exist at other sites.  There exists evidence that Alcoa’s wastes were disposed of at other sites such as Site 2, where Peabody records indicate that “neutralized acid waste” was deposited and Site 1 where elevated chloride levels were identified in 1996 and elevated fluoride concentrations were identified in deep well samples in 2006. 


115.          Furthermore, the evidence presented in this proceeding does not address wastes generated between 1968 and October 1970 and between April 1972 and ending January 1977.


116.          While BHE’s work towards the completion of the 2006 Site Conceptual Model was extensive and did address many of IDEM’s 2003 recommendations, IDEM’s suggested quarterly monitoring program to determine the fate and migration of the waste constituents has not been implemented.


117.          The “most significant” potential for release of the wastes and their constituents is through the contamination of surface water while percolating through the waste laden overburden resulting in the transportation of the wastes and their constituents into the groundwater above the “underclay”. 

Musgrave Exhibit A, pg. 2-8.


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118.          This “migration to groundwater represents a potentially complete exposure pathway.”  “… The greatest potential for waste-associated transport is leaching to groundwater and subsequent transport by groundwater to surface water bodies where exposures may occur.” 

SCCC’s Exhibit 1, pg. 10. 


119.          Without having information as to fate and transport the “most significant” potential waste release mechanism, which results from water percolating through the overburden left by SCCC depositing wastes and their constituents into the groundwater above the underclay, cannot realistically be evaluated. 

Musgrave Exhibit A, pg. 2-8.


120.          In terms of this proceeding it is particularly important that the “permeability of the mine overburden is significantly greater than that of the underclay such that lateral flow dominates.  The laterally flowing water travels to the lowest discharge points, which are surface water bodies and stream drainages.”  SCCC Exhibit 1, pg. 10.  Certain of those stream drainages are to Cypress Creek.


121.          It is acknowledged that waste disposal Sites 1 - 12 do not occur within the specific areas where bond release has been requested by SCCC.  SCCC Exhibits 2 & 3.  However, the migration of the waste or constituents of that waste from the disposal sites throughout SCM and possibly beyond is facilitated by the permeable overburden layer created throughout the SCM by SCCC’s mining operation.


122.          The available evidence supports the factual conclusion that SCCC has completed all backfilling, regrading, drainage control and revegetation in accordance with the requirements of I/SMCRA with respect to those areas for which Phase I and Phase II bond release has been requested by SCCC. 

SCCC Exhibit 4.


123.          Evidence also supports the factual conclusion that areas associated with SCCC’s Phase II bond release request are not contributing suspended solids outside the permit area and appropriate crop productivity has been accomplished. 

SCCC Exhibit 4.



B.        Procedural Due Process Associated with Department’s Conduct of Public Hearing


124.          A public hearing was conducted by the Department in accordance with Indiana Code § 14-34-6-11 and 312 IAC 25-5-16 on January 3, 2008.   

SCCC Exhibit 7, pg. 9.


125.          At the outset of the public hearing, Adam Warnke (Warnke), who served as the Department’s public hearing officer announced that a court reporter was present as required by 312 IAC 25-5-16.  Warnke advised everyone in attendance that in order to obtain an accurate record of the hearing that only the testifying witness should be talking.  Warnke further explained that he would be placing witnesses under oath to receive evidence from them and that due to the large turnout, in an effort to be fair to everyone, each individual’s testimony would be “limited to five minutes”. 

SCCC Exhibit 7, pgs. 10 – 11.


126.          It is noted that Scott Darling’s (Darling), Alcoa’s representative’s, testimony consists of six pages of testimony whereas several of the other witnesses were notified that their five minutes was up in much less than six pages of testimony.  However, it is also understood that because Darling prepared his testimony as part of his employment, his remarks were likely highly prepared and efficiently delivered in comparison to the testimony of lay individuals unaccustomed to making such presentations. 

SCCC Exhibit 7.


