No. 13- IN THE. UNITED STATES, Respondent. On Petition for a Writ of Certiorari to the United States Court of Appeals for the Federal Circuit

Transcription

1 No. 13- IN THE ARACOMA COAL COMPANY, ET AL., v. Petitioners, UNITED STATES, Respondent. On Petition for a Writ of Certiorari to the United States Court of Appeals for the Federal Circuit PETITION FOR A WRIT OF CERTIORARI Steven H. Becker BECKER LAW FIRM PLLC 600 Third Ave. New York, NY Robert M. Rolfe HUNTON & WILLIAMS LLP Riverfront Plaza, East Tower 951 East Byrd St. Richmond, VA Thomas C. Goldstein Counsel of Record Tejinder Singh GOLDSTEIN & RUSSELL, P.C Wisconsin Ave. NW Suite 404 Washington, DC (202) tg@goldsteinrussell.com

2 John Y. Merrell, Jr. MERRELL & MERRELL, P.C Chain Bridge Rd., Suite 201 Post Office Box 1111 McLean, VA Charles H. Critchlow Lindsay A. Minnis BAKER & MCKENZIE LLP 452 Fifth Ave. New York, NY 10018

3 QUESTION PRESENTED The Export Clause of the United States Constitution, Art. I 9, cl. 5, provides that No Tax or Duty shall be laid on Articles exported from any State. The question presented is: Whether an otherwise unconstitutional tax imposed upon the sale of goods in the stream of export commerce can be saved from invalidation under the Export Clause by recharacterizing it as a deferred tax on manufacturing?

4 ii PARTIES TO THE PROCEEDINGS Petitioners include the following entities, all of which were plaintiff-appellants below: Alex Energy, Andalex Resources, Apogee Coal, n/k/a Apogee Coal, LLC Aracoma Coal, Arch Western Resources, LLC Bandmill Coal Corporation Black Stallion Coal, LLC Canyon Fuel, LLC Catenary Coal, n/k/a Catenary Coal, LLC Clinchfield Coal Clintwood Elkhorn Mining Coal-Mac, Coastal Coal, LLC n/k/a Enterprise Mining, LLC Coastal Coal-West Virginia, LLC n/k/a Brooks Run Mining Colony Bay Coal CONSOL Energy, Consol of Kentucky Consol of Pennsylvania Coal, n/k/a Consol Pennsylvania Coal LLC Consolidation Coal Covenant Coal Corp.

5 iii Coyote Coal, LLC Dal-Tex Coal Corporation Delbarton Mining Dodge Hill Mining, LLC Eagle Energy, Eaglehawk Carbon, Eastern Associated Coal Corporation, n/k/a Eastern Associated Coal, LLC Eighty Four Mining Elk Run Coal, Elkay Mining Evergreen Mining Gatliff Coal Genwal Resources, Glamorgan Coal, LLC Goals Coal Green Valley Coal Heartland Coal Helvetia Coal Highland Mining, LLC Hobet Mining,, n/k/a Hobet Mining, LLC Holston Mining Independence Coal, Island Creek Coal Jim Walter Resources, Jupiter Holdings, LLC Kanawha Eagle Coal, LLC

6 iv Kanawha Eagle Limited Liability Kent Coal Mining (merged into petitioner Keystone Coal Mining Corporation) Keystone Coal Mining Corporation Kingston Resources, Knox Creek Coal Corporation Laurel Run Mining LLC Logan Fork Coal Marfork Coal, Martin County Coal Corporation McElroy Coal Meadow River Coal Mid-Vol Leasing,, n/k/a Mid-Vol Coal Sales, Mingo Logan Coal Mossy Eagle Limited Liability Co. Motivation Coal Mountaineer Coal Development Nicholas-Clay, LLC, n/k/a AMVEST West Virginia Coal, LLC Nicholas-Clay Land & Mineral, Nineveh Coal Old Ben Coal Pacific Coast Coal Panther, LLC Paramont Coal Corporation Paynter Branch Mining, Peabody Holding, Peerless Eagle Coal

7 v Performance Coal Perry County Coal Corporation Pine Ridge Coal n/k/a Pine Ridge Coal, LLC Pioneer Fuel Corporation Plateau Mining Corporation Powder River Coal, n/k/a Powder River Coal Sales, LLC Premier Elkhorn Coal Pyxis Resources Corporation Quarto Mining RAG Cumberland Resources, L.P., n/k/a Cumberland Coal Resources, L.P. RAG Emerald Resources, L.P., n/k/a Emerald Coal Resources, L.P. Ranger Fuel Corporation Rawl Sales & Processing Red River Coal, Remington, LLC Rivers Edge Mining, Riverside Energy,, n/k/a AMCI Holdings, Rockspring Development, Sea B Mining Shipyard River Coal Terminal Sidney Coal, Spartan Mining Stirrat Coal Stone Mining

8 vi Terry Eagle Limited Partnership Twentymile Coal Twin Star Mining U.S. Steel Mining, LLC Usibelli Coal Mine, Virginia Crews Coal West Ridge Resources, White Flame Energy, Wildcat, LLC The United States is respondent and was the defendant-appellee below.

9 vii CORPORATE DISCLOSURE STATEMENT Pursuant to this Court s Rule 29.6, below is a list of all parent corporations and any publicly held companies that own 10 percent or more of the stock of a petitioner (italics indicate public ownership): Petitioner Parent Corporations and Any Publicly Held that Owns 10 Percent or More of Petitioner Alex Energy, Nicholas Energy Elk Run Coal, Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, Andalex Resources, UtahAmerican Energy, Apogee Coal n/k/a Apogee Coal, LLC New Trout Coal Holdings II, LLC Magnum Coal LLC Patriot Coal Corporation

10 Aracoma Coal, Arch Western Resources, LLC viii Elk Run Coal, Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, Arch Western Acquisition Corporation Arch Coal, Bandmill Coal Corporation Black Stallion Coal, LLC Canyon Fuel, LLC Elk Run Coal, Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, Black Walnut Coal Eastern Coal, LLC Patriot Coal Corporation Bowie Resource Holdings, LLC Bowie Resource Partners, LLC

