ESA Final Rule

Regulations Implementing the Federal Coal Mine Health and Safety Act of 1969, as Amended [12/20/2000]

Due to the large file size, this document has been divided into four parts:

Volume 65, Number 245, Page 80019-80068

[[pp. 80019-80068]] Regulations Implementing the Federal Coal Mine Health and Safety 
Act of 1969, as Amended

[[Continued from page 80018]]

[[Page 80019]]

is responsible, each of which is worth approximately $175,000, could 
become the responsibility of the Black Lung Disability Trust Fund. The 
Department has a duty to protect the assets of the Trust Fund, and thus 
intends to enforce the post-award security provision incorporated into 
the Black Lung Benefits Act from section 14(i) of the Longshore and 
Harbor Workers' Compensation Act, 33 U.S.C. 914(i), as incorporated by 
30 U.S.C. 932(a).
    (c) One comment states that coal transportation employers are 
generally unaware of their potential liability for black lung benefits, 
and are surprised when they are identified as a responsible operator in 
the adjudication of an individual claim for benefits. At that point, 
the commenter maintains, any insurance that they are able to purchase 
will not cover benefits owed to the former employee who has already 
filed a claim. The commenter requests that the proposed regulations 
prohibit the case-by-case adjudication of issues of coverage involving 
coal transportation employers.
    The Department does not believe that it is necessary to revise the 
regulations to provide further guidance to coal transportation 
employers. Neither does the Department deem it advisable to limit the 
authority of adjudication officers to apply the pertinent statutory and 
regulatory definitions to claims for benefits filed by employees of 
transportation employers. Congress amended the Federal Mine Safety and 
Health Act in 1977 to include ``any independent contractor performing 
services or construction'' at the Nation's coal mines.'' 30 U.S.C. 
802(d); Pub. L. 95-164, 91 Stat. 1290, Sec. 102(b)(2) (1977). When it 
amended the Black Lung Benefits Act several months later, Congress 
specifically recognized, in two separate provisions, that coal 
transportation companies were now liable for the payment of benefits. 
First, Congress amended the definition of the term ``miner'' to include 
``an individual who works or has worked in coal mine construction or 
transportation in or around a coal mine, to the extent such individual 
was exposed to coal dust as a result of such employment.'' 30 U.S.C. 
902(d); Pub. L. 95-239, 92 Stat. 95, Sec. 2(b) (1978). In addition, 
Congress added language to section 422(b) that exempted coal 
transportation employers, as well as coal mine construction employers, 
from the requirement that they generally secure the payment of benefits 
by purchasing insurance or seeking the Department's approval to self-
insure their obligations. 30 U.S.C. 932(b); Pub. L. 95-239, 92 Stat. 
95, Sec. 7(b) (1978). Congress provided, however, that coal 
transportation and coal mine construction employers may be required to 
post a bond or otherwise guarantee the payment of benefits in any 
awarded claim for which they have been determined liable. Ibid. The 
regulations promulgated by the Department to implement the 1978 
amendments also specifically recognized the liability of coal 
transportation employers. See 20 CFR 725.491(a)(1979); 43 FR 36801-02 
(Aug. 18, 1978).
    Thus, since 1978, both the statute and the regulations have put 
coal mine transportation employers on notice that they could be held 
liable for the payment of any benefits owed to their former employees. 
See Norfolk & Western Railway Co. v. Roberson, 918 F.2d 1144, 1149-50 
(4th Cir. 1990), cert. denied, 500 U.S. 916. Accordingly, the 
Department does not believe that such an employer should be surprised 
when it receives notification of a claim filed by one of its employees. 
Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384-85 (1947) (``Just 
as everyone is charged with knowledge of the United States Statutes at 
Large, Congress has provided that the appearance of rules and 
regulations in the Federal Register gives legal notice of their 
contents.'') Finally, even though a transportation employer is not 
required to obtain insurance to secure its black lung liability, it 
remains free to purchase such insurance in order to ensure that its 
assets are not depleted by the defense and payment of black lung 
claims.
    (d) No other comments were received concerning this section. The 
Department has corrected one error in the proposed regulation, 
replacing the phrase ``the United States Treasurer'' in subsection (f) 
with the term ``a Federal Reserve Bank.'' The Department explained in 
its initial proposal that the funds will be deposited with the 
appropriate Federal Reserve Bank rather than the United States 
Treasurer and had changed similar language in subsection (c). See 62 FR 
3367 (Jan. 22, 1997).

20 CFR 725.608

    (a) The Department proposed revising Sec. 725.608 in its initial 
notice of proposed rulemaking in order to simplify the regulation, and 
to allow all parties to a claim to ascertain their obligations and 
rights with respect to the payment of interest. The proposal recognized 
that black lung beneficiaries were entitled to the payment of interest 
on retroactive benefits, additional compensation, and medical benefits. 
Interest on retroactive benefits starts to accrue 30 days after the 
first date on which the claimant was determined to be entitled to such 
benefits. Interest on additional compensation starts to accrue on the 
date that the beneficiary becomes entitled to additional compensation, 
while interest on medical benefits starts to accrue on the date that 
the miner received the medical service or 30 days after the date on 
which the miner was first determined to be generally eligible for black 
lung benefits, whichever date is later. 62 FR 3368 (Jan. 22, 1997)
    In addition, the proposal specifically required the payment of 
interest by responsible operators on attorneys' fee awards. 62 FR 3368 
(Jan. 22, 1997). In some cases, those awards may be issued long before 
the award of claimant's benefits becomes final, the first point at 
which the attorney is able to collect his fee under Sec. 28 of the 
Longshore and Harbor Workers' Compensation Act, 33 U.S.C. 928, 
incorporated into the Black Lung Benefits Act by 30 U.S.C. 932(a). The 
Department did not discuss this regulation in its second notice of 
proposed rulemaking. See list of Changes in the Department's Second 
Proposal, 64 FR 54971 (Oct. 8, 1999).
    (b) The Department has replaced the term ``beneficiary'' with the 
phrase ``beneficiary or medical provider'' in two places in the last 
sentence of subsection (a)(4). This revision is intended to conform 
that sentence with the first sentence of subsection (a)(4), which 
clearly reflects the Department's intention that medical providers as 
well as beneficiaries are eligible for interest to compensate them for 
any delays in the payment of medical benefits.
    (c) A number of comments oppose the allowance of interest on 
attorneys' fees in general, and the computation of that interest from 
the date the fee is awarded until it is paid. In its first notice of 
proposed rulemaking, 62 FR 3368 (Jan. 22, 1997), the Department 
explained that the payment of such interest is necessary to buttress 
the economic value of fees which may take years to become due because 
of the duration of the underlying litigation of claimant entitlement. 
Although the Black Lung Disability Trust Fund is not liable for the 
payment of interest in any event, Shaffer v. Director, OWCP, 21 Black 
Lung Rep. (MB) 1-98, 1-99 (Ben. Rev. Bd. 1998), a responsible operator 
is not obliged to pay attorney's fees until the claimant successfully 
establishes entitlement to benefits in a final award. Because appeals 
may delay an award's finality for years, the attorney's fees awarded at 
earlier stages of the litigation will diminish in real value as a 
result of inflation. Interest from the date of a fee award, however, 
will reduce the inroads made by inflation. An award of interest will 
therefore encourage attorneys to

[[Page 80020]]

represent claimants because the value of their fees will be protected, 
notwithstanding delays in actual payment. The Department wishes to 
encourage attorney representation of claimants, believing it a means to 
enhance the fairness of the adjudication process. The Department 
therefore rejects the commenters' objection to the allowance of 
interest on attorneys' fees in principle.
    With respect to the computation of interest from the date of the 
attorney fee award, the Department notes that any other date would not 
afford an attorney maximum protection of the fee's value. Although the 
operator is under no obligation to pay the fee at the time it is 
awarded, the primary purpose of subsection (c) is to protect the value 
of the attorney's fee from its inception. Moreover, an operator who is 
able to postpone the payment of an attorney's fee by appealing the 
underlying award of benefits is not entitled to profit from its 
decision to appeal unless it succeeds in overturning the award. The 
operator retains the money, and the use of the money, while the appeal 
is pending. If the award of benefits is ultimately affirmed, the 
operator should not reasonably expect to be able to retain any of the 
profits it earned on that money during the appellate proceeding. 
Instead, those profits, in the form of interest designed to compensate 
an attorney for delay, rightfully belong to the attorney who had to 
wait to receive payment of his fee. Consequently, the date of the fee 
award is the logical date from which to calculate the interest owed.
    The same commenters also argue that the Department has no statutory 
authority to require the payment of interest on attorneys' fees. The 
award of fees is governed by section 28 of the Longshore and Harbor 
Workers' Compensation Act, 33 U.S.C. Sec. 928, as incorporated by 30 
U.S.C. Sec. 932(a). Section 28 authorizes the payment of a 
``reasonable'' attorney's fee by an employer if, after the employer 
controverts a claimant's entitlement, the claimant obtains an award of 
benefits. No fee must be paid until the award is final. The Supreme 
Court has held that ``[a]n adjustment for delay in payment is * * * an 
appropriate factor in the determination of what constitutes a 
reasonable attorney's fee'' under a fee-shifting statute. Missouri v. 
Jenkins, 491 U.S. 274, 284 (1989) (decided under Civil Rights 
Attorney's Fees Award Act); see also Pennsylvania v. Delaware Valley 
Citizens' Council, 483 U.S. 711, 716 (1987) (dicta, decided under Clean 
Air Act); Goodloe v. Peabody Coal Co., 19 Black Lung Rep. 1-91, 1-101-
102 (1995), vac. on other grounds sub nom Peabody Coal Co. v. Director, 
OWCP, 116 F.3d 207 (7th Cir. 1997) (overruling prior decisions 
prohibiting augmentation of attorney fee for delay, citing Jenkins). 
Consequently, interest on an attorney's fee may be awarded consistent 
with section 28 to compensate an attorney for delay in receiving his 
fees.
    The Court of Appeals for the Fourth Circuit recently addressed this 
issue in Kerns v. Consolidation Coal Co., 176 F.3d 802 (4th Cir. 1999). 
A claimant's attorney was awarded fees by an administrative law judge 
in 1984, but was not able to collect those fees until the award became 
final in 1990. He then filed a motion for supplemental attorneys' fees 
based on the six-year delay between the award and its payment. The ALJ 
denied the motion, and the Benefits Review Board affirmed. In reversing 
the Board, the court noted that a 1995 decision of the Board, Nelson v. 
Stevedoring Services of America, 29 BRBS 90 (1995), had authorized the 
enhancement of an attorney's fee for delay under the Longshore and 
Harbor Workers' Compensation Act. The court concluded that ``current 
law'' thus required enhancement for delay, and remanded the case to 
allow the ALJ to consider the merits of the attorney's supplemental fee 
request. 176 F.3d at 805. Section 725.608 simply provides a mechanism 
for ensuring that claimants' attorneys receive this enhancement in each 
case involving a responsible operator.
    The interest on a fee award provided by section 725.608, of course, 
provides compensation only for part of the delay that an attorney may 
face in collecting his fee, i.e., the time between the fee award and 
the actual payment. It is not intended to compensate the attorney for 
any delay between the performance of his work and the award of fees by 
the appropriate adjudicator. If, for example, a claimant filed his 
application in 1995, and was not awarded benefits by an administrative 
law judge until 1999, Sec. 725.608 will require only that interest be 
paid to the attorney from the date the ALJ approves the fee petition 
until the date that the attorney collects that amount. It will not 
provide interest from the date on which the attorney performed the 
work. In such cases, it is the responsibility of the attorney who 
submits a fee request to ensure that the request reflects any necessary 
enhancement for the delay between the performance of the work and the 
award of the fee. There are several methods by which an attorney may 
seek enhancement of his fee award to cover this delay. For example, the 
attorney could request the adjudication officer to use the attorney's 
current rate (his rate at the time he applies for the fee), rather than 
his historical rate (the rate at the time he performed the work), to 
calculate the fee to which he is entitled. Thus, the attorney in the 
example above, who performed 20 hours of work in 1995 but did not 
submit his fee petition until benefits were awarded in 1999, might use 
the $125 hourly rate he customarily charged in 1999 rather than the 
$100 hourly rate he charged in 1995. Using the current rate would 
permit the attorney to claim an additional $500, and would compensate 
him for the delay between the time he performed the work and date of 
the fee award. Another method of attaining the same result would be to 
calculate a ``lodestar'' amount by multiplying the number of hours the 
attorney worked by his historical rate, and then requesting the 
adjudication officer to augment that figure by an additional amount 
intended to compensate the attorney for the delay. Thus, the attorney 
in the example might request that the adjudication officer multiply the 
lodestar amount by an additional 25 percent. In either case, the fee 
awarded by the adjudicator, in concert with the interest provided by 
Sec. 725.608, will ensure that when the attorney finally receives 
payment, he is fully compensated for the work he performed.
    (d) One comment supports the allowance of interest on attorney fees 
and on medical benefits. No other comments were received concerning 
this section, and no changes have been made in it.

