Intimidation or accountability? A mining company goes after Kentucky regulators' own money

The family of the newest Republican governor – billionaire Jim Justice of West Virginia is going after the personal assets of two top Kentucky environmental regulators after Kentucky sought to collect millions in unpaid fines from the coal-mining companies they control.

Lawsuits against Kentucky Department for Natural Resources Commissioner Allen Luttrell and Deputy Commissioner John D. Small by the Kentucky Fuel Corporation blame the two for their company's failure to meet reclamation deadlines, potentially costing more than $4.5 million in fines.

The suits seek money from the regulators themselves, not the state of Kentucky for which they work – a move that one veteran environmental attorney not involved in the case said may be unprecedented.

Universty of Kentucky law professor Michael P. Healy described the suits as potential intimidation, similar to the kind of lawsuits by businesses that seek to silence their citizen critics.

"It has to be intimidating," Healy said.

He said he was not familiar with the specifics of the Pike County Circuit Court lawsuit, but added: "If a company comes after you personally with a lawsuit that has the potential for resulting in significant judgements, even if it's extremely unlikely the lawsuit may be successful, it is going to be difficult for you as a defendant."

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Louisville attorney Tom FitzGerald, director of the Kentucky Resources Council, also said the lawsuit – which claims the two bureaucrats interfered with the company's business – was highly unusual.

"In my 37 years in the natural resources and environment field, I can't recall another instance where a regulated entity sought damages against an agency official in his individual capacity," said FitzGerald, who has taught environmental law at the University of Louisville.

The West Virginia governor’s office referred the Courier-Journal to the Justice companies, which referred a reporter to their attorney.

The two lawsuits were filed on behalf of the Kentucky Fuel Corporation by The Getty Law Group in Lexington.

"I use the word accountability, not intimidation," said attorney Richard Getty. "When a regulator crosses a line, he ought to be held accountable."

He said the company is getting close to meeting its reclamation obligations and that regulators were preventing them from doing so.

Luttrell and Small did not return emails or telephone messages.

Energy cabinet spokesman John Mura said in a written statement that "these lawsuits appear to be an attempt to intimidate public officials from performing their statutory duties to enforce coal mine reclamation laws. The legal actions are entirely without merit and will be vigorously defended to protect these state government officials who devote their careers to protecting the land and the citizens of Kentucky."

Hundreds of violations

The matter stems from a 2014 agreement between Justice – before the billionaire was elected West Virginia governor on the Democratic Party ticket – and Kentucky regulators, who cited several Justice-owned companies, including Kentucky Fuel, with hundreds of coal-mining reclamation violations in eight eastern Kentucky counties: Breathitt, Floyd, Harlan, Knott, Leslie, Letcher, Magoffin and Pike.

In terms of the amount of land reclamation needed, the Justice case was the largest Kentucky had dealt with since the bankruptcies of Lodestar Energy and Horizon Natural Resources between 1999 and 2001, cabinet officials said at the time.

It involved a commitment by Justice to reclaim, by Sept. 1, 2015, at multiple locations, nearly 10 miles of cliffs known as "highwalls" that had been carved into the sides of mountains, according to court records. Highwalls are left behind after rock and coal have been blasted away in a type of strip mining.

As late as last month, cabinet officials told Franklin Circuit Court Judge Thomas Wingate the companies had by their own estimation reclaimed about three miles of highwall. The cabinet estimated reclamation of about five miles was still required.

In addition, Luttrell, in a written statement to Wingate, said since Sept. 1, 2015, the companies had been cited for eight additional reclamation violations, each of which constituted other breaches of the 2014 agreement.

State officials had asked Wingate to find the company in violation of the agreement and compel them to pay the full $4.5 million they owed, plus unspecified additional penalties, under terms of the 2014 agreement.

State loses ruling

Wingate said he could not do that as long as the company was still working to finish the reclamation work, which state officials said was on pace to take another five years.

"Surely it is not unreasonable for the cabinet to decline to extend an agreement, which has produced such a protracted and lackadaisical highwall elimination," cabinet attorneys argued unsuccessfully.

Wingate in his July 24 ruling commented that only 15 of 472 violations had not yet been addressed and told the companies they "must continue diligently toward achieving compliance."

He scheduled a follow-up hearing for Nov. 27.

Highwall reclamation is required under federal law and "restores the environment and protects the public from potential negative off-site impacts," Mura said.

A mudslide last year in Pike County damaged several homes, and cabinet officials said a mine owned by the Justice companies was at least partly to blame.

“This is a serious incident,” Luttrell said then. "The company has been given a deadline to pursue abatement and remediation. We won’t leave until we’re satisfied the permits have been brought back into compliance."

At a court hearing in June 2016, Billy Shelton, representing Justice, said Justice had obtained the rights to do additional coal mining at the Kentucky Fuel's Bent Mountain mine, making it easier to reclaim. He said the highwalls there had existed for more than 20 years and were left by another company that had gone bankrupt.

Kentucky Secretary of State records now show Gov. Justice has removed himself from being president or on the boards of directors of several of the companies involved in the lawsuit, leaving other Justice family members in charge. Gov. Justice announced he was changing his political affiliation from Democrat to Republican at a recent rally with President Donald Trump.

It gets personal

On July 27, Kentucky Fuel with Jim Justice III – the governor's son – now company president, sued Luttrell and Small.

The Getty Law Group attorneys claimed Luttrell interfered in a business relationship between Kentucky Fuel and another mining company that was going to do the mining and reclamation at its Bent Mountain mine in Pike County, but "willful and malicious" comments by Luttrell caused the other company to back out, causing it to not meet its reclamation obligations.

Getty declined to say what language Luttrell used that prompted the lawsuit.

Luttrell is a 36-year veteran of the state natural resources agency, according to a news release from last year.

Small worked nearly four decades in the mining industry before he was brought into state government by energy cabinet Secretary Charles Snavely, himself a former coal mining executive.

Those company attorneys claimed Small had "willfully and maliciously" stopped excavation at another Pike County because of a workers compensation issue, costing the company time and money.

Claims only present one side of a dispute.

"As a general rule, Kentucky courts have recognized a qualified immunity from tort liability for state agency personnel, subject to exceptions for intentional or malicious actions," said FitzGerald, the Louisville lawyer.

Kentucky Coal Association president Tyler White declined to comment on Justice company's compliance problems except to say Kentucky Fuel was not a member of the association.

He also did not comment specifically on the unusual lawsuits against the regulators, but generally defended the energy cabinet under Gov. Matt Bevin, a Republican, and Luttrell.

"The Kentucky Coal Association has been very supportive and pleased with the job that the cabinet, including commissioner Luttrell, has been doing for the industry," White said.

Reach reporter James Bruggers at 502-582-4645 and at jbruggers@courier-journal.com.

Unfinished business

Infinity Energy, Inc., Harlan County, 7,000 feet of highwall remains open.

Sequoia Energy, Harlan County, 1,414 feet of highwall remains open.

Kentucky Fuel Corporation, Knott County, 230 feet of highwall remains open.

Kentucky Fuel Corporation, Pike County, 6,901 feet of highwall remains open.

Kentucky Fuel Corporation, Pike County, 9,563 feet of highwall remains open.

Source: Kentucky Energy and Environment Cabinet