Secretary of Labor v. Kerneos, Inc.

Plain-English summary

MSHA issued citations at Kerneos' Chesapeake Plant, which makes specialty calcium aluminate cement from alumina and quicklime. Kerneos argued that OSHA, not MSHA, had jurisdiction because the plant did not extract minerals and used materials already processed elsewhere. Judge L. Zane Gill held that the Mine Act and the MSHA-OSHA Interagency Agreement reasonably treat the plant's grinding, sizing, sintering, and kiln operations as mineral milling. He concluded that the Chesapeake Plant was a mine subject to the Mine Act and ordered the parties to confer about settlement and report within 60 days if no agreement was reached.

Decision snapshot

• Governing authority: 30 U.S.C. §§ 802(h)(1), 803, and 814(a); 29 C.F.R. § 2700.53
• Outcome: MSHA jurisdiction was upheld, and the parties were ordered to confer about settlement.
• Key point: A specialty cement plant can fall under the Mine Act when it processes covered mineral materials through operations identified as milling.

Full text (FMSHRC public release)

FEDERAL MINE SAFETY AND HEALTH
REVIEW COMMISSION

OFFICE OF
ADMINISTRATIVE LAW JUDGES

1331 PENNSYLVANIA
AVE., N.W., SUITE 520N

WASHINGTON, DC
20004-1710

TELEPHONE:
202-434-9958 / FAX: 202-434-9949

SECRETARY
OF LABOR

MINE
SAFETY AND HEALTH   

ADMINISTRATION
(MSHA),

Petitioner

v.

KERNEOS,
INC.,

Respondent

CIVIL
PENALTY PROCEEDINGS

Docket
No. VA 2013-0029-M

A.C.
No. 44-05046-302469

Docket
No. VA 2013-0082-M

A.C.
No. 44-05046-305615

Docket
No. VA 2013-0120-M

A.C.
No. 44-05046-308052

Docket
No. VA 2013-0183-M

A.C.
No. 44-05046-310655

Mine:
Chesapeake Plant

DECISION AND ORDER

Appearances:               Thomas
Grooms, U.S. Department of Labor, Office of the Solicitor, Nashville, TN, for
Petitioner;

Margaret S. Lopez, Ogletree, Deakins,
Nash, Smoak & Steward, P.C., Washington, DC, for Respondent.

Before:                        Judge
L. Zane Gill

This proceeding
arising under the Federal Mine Safety and Health Act of 1977, 30 U.S.C. § 801
et seq. (1994) (“Mine Act” or “Act”) involves 104(a) citations, 30 U.S.C. §
814(a), issued by the Department of Labor’s Mine Safety and Health
Administration (“MSHA”) to Kerneos, Inc. (“Kerneos” or “Respondent”) at its Chesapeake
Plant. Kerneos
alumina and quicklime make a specialty calcium aluminate cement. (Tr. 127: 4;
Tr. 145:3-16; Tr. 255:23-24; Ex. S-16; Ex. S-35)

The
parties presented testimony on September 8, 2014, in Washington, D.C., regarding
the sole issue of MSHA’s asserted jurisdiction over the Chesapeake Plant. For
the reasons stated below, I find that MSHA does have jurisdiction over the Kerneos
Chesapeake Plant.

Background
History

In 2008, James R. Petrie, the Northeast
District Manager for MSHA, notified Thomas Green, the President of Kerneos,
that MSHA was relinquishing jurisdiction over the Chesapeake Plant, which would
thereafter be under the jurisdiction of the Occupational Safety and Health
Administration (“OSHA”). (Ex. S-9) This determination was made in the course of
a penalty proceeding, See Kerneos, Inc., VA 2007-0076 and VA
2007-0077.

