One of Kentucky's largest surface coal-mining companies has agreed to pay $575,000 in a case that involved thousands of alleged instances of fraudulent or improper water-pollution discharge reports.
International Coal Group, or ICG, has reached an agreement in principle with the state and environmental groups to settle claims against the company, according to a status report on the lawsuit the state Energy and Environmental Cabinet filed this week in Franklin Circuit Court.
The report said ICG would pay Eastern Kentucky PRIDE $335,000 to rid homes of illegal "straight pipe" sewage discharges, which have fouled water quality in some areas of Eastern Kentucky.
ICG also will pay the state $240,000 to assess the impact of surface mining on waterways.
The deal does not resolve claims against a second coal company in the case, Frasure Creek Mining. Frasure Creek said in a court document that it can't afford to pay a penalty as large as the environmental groups want.
It is unclear how that part of the lawsuit will be resolved.
The deal with ICG, if approved in court, would end its part of a controversy that came to light in the fall of 2010.
That was when environmental groups announced they had discovered widespread problems with water-pollution discharge monitoring reports from ICG and Frasure Creek.
Coal companies must monitor pollutants coming from surface mines and report the data to the state, which is supposed to investigate if pollutants exceed certain levels.
The groups said in reviewing reports from ICG and Frasure Creek from 2007 and 2008 they found cases of mineral discharges exceeding legal limits by up to 40 times. There also were forms signed by supervisors before tests were actually done, data copied and pasted from one quarter to the next, and testing dates scratched out and rewritten. Some reports were missing.
The groups argued the reports were falsified and that Kentucky was not doing a good job reviewing them for violations.
A Kentucky official later acknowledged the state had not done enough to make sure mining companies were submitting accurate information.
Appalachian Voices, Kentuckians for the Commonwealth, Waterkeeper Alliance, Kentucky Riverkeeper and four individuals filed notice of intent to sue the companies for 20,000 alleged violations of the federal Clean Water Act.
In a subsequent review, the state said it found more than 2,700 instances of poor record-keeping but no evidence of fraud by the labs hired to test water for the coal companies.
The lawsuit by the environmental groups prompted new state standards on water-testing labs, however.
The state cited the companies and worked out a plan for them to make improvements and pay a total of $660,000.
The environmental groups successfully sued for the right to intervene in the settlement, arguing among other things that the penalty was too low to deter companies from submitting false data.
The attorney for Appalachian Voices, Lauren Waterworth, said the groups can't comment because a final agreement has not been submitted, but they remain optimistic there will be an agreement with ICG.
R. Bruce Scott, commissioner of the state Department for Environmental Protection, said Thursday the settlement agreement affirms the state did a good job assessing penalties in the case.
The initial fine was $310,000 against Frasure Creek and $350,000 against ICG.
Violations assessed since December 2010 have brought ICG's total to $575,000, Scott said, which is what ICG would pay under the agreement.
The state has since assessed additional fines of an undisclosed amount against Frasure Creek as well, but that company's financial status complicates the effort to settle the case. The company has said it lost a major contract with a utility and is not mining in Kentucky, though it is keeping up its reclamation obligations.
Frasure Creek faces more than 70 lawsuits, many from creditors, and plans to sell all its Kentucky assets, the company said in its status report.
Resolving the water-monitoring violations would help the company in its effort to restructure, but no deal has been possible because the environmental groups "are demanding a ransom Frasure Creek can't pay," the company said in its report to the court.
Scott said the state wants to make sure reclamation is completed on Frasure Creek's mines.
Settling its outstanding violations would help in that effort, Scott said.