11 Catenary Coal n/k/a Catenary Coal, LLC Clinchfield Coal Clintwood Elkhorn Mining Coal-Mac, Coastal Coal, LLC n/k/a Enterprise Mining, LLC Coastal Coal-West Virginia, LLC n/k/a Brooks Run Mining, LLC ix Viper LLC New Trout Coal Holdings II, LLC Magnum Coal LLC Patriot Coal Corporation Pittston Coal Pittston Minerals Group, The Brink s TECO Coal Corporation TECO Diversified, TECO Energy, Arch Coal, AMFIRE, LLC Maxxum Carbon Resources, LLC Alpha Natural Resources, LLC Alpha Natural Resources, AMFIRE WV, L.P. AMFIRE Holdings, LLC AMFIRE, LLC Maxxum Carbon Resources, LLC Alpha Natural Resources, LLC Alpha Natural Resources,

12 Colony Bay Coal x Eastern Associated Coal, LLC Coal Properties, LLC Heritage Coal LLC Interior Holdings, LLC Eastern Coal, LLC Patriot Coal Corporation CONSOL Energy, Southeastern Asset Management, CONSOL of Kentucky Consol of Pennsylvania Coal n/k/a Consol Pennsylvania Coal LLC Consolidation Coal Coyote Coal LLC Dal-Tex Coal Corporation (merged in 1996 into co-plaintiff Hobet Mining, n/k/a Hobet Mining, LLC) CONSOL Energy CONSOL Energy CONSOL Energy Magnum Coal, LLC Patriot Coal Corporation New Trout Coal Holdings II, LLC Magnum Coal LLC Patriot Coal Corporation

13 Delbarton Mining Dodge Hill Mining, LLC Eagle Energy, Eastern Associated Coal Corporation n/k/a Eastern Associated Coal, LLC Eighty Four Mining xi Elk Run Coal, Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, Dodge Hill of Kentucky, LLC Dodge Hill Holding JV, LLC Indian Hill LLC Patriot Coal Corporation Long Fork Coal Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, Coal Properties, LLC Heritage Coal LLC Interior Holdings, LLC Eastern Coal, LLC Patriot Coal Corporation CONSOL Financial Consol Energy

14 Elk Run Coal, Elkay Mining Evergreen Mining Gatliff Coal Genwal Resources, Glamorgan Coal, L.L.C. xii Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, Pittston Coal Pittston Minerals Group, The Brink s Bluegrass Coal Development Horizon Natural Resources TECO Coal Corporation TECO Diversified, TECO Energy, Andalex Resources, AMVEST Minerals, L.L.C. AMVEST Corporation CONSOL Energy

15 Goals Coal Green Valley Coal Heartland Coal Helvetia Coal Highland Mining, LLC xiii Performance Coal Elk Run Coal, Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, Elk Run Coal, Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, Pittston Coal Pittston Minerals Group, The Brink s Rochester & Pittsburgh Coal Consolidation Coal CONSOL Energy Interior Holdings, LLC Eastern Coal, LLC Patriot Coal Corporation

16 Hobet Mining, n/k/a Hobet Mining, LLC Independence Coal, Island Creek Coal Jim Walter Resources, Jupiter Holdings LLC Kanawha Eagle Coal, LLC Kent Coal Mining (merged in 2001 into co-plaintiff Keystone Coal Mining Corporation) xiv New Trout Coal Holdings II, LLC Magnum Coal LLC Patriot Coal Corporation Elk Run Coal, Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, Consolidation Coal CONSOL Energy Walter Energy, Brook Trout Coal, LLC Trout Coal Holdings, LLC Magnum Coal LLC Patriot Coal Corporation KE Ventures, LLC Snowberry Land Patriot Coal Corporation Rochester & Pittsburgh Coal Consolidation Coal CONSOL Energy

17 Keystone Coal Mining Corporation Kingston Resources, Knox Creek Coal Corporation Laurel Run Mining Logan Fork Coal xv Rochester & Pittsburgh Coal Consolidation Coal CONSOL Energy Riverton Coal Production Alpha American Coal Holding, LLC Alpha Natural Resources, Martin County Coal Corporation Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, Island Creek Coal Consolidation Coal CONSOL Energy Interior Holdings, LLC Eastern Coal, LLC Patriot Coal Corporation

18 Marfork Coal, Martin County Coal Corporation McElroy Coal Meadow River Coal Mid-Vol Leasing Mingo Logan Coal Motivation Coal xvi Elk Run Coal, Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, Consolidation Coal CONSOL Energy Pittston Coal Pittston Minerals Group, The Brink s Mid-Vol Coal Sales ArcelerorMittal Peabody Energy Corporation Arch Coal, Pittston Coal Pittston Minerals Group, The Brink s

19 Mountaineer Coal Development Nicholas-Clay, LLC n/k/a AMVEST West Virginia Coal, L.L.C. Nicholas-Clay Land & Mineral, Nineveh Coal (merged in 2002 into co-petitioner Consol of Pennsylvania Coal ) Old Ben Coal xvii Bluegrass Coal Development Horizon Natural Resources Nicholas-Clay Land & Mineral, Terry Eagle Limited Partnership TECPART Corporation TEAGLE, L.L.C. AMVEST Coal & Rail, L.L.C. AMVEST Minerals, L.L.C. AMVEST Corporation CONSOL Energy AMVEST Coal & Rail, L.L.C. AMVEST Minerals, L.L.C. AMVEST Corporation CONSOL Energy CONSOL Energy Horizon Natural Resources Lexington Coal

20 Pacific Coast Coal Panther LLC Paramont Coal Corporation Paynter Branch Mining, Peabody Holding, Peerless Eagle Coal xviii Pacific Coast Coal Co., Brook Trout Coal, LLC Trout Coal Holdings, LLC Magnum Coal LLC Patriot Coal Corporation Pittston Coal Pittston Minerals Group, The Brink s Riverton Coal Production Alpha American Coal Holding, LLC Alpha Natural Resources, Fidelity Investments Peabody Energy Corporation Elk Run Coal, Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources,

