State

Kentucky coal helped W.Va. governor prosper. Now a bitter fight over the aftermath.

The coal industry has shed thousands of jobs. Many large companies declared bankruptcy during the downturn, but West Virginia Gov. Jim Justice has not.
The coal industry has shed thousands of jobs. Many large companies declared bankruptcy during the downturn, but West Virginia Gov. Jim Justice has not. AP

West Virginia Gov. Jim Justice and coal companies associated with him have shirked property taxes, lied in lawsuits and failed to complete a 2014 deal to fix hundreds of mining reclamation violations in Kentucky, state regulators have charged in a court motion.

The state is asking a judge to order Justice to pay a $2.99 million penalty outlined in the deal.

The agreement makes Justice and his son, Jay Justice, personally liable for financial commitments it covers.

The state’s motion was in response to one from Justice arguing that state officials have acted inappropriately.

State employees tried to interfere with lease arrangements between the companies and landowners, and have stymied Justice-company efforts to fix reclamation violations, Justice’s attorneys alleged in a motion.

“They’ve impeded us wrongfully,” said Richard A. Getty, a Lexington attorney who represents the Justices and their companies along with Danielle H. Brown, who is in Getty’s firm, and Billy R. Shelton, also of Lexington.

The state’s point of view on that? Justice companies “habitually blame others for their own bad debts and breached agreements,” attorneys for the Energy and Environment Cabinet said in a motion.

The harsh broadsides between the state and Justice raise questions about whether they can settle the court fight.

Franklin Circuit Judge Thomas D. Wingate had the two sides take part in mediation, but they did not reach an agreement.

Wingate ordered a second attempt at mediation, but the state asked him to cancel it, arguing it won’t work because of the Justices’ hostility toward state employees.

However, at a hearing Monday Wingate ordered the two sides to hold another mediation session in September.

If that doesn’t work, the alternative would be for Wingate to order a resolution.

Companies owned by Jim Justice were facing fines of nearly $4.5 million for more than 500 environmental and reclamation violations when he and his son worked out a settlement in August 2014.

Justice agreed to post a $10.6 million bond to guarantee completion of the reclamation work. For its part, the state agreed to drop the fine to $1.5 million.

The violations were mostly at surface mines, but also some underground mines, in Harlan, Knott, Pike, Leslie, Letcher, Breathitt, Magoffin and Floyd counties.

The deal called for a wide range of work to reclaim mined areas, including cleaning out sediment ponds, stabilizing landslides, fixing drainage problems and monitoring water quality.

One particular problem was unreclaimed highwalls — cliffs created when a coal company cuts into the side of a mountain to uncover a seam of coal.

Federal law requires restoring the approximate original contour of the slope, but there was a highwall more than a mile long and 80 feet high at one Justice job in Harlan County, as well as others.

Justice owned the coal companies included in the settlement, but has since switched most to his son and daughter.

The deal called for finishing the work by Sept. 1, 2015.

Justice posted the required bond and paid the $1.5 million fine, but missed the deadline to clear up all the reclamation violations, leading to the state lawsuit that has now been going on nearly three years.

Justice was elected governor of West Virginia as a Democrat in 2016 but later announced at a rally with President Donald Trump that he was changing his registration to Republican.

Forbes estimated Justice’s net worth at $1.9 billion this month. In addition to coal and agricultural interests, he owns The Greenbrier, a historic resort in West Virginia.

Justice’s point of view is that he inherited many of the violations covered in the settlement when he bought a bankrupt coal company in Eastern Kentucky.

Justice said he has worked steadily to correct nearly all the problems, spending millions in the process despite a tough time for the coal industry.

The industry has shed thousands of jobs in Eastern Kentucky since 2011. Many large companies declared bankruptcy during the downturn, but Justice has not.

A new study shows in stunning visuals the impacts of surface coal mining in Eastern Kentucky

As of mid-August, Justice had six unresolved non-compliances on five mine permits covered in the original settlement, according to the Energy and Environment Cabinet.

That’s a small number compared to the hundreds of violations included in the settlement, but the cabinet said the remaining non-compliances account for a large amount of the work.