Lewis Harvey Kirk, III[1] first
learned of the transfer of jurisdiction from MSHA to OSHA in 2011 in the course
of a conversation he had with Derek Goossens.[2]
(Tr. 118:20 – 119:20) Kirk then discussed this with his supervisor, Bill
Wilson, who knew of the transfer, but disagreed with the removal of
jurisdiction. (Tr. 119:24 – 120:8) Both Wilson and Kirk spoke to the
Administrator and Deputy Administrator of the metal/non-metal branch about the
change in jurisdiction, which resulted in Mike Davis, the Southeast District
Manager, getting involved.[3]
(Tr. 120:11-16)

At that point Davis informed Kirk that
an inquiry needed to be made and offered Judith Etterer's assistance to investigate
the Chesapeake Plant. (Tr. 121:9-23) Kirk joined Etterer in her investigation
at the plant in late May, 2011.[4]
(Id.; Tr. 122:10-11) Kirk testified that he was at the plant to see what
materials, equipment, and processes were being used, to determine if MSHA had
jurisdiction over the plant. (Tr. 124:16-21) The investigation resulted in
MSHA’s determination that the Kerneos plant was under its jurisdiction. (Mike
Davis Dep. at 10:2-17) Kerneos objects to this assertion of jurisdiction and
argues that it should be under OSHA’s jurisdiction.

Definition
of a Mine

Section 4 of the Mine Act provides, in
part, that “[e]ach coal or other mine … shall be subject to the provisions of
this Act.” 30 U.S.C. § 803. “Coal or other mine” is defined in section 3(h)(1)
of the Act as:

(A) an area of land from which minerals
are extracted […], (B) private ways and roads appurtenant to such area, and (C)
lands, excavations, underground passageways, shafts, slopes, tunnels and
workings, structures, facilities, equipment, machines,
tools, or other property […] or used in, or to be used in, the
milling of such minerals, or the work of preparing coal or other
minerals [...] In making a determination of what constitutes mineral
milling for purposes of this Act, the Secretary shall give due consideration to
the convenience of administration resulting from the delegation to one
Assistant Secretary of all authority with respect to the health and safety of
miners employed at one physical establishment.

30
U.S.C. § 802(h)(1) (emphases added).

This Section defines a “mine” to include
“structures” and “facilities” used in “milling” or “the work of preparing [...]
minerals.” Id. “It does not require that those structures or facilities
be owned by a firm that also engages in the extraction of minerals from the
ground or that they be located on property where such extraction occurs.” Donovan
v. Carolina Stalite Co., 734 F.2d 1547, 1552 (D.C. Cir. 1984). The
Commission has also recognized this, observing that “‘milling’ and
‘preparation’ can be perceived as words used, in a loose sense, interchangeably
to describe the entire process of treating mined minerals for market.” Id.
at 1551 (internal citations omitted).

The language in Section 3(h)(1)(C) “gives
the Secretary discretion, within reason, to determine what constitutes mineral
milling, and thus indicates that his determination is to be reviewed with
deference both by the Commission and the courts.” Id. at 1552. The Donovan
court went on to state that, “[i]n this highly technical area deference to
the Secretary's expertise is especially appropriate.” Id. at n.9; See
Magma Copper Co. v. Secretary of Labor, 645 F.2d 694, 696–98 (9th Cir.), cert.
denied, 454 U.S. 940 (1981); National Industrial Sand Ass'n v. Marshall,
601 F.2d 689, 703 (3d Cir.1979).

Indeed, when the Mine Act was enacted,
the report of the Senate Committee on Human Resources specified that

[T]here may be a need to resolve
jurisdictional conflicts, but it is the Committee's intention that what is
considered to be a mine and to be regulated under this Act be given the broadest
possibl[e] interpretation, and it is the intent of this Committee that
doubts be resolved in favor of inclusion of a facility within the coverage of
the Act.

S.
Rep. No. 95-181 at 14 (1977), reprinted in Senate Subcomm. on Labor,
Comm. on Human Res., Legislative History of the Federal Mine Safety and
Health Act of 1977 at 602 (1978) (emphasis added).

