Opinion
2022-CA-0915-MR
07-26-2024
COMMONWEALTH OF KENTUCKY, ENERGY AND ENVIRONMENT CABINET APPELLANT v. JIMMY W. HALL, SR.; CONSOL OF KENTUCKY, INC.; DEANE MINING, LLC; AND REEDY COAL COMPANY, INC. APPELLEES
BRIEFS FOR APPELLANT: M. Brandon Roberts Lance C. Huffman Frankfort, Kentucky BRIEF FOR APPELLEE JIMMY W. HALL, SR.: Parker M. Wornall Gregory A. Healey Louisville, Kentucky
NOT TO BE PUBLISHED
APPEAL FROM FRANKLIN CIRCUIT COURT HONORABLE PHILLIP J. SHEPHERD, JUDGE ACTION NO. 12-CI-01000
BRIEFS FOR APPELLANT: M. Brandon Roberts Lance C. Huffman Frankfort, Kentucky
BRIEF FOR APPELLEE JIMMY W. HALL, SR.: Parker M. Wornall Gregory A. Healey Louisville, Kentucky
BEFORE: EASTON, A. JONES, AND LAMBERT, JUDGES.
OPINION
JONES, A., JUDGE
The Commonwealth of Kentucky, Energy and Environment Cabinet ("Cabinet"), appeals the Franklin Circuit Court's February 1, 2022 order, as clarified by its June 28, 2022 order. The Cabinet asserts the circuit court erred when it reversed the Secretary's July 3, 2012 order upholding the issuance of five mining permits to three different coal companies, allowing them to enter certain real property located in Letcher County, Kentucky, for the purpose of mining coal and performing reclamation-related activities. Having reviewed the record and being otherwise sufficiently advised, we affirm, although for slightly different reasons than those articulated by the circuit court.
The administrative appeal before the circuit court was rather protracted. A full decade elapsed between the time the Appellee, Jimmy Hall, ("J. Hall"), filed his petition for review with the circuit court in July 2012 and the Cabinet filed its notice of appeal in July 2022. Notably, J.
Permit Nos. 867-0404, 867-0405, 867-0473, 867-0474, and 867-5190.
The three companies are: (1) Consol of Kentucky, Inc. ("Consol"); (2) Deane Mining, LLC ("Deane"); and (3) Reedy Coal ("Reedy"). We refer to them collectively as the "Coal Companies." Although the Coal Companies participated in the litigation below, they have not filed briefs before this Court.
I. Background
The record below is voluminous. We discuss only the facts necessary to understand and analyze the narrow legal issue before this Court.
The present appeal concerns five mining permits the Cabinet issued to the Coal Companies allowing them enter certain real property in Letcher County, Kentucky, for mining and reclamation. In support of their applications, among
Permit No. 867-5190 was originally issued to Reedy Coal in 1996. Permit No. 867-5190 was subsequently overlapped by Consol Permit Nos. 867-0404 and 867-0405 in 2000. In 2008, the Consol permits were transferred to Deane and re-issued as Permit No. 867-0473 and Permit No. 867-0474.
Hall's counsel was permitted to withdraw in 2016. Thereafter, J. Hall appeared without the assistance of counsel. The parties completed briefing on their cross-motions for summary judgment in late 2017. For reasons that are not entirely clear from the record, no action was taken on the matter from that point until July 2021, when the parties jointly moved the circuit court to hold a status conference. other documents, the Coal Companies relied on two surface lease agreements they entered into with Homer Hall. In the first lease, dated April 7, 1998, Homer gave Reedy the right to mine coal on a tract of land located on Mill Creek in Letcher County. The tract was identified on a map attached to the lease. In the second lease, dated July 24, 1998, Homer gave Consol the right to mine coal from "a certain tract of land located on Mill Creek of Rockhouse Creek . . . comprising approximately 125.00 acres, more or less" as particularly described in an exhibit to the lease. The exhibit attached to the lease provided descriptions of the two tracts as they appeared in the deed books.
It appears Homer Hall may have owned the property as a tenant in common.
During the permitting process, Deane provided the Cabinet copies of an assignment of the Consol/Homer Hall lease to Reserve Holdings, LLC ("Reserve"), and a February 21, 2008 right of entry agreement between Reserve and Deane. The Coal Companies also provided the Cabinet with a 2004 division order, in which J. Hall confirmed that he owned 100% of the 125 acres covered by the Consol/Homer Hall lease and ratified and confirmed the lease.
