DRUMMOND COMPANY, INC., PETITIONER V. DONALD P. HODEL, SECRETARY OF
THE INTERIOR

   No. 86-1057

   In the Supreme Court of the United States

   October Term, 1986

   On Petition for a Writ of Certiorari to the United States Court of
Appeals for the District of Columbia Circuit

   Brief for the Respondent in Opposition

            TABLE OF CONTENTS
   Opinions below
   Jurisdiction
   Question Presented
   Statement
   Argument
   Conclusion
   Appendix

                            OPINIONS BELOW

   The opinion of the court of appeals (Pet. App. 1a-11a) is reported
at 796 F.2d 503.  The opinion of the district court (Pet. App.
12a-42a) is reported at 610 F. Supp. 1489.

                             JURISDICTION

   The judgment of the court of appeals was entered on July 22, 1986.
The order denying rehearing was entered on September 26, 1986 (Pet.
App. 43a).  The petition for a writ of certiorari was filed on
December 26, 1986.  The jurisdiction of this Court is invoked under 28
U.S.C. 1254(1).

                          QUESTION PRESENTED

   Whether Section 402(a) of the Surface Mining Control and
Reclamation Act of 1977, which requires coal mine operators to pay the
Secretary of the Interior a fixed reclamation fee "per ton of coal
produced," permits the Secretary to base this fee on the gross weight
of the coal at the time of the initial sale, transfer, or use, without
deductions for any impurities or water therein.

                               STATEMENT

   1. In 1977, Congress enacted the Surface Mining Control and
Reclamation Act of 1977 (SMCRA), 30 U.S.C. 1201 et seq., to "establish
a nationwide program to protect society and the environment from the
adverse effects of surface coal mining operations." 30 U.S.C. 1202(a).
 A provision of SMCRA, 30 U.S.C. 1231, established the Abandoned Mine
Reclamation Fund to be used to pay for the restoration of lands harmed
by past coal mining activities.  Coal operators subject to the Act are
required to pay a reclamation fee of "35 cents per ton of coal
produced by surface coal mining * * *(,) 15 cents per ton of coal
produced by underground mining", and 10 cents per ton of lignite coal
(30 U.S.C. 1232(a)).  Congress, estimating the cost to reclaim
abandoned mines at between $7 billion and $10 billion (H.R. Rep.
95-218, 95th Cong., 1st Sess. 134, 135 (1977)), found that "(t)he
burden of paying for reclamation is rightfully assessed against the
coal industry." Id. at 136.

   In order to implement the reclamation program, the Secretary of the
Interior promulgated national regulations on December 13, 1977,
establishing the procedures to be used by coal mine operators in
computing their reclamation fee liability.  42 Fed. Reg. 62715.  The
regulations, codified at 30 C.F.R. 870.12 (1978), originally provided
for the payment of the reclamation fee "on each ton of coal produced
for sale, transfer, or use" based on "the weight and value at the time
of initial bona fide sale, transfer of ownership, or use by the
operator." /1/

   After he became aware of inconsistent interpretations of the
regulations by local representatives of the Office of Surface Mining
(OSM) -- particularly in Alabama -- and some confusion among coal mine
operators as to how to calculate the "weight and value" of the coal,
the Secretary proposed a clarifying regulation in December 1981.  46
Fed. Reg. 60078.  The new regulation /2/ added the following
explanation to 30 C.F.R. 870.12(b) (emphasis in original):

      (3) The weight of each ton shall be determined by the actual
      gross weight of the coal. (i) Impurities, including water, that
      have not been removed prior to the time of initial bona fide
      sale, transfer of ownerhips, or use by the operator shall not be
      deducted from the gross weight.

