A stunning ruling from an Administrative Law Judge (ALJ) on Nov. 28, 2011, has undercut

Adele Abrams

the legitimacy of the Mine Safety and Health Administration’s (MSHA) use of “flagrant penalties” against mine operators.

The order by ALJ Feldman in Conshor Mining LLP has the potential to eviscerate this strong enforcement tool, which was created by Congress under the 2006 “MINER Act” in the wake of the Sago mine disaster. Although the ruling occurred in a coal case and was issued as a preliminary order on the threshold issue of penalties, the arguments accepted by the judge can be offered by any mine who has been subjected to the heightened “flagrant” penalties.

The ruling on the novel issue of the appropriate standard for imposing the enhanced penalties came in Conshor, where MSHA cited the operator for failing to follow its roof control plan, and three section 104(d)(2) orders were issued with penalties totaling $328,000.

Although penalties are normally capped at $70,000 per violation, under the MINER Act of 2006, a new category of violation was created — the “flagrant” violation — which could be subject to hiked penalties of between $70,000 and $220,000 per violation. During preliminary discussions with the ALJ, Conshor challenged the legitimacy of MSHA’s imposition of flagrant penalties, and the judge ordered the parties to brief the issue. The November 2011 ruling followed.

The MINER Act created flagrant penalties by adding Section 110(b)(2) to the 1977 Mine Act, and the new law took effect Aug. 17, 2006. That section states:

Violations under this section that are deemed to be flagrant may be assessed a civil penalty of not more than $220,000. For purposes of the preceding sentence, the term “flagrant” with respect to a violation means a reckless or repeated failure to make reasonable efforts to eliminate a known violation of a mandatory health or safety standard that substantially and proximately caused, or reasonably could have been expected to cause, death or serious bodily injury.

The judge noted that the applicable evidentiary requirements to support a flagrant violation based on a “reckless failure” to eliminate a known violation is pending before the full FMSHRC, on review of ALJ Paez’ ruling in Stillhouse Mining LLC. By comparison, in Conshor, ALJ Feldman analyzed the penalty structure itself without ruling on the merits of MSHA’s allegations against the mine operator. In Conshor, MSHA sought the enhanced penalties because it relied, in substantial part, on the operator’s past history of violations during the preceding 15 months.

In doing so, MSHA pointed to its two Procedure Instruction Letters (PILs), which were issued to “explain” the agency’s interpretation of the congressional language, and also an April 19, 2011, News Release.

The test articulated in the policies — both of which had expired by the time this case came before the ALJ — deemed a violation as “flagrant” (and eligible for the higher penalties) if the cited violation was attributable to an unwarrantable failure (citation/order issued under Section 104(d)(1) or 104(d)(2)) of a mandatory standard, and there have been at least two prior unwarrantable failure violations of the same mandatory standard in the preceding 15 months.

In Conshor’s case, there had been prior unwarrantable violations that had become final concerning the roof control plan, but  those were issued related to different plan provisions than the ones currently in litigation. Therefore, the issue of whether a “repeated” flagrant violation can be based on a history of previous violations in this case is one of first impression.

Conshor attacked the flagrant penalty program on several different bases. First, it argued that the PILs had no legal effect because they were not properly issued under the Administrative Procedure Act (APA), which require notice-and-comment rulemaking for any agency action that impacts substantive rights of mine operators.

It further claimed that the Secretary of Labor’s test for ‘repeated” flagrant violations was not entitled to deference because it was contrary to the plain meaning of the statutory language. It added, in the alternative, that no deference was required because the Secretary’s interpretation as based on the informal PILs and press release, which were not the subject of rulemaking. There is a long line of administrative law cases that hold agency policy statements that are not subject to the notice-and-comment rulemaking process lack the force of law and can be denied deference from the court.

The judge found that the preferred interpretation of the provisions of Section 110(b)(2) with respect to “repeated” failure could not take effect because the PIL and News release were, in fact, substantive rules that failed to abide by the APA requirements.