Homer died in 2004. Thereafter, J. Hall maintained that he acquired Homer's property through a combination of purchase from Homer's estate and inheritance from relatives. The Coal Companies stipulated that, at one point in time, J. Hall was a co-owner of the property.
Between January 2009 and April 2010, J. Hall filed two petitions for a hearing with the Cabinet relating to the five permits. The first petition was assigned five separate case numbers since it dealt with five different permits. The hearing officer referred to these five cases as the "GAH cases." J. Hall's second petition dealt only with Amendment No. 4 to Permit No. 867-0473. The hearing officer referred to this case as "the PDH case." The Cabinet consolidated the six cases. While J. Hall's petitions raised numerous issues, the only remaining issue before us concerns right of entry. Regarding this issue, insofar as we can determine, J. Hall maintains that the Cabinet lacked the authority to issue the permits because the Coal Companies submitted inaccurate or incomplete information during the application process.
In May 2011, the hearing officer conducted a two-day evidentiary hearing; however, by that time, the right of entry issue had already been resolved by the hearing officer. Prior to the hearing, the Cabinet filed motions for partial summary disposition on various issues, including right of entry. The hearing officer orally granted those motions prior to the hearing, and then reduced her oral rulings to writing as part of her final report following the hearing.
Notably, the hearing officer's report lists the facts related to right of entry separately from the factual findings she made following the hearing. The report explains this was done because the facts related to right of entry "were not part of the evidence in the Formal Hearing but were [instead] the bases for the summary disposition decision." Report at 16.
As related to the GAH cases, the hearing officer determined that, even though J. Hall claimed that neither Consol nor Deane had obtained his consent to mine the property, the following facts were undisputed: (1) the property was at one time owned by Miles Hall; (2) Miles's successor, Homer Hall, had either a 100 percent interest or an undivided interest in the property which J. Hall alleges Consol and Reedy mined; (3) J. Hall purchased Homer's interest in 2004; (4) the mine reclamation plan (MRP) maps submitted by the Coal Companies depict a roughly circular shaped tract labeled "Homer Hall Surface," similar in shape and size to that depicted on the maps J. Hall submitted; (5) Homer and Consol entered into a surface lease on July 24, 1998, which described the leased property as "all my interest in the Miles Hall Farm;" (6) Deane was able to trace its rights back to the Consol Lease; (7) J. Hall never identified the boundaries he was claiming were at issue; and (8) on April 27, 2004, J. Hall executed a division order in which he ratified, confirmed and adopted the lease between Homer and Consol. Based on these facts, the hearing officer concluded that the Cabinet established that the permits demonstrated a sufficient showing of a right to enter and mine the area in question, and that J. Hall had failed to come forward with any evidence that would call that right into question.
With respect to the PDH case, the hearing officer concluded that J. Hall's main complaint was that "Permit 867-0473 did not list "Jimmy Hall, Sr." as a property owner, and that Amendment #4 should not have been issued because it amends a permit that is invalid. Ultimately, the hearing officer determined that J. Hall was listed as an owner mooting his arguments in the PDH case.
On May 3, 2012, the Secretary adopted and incorporated the hearing officer's report, including her summary dismissal of J. Hall's right of entry claims in the GAH cases and the PDH case. J. Hall appealed to the circuit court. The circuit court acknowledged that J. Hall did a poor job of clearly making out his case. Nevertheless, it held that the Cabinet should not have issued the permits due to certain boundary line disputes. It explained:
The [c]ourt is remanding the case for further proceedings so that the proper legal standard and burden of proof may be applied. As part of these proceedings, it would be improper for the [h]earing [o]fficer to rely solely on the untested allegations of the coal companies on the right of entry issue. The [h]earing [o]fficer may recommend that the Cabinet further investigate such allegations as required under 405 KAR 8:030(4), or that the Cabinet Secretary order the coal companies to obtain a judicial determination in circuit court. The [c]ourt will not dictate how the Cabinet should deal with the issue on remand, but the law clearly requires that the permit applicant obtain any property rights determination from a court of competent jurisdiction, or to demonstrate that there is no bona fide dispute as to the property rights at issue, before a permit can be issued. ...
