Kentucky mine regulators ineffective, judge says

• Case involves claims of faked