Chevron
Deference

In reviewing MSHA's interpretation of a
statute, I must first inquire “whether Congress has directly spoken to the
precise question at issue.” Chevron U.S.A. Inc. v. Natural Res. Def. Council,
467 U.S. 837, 842-44 (1984); Watkins Eng'rs & Constructors 24 FMSHRC
669, 672-73 (July 2002). If the statute is clear and unambiguous, effect must
be given to its language. Id. When a statute is ambiguous or silent on
the point in question, a further analysis is required to determine whether an
agency's interpretation of the statute is a reasonable one. Id. Deference
is accorded to “an agency's interpretation of the statute it is charged with
administering when that interpretation is reasonable.” Energy W. Mining Co.
v. FMSHRC, 40 F.3d 457, 460 (D.C. Cir. 1994) (citing Chevron, 467
U.S. at 844). “The agency's interpretation of the statute is entitled to
affirmance as long as that interpretation is one of the permissible
interpretations the agency could have selected.” Watkins 24 FMSHRC at
673 (citations omitted).

In Watkins, the Commission
reached the following conclusion:

The Supreme Court recently recognized
that Chevron deference is appropriately applied to an agency's
interpretation of a statute when Congress delegated authority to the agency to
speak with the force of law when it addresses ambiguity or “fills in a space”
in the statute and the agency's interpretation claiming deference was
promulgated in the exercise of that authority. United States v. Mead Corp.,
533 U.S. 218, 226-27, 229 (2001). Section 3(h)(1) contains an express
delegation of authority to the Secretary to determine what constitutes milling.
See In re: Kaiser Aluminum and Chem. Co., 214 F.3d 586, 591 (5th Cir.
2000) (“Congress expressly delegated to the Secretary … authority to determine
what constitutes mineral milling”) (internal quotations omitted), cert.
denied, 532 U.S. 919 (2001). Thus, Congress explicitly left a gap for the
Secretary to fill with respect to the definition of milling. Under Mead,
533 U.S. at 227, the Secretary's interpretation of milling is entitled to
acceptance if it is reasonable. See Chevron, 467 U.S. at 843-44; Thunder
Basin, 18 FMSHRC at 584 n.2; Keystone Coal, 16 FMSHRC at 13.

24
FMSHRC at 673.

“Milling” is not defined in the Mine
Act, but it is defined in the Interagency Agreement between MSHA and OSHA
(“Interagency Agreement”) published in 1979. The Interagency Agreement defines
milling as “the separation of one or more valuable desired constituents of the
crude from the undesirable contaminants with which it is associated.” Mine
Safety and Health Administration and the Occupational Safety and Health
Administration Interagency Agreement, 44 Fed. Reg. 22,827, 22,829 (April 17,
1979), amended by 48 Fed. Reg. 7,521 (Feb. 22, 1983).[5]
Appendix A to the Interagency Agreement provides a detailed description of the
kinds of operations included in mining and milling. The Agreement defines the
term “milling” in Appendix A, as follows:

Milling is the art of treating the crude
crust of the earth to produce therefrom the primary consumer derivatives. The
essential operation in all such processes is separation of one or more valuable
desired constituents of the crude from the undesired contaminants with which it
is associated. A CRUDE is any mixture of minerals in the form in which it
occurs in the earth's crust. An ORE is a solid crude containing valuable
constituents in such amounts as to constitute promise of possible profit in
extraction, treatment, and sale.

44 Fed.Reg. at 22,829; Ex. S-5 at 4.
Appendix A further provides that “milling” consists of one or more of
the following processes: crushing, grinding, pulverizing, sizing,
concentrating, washing, drying, roasting, pelletizing, sintering,
evaporating, calcining, kiln treatment, sawing and cutting stone, heat
expansion, retorting (mercury), leaching, and briqueting. Id.; Ex.
S-5 at 6 (emphasis added). Additionally, Appendix A provides that MSHA has
authority to regulate the “mining” of “alumina” and “lime.” Id. Further,
the Interagency Agreement explicitly states that “MSHA[’s] jurisdiction
includes […] alumina and cement plants.” 44 Fed.Reg. at 22,828; Ex. S-5 at 2.