21 Performance Coal Perry County Coal Corporation Pine Ridge Coal n/k/a Pine Ridge Coal, LLC Pioneer Fuel Corporation Plateau Mining Corporation xix Elk Run Coal, Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, TECO Coal Corporation TECO Diversified, TECO Energy, Coal Properties, LLC Heritage Coal LLC Interior Holdings, LLC Eastern Coal, LLC Patriot Coal Corporation Pioneer Mining, Riverton Coal Production Alpha American Coal Holding, LLC Alpha Natural Resources, Alpha American Coal, LLC Alpha American Coal Holding, LLC Alpha Natural Resources,

22 Powder River Coal n/k/a Powder River Coal Sales, LLC Premier Elkhorn Coal Pyxis Resources Corporation Quarto Mining (merged in 2005 into co-plaintiff Consolidation Coal ) RAG Cumberland Resources, L.P. n/k/a Cumberland Coal Resources, L.P. xx Fidelity Investments Peabody Energy Corporation TECO Coal Corporation TECO Diversified, TECO Energy, Pittston Coal Pittston Minerals Group, The Brink s CONSOL Energy Foundation PA Coal, LLC Pennsylvania Services Corporation Alpha American Coal, LLC Alpha American Coal Holding, LLC Alpha Natural Resources,

23 RAG Emerald Resources, L.P. n/k/a Emerald Coal Resources, L.P. xxi Foundation PA Coal, LLC Pennsylvania Services Corporation Alpha American Coal, LLC Alpha American Coal Holding, LLC Alpha Natural Resources, Ranger Fuel Corporation Rawl Sales & Processing Remington LLC Rivers Edge Mining, Pittston Coal Pittston Minerals Group, The Brink s Elk Run Coal, Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, Remington Holdings LLC Trout Coal Holdings, LLC Magnum Coal LLC Patriot Coal Corporation Eastern Coal, LLC Patriot Coal Corporation

24 Rockspring Development, Sea B Mining Shipyard River Coal Terminal Sidney Coal, Spartan Mining xxii Neweagle Development Corp. Neweagle Industries, Riverton Coal Production, Alpha American Coal Holding LLC Alpha Natural Resources, Pittston Coal Pittston Minerals Group, The Brink s Bluegrass Coal Development Horizon Natural Resources Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, Elk Run Coal, Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources,

25 Stirrat Coal Stone Mining Terry Eagle Limited Partnership Twentymile Coal xxiii Elk Run Coal, Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, Long Fork Coal Appalachia Holding Alpha Appalachia Holdings, Alpha Natural Resources, TECPART Corporation TEAGLE, L.L.C. AMVEST Coal & Rail, L.L.C. AMVEST Minerals, L.L.C. AMVEST Corporation CONSOL Energy Fidelity Investments Peabody Energy Corporation Twin Star Mining Premium Energy, LLC Alpha Natural Resources, LLC Alpha Natural Resources,

26 U. S. Steel Mining, LLC Virginia Crews Coal West Ridge Resources, White Flame Energy, (merged 2014 into Premium Energy, LLC) Wildcat, LLC xxiv United States Steel Corporation USS Mine Management, AMCI Holdings, K-M Investment Corporation American Metals & Coal International, AMCI Resources, Andalex Resources, Alpha Natural Resources, LLC Alpha Natural Resources, Brook Trout Coal, LLC Trout Coal Holdings, LLC Magnum Coal LLC Patriot Coal Corporation

27 xxv TABLE OF CONTENTS QUESTION PRESENTED... i PARTIES TO THE PROCEEDINGS... ii CORPORATE DISCLOSURE STATEMENT... vii TABLE OF AUTHORITIES... xxvii PETITION FOR A WRIT OF CERTIORARI... 1 OPINIONS BELOW... 1 JURISDICTION... 1 RELEVANT CONSTITUTIONAL, STATUTORY AND REGULATORY PROVISIONS... 1 STATEMENT OF THE CASE... 3 REASONS FOR GRANTING THE WRIT I. The Federal Circuit s Rulings Conflict With This Court s Established Export Clause Jurisprudence In Upholding The Reclamation Fee As Applied By The Government To The Sale Of Exported Coal A. The Export Clause Prohibits A Tax On The Sale Of A Good For Export B. The Government Has Administered The Reclamation Fee As A Tax On The Sale Of Coal In Export Commerce C. An Unconstitutional Tax On Sales For Export Is Not Saved By Recharacterizing That Tax As A Deferred Manufacturing Tax

28 xxvi D. The Canon Of Constitutional Avoidance Does Not Authorize A Court To Displace An Agency s Interpretation Of The Statute Or To Ignore The Way In Which A Statute Has Actually Been Applied II. The Federal Circuit s Decisions Have Nationwide Implications And Warrant This Court s Review CONCLUSION APPENDIX APPENDIX A: Court of Appeals Decision... 1a APPENDIX B: Court of Federal Claims Decision... 8a APPENDIX C: Denial of Rehearing En Banc... 24a

29 xxvii TABLE OF AUTHORITIES Constitutional Provisions U.S. Const. Art. I, 9, cl passim Cases A.G. Spalding & Bros. v. Edwards, 262 U.S. 66 (1923)... 13, 14, 18, 28 Bowen v. Georgetown Univ. Hosp., 488 U.S. 204 (1988) Coal River Energy, LLC v. Jewell, No (D.C. Cir.)... 10, 27 Consolidation Coal Co. v. United States, 131 S. Ct (2011)... 9 Consolidation Coal Co. v. United States, 528 F.3d 1344 (Fed. Cir. 2008) Consolidation Coal Co. v. United States, 615 F.3d 1378 (Fed. Cir. 2010)... passim Drummond Coal Co. v. Hodel, 796 F.2d 503 (D.C. Cir. 1986)... passim Edward J. DeBartolo Corp. v. Fla. Gulf Coast Building & Construction Trades Council, 485 U.S. 568 (1988) Fairbank v. United States, 181 U.S. 283 (1901) Garcia-Villeda v. Mukasey, 531 F.3d 141 (2d Cir. 2008)... 23, 24 Hernandez-Carrera v. Carlson, 547 F.3d 1237 (10th Cir. 2008) Kwong Hai Chew v. Colding, 344 U.S. 590 (1953)... 25, 26

