Kentucky's two largest surface coal mine operators will pay $660,000 to the state because of violations found at labs that test water discharged into streams.
In addition, the state is expanding its audit into about two dozen other laboratories that contract with the coal industry. Gov. Steve Beshear on Friday called for the labs to be certified by the state, something required for labs that test drinking water but not for coal industry-specific labs.
After four environmental groups filed federal notices of intent to sue ICG of Hazard and Knott County and Frasure Creek Mining, the state Energy and Environment Cabinet began auditing the companies' water discharge monitoring reports. The environmental groups had reviewed two years' worth of discharge monitoring reports and on Oct. 7 accused the companies of falsifying data and polluting the state's waterways.
The companies and the state had 60 days to review the groups' accusations. In court documents filed Friday, the 59th day, the Energy and Environment Cabinet said it found no evidence of intentional fraud but did find lax procedures and documentation at the two labs.
The state's review found seven instances of discharged pollutants exceeding acceptable levels, but officials acknowledged that they can't trust the data.
"We can't say with 100 percent certainty" that the companies aren't polluting, said Bruce Scott, Kentucky's commissioner for environmental protection.
Donna Lisenby of the group Appalachian Voices, which filed the notice of intent to sue the companies in October, noted that the state already has the power to require companies to have water tested out of state at labs certified by the Environmental Protection Agency, if no such labs exist in Kentucky. The coal companies are legally responsible in Kentucky for overseeing discharge testing, regardless of who does the work.
"Any attempt to deflect responsibility away from these companies and scapegoat the labs ... is unfounded and unjustified," Lisenby said.
In an interview, state officials also acknowledged that surface mine regulators haven't kept up with reviewing monitoring reports, some of which the environmental groups said were simply photocopied or partially forged from month to month.
Surface mine regulators receive the reports and are supposed to screen them for violations before they are handed over to the Department of Environmental Protection.
"We will ramp up that effort," Energy and Environment Cabinet Secretary Len Peters said.
Officials at ICG plan to work with the state to create a certification program for water testing laboratories, spokesman and general counsel Roger Nicholson said. He said the company conducted its own investigation of records going back five years, when ICG acquired the permits in question.
"The investigations did not find evidence of actual on-the-ground violations of water quality standards, and the sites at issue enjoy a good compliance record for meeting water quality standards," the company said in a statement.
ICG said the state found violations in less than 1 percent of its reports.
The state's investigation found one site, Frasure Creek's West Lick Mine on Hurricane Branch in Perry County, where water quality was affected by the poor tests.
Frasure Creek agreed to submit a plan to mitigate damage there.
ICG called the problems "technical reporting errors" at the laboratories it contracted with, S&S Water Monitoring in Johnson County and Geological Services & Labs in Hazard. Officials at S&S didn't return a phone message Friday, and no one at GSL could be reached.
Frasure Creek officials also didn't return a phone call Friday afternoon.
The New York-based Waterkeeper Alliance speculated in October that each of the violations it found could have netted a penalty of $37,500 for more than 20,000 violations it found in its review, which would add up to about $750 million. Lisenby called the $660,000 settlement for about 3,000 violations the state found "a slap on the wrist."
The Waterkeeper Alliance had joined with North Carolina-based Appalachian Voices, Kentuckians for the Commonwealth and Kentucky Riverkeeper of Berea in reviewing discharge monitoring reports and filing the notice of intent to sue.
Lisenby said the groups are continuing their review of other companies' discharge monitoring reports and will watch the state's actions.
The state filed its lawsuit and settlement agreement Friday in Franklin Circuit Court ordering Frasure Creek Mining to pay $310,000 and four subsidiaries of ICG — East, Knott County, Hazard and Powell Mountain Energy — to pay a total of $350,000.
The money will go to the state's Heritage Land Conservation Fund.