20 CFR 725.609

    (a) The Department proposed revising section 725.609 in its first 
notice of proposed rulemaking. In the revised regulation, the 
Department clarified its intent and authority to enforce a final award 
of benefits against other parties in the event the named operator is no 
longer capable of assuming its liability for benefits. The revised 
regulation outlined the other parties against which such an award might 
be enforced, including corporate officers and successor operators. The 
regulation also outlined the circumstances under which the Department 
may impose liability on these parties. In proposing this regulation, 
the Department relied on Congress' explicit determination that such 
entities may be held liable for these awards. 62 FR 3368-69 (Jan. 22, 
1997). The Department did not discuss the regulation in its second 
notice of proposed rulemaking. See list of Changes in the Department's 
Second Proposal, 64 FR 54971 (Oct. 8, 1999).

[[Page 80021]]

    (b) One comment objects to subsection (b)'s imposition of personal 
liability on corporate officers of companies which provide services at 
mine sites. The commenter suggests that liability is inappropriate 
because the officers have never had notice that their employees could 
be considered miners, and have not previously had knowledge of an 
obligation to obtain insurance to cover their employees' potential 
benefit entitlement. The Department rejects this suggestion. Congress 
amended the statutory definition of ``operator'' in 1977 to include 
``any independent contractor performing services or construction at 
such mine[.]'' 30 U.S.C. 802(d). The current regulations also recognize 
that an independent contractor may be held liable as a ``responsible 
operator'' with respect to any employee who performs covered services 
at a coal mine site. 20 CFR 725.491(c)(1). The Black Lung Benefits Act 
requires an operator to secure its potential benefits liability by 
obtaining insurance or qualifying as a self-insurer. 30 U.S.C. 932(b), 
933(a). Section 423(d)(1) of the Act authorizes the Department to 
impose personal liability on certain officers of a corporation if the 
operator is a corporation that has failed to satisfy its insurance 
obligations. 30 U.S.C. 933(d)(1). The Department therefore disagrees 
that application of these provisions to employers engaged as 
independent contractors providing covered services at mine sites is 
unfair. Such corporate entities are coal mine operators under the Act, 
and are liable to their employees when covered employment causes them 
to become totally disabled by pneumoconiosis. Any such entity is 
required to anticipate its obligations and take adequate measures to 
satisfy those obligations as a cost of doing business. Moreover, since 
1977, the officers of an independent contractor who meets the Act's 
definition of the term ``operator'' have been subject to the Act's 
imposition of liability on the officers of a corporation that fails to 
meet its security obligations. The revised regulation does not alter 
the obligation of these officers to obtain the appropriate security, 
nor does it impose any additional consequences for failing to comply 
with that obligation. Instead, it simply provides more explicit notice 
of those consequences.
    (c) One comment approves in general terms of the enforcement 
provisions.
    (d) No other comments were received concerning this section, and no 
changes have been made in it.

20 CFR 725.620

    (a) In its first notice of proposed rulemaking, the Department 
proposed amending the cross-reference in subsection (a) from 
Sec. 725.495 to subpart D of part 726. This amendment reflected a move 
to part 726 of the regulations governing the obligations of coal mine 
operators to secure the payment of benefits. 62 FR 3369 (Jan. 22, 
1997). The Department did not discuss Sec. 725.620 in its second notice 
of proposed rulemaking. See Changes in the Department's Second 
Proposal, 64 FR 54971 (Oct. 8, 1999).
    (b) Two comments urge the Department to revise its regulations to 
allow parties to settle black lung benefits claims. These comments were 
listed as relevant to Sec. 725.620(d) in the Department's listing of 
comments by issue. See, e.g., Exhibit 71 in the Rulemaking Record. They 
do not directly affect Sec. 725.620, however. Subsection (d) of the 
regulation implements section 15(b) of the Longshore and Harbor 
Workers' Compensation Act, 33 U.S.C. 915, as incorporated by 30 U.S.C. 
932(a), rather than section 16, 33 U.S.C. 916, as incorporated by 30 
U.S.C. 932(a), the statutory provision governing settlements. The 
Department has responded to the comments concerning settlement of black 
lung claims in its Final Regulatory Flexibility Analysis.
    (c) No other comments were received concerning this section, and no 
changes have been made in it.

20 CFR 725.621

    In its first notice of proposed rulemaking, the Department proposed 
increasing subsection (d)'s maximum penalty amount from $500 to $550 
for failing to file a required report after the date on which the 
regulations became effective. This revision implements the Civil 
Penalties Inflation Adjustment Act of 1990, as amended by the Debt 
Collection Improvement Act of 1996. 62 FR 3369 (Jan. 22, 1997). The 
Department did not discuss Sec. 725.621 in its second notice of 
proposed rulemaking. See Changes in the Department's Second Proposal, 
64 FR 54971 (Oct. 8, 1999). No comments were received concerning this 
section. The Department has removed an unnecessary comma from 
subsection (b) in order to make the regulation easier to understand, 
but no other changes have been made in it.

Subpart J

20 CFR 725.701

    (a) After a miner has been found totally disabled by pneumoconiosis 
arising out of coal mine employment, (s)he receives fixed monthly 
benefits for that condition. The miner is also entitled to medical 
benefits, i.e., treatment, supplies and other medical services for the 
disabling pneumoconiosis. In its initial notice of proposed rulemaking, 
the Department proposed amending Sec. 725.701 to establish a 
presumption of medical benefits coverage for the treatment of any 
pulmonary disorder. 62 FR 3423 (Jan. 22, 1997). This presumption 
derived from a judicially-created presumption first announced by the 
Court of Appeals for the Fourth Circuit in Doris Coal Co. v. Director, 
OWCP [Stiltner,] 938 F.2d 492 (4th Cir. 1991). The Department explained 
the means by which the presumption could be rebutted, and limited the 
type of evidence relevant to rebuttal by excluding any medical opinion 
premised on the absence of disabling pneumoconiosis. The Department 
based its exclusion of certain medical evidence in rebuttal on the fact 
that the existence of the miner's totally disabling pneumoconiosis had 
already been established in the underlying claim for monthly benefits. 
62 FR 3369, 3423 (Jan. 22, 1997). The Department received a number of 
comments critical of the presumption. Some comments alleged the 
presumption would effectively compensate miners for disorders caused by 
smoking cigarettes and raise the operators' health care costs. Other 
comments contended the presumption did not have a sound medical basis. 
64 FR 55003 (Oct. 8, 1999).
    After considering the public's comments and intervening judicial 
decisions, the Department proposed additional changes to the regulation 
in its second notice of proposed rulemaking. 64 FR 55060 (Oct. 8, 
1999). The Department reviewed the decisions in Glen Coal Co. v. Seals, 
147 F.3d 502 (6th Cir. 1998), and Gulf & Western Indus. v. Ling, 176 
F.3d 226 (4th Cir. 1999). 64 FR 55003-04 (Oct. 8, 1999). The Department 
noted both decisions agreed that the Doris Coal presumption shifted 
only the burden of production to the party opposing benefits, and was 
therefore valid under the Administrative Procedure Act (APA), 5 U.S.C. 
Sec. 556(d) (proponent of rule bears burden of persuasion) and 
Director, OWCP v. Greenwich Collieries, 512 U.S. 267 (1994). The 
Department also pointed out that the majority in Seals rested on a 
relatively narrow point: that the administrative law judge and Benefits 
Review Board erroneously applied Fourth Circuit precedent when Sixth 
Circuit law controlled and was inconsistent with Doris Coal. 147 F.3d

[[Page 80022]]

at 514 (Dowd, D.C.J), 515 (Boggs, J.). Citing the need for a uniform 
standard of national applicability, the Department proposed several 
changes to Sec. 725.701. 64 FR 55004 (Oct. 8, 1999). The Department 
eliminated the reference to ``ancillary pulmonary conditions'' in 
subsection (b) because the phrase was unnecessary and arguably 
confusing. 64 FR 55004 (Oct. 8, 1999). The Department also changed the 
language of subsection (e) to clarify the specific facts which might 
rebut the presumption that a particular medical expense is compensable. 
Subsection (e) contains a rebuttable presumption that a pulmonary 
disorder for which the miner receives a medical service or supply is 
caused or aggravated by pneumoconiosis. 64 FR 55060 (Oct. 8, 1999). In 
the second proposal, the Department also clarified subsection (f) to 
ensure that the party opposing benefits does not attempt to relitigate 
established facts by using medical evidence for rebuttal which is 
premised on the absence of totally disabling pneumoconiosis. Finally, 
the Department acknowledged the controlling weight a report from a 
treating physician may receive in determining the compensability of a 
service or supply. 64 FR 55004 (Oct. 8, 1999).
    (b) The Department has revised the rebuttal provisions set forth in 
Sec. 725.701(e) in light of a decision from the Court of Appeals for 
the Fourth Circuit issued after the second notice of proposed 
rulemaking entered the final stage of administrative clearance. In 
General Trucking Corp. v. Salyers, 175 F.3d 322 (4th Cir. 1999), the 
Court reviewed the various means of rebutting the Doris Coal 
presumption as presented in Ling:

    It is certainly true that if the treatment at issue is found to 
be `beyond that necessary to effectively treat a covered disorder, 
or is not for a pulmonary disorder at all,' then the presumption 
`shall not carry the day.' Ling, 176 F3d at 233. It does not follow, 
however, that proof of these two circumstances is the exclusive 
means of rebutting the presumption.
    An employer contesting an award of medical benefits may also 
rebut the presumption by adducing sufficient credible evidence that 
the claimant was treated for `a pulmonary condition that had not 
manifested itself, to some degree, at the onset of his disability,' 
or for `a preexisting pulmonary condition adjudged not to have 
contributed to his disability.' Ling, 176 F.3d at 232.

175 F.3d at 324. The Salyers decision emphasizes the importance of 
affording the party liable for medical benefits an opportunity to rebut 
the presumption with evidence that the service provided treated a 
condition which became manifest after the underlying adjudication of 
entitlement, or that it treated a preexisting pulmonary condition 
adjudged not to have contributed to disability. It is the Department's 
intent merely to codify the Court's coverage presumption and its 
rebuttal methods as outlined in Fourth Circuit precedent. In light of 
Salyers and Ling, the Department has revised Sec. 725.701(e) to conform 
the regulation's rebuttal provisions to the decisions issued by the 
Fourth Circuit since Doris Coal. Accordingly, the Department has 
replaced the phrase ``was not for a covered pulmonary disorder as 
defined in Sec. 718.201 of this subchapter,'' with ``was for a 
pulmonary disorder apart from those previously associated with the 
miner's disability[.]'' The foregoing explanation also responds to one 
comment which faulted the Department for omitting any discussion of 
Salyers in the second notice of proposed rulemaking.
    (c) In response to its second notice of rulemaking, the Department 
received numerous comments opposing the medical benefits program in 
general or the Sec. 725.701(e) presumption in particular because, in 
the commenters' view, coal mine operators would be forced to pay for 
medical treatment unrelated to pneumoconiosis, especially respiratory 
disorders caused by cigarette smoking. These same objections were made 
to the version of Sec. 725.701(e) contained in the Department's initial 
notice of proposed rulemaking. 64 FR 55003 (Oct. 8, 1999). In response, 
the Department noted that operators may submit ``appropriate medical 
evidence'' showing the particular medical service or supply relates to 
the miner's smoking-related disease and not his pneumoconiosis. 64 FR 
55004 (Oct. 8, 1999). An operator may still make such a showing, 
although the Department has revised the rebuttal provisions of 
Sec. 725.701(e) in the final rule. The nexus between the miner's 
pneumoconiosis and the disorder under treatment is only presumed, and 
therefore subject to being disproved. The operator may produce evidence 
showing the treatment was for a particular pulmonary disorder apart 
from those conditions previously associated with the miner's 
disability, or exceeds the effective level of treatment for a covered 
disorder, or did not involve a pulmonary disorder at all. As with the 
Doris Coal presumption, invocation shifts only the burden of 
production, not persuasion. The operator must confront the presumption 
by submitting evidence which, if credited, establishes one of the means 
of rebuttal. Section 725.701(f), however, does preclude one defense: 
the operator cannot escape liability by trying to prove the medical 
service cannot pertain to disabling pneumoconiosis because the miner 
was disabled solely from smoking or some other non-occupational cause. 
Once the miner establishes (s)he is entitled to disability benefits, no 
element of entitlement can be relitigated or otherwise questioned via 
the medical benefits litigation. Consequently, the operator and its 
physician must accept that the miner has a totally disabling 
respiratory or pulmonary impairment, and that pneumoconiosis, as 
defined in Sec. 718.201, is a substantially contributing cause of that 
impairment. See Ling, 176 F.3d at 232 and n.13, citing Doris Coal, 938 
F.2d at 497 (operator cannot rebut presumption of benefits coverage by 
showing miner's pneumoconiosis did not at least aggravate pulmonary 
condition because ``[t]he time for that argument had passed with the 
prior adjudication of disability'').
    (d) Two comments state without explanation that the medical 
benefits program implemented by these regulations will force the coal 
industry to ``subsidize'' other private health plans and insurance as 
well as the Medicare program. The Department interprets this contention 
to mean that the industry and its insurers will be forced to 
financially assist other health care programs by paying for treatment 
expenses which are not actually related to the miner's pneumoconiosis, 
and should be paid by the other programs. The Department disagrees. 
Congress created the black lung medical benefits program as the primary 
payor for the treatment of miners afflicted with disabling 
pneumoconiosis. The program covers the costs of treatment, services and 
supplies only for that purpose. Consequently, the operator may avoid 
liability for any expense which is not for the treatment of totally 
disabling pneumoconiosis, and which therefore should be paid by some 
other health care program.
    (e) One comment contends the Department misinterpreted Seals and 
Ling in its analysis of those cases. 64 FR 55003-04 (Oct. 8, 1999). The 
commenter also states the Department cannot ``overrule'' Seals by 
regulation because that decision is based on an interpretation of the 
APA. The Department rejects both arguments. The commenter does not 
identify any specific mischaracterization or other error in the 
Department's interpretation of either decision. The Department believes 
its analysis is correct, and declines to change its position on the 
meaning of those decisions except to the