30 xxviii Liggett & Myers Tobacco Co. v. United States, 299 U.S. 383 (1937)... 19, 20, 21 Morales-Izquierdo v. Gonzales, 486 F.3d 484 (9th Cir. 2007)... 23, 24, 30 Nat l Mining Ass n v. Kempthorne, 512 F.3d 702 (D.C. Cir. 2008) Nat'l Cable & Telecommunications Ass'n v. Brand X Internet Servs., 545 U.S. 967 (2005) United States v. Consolidation Coal Co., No , 1987 WL (4th Cir. Jan. 30, 1987)... 15, 27, 28 United States v. Hvoslef, 237 U.S. 1 (1915)... 19, 28 United States v. IBM Corp., 517 U.S. 843 (1996)... 3, 11, 20, 28 United States v. Spring Ridge Coal Co., 793 F. Supp. 124 (N.D.W.Va. 1992)... 16, 27 United States v. Tri-No Enters.,, 819 F.2d 154 (7th Cir. 1987)... 15, 29 United States v. United States Shoe Corp., 523 U.S. 360 (1998)... passim Wyodak Res. Dev. Corp. v. United States, 637 F.3d 1127 (10th Cir. 2011)... 9 Statutes 28 U.S.C. 1254(1) U.S.C. 1295(a)(3) Surface Mining Control and Reclamation Act (SMCRA), 30 U.S.C. 1201, et seq.... 1, 4 30 U.S.C. 1232(a)... passim

31 xxix 30 U.S.C. 1232(a) (2006)... 2 Tax Relief and Health Care Act of 2006, Pub. L. No Regulations 30 C.F.R (b)... 3, C.F.R (b) (1983) C.F.R (b)(1)... 4, C.F.R (b)(1) (1983) C.F.R (b)(3)(i)... 6, C.F.R , Fed. Reg. 28,574 (June 30, 1982)... 4, Fed. Reg. 19,718 (May 27, 1988) Fed. Reg. 56,122 (Sept. 17, 2004)... 5, 14 Other Authorities Clifford Krauss, U.S. Coal Companies Scale Back Export Goals, N.Y. TIMES, Sept. 14, 2013, at B OSM PAYER HANDBOOK (Oct. 2011), available at ments/payer%20handbook%20oct2011.pdf... 5, 15 Robert W. Scheef, Temporal Dynamics in Statutory Interpretation: Courts, Congress, and the Canon of Constitutional Avoidance, 64 U. PITT. L. REV. 529 (2003) Steven L. Schooner, The Future: Scrutinizing The Empirical Case For The Court Of Federal Claims, 71 GEO. WASH. L. REV. 714 (2003)... 29

32 PETITION FOR A WRIT OF CERTIORARI Petitioners Aracoma Coal, et al. respectfully petition for a writ of certiorari to review the judgment of the United States Court of Appeals for the Federal Circuit in this case. OPINIONS BELOW The decision of the court of appeals (Pet. App. 1a- 7a) is unreported. The decision of the United States Court of Federal Claims (Pet. App. 8a-23a) is reported at 104 Fed. Cl JURISDICTION The judgment of the court of appeals was entered on July 22, The court denied a timely petition for rehearing en banc on October 8, Pet. App. 29a-30a. The Chief Justice extended the time within which to file a petition for a writ of certiorari to and including February 5, App. No. 13A655. This Court has jurisdiction pursuant to 28 U.S.C. 1254(1). RELEVANT CONSTITUTIONAL, STATUTORY AND REGULATORY PROVISIONS The Export Clause of the United States Constitution, Art. I 9, cl. 5, provides: No Tax or Duty shall be laid on Articles exported from any State. The Surface Mining Control and Reclamation Act (SMCRA), 30 U.S.C. 1201, et seq., provides in relevant part: All operators of coal mining operations subject to the provisions of this Act shall pay to the Secretary of the Interior, for deposit in

33 2 the fund, a reclamation fee of 28 cents per ton of coal produced by surface coal mining and 12 cents per ton of coal produced by underground mining or 10 per centum of the value of the coal at the mine, as determined by the Secretary, whichever is less, except that the reclamation fee for lignite coal shall be at a rate of 2 per centum of the value of the coal at the mine, or 8 cents per ton, whichever is less. Id. 1232(a). 1 The regulations implementing the SMCRA provide in relevant part: The fee shall be determined by the weight and value at the time of initial bona fide sale, transfer of ownership, or use by the operator. (1) The initial bona fide sale, transfer of ownership, or use shall be determined by the first transaction or use of the coal by the operator immediately after it is severed, or removed from a reclaimed coal refuse deposit. 1 The prior version of the statute, also relevant here, provided for a reclamation fee of 31.5 cents per ton of coal produced by surface coal mining and 13.5 cents per ton of coal produced by underground mining or 10 per centum of the value of the coal at the mine, as determined by the Secretary, whichever is less, except that the reclamation fee for lignite coal shall be at a rate of 2 per centum of the value of the coal at the mine, or 9 cents per ton, whichever is less. 30 U.S.C. 1232(a) (2006). Congress amended the rates in 2006, and the new rates became effective in October of See Tax Relief and Health Care Act of 2006, Pub. L. No

34 (2) The value of the coal shall be determined F.O.B. mine. (3) The weight of each ton shall be determined by the actual gross weight of the coal. (i) Impurities that have not been removed prior to the time of initial bona fide sale, transfer of ownership, or use by the operator, excluding excess moisture for which a reduction has been taken pursuant to , shall not be deducted from the gross weight. (ii) Operators selling coal on a clean coal basis shall retain records that show run-ofmine tonnage, and the basis for the clean coal transaction. (iii) Insufficient records shall subject the operator to fees based on raw tonnage data. 30 C.F.R (b). 3 STATEMENT OF THE CASE The Export Clause of the United States Constitution provides that No Tax or Duty shall be laid on Article exported from any state. U.S. Const. Art. I, 9, cl. 5. This Court has held that the clause strictly prohibits any tax or duty, discriminatory or not, that falls on exports during the course of exportation. United States v. IBM Corp., 517 U.S. 843, 848 (1996). While Congress may tax the manufacture of goods destined for export, its ability to tax ends once those goods enter the export stream. This case presents the question whether the government may recharacterize a tax on the sale of