127.          Many witnesses were able to testify completely in less than the five minutes allotted and on each of these occasions Warnke inquired whether the witness had anything further to add.  In this regard, Warnke’s behavior appears to be courteous.



128.          Some of the witnesses, including Musgrave, did run short of time for the completion of their testimony.  However, Mugrave sought and was granted the opportunity to provide further testimony at the end of the hearing.  The record does not indicate whether other individuals sought additional opportunities. 



129.           It is noted that Darling’s testimony was delivered without interruption from Warnke, while Warnke did frequently interrupt the testimony of other witnesses with questions.  However, frequently Warnke’s interruptions were to ask for clarification as to the information being provided.  Again the transcript reflects the difference between the well prepared testimony of an expert employed by Alcoa and the testimony of persons unexperienced in offering public testimony. 



130.          Warnke did express his intent to limit the testimony to matters within the boundaries of the areas sought by SCCC for bond release on more than one occasion, but was not firm in enforcing this limitation as many witnesses were allowed to testify as to dumping that occurred outside the specific bond release areas. 

Musgrave Exhibit I-4. 


[VOLUME 12, PAGE 205]


131.          Musgrave complains that he was prevented from using maps that he had brought to the public hearing.  Musgrave Exhibit I, pg. 2, paragraph 13.  There is nothing contained within the transcript to reflect that Musgrave offered and was refused the opportunity to use or present additional maps.  SCCC Exhibit 7.  Furthermore, the transcript reveals that Musgrave and another witness, Gary W. Herr, were allowed to provide marked up copies of the map made available at the public hearing by the Department.  Musgrave Exhibit I-4.




A.        Mining, Reclamation and Bond Release Associated with Squaw Creek Mine’s North Field


132.          Following submission of an application for bond release under 312 IAC 25-5-16(d) and Indiana Code § 14-34-6-9:

…the department shall conduct an inspection and evaluation of the reclamation work. The evaluation shall consider, among other things, the following:

(1) The degree of difficulty to complete any remaining reclamation.

(2) Whether pollution of surface and subsurface water is occurring.

(3) The probability pollution will continue.

(4) The estimated cost of abating the pollution


1.         Phase I and Phase II Bond Release

133.          Indiana Code § 14-34-6-13 as implemented by 312 IAC 25-5-16 controls bond release processes and requirements.  In pertinent part, 312 IAC 25-5-16 states:

(e) The department may release the bond or deposit, in whole or in part, upon a determination the reclamation covered by the bond or deposit or portion thereof has been accomplished as required by IC 14-34 according to the following schedule:

(1) Phase I. After the operator completes the backfilling, regrading, and drainage control of a bonded area under the approved reclamation plan, sixty percent (60%) of the bond or collateral for the applicable permit may be released.

(2) Phase II. After the operator establishes revegetation on the regraded mined lands under the approved reclamation plan, an additional twenty-five percent (25%) of the total original bond amount may be released. No part of the bond or deposit shall be released under this subdivision if the lands to which the release would be applicable are contributing suspended solids to the stream flow or run-off outside the permit area in excess of the limitations in IC 14-34 and until soil productivity for prime farmlands has returned to the equivalent levels of yield as nonmined land of the same soil type in the surrounding area as determined from the soil survey performed under IC 14-34. If a siltation structure is to be retained as a permanent impoundment, a bond release may occur under this subdivision if provisions for sound future maintenance by the operator or the landowner are made with the department.


134.          SCCC sought Phase I bond release on 49.39 acres and it has been established that backfilling, regrading, and drainage control in accordance with the approved reclamation plan for those acres has been completed as required by 312 IAC 25-5-16(e)(1).


135.          The approval of SCCC’s application for a 60%, Phase I, bond release for 49.39 acres is supported by a preponderance of the evidence.


136.          SCCC sought Phase II bond release on 268.25 acres that may be released following the determination that the area is not contributing suspended solids to stream flow or run-off outside the permit area and that crop production levels equivocate the production yields of similar un-mined lands.