   2. On August 27, 1982, the petitioner filed this action in the
United States District Court for the District of Columbia, seeking
review of the June 30, 1982, clarifying regulation.  /3/ The
petitioner also filed a similar action in the United States District
Court for the Northern District of Alabama.  The instant action was
stayed, on petitioner's motion, pending disposition of the action in
the Alabama district court.  The Alabama court upheld the Secretary's
regulations on May 18, 1983 (Pet. App. 44a-50a), and petitioner
appealed to the United States Court of Appeals for the Eleventh
Circuit.  The court of appeals reversed (id. at 51a-64a), holding
that, while it agreed with the district court's finding that the
challenged regulations are valid, the district court lacked
jurisdiction over the action.  The court of appeals found that 30
U.S.C. 1276(a)(1) "require(s) that judicial review of regulations
having nation-wide application occur in the federal district court in
the District of Columbia" (Pet. App. 58a).  /4/

   Following the decision of the Eleventh Circuit, petitioner and
respondent filed motions for summary judgment in the instant action.
The district court granted summary judgment in favor of the Secretary
(Pet. App. 12a-42a), rejecting petitioner's argument that the
Secretary had exceeded his authority in promulgating the challenged
regulations (id. at 13a).  The district court relied on the "well
established" principle that "'great deference (must be shown) to the
interpretation given the statute by the officers or agency charged
with its administration'" (id. at 23a (citations omitted)), noting
that "(d)eference becomes all the more important when the
interpretation of an administrative regulation is involved" (ibid.).
The district court found that the 1982 regulations -- which
interpreted, but did not change prior policy (id. at 36a-41a) -- are
consistent with the language of the statute (id. at 25a-28a) and are
"patently consistent with the legislative intent of the Act" (id. at
33a).

   On appeal, petitioner again argued that the regulations exceed the
Secretary's authority under Section 402(a) of SMCRA, 30 U.S.C.
1232(a), and violate the plain language of the statute and the
legislative intent in enacting Section 402.  Petitioner also took
issue with the scope of review employed by the district court,
asserting that no deference should be accorded the Secretary's
interpretation given what the petitioner viewed as the plain meaning
of the statutory language.  The court of appeals affirmed (Pet. App.
1a-11a).  Concluding that neither the statute nor the legislative
history defined the term "coal produced" (id. at 5a-6a), the court of
appeals found the Secretary's construction of the term to be a
reasonable exercise of his broad rulemaking authority to fill the
statutory "gap in the regulatory regime" (id. at 9a).  /5/

                               ARGUMENT

   The court of appeals correctly concluded that the regulation,
requiring the reclamation fee on the weight of coal produced at the
time of the first sale, transfer of ownership or use by the operator
to be calculated with no deductions for impurities that have not then
been removed, is entirely consistent with congressional intent in
establishing the Abandoned Mine Reclamation Fund under SMCRA.  Further
review by this Court is not warranted at this time.

   The petitioner bases its request for review on three grounds.
First, petitioner asserts that under the "plain meaning" of the term
"coal" the Secretary can assess reclamation fees on coal only after
all impurities, including moisture, have been removed (Pet. 15).
Second, petitioner urges review on the ground that there is a conflict
between the District of Columbia Circuit and the Third Circuit as to
the validity of the fee assessment regulation (id. at 15-21).
Finally, petitioner asserts that the statutory analysis employed by
the court of appeals requires correction by this Court (id. at 21-22).

   1. Petitioner states that "Congress' analysis of the costs
associated with payment of reclamation fees by the coal industry was
predicated on the assumption, not articulated in the text of the
statute but nevertheless apparent from the House Report on the final
bill, that the substance to be taxed was in fact combustible coal and
not extraneous materials found with it or absorbed by it during or
after mining" (Pet. 3 (footnote omitted)).  Petitioner's argument has
no basis in the statute, its legislative history, or in the consistent
interpretation of the relevant term by the Secretary.

   Petitioner notes (Pet. 5) that the Secretary's regulations define
"coal" as "combustible carbonaceous rock, classified as anthracite,
bituminous, subbituminous, or lignite by ASTM (American Society for
Testing and Materials) Standard D 388-77" (30 C.F.R. 700.5).
Preceding the definitional section of the regulations, however, is the
statement that "(a)s used throughout this chapter, the following terms
have the specified meaning except where otherwise indicated" (emphasis
added).  Thus, the Secretary is free to "otherwise indicate" a
reasonable different meaning for the term "coal" in other
circumstances, as in Section 870.12(b)(3)(i).