[[Page 80023]]

extent reflected in changes to the rebuttal provisions contained in 
Sec. 725.701(e). As for departing from the APA analysis of the majority 
in Seals, the comment is simply incorrect. The specific majority 
holding of Seals reversed the decisions of the administrative law judge 
and Benefits Review Board because of an incorrect application of Fourth 
Circuit law to a case arising in the Sixth Circuit. Judge Boggs 
(concurring), however, agreed with Judge Moore (dissenting) ``that it 
would not necessarily contravene Greenwich Collieries for the Secretary 
to adopt a regulation shifting the burden of production in the manner 
of Doris Coal.'' 147 F.3d at 517. Consequently, the majority holding 
does not rest on any APA considerations, and a majority of the panel, 
albeit in dicta, acknowledges the Department's authority under 
Greenwich Collieries (and, by extension, the APA) to promulgate 
regulatory presumptions which reallocate burdens among parties. The 
Department therefore rejects this comment.
    (f) One comment contends the presumption of coverage for pulmonary 
treatment is not supported by any scientific or medical information. 
The commenter relies largely on a report prepared by a physician for 
purposes of the rulemaking proceedings; the physician addresses several 
of the regulations from a medical standpoint and reviews the medical 
literature compiled during the rulemaking. With respect to 
Sec. 725.701(e), the physician challenges the reasonableness of 
presuming a connection between the miner's pneumoconiosis and any 
pulmonary disorder for which (s)he seeks treatment. The physician notes 
that many pulmonary disorders bear no relationship to pneumoconiosis, 
and their treatment is unaffected by the presence of pneumoconiosis. 
The physician further contends that each patient encounter must be 
amply documented by evidence that the treatment is necessary for the 
miner's pneumoconiosis, and should include medical testing, physical 
examinations, etc. The Department acknowledges the concerns expressed 
by the comment and accompanying medical views, but does not consider 
any change in the regulation to be necessary.
    As an initial matter, the fact that a physician might view the 
presumption as medically unwarranted does not necessarily undermine its 
validity as a legal, or evidentiary, presumption. The Department 
understands the physician's objection to mean a physician would not 
rely on such a presumption as a basis for treating a patient. Most of 
the statutory and regulatory presumptions in the black lung benefits 
program, however, draw factual inferences from a combination of medical 
and non-medical facts for purposes other than patient care. See 30 
U.S.C. Sec. 921(c)(1) (miner's pneumoconiosis presumed caused by coal 
mine employment if miner worked ten years); (c)(3) (miner who has 
complicated pneumoconiosis irrebuttably presumed totally disabled); 20 
CFR. Sec. 727.203(a)(1)-(4) (proof of one of enumerated medical facts 
about miner's pulmonary condition invokes presumption of all remaining 
elements of entitlement); 20 CFR. Sec. 725.309 (material change in 
miner's medical condition presumed if miner proves one element of 
entitlement in duplicate claim previously not proven). ``Like all rules 
of evidence that permit the inference of an ultimate fact from a 
predicate one, black lung benefits presumptions rest on a judgment that 
the relationship between the ultimate and the predicate facts has a 
basis in the logic of common understanding.'' Mullins Coal Co. v. 
Director, OWCP, 484 U.S. 135, 157 n. 30 (1987), reh'g den. 484 U.S. 
1047 (1988). The Department explained the logical basis and 
administrative purpose for the presumption in the notice of reproposed 
rulemaking. See generally 64 FR 55004 (Oct. 8, 1999). A miner who is 
entitled to disability benefits has proven three basic medical facts: 
(s)he has pneumoconiosis as that disease is defined by Sec. 718.201; 
(s)he has a totally disabling respiratory or pulmonary impairment; and 
the pneumoconiosis significantly contributes to that respiratory or 
pulmonary impairment. Consequently, the miner has established a 
connection between the compensable disease and the disabling lung 
condition. From those proven facts, Sec. 725.701(e) draws a rational 
inference that the need for treating the miner's compromised 
respiratory condition at any given time is necessitated, directly or 
indirectly, by the presence of pneumoconiosis. This inference is 
rebuttable, and the operator may submit evidence showing the treatment 
is for a particular pulmonary disorder apart from those conditions 
previously associated with the miner's disability, or exceeds the 
effective level of treatment for a covered disorder, or did not involve 
a pulmonary disorder at all. The Fourth Circuit endorsed the same 
general line of reasoning in Ling when it upheld the validity of the 
Doris Coal presumption. 176 F.3d at 233-34. The Department therefore 
disagrees with the commenter that Sec. 725.701(e) does not have a 
supportable basis which satisfies the legal test for a rational 
presumption.
    The physician-commenter also urges the Department to require 
rigorous medical documentation for each medical treatment service, 
including contemporaneous objective testing, examinations, etc., to 
impose quality controls on the treatment program. The Department 
indirectly addressed this concern in the notice of reproposed 
rulemaking. 64 FR 55004 (Oct. 8, 1999). The Department noted that it 
receives 12,000 to 15,000 bills weekly for treatment services, most of 
which involve relatively minor amounts in the $25.00 to $75.00 range. 
The Department cited cost effectiveness and promptness as practical 
reasons for using a presumption of coverage to expedite the 
administrative process. The presumption supplants the need for more 
elaborate medical proof that the particular service or expense involves 
the miner's pneumoconiosis, at least until the operator challenges the 
expense with credible medical evidence. The Fourth Circuit reached the 
same conclusion in Ling:

    Hence, rather than compel the miner to exhaustively document his 
claim for medical benefits, i.e., requiring him to again laboriously 
obtain all the evidence that he can that his shortness of breath, 
wheezing, and coughing are still the result of his pneumoconiosis, 
we have fashioned the Doris Coal presumption as a shorthand method 
of proving the same thing. The proof needed is a medical bill for 
the treatment of a pulmonary or respiratory disorder and/or 
associated symptoms.

176 F.3d at 233 (emphasis in original). Section 725.701(e) does not 
eliminate the need for medical documentation for treatment and 
services. The presumption merely provides a short-hand means of 
identifying expenses which are likely to be legitimate unless the 
liable party opposes payment of particular expenses.
    (g) One comment states generally that the medical benefits program, 
as reproposed, will promote fraud. Another comment contends that 
reliance on the miner's treating physician under Sec. 725.701(f) will 
promote fraudulent payments because the doctor has a financial 
incentive to attribute the miner's pulmonary problems to 
pneumoconiosis. The commenter also alludes to a long-standing pattern 
of abuse of the black lung program by treating physicians who mix 
compensable and non-compensable services when billing the Trust Fund 
and operators as documented in Doris Coal Co. v. Director, OWCP, 938 
F.2d 492, 497-98 (4th Cir. 1991). Finally, the comment

[[Page 80024]]

objects to the basic concept of special deference to a treating 
physician's opinion as proposed in Sec. 718.104(d). With respect to 
allegations of fraud, the professional integrity of any physician 
should be accepted until particular acts of malfeasance are established 
in the appropriate forum. The comment's allegations that particular 
physicians are motivated by financial incentives can as easily be 
directed toward any party-affiliated physician, or group of such 
physicians, who may benefit by tailoring conclusions to fit the 
interests of the party paying for the medical opinion. As for the 
commenter's specific suggestion that there is no cost containment in 
the program and that health care providers routinely seek payment from 
the program for unrelated charges, the Department accepts the holding 
in Doris Coal. In this decision, the Court refused to sanction the 
practice of submitting an unitemized bill for multiple services because 
such a practice could impose liability on the insurer for services 
unrelated to the treatment of the miner's pneumoconiosis and encourage 
fraud. 938 F.2d at 497-98. The Court, however, only alluded to the 
potential for fraud if unitemized billing were permitted. It did not 
address the practice as an historical reality or beyond the facts 
involving the one treating physician involved in the case. The 
Department therefore rejects the position that miners' treating 
physicians should be viewed with special suspicion as a group because 
of a motive for fraudulent diagnoses and/or treatment. The Department 
responds to the objections concerning special deference to the treating 
physician's opinion, as proposed in Sec. 718.104(d), in the preamble to 
that subsection.
    (h) One comment urges the Department to join the lawsuit filed by 
the Department of Justice to recover money from the tobacco industry 
for costs incurred by the black lung program in treating sick cigarette 
smokers. The comment is not directed to any regulatory proposal, and no 
response is therefore warranted.
    (i) The Department received several comments which approve of 
Sec. 725.701.
    (j) No other comments were received concerning this section, and no 
other changes have been made in it.

20 CFR 725.706

    The Department proposed changing the no-approval dollar amount in 
Sec. 725.706(b) from $100.00 to $300.00 in the initial notice of 
proposed rulemaking. 62 FR 3424 (Jan. 22, 1997). No comments were 
received concerning this section, and no other changes have been made 
in it.

20 CFR Part 726--Black Lung Benefits; Requirements for Coal Mine 
Operators' Insurance

    The Department has received one comment relevant to Part 726 in its 
entirety. The Department proposed revising only specific regulations in 
Part 726, and invited comment only on those regulations, see 62 FR 3340 
(Jan. 22, 1997); 64 FR 54970 (Oct. 8, 1999). The Department either made 
only technical revisions to the remaining regulations in Part 726, or 
made no changes, see 62 FR 3340-41 (Jan. 22, 1997) (lists of technical 
revisions and unchanged regulations); 64 FR 54970-71 (Oct. 8, 1999) 
(same). Therefore, no changes are being made to Part 726 in its 
entirety.

Subpart A

 20 CFR 726.2

    In its initial notice of proposed rulemaking, the Department 
proposed adding subsection (e) to this regulation in order to recognize 
the addition of subpart D, implementing the civil money penalty 
provision of 30 U.S.C. 933, to part 726. 62 FR 3369 (Jan. 22, 1997). 
The Department did not discuss the regulation in its second notice of 
proposed rulemaking. See list of Changes in the Department's Second 
Proposal, 64 FR 54971 (Oct. 8, 1999). The Department has capitalized 
the word ``subpart'' in subsection (b) to be consistent with the use of 
that word in subparts (c), (d), and (e). In subsection (d), the 
Department has replaced the phrase ``coal operator'' with the phrase 
``coal mine operator'' to be consistent with subsections (c) and (e). 
No comments were received concerning this section, and no other changes 
have been made in it.

20 CFR 726.3

    This regulation was not opened for comment in the Department's 
first notice of proposed rulemaking. See list of Unchanged Regulations, 
62 FR 3341 (Jan. 22, 1997). The Department proposed a revision to 
subsection (b) in its second notice of proposed rulemaking at the 
request of the Office of Federal Register to clarify the treatment of 
cases in which the regulations in Part 726 appear to conflict with the 
regulations incorporated from Part 725. 64 FR 55005 (Oct. 8, 1999). In 
subsection (a), the Department has replaced the phrase ``coal 
operator'' with the phrase ``coal mine operator'' to be consistent with 
subsection (b). No comments were received concerning this section, and 
no other changes have been made in it.