137.          The evidence presented supports by a preponderance of the evidence that SCCC has completed revegetation and has met soil productivity standards with respect to the area for which it has sought Phase II bond release.  Therefore, approval of SCCC’s application for Phase II bond release as to 268.25 acres is also supported by a preponderance of the evidence.  

[sic., 2] 3.        Phase III Bond Release

138.          The Department concludes from its interpretation of I/SMCRA that:

None of the information presented or the testimony given has indicated that the actual reclamation of the lands proposed for release was in any way defective or inadequate.  All required grading, soil replacement and stabilization has been completed.  Revegetation according to the approved land uses has been restored and appropriate land productivity has been demonstrated.

SCCC Exhibit 5.


139.          The Department’s determination that SCCC completed the grading, land stabilization, revegetation and established crop productivity is controlling with respect to Phase I and Phase II bond releases, but the completion of those activities do not dominate the evaluation of Phase III bond release applications.


140.          The Department further concludes, again based upon its interpretation of I/SMCRA, that:

The actual or theoretical threat of pollution from industrial wastes is not the type of impact anticipated by the bond release requirements.  SMCRA addresses the handling of coal wastes and prevention of pollution as a direct result of coal mining.  The handling of plant wastes and the potential for pollution from those wastes is, and will continue to be, a matter within the jurisdiction of IDEM.  The release of reclamation bond is a finding that Squaw Creek has completed reclamation in accordance with the respective regulations. 

SCCC Exhibit 5.


[VOLUME 12, PAGE 206]


141.          The Department’s interpretation of I/SMCRA’s reclamation requirements is too narrow.


142.          SCCC filed its bond with the Department “conditional upon faithful performance of all the requirements of this article and of the permit.” 

Indiana Code § 14-34-6-1(a), (emphasis added).


143.          Indiana Code § 14-34-6-13 and 312 IAC 25-5-16, which also control the release of all bond remaining after Phase I and Phase II releases, states: 

Phase III. The department may release the remaining bond only after the:

(A) operator has successfully completed all surface coal mining and reclamation activities required in IC 14-34, this article, or the permit; and

(B) expiration of the period specified for operator responsibility in IC 14-34-10-2.

312 IAC 25-5-16(e)(3) (emphasis added).


144.          Based upon Indiana Code §§ 14-34-6-1(a), 14-34-6-13 and 312 IAC 25-5-16, Phase III bond release must be evaluated in broad terms encompassing not only compliance with the individual permit but also considering compliance with the entirety of Indiana Code §§ 14-34 et seq. and 312 IAC 25 et seq.


145.          By virtue of Indiana Code § 14-34-10-2(b)(13)(A), SCCC was specifically obligated to:

Minimize disturbances to the prevailing hydrologic balance at the mine site and associated offsite areas and to the quality and quantity of water in surface and ground water systems during and after surface coal mining and reclamation operations by doing the following:
(A) Avoiding acid or other toxic mine drainage by measures such as the following:
i) Preventing or removing water from contact with toxic-producing deposits.
    (ii) Treating drainage to reduce toxic content that adversely affects downstream water upon being released to watercourses.
    (iii) Casing, sealing, or otherwise managing boreholes, shafts, and wells and keep acid or other toxic drainage from entering ground and surface water.


146.          SCCC is also particularly required to avoid drainage from toxic-forming spoil into ground and surface water by: 

(1) Identifying, burying, and treating where necessary, spoil that in the judgment of the director, may be detrimental to vegetation or may adversely affect water quality if not treated or buried.

(2) Preventing water from coming into contact with acid-forming and toxic-forming spoil in accordance with section 50 of this rule.

(3) Burying or treating all acid-forming or toxic-forming spoil within a reasonable period of time. If the director determines that such spoil is detrimental to the offsite hydrologic balance, the permittee shall bury or treat the acid-forming or toxic forming spoil within thirty (30) days.

