Regulators: Environmental violations remain at coal mines of bankrupt KY producer
Companies that bought coal mines from a bankrupt Kentucky producer still have outstanding environmental citations, fees and fines more than a year after the sale, blocking them from receiving mining permits, according to state and federal agencies.
Regulators cited an affiliate of one of the companies, American Resources Corporation, for a violation in December in which the company allegedly allowed polluted water to drain into a stream from an underground mine in Pike County.
The iron content of the bright-orange water was so high inspectors couldn’t measure it with a device they use in the field, according to an order from the U.S. Office of Surface Mining Reclamation and Enforcement (OSMRE).
The discharge at the McCoy Elkhorn Coal LLC mine was causing “significant, imminent environmental harm,” according to the violation notice.
Representatives of American Resources and a company attorney did not respond to a request for comment. The Kentucky Energy and Environment Cabinet said the company was treating the water to fix the problem.
American Resources also said in a court document that it has made significant progress on fixing reclamation violations at mines in Kentucky and Indiana, where it is based.
The violations have been an issue in the bankruptcy of Cambrian Coal.
Cambrian was a major coal producer at one time, with operations in Eastern Kentucky and elsewhere in Central Appalachia.
Like several other coal companies, however, it foundered as demand for coal slumped in recent years because of several factors, including competition from natural gas for power plant customers, competition from renewable energy sources, and a push for tougher environmental rules.
Cambrian filed for bankruptcy in June 2019.
Three companies were approved to buy Cambrian’s permits in September 2019, but are still working to try to complete the transfers. The companies are American Resources; a venture called Clintwood JOD LLC; and Pristine Clean Energy LLC.
Dozens of violations
Regulators included information about outstanding violations and unpaid fees and fines against the three companies in a recent court motion in Cambrian’s bankruptcy.
Michael C. Castle, director of the OSMRE field office in Lexington, included a list with an affidavit he swore out on Feb. 2 that showed the companies all had numerous outstanding violations — more than 50 for American Resources, 125 against Pristine and 169 for Clintwood JOD.
The December violation notice against McCoy Elkhorn Coal said inspectors found “opaque, orange-colored water” coming out of a seal at the underground mine and running down a slope and into a creek in mid-December.
There also was what appeared to be polluted water draining from another seal.
The discharges stained a two-mile section of the creek, according to the state Energy and Environment Cabinet.
State records indicate that McCoy Elkhorn had been cited for prior alleged violations at the mine on October 2019 and January 2020, when inspectors said polluted water had stained a mile or more of the creek each time.
In June of 2020, inspectors said structures designed to treat runoff from the mine had been neglected since the fall of 2019.
A violation notice said a state biologist had studied an affected stream and it was “deemed as ‘killed’ of aquatic species.”
Regulators proposed fines of nearly $60,000 in January and June 2020, records show.
In December, inspectors issued what is called a cessation order directing McCoy Elkhorn to fix the iron-laden discharge.
Federal rules bar coal companies from getting new permits or modifying existing ones if they have outstanding violations. That is called being “permit blocked.”
American Resources, Clintwood JOD and Pristine are all permit-blocked because of outstanding violations, federal officials said in court filings Feb. 2.
Because of that, the three companies can’t complete the transfer of permits from Cambrian required to conduct mining, federal and state regulators said.
‘Environmentally damaging’
The Kentucky Energy and Environment Cabinet said in a statement released this week that American Resources, called ARC, has alleged that the cabinet is preventing the company from resuming mining at its complex in Perry County.
The reality is that the company’s failure to comply with environmental rules is the roadblock, the cabinet said.
“ARC and its owned subsidiaries have environmentally damaging and unabated violations in Kentucky,” the cabinet said in a statement. “Due to these unabated violations, the EEC cannot issue operating approval for ARC or any entity affiliated with the company.”
The cabinet said it has been working with the company to get the violations resolved and open a path to resuming operations.
Mark Jensen, chief executive officer of American Resources, said in a Feb. 4 affidavit that the company has had at least four crews working over the last year to reclaim mines and correct violations in Eastern Kentucky.
Jensen said in a news release in mid-December that American Resources anticipates being able to generate at least $55 million in revenue this year, much of it from the Perry County mine, but also some from a division it set up to recycle metal at mines and another focused on extracting rare-earth minerals.
In some cases, the outstanding citations against the companies don’t involve on-going environmental problems, but rather a failure to pay fees and fines.
The three companies said in court documents that they have either paid those obligations or are making arrangements to pay in order to finish getting Cambrian’s permits transferred to them.
William K. Abraham, managing partner of Pristine Clean Energy, said in a court document that the company had submitted all applications needed to finalize the transfer of the Cambrian permits it bought and would pay the required application fees by Feb. 12.
The company has set up a deal to pay outstanding fees and will pay fines or negotiate to reduce them, Abraham said.
Christopher Stanley, general manager of Clintwood JOD, said in an affidavit that the company was working to get permits transferred.
Jensen said in a Feb. 4 affidavit that the company has submitted all the applications and fees necessary to finalize the permit transfers and would arrange to pay outstanding fees and pay or negotiate settlements on fines.
The company faced accusations several times during the bankruptcy of not paying costs it agreed to pay, and employees who said the company had shorted them blocked a coal shipment in Pike County early last year.
More recently, however, American Resources has made good on its financial obligations in the bankruptcy and paid a company for bonds to cover reclamation work at mines, according to a court document filed by Patricia Burgess, an attorney for Cambrian, and attorneys representing unsecured creditors.
Burgess said in a court hearing last week that Cambrian and other parties to the bankruptcy had agreed on a plan to wind up the liquidation of the company.