20 CFR 726.8

    (a) The Department proposed adding Sec. 726.8 in its first notice 
of proposed rulemaking in order to define certain terms including 
``employ'' and ``employment.'' The definition of ``employ'' and 
``employment'' proposed in subsection (d), was identical to that in 
proposed Sec. 725.493(a)(1). 62 FR 3369 (Jan. 22, 1997). In its second 
notice of proposed rulemaking, the Department incorporated into 
subsection (d) a change to the definition of the term ``employment'' 
that it had also made to Sec. 725.493. 64 FR 55005 (Oct. 8, 1999). The 
Department also responded to comments concerning the retroactive effect 
of the proposal and the scope of the definitions. The Department stated 
its belief that the proposal was neither improperly retroactive nor an 
instrument for creating additional insurer liability. Neither did the 
proposal intrude on insurance functions reserved to the states. The 
Department noted the Court of Appeals for the Seventh Circuit's holding 
that the Black Lung Benefits Act ``specifically relates to the business 
of insurance and therefore does not implicate the McCarran-Ferguson 
Act,'' 15 U.S.C. 1012, which confers primacy on state law for the 
regulation of the insurance industry, unless a conflicting federal 
statute specifically provides otherwise. Lovilia Coal Co. v. Williams, 
143 F.3d 317, 325 (7th Cir. 1998). The Department also justified the 
scope of the proposed definition as well within the rulemaking 
authority granted the Department by Congress.
    (b) One comment objects to the Department's definitions of the 
terms ``employ'' and ``employment.'' The commenter argues that the 
Department is improperly interfering with existing employment 
relationships by adopting regulations that differ from those provided 
by state employment and insurance laws. The Department provided a 
detailed explanation of both its authority and its reasoning for 
proposing this regulation in its October 8, 1999 proposal. See 64 Fed. 
Reg. 55005 (Oct. 8, 1999). The Department does not agree that the 
regulations it issues to implement the Black Lung Benefits Act 
interfere with employment relationships recognized by the various 
states. The Black Lung Benefits Act requires that a coal mine 
operator's liability for a miner's black lung benefits be based on that 
operator's employment of the miner. See 30 U.S.C. 932(a) (making the 
operator of a coal mine liable for benefits based on ``death or total 
disability due to pneumoconiosis arising out of employment in such

[[Page 80025]]

mine''). Congress did not specifically define the term ``employment,'' 
however. In such cases, an administrative agency is authorized to 
promulgate regulations to fill the gaps Congress left in the statute. 
Morton v. Ruiz, 415 U.S. 199, 231 (1974). In addition, the Department 
is authorized to promulgate regulations to ensure sufficient insurance 
coverage for all of the liabilities borne by operators under the Act. 
30 U.S.C. 933(b)(3) (permitting the Secretary to promulgate regulations 
governing the content of insurance policies issued to cover liability 
under the Black Lung Benefits Act). The Department's definition of the 
terms ``employ'' and ``employment'' is intended to meet its 
responsibility to properly administer the Black Lung Benefits Act. The 
Department does not believe that its definitions will in any way affect 
the application of state law to the relationships between coal mine 
operators and the miners they employ.
    (c) The same commenter also argues that the Department's regulation 
will eliminate the ability of a coal mine operator to enter into an 
employee leasing arrangement with an employee leasing company. The 
commenter observes that the current model employee leasing rule of the 
National Association of Insurance Commissioners requires the employee 
leasing company to provide workers' compensation coverage, including 
federal black lung benefits coverage, for its employees. According to 
the commenter, the Department's proposal, which would hold lessors 
responsible for the insurance of their leased employees, will make 
employee leasing a less viable option.
    The Department does not believe that its proposal will interfere 
with an employer's economic decision to use leased employees in its 
coal mine operations. Moreover, the Department does not intend to force 
coal mine operators to secure the payment of benefits for leased 
employees when the leasing company has already obtained the necessary 
insurance. In such cases, the operator will be considered to have met 
the security requirements of the Act with respect to those employees. 
Such a practice is sound from the point of view of both the traditional 
coal mine operator and the employee leasing company. Although the 
commenter suggests that leasing companies are not mine operators, that 
is not entirely clear under the Black Lung Benefits Act. Section 423(a) 
of the Act, 30 U.S.C. Sec. 933(a), requires ``each operator of a coal 
mine'' to secure the payment of benefits by qualifying as a self-
insurer or purchasing insurance. The term ``operator,'' as used in 
section 423(a), includes ``independent contractors who perform services 
or construction at such mines.'' 30 U.S.C. Sec. 802(d). This definition 
of ``operator'' thus includes companies that provide employees under a 
leasing arrangement. The Department therefore does not agree that 
employee leasing companies should not be considered ``operators'' under 
the Black Lung Benefits Act. The Department's ability to monitor the 
use of temporary contractual arrangements by the coal mining industry, 
however, is limited. In addition, the commenter's different 
interpretation of the term ``operator'' suggests that any effort to 
impose civil money penalties on a leasing company under Part 726, or to 
assign liability to such an entity under Part 725, would be vigorously 
contested. Accordingly, the Department has defined the terms ``employ'' 
and ``employment'' in a manner which maximizes its ability to ensure 
the insurance coverage of leased employees.
    By contrast, the application of both Parts 725 and 726 to 
traditional coal mine operators is quite clear. The Act authorizes the 
Department to ensure that all of the individuals performing mining work 
under that operator's direction are covered by appropriate security. In 
addition, those coal mine operators who use leased employees are in the 
best position to ensure that those employees are covered by the 
necessary insurance. The Department does not intend to require that the 
traditional coal mine operator purchase insurance when the leasing 
company has done so, but it does intend the regulations to provide an 
incentive for the coal mine operator to deal only with those leasing 
companies that have purchased insurance meeting federal standards for 
black lung benefits coverage. See 20 CFR 726.203 (1999). Contrary to 
the commenter's suggestion, the rule thus does not make insurers and 
state funds the enforcement officers of the Department. Rather, the 
traditional coal mine operator is simply on notice that it may be held 
liable for the benefits of leased employees if the leasing company 
fails to procure the necessary insurance coverage, or for any civil 
money penalties arising as a result of that failure.
    (d) Finally, the same comment objects that the Department's 
regulation is impermissibly retroactive. The Department has discussed 
the retroactive effect of its regulations in considerable detail in 
both its first and second notices of proposed rulemaking. See 
discussions of Sec. 725.2 at 62 Fed. Reg. 3347-48 (Jan. 22, 1997) and 
64 Fed. Reg. 54981-82 (Oct. 8, 1999). In those discussions, the 
Department recognized that it lacks the authority to make substantive 
changes to the regulations in a manner that applies retroactively. For 
example, if the previous civil money penalty regulation, 20 CFR 725.495 
(1999), did not permit the assessment of penalties against an operator 
for its failure to secure the benefits payable to its leased employees, 
the Department may not assess a penalty against that operator under the 
revised regulations for any period prior to the effective date of these 
regulations. Although the Department believes that the previous 
regulation is broad enough to permit the assessment of civil money 
penalties in these cases, it also recognizes that the issue must be 
resolved on a case-by-case basis in the context of litigating penalty 
assessments.
    It is also important to note that the revised regulation does not 
affect the liability of insurers for claims filed prior to the 
effective date of the regulations. Under the insurance endorsement set 
forth at Sec. 726.203, an insurer is already liable for all of the 
miners employed by its insured. See Lovilia Coal Co. v. Williams, 143 
F.3d 317, 322 (7th Cir. 1998). An employer's liability, in turn, is 
determined by the regulations set forth at 20 CFR Secs. 725.491-.495. 
The Department has stated explicitly that the revised version of those 
regulations will not be applied retroactively. See Sec. 725.2. 
Accordingly, if the prior regulations did not permit the imposition of 
liability against a coal mine operator for benefits owed to a miner 
whose services were obtained from a leasing company, they will not 
permit imposition of liability against that operator's insurer. The 
Department thus does not agree that the revised regulation is 
impermissively retroactive.
    (e) No other comments were received concerning this section, and no 
changes have been made in it.

Subpart B

20 CFR 726.101

    In its initial notice of proposed rulemaking, the Department 
proposed revising this regulation to delete the formula used in 1974 to 
establish the amount and types of security required for an operator to 
be authorized to self-insure. The proposal also removed the reference 
in subsection (a) to indemnity bonds and negotiable securities as the 
only forms of acceptable security. 62 FR 3369 (Jan. 22, 1997). The 
Department did not discuss the regulation in its second notice of 
proposed rulemaking. See list of Changes in the Department's Second 
Proposal, 64 FR 54971 (Oct. 8, 1999). The Department has revised

[[Page 80026]]

subsections (b)(1), (2), and (3), and subsection (c) in order to 
clarify the meaning of the regulation. No comments were received 
concerning this section, and no other changes have been made in it.

20 CFR 726.104

    In its initial notice of proposed rulemaking, the Department 
proposed revising subsection (b) to recognize two additional forms of 
security available to an authorized self-insurer: Letters of credit and 
tax-exempt trusts. 62 FR 3369 (Jan. 22, 1997). The Department did not 
discuss the regulation in its second notice of proposed rulemaking. See 
list of Changes in the Department's Second Proposal, 64 FR 54971 (Oct. 
8, 1999). The Department has revised subsections (a) and (d) to clarify 
the meaning of those provisions. The Department received one comment 
concerning this regulation; that comment is addressed under 
Sec. 726.106. No other comments were received concerning this section, 
and no other changes have been made in it.

20 CFR 726.105

    In its initial notice of proposed rulemaking, the Department 
proposed deleting the reference to the formula contained in 20 CFR 
725.101(1999), in favor of a non-exclusive list of factors to be 
considered by the Department in determining the appropriate amount of 
security required to be provided by a self-insured operator. 62 FR 3369 
(Jan. 22, 1997). The Department did not discuss the regulation in its 
second notice of proposed rulemaking. See list of Changes in the 
Department's Second Proposal, 64 FR 54971 (Oct. 8, 1999). The 
Department has revised the first and third sentences of the regulation 
in order to clarify their meaning. No comments were received concerning 
this section, and no other changes have been made in it.

20 CFR 726.106

    (a) In its initial notice of proposed rulemaking, the Department 
proposed deleting an incorrect reference to specific sections in Title 
31 of the Code of Federal Regulations and replacing the reference with 
a citation to the appropriate regulatory part governing deposits with 
the United States. 62 FR 3369 (Jan. 22, 1997). The Department did not 
discuss the regulation in its second notice of proposed rulemaking. See 
list of Changes in the Department's Second Proposal, 64 FR 54971 (Oct. 
8, 1999).
    (b) One comment urges the Department to include language in this 
regulation confirming the sole liability of a surety company which 
writes the most recent indemnity bond for a responsible operator, and 
the exoneration of all previous sureties. No change in the regulation 
is necessary. In United States of America v. Insurance Co. of North 
America, 83 F.3d 1507 (D.C. Cir. 1996), the Department argued that a 
surety assumes liability for all of an operator's existing obligations 
when the bond is written and continuing until the termination of the 
bond. The Court rejected this argument. It held that a surety is liable 
only for those obligations which actually accrue to the responsible 
operator during the lifetime of the bond, and not for all outstanding 
liabilities of the insured entity. 83 F.3d at 1511. The Court also 
rejected the notion that each successive bond exonerates any previous 
surety to which liability has attached. 83 F.3d at 1512-13. The Court 
based these holdings on its interpretation of the bond language itself. 
Consequently, the commenter's recommendation can be accomplished only 
by further specifying in the bond's language, as prescribed by the 
Department, the scope of the bond's coverage and its terms of release. 
The Department has yet to determine whether revision of the bond form 
is appropriate. In any event, the commenter's suggestion does not 
require changing the language of the regulation.
    (c) The Department has revised the first sentences of subsections 
(b) and (c) to clarify the meaning of these provisions. No other 
comments were received concerning this section, and no other changes 
have been made in it.

20 CFR 726.109

    In its initial notice of proposed rulemaking, the Department 
proposed deleting specific references to indemnity bonds and negotiable 
securities in favor of more general references to the security required 
to be provided by a self-insured operator. 62 FR 3369 (Jan. 22, 1997). 
The Department did not discuss the regulation in its second notice of 
proposed rulemaking. See list of Changes in the Department's Second 
Proposal, 64 FR 54971 (Oct. 8, 1999). The Department has revised the 
second and third sentences of the regulation in order to clarify their 
meaning. No comments were received concerning this section, and no 
other changes have been made in it.

20 CFR 726.110

    In its initial notice of proposed rulemaking, the Department 
proposed deleting references to indemnity bonds and negotiable 
securities in subsections (a)(3) and (b) in favor of more general 
references to the security required to be provided by a self-insured 
operator. 62 FR 3369 (Jan. 22, 1997). The Department did not discuss 
the regulation in its second notice of proposed rulemaking. See list of 
Changes in the Department's Second Proposal, 64 FR 54971 (Oct. 8, 
1999). The Department has revised the regulation to clarify its 
meaning. No comments were received concerning this section, and no 
other changes have been made in it.

20 CFR 726.111

    In its initial notice of proposed rulemaking, the Department 
proposed deleting a reference to indemnity bonds and negotiable 
securities in favor of a more general reference to the security 
required to be provided by a self-insured operator. 62 FR 3369 (Jan. 
22, 1997). The Department did not discuss the regulation in its second 
notice of proposed rulemaking. See list of Changes in the Department's 
Second Proposal, 64 FR 54971 (Oct. 8, 1999). The Department has revised 
the regulation to clarify its meaning. No comments were received 
concerning this section, and no other changes have been made in it.