35 4 coal in the export stream, which would violate the Export Clause, as a deferred tax on the extraction of coal, which would not. Petitioners are 105 coal producers that, for decades, have paid taxes upon exported coal. These taxes that were calculated and levied after the extracted raw and unusable coal had been processed i.e., washed and separated from rock and debris, crushed, sized, and blended per specifications into a commercially different and usable product and had been sold into the export stream. Moreover, for decades, and continuing to this day, the government has taken inconsistent positions as to how the tax functions, obscuring reality and playing both sides to impose tax obligations on petitioners while avoiding its constitutional obligations. 1. Congress enacted the Surface Mining Control and Reclamation Act (SMCRA), 30 U.S.C. 1201, et seq., in The statute authorizes the Department of the Interior s Office of Surface Mining (OSM) to impose a reclamation fee on coal produced by covered coal mining operations. Id. 1232(a). The tax is the lesser of a specified amount per ton or 10 per centum of the value of the coal at the mine. Id. The SMCRA does not compel OSM to impose the tax at any particular point in the process of the coal s extraction, sale, processing, and delivery. Pursuant to the statutory authorization to impose the tax, OSM in 1977 specified by regulation that the tax would be determined by the weight and value at the time of initial bona fide sale, transfer of ownership, or use by the operator. 30 C.F.R (b)(1) (emphases added).

36 5 Consistent with the plain language of the regulation, OSM has for decades interpreted the fee to arise at the time the coal is sold. Every nexus with the tax lies with the processed coal at sale and none lies with the raw extracted coal. In 1982, OSM revisited its regulations to clarify the point in time of fee determination. 47 Fed. Reg. 28,574, (June 30, 1982). The agency specified that the requirement that the fee shall be determined... at the time of the initial bona fide sale, transfer of ownership, or use referred to the first transaction or use of the coal by the operator immediately after it is severed, or removed from a reclaimed coal refuse deposit, 30 C.F.R (b), (b)(1) (1983). Only the actual gross weight of the processed coal that is sold at the time of its sale matters for purposes of imposing the tax. Id (b)(3). OSM announced an amendment of the tax rate in 2004, at which time it proposed to apply the new rate to coal that was subsequently sold, even if that coal was extracted before the new rate became effective. See 69 Fed. Reg. 56,122, 56,128 (Sept. 17, 2004). Subsequently implemented sale-based tax rates are officially embodied in OSM regulations, 30 C.F.R , and confirmed by OSM s own guidance to be rates for coal used, sold or transferred during the effective period, OSM PAYER HANDBOOK (Oct. 2011), available at Handbook/Documents/Payer%20Handbook%20OCT2 011.pdf. Thus, when Congress enacts tax rate changes effective on a certain date, OSM applies the new rate based on the date of sale of the processed coal, rather than the date of raw coal extraction.

37 6 The most telling evidence that the SMCRA tax applies to coal upon sale, as opposed to extraction, is that if the coal is stockpiled instead of sold, it is never taxed. Thus, under OSM s rule, the statutory term coal produced has always effectively meant coal sold. The distinction between imposing the tax upon sale rather than the initial extraction of the coal matters. The tax depends on the coal s weight and value, 30 U.S.C. 1232(a), both of which change between extraction and sale. The weight of the raw extracted coal is reduced during processing by the removal of rock and debris, and conversely, augmented by the addition of non-extracted substances, such as antifreeze and dust-allaying material. OSM s regulations thus specify that [i]mpurities that have not been removed prior to the time of initial bona fide sale, transfer of ownership, or use by the operator... shall not be deducted from the gross weight. 30 C.F.R (b)(3)(i). 2 In addition to the weight, the value of coal can of course also fluctuate substantially between extraction and sale. The impact of OSM s imposition of the tax upon sale, rather than extraction, on the amount of the tax 2 The regulations originally provided that even the weight of water added to the raw coal would be included, but the Secretary subsequently amended them to permit producers to deduct excess moisture in order to bring the fee methodology into accord with that used by the Internal Revenue Service in assessing the Black Lung tax. See 53 Fed. Reg. 19,718 (May 27, 1988).

38 7 extends even further than that. The tax rate may also change between those two imposition points. When the tax rate is revised effective on a certain date, OSM applies the new rate based on the date of sale, rather than the date of extraction. Similarly, OSM applies the statutory tax rate applicable to the quality of coal in its condition at sale, rather than its condition at extraction. Finally, OSM s imposition of the tax at sale means that on the pretext of taxing extraction of raw coal, the agency is taxing a processed product that is commercially different from the raw extracted article that is the purported subject of the tax, and which includes substances that are not even extracted. Shortly after OSM determined in 1982 to impose the tax upon sale, several coal companies filed suit, arguing that by specifying that OSM should impose a fee on coal produced, 30 U.S.C. 1232(a), Congress had left OSM with no choice but to impose the tax on the coal at the time of extraction. See Drummond Coal Co. v. Hodel, 796 F.2d 503, 505 (D.C. Cir. 1986). OSM argued that its authority was not so limited, and that the statute could permissibly be construed to allow it to impose the tax upon sale. Specifically, the government argued that the real dispute in the case was: not over the term coal but the meaning of produced. Under [the producer s] interpretation, coal produced means coal immediately after extraction. The Secretary s interpretation of produced involves coal as it is offered for initial sale. Br. for the Secretary of the Interior 13, Drummond Coal, 796 F.2d 503 (D.C. Cir. 1986). The D.C. Circuit

