By Taylor Kuykendall

This article is part one of a two-part series on various legal actions brought against the coal supply chain. Part one focuses on environmentalists' efforts to keep coal in the ground.

While the market continues to batter the coal sector and legislative relief from regulatory pressures seems increasingly distant, coal companies also increasingly find themselves waging expensive battles in the nation's courtrooms.

Traditional environmentalism often focused on the local and visible effects of industry, however, the current so-called "war on coal" is both a ground and air battle, with groups simultaneously fighting supply and demand-side dynamics of the coal business.

Bruce Nilles, senior campaign director of the Sierra Club, told SNL Energy that the campaign files a legal appeal roughly every three days — including holidays and weekends — against everything from new and existing coal plants right down to the mine itself. The group is even attacking the industry's means of transport with lawsuits against the railroads that move coal around the country and the ports that move it abroad.

“Litigation is the first line of attack for the [environmental non-government organizations] and the last line of defense for our industry.”

 Luke Popovich, spokesman, National Mining Association

"Litigation is the first line of attack for the [environmental non-government organizations] and the last line of defense for our industry," said National Mining Association spokesman Luke Popovich. "Much of the litigation against mining, funded generously by foundations and donors typically far removed from the mining regions, is enormously wasteful and short-sighted."

Popovich told SNL Energy that energy and mineral resources are "essential" and what is not produced here for domestic needs will be produced elsewhere, often where environmental regulations are "likely to be less comprehensive and standards less strict."

Nilles said the campaign's intense legal strategy against the industry has been an "integral" part of the organization's efforts since the early days of the group's work in 2002 and 2003. Environmental groups have seemingly attacked coal at every misstep: pieces of coal falling from the trains transporting the coal, orange clouds emitted from blasting surface mines, federal leasing practices and damage from long abandoned mines have all been ripe for litigation or other forms of action against the industry.

"The focus on most instances has been around the fact that at each step of the coal lifecycle — whether it's the mining or the burning or the coal ash disposal or even the railroad shipping the coal — we have found case after case where the state and federal regulators are either unable or unwilling to do their jobs and protect the public," Nilles said. "It's really stepping into their shoes when the regulators either lack the resources or they lack the political will in many cases to step in and enforce our nation's state and environmental laws."

Much of the attention on the Sierra Club's strategy has been focused on its climate-driven efforts to shut down the nation's coal-fired power plants — the result of a "robust process" featuring an extensive database of plants and boilers in which staff take a "fine-tooth comb" through federal and state permits. However, environmentalists have also conducted extensive work that is a thorn directly in the side of the industry much further down the supply chain and in the heart of where these companies mine coal.

The ground attack

The group has even deployed climate science to not only attempt to pressure demand, but to also wield direct influence on supply from the mine. In a recent lawsuit, several groups targeted Signal Peak Energy LLC over a project that would expand one of its mines into the largest underground coal mine in the U.S. The groups, including the Sierra Club, insist that the federal government consider climate impacts of the project before approval.

Well before the climate movement was picking up significant victories from courts and the administration of President Barack Obama, a frequent focus of groups like the Sierra Club was on the air, water and ground effects of mountaintop removal coal mining. The practice, which is a highly productive and relatively inexpensive form of accessing a coal seam, is also the object of scorn among environmentalists and some living in nearby communities.

“We know that's a lie. That's a complete and utter lie. Coal is never coming back.”

 Bruce Nilles, senior director, Sierra Club's Beyond Coal campaign

Though the practice initially proved highly profitable, its success and propagation has been complicated by community backlash and stacking evidence against its effect on community health and the environment.

The industry has largely insisted that the practice is safe and that such techniques can be done responsibly. Claims against the practice are often dismissed as ideological or political by the industry.

Nilles said that if he were to walk outside of Sierra Club's offices today and drop a wheelbarrow full of dirt into the San Francisco Bay, he would go to jail as a criminal violator of the Clean Water Act. On the other hand, he said, coal companies are dumping "millions of tons" of mining waste into rivers and streams across Appalachia every day.

To combat this, the Sierra Club and over 100 partner groups have conducted their monitoring and citizen-suit provisions of federal and state law to push lawsuits identifying alleged violations of the law. The effort appears to have met some success as a recent report from the U.S. Energy Information Administration revealed mountaintop removal coal production and permits have plummeted.

The relentless legal challenges have been especially effective as coal finds increasingly thin margins in the marketplace. Patriot Coal Corp. for example, agreed to a legal settlement severely restricting the practice of mountaintop removal in exchange for reprieve from notoriously costly selenium obligations. Selenium, a notoriously costly toxic pollutant to cleanup, has cost companies such as Alpha Natural Resources Inc. millions of dollars in settlements.

One recent example of the groups' vigilance includes its efforts at PPL Corp. subsidiary Louisville Gas and Electric Co.'s Mill Creek power plant. There, the power company is now facing a lawsuit over the outfall of a coal ash site. Activists on the ground say they have captured what may be hard evidence to dispute — a year's worth of video of what they say is a nearly continuous leakage of an outfall site into the Ohio River.

Case study: Frasure Creek

Yet another example is that of Frasure Creek Mining LLC. The mining company, currently embattled following bankruptcy proceedings, has been accused of faking thousands of its water pollution monitoring results dating back to 2008.

Lauren Waterworth, an attorney working with environmental groups in the case, said that the organizations did an open records requests on monitoring reports in Kentucky. She said that among their findings were that the records were not easily located and that the regulatory agency seemed "grossly underfunded."