It is important to note that the
Secretary realized that “[n]otwithstanding the clarification of authority
provided by Appendix A, there will remain areas of uncertainty regarding the
application of the Mine Act, especially in operations near the termination of
the milling cycle and beginning of the manufacturing cycle.” Id. at 22; 828
Ex. S-5 at 2. The Interagency Agreement also states that the “scope of the term
milling may be expanded to apply to mineral product manufacturing processes
where those processes are related, technologically or geographically, to
milling.” Id.

Analysis
under Chevron of the Secretary’s interpretation of “milling”

The question to be answered is whether
the Secretary's interpretation of “milling” is based on a “permissible
construction of the statute,” Chevron, 467 U.S. at 842, and is
reasonable, Mead, 533 U.S. at 227. In Watkins, the Commission held
that the Secretary’s interpretation of “milling” was reasonable when MSHA
adopted the view that the term “milling” can apply to cement plants even if the
facility does not separate waste from valuable material. Watkins, 24
FMSHRC at 674. The Commission further found that:

The Secretary's interpretation of
“milling” is consistent with the general usage of the term within the mining
industry and with ordinary usage. Within the industry, milling is defined as:
“The grinding or crushing of ore. The term may include the operation of
removing valueless or harmful constituents …,” while mill is defined as a
“mineral treatment plant in which crushing, wet grinding, and further treatment
of ore is conducted.” DMMRT at 344 (emphasis added); see also Alcoa
Alumina & Chems., L.L.C., 23 FMSHRC 911, 914 (Sept. 2001) (using DMMRT
to determine usage in mining industry). The ordinary meaning of “to mill” is
“to crush or grind (ore) in a mill,” and the term “a mill” is defined as “a
machine for crushing or comminuting some substance.” Webster's Third New
Int'l Dictionary (Unabridged) 1434 (1993); see also Nolichuckey Sand Co.,
22 FMSHRC 1057, 1060 (Sept. 2000) (“Commission … look[s] to the ordinary
meaning of terms not defined by statute”). These definitions are consistent
with the Secretary's interpretation that milling includes processes such as
grinding and crushing […] The legislative history of the Mine Act also supports
the Secretary's interpretation of “milling.” Congress clearly intended that any
jurisdictional doubts be resolved in favor of coverage by the Mine Act. S. Rep.
No. 95-181, at 14 (1977), reprinted in Senate Subcomm. on Labor, Comm.
on Human Res., Legislative History of the Federal Mine Safety and Health Act
of 1977, at 602 (1978) (“Legis. Hist.”) (“[I]t is the intent of this
Committee that doubts be resolved in favor of inclusion of a facility within
the coverage of the Act.”).

24 FMSHRC 669, 674-76

The court in Watkins also held
that “in light of the explicit delegation of authority granted to the Secretary
in section 3(h)(1) to define milling, that the Secretary's definition of
milling was reasonable.” Watkins, 24 FMSHRC at 676 (citing In re
Kaiser Aluminum & Chem. Co., 214 F.3d 586, 592-93 (5th Cir. 2000)). The
court in Kaiser held that “the Interagency Agreement expressly includes
alumina plants within the jurisdiction of MSHA. Despite some general language
ceding regulation of ‘refining’ to OSHA, the Agreement could not be more clear
that ‘[p]ursuant to the authority in section 3(h)(1) to determine what
constitutes mineral milling ... MSHA jurisdiction includes ... alumina and
cement plants.’” Kaiser, 214 F.3d at 592 (citing Interagency Agreement
at 22,827).

I agree with the reasoning cited above and
find the Secretary's interpretation of “milling” under the Interagency
Agreement to be reasonable and entitled to deference.[6]

MSHA
has jurisdiction over Kerneos’ Chesapeake Plant

The issue now becomes whether it was
reasonable for the Secretary to conclude that the Chesapeake Plant is a “mine”
engaging in “milling.” Kirk concluded that the Chesapeake Plant should be subject
to MSHA's jurisdiction because they used alumina and lime materials and applied
milling processes such as grinding, crushing, sizing, kiln treatment, and
sintering to make cement. (Tr. 186:1 – 187:4) I agree with this assessment and
for the foregoing reasons find that the Interagency Agreement supports the
Secretary's determination the MSHA has jurisdiction over the Chesapeake Plant.