39 8 accepted OSM s position, concluding the term coal produced was ambiguous, and could therefore be interpreted to permit taxation at the time of sale. See Drummond Coal, 796 F.2d at The government defended its position in this Court, describing Drummond s contention that the SMCRA was limited to taxing extraction as having no basis in the statute, its legislative history, or in the consistent interpretation of the relevant term by [OSM]. Br. of the United States in Opposition to Certiorari 5, Drummond Coal v. Hodel, No (1986). 2. In 2001 in what would come to be known as the Consolidation Coal case a group of sixty-eight coal producers filed suit alleging that OSM s interpretation and implementation of the tax vis-àvis coal bound for export violates the Export Clause because by the time the coal is sold, it has already entered the export stream. The plaintiffs sought a declaration of the tax s invalidity and a refund of previously paid assessments. In response, the government suddenly changed its description of the SMCRA tax. Instead of imposing a tax upon sale, the government argued, OSM s regulations imposed a deferred tax upon the extraction of raw coal, and the assessment at the time of sale, on processed coal, was actually meant only for the sake of administrative convenience. After a series of appeals, the Federal Circuit ultimately accepted the government s new position, holding that because it would violate the Export Clause to impose a tax on the sale of coal in the stream of export commerce, the doctrine of constitutional avoidance compelled recharacterizing

40 9 the tax as a deferred tax on the extraction of coal. See Consolidation Coal Co. v. United States, 615 F.3d 1378, 1382 (Fed. Cir. 2010). This court denied certiorari. Consolidation Coal Co. v. United States, 131 S. Ct (2011) (mem). 3. Its position in Consolidation Coal notwithstanding, the government has continued to argue that all parts of the fee, including [which tax rate applies to the coal] must be determined at the time of [sale], and not earlier. Br. of the United States, Wyodak Res. Dev. Corp. v. United States, 637 F.3d 1127 (10th Cir. 2011), No , 2010 WL , at *26. In that case, a coal producer argued that the coal seam it was mining contained both lowquality lignite coal, and higher quality subbituminous coal. See Wyodak, 637 F.3d at The statute applies different tax rates to those two kinds of coal, and the producer argued that because the coal in the seam was twelve percent lignite, it should only pay the lower tax rate for extracting that coal. Id. The government responded that because the two kinds of coal were commingled during the mining process, the mixture comprising mostly the higher grade coal was the coal that Wyodak actually produces and is the coal it sells to its customers and power plants. Br. of United States, Wyodak, 2010 WL , at * Petitioners are 105 coal producers whose cases were stayed pending the outcome of Consolidation Coal. After that case was decided, the Court of Federal Claims relied on it to grant the government s motion for summary judgment against petitioners. Pet. App. 18a. The Federal Circuit affirmed without

41 10 opinion, id. 7a, and petitioners submitted a timely petition for rehearing en banc. One critical point raised in the petition for rehearing en banc (at 8-9) was that the government s position in Wyodak was inconsistent with its position in Consolidation Coal. The consequence of the government s position is that the type of coal that is extracted may not be the type of coal that is taxed for example, relatively low-quality lignite extracted from the ground is not taxed as lignite (at a more favorable rate) if it is processed and blended to produce bituminous coal at sale. The tension in the government s positions notwithstanding, the Federal Circuit denied rehearing. Pet. App. 29a-30a. This petition followed. Parallel litigation by other parties raising similar arguments is also pending before the D.C. Circuit. See Coal River Energy, LLC v. Jewell, No (D.C. Cir.). REASONS FOR GRANTING THE WRIT Consolidation Coal was wrong when it was decided, and the government s continued adherence to inconsistent interpretations of the SMCRA tax highlights the Federal Circuit s error and establishes the need for this Court s review. This Court has carefully drawn and rigorously enforced a bright line distinguishing lawful taxes on manufacturing from unconstitutional taxes imposed upon sale for export. Taking care to forbid the government s efforts to evade this foundational restriction on its taxing powers, this Court has strictly enforced the Export Clause s prohibition against federal taxation of goods

42 11 in export transit. United States v. IBM Corp., 517 U.S. 843, 849 (1996). The Federal Circuit s decision in Consolidation Coal, applied to foreclose petitioners claims in this case, represents a significant departure from that vigilance, which this Court must correct. The government imposed a tax on the sale of exported coal the fee is not imposed unless and until the sale, and the amount of the tax depends solely on the weight and value of the coal at sale rather than at the time of its extraction. For decades and even contemporaneously with this litigation OSM has maintained that it is valid for the tax to apply to the sale of coal and uniformly imposed the tax upon sale. The Federal Circuit was able to deny the inevitable conclusion that the tax violates the Export Clause when applied to sales in export commerce only by overriding OSM s own longstanding position, blinking reality, and retroactively recharacterizing the tax s imposition. Review is also warranted because Consolidation Coal and the decision below provide a roadmap to evade the clear and strict terms of the Export Clause. This is so because any sales tax can be recharacterized as a deferred tax on manufacturing, and thus taken outside the clause s scope. The Federal Circuit s decisions equally conflict with this Court s precedent because they turn the canon of constitutional avoidance on its head. The court of appeals converted a mechanism to prevent future unlawful action into a tool to excuse past constitutional violations.

43 12 Finally, certiorari should be granted because the court of appeals decisions give rise to a three-to-two circuit conflict over whether the canon of constitutional avoidance takes precedence over the deference owed to an agency s settled interpretation of a statute that it implements under a direct delegation from Congress. In Consolidation Coal, the Federal Circuit invoked the canon to reject OSM s longstanding determination to impose the tax upon the sale of exported coal. That ruling is consistent with the precedent of the Tenth and DC Circuits, but the Second and Ninth Circuits would hold that a court has no authority to reject the agency s prior interpretation of the statute. The circuit split implicates the adjudication of virtually every constitutional challenge to an agency-implemented statute. This Court s intervention is accordingly required. I. The Federal Circuit s Rulings Conflict With This Court s Established Export Clause Jurisprudence In Upholding The Reclamation Fee As Applied By The Government To The Sale Of Exported Coal. A. The Export Clause Prohibits A Tax On The Sale Of A Good For Export. The imposition of a tax on the sale of coal in the export stream violates the Export Clause, which categorically bars Congress from imposing any tax on exports. United States v. United States Shoe Corp., 523 U.S. 360, 363 (1998). Unusual in its strictness and the vigor of its application, the Export Clause allows no room for any federal tax, however