20 CFR 726.114

    In its initial notice of proposed rulemaking, the Department 
proposed adding subsection (c) to codify the Department's position that 
self-insured coal mine operators who cease mining coal nevertheless 
have a continuing responsibility to maintain adequate security to cover 
their potential liability under the Black Lung Benefits Act. The 
Department also replaced a specific reference to negotiable securities 
and indemnity bonds in subsection (b) with a more general reference to 
the security required to be provided by a self-insured operator. 62 FR 
3369 (Jan. 22, 1997). The Department did not discuss the regulation in 
its second notice of proposed rulemaking. See list of Changes in the 
Department's Second Proposal, 64 FR 54971 (Oct. 8, 1999). In the third 
sentence of subsection (a), the Department has replaced the word 
``have'' with the word ``has'' to make the sentence grammatically 
correct. The Department has also revised subsections (a) and (c) to 
clarify their meaning. No comments were received concerning this 
section, and no other changes have been made in it.

Subpart C

20 CFR 726.203

    (a) The Department made technical revisions to Sec. 726.203 in its 
first notice of proposed rulemaking, but did not open the regulation 
for comment. See

[[Page 80027]]

list of Technical revisions, 62 FR 3340-41 (Jan. 22, 1997). At the 
Department's July 22, 1997 hearing in Washington, D.C., however, the 
Department heard testimony indicating that, since 1984, the insurance 
industry had used an endorsement for black lung insurance that differed 
from the endorsement set forth in Sec. 726.203. Transcript, Hearing on 
Proposed Changes to the Black Lung Program Regulations, July 22, 1997, 
p. 127 (testimony of Robert Dorsey). In its written comments, the 
industry stated that the Department had approved use of the new 
endorsement. Because the Department's records contained no document 
authorizing use of a different endorsement, the Department opened the 
regulation for comment, and invited the industry to produce proof that 
the Department had approved the change. In addition, the Department 
invited comment on the endorsement language that the insurance industry 
had supplied. 64 FR 55005-06 (Oct. 8, 1999).
    (b) In response to the second notice of proposed rulemaking, the 
insurance industry submitted two affidavits. Rulemaking Record, Exhibit 
89-37, Appendix G. One, from a former vice president and general 
counsel of the National Council on Compensation Insurance (NCCI), 
states that ``NCCI was informed by officials of the Office of Workers' 
Compensation Programs, in writing, that the agency had no objection to 
the changes.'' The affidavit also states that the changes were put into 
use. The other affidavit, from NCCI's current general counsel, states 
that NCCI's schedule for the retention of records requires the council 
to maintain correspondence for 10 years, and that correspondence more 
than 10 years old is destroyed in accordance with established policy. 
Accordingly, the affiant stated, NCCI was unable to produce a copy of 
the Department's ``acknowledgment'' of the revised insurance 
endorsement.
    The Department has conducted a second thorough search of its files, 
including files in the Office of Workers' Compensation Programs, the 
Employment Standards Administration, and the Office of the Solicitor. 
Although the Department's files contain correspondence with NCCI dating 
back to 1984, the Department's search failed to produce any 
correspondence in which the Department approved NCCI's revised 
insurance endorsement. Moreover, the Department does not believe that 
it would have approved the proposed revision. The revision differs in 
two material respects from the endorsement set forth in Sec. 726.203. 
First, the revision limits an insurer's liability for claims that are 
based on employment that ended before an operator first obtained 
insurance to secure its liability under the Act. Second, the revision 
limits an insurer's liability for claims that are approved as a result 
of amendments to the Black Lung Benefits Act.
    The current black lung insurance endorsement obligates an insurer 
to provide coverage to an operator in two different types of claims. 
First, the insurer is liable when the miner's last exposure to coal 
mine dust in the employment of the insured ``occurs during the policy 
period.'' Thus, if a miner is last employed by XYZ Coal Company on 
March 1, 1990, and XYZ Coal Company is the coal mine operator 
responsible for the payment of that miner's benefits, the insurer whose 
policy covered XYZ on March 1, 1990 will be liable for the payment of 
those benefits. In addition, however, the endorsement covers a second 
type of claim. Prior to the Black Lung Benefits Reform Act of 1977, the 
Black Lung Benefits Act obligated employers to pay benefits to former 
employees who were totally disabled due to pneumoconiosis arising out 
of coal mine employment, no matter when their employment ended. See 
Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15-16 (1976) (observing 
that the Act has ``some retrospective effect''). Because operators were 
not required to purchase insurance until January 1, 1974, however, the 
endorsement contained a second clause providing coverage if the miner's 
last exposure in the employment of the insured operator ``occurred 
prior to (effective date) and claim based on such disease is first 
filed against the insured during the policy period.'' Thus, if a miner 
last worked for XYZ Coal Company in 1972, but did not file a claim 
until July 1, 1978, the insurer whose policy covered XYZ on the 1978 
filing date would be liable for the miner's benefits.
    The regulations define the term ``effective date'' in the 
endorsement as the effective date of the operator's first insurance 
policy providing coverage for the operator's federal black lung 
benefits liability. 20 CFR 726.203(b) (1999). Thus, if the operator did 
not obtain its first policy until January 1, 1974, that policy would 
cover any claims based on employment that ended prior to that date. The 
revised endorsement offered by the insurance industry replaces the term 
``effective date'' with the date ``July 1, 1973.'' Although a number of 
operators did purchase insurance before January 1, 1974, none did so 
until after July 1, 1973. Accordingly, the industry's revised 
endorsement would potentially leave coal mine operators uninsured for 
certain claims. For example, if an operator did not purchase insurance 
until November 1, 1973, the revised endorsement would cover the miner's 
last exposure in the employment of the insured operator only if it 
``occurred prior to July 1, 1973,'' and therefore would not cover any 
claims based on employment that ended between July 1, 1973 and November 
1, 1973. If the coal company is still in business, the claim would be 
the responsibility of that company. If the coal company is no longer in 
business, the claim would become the responsibility of the Black Lung 
Disability Trust Fund. Either result is unacceptable. Although the 
Department recognizes that this change would not affect a significant 
number of claims, it could materially alter the liability of the 
insurance industry in some cases. Thus, the Department does not believe 
that the revision is appropriate.
    The second material change in the endorsement is potentially more 
serious. The current endorsement obligates an insurer for liability 
that arises under the Black Lung Benefits Act and ``any laws amendatory 
thereto, or supplementary thereto, which may be or become effective 
while this policy is in force.'' Following the Black Lung Benefits 
Reform Act of 1977, several Virginia coal mine operators sued two 
insurers in federal district court to obtain a declaratory judgment 
regarding the coverage of claims that were subject to approval under 
the new criteria. The court agreed with the operators and held that, 
under the Department's endorsement, a policy was ``in force'' as long 
as claims could be filed against it. National Independent Coal 
Operators Association, Inc. v. Old Republic Insurance Co., 544 F. Supp. 
520, 527-8 (W.D.Va. 1982). The court accordingly rejected the argument 
of the insurers that the term ``in force'' was synonymous with the term 
``policy period,'' and that an insurer was liable only to the extent of 
amendatory or supplementary laws enacted during the one-year period 
covered by each policy. See 20 CFR 726.206 (a policy shall be issued 
for the term of one year from the date on which it becomes effective). 
The court stated that if the insurers had intended that meaning ``it 
should have been made clear to the plaintiffs [operators] by either 
using `policy period' where the words `in force' appear, or by defining 
`in force' somewhere in the contract.'' National Independent Coal 
Operators Association at 528.
    The court's decision was issued in 1982, and the insurance industry 
quickly accepted the court's invitation.

[[Page 80028]]

The revised endorsement, apparently submitted to the Department in 
1983, replaces the language in the current endorsement that obligates 
the insurer to cover liability resulting from amendments while the 
policy is ``in force'' with a phrase obligating the insurer to cover 
liability resulting from ``any amendment to the law that is in effect 
during the policy period.'' This altered language would permit the 
insurance industry to accomplish what it failed to win in the 1982 
litigation, i.e., an exemption from liability resulting from any future 
amendments. Like the other proposed change, this revision would 
increase the exposure of coal mine operators and the Black Lung 
Disability Trust Fund, and is therefore unacceptable to the Department.
    Because the revised black lung endorsement offered by the insurance 
industry materially alters the obligations and coverage provided by the 
insurance industry under the Black Lung Benefits Act, the Department 
must reject that endorsement. Accordingly, no changes are made to 
Sec. 726.203.
    (c) One comment urges the Department to add a sentence to 
subsection (d) of the regulation. The sentence, which the commenter 
states would conform the regulation to state regulatory regimes, would 
read as follows: ``The requirements of this section shall be construed 
to the extent possible, harmoniously with the workers' compensation 
rules and practices of the state is [sic] when the coverage is 
provided.'' Rulemaking Record, Exhibit 89-37, pp. 177-178. The 
commenter does not suggest any problem in the current regulations that 
this sentence is intended to correct, and the Department declines to 
add a sentence whose intent is unclear. To the extent that this 
sentence could be interpreted to require a result different from that 
reached in Lovilia Coal Co. v. Williams, 143 F.3d 317 (7th Cir. 1998), 
in which the Court of Appeals for the Seventh Circuit held that the 
federal black lung insurance endorsement was not subject to exclusions 
available under state law, the Department also does not believe that it 
would be appropriate.
    The commenter also renews a suggestion, made in response to the 
first notice of proposed rulemaking, that subsections (b) and (c)(2) of 
Sec. 726.203 should be eliminated. The commenter's first suggestion is 
premised on the Department's acceptance of the insurance industry's 
revised endorsement. As discussed above, the Department does not 
believe that the revised endorsement provides necessary coverage and 
therefore has refused to accept it. The commenter's second suggestion 
states that the addition of subsections (b)(1) and (b)(2) to 
Sec. 725.493 have created a conflict with Sec. 726.203(c)(2), and made 
the latter provision redundant. The Department disagrees because the 
two regulations serve wholly different purposes. Section 725.493(b)(1) 
governs the liability of prior and successor operators in two cases: 
(1) Where the miner was employed by the successor after the sale giving 
rise to successor liability; and (2) where the miner was never employed 
by the successor operator. Subsection (b)(2) governs the successor 
liability of companies whose relationship to the prior operator is as a 
parent company, as members of joint ventures, a partner, or a company 
that substantially owned or controlled the prior operator. Section 
726.203(c)(2) governs the interpretation of the insurance contract in a 
case where the insured company is liable as a successor operator. 
Because the sections 725.493 and 726.203 govern different subjects, the 
Department does not believe that the regulations are in conflict, or 
that subsection (c)(2) is redundant.
    (d) No other comments were received concerning this section, and no 
changes have been made in it.

20 CFR 726.208

    Although the Department received comments under this section, the 
regulation was not open for comment, see 62 Fed. Reg. 3341 (Jan. 22, 
1997); 64 Fed. Reg. 54970 (Oct. 8, 1999). The Department made only a 
technical change to the regulation in the second notice of proposed 
rulemaking. Accordingly, no changes are being made in this section.

20 CFR 726.211

    Although the Department received comments under this section, the 
regulation was not open for comment, see 62 Fed. Reg. 3341 (Jan. 22, 
1997); 64 Fed. Reg. 54970 (Oct. 8, 1999). The Department made only a 
technical change in the regulation. Accordingly, no changes are being 
made in this section.

Subpart D

20 CFR 726.300-726.320

    (a) In its first notice of proposed rulemaking, the Department 
proposed a complete revision of the procedural and substantive 
regulations governing the imposition of civil money penalties against 
operators that fail to secure the payment of benefits under the Black 
Lung Benefits Act, 30 U.S.C. 933(d)(1). 62 FR 3370 (Jan. 22, 1997). 
These revisions included a series of graduated penalties based on the 
number of the operator's employees, the length of time the operator's 
uninsured status continues following notification, and its constructive 
and actual notice of its obligation to secure. In addition, the 
Department proposed allowing the initial assessment of penalties by the 
Office of Workers' Compensation Programs to become final if neither the 
operator nor its officers filed a timely notice of contest. The 
proposal also subjected decisions of administrative law judges on 
penalty issues to discretionary review by the Secretary. The Department 
did not discuss these regulations in its second notice of proposed 
rulemaking. See list of Changes in the Department's Second Proposal, 64 
FR 54971 (Oct. 8, 1999).
    (b) The Department has made several minor changes to the 
regulations in Subpart D of Part 726. In Sec. 726.302(c)(3) and (4), 
the Department replaced a reference to subsection (b) with a reference 
to subsection (c)(2)(i) to correctly identify the applicable provision. 
In Sec. 726.308, the Department corrected the address of the Black Lung 
Benefits Division of the Office of the Solicitor and added a reference 
to Sec. 725.311, which lists federal holidays. In Sec. 726.313(f), the 
Department replaced the word ``will'' with the word ``shall'' to 
clarify the Department's intent. The Department has made minor 
revisions to Secs. 726.300, 726.301, 726.302, and 726.305 to clarify 
their meanings.
    (c) One comment is critical of the Department's failure to enforce 
its current requirement (20 CFR Sec. 725.495 (1999)) that coal mine 
operators either purchase commercial insurance or qualify as self-
insured entities. The commenter argues that if Sec. 725.495 was 
enforced to its fullest extent, the Department would not find it 
necessary to alter the methods used to identify responsible operators. 
The Department provided a detailed explanation of the purpose behind 
its proposed revision of the civil money penalty regulations in its 
initial notice of proposed rulemaking. 62 FR 3370-71 (Jan. 22, 1997). 
Subpart D of part 726 replaces Sec. 725.495 with a comprehensive scheme 
for the imposition of graduated penalties on those operators who fail 
to secure their liability for benefits. The previous regulation 
required only that an administrative law judge levy the maximum penalty 
possible in the absence of ``mitigating circumstances,'' and provided 
no guidance or criteria for determining an appropriate assessment. The 
revised regulations fill this void. The Department thus disagrees with 
the commenter's view that vigorous enforcement of penalties under 20 
CFR