The
Respondent argues its Chesapeake Plant is the only calcium aluminate cement
manufacturing plant in the U.S. and is not a “mine” engaged in “milling.”
(Resp. Br. at 1; Tr. 248:5-7) Kerneos states that no material is extracted at
the plant and it does not handle raw, mined materials. (Id. at 1-2; Tr.
288:16-17) Kerneos argues that the materials used at the plant have “already
undergone significant chemical and physical changes through processes performed
at other facilities” and is “performing manufacturing of consumer-ready products
at its plant,” and therefore, there is no treatment of “the crude crust of the
earth.” (Id. at 2, 13; Tr. 288:13-15)

I
find these arguments unconvincing. The raw materials being sintered at the
Chesapeake Plant are alumina and quicklime. (Tr. 31:15-17; 255:23-24) Alumina
and lime are listed among the items that are under MSHA’s jurisdiction in the
Interagency Agreement. (Tr. 128:14-25; 44 Fed. Reg. at 22,829) Indeed, the
materials were included in the list codified by MSHA and OSHA even though both
alumina and lime are not “crude crust[s] of the earth” that require processing.

Kerneos also argues that it is not a
“cement” plant but is a “specialty” cement plant that makes calcium aluminate
cement. (Resp. Br. at 19)  Kerneos further establish that it is not a “cement”
plant by comparing itself to Portland cement plants, which are under MSHA’s
jurisdiction. It claims that its plant is smaller, uses a different type of
kiln, its raw mills are smaller, there are no preheaters, they do not perform
some of the processes that are listed on the Interagency Agreement,[7] and its
finished product differs substantially from Portland cement plants. (Resp. Br.
at 19-21; Tr. 204:2; Tr. 206:2-3; Tr. 207:1-6) These arguments are equally unconvincing.
The size of the plant, and its production and operation capacities does not
negate the fact that its processes are similar to the Portland cement plants,
and that its processes are listed in the Interagency Agreement. Additionally, stating
that the Kerneos plant is a “specialty cement plant” simply establishes that
the Kerneos plant is a “cement plant” that produces a very expensive product. (Tr.
276:8-13)

Goossens testified at the hearing that crushing
(Tr. 130:9; Tr. 132:9), grinding (Tr. 132:13-25; 134:3), sizing (Tr. 134:18-21),
sintering (Tr. 135:20), and kiln treatment (Tr. 136:19) all occur at the
Chesapeake plant. Graham Reid[8]
admitted at the hearing that at the Chesapeake Plant, the raw mill blends and
mixes and reduces the size of particles by grinding. (Tr. 295:21 –296:14)
He further admitted that sintering occurs in the rotary kiln. (Tr.
270:13-14; 296:19-21) Reid then admitted that from the kiln, the materials go
into a cement mill where a grinding process occurs. (Tr. 298:2-13) Reid
testified at the hearing that he does not think what Kerneos does with the air
separator fits under the sizing definition in the Interagency Agreement because
it is not a process that uses a screen. (Tr. 266:17 – 267:2) However, Reid
later admitted that the air separator cannot be removed out of the process
because the “particle size distribution would not be the same shape.” (Tr. 306:16-20)
This shows that the air separators at the Chesapeake Plant do in fact perform a
sizing function despite the Respondent’s arguments to the contrary.

Kerneos’ Chesapeake Plant is a cement
plant that mills lime and alumina and performs grinding, sizing, sintering, and
kiln treatment processes. It is a “mine” under MSHA’s jurisdiction as contemplated
in the Interagency Agreement. I conclude that the Kerneos Chesapeake plant is
subject to the jurisdiction of the Mine Act.