44 13 generally applicable or nondiscriminatory, on goods in export transit. Id. at 367. This Court has long held that this prohibition precludes taxes on the sale of goods in the stream of export commerce. In A.G. Spalding & Bros. v. Edwards, 262 U.S. 66, 67 (1923), for example, the Court considered a tax on the sale of baseball bats, as applied to sales for export. The Court explained that although the Export Clause permits Congress to tax goods during manufacturing even if the goods are destined for export, [a]rticles in course of transportation cannot be taxed. Id. at 69. The fact that the law under which the tax was imposed was a general law touching all sales of the class, and not aimed specially at exports, would not help the defendant, the Court explained, so long as the goods were in the process of being exported at the time the tax was imposed. Id. With respect to a sales tax, then, the question is whether the sale was a step in exportation. Id. at 68. To answer that question, the Court observed, we have to fix a point at which, in view of the purposes of the Constitution, the export must be said to begin. Id. at 69. The Court held that the sale marks the beginning of exportation, and therefore cannot be taxed. Id. The very act that passed the title and that would have incurred the tax had the transaction been domestic, committed the goods to the carrier that was to take them across the sea. Id. In Spalding, the Court never suggested that the tax could be saved by recharacterizing it as a deferred tax on the manufacture of baseball bats.

45 14 B. The Government Has Administered The Reclamation Fee As A Tax On The Sale Of Coal In Export Commerce. 1. The SMCRA directs the OSM to impose a tax to be calculated per ton of coal produced or as a per centum of the value of the coal at the mine. 30 U.S.C. 1232(a). Because the weight and value of coal invariably change between the initial extraction of raw coal and the sale of processed coal, OSM in implementing this Congressional directive was required to choose the point in time at which the tax would be imposed. OSM chose the point of sale, which is when the coal enters the export stream, and the agency thus violated the Export Clause. See A.G. Spalding, 262 U.S. at 69. First, OSM s regulations unambiguously provide that [t]he fee shall be determined by the weight and value at the time of initial bona fide sale C.F.R (b) (emphasis added). Second, OSM specifically revised its regulations to clarify the point in time of fee determination by reaffirming OSM policy in effect since initial implementation of the fee collection program : that the tax was imposed on the coal at the time of sale, not extraction. 47 Fed. Reg. 28,574, 28,577 (June 30, 1982). It added to the regulations the statement that the initial bona fide sale... shall be determined by the first transaction or use of the coal by the operator. 30 C.F.R (b)(1) (emphasis added). The revised regulations further provided that the [i]mpurities that have not been removed prior to the time of the initial bona fide sale... shall not be deducted from the gross weight. Id.

46 (b)(3)(i) (emphasis added). Accordingly, the regulations made clear that the tax was not to be based on the weight of the coal at the time of extraction; so long as impurities are removed prior to the time of the initial bona fide sale, they do not contribute to the taxable weight of the coal. Likewise, the revised regulations provided that the weight of any impurities accumulating in or added to the coal during processing between extraction and sale would be taxed. Id. Third, consistent with its treatment of the sale as the taxable event, when OSM announced an amendment of the tax rate in 2004, it proposed to apply the new rate to coal that was subsequently sold, even if that coal had been extracted before the new rate became effective. See 69 Fed. Reg. 56,122, 56, (Sept. 17, 2004). OSM has proceeded to adopt that methodology, disregarding extraction in favor of applying the tax to sale, in subsequent revisions of the tax rate, see 30 C.F.R , and in its guidance on rates for coal used, sold or transferred during the effective period, OSM PAYER HANDBOOK (Oct. 2011). Fourth, OSM imposes the tax only if and when a sale takes place. In those instances in which producers have stockpiled coal for later sale, the government has neither required payment of the tax at that time, nor calculated the value and weight of the coal as of the time of extraction. See, e.g., United States v. Tri-No Enters.,, 819 F.2d 154, 156 (7th Cir. 1987) (government imposed tax when previously stockpiled coal was sold); United States v. Consolidation Coal Co., No , 1987 WL 36307, at *1 (4th Cir. Jan. 30, 1987) (same); United States v.

47 16 Spring Ridge Coal Co., 793 F. Supp. 124, 127 (N.D.W.Va. 1992) (same). Fifth, in Drummond Coal Co. v. Hodel, 796 F.2d 503 (D.C. Cir. 1986), the D.C. Circuit deferred to and upheld OSM s decision to tax coal according to its weight and value at the time of sale, rather than extraction. In defeating certiorari, the government argued that imposing the tax at extraction was contrary to the text and history of the statute, and to OSM s consistent interpretation. Br. of the United States in Opposition to Certiorari 5, Drummond Coal v. Hodel, No (1986). Instead, the government continued to adhere to its contention that the tax should be imposed at sale. Finally, OSM reiterated its policy to tax sales in Wyodak Resources Development Corp. v. United States, where it argued that all parts of the fee... must be determined at the time of sale. Br. of the United States, Wyodak Res. Dev. Corp. v. United States, 637 F.3d 1127 (10th Cir. 2011), No , 2010 WL , at *26. There, the government argued that the rate of tax is determined by the quality of coal at sale, rather than at extraction. See id. Thus, this is not a case in which the government has changed positions over time: it is a case in which the government has been remarkably consistent in treating the tax as one on sales, and has adopted an inconsistent position solely for the purpose of this litigation. But OSM cannot have it both ways, construing the statute to mean one thing when its taxing methodology is challenged as unauthorized by the statute, and the opposite when the tax so administered is challenged under the Export Clause.

