W.Va. Regulators Sue Coal Operator ERP, Here’s Why It Matters

Mar 27, 2020

The West Virginia Department of Environmental Protection Thursday filed a lawsuit against coal operator ERP Environmental Fund, Inc. alleging the company has racked up hundreds of violations, laid off employees, and walked away from its mining operations, leaving environmental obligations unfulfilled. 

According to documents filed with the Kanawha Circuit Court on March 26, ERP holds more than 100 permits at numerous mine sites across West Virginia. With the exception of one permit, all were acquired in 2015 from Patriot Coal Corporation during the company’s second bankruptcy. 

DEP says it has issued 160 notices of violations and 118 failure to abate cessation orders to the struggling company. It argues ERP’s failure to comply with surface mining and water pollution laws poses “existing and ongoing threats to the public health and safety and the environment.”

High Stakes

Of greatest concern, the agency says, is the Tygart River Mine complex located in Marion County. The abandoned underground mine, often known as the Martinka mine, requires constant water pumping and treatment, which costs $900,000 annually. 

Without it, water will rise in the mine. If a blowout occurs, DEP says water would contaminate the Tygart River, a source of drinking water for thousands of West Virginians. 

“The situation at Martinka represents the proverbial canary in the coal mine and signals the serious issues involved in the Defendant’s cessation of operations,” the motion states. “Without immediate funding and effective management oversight of its environmental liabilities and operations, any one or all of the Defendant’s mine sites in West Virginia could soon become the next Martinka, placing the environment and the health and safety of many thousands of West Virginians at significant risk on a much broader scale.”

Clarke Enterprise 

ERP is associated with the Virginia Conservation Legacy Fund, a nonprofit operated by Virginia businessman Tom Clarke. Clarke, whose background is in healthcare, has faced scrutiny from conservation groups for his plans to reduce the environmental impacts of coal mining by planting trees on reclaimed mines. In addition to the Patriot mines, Clarke has purchased coal mines including from Cleveland Cliffs, Walter Energy and Alpha Natural Resources. In some cases his attempts were rebuffed.

According to the West Virginia Secretary of State, ERP’s president is former Patriot mining engineer Matt Cook. Clarke is listed as the company’s treasurer. 

A representative for Clarke did not respond to a request for comment. 

 

Erin Savage, central Appalachian senior program manager, with Appalachian Voices, said she was not surprised to see state regulators take this step.

 

"Tom Clarke had put together a scheme that we’ve seen other companies do as well, that they take on a lot of struggling mines out of bankruptcies and they have some plan that seems not fully thought out that will somehow allow them to succeed when the previous company did not," she said. "I've been skeptical of Tom Clarke's ability to clean up these mines and fund reclamation for years now."

Receivership Compromise 

During the years after the purchase, DEP officials say ERP received little funding and struggled to keep up with its required environmental obligations. It asked the agency for access to money set aside for reclamation work, which the agency did not grant. DEP did allow ERP access to $1 million earmarked for water treatment at former Patriot mine sites. 

By late 2019 or early 2020, the documents state, ERP was out of cash. Officials say the company has performed only limited essential activities since February, and as of March 19, laid off all employees and ceased operating. 

But the DEP also stated it doesn’t have the resources to revoke all of ERP’s permits and do the reclamation by itself. 

The agency says transferring more than 100 permits to the state’s Special Reclamation Fund “would overwhelm the fund both financially and administratively, with the result that the actual reclamation and remediation of the ERP mining sites could be delayed.”

ERP has $115 million in surety bonds, which would be forfeited if the agency revokes the company’s permits. DEP says instead of taking that “drastic” step it has been in communication with the surety bond issuer, Indemnity National Insurance Company. 

“To put the matter bluntly, neither DEP nor the surety is willing to permit the Defendant to continue its operations and attempt environmental compliance under its current organization and management structure,” the motion states. “Each is willing, on the other hand, to fund and facilitate the Defendant’s compliance with its environmental obligation under the supervision and control of a qualified and capable receiver.” 

Savage, with Appalachian Voices, said this situation highlights the systemic challenges with how regulators allow coal operators to bond their mines.

"Having pool bonds and bond amounts that are potentially not sufficient to cover actual reclamation costs, having a single surety company cover so many permits -- these are all red flags that could have been dealt with years ago, but as this point it’s hard to change the bonding structure," she said.

The agency is seeking a temporary restraining order and temporary injunction compelling ERP to do its environmental remediation. DEP is also asking for the appointment of a special receiver to take control of ERP’s mines and assets. 

The receiver, Doss Special Receiver, LLC, would take control of ERP’s mines and carry out its reclamation requirements. In a press release issued Friday, the agency said Imdenmity has agreed to provide $1 million in funding to Doss to fund its operations for an initial period of 90 days.

 

 

 

Motion for TRO, Et Al (PDF)
Motion for TRO, Et Al (Text)