1992-08-13_GENERAL DOCUMENTS - C1981017 (2)

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Assertion of unpaid reclamation claims against Mid - Continent Minerals If Resources' bankruptcy estate does not have the funds to implement Resources' reclamation plan, or if the estate does have the funds but the funds are paid to Sanwa because Sanwa's secured claim comes before the state's unsecured claim, does the state have any basis for asserting a claim for the deficiency against Mid - Continent Minerals ( "Minerals ") or Mid - Continent Coal & Coke ('.Coal & Coke ")? This is not really a "bankruptcy" issue, in that bankruptcy law does not provide an answer to the question. However, the question should be considered in connection with the positions taken by Resources and Sanwa in Resources' Chapter 11 case. The Surface Mine Control and Reclamation Act of 1977 ( "SMCRA "), 30 USC § 1201 et sea., is the federal act from which the Colorado Surface Coal Mining Reclamation Act is derived. SMCRA permits the Secretary of the Interior to seek injunctive relief imposing affirmative remedial obligations whenever a permittee or his agent violates or fails or refuses to comply with any order or decision issued by the Secretary under SMCRA. 30 USC § 1271(c). In a recent conversation which I had with Frank Johnson, an Assistant Attorney General of Colorado who is working on enforcement of Resources' reclamation plan, Johnson implied that state or federal authorities may attempt to enforce the plan against Minerals or the individual officers and directors of Resources on the grounds that they are agents of Resources for purposes of SMCRA. Johnson cited the case of United States v. Dix Fork Coal Co., 692 F.2d 436 (6th Cir. 1982). In that case, the corporation holding a permit under SMCRA had no assets and federal authorities therefore sought to impose remedial obligations on an individual who was the father of the corporation's president and majority shareholder. The court examined the relationship between the father and the permittee and found that the father (i) was a spokesman for the corporation, (ii) was an advisor to the corporation with particular responsibility in ensuring compliance with SMCRA requirements, (iii) operated a company which moved dirt for the corporation, and (iv) guaranteed the corporation's bank debt. The Sixth Circuit found that an agent for purposes of SMCRA includes "that person charged with the responsibility for protecting society and the environment from the adverse effects of the surface coal mining operation and particularly charged with effectuating compliance with environmental performance standards..." The court noted a "quasi- symbiotic relationship" between the corporation and the father and further noted that the father, through his earth - moving business, had contributed to the -9-