## Facts

- Sam F. Kennedy bought land containing an abandoned coal mine as part of a plan to reclaim the site and build a shopping center.
- The property contained large surface piles of coal refuse (“gob”) left from prior mining activity.
- Because the refuse contained recoverable coal, the material was treated as “coal” for purposes of the Surface Mining Control and Reclamation Act of 1977 (SMCRA).
- Kennedy removed the refuse from the surface piles, loaded it onto trucks, and sold it to a power company; he did not dig below the surface.
- The Department of the Interior (through the Office of Surface Mining Reclamation and Enforcement) determined that Kennedy’s activity was a “surface coal mining operation” under SMCRA and assessed reclamation fees based on the tonnage of coal produced (about $39,000).
- A federal inspector attempted to inspect the site. Kennedy refused entry, and the agency assessed a civil penalty (about $2,000) for the inspection refusal.
- Kennedy did not timely pursue SMCRA’s administrative review procedures to contest the fee assessment or the civil penalty and did not pay the assessed amounts.
- The United States filed civil actions to collect the reclamation fees and the civil penalty. The district court entered judgment for the United States, and Kennedy appealed.

## Issues

1. Whether removing and selling coal-bearing refuse from surface piles, without below-surface excavation, is a “surface coal mining operation” under SMCRA and Interior’s regulations.
2. Whether Interior’s regulations treating coal recovery from refuse piles as regulated surface coal mining are consistent with SMCRA.
3. Whether the United States may collect SMCRA reclamation fees and civil penalties in court when the operator failed to timely seek administrative review and failed to pay.

## Decision

- The Seventh Circuit affirmed the judgments for the United States.
- Kennedy’s recovery and sale of coal from refuse piles qualified as a “surface coal mining operation” under SMCRA as implemented by Interior’s regulations, even though he did not excavate below the surface.
- Interior’s regulatory treatment of refuse-pile coal recovery as surface coal mining was a permissible reading of SMCRA and was entitled to judicial deference.
- Because Kennedy did not use the available administrative review process to challenge the assessments, the reclamation fees and the inspection-refusal civil penalty were enforceable in the government’s collection actions.

## Legal Principles

- SMCRA may apply to commercial recovery and sale of coal from existing surface refuse piles, not only to operations involving active digging or traditional strip mining.
- Courts generally defer to Interior’s reasonable regulations implementing SMCRA, including rules that define covered operations and impose per-ton reclamation fees to finance the reclamation fund.
- SMCRA authorizes penalties for refusing a lawful inspection of a regulated surface coal mining operation.
- When SMCRA provides a specific administrative process to contest assessments, failure to timely pursue that process can leave the assessment final for purposes of a later federal collection suit.

## Conclusion

The Seventh Circuit held that Kennedy’s activity of loading and selling coal-bearing refuse from surface piles was regulated surface coal mining under SMCRA, upheld Interior’s regulations applying SMCRA to refuse-pile coal recovery, and allowed the United States to collect the assessed reclamation fees and the civil penalty for refusing inspection because Kennedy did not timely challenge the assessments through SMCRA’s administrative review procedures.


United States v. Kennedy, 806 F.2d 111 (1985)