The underlying legal principle is clear: the permit applicant failed to carry its burden to demonstrate a legal right of entry on the disputed tracts. The administrative record in this case is conclusive that a bona fide property rights dispute exists. The 'burden shifting' approach of the Cabinet ignored the controlling law, and placed the Cabinet back in the position of adjudicating the disputed
property rights claims of the parties, which it has no jurisdiction or authority to do. Only a court can make that determination, and the Cabinet cannot issue a permit until the permit applicant has demonstrated a right of entry. 405 KAR 8:030(3) is crystal clear: "Nothing in the section shall be construed to authorize the cabinet to adjudicate property rights disputes." By granting the permit for the areas in which there is disputed issue of property rights, the Cabinet violated this administrative regulation. The state cannot authorize a trespass on private property to extract coal. If there is a bona fide dispute over the permittee's right of entry, the permit applicant must obtain an adjudication of its right to enter the property and mine the coal. If the Cabinet had obtained an independent legal opinion that supported the permit applicant's right of entry prior to issuing the permit[s], it could have made a finding that [J. Hall's] claims did not present a bona fide dispute. But there is no such evidence in the record. The Cabinet erred by placing the burden on the property owner to refute the contest claims of the permit applicant and the Cabinet improperly assumed the role of legal arbiter of the property dispute by granting the permit.6/28/2022 Order at 3-5. This appeal followed.
Kentucky Administrative Regulations.
II. Standard of Review
As noted, this appeal began with an administrative decision by the Secretary in favor of the Coal Companies and the Cabinet. "In a very general sense, our review of the decision of an administrative agency is highly deferential, and we reverse only if the decision was arbitrary, unsupported by substantial evidence, or otherwise erroneous as a matter of law." Jefferson Cnty. Sheriff's Office v. Kentucky Retirement Systems, 626 S.W.3d 554, 558 (Ky. 2021).
However, "[w]hen a question of law arises out of an administrative hearing, appellate review is conducted de novo." Cabinet for Health and Family Services v. Appalachian Hospice Care, Inc., 642 S.W.3d 693, 695 (Ky. 2022).
III. Analysis
A. The Permitting Process
The Cabinet is responsible for the exclusive regulation and control of surface coal mining permitting within the Commonwealth. KRS 350.060(1)(a) directs: "[n]o person shall engage in surface coal mining and reclamation operations without having first obtained from the cabinet a permit designating the area of land affected by the operation." The burden is on the applicant to demonstrate the legal right to the permit. Kentucky Southern Coal Corp. v. Kentucky Energy and Environment Cabinet, 396 S.W.3d 804, 808 (Ky. 2013). The Cabinet cannot approve a permit application "unless the application affirmatively demonstrates, and the cabinet finds in writing on the basis of the information set forth in the application or from information otherwise available that the permit application is accurate and complete and that all the requirements of this [Chapter 350] have been complied with." KRS 350.060(1)(a).
Kentucky defines surface coal mining operations as:
activities conducted on the surface of lands in connection with a surface coal mine and surface impacts incident to an underground coal mine. The activities shall include excavation for the purpose of obtaining coal, including such common methods as contour, strip, auger, extended depth secondary recovery systems, mountaintop removal, box cut, open pit, and area mining, the use of explosives and blasting, and in situ distillation or retorting, leaching, or other chemical or physical processing, and cleaning, concentrating, or other processing or preparation, and the loading of coal at or near the mine site.... Surface coal mining operations shall also include the areas upon which the activities occur or where the activities disturb the natural land surface. The areas shall also include any adjacent land, the use of which is incidental to the activities, all lands affected by the construction of new roads or the improvement or use of existing roads to gain access to the site of the activities and for haulage, and excavations, workings, impoundments, dams, ventilation shafts, entryways, refuse banks, dumps, stockpiles, overburden piles, spoil banks, culm banks, tailings, holes or depressions, repair areas, storage areas, processing areas, shipping areas, and other areas upon which are sited structures, facilities, or other property or materials on the surface resulting from or incident to the activities. This definition shall include the terms "strip mining" of coal and the "surface effects of underground mining" of coal as used in this chapter[.]Kentucky Revised Statutes ("KRS") 350.010(1).