Justice has yet to reclaim about 2.5 miles of highwalls, for instance.

Justice’s attorneys argue that improper conduct by state employees has blocked progress on reclamation.

A state inspector refused to meet with the Justice companies’ chief engineer to discuss resolving an issue at one point, for instance, according to a motion.

State employees also allegedly have encouraged landowners to file objections to Justice mining permits.

In one case, a state supervisor encouraged a man to file a permit objection even though the permit had been approved on technical grounds, and enacting it would have meant revenue for him, Justice-company attorneys said in a motion.

“It is unfortunate that those who purport to work for all Kentuckians are so single-minded in their determination to bring down the Justices,” their attorneys said in a motion.

Company attorneys asked Wingate to admonish state employees to treat the Justices fairly.

From the state’s view, the idea that regulators are out to get the governor, his son and family companies is hogwash.

Inflammatory statements by Justice’s attorney “are patently false and a feeble effort to attempt to deflect attention from the Justice Companies’ persistent failure over many years” to meet their reclamation obligations, said John Mura, spokesman for the Energy and Environment Cabinet.

The state is merely trying to enforce the agreement so that land in Eastern Kentucky will be reclaimed properly, state attorneys have said in court motions.

State employees’ contacts with landowners involved in leases with the Justices have been aimed at protecting the landowners’ rights, state attorneys said.

State employees have refused to meet with Justice-company employees alone to avoid getting sued, not to block progress on reclamation work, state attorneys Lance Huffman, Jeffrey Harmon and John S. West said in one response.

They pointed to lawsuits a Justice company, Kentucky Fuel, filed last year against Allen Luttrell, who was then commissioner of Department for Natural Resources, and John D. Small, the current commissioner.

Kentucky Fuel alleged the two took actions that interfered with its efforts to get mines reclaimed.

Small, for instance, stopped work on a site at one point because Kentucky Fuel did not have workers compensation insurance in place as required, according to court documents.

Justice said the contractor on the job had insurance, so the stop order was not justified.

The state’s attorneys argue the lawsuits against Small and Luttrell are based on lies, with the real motive being to intimidate state workers and try to force the state into re-negotiating the 2014 deal on terms more favorable to the Justices.

Because of the lawsuits and threats of more, state employees have been instructed not to meet with Justice representatives without a state lawyer present, according to a state motion.

Justice’s attorneys have argued Small and Luttrell acted outside their authority, justifying the lawsuits.

The state said it doesn’t trust Justice to finish work under the 2014 deal.

Justice companies have let leases expire in Kentucky, been sued in West Virginia for allegedly writing cold checks to pay employees, and failed to pay property taxes on time in several Kentucky counties, state attorneys said.

Even Shelton, one of Justice’s lawyers in the current case, sued him and several of his coal companies in 2013 alleging that they’d stiffed him for $85,000 in legal fees, state attorneys said.

A check earlier this month showed companies linked to Justice owed more than $2.5 million in delinquent property taxes to several Kentucky counties and the state.

Getty said Justice companies are working to make good on the tax debts despite their financial difficulties.

And Justice’s lawyers said the vitriol in the state’s most recent state court motion prove some state employees are out to get the Justices.

The state filed a proposed order requiring Justice to pay the $2.99 million penalty. It also would have let the state revoke the five permits still at issue and forfeit performance bonds on the sites, meaning the state would hire someone else to finish the work.

Wingate did not sign the order.

Justice’s lawyers have argued for more time to complete the work required under the 2014 deal.

That deal was unworkable from the outset, but Justice signed it because of assurances from state officials that they would extend deadlines for finishing the work as long as he was making progress, his attorneys said.

The state, however, has argued Justice knew what the deal involved and has shown no valid reason to change it.

“The Justice Companies mined Kentucky coal and profited from it. But they have dragged their feet for years in meeting their obligations to restore the land,” Mura said. “The cabinet is merely asking the court to enforce the agreement that the Justices signed, then breached.”

Idle coal conveyors
Conveyors to move coal stand idle at a Kentucky Fuel Corporation underground mine in Knott County. Bill Estep bestep@herald-leader.com

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