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decided: March 10, 1982.


Appeal from the Order of the Environmental Hearing Board in the case of American Casualty Company of Reading, Pennsylvania v. Commonwealth of Pennsylvania, Department of Environmental Resources, Docket No. 78-157-S, Mining.


Edward E. Knauss, IV, Metzger, Wickersham, Knauss & Erb, for petitioner.

Peter Shelley, Assistant Counsel, for respondent.

Judges Mencer, Craig, and MacPhail, sitting as a panel of three. Opinion by Judge MacPhail. Judge Palladino did not participate in the decision in this case.

Author: Macphail

[ 65 Pa. Commw. Page 225]

American Casualty Company of Reading, Pennsylvania (Petitioner) appeals from an adjudication of the Environmental Hearing Board (EHB) which held that the Department of Environmental Resources (DER) properly forfeited five bonds issued by Petitioner as surety to the Commonwealth of Pennsylvania to guarantee compliance by Blue Coal Corporation (Blue Coal) with the requirements of the Anthracite Strip Mining and Conservation Act (Anthracite Act).*fn1

The complex facts in this case are, for the most part, undisputed. In 1966*fn2 and 1967 Blue Coal became the operator under four strip mining permits issued pursuant to the Anthracite Act by the Department of Mines and Mineral Industries (DMMI), the predecessor

[ 65 Pa. Commw. Page 226]

    agency to DER.*fn3 Section 6 of the Anthracite Act, 52 P.S. § 681.6, requires that for each operation the operator filed a bond payable to the Commonwealth conditioned upon the operator's faithful performance of all the requirements of the Act. At issue in the instant case are five bonds filed pursuant to Section 6. The bonds were originally executed between 1963 and 1967 with face amounts ranging from the statutory minimum of $5000 to $9500.*fn4

Mining under each of the four permits was performed by Blue Coal, which frequently contracted with other companies for labor and equipment. It is undisputed that all of the areas covered by the bonds here at issue were affected by the mining activities. The record also establishes that over a period of time each of the permits was amended to increase the acreage to be mined, which in turn required some additional bonding. Pursuant to Section 11 of the Anthracite Act, 52 P.S. § 681.11, the permits required backfilling of the permitted areas which was to be accomplished within six months after the operation was completed or abandoned.

Notice of the forfeitures here at issue was sent to Petitioner on or about November 21, 1978. The forfeiture action was taken due to the failure of Blue Coal to complete reclamation work in the bonded areas. Prior to the actual forfeitures, DER had taken

[ 65 Pa. Commw. Page 227]

    various actions including verbal and written orders issued during 1973 to Blue Coal to increase backfilling work and to prevent the removal of backfilling equipment from the permit areas before reclamation was completed. When reclamation work again fell behind schedule and it was rumored that Blue Coal was being liquidated, DER instituted an action in equity in the Luzerne County Court of Common Pleas. As a result of that action, counsel for DER and Blue Coal entered into a stipulation providing for reclamation to be performed by Blue Coal and a contractor by December 31, 1974. The reclamation work was not completed as agreed and a contempt petition was filed by DER with the Court of Common Pleas on April 14, 1975. Approximately two months later, ownership of Blue Coal was transferred to new owners who in March or April of 1976 were granted a "moratorium" on their obligations under the stipulation to allow time for the corporation to generate operating capital which would enable further reclamation. When, in 1978, it became clear that reclamation would not be completed by Blue Coal, which had declared bankruptcy, and that the permits were not to be transferred to a solvent operator, DER declared the bonds here at issue forfeited. Petitioner appealed from the forfeiture action to the EHB which found the forfeitures proper and the instant appeal was taken.

Four issues have been raised for our consideration: 1) whether DER's forfeiture action was timely; 2) whether Petitioner's obligation has been discharged by reason of DER's alleged negligence in the enforcement of the provisions of the Act; 3) whether Blue Coal's use of contract miners has discharged Petitioner's obligation as surety on the bonds and 4) whether the bonds at issue are indemnity bonds or penal bonds. Each of these issues was raised before the EHB and in each instance, rulings favorable to DER were entered.

[ 65 Pa. Commw. Page 228]

Before we can resolve the first issue presented we must determine whether the bonds should be interpreted in light of the provisions of the Anthracite Act or those of the amended Surface Mining Conservation and Reclamation Act (SMCRA) which became effective January 1, 1972 and repealed the Anthracite Act insofar as it was inconsistent with SMCRA.*fn5 It is undisputed that the five bonds at issue were executed before the amendments to SMCRA became law. It also appears, however, that pursuant to Section 5 of SMCRA, 52 P.S. § 1396.4, Blue Coal applied for and was issued new permits for its operations subsequent to January 1, 1972 and that the Petitioner's existing bonds were used to meet the bonding requirements of SMCRA. There is nothing in the record to indicate that Petitioner had knowledge that the bonds were being used to secure performance under permits issued pursuant to SMCRA. Since the bonds specifically state that they are conditioned on the principal's faithful performance of the requirements of the Anthracite Act and they were not amended to reflect the change of law when the amendments to SMCRA became effective, we agree with the EHB that the Anthracite Act should be used to interpret the bonds.

We also note that both the Anthracite Act and SMCRA require that the bonds be executed on forms prescribed and furnished by the department.*fn6 See Section 6 of the Anthracite Act, 52 P.S. § 681.6 and Section 5(d) of SMCRA, 52 P.S. § 1396.4(d). When the new permits were issued under SMCRA, we are of the opinion that had DER wanted Petitioner's bonds to reflect ...

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