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Energy and Environment Monitor

WV Surface Mine Board Holds WVDEP Cannot Charge Surface Mine Permit Transfer Fees for Upstream Changes in Ownership and Control: Justice Companies Not Responsible for Fee in Stock Acquisition

January 19, 2016

By: Robert G. McLusky

In 2010 or 2011, the Legislature amended the West Virginia Surface Coal Mining and Reclamation Act to impose a $1,500 fee for the transfer or assignment of permits by adding the highlighted language:

d) No transfer, assignment or sale of the rights granted under any permit issued pursuant to this article may be made without the prior written approval of the secretary, application for which shall be accompanied by a filing fee of $1,500 for transfer or $1,500 for assignment.

W.Va. Code § 22-3-19(d).

WVDEP has construed the statute to require payment of the fee whenever there is a change in ownership or control over the permittee, including changes in control over upstream parent companies. Thus, where subsidiary companies hold permits and the stock in their parent company changes hands, WVDEP considers that a “change in control” that also triggers the payment of the permit transfer fee for every permit held by the subsidiaries—even though there is no real transfer of the individual permits held by the subsidiaries to new entities. In major acquisitions, this fee has been a windfall to WVDEP. Now, responding to an appeal by a number of the Justice Companies, the West Virginia Surface Mine Board ruled that the fees cannot be assessed when there is no movement of the permit from one operating entity to another. See Bluestone Coal Corporation v. Ward, Appeal No. 2015-03-SMB (Dec. 29, 2015).

In February 2015, the stock in the parent corporation of a number of permit-holding corporate entities was sold to Galencia, a subsidiary of Bluestone Resources. Both before and after the sale, the surface mining permits were held by the same corporate subsidiaries. Nonetheless, WVDEP sought to collect a permit transfer fee of $1,500 for every permit held by the operating subsidiaries. The permit-holding subsidiaries of Bluestone Resources appealed WVDEP’s action to the State Surface Mine Board (“SMB”).

The SMB examined the statutory language set out above, and noted that the first part of the statute requires WVDEP approval for a “transfer, assignment or sale of the rights granted under any permit.” It then observed that the second portion of the statute, which describes when the $1,500 fee is assessed, applies only to “transfers” or “assignments,” and not to a “sale of rights.” Finding the omission of a “sale of rights” to be intentional, the SMB ruled that the fee does apply to stock sales that are not accompanied by an actual permit transfer.

According to the SMB, WVDEP argued that its rules treat changes of control (such as stock sales) as “transfers” and, therefore, the fee is owed whenever there is a change in control. See W.Va Code St. R 38-2-2.131 (defining “transfer, assignment or sale of rights” as “a change in ownership pursuant to subsection 2.88 or other effective control over the right granted in a permit….”). Whatever the rule does or does not do, however, the SMB declared that it could not alter the STATUTE, which it said “clearly excludes a fee for a sale of permit rights.”

This article was authored by Robert G. McLusky, Jackson Kelly, PLLC.

 

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