Coal company agrees to pay $219,000 in penalties, fix environmental violations in KY
A coal company in Eastern Kentucky has agreed to pay more than $200,000 in penalties and fix environmental violations covered by citations that had been pending more than two years in some cases.
The deal clears the way for coal production at an American Resources Corporation mine in Perry County, where the company had been blocked from operating on the permit because of the outstanding violations.
American Resources, or ARC, said in a March 30 news release that it had begun shipping coal from the mine, which operates under a subsidiary called Perry County Resources.
The company declined comment on how many employees it has at the mine, but said in the release it ultimately will have more than 170 workers when it builds production to a target of 1 million to 1.5 million tons a year.
Hiring that many miners would be a welcome development in a region where coal jobs began evaporating nearly a decade ago, hobbling the economy. It’s unclear how long it will take the mine to build to that level of production and employment.
The mine had 13 employees in the fourth quarter of 2020, according to the U.S. Mine Safety and Health Administration. The MSHA database lists no coal production from the mine in 2020, when it was idled during the novel coronavirus pandemic, and only 179,266 tons in 2019.
That was the year prior controller Cambrian Coal, once a major producer in Central Appalachia, declared bankruptcy.
The last time the mine produced more than 1 million tons of coal was in 2011, according to the MSHA database.
American Resources, which is based in Indiana, bought permits to former Cambrian mines in September 2019, but was blocked from getting new permits at the time because of unpaid penalties and alleged environmental and reclamation violations that state and federal regulators had cited.
Outstanding violations
The citations charged a range of violations, including not reclaiming land as required, failing to clean out ponds designed to keep sediment out of streams and allowing polluted water to drain from mines.
A state inspector said in one citation that a failed drain at an ARC subsidiary’s mine in Knott County had allowed water to run across a woman’s property, caused a landslide above her home and created the potential for a sudden blow-out of water.
The initial sales agreement filed in bankruptcy court said ARC was not blocked from getting mine permits.
The company’s attorney, Billy Shelton, later said in a court document that an attorney for Cambrian apparently filed that document by mistake, but later filed a corrected sales agreement with the court indicating ARC was blocked.
American Resources officials did not make a representation to the court that was false, Shelton said.
Bankruptcy Judge Gregory R. Schaaf said in a May 2020 order that American Resources had reneged on a number of agreements to pay liabilities it assumed to get the Cambrian permits, including employee wages and workers’ compensation insurance.
American Resources and Perry County Resources showed a pattern of “reaching agreements they quickly violated,” Schaaf wrote.
The companies made the payments required under Schaaf’s order, but remained blocked from getting new permits for more than a year after agreeing to buy the Cambrian permits.
In May 2020, state regulators said in a court document that ARC had “taken little to no actions” to fix violations on its permits.
However, in late February, Mark Jensen, chief executive officer of American Resources, told a Kentucky Senate committee that the company had made significant headway in abating violations.
The company needed permission to mine because it had a contract to sell coal from the E4-2 mine near Hazard to a steelmaker in Canada, Jensen said.
He urged legislators to push the state Department of Natural Resources to let a contractor mine under the permit ARC bought from Cambrian.
‘Failure to comply’
The state had not allowed the contractor to mine because of ARC’s outstanding violations.
Gordon Slone, Natural Resources commissioner, told legislators that ARC’s “failure to comply with mining laws” was the reason miners weren’t producing coal at its Perry County mine.
The committee asked regulators to try to work out something with the company.
The state Energy and Environment Cabinet filed an agreement last week to resolve the issue.
American Resources agreed to pay $219,320 in penalties, with an initial payment of $39,320 and 12 installments of $15,000 each.
The agreed order listed more than 40 notices of non-compliance or cessation orders issued to ARC subsidiaries Knott County Coal, Samuel Coal, McCoy Elkhorn Coal and Deane Mining.
The deal requires ARC to post an additional reclamation bond of $500,000 and to abate outstanding violations.
In entering into the order, Gov. Andy Beshear and Energy and Environment Secretary Rebecca Goodman took into account the need to balance protection for miners and the environment with the need to preserve coal jobs, according to a statement from the cabinet.
As long as ARC is in compliance with the agreement, it is considered as being in the process of fixing environmental problems.
That means its violations are now listed as conditional, rather than outstanding, so it is not blocked from getting permits.
“With the permit blocks being removed, the cabinet’s objections to mining on the permits was resolved,” the Energy and Environment Cabinet said in the statement.
Pending challenge
The cabinet said it routinely signs agreed orders with companies to resolve violations.
It had not historically signed a deal for a company to abate violations like some of those at issue with ARC, but the U.S. Office of Surface Mining Reclamation and Enforcement told the state that was an acceptable way to resolve those kinds of violations, the cabinet said.
American Resources reached a similar deal over violations at a mine in Indiana.
Company officials did not respond to a question on why ARC didn’t fix the violations sooner, other than to say no comment.
The state can take a number of steps if American Resources doesn’t comply with the agreement, including stopping mining on its permits, reinstating the permit block in the federal system, and taking the $500,000 bond.
The agreement does not resolve all conflicts related to permits ARC bought in the bankruptcy.
Hazard Coal Company, which had leased coal to a Cambrian subsidiary, has argued that the permit transfer to American Resources was not valid.
The fact that American Resources said it was not blocked from getting new permits when Schaaf initially approved the sale, when in fact it was, was fraudulent, Hazard Coal attorneys Stan Cave and Daniel T. Logsdon said in court documents.
“The bottom line is that there was no approved sale of mining properties, mining permits” and the Hazard Coal lease to American Resources, Hazard Coal argued.
Shelton, American Resources’ attorney, has said the company did not engage in fraud and that the lease at issue was legitimately assigned to the company.
That case is pending.