[[Page 80029]]

Sec. 725.495 (1999) would eliminate the need to revisit the 
Department's method of identifying responsible operators. Consequently, 
the revised regulations represent a necessary exercise of the 
Department's rulemaking authority.
    (d) One comment generally characterizes this revision as adding 
``onerous'' penalties to the current program, but makes no specific 
criticism of them. The revised Subpart D of part 726 does not add any 
penalty not specifically authorized by 30 U.S.C. Sec. 933(d), and not 
contained in the previous regulations. Moreover, the graduated scale of 
penalties contained in the revision provides specific guidelines for 
computing penalties and may result in a lesser penalty being imposed 
than the former regulation would have required. This comment does not 
provide any other basis for a substantive response by the Department.
    (e) One comment observes that the prospect of civil money penalties 
may encourage an unsecured operator to pass on its liabilities to an 
insured successor whose carrier has not collected a premium reflecting 
the additional liability. To the extent that such a possibility exists 
in cases where the prior operator subsequently becomes unable to pay 
benefits to its former employees, it implicates business 
considerations, not legal questions. An insured operator should weigh 
the potential effect of acquiring an entity with unsecured benefits 
liability as a factor in the financial soundness of making the 
acquisition. The possibility of adverse economic effects on some future 
mergers or acquisitions, however, does not excuse the Department's 
obligation to enforce compliance with the Act's insurance requirements 
and to penalize a failure to comply.
    (f) Two comments approve of the proposed civil money penalties. No 
other comments were received concerning this subpart, and no other 
changes have been made in it.

20 CFR Part 727

    (a) In its first notice of proposed rulemaking, the Department 
proposed deleting Part 727 from title 20 of the Code of Federal 
Regulations. 62 FR 3371, 3435 (Jan. 22, 1997). The Department explained 
that the Part 727 regulations, which govern black lung benefits claims 
filed prior to April 1, 1980, are relevant only to a small minority of 
the claims currently pending. Because the parties to those claims are 
already familiar with the standards in Part 727, the Department 
proposed to discontinue the annual publication of that part. In lieu of 
continued publication, section 725.4(d), as revised, will refer 
individuals to the 1999 version of title 20 of the Code of Federal 
Regulations for a copy of the regulations. See discussion of 
Sec. 725.4, above; 62 FR 3348, 3386 (Jan. 22, 1997). The Department did 
not discuss Part 727 in its second notice of proposed rulemaking. See 
list of Changes in the Department's Second Proposal, 64 FR 54971 (Oct. 
8, 1999).
    (b) Three comments urge the Department not to discontinue its 
annual publication of Part 727 because the part governs claims still 
pending in various stages of adjudication. Although the Department 
recognizes that the Part 727 regulations are applicable to some pending 
claims, the Department does not believe that the existence of this 
relatively small number of cases justifies the continued publication of 
the part in the Code of Federal Regulations. The parties to these 
claims are already familiar with the regulations, and have received 
sufficient notice of the Department's intention to cease publication to 
allow them to retain their current copies of the Code. Accordingly, the 
Department has discontinued the annual publication of Part 727.
    (c) No other comments were received concerning this part, and no 
changes have been made in it.

Drafting Information

    This document was prepared under the direction and supervision of 
Bernard Anderson, Assistant Secretary of Labor for Employment 
Standards.
    The principal authors of this document are Rae Ellen James, Deputy 
Associate Solicitor; Richard Seid, Counsel for Administrative 
Litigation and Legal Advice; and Michael Denney, Counsel for 
Enforcement, Black Lung Benefits Division, Office of the Solicitor, 
U.S. Department of Labor. Personnel from the Division of Coal Mine 
Workers' Compensation, Office of Workers' Compensation Programs, 
Employment Standards Administration, U.S. Department of Labor, assisted 
in the preparation of the document.

Executive Order 12866

    The Office of Information and Regulatory Affairs of the Office of 
Management and Budget has determined that the Department's proposed 
rule represents a ``significant regulatory action'' under section 
3(f)(4) of Executive Order 12866 and has reviewed the rule.

Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995, this rule 
does not include any federal mandate that may result in increased 
expenditures by State, local and tribal governments, or increased 
expenditures by the private sector of more than $100 million in any one 
year.

Executive Order 13132

    The Department has reviewed this rule in accordance with Executive 
Order 13132 regarding federalism, and has determined that it does not 
have ``federalism implications.'' The rule does not have ``substantial 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''

Paperwork Reduction Act

    The changes establish no new record keeping requirements. Moreover, 
they reduce the volume of medical examination and consultants' reports 
which currently are created solely for litigation by limiting the 
amount of such medical evidence which will be admissible in black lung 
proceedings.

Regulatory Flexibility Act, as Amended

    The Regulatory Flexibility Act (``RFA'') was enacted by Congress in 
1980 ``to encourage administrative agencies to consider the potential 
impact of nascent federal regulations on small businesses.'' Associated 
Fisheries of Maine, Inc. v. Daley, 127 F.3d 104, 111 (1st Cir. 1997). 
The preamble to the RFA provides in part as follows:

    It is the purpose of this Act to establish as a principle of 
regulatory issuance that agencies shall endeavor, consistent with 
the objectives of the rule and of applicable statutes, to fit 
regulatory and informational requirements to the scale of the 
businesses, organizations, and governmental jurisdictions subject to 
regulation. To achieve this principle, agencies are required to 
solicit and consider flexible regulatory proposals and to explain 
the rationale for their actions to assure that such proposals are 
given serious consideration.

Pub. L. 96-354, 94 Stat. 1165 (1980).
    The RFA outlines in some detail the analysis required for 
compliance. Unless the agency certifies that the rule will not have ``a 
significant economic impact on a substantial number of small 
entities,'' 5 U.S.C. 605, each agency that publishes a notice of 
proposed rulemaking must prepare an ``initial regulatory flexibility 
analysis'' describing the impact of the proposed rule on small 
entities. 5 U.S.C. 603(a). That analysis, or a summary of the analysis, 
must be published in the Federal Register when the notice of proposed 
rulemaking is published, and a copy of the analysis must be sent to the 
Chief Counsel for Advocacy of the Small Business Administration.

[[Page 80030]]

    In its initial notice of proposed rulemaking, the Department 
certified that the proposed revisions would not have a significant 
effect on a substantial number of small businesses. 62 FR 3371-73 (Jan. 
22, 1997). The Department's certification was criticized by both the 
coal mining industry and the Small Business Administration's Office of 
Advocacy. Industry argued that the Department had grossly 
underestimated the effect of the proposed rule. The Office of Advocacy 
observed that the Department had not used the size standards 
established by the Small Business Administration, and that the 
Department did not provide a factual basis for its certification. In 
particular, the Office of Advocacy took issue with the Department's 
interpretation of the term ``significant economic impact.''
    In light of the comments the Department received in response to the 
first notice of proposed rulemaking, the Department included in its 
second notice of proposed rulemaking an initial regulatory flexibility 
analysis. That analysis included each of the components identified by 
the RFA: (1) A statement of the reasons for issuing the proposed rule; 
(2) a statement of the objectives of, and legal basis for, the proposed 
rule; (3) a description and, where feasible, an estimate of the number 
of small businesses to which the rule would apply; (4) a description of 
projected reporting, recordkeeping, and other compliance requirements 
of the proposed rule; and (5) an identification of any rules that would 
overlap, duplicate, or conflict with the proposed rule. 5 U.S.C. 
603(b). Finally, as is also required by the RFA, the analysis contained 
a description of alternatives to the rule. 5 U.S.C. 603(c). 64 FR 
55006-09 (Oct. 8, 1999).
    The Regulatory Flexibility Act ``plainly does not require economic 
analysis.'' Alenco Communications, Inc. v. FCC, 201 F.3d 608, 625 (5th 
Cir. 2000). Because of the serious concerns raised in the comments to 
its initial notice of proposed rulemaking, however, the Department 
undertook an extensive analysis of the effect of its proposed rule on 
the coal mining industry in general and on small businesses, as defined 
by the Small Business Administration, in particular. Rulemaking Record, 
Exhibit 80. That analysis determined that the potential costs of the 
Department's rule would be imposed on most coal mine operators through 
higher insurance premiums, and that, in the long term, those insurance 
premiums could be expected to rise by 39.3 percent. Exhibit 80 at p. 
44. The analysis assumed that all coal mine operators purchased 
insurance to cover their obligations, although it noted that this 
assumption probably overstated costs with respect to operators that are 
authorized to self-insure. Logically, operators self-insure only if 
they may do so at a lower cost. Exhibit 80 at p. 44. The analysis 
calculated that an increase in premiums of this magnitude would result 
in a total annual cost to the industry between $32.22 million and 
$88.32 million, with a point estimate of $57.56 million. Exhibit 80 at 
p. 46. The Department believes that these figures contain substantial 
upward biases, and that they therefore overstate, by a considerable 
amount, the total cost to industry. Specifically, the Department 
estimated the costs based on the insurance premiums paid by underground 
coal mine operators. The insurance premiums paid by surface mine 
operators, which employ a substantial percentage of the people working 
in coal mine employment, are significantly lower. (See the economic 
analysis prepared by Milliman & Robertson, Inc., at p. 6, Table 4; 
Rulemaking Record Exhibit 89-37, Appendix A.) In addition, coal mine 
operators who self-insure their liabilities under the Black Lung 
Benefits Act may be assumed to do so because their costs are lower than 
the costs of commercial insurance. Although it is conservatively high, 
the Department believes the $57.56 million point estimate to be the 
most useful indicator of industry costs. The analysis concluded that 
the effects of this rise in insurance costs would be most heavily felt 
by underground bituminous coal mine operators with less than 20 
employees, who would be in a poorer position to recoup those costs. 
Some of those operators, the analysis observed, might be forced to 
suspend operations. Exhibit 80 at pp. 56-59.
    The RFA also requires that agencies assure that small businesses 
have an opportunity to participate in the rulemaking ``through the 
reasonable use of techniques such as--* * * 3) the direct notification 
of interested small entities; * * *'' 5 U.S.C. 609(a)(3). Accordingly, 
the Department mailed a copy of its second notice of proposed 
rulemaking, including its initial regulatory flexibility analysis, to 
each coal mine operator identified in a database maintained by the Mine 
Safety and Health Administration. In addition, the Department made a 
copy of its economic analysis available to any interested party that 
requested it and posted it on the Internet. 64 FR 55008 (Oct. 8, 1999). 
Finally, because the Department did not complete its mailing of the 
proposal until November 5, 1999, it extended the comment period through 
January 6, 2000 to ensure that each small business was given no less 
than 60 days to submit comments, the length of the original comment 
period in the second notice of proposed rulemaking. 64 FR 62997 (Nov. 
18, 1999).
    Finally, the Regulatory Flexibility Act requires that when an 
agency promulgates a final rule after having been required to publish a 
notice of proposed rulemaking, the agency must prepare a final 
regulatory flexibility analysis. That analysis must contain:
    (1) a succinct statement of the need for, and objectives of, the 
rule;
    (2) a summary of the significant issues raised by the public 
comments in response to the initial regulatory flexibility analysis, a 
summary of the assessment of the agency of such issues, and a statement 
of any changes made in the proposed rule as a result of such comments;
    (3) a description of and an estimate of the number of small 
entities to which the rule will apply or an explanation of why no such 
estimate is available;
    (4) a description of the projected reporting, recordkeeping and 
other compliance requirements of the rule, including an estimate of the 
classes of small entities which will be subject to the requirement and 
the type of professional skills necessary for preparation of the report 
or record; and
    (5) a description of the steps the agency has taken to minimize the 
significant economic impact on small entities consistent with the 
stated objectives of applicable statutes, including a statement of the 
factual, policy, and legal reasons for selecting the alternative 
adopted in the final rule and why each one of the other significant 
alternatives to the rule considered by the agency which affect the 
impact on small entities was rejected.

5 U.S.C. 604(a). The agency must make a copy of its final regulatory 
flexibility analysis available to the public, and must publish its 
analysis or a summary of its analysis in the Federal Register. 5 U.S.C. 
604(b). The Department's final regulatory flexibility analysis is 
published below.