   In any event, the term "coal" is not used independently in the
relevant section of the statute or its implementing regulation.  The
term employed in 30 U.S.C. 1232(a), the reclamation fee section of the
statute, is "coal produced." Both courts below found that this
statutory term is ambiguous.  "Production could reasonably be
interpreted to include the entire process of extracting and selling
coal, complete from pit to buyer's door, or it could refer solely to
the process of extraction.  * * * (N)owhere does the (SMCRA) specify
what elements comprise a 'taxable' piece of coal" (Pet. App. 5a-6a
(quoting district court at Pet. App. 25a-26a)).  There is nothing
unreasonable or "counterintuitive" (Pet. 13) about the Secretary's
resolution of this ambiguity.  Indeed, as the court of appeals noted,
the record here shows that "the vast majority of U.S. coal operators,
as well as OSM personnel outside of Alabama, interpreted the phrase
'coal produced' as do the revised regulations" (Pet. App. 6a).

   The legislative history of the Act "does not disclose the requisite
specific intent upon which a court could properly rely to overturn the
Secretary's regulations" (Pet. App. 6a).  Because neither the statute
nor its history defines the term "coal produced," the Secretary's
interpretation must be upheld if found to be consistent with
legislative intent.

   In enacting the Abandoned Mine Reclamation Fund provision of SMCRA,
Congress expressed its concern with the costs of "widespread
environmental degradation associated with coal surface mining" (H.R.
Rep. 93-1072, 93d Cong., 2d Sess. 116 (1974)), costs which, until
then, had been unfairly borne by the local residents of the mined
areas where states had not accepted responsibility for rehabilitating
the sites of abandoned mines.  Congress was aware of the need to
generate sufficient funds to reclaim abandoned mines, a cost estimated
at between $7 billion and $10 billion.  H.R. Rep. 95-218, 95th Cong.,
1st Sess. 135 (1977).  The petitioner, in emphasizing "the economic
harm imposed by the Secretary's regulations" on the industry (Pet.
14), ignores the countervailing concern of Congress that attention be
paid to

      the protection of health or safety of the public;  protection of
      the environment from continued degradation and conservation of
      land and water resources;  the protection or enhancement of
      public facilities as part of reclamation of land and water
      conservation projects;  the improvement of lands and waters to a
      suitable condition useful in economic social development;  and
      research and demonstration relating to the development of
      surface mining reclamation and water quality control program
      methods.

   H.R. Rep. 95-218, supra, at 169.

   Congress was aware of the potential economic impact on the coal
mining industry and addressed that concern by establishing three
different flat tax rates per ton of coal produced, depending on the
type of coal (30 U.S.C. 1232(a)).  That Congress intended to create
these three categories and no others is shown by the congressional
rejection of suggestions that the tax be based on BTU or energy value
of the coal produced (H.R. Rep. 93-1072, supra, at 116-117) or that
deductions be permitted for excess moisture (120 Cong. Rec. H-25230
(1974)), precisely the deduction that petitioner seeks to have the
Secretary establish by interpretation.  /6/

   The district court, in upholding the regulation, found that a tax
based on gross weight as of a given time, instead of one based on the
purity of the mined coal, was clearly consistent with congressional
intent (Pet. App. 30a-31a):  it was easily enforceable, avoiding the
need to test the coal for particular impurities;  it did not require
the Secretary to choose among impurities, whether inherent, such as
moisture, ash and sulfur, or extrinsic, such as dirt and clay, in
order to define "the 'true' elements of 'pure' coal" (id. at 31a);
and finally, it provided an equitable national standard.

