## Facts

- The Surface Mining Control and Reclamation Act (SMCRA) regulated surface coal mining but generally exempted mines of two acres or less.
- The two-acre exemption could be lost if multiple small sites met SMCRA’s “relatedness” standard—i.e., sites that were each two acres or less but physically and economically related so that they constituted a single operation exceeding two acres.
- Kentucky operated an approved SMCRA program (a “primacy” state) through its Natural Resources and Environmental Protection Cabinet.
- OSMRE inspected Annaco, Inc.’s mining activities in Kentucky and concluded that Annaco and certain individuals were violating the relatedness provisions, meaning the operations were not entitled to the two-acre exemption.
- On June 11, 1985, OSMRE sent Kentucky a ten-day notice asserting relatedness violations by Annaco and four individuals (members of the Phillips family, who later intervened).
- Kentucky responded that it had already addressed the matter and, in late July and early August 1985, issued state cessation orders requiring reclamation.
- Kentucky and Annaco later entered administrative settlement agreements resolving relatedness-related enforcement matters, including an agreement that, according to Annaco, did not require reclamation of the affected land.
- After the state settlements, OSMRE inspected again, concluded the relatedness violation and noncompliance continued, and issued federal cessation orders and pursued federal enforcement.
- Annaco sought temporary relief from the federal orders in the administrative process; an Administrative Law Judge (ALJ) denied temporary relief.
- Annaco then petitioned the United States District Court for the Eastern District of Kentucky for review, arguing OSMRE lacked authority to proceed in a primacy state and that the state settlements barred federal action.

## Issues

1. Whether OSMRE has jurisdiction under SMCRA to issue and enforce federal cessation orders in a primacy state after concluding the state failed to take appropriate enforcement action following a ten-day notice.
2. Whether res judicata or collateral estoppel barred OSMRE’s federal enforcement because Kentucky had entered administrative settlement agreements with Annaco addressing the same relatedness violations.
3. Whether Annaco met the requirements for temporary relief from SMCRA enforcement orders, including showing a likelihood of success on the merits.

## Decision

- The court denied Annaco’s motion for temporary relief from the federal cessation orders.
- The court granted the respondents’ motion for judgment on the pleadings.
- The court held that Kentucky’s primacy status did not eliminate OSMRE’s federal oversight authority under SMCRA and that OSMRE could act when the state’s response was not appropriate after a ten-day notice.
- The court rejected Annaco’s res judicata and collateral estoppel defenses because the state settlements were not final court judgments and OSMRE was not in privity with Kentucky for preclusion purposes.
- The court remanded the matter to the ALJ for final agency adjudication.

## Legal Principles

- SMCRA preserves federal oversight even in primacy states; OSMRE may inspect and take federal enforcement action when it determines a state has not taken appropriate action after receiving a ten-day notice.
- A state administrative settlement does not bind a federal enforcement agency through res judicata or collateral estoppel absent the standard elements of preclusion, including a final judgment and the same parties (or parties in privity).
- Where a regulated party seeks temporary relief from SMCRA enforcement, a weak showing on threshold legal arguments—such as lack of federal jurisdiction or claim preclusion—supports denial of temporary relief and allows the administrative process to proceed to a final agency decision.

## Conclusion

Annaco, Inc. v. Hodel held that OSMRE retained authority under SMCRA to issue federal cessation orders in Kentucky despite Kentucky’s primacy, particularly where OSMRE concluded the state’s enforcement response was not appropriate after a ten-day notice, and it further held that Kentucky’s administrative settlements with Annaco did not preclude federal enforcement because they were not final court judgments and did not place OSMRE in privity with the state; the court therefore denied temporary relief, entered judgment on the pleadings for the federal respondents, and remanded to the ALJ for final agency adjudication.


Annaco, Inc. v. Hodel, 675 F. Supp. 1052 (1987)