Need for, and Objectives of, the Rule

    The Department discussed its need to revise the black lung 
regulations in its initial regulatory flexibility analysis. 64 FR 
55006-07 (Oct. 8, 1999). In that analysis, the Department observed that 
the revisions satisfied a number of different objectives. First, many 
of the revisions simply updated the regulations implementing the Black

[[Page 80031]]

Lung Benefits Act. The Department's initial analysis provided examples 
of much needed regulatory updates such as those needed to reflect 
decisions of the courts of appeals and to clarify the Department's 
original intent when certain regulations were promulgated. Similarly, 
the Department noted the proposed regulatory revisions reflected 
changes that had occurred over the previous 20 years in the diagnosis 
and treatment of pneumoconiosis. Paragraphs (1), (3), (4), and (6) of 
the section entitled ``Reasons for, and Objectives of, the Proposed 
Rule,'' discussed areas in which the Department sought to update its 
regulations.
    The black lung program regulations were in need of significant 
revision to make them current. The Department last made substantive 
revisions to certain regulations in 1983, see 48 FR 24272 (May 31, 
1983), and those revisions reflected only substantive changes made to 
the Black Lung Benefits Act by the Black Lung Benefits Revenue Act of 
1981, Pub. L. 97-119, Title I, 95 Stat. 1635 (1981) and the Black Lung 
Benefits Amendments of 1981, Pub. L. 97-119, Title II, 95 Stat. 1644 
(1981), both of which became effective on January 1, 1982. Most of the 
regulations have not been revised since they were originally 
promulgated: Part 718 in 1980, Part 722 in 1973, and Parts 725 and 727 
in 1978. See 45 FR 13678 (Feb. 29, 1980); 38 FR 8328 (March 30, 1973); 
43 FR 36772 (Aug. 18, 1978). Some regulations, however, did not reflect 
the amendments to the Black Lung Benefits Act enacted over the last 
quarter century. For example, Part 722 sets forth criteria states must 
meet when seeking certification from the Secretary that their workers' 
compensation programs provide ``adequate coverage'' for occupational 
pneumoconiosis. These regulations were never revised in light of either 
the Black Lung Benefits Reform Act of 1977, Pub. L. 95-239, 92 Stat. 95 
(1978), or the Black Lung Benefits Amendments of 1981. Similarly, the 
Secretary's Part 725 regulations required revision in order to reflect 
amendments to other statutes. For example, revised Sec. 725.621 
reflected the Debt Collection Improvement Act of 1996, Pub. L. 104-334, 
110 Stat. 1358 (1996), see preamble to first notice of proposed 
rulemaking, Sec. 725.621, 62 FR 3369 (Jan. 22, 1997). Section 725.515 
was revised to reflect amendments to the Social Security Act, see 
preamble to second notice of proposed rulemaking, Sec. 725.515, 64 FR 
55001 (Oct. 8, 1999). Section 725.544 was amended to reflect the 
statutory increase in the dollar amount of claims which may be 
compromised by the United States and to reflect the repeal of the 
Federal Claims Collection Act, see preamble to second notice of 
proposed rulemaking, Sec. 725.544, 64 FR 55002 (Oct. 8, 1999).
    In addition, over the last two decades, many of the regulations in 
Parts 718 and 725 have been interpreted by both the Benefits Review 
Board and the federal appellate courts. The Department strongly 
believes that, where these interpretations represent a consensus of 
opinion as to the meaning and correct application of particular 
regulations, that consensus should be embodied in the Department's 
regulations. One commenter correctly observes that none of these courts 
specifically ordered the Department to revise its regulations. The 
Department believes, however, that the interests of all parties to the 
adjudication of a claim--coal mine operators and their insurers as well 
as claimants--will be better served if a judicial consensus is 
reflected in the explicit language of the Department's regulations. 
Incorporating such a consensus will allow both the parties and the 
adjudication officer to use a current version of the regulation that 
does not require constant recourse to databases of federal case law. 
Moreover, the black lung program serves a population of applicants--
individuals who spent their working lives in the Nation's coal mines--
who cannot be expected to be aware of all of the judicial decisions 
bearing on their eligibility for benefits, and who thus cannot be 
expected to bring them to the attention of the administrative law 
judges who conduct formal hearings on applications for benefits under 
the Act.
    For example, the substantive criteria governing a claimant's 
eligibility for benefits, set forth in Part 718, have been the subject 
of numerous appellate decisions. The Department's preamble discussion 
of Sec. 718.201 contains citations to a considerable body of case law 
recognizing that pneumoconiosis, as defined by the Act and the 
Department's regulations, includes obstructive lung disease arising 
from coal mine dust exposure. Similarly, the preamble discussion of 
Sec. 725.309 references those decisions noting that pneumoconiosis is a 
latent, progressive disease. See preamble to Sec. 718.201, paragraph 
(f), preamble to Sec. 725.309, paragraph (b). The Department's revised 
definition of ``pneumoconiosis'' in Sec. 718.201 explicitly 
incorporates both of these principles. The Department's revisions of 
Secs. 718.204 (criteria for establishing that a miner suffers from 
total disability due to pneumoconiosis) and 718.205 (criteria for 
establishing that a miner died due to pneumoconiosis) codify nearly 
unanimous case law interpreting the Department's prior regulations. See 
preamble to Sec. 718.204, paragraph (d), explaining that the definition 
of ``total disability'' requires proof of a totally disabling 
respiratory or pulmonary impairment, preamble to Sec. 718.205, 
paragraph (d), providing practical meaning to the regulatory standard 
that death is due to pneumoconiosis when pneumoconiosis is a 
substantially contributing cause of death; see also 62 FR 3345 (Jan. 
22, 1997) (citing cases defining when total disability is due to 
pneumoconiosis under 20 CFR 718.204 (1999)). Similarly, revised 
sections 725.309, governing subsequent claims filed by the same 
individual, and 725.310, governing requests for modification of a 
claim, reflect a body of decisional law that has developed since these 
regulations were promulgated in 1978. See preamble discussions of 
Sec. 725.309, 62 FR 3351-52 (Jan. 22, 1997), 64 FR 54984-85 (Oct. 8, 
1999), and above; and preamble discussions of Sec. 725.310, 62 FR 3353-
54 (Jan. 22, 1997), 64 FR 54985-86 (Oct. 8, 1999), and above.
    The Department also believes that, where the Board or the appellate 
courts have identified issues which the regulations do not adequately 
address, regulatory action is appropriate to correct that omission. 
Thus, section 725.495 addresses a problem observed by the Fourth 
Circuit Court of Appeals in Director, OWCP v. Trace Fork Coal Co., 67 
F.3d 503, 507 (4th Cir. 1995), viz., that ``[t]he Black Lung Benefits 
Act and its accompanying regulations do not specifically address who 
has the burden of proving the responsible operator issue.'' Similarly, 
where the Board or the appellate courts have interpreted a regulation 
in a manner different from that intended by the Department, the only 
way to ensure that the Department's intent is fulfilled is to amend the 
regulations. See, e.g., preamble to first notice of proposed 
rulemaking, Sec. 718.101, 62 FR 3341 (Jan. 22, 1997) (noting intent 
that standards for ensuring the quality of medical evidence be made 
uniformly applicable to all new evidence developed in the claims 
adjudication process).
    Finally, in order to update its regulations, the Department also 
needed to revise certain provisions in light of its experience 
administering the program for over 25 years. This experience had 
demonstrated that the regulations did not adequately address certain 
issues. For example, the former regulations provided little guidance as 
to when a claimant could reasonably expect the payment of monthly and 
retroactive

[[Page 80032]]

benefits from coal mine operators, see preamble to first notice of 
proposed rulemaking, Sec. 725.502, 62 FR 3365-66 (Jan. 22, 1997). 
Similarly, the Department had learned that the rules governing 
overpayments and their possible waiver varied depending on whether the 
overpayment was made by the Black Lung Disability Trust Fund or a coal 
mine operator, see preamble to first notice of proposed rulemaking, 
Sec. 725.547, 62 FR 3366 (Jan. 22, 1997).
    In addition to making its regulations current, the Department 
intended to revise its regulations to streamline the adjudication of 
claims under the Act. 62 FR 3338 (Jan. 22, 1997). The Department felt 
this need was critical and hoped to ensure that the resulting process 
for determining a claimant's eligibility was both simple and equitable. 
For example, the Department had been widely criticized for delays in 
the adjudication process. In response, the Department has made 
considerable changes in the initial processing of claims. The 
Department's revisions begin with the manner in which each miner who 
files an application for benefits is afforded a complete pulmonary 
evaluation, see 30 U.S.C. 923(b). The Department's revisions will allow 
each miner to select a highly qualified physician to perform his 
evaluation from a list of authorized providers maintained by the 
Department. See preamble discussion of Sec. 725.406, 64 FR 54988-90 
(Oct. 8, 1999). The Department hopes thereby to provide each claimant 
with a realistic appraisal of his condition and to provide each claim 
with a sound evidentiary basis. The regulations governing the 
additional development and submission of evidence will ensure that the 
parties to a claim receive fewer documents to which they need to file a 
response than was formerly the case. Thus, rather than issue initial 
findings and a memorandum of conference, formerly provided for in the 
regulations (20 CFR 725.410, 725.411, 725.417 (1999)), the district 
director will issue only one decisional document at the conclusion of 
his processing: a proposed decision and order. See preamble discussion 
of Secs. 725.410-725.413. In addition, the revised regulations will 
allow the Department to generate documents that provide a clearer and 
better reasoned explanation of any evidentiary evaluation made by the 
district director and a better understanding by the parties of their 
rights and responsibilities. Thus, the district director will issue a 
schedule for the submission of additional evidence which explains his 
preliminary analysis of the results of the miner's complete pulmonary 
evaluation. It will notify all parties of their right to submit 
additional evidence and to obtain further adjudication of the claim. 
See preamble discussion of Secs. 725.410-725.413. One of the most 
important revisions made by the Department will limit the parties' 
submission of documentary medical evidence. This revision will require 
that the factfinder evaluate a claimant's eligibility based on the 
quality of medical evidence that the parties submit, rather than the 
numerical superiority of the evidence on either side. See preamble 
discussion of Sec. 725.414, 64 FR 54994 (Oct. 8, 1999); 62 FR 3356-57 
(Jan. 22, 1997).

Significant Issues Raised by Public Comments in Response to Initial 
Regulatory Flexibility Analysis

    The comments in response to the Department's initial regulatory 
flexibility analysis fall into three categories: (1) Those comments 
urging the Department not to promulgate regulations having any adverse 
economic effect on the coal mining industry, or on one or more segments 
of that industry; (2) comments contending that the assumptions 
underlying the economic analysis on which the Department's initial 
regulatory flexibility analysis was based were flawed, and that the 
analysis thus underestimates the effect on small businesses subject to 
regulation by the rule; and (3) comments suggesting regulatory 
alternatives that the Department allegedly failed to consider in its 
initial regulatory flexibility analysis. The Department discusses those 
comments suggesting regulatory alternatives below, in the section 
entitled ``Description of Steps the Agency has taken to Minimize the 
Impact on Small Entities Consistent with the Stated Objectives of 
Applicable Statutes.'' The Department responds to comments in the first 
two categories in this section.
    Several commenters argue that, in light of the costs identified by 
the Department in its initial regulatory flexibility analysis, the 
Department should not promulgate any revised regulations. The 
Department disagrees. The regulations implementing the Black Lung 
Benefits Act are badly in need of revision to reflect more than two 
decades of judicial interpretation and administrative experience. In 
addition, the Department believes that the process used to determine a 
claimant's eligibility for benefits, and an operator's liability for 
those benefits, needs to be made faster, fairer, and more credible. No 
parties have benefitted from the delays that the courts of appeals have 
identified in the program, see, e.g., Venicassa v. Consolidation Coal 
Co., 137 F.3d 197, 198 n.2 (3d Cir. 1998) (noting ``a disturbing record 
of delay in processing claims for black lung benefits in prior 
cases''). The Department's regulations are intended to eliminate that 
delay by, inter alia, reducing the number of steps in the district 
director's processing of a claim, requiring the timely development of 
evidence relevant to the issue of operator liability and eliminating 
the possibility of remands from the Office of Administrative Law Judges 
for the development of additional evidence as to the identity of the 
liable party. The Department's revised regulations promote fairness and 
credibility in claims adjudications by providing each miner with a 
quality medical evaluation of his pulmonary condition when he first 
applies, by explaining the Department's initial assessment of that 
evidence and by informing all parties of their rights to submit 
additional evidence and to request further adjudication of the claim.
    One comment suggests that ``a reasonable interpretation of the 
Department's own economic analysis leads to the inescapable conclusion 
that the proposed rule will have a significant economic impact on a 
substantial number of small entities.'' Rulemaking Record, Exhibit 89-
37, p. 24. The Department does not disagree. 64 FR 55008 (Oct. 8, 
1999). The Department recognized that the rule will have an economic 
impact on the coal mining industry, and in particular on underground 
bituminous coal mine operators that employ less than 20 people. It is 
for this reason that in its second notice of proposed rulemaking, the 
Department prepared an initial regulatory flexibility analysis in lieu 
of its prior certification that the proposed rule would not have a 
significant economic impact on a substantial number of small entities. 
64 FR 55006 (Oct. 8, 1999). The existence of an economic impact, 
however, does not mean that the Department is foreclosed from 
promulgating its rule. In Associated Fisheries, the First Circuit 
quoted with approval from the Commerce Department's explanation of its 
responsibilities under the Regulatory Flexibility Act:

    The intent of the RFA is not to limit regulations having adverse 
economic impacts on small entities, rather the intent is to have the 
agency focus special attention on the impacts its proposed actions 
would have on small entities, to disclose to the public which 
alternatives it considered to lessen adverse impacts, to require the 
agency to consider public comments on impacts and

[[Page 80033]]

alternatives, and to require the agency to state its reasons for not 
adopting an alternative having less of an adverse impact on small 
entities.