312 IAC 25-6-19.


147.           “‘Toxic-forming materials’ means earthen materials or wastes that, if acted upon by air, water, weathering, or microbiological processes, are likely to produce chemical or physical conditions in soils or water that are detrimental to biota or uses of water.” 

312 IAC 25-1-154 (emphasis added).


148.          Nothing within the definition of “toxic-forming material” indicates that the earthen materials and wastes are required to be directly related to the surface coal mining or reclamation activities. See Hoosier Environmental Council v. DNR and Foertsch Construction Company, Inc., 7 CADDNAR 162, 169, (1997).


149.          The Foertsch decision is distinguishable from the present case in that it involved an application for a permit amendment while this proceeding involves a bond release application.  However, the decision supports the premise that I/SMCRA obligates a coal mine operator to properly address wastes or other toxic or toxic-forming material, regardless of whether the material is naturally occurring, a result of man-made deposits, regardless of whether the materials are the directly involved in mining operations or resulting from some other source entirely. 



150.           “‘Toxic mine drainage’ means water that is discharged from … surface coal mining and reclamation operations that contains a substance that through chemical action or physical effects is likely to kill, injure, or impair biota commonly present in the area the might be exposed to the substance.” 

312 IAC 25-1-155.


151.          The definition of “toxic mine drainage” requires only that a chemical action or physical effect occur to cause the drainage to be discharged from a mine operation.


152.          It is clear from the language of Indiana Code § 14-34-10-2(b)(13)(A), 312 IAC 25-6-19, 312 IAC 25-1-154 and 312 IAC 25-1-155 that I/SMCRA contemplated the occasion that mining could occur in locations where toxic forming materials, either naturally occurring earthen materials or non-naturally occurring deposits placed by entities such as Alcoa, exist. See Hoosier Environmental Council v. DNR and Foertsch Construction Company, Inc., 7 CADDNAR 162, 169, (1997).


[VOLUME 12, PAGE 207]


153.          312 IAC 25-6-21 specifies that:

Backfilled materials shall be placed so as to do the following:

(1) To minimize contamination of ground water systems with acid, toxic, or otherwise harmful mine drainage.

(2) To minimize adverse effects of mining on ground water systems outside the permit area.

(3) To support approved postmining land uses.

(b) To control the effects of mine drainage, pits, cuts, and other mine excavation or disturbances shall be located, designed, constructed, and utilized in such manner as to prevent or control discharge of acid, toxic, or otherwise harmful mine drainage waters into ground water systems and to prevent adverse impacts on such ground water systems or on approved postmining land uses.

312 IAC 25-6-21


154.          “Backfill” is not defined within Indiana Code §§ 14-34 et seq. or 312 IAC 25 so the plain and customary meaning must apply.  F.D. McCrary Operator, Inc. v. Department of Natural Resources, 10 CADDNAR 73, 79, (2005).  Commonly “backfill” is defined as “material used for refilling an excavation.”  Random House Webster’s College Dictionary, 2000 Second Revised and Updated Random House Edition, April 2000.


155.          The waste disposed of by Alcoa at SCM partially refilled SCCC’s excavation and consequently must be characterized as backfill.


156.          SCCC is obligated to comply with Indiana Code § 14-34-10-2(b)(13)(A), 312 IAC 25-6-21 and 312 IAC 25-6-19 before Phase III bond release may occur.


157.          It can be reasonably inferred that the wastes disposed of by Alcoa at SCM, many of which have constituents listed as hazardous wastes under RCRA, are likely to, at minimum, impair or be injurious to biota in the area of SCM.


158.          The evidence clearly establishes that constituents of the wastes disposed of by Alcoa at SCM are evident in the soil and water in the vicinity of Sites 3, 7, 8, 9, 10 & 11, some of which are located in open watersheds with drainage outside the permit area of Permit S-008, including Cypress Creek.


