A lawsuit that raised concerns about the financial health of West Virginia’s surface coal mining reclamation program and outlined evidence of a state reclamation bonding shortfall is no more, but the concerns remain.
A day after the state Department of Environmental Protection on Dec. 30 notified the federal Office of Surface Mining Reclamation and Enforcement of a substantial change in its special reclamation fund, as required by federal law, three environmental groups agreed to dismiss their lawsuit against the department in the U.S. District Court for the Southern District of West Virginia that had asked the DEP to do just that.
The complaint was from the Ohio Valley Environmental Coalition, the West Virginia Highlands Conservancy and the Sierra Club. It stemmed from the Surface Coal Mining and Reclamation Act, under which the federal government allows states to regulate their own surface coal mining and reclamation operations while the OSMRE maintains some oversight to keep state programs in compliance with the federal law, enacted in 1977.
The environmental groups argued that the DEP should have informed the OSMRE that some permit holders have or will become insolvent. Failing to advise the feds violates the Reclamation Act’s mandate that states notify the Surface Mining office of “a significant change in funding or budgeting,” the environmental groups claimed, fearing that permit holders slipping into insolvency could overwhelm the DEP’s bonding system.
In March, the DEP sued in Kanawha County Circuit Court to appoint a special receiver to assume the responsibilities of ERP Environmental Fund Inc., a company that acquired more than 100 mining permits following Patriot Coal Corp.’s bankruptcy in 2015.
ERP laid off all its employees and management as of March 20 and ceased operations, leaving its mining sites abandoned and public health and safety threatened, according to the DEP motion.
The DEP reported that the costs of reclaiming and remediating ERP’s sites totaled more than $230 million.
Indemnity National Insurance Co., which issued about $125 million in surety bonds backing ERP’s obligations under its mining permits, agreed to provide $1 million in funding to Doss Special Receiver LLC to fund its operations for an initial period of 90 days, leaving a $114- to $229-million deficit between reclamation costs and available money, depending on the DEP’s ability to collect ERP’s bonds.
The agency said the state Special Reclamation Fund would assume responsibility for reclaiming and remediating all of ERP’s mining sites, the environmental groups’ complaint says. That could potentially “overwhelm the fund both financially and administratively,” with many of ERP’s sites “expected to begin to threaten imminent and identifiable harm to the environment and the public health and safety,” according to the complaint.
“It is a bittersweet victory when a citizen lawsuit forces [the] DEP to do its job,” said Vivian Stockman, executive director of the Ohio Valley Environmental Coalition. “One would prefer that [the] DEP and politicians — of their own accord — would address the fact the Special Reclamation program is long-broken and wholly inadequate to address the toxic messes we face as more companies go bankrupt as the nation continues to reduce its reliance on coal-fired electricity.”
“This is the result we were seeking in our lawsuit, so we’re happy the DEP came around on the issue,” Sierra Club senior attorney Peter Morgan said. “We’re hopeful that the DEP’s submission to the federal OSM will initiate a conversation about the real danger the state of West Virginia is in from the state of the coal industry and the failure of [the] DEP to prepare for the time that we’re in where coal mining is really slowing down.”
Terry Fletcher, the DEP’s acting communications director, declined comment.
A report released last week by the Reclaiming Appalachia Coalition, a regional collaboration aiming to redevelop communities across the region through mine reclamation projects, said the cost of reclaiming at least 490,000 acres of mined land in West Virginia, Kentucky, Ohio, Virginia and Tennessee might amount to $6 billion. That’s far more than the $2.5 billion the report says those states have in available bonds based on a review of state and federal data.
Blackjewel’s shutdown of 32 coal mines across four states, mainly in Kentucky but also in West Virginia, amid the company’s bankruptcy proceeding has left behind mining-linked messes and questions about where the funding will come from to clean them up as other coal companies follow Blackjewel into bankruptcy.
“That has caused a lot of concern, in particular among the surety-line providers who are potentially going to have to pay out hundreds of millions of dollars to pay for the cleanup of those abandoned mines,” Morgan said.
Indemnity National Insurance, which had backed ERP Environmental’s obligations, also provided bonding for Blackjewel properties.
“So, even without a lot of coal mines for Blackjewel in West Virginia, the major mine abandonments for Blackjewel are going to have ripple effects across the industry because of what it could do to the surety bond providers,” Morgan said.
Morgan suggests the DEP and regulators in other states acknowledge the funding gap more openly, pressure mine operators to increase their reclamation and minimize the burden the state will have to bear when it becomes responsible for abandoned permits, and go after whatever assets they can to put toward reclamation.
“One of the fundamental realities is the mining industry is never going to have more resources than it does right now,” Morgan said. “There’s not much road left to kick the can down.”