127 F.3d at 115-116. The Regulatory Flexibility Act thus vests the 
Department with the responsibility for determining, in light of the 
recognized costs, whether the rule should nevertheless be promulgated.
    The economic analysis performed in connection with the Department's 
initial regulatory flexibility analysis described the costs that the 
rule would impose on the coal mining industry. That analysis was based 
on a number of conservative assumptions that were designed to establish 
a cost ceiling, i.e., the maximum additional costs that industry would 
face as a result of these rules. For example, the analysis assumed that 
all coal mine operators purchase commercial insurance. The Department 
did not attempt, however, to estimate precisely the number of mines 
which would close as a result of these increased costs. Instead, the 
Department concluded that there was only a significant potential for 
closures in the very smallest size class of underground bituminous coal 
mine, those with under 20 employees. Rulemaking Record, Exhibit 80, 
Exhibits O and Q. These mines will feel the greatest effect of the 
Department's rule largely because of their operating characteristics. 
As a group, very small coal mines are far more labor intensive (i.e., 
much less mechanized) than larger coal mines. Because the rule will 
raise costs in the form of higher insurance premiums, which in turn are 
based on each mine's payroll, increased premiums will represent a 
substantially higher cost increase per ton of coal mined for a very 
small mine than for a larger mine. Thus, based on its preliminary 
economic analysis (Rulemaking Record, Exhibit 80, pp. 46-51), the 
Department found that larger mines--including many mines that meet the 
definition of a ``small'' business under the definition used by the 
Small Business Administration--would not face significant impacts from 
the rule in terms of closures.
    In addition to being more labor intensive, very small underground 
mines also incur the higher insurance premiums associated with 
underground coal mining. Data contained in comments received by the 
Department indicate that surface bituminous coal mine insurance rates 
average $1.57, only 59 percent of the average underground mine 
insurance rate of $2.64. Similarly, surface mine rates average only 53 
percent of underground rates for eastern bituminous mines; and 37 
percent of underground rates for a four-state average of Pennsylvania, 
Kentucky, Virginia, and West Virginia. For anthracite coal, surface 
mine insurance rates are only 44 percent of underground mine insurance 
rates. Rulemaking Record, Exhibit 89-37, Appendix A, Table 4. Any 
increase in insurance rates, then, assuming that all other things are 
equal, will affect the price per ton of underground coal twice as much 
as it will the price of coal extracted from surface mines. This 
distinction renders very small underground coal mines potentially 
vulnerable to closures in a way that very small surface coal mines are 
not. Because the insurance rates for surface anthracite mines are also 
high, very small anthracite strip mines may also be potentially 
vulnerable to closure.
    Additional data provided by commenters, as well as data that has 
become available from the Department of Energy since publication of the 
Department's initial regulatory flexibility analysis, allow the 
Department to forecast the number of potential mine closures in 
somewhat greater detail. This analysis confirms the Department's 
preliminary conclusion that, although the regulations will have a 
significant impact on some mines, the impact on the mining industry as 
a whole will not be substantial. The Department's additional analysis 
therefore provides no basis to reconsider the decision to promulgate 
final regulations.
    Mine Safety and Health Administration data are useful in 
establishing the number of mines that are potentially at risk of 
closure. The Department emphasizes, however, that this data addresses 
only the mines that are potentially at risk of closure because of the 
Department's rulemaking. The actual effects of the rule can be 
determined only by establishing the ``base case'' of mines that could 
be expected to close even if the Department does not promulgate its 
final rule. In 1998, 1,609 mines produced bituminous coal. An 
additional 743 bituminous mines are listed in the MSHA data but 
produced no coal during 1998. Of the 1,609 producing mines, 791 were 
underground mines, and 263 of the underground mines had fewer than 20 
employees. Of these 263 mines, 37 produced over 100,000 short tons of 
coal in 1998. Because mines with fewer than 20 employees that produced 
over 100,000 short tons have high labor productivity, the Department 
does not believe that they will be significantly impacted by a rule 
whose primary effects are felt through increased insurance premiums 
that are based on labor costs. Subtracting these 37 mines from the 263 
very small underground mines leaves 226 mines. The mines are located in 
Kentucky (81 mines), West Virginia (71 mines), Virginia (52 mines), 
Pennsylvania (14 mines), Tennessee (5 mines), and Alabama (3 mines). 
These mines are extremely small, employing a total of only 2,586 
people. Median 1998 employment per mine was 11; mean employment was 
11.4. Median production was 25,957 short tons of coal; mean production 
was 34,273 short tons.
    The Department's previous economic analysis demonstrated that very 
small underground mines with first quartile accounting profits (the 
one-quarter of these mines with lowest profits) might be forced to 
close as a result of the rule, but that mines with median accounting 
profits were not in such jeopardy. For purposes of estimating the 
potential number of mine closures, however, the Department will assume 
that as many as three-eighths of these mines (the half-way point 
between .25, representing the first quartile, and .5, representing the 
second) are at risk. Multiplying this figure (.375) by the total number 
of very small underground bituminous mines (226) yields a total of 85 
mines. According to MSHA data, these 85 underground bituminous mines 
represent 5.3 percent of all producing bituminous coal mines, employed 
1.3 percent of the miners engaged in bituminous coal mine employment, 
and accounted for 0.3 percent of bituminous coal production.
    MSHA data indicate that 117 mines produced anthracite in 1998. An 
additional 87 anthracite mines are listed in the MSHA data but produced 
no coal during 1998. Of the 117 producing mines, 60 were strip mines, 
39 were underground mines, and 18 were culm bank/refuse pile 
operations. Of the 117 mines, 12 (10 strip mines, 1 underground mine, 
and 1 culm bank operation) had 20 or more employees, and only 3 had 
more than 50 employees. An additional 6 mines (3 strip mines and 3 culm 
bank operations) produced over 100,000 short tons in 1998. Culm bank 
operations and mines with 20 or more employees or over 100,000 tons 
output do not appear to be at risk of closure. Culm banks are discussed 
in detail below in response to a comment regarding the Department's 
assumptions about price elasticity. Thus, the population of very small 
anthracite mines consists of 85 mines. This total includes 47 strip 
mines (60 total strip mines minus 10 strip mines with 20 or more 
employees minus 3 strip mines that produced more than 100,000 short 
tons of coal in 1998) and 38

[[Page 80034]]

underground mines (39 underground mines minus 1 mine with 20 or more 
employees). These mines are extremely small. They had a total of 411 
employees (220 in strip mines and 191 in underground mines). Median 
1998 employment was 3; mean employment was 4.8. Median production of 
these anthracite mines was 4,500 short tons (7,484 for strip mines and 
2,598 for underground mines); mean production was 12,173 short tons 
(17,116 for strip mines and 6,060 for underground mines).
    Profit data for anthracite mines are not available. It appears 
reasonable to assume, however, that very small anthracite strip mines 
will be potentially subject to closure because their insurance premiums 
are high, and that very small underground anthracite mines will be even 
more heavily impacted. The Department will therefore assume that three-
eighths of very small anthracite strip mines (the same figure used for 
bituminous mines) and five-eighths of very small anthracite underground 
mines (a higher figure to take into account the possibility of a 
heavier impact on these mines) are potentially in jeopardy of closure 
because of costs of the rule. Thus, an estimated 42 very small 
anthracite mines (18 strip mines (.375 times 47 mines) and 24 
underground mines (.625 times 38 mines)) are potentially in jeopardy of 
closing as a result of the rule.
    The next step in forecasting the number of mines that may close as 
a result of the rule is establishing the ``base case,'' i.e., the 
number of mines that would close regardless of whether the Department 
promulgated new regulations. This is particularly important for an 
industry such as coal mining, where the number of small mines has been 
declining for decades, and where a continued sharp decline is likely in 
the foreseeable future. Only after establishing the base case can the 
Department estimate the extent to which the rule may result in 
additional closures.
    The current and predicted decline in the number of small coal mines 
is the result of a variety of market factors. They include electricity 
deregulation, reduction in coal reserves, the use of on-time delivery 
by coal company customers, equipment upgrades, increased use of low 
sulfate coals, and the reduction in the number of small mining firms 
due to industry consolidation over the last two decades. All of these 
factors put very small coal mines, particularly underground mines, in 
an increasingly disadvantageous competitive position. Because of their 
size, very small coal mines have difficulty increasing productivity. 
They lack the physical scale to take advantage of new, high-
productivity equipment, most of which is very large, or to adopt more 
productive techniques, such as continuous miner operations or longwall 
mining. Restricted space, of course, is a greater constraint in 
underground coal mines than surface mines.
    Many very small coal mines are also characterized by unfavorable 
geological conditions. These may include thin coal veins, splitting 
coal beds, fractures or offsets due to faulting, interruptions in coal 
deposits or coal quality due to sandstone-or clay-filled channels, and 
unstable roof rock. Such geologic conditions may well be the reason the 
mine is small to begin with. They also make it costly to extract coal 
and difficult to improve productivity. Mines with such geological 
problems are therefore especially vulnerable to price competition. The 
economic suitability of coal beds for mining is reflected in changes in 
committed active reserves as the price of coal changes. Culling 
reserves to eliminate hard-to-mine reserves, or ``high-grading'' of 
reserve blocks, is a logical adaptation to low coal prices. From 1991 
to 1996, as coal prices fell, the reserves of small mines (annual 
production of 10,000 to 100,000 short tons) fell by 61.6 percent, 
compared with a 12.9 percent decline for the coal mining industry as a 
whole. U.S. Department of Energy, Energy Information Administration, 
``The U.S. Coal Industry in the 1990's: Low Prices and Record 
Production,'' (October, 1999) p. 6 (hereafter, ``U.S. Coal Industry'').
    In addition, the shift in demand to low-sulfur western coal, which 
has occurred in response to the Clean Air Act Amendments of 1990 and 
the resulting regulations of the Environmental Protection Agency, puts 
very small coal mines at a severe disadvantage. Very small coal mines 
are concentrated in areas where coal has a relatively high sulfur 
content. Low-sulfur coal is found predominantly in the west, 
particularly in the Powder River Basin. The large strip mines that 
produce low sulfur coal have easy geology (thin overburden and thick 
coal beds), and their large scale results in labor productivity 
approximately three times as high as that of eastern mines. This 
productivity differential continues to grow. Moreover, recent 
investments in track by western railroads are further lowering the 
power-plant price of Powder River Basin coal.
    Finally, many very small coal mines have management that may not be 
well equipped with tools such as computers. Such mines are in a poor 
position to adapt to practices such as on-time delivery or to utilize 
other risk management techniques that utility deregulation is making 
increasingly important in coal mine operation. Independent very small 
coal mines are also, by virtue of their size, in a relatively poor 
position to participate in strategic inter-fuel alliances, an 
increasingly common result of utility deregulation.
    Because of all of these market factors, the outlook for independent 
very small mines is extremely bleak. The Department's preliminary 
economic analysis, in fact, was based on the observation that the base 
case already includes extensive closures of very small mines. Over the 
last 15 or 20 years, the market forces discussed above have eliminated 
a large majority of very small mines. Data collected by the Energy 
Information Administration (EIA) indicate that in the 11 years between 
1986 and 1997 the number of coal mines with annual production of less 
than 10,000 short tons decreased from 1,069 to 281 (a total of 74 
percent), while production of mines of this size decreased from 4.4 
million short tons to 1.2 million tons, or by 73 percent. In the same 
period, the number of coal mines with annual production of 10,000 to 
100,000 short tons decreased from 1,956 to 638 (a 67 percent decrease), 
while production of mines of this size decreased from 82.8 million 
short tons to 27.8 million short tons, or by 66 percent. EIA, U.S. Coal 
Industry, p. 3, Table 1.
    To estimate both baseline closures and closures that may be 
considered impacts of the rule, two regression models were created 
using EIA data for 1986 through 1998. Both used the log of the number 
of underground bituminous coal mines with production in the range of 
10,000 to 99,999 short tons. Both models used the log of the national 
price of coal as an independent variable, and one also included time as 
an independent variable. Both models had high statistical significance 
by any measure. Using EIA projections of coal price changes (see 
Department of Energy, Energy Information Administration, ``Challenges 
of Electric Power Industry Restructuring for Fuel Suppliers'' 
(September 1998) (hereafter, ``Challenges,''), Table ES1, p. 13), the 
models were used to forecast the percentage decrease in the number of 
coal mines in the base case in the years 2005 and 2015, and the 
decreases that may result from the Department's rule during the same 
interval.

[[Page 80035]]

    The log-log model with no time variable predicted a baseline 
decrease in underground bituminous mines of