Federal Court Holds the Issuance of a Mining Permit Requires the Consent of All Surface Owners
On June 13, 2014, a federal district court interpreting the Surface Mining Control and Reclamation Act (SMCRA) ruled that surface coal mining operations require the consent of all surface owners when ownership of the coal estate has been severed from the surface estate. Many view this decision as a direct contradiction to Kentucky’s well-established co-tenancy precedent.
SMCRA was enacted by Congress to limit the environmental effects of surface coal mining operations. “Surface coal mining operations” include activities performed in connection with surface coal mining and surface impacts incident to underground coal mining. Under SMCRA, no person may engage in “surface coal mining operations” without first obtaining a mining permit. To obtain a mining permit, a permit application must be submitted to the applicable regulatory authority. The Kentucky Department of Natural Resources (KDNR) was approved to administer SMCRA in Kentucky in 1982. When applying for a mining permit and the mineral estate has been severed from the surface estate, the permit applicant must demonstrate some authority for disturbing the surface estate. One such basis is for the mining company to provide “written consent of the surface owner” to demonstrate the surface owner’s willingness to allow surface coal mining operations. Under Kentucky common law, one cotenant may authorize the development, or mining, of commonly owned property without obtaining the consent of other cotenants. In reliance on this precedent, KDNR consistently issued mining permits on a showing that at least one surface owner consented to surface mining operations.
The plaintiff, M.L. Johnson Family Properties, LLC, owns an undivided 62.5 percent interest in a 450 acre tract of real property in Pike County, Kentucky. Pike-Letcher Land Company (Pike-Letcher) owns an undivided 25 percent interest in the same real property. The mineral estate was severed from the surface estate in the early 1900s. In April 2013, Pike-Letcher granted Premier Elkhorn the right to conduct surface coal mining operations on the property under a certain right-of-entry agreement. Premier Elkhorn disclosed this agreement to KDNR when applying for a mining permit and listed the surface owners on the permit application as “Pike-Letcher Land Company, et al.” In October 2013, after providing public notice of the permit application, KDNR issued a mining permit to Premier Elkhorn. The plaintiff first mounted an unsuccessful administrative challenge to the permit before filing a lawsuit on May 14, 2014, against Sally Jewell, Secretary of the Interior, in her capacity as the lead administrator of the SMCRA in U.S. District Court for the Eastern District of Kentucky.
The plaintiff argued that the issuance of the mining permit to Premier Elkhorn was in violation of SMCRA and applicable Kentucky regulations for multiple reasons. First, the plaintiff alleged that it received inadequate notice of the permit application, because it was not listed in the permit application and public notice of the mining permit. Specifically, the plaintiff argued that a complete SMCRA permit application and adequate public notice require a listing of all owners of record of the property to be mined. Second, plaintiff alleged that SMCRA requires the written consent of all surface owners, not just a limited number of cotenants, before a mining permit can be issued.
The district court granted the plaintiff’s motion for a temporary injunction in its June 13 ruling. The court held that SMCRA requires the consent of all surface owners before the issuance of a permit. The court rejected the defendants’ common law justification of the permit’s issuance as irrelevant to the interpretation of SMCRA. “When Congress meant to punt to State law, it did so expressly.” Further, the court ordered the Secretary to inspect Premier Elkhorn’s permit and mining operation and decide whether to order cessation of mining operations. During the pendency of the Secretary’s inspection, Premier Elkhorn is enjoined from mining on the plaintiff’s property.
The court’s decision and interpretation of SMCRA could have significant consequences across Kentucky’s extractive industries in addition to threatening the validity of existing permits. KDNR quickly responded to the court’s decision by issuing an internal policy memorandum to permit review staff addressing surface owner consent in several estate situations. Going forward, KDNR will require that the full names of all record surface owners be listed in the public notice of a permit application; designations such as “et al.” will not be accepted. KDNR has also indicated it will finalize its policy on this issue in the form of a Reclamation Advisory Memorandum to the coal industry.