   2. Petitioner also urges review on the ground that there is a
conflict between the District of Columbia Circuit decision in this
case and the Third Circuit decision in United States v. Brook
Contracting Corp., 759 F.2d 320 (1985).  But the current position of
the Third Circuit is unclear.  In United States v. Devil's Hole, Inc.,
747 F.2d 895 (3d Cir. 1984), the court found that anthracite silt was
"coal" and therefore subject to reclamation fees.  The court expressly
affirmed "the Secretary's position that the noncombustible portion of
the silt was properly included in calculating the weight upon which
the reclamation fee was imposed." Pet. App. 71a;  747 F.2d at 899.  In
Brook Contracting (Pet. App. 65a-79a), however, a different panel of
the Third Circuit disallowed the government's assessment of fees on
the coal produced prior to first sale, stating that "as a matter of
law * * * 'coal produced by surface coal mining' means combustible
coal that would qualify as such under ASTM standards and excludes the
weight of rock, clay, dirt and other debris" (id. at 79a).  /7/ The
Third Circuit has been asked to reconcile these different
interpretations of the regulation at issue here in United States v.
Warren Troup, No. 86-1409 (argued Jan. 21, 1987).  In that case, as in
Devil's Hole, there was expert testimony that the aggregate is
combustible enough to qualify as coal under ASTM standards, but the
district court, relying on Brook Contracting, nevertheless disapproved
of the calculation of the fee based on the weight of the aggregate at
the point of first sale.  /8/ Significantly, the court of appeals in
Troup has informed the parties that it will withhold action on the
appeal until this Court has acted on the instant petition (App. A,
infra), thus indicating its reluctance to accept the Brook Contracting
analysis.

   We submit that the Third Circuit should be permitted to resolve the
conflict within that circuit in the first instance.  In resolving that
conflict, the Troup court may well bring the Third Circuit into
agreement with the District of Columbia's position in the instant
case, thus eliminating the conflict which petitioner asks this Court
to resolve.  If, on the other hand, the Troup court should disagree
with the decision of the court of appeals in the instant case, a
petition for a writ of certiorari in Troup, raising both the
jurisdictional issue (see note 7, supra) and the definitional issue,
may be appropriate.

   3. Finally, petitioner asserts that the decision below "violated
fundamental precepts of statutory construction" in ignoring
congressional intent (Pet. 21).  Petitioner correctly notes (id. at
21-22) that both the agency and the reviewing court must "give effect
to the unambiguously expressed intent of Congress" (Chevron U.S.A.,
Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843
(1984)).  But petitioner ignores the context in which the quoted
language occurs.  The agency interpretation may be ignored only when
"Congress has directly spoken to the precise question at issue.  If
the intent of Congress is clear, that is the end of the matter" (467
U.S. at 842).  The Chevron Court went on to emphasize that when
"Congress has not directly addressed the precise question at issue, *
* * the question for the court is whether the agency's (regulation) is
based on a permissible construction of the statute" (id. at 843).  The
court of appeals correctly concluded that the instant case is governed
by the latter principle;  Congress did not address the precise issue
of whether the reclamation fee was to be based on clean coal, and its
use of the term "coal produced" is inherently ambiguous.  Accordingly,
as Chevron directs, the court below considered whether the agency's
"view that (the regulation) is appropriate in the context of (the)
particular program is a reasonable one" (id. at 845).  Here, as in
Chevron, affirmance of the agency interpretation followed from the
conclusion that it reflected "a reasonable policy choice for the
agency to make" (ibid.).

   Aar from being "misguided," as petitioner contends (Pet. 21), the
court of appeals simply followed customary principles of statutory
construction, rejecting "crabbed interpretations" of agency rulemaking
powers (In re Permanent Surface Mining Regulation Litigation, 653 F.2d
514, 525 (D.C. Cir.), cert. denied, 454 U.S. 822 (1981)), and properly
accorded "considerable weight * * * to (the) executive department's
construction of a statutory scheme it is entrusted to administer,"
Chevron, 467 U.S. at 844 (footnote omitted);  Udall v. Tallman, 380
U.S. 1, 16 (1965);  EPA v. National Crushed Stone Ass'n, 449 U.S. 64,
83 (1980).  In a similar context, the court of appeals correctly noted
that such deference "is particularly appropriate when a complex
regulatory statute emerges from a process of difficult legislative
gestation" (In re Permanent Surface Mining Regulation, 653 F.2d at
522).  There is no need for this Court to review the application of
these established principles in this case.

