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Audit: DEP allowing company to issue reclamation bonds without the right certification

The state Department of Environmental Protection has allowed a bonding company to keep doing work without getting the required approval from the federal government.

A legislative auditor’s report released Tuesday says First Surety Corporation issued mine reclamation bonds for 13 years for several mining companies around West Virginia totaling $47.8 million.

First Surety Corporation also issued reclamation bonds to companies owned by Gov. Jim Justice’s family. All told, Bluestone Coal Corporation, James C. Justice Companies, Justice Highwall Mining Inc., Kentucky Fuel and Nufac Mining Company had $8.9 million worth of bonds through First Surety Corporation — about one-fifth of the total.

At issue was whether the bonding company had received its certificate of authority from the U.S. Department of the Treasury required to issue reclamation bonds in West Virginia (a process referred to as being “T-Listed”).

These bonds ensure coal companies won’t be let off the hook from cleaning up the mined land. The audit comes as the coal industry continues to be eclipsed by natural gas and renewable energy, leaving coal miners to demand funding for pensions and, in Kentucky, paychecks from their now-bankrupt employer.

An investigation earlier this month by the Center for Public Integrity found that of the country’s 415 currently idled coal mines and related facilities, half are in Central Appalachia. Half of the mines idled for more than three years are also in Central Appalachia, the Center for Public Integrity found.

The Governor’s Office didn’t respond to a request for comment. Neither did First Surety.

The legislative auditor also noted a series of issues surrounding First Surety Corporation’s financial standing, including a state Offices of the Insurance Commissioner examination report that said the company had paid dividends that could pose a threat to the company’s financial health.

“These areas of concern, together with the fact that First Surety Corporation is the surety for $47.8 million in mining and reclamation bonds, should prompt the DEP to closely monitor First Surety’s potential to fulfill their surety obligations in the event of one or more bond forfeitures,” the legislative auditor’s report says.

In response, the DEP will rewrite its own rule, said Jason Wandling, general counsel for the DEP.

“It’s a little complicated, to be sure. First, the agency will propose a new version of this rule that will make it clear that, in the future, T-listing will be a requirement for posting surety bonds,” Wandling wrote in an email to Doren Burrell, an attorney for the legislature. The email was made public in the audit.

Tuesday in a legislative interim committee, Wandling told lawmakers the DEP had simply interpreted the rule differently, but the agency planned to rewrite the legislative rule to accommodate First Surety and make sure that all reclamation bonds get certified by the Department of Treasury starting in 2021.

West Virginia is the only state that requires surety bonds be T-Listed, Wandling noted. According to the audit, surety bonds comprise about $956 million of the state’s $982 million in active mining and reclamation bonds issued to the state.

Senate President Mitch Carmichael, R-Jackson, asked if the DEP realized First Surety bonds weren’t T-Listed at all.

Wandling said the agency was aware — the agency just thought there were two different avenues by which a company could submit surety bonds to the state, one of which didn’t require being T-Listed.

“I’m at a loss as to how you obtained that understanding, but I accept that you have to say that,” Carmichael said.

But to an outsider, Carmichael said, it looks like the DEP didn’t follow the rule.

“We didn’t comply with the rule, and now we’re changing the rule. It’s like you’re speeding and you get caught speeding and you just change the speed limit,” Carmichael said.

Wandling had a different interpretation.

“I like to think of it more as, maybe you were speeding, maybe the agency wasn’t, but we’re going to make sure that rule for the speeding was black and white,” he said.

Reach Kate Mishkin at kate.mishkin@wvgazettemail.com, 304-348-4843 or follow @katemishkin on Twitter.

Funerals for Wednesday, October 23, 2019

Ball, Sherman - 2 p.m., Spencer Chapel United Methodist Church.

Clay, Karen - Noon, Koontz Funeral Home, Hamlin.

Clonch, Daniel - 1 p.m., O'Dell Funeral Home, Montgomery.

Harvey, Joseph - 11 a.m., Donel C. Kinnard State Veterans Cemetery, Dunbar.

McClung, L. Bruce - Noon, Aldersgate United Methodist Church, Charleston.

Mills, Ambra - 1 p.m., Leonard Johnson Funeral Home, Marmet.

Pitsenbarger, Cindy - 7 p.m., Solid Rock Worship Center, Oak Hill.

Sowards, Teresa - 1 p.m., Keller Funeral Home, Dunbar.

Stilwell, Jason - 3 p.m., Strange Creek Cemetery, Strange Creek.

Vacheresse, Robert - 12:30 p.m., procession to leave Barlow Bonsall Funeral Home, Charleston.

Vaughan, Darlene - 10 a.m., Cross Lanes Baptist Church, Cross Lanes.