One of the requirements to hold a mining permit under Kentucky law is that an applicant (or a potential transferee) must have a legal right to enter on the property sought to be permitted. In other words, an applicant may not obtain a mining permit for property it does not own or lease or otherwise have a right to enter. To this end, a person seeking a permit for surface coal mining must file an application, which among other things, states "[t]he source of the applicant's legal right to mine the coal on the land affected by the permit[.]" KRS 350.060(3)(d).
Specifically, as related to the right of entry, 405 KAR 8:030, Section 4, provides that:
(1) Each application shall contain a description of the documents upon which the applicant bases his or her legal right to enter and begin surface mining activities in the permit area and if that right is the subject of pending litigation. The description shall identify those documents by type and date of execution, identify the specific lands
to which the document pertains, and explain the legal rights claimed by the applicant.
(2) If the private mineral estate to be mined has been severed from the private surface estate, the application shall contain:
(a) A copy of the written consent of the surface owner for the extraction of coal by surface mining methods;
(b) A copy of the conveyance that expressly grants or reserves the right to extract coal by surface mining methods; or
(c) If the conveyance does not expressly grant the right to extract the coal by surface mining methods, documentation that under applicable state law, the applicant has the legal authority to extract coal by those methods.
(3) Nothing in this section shall be construed to authorize the cabinet to adjudicate property rights disputes.Id.
The circuit court concluded that the Cabinet was required to "scrutinize" the Coal Companies' allegations, as contained in their applications, before making its permit determination. The circuit court explained this required the Cabinet to do more than blindly accept the documents submitted by the Coal Companies. Rather, according to the circuit court, the Cabinet had to undertake an independent investigation before granting the permit applications, which the circuit court suggested could have included obtaining an independent legal opinion that supported the permit applicant's right of entry prior to issuing the permit.
We agree with the circuit court insomuch as it concluded that the Cabinet must exercise independent judgment in ascertaining whether an applicant has met its burden of demonstrating the right to enter the property at issue. Indeed, KRS 350.060(2) requires the Cabinet to make written findings in connection with its review, and states that the findings must be based on "the information set forth in the application or from information otherwise available[.]" (Emphasis added.) The statute plainly contemplates some level of independent review by the Cabinet and permits the Cabinet to consider information outside the application if it deems it necessary to do so.
If a bona fide dispute is apparent from the application, the Cabinet cannot issue the requested permit. Southern Coal Corp., 396 S.W.3d at 808. In such a case, "[t]he property dispute regarding the applicant's right of entry must be adjudicated in the court of general jurisdiction in which the real estate is located, not in administrative proceedings held by the Cabinet." Id. While pending litigation has a bearing on whether a bona fide dispute exists, it is not a prerequisite. Id. "The term 'bona fide' means good faith, and the terms are interchangeable." Estes v. McKinney, 354 S.W.3d 144, 148 (Ky. App. 2011) (quoting Meade v. Richardson Fuel, Inc., 166 S.W.3d 55, 58 n.7 (Ky. App. 2005)).
We cannot agree with the circuit court that the Cabinet erred when it originally granted the Coal Companies' applications. As detailed by the hearing officer, the permit applications, which included the applicable leases and assignments submitted by the Coal Companies, demonstrated prima facie right of entry. Although the Cabinet could have undertaken further investigation by looking outside the application, it was not required to do so at that juncture.
Moreover, at most, a review of the chain of title might have indicated that Homer was not the sole owner of the property when he executed the leases. This fact, alone, however, would not have created a bona fide dispute as to the Coal Companies' right to enter the property. See Johnson v. Environmental and Public Protection Cabinet, 289 S.W.3d 216, 221 (Ky. App. 2009) (holding that consent of one cotenant could satisfy the right of entry requirement).
In applying the federal Surface Mining Control and Reclamation Act, which requires application of state law, the federal district court for the Eastern District of Kentucky explained that, because Johnson "clearly states that consent of one cotenant creates a right of entry to surface mine, [the coal company] was not required to obtain a favorable court judgement prior to approval of its application." M.L. Johnson Family Properties, LLC v. Zinke, 298 F.Supp.3d 1014, 1029 (E.D. Ky. 2018), aff'd sub nom. M.L. Johnson Family Properties, LLC v. Bernhardt, 924 F.3d 842 (6th Cir. 2019). Rather, the Cabinet "could rely on the valid right of entry agreement and the clearly established Kentucky law in determining the surface-subsurface legal relationship." Id.