                              CONCLUSION

   The petition for a writ of certiorari should be denied.

   Respectfully submitted.

   CHARLES FRIED

      Solicitor General

   F. HENRY HABICHT II

      Assistant Attorney General

   DIRK D. SNEL

   MARIA A. IIZUKA

      Attorneys

   FEBRUARY 1987

   /1/ In the preamble to the 1977 regulations, addressing the
question whether the reclamation fee would be paid on "run-of-mine"
coal or "clean" coal, the Secretary stressed that the crucial factor
was not the specific composition of the coal produced but, rather, the
point in the mining operation at which the first sale of transfer
occurred.  42 Fed. Reg. 62714.  This interpretation of the 1977
regulation was repeated in an opinion of the Solicitor of the Office
of Surface Mining, stating that (Pet. App. 27a):

      The fee must be determined by the weight and value of the coal
      at the time of initial bona fide sale.

   /2/ The Secretary emphasized that the purpose of the revised
regulation was "to clarify the point in time of fee determination as
well as the value and weight parameters for calculating reclamation
fees." 47 Fed. Reg. 28574, 28577 (1982).  See note 1, supra.

   /3/ The statute provides that national regulations are subject to
review in the United States District Court for the District of
Columbia Circuit within 60 days of their promulgation (30 U.S.C.
1276(a)).

   /4/ See note 3, supra.

   /5/ It has been reported that the Secretary has decided to propose
an amendment to the regulation to permit deduction of the weight of
excess water before calculation of the reclamation fee (Inside Energy
with Federal Lands, Feb. 9, 1987, at 1;  Coal Outlook, Feb. 16, 1986,
at 1;  Coal News, No. 4862, Feb. 16, 1987.  This is inaccurate.
Although such a proposed amendment is under consideration, no decision
has yet been made as to whether it will be proposed.

   /6/ The legislative history on which petitioner relies (Pet. 3 n.2)
is at best ambiguous.  H.R. Rep. 95-218, supra, at 137 notes that the
reclamation fee may be reduced based on the "value of coal at the mine
after extraction," thus implying that the fee is to be based on the
rough ore, at the point of extraction, and in the condition in which
it is at that time -- i.e., that the coal is "produced" at that point.
 The other reference (id. at 149) discusses the relatively small
contribution of the reclamation fee to the cost of coal, and defines
the reclamation fee as one of the "production costs." This scarcely
requires petitioner's conclusion that the fee must be based on the
value of "clean coal" -- that it cannot be considered to be "produced"
until it is ready for consumption.

   /7/ The Brook Contracting court distinguished Devil's Hole on the
ground that there "the district court's finding that anthracite silt
was 'coal' * * * was supported in the record by expert testimony and
other evidence that anthracite silt was combustible and qualified as
'coal'" under ASTM standards (Pet. App. 71a).

   /8/ In Troup, the government also argued on appeal that the courts
in the Third Circuit are without jurisdiction to consider the validity
of the national regulations implementing SMCRA, in light of 30 U.S.C.
1276(a)(1).  See note 3, supra.  That interpretation of the statute
was rejected in Holmes Limestone Co. v. Andrus, 655 F.2d 732 (6th Cir.
1981), cert. denied, 456 U.S. 995 (1982), but subsequently accepted in
Virginia v. Clark, 741 F.2d 37 (4th Cir. 1984), cert. granted, 469
U.S. 979 (1984), dismissed by stipulation, 469 U.S. 1198 (1985), and
by the Eleventh Circuit in this case (see page 3, supra).

   APPENDIX