The reports, which she said were to be monitored quarterly, were eventually found on a secretary's desk, unprocessed and "covered in dust."

"We're dealing with a company that at one point was one of the top two strip mine coal producers in the state," Waterworth said. "We discovered that they had been submitting false water monitoring reports."

Some of those reports, she said, also appeared to be duplicates. She said there was strong reason to believe much of the data from the company had been fabricated and no one was double checking their reports.

"The state had no idea," Waterworth said. "We were the ones that brought it to the state's attention that these reported violations were going on. … One of the major coal producers was engaging in false reporting: that throws into question the integrity of the entire Clean Water permitting system."

Pushing against the states

While Kentucky has faced its share of criticism over environmental issues related to the coal industry, it has also been lauded by some environmentalists for steps taken toward economic diversification. West Virginia, on the other hand, is often regarded as a prime area for concern over what environmentalists warn is a catastrophe waiting to happen if state leaders do not begin to act quickly.

"The leadership in the state says 'full speed ahead with coal' and 'if it wasn't for this administration coal would be soaring' and 'we just got to wait out this administration and coal will be back,'" Nilles said. "We know that's a lie. That's a complete and utter lie. Coal is never coming back."

An appointee of coal-friendly Democratic Gov. Earl Ray Tomblin, Randy Huffman, cabinet secretary of the West Virginia Department of Environmental Protection, finds some of the accusations by citizen groups frustrating. He said the ability for citizens to sue when regulators are not doing their job is a legitimate legal tool, but he worries it is misused.

"There are reasons that we sometimes do what we do and handle things the way we handle them," Huffman told SNL Energy. "Sometimes we're not always on the same page as citizen groups."

He said that many special interest attorneys are "opportunistic" and even more so when they find a judge has "leanings more supportive of their particular agenda."

"As a regulator that is trying to enforce the law and help companies that employ hundreds of people understand how to comply with the law, my world is just not as simple as filing a lawsuit," Huffman said. "We live in a little more complex world that has real ramifications to our decisions."

He said that the agency has a "lot of discretion" and instead of direct enforcement can choose to use things like compliance orders to goad companies into following the law.

“Anything I say to you, that you print, the activists out there in the world are going to suggest 'that just proves that he's supporting the coal industry.'”

 Randy Huffman, cabinet secretary, West Virginia Department of Environmental Protection

"If a police officer pulls you over for doing 65 in a 60, he doesn't have to write you a ticket," Huffman said. "He doesn't even have to pull you over. Yes, you're breaking the law, it doesn't make you any [more or] less innocent, but there are reasons why that might not happen."

Huffman said the agency does not "intentionally ignore rules," but instead seeks a balance among the many factors affecting the industry. He said that based on whether proven and affordable technology is available, a company may be given weeks, months or even years to come into compliance due to a number of issues including employee concerns, contract issues, trouble getting equipment or "any number of things."

"Anything I say to you, that you print, the activists out there in the world are going to suggest 'that just proves that he's supporting the coal industry,'" Huffman said. "Well, you know, I work for a guy that is very much supportive of jobs and needs to generate revenue and have an economy in order to provide the services that the state needs."

Nilles warns of an industry that has a long history of influencing officials and "skirting environmental laws." He said Sierra Club's efforts are merely about ensuring compliance with those laws.

"There are a lot of good folks who work in both state and federal agencies," Nilles said. "In a given state, the politics might be such that they can't do their job either because the state has slashed the enforcement so there is actually no resources to go out and do sampling, or when they do find violations they don't have the political will to do their jobs."

Huffman emphasized that the agency would never allow its use of discretion to harm the people of the state. He said those that insinuate otherwise are "promoting their own political agenda."

"Any enforcement discretion that we use or any delays that we use — we are not putting people at risk," Huffman said. "We don't put people's lives at risk or their health at risk in that way."

As an example, Huffman points to recent reports and press releases around the pollutant selenium.

"It is a rule. It is a standard, I have to enforce it. I get that," Huffman said. "I'm not arguing that I have the flexibility to ignore selenium, but selenium from our coal mining operations in our streams is killing no one, is harming no one's health."

Coal finances wane, concerns mount

As the industry flounders, particularly in high-cost regions like Central Appalachia, many are concerned about what that may mean for liabilities coal companies leave behind. A major source of mine clean-up funding, a coal company's ability to self-bond its obligations, is increasingly affected by weakened balance sheets.

"The way that West Virginia has prepared to deal with this — it's not a perfect system at all," Huffman said.

He said that as coal production — and coal revenue declines, so does funding for a special reclamation trust. The window to tax further coal production to cover those reclamation liabilities may be closing," Huffman said.

"It's a bad downward spiral, the way we're set up today," Huffman said.

Nilles said potential liabilities and what former coal-dependent communities will do without that industry are major issues the Sierra Club and other groups are considering. He said, unfortunately, regulators have done "very shoddy job" of ensuring there is money to clean up after abandoned coal properties, though some are starting to raise that question.

"If they don't move a little faster here, they are going to be a day short and a lot of dollars short," Nilles said. "What's going to be left is going to make the disaster in Colorado — a mining disaster — look like small potatoes because you're going to have literally billion dollars of cleanup. And the coal barons are all off enjoying their winnings and the coal regions — Appalachia, Illinois and the Powder River Basin — are going to be left holding the bag while you and I as taxpayers will ultimately have to pick up a huge amount of this cleanup."