B. Review of Permit Applications
"Any person who considers himself or herself aggrieved by any determination made by the cabinet under [KRS, Chapter 350] may file, in accordance with administrative regulations promulgated by the cabinet under the provisions of this chapter, a petition alleging that the determination is contrary to law or fact and is injurious to him, the grounds and reasons therefor, and demand a hearing." KRS 350.030(1); see also 400 KAR 1:110, Section 8. The petition for review must include:
J. Hall's petition for review in circuit court asserted that his petitions were brought under 405 KAR 7:092. In 2017, while J. Hall's petition for review was pending before the circuit court, 405 KAR 7:092 was recodified to 400 KAR 1:110. Section 8 of 400 KAR 1:110 is identical in all material respects with the relevant portions of 405 KAR 7:092. For ease of reference, we cite to the recodified version of the regulation.
(a) A clear statement of the facts entitling the person requesting review to administrative relief;
(b) An explanation of each specific alleged error in the cabinet's decision[;]
(c) A request for specific relief; and
(d) A statement whether or not the person requests or waives the opportunity for an evidentiary hearing.400 KAR 1:110, Section 8(3). A party opposing the permit or the renewal of a permit "shall have the burden of going forward to establish a prima facie case, and the ultimate burden of persuasion" that the permit application or renewal should have been disapproved. 400 KAR 1:110, Section 8(8)(a)-(e).
Here, J. Hall did not have to prove his absolute ownership of the property before the hearing officer or the precise relationship between the property and the permit boundaries. Indeed, the hearing officer lacked jurisdiction to resolve ownership issues, including boundary questions. What J. Hall had to establish was the existence of a bona fide dispute. As recognized by the circuit court, even though J. Hall did not produce specific, affirmative evidence that refuted the Coal Companies' right of entry, he did bring to light certain discrepancies and errors such as inaccurate maps, improperly drawn boundary lines, and inadequate evidence of boundary lines. In fact, as the circuit court pointed out, the hearing officer even went so far as to recognize that Deane's 2010 aerial maps "appear[ed] to demonstrate that some of [J. Hall's] claimed property was not under permit and that the two permits issued covered more land than the property claimed by [J. Hall]."
We recognize that the hearing officer was faced with a monumental task, and that J. Hall may have been unclear as to the basis of his right of entry challenges. Nevertheless, by the time the matter progressed to the summary judgment stage, it was evident that, in addition to the right of consent issues regarding the Homer Hall leases, J. Hall's right of entry challenges also included boundary-related issues. As the hearing officer plainly acknowledged, by that stage of the proceedings, the evidence was so unclear that she was unable to say for certain where the property/boundary lines lay in order to make a finding that the boundaries set forth in the permit application were consistent with the underlying leases.
Disputes over property boundary lines are property rights disputes over which the Cabinet lacks jurisdiction. See, e.g., Parsley v. McCauley, 338 S.W.3d 290, 295 (Ky. App. 2010) (holding that parties' dispute regarding the appropriate boundary line was a matter for the circuit court's exclusive jurisdiction). Based on the alleged disparity in the maps and the hearing officer's inability to determine "where certain areas or things were on the property in relation to the permits at issue," we must conclude that J. Hall met his burden of "going forward to establish a prima facie case." 400 KAR 1:110, Section 8(8)(a)-(e). In other words, J. Hall established that a bona fide dispute existed regarding the proper boundaries. This is sufficient to prevail at the administrative level. Southern Coal Corp., 396 S.W.3d at 808. Once J. Hall established the existence of a bona fide boundary dispute, the hearing officer could not approve the issuance of the permits until the boundary dispute was settled by a court of competent jurisdiction. And, as the circuit court correctly observed, the Coal Companies, not J. Hall, bore the ultimate burden of obtaining a judicial determination regarding the boundary disputes.
IV. Conclusion
For the reasons set forth above, we affirm the Franklin Circuit Court's February 1, 2022 order, as clarified by its June 28, 2022 order.
ALL CONCUR.