It is ORDERED that the parties
immediately confer regarding the possibility of settlement pursuant to 29
C.F.R. § 2700.53, and within sixty (60) days of the filing of this decision the
parties shall provide a status report to the court if a settlement has not been
reached.

/s/
L. Zane Gill

L. Zane Gill

Administrative
Law Judge

Distribution:

Thomas
Grooms, Esq., U.S. Department of Labor, Office of the Solicitor, 618 Church
Street, Suite 230, Nashville, TN 37219-2456

Margaret
S. Lopez, Esq., Ogletree, Deakins, Nash, Smoak & Steward, P.C., 1909 K
Street, N.W., Suite 1000, Washington, DC 20006

[1] At the time of
the hearing, Kirk had been employed at MSHA since 2003. (Tr. 102:20 – 103:1) Kirk
obtained a BS in civil engineering from the University of Delaware in 1969.
(Tr. 103:6-13) Kirk worked for Lehigh Portland Cement for approximately 30
years. (Tr. 103:16 – 104:2) Since Kirk began with MSHA in 2003, he has worked
in the safety division. His title at the time of the hearing was senior mine
safety and health specialist. As part of his job, he performs jurisdictional
investigations to determine MSHA jurisdiction over facilities. (Tr. 110:13 –
111:4)

[2] At the time of
the hearing, Goossens had been employed by MSHA since 2007 inspecting
metal/non-metal mines. (Tr. 20:16 – 21:4) He has been in the metal/non-metal
industry since 1972, approximately 42 years. (Tr. 21:8-22) Goossens received
his undergraduate degree from University of England, with a major in extractive
metallurgy, and concentrations in mathematics and mechanical engineering. (Tr.
22:5-8) Goossens began employment at Lafarge, Kerneos' predecessor, in 1989. (Tr.
23:3-4) Goossens worked for Lafarge from 1994-2005, and from 1994-1996 he was
the production manager. (Tr. 23:25 – 24:8) By 2003, Goossens was the plant
manager. (Tr. 115:9-11)

[3] At one point
the Chesapeake Plant was regulated by the northeast district, but was then
transferred to the southeast district. (Tr. 120:19-23)

[4] Etterer prepared
a report of her findings. (Tr.121:24 – 122:7)

[5] The interagency
agreement was originally reported in 39 Fed. Reg. 27,382 (1974), and the
current agreement is published in 44 Fed. Reg. 22,827 (1979).

[6] Kerneos argues
that the Secretary’s current interpretation, being in conflict with its previous
position, is entitled to considerably less deference. See Watt v. Alaska,
451 U.S. 259, 273 (1981); See General Electric Co. v. Gilbert,
429 U.S. 125, 143 (1976). I find this argument to be unavailing. Even if the
Secretary was given less deference in its interpretation of what constitutes “milling,”
I still find the Secretary’s interpretation to be reasonable.

[7] Concentrating
(Tr. 207:12), washing (Tr. 207:13-14), drying (Tr. 207:15-16), pelletizing (Tr.
210:8-10), and evaporation (Tr. 210:11-12) are some of the processes not used
at the Kerneos plant. This, however, is not relevant in my analysis of whether
the processes that are used at the plant are included under the Interagency
Agreement because “[m]illing consists of one or more of the […] processes” listed
in the Interagency Agreement. 44 Fed. Reg. at 22,829.

[8] At the time of
the hearing, Reid had been the plant manager at Kerneos’ Chesapeake plant since
2005. (Tr. 234:13-20) Reid has a master's degree in chemical engineering from
the University of Cambridge in England. (Tr. 236 :22-24) For the first six
years of his career, he worked for a chemical company called Imperial Chemica
in the UK, like DuPont in the U.S. (Tr. 237:4-10) Reid then worked for Lafarge
in London since 1999. (Tr. 238:17 – 239:2) He was promoted to production
manager in two and a half years, and then became plant manager when he was transferred
to Kerneos' plant in Virginia in 2005. (Tr. 239:9-25)