159.          IDEM was not satisfied in 2003 that the fate and transport of the waste constituents could be reasonably ascertained without two years of quarterly sample analysis and the evidence confirms that this level of evaluation has not been completed to date.


160.          SCCC’s own evidence confirms that SCCC’s mining activity left in its wake a layer of highly permeable overburden that serves as an unconfined aquifer.

Musgrave Exhibit A, pg. 2-8,  SCCC Exhibit 1, pg. 10.


161.          The permeable overburden, which resulted from SCCC’s mining operation, will have a direct impact on the fate and migration of Alcoa’s wastes and waste constituents and in this way SCCC’s mining activities are directly associated with the pollution of surface and subsurface water that is presently occurring and will continue to occur in the future.


162.          It is acknowledged that a portion of SCCC’s mining activities occurred before the implementation of I/SMCRA and thus there exists an argument that the requirements of I/SMCRA cannot be applied to those activities.  However, SCCC’s mining activities that occurred after the implementation of I/SMCRA were equally responsible for creating the permeable overburden and thus the unconfined aquifer.  Therefore, SCCC’s post-I/SMCRA activities cannot be distinguished from the mining activities occurring before the implementation of I/SMCRA as it relates to the migration of wastes and waste constituents through the overburden. 

SCCC Exhibit 5.


163.          While SCCC was not responsible for the actual disposal of wastes by its partner, Alcoa, the environmental assessments clearly establish that the highly permeable overburden created by SCCC’s mining activities serves to facilitate what has been characterized as the “most significant” potential for the release of waste constituents by allowing for the percolation of water through the wastes until the now waste laden water collects above the underclay from where it flows laterally to points of lowest discharge, which in some cases is Cypress Creek. 

Musgrave Exhibit A, pg. 2-8,  SCCC Exhibit 1, pg. 10.


164.            Evidence establishes by a preponderance of the evidence that SCCC has failed to minimize disturbances to water quality by “preventing or removing water from contact with toxic-producing deposits” as required by Indiana Code § 14-34-10-2(b)(13)(A)(i).  In fact, in direct opposition to Indiana Code § 14-34-10-2(b)(13)(A)(i), SCCC actively participated in the burial of Alcoa’s wastes at depths that it reasonably knew would result in contact with water.


165.          The record is void of any evidence that SCCC has, since the disposal of waste ceased, taken steps to remove water from contact with the wastes or taken steps to “treat drainage to reduce toxic content…” 

Indiana Code § 14-34-10-2(b)(13)(A)(i – ii).


166.          The record of this proceeding is void of any evidence that SCCC took action to treat “drainage to reduce toxic content that adversely affects downstream water…” before seeking Phase III bond release. 

Indiana Code § 14-34-10-2(b)(13)(A)(ii).


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167.          Similarly the record of this proceeding is void of any evidence that SCCC has taken steps to prevent “water from coming into contact with acid-forming and toxic-forming spoil” as required by 312 IAC 25-6-50(f). 

312 IAC 25-6-19(2).


168.          Evidence establishes by a preponderance of the evidence that pollution to surface and subsurface water, facilitated by SCCC’s creation of a highly permeable overburden, is occurring at SCM.


169.          Evidence establishes by a preponderance of the evidence that two years of quarterly sampling analysis as recommended by IDEM in 2003 to reasonably ascertain the fate and transport of the waste has not been completed.  While the environmental assessments conclude that it appears that the waste constituents identified do not easily partition to water, without appropriate sampling analysis it cannot be determined whether the pollution occurring at SCM will continue, worsen or possibly diminish.


170.          Without some reasonably certain hypothesis, based on sound and complete data, it can also not be determined what costs may be associated with abating the pollution.


171.          The evidence overwhelmingly establishes that SCCC’s request for Phase III bond release on 955.37 acres is premature.


172.          The Department failed to properly evaluate SCCC’s Phase III bond release application in terms of the entirety of Indiana Code §§ 14-34 et seq. and 312 IAC 25 et seq. as required by 312 IAC 25-5-16 and Indiana Code § 14-34-6-9.



B.        Procedural Due Process Associated with Department’s Conduct of Public Hearing


173.          A public hearing was requested by Musgrave and others under Indiana Code § 14-34-6-11, following SCCC’s application for bond release.


174.          With the exception that the Department must provide a court reporter for purposes of developing a transcript of the public hearing and the Department’s representative, in conducting a public hearing may administer oaths, subpoena witnesses and written materials, compel the attendance of witnesses and production of materials and “take evidence”, Indiana Code and Indiana Administrative Code are silent as to how the public hearing is to be conducted. 

312 IAC 25-5-16.


175.          The public hearing conducted by the Department was required to provide an opportunity to be heard in a proceeding that was “orderly, impartial, judicious and fundamentally fair.”  City of Hobart Common Council v. Behavioral Institute of Indiana, LLC, 785 N.E.2d 238, (Ind.App. 2003).


176.            Musgrave’s complaints involve the conduct of the public hearing in terms of what he contends to be inappropriate time limits on witness testimony, improper limits on the type of testimony, interruption of witnesses by the hearing officer, and the inability to offer evidence in rebuttal relating to the map used by the hearing officer in conducting the hearing.


177.          The only evidence as to the actual conduct of the public hearing is the transcript, which does not establish that Musgrave’s due process rights were violated by the hearing officer’s conduct of the public hearing. 


178.          The hearing officer established time limits upon the presentation of evidence with the stated intent of conducting a practical and expedient public hearing that would afford all persons in attendance an opportunity to be heard.  Only a few witnesses were cut short on time to testify and Musgrave, himself, was afforded a second opportunity to provide additional testimony near the end of the hearing.


179.          It is believed that Warnke inappropriately attempted to limit the testimony to activities occurring only within the bond release areas without consideration for how those bond release areas might contribute to the migration of wastes and waste constituents throughout the SCM and possibly beyond.[3]  However, despite the hearing officer’s limitations, many witnesses, including Musgrave, provided evidence relating to activities occurring outside the bond release areas.


180.          The hearing officer’s interruptions of witness testimony appear to be simply clarifications of the testimony being received and nothing more.


181.          Musgrave alleges that the hearing officer’s demeanor was unprofessional and intimidating to witnesses.  While Musgrave’s perception of the hearing officer’s non-verbal demeanor is not being ignored, the transcript of the hearing does not reflect that witnesses succumbed to or ceased giving testimony as a result of any intimidation.  Furthermore, the actual spoken words recorded within the transcript appear to be generally courteous.


182.          Musgrave’s allegation that he was refused the ability to provide rebuttal testimony is unfounded.  Musgrave had the ability to testify with respect to the map used by the Department during the public hearing.  While Musgrave alleges that he was refused the opportunity to use other maps, nothing in the transcript reflects that such occurred.


183.          There exists insufficient evidence to support the conclusion that Musgrave’s due process rights were violated as a result of the Department’s conduct of the public hearing.


[EDITOR’S NOTE: The original format of the Administrative Law Judge’s Findings of Fact, Conclusions of Law, and Final Order has been modified to correspond with CADDNAR format.  Findings 184 through 187 have been relocated to the “Final Order” section at the beginning of this document.]


[1] SCCC Exhibit 1 is the same document designated as evidence by Musgrave as his Exhibit E.  This document will consistently be identified as SCCC Exhibit 1.

[2] Many of the parties’ exhibits refer to these disposal points at “pits,” which is not an entirely accurate description as is noted in SCCC Exhibit 1, pg. 5. 

[3] This limitation would appear consistent with the Department’s narrow interpretation that I/SMCRA’s bond release evaluation is limited to “coal wastes and prevention of pollution as a direct result of coal mining” that has been deemed incorrect.