48 17 2. In response to the petition for a writ of certiorari in Consolidation Coal, the government argued that its decision to determine and levy the tax at the time of sale constituted an accommodation to coal producers because it permits them to remove impurities, such as rock and dirt, before the coal is weighed. See Br. of United States in Opposition, Consolidation Coal Co. v. United States 3-4, 17, No (2011). That contention however, rests on the false premise that the SMCRA permits the government to tax substances other than coal if they are truly taxed at extraction. The premise is false because the SMCRA would not permit OSM to deny producers the right to a clean coal calculation, by which non-coal substances would be excluded from the taxable weight a task that can readily be accomplished using regularly issued processor reports of the weight of the non-coal washed and removed from the coal. In any event, even if the tax imposed at the time of sale was lower than if it had been imposed at extraction, the purported accommodation does not excuse OSM s violation of the Export Clause. Whether the government can cure the violation by taxing coal at extraction, including by weighing non-coal impurities, is a separate question to be decided in another case. The government s argument also ignores the fact that its tax has features that increase producers tax burden. For example, by taxing non-extracted substances such as antifreeze and dust-allaying material, OSM is taxing more than the coal produced that the statute permits it to tax. By applying new tax rates to coal that has already been extracted, as long as the coal is sold after the new

49 18 rate is enacted, the government has created a mechanism by which it may retroactively increase the tax burden on extracted coal. And by adopting the policy that the quality of coal should be determined at the time of sale, as the government did in Wyodak, the government would permit the taxation of lower-quality coal at higher rates if the coal extracted is later blended with higher quality coal. C. An Unconstitutional Tax On Sales For Export Is Not Saved By Recharacterizing That Tax As A Deferred Manufacturing Tax. 1. The Government cannot avoid the restrictions of the Export Clause simply by recharacterizing its sales tax as a tax on manufacturing, collected at the time of sale. If that were sufficient to evade the Export Clause, then this Court would have reached the opposite result in A.G. Spalding, supra. The sales on baseball bats could just as easily have been characterized as a tax that accrued when the baseball bats were produced but was collected when the bats were sold. To be sure, the sales tax in that case was imposed as a percentage of the sales price. But the tax would have been no less unconstitutional if imposed as a flat, one dollar charge on every sale. This Court specified that the determinative consideration was not the formula for the amount of the tax, but rather the timing of its application i.e., whether the goods were in the stream of export when the tax accrued. A.G. Spalding & Bros. v. Edwards, 262 U.S. 66, 69 (1923).

50 19 Consolidation Coal thus provides a roadmap for evasion of the Export Clause, both foreseen and forbidden by this Court s prior cases. The Court has warned that the obstructions to exportation which it was the purpose [of the Clause] to prevent could readily be set up by legislation nominally conforming to the constitutional restriction, but in effect overriding it. United States v. Hvoslef, 237 U.S. 1, 13 (1915). Accordingly, courts reviewing Export Clause challenges must regard things rather than names, in determining whether an imposition on exports ranks as a tax. United States v. United States Shoe Corp., 523 U.S. 360, 367 (1998) (quoting Pace v. Burgess, 92 U.S. 372, 376 (1876)). The crucial question is whether the [tax] is a tax on exports in operation as opposed to nomenclature. Id. And here, there is no escaping that in operation, OSM imposed the reclamation fee as a tax on sales. 2. The Federal Circuit nonetheless purported to find precedent for its recharacterization in this Court s decision in Liggett & Myers Tobacco Co. v. United States, 299 U.S. 383 (1937). But that case is both doctrinally irrelevant and factually inapposite. Liggett concerned the principle of state immunity from federal taxation, which has no textual or structural relationship to the Export Clause. The plaintiff in that case, Liggett & Myers, contended that a tax imposed upon certain tobacco products, which it sold to Massachusetts state hospitals, amounted to a direct burden imposed upon the state. Id. at 386. This Court rejected that argument, finding that the tax was properly considered a tax [ ] upon the manufacture of the tobacco, the effect of which upon the State was

51 20 indirect and imposed no prohibited burden. Id. The Court based that conclusion principally on the fact that the tax is laid upon each pound of manufactured tobacco irrespective of intrinsic value or price obtained upon sale. Id. Liggett does not overrule this Court s unambiguous holding that the question whether a tax violates the Export Clause turns on the taxable event here, the sale of the good. United States v. IBM Corp., 517 U.S. 843, 848 (1996). The Federal Circuit s contrary decision renders this Court s precedent a nullity. This Court has repeatedly cautioned that the Export Clause s simple, direct, unqualified prohibition on any taxes or duties distinguishes it from other constitutional limitations on governmental taxing authority. U.S. Shoe, 523 U.S. at 368. The Court has thus rejected attempts to impose onto the Export Clause doctrines involving even the Import-Export Clause, see IBM, 517 U.S. at 857, the Dormant Commerce Clause, see id. at 851, and the Takings Clause, see U.S. Shoe, 523 U.S. at If the Court has hesitate[d] before adopting the analysis of our recent Import-Export Clause cases into our Export Clause jurisprudence, IBM, 517 U.S. at 857 despite the fact that the two provisions are textually similar, id. at 852, and frequently interpreted... together, id. at 857 it has even greater reason to resist reliance on cases implementing an implied restriction on federal burdens placed on state instrumentalities. Cf. IBM, 515 U.S. at 851 (concluding that the meaning of the nontextual negative command of the dormant Commerce Clause was uninformative of the meaning

52 21 of the textual prohibition of the Export Clause). Accordingly, decisions [that] involved constitutional provisions other than the Export Clause... do not govern here. U.S. Shoe, 523 U.S. at 368. The structural command at issue in Liggett bears no relationship to the Export Clause. The central question under the Export Clause is one of timing: was the tax imposed on the item while it was in the export stream? The federalism question in Liggett, by contrast, turns on the degree and directness of the burden imposed on a state instrumentality. 299 U.S. at 386 (question is whether the tax imposed a direct burden on the state or instead the effect was incidental, indirect, and [therefore] permissible ). Thus, the dispositive fact in Liggett that the amount of the tax was measured as a percentage of the sale price, id. is not important (much less determinative) in this challenge under the Export Clause. Because the Export Clause prohibits any Tax or Duty on exported articles, so long as the tax accrues while the item is in the export stream, it is unconstitutional no matter whether it is properly classified as a sales tax or not. See, e.g., Fairbank v. United States, 181 U.S. 283, 283, (1901) (flat ten cent stamp tax on bills of lading held unconstitutional). In any event, even if Liggett were useful precedent, it is factually distinguishable. The decision in Liggett turned critically on the fact that the tobacco tax at issue there did not depend on the intrinsic value or price obtained upon sale. 299 U.S. at 386. But the reclamation fee in this case depends directly on the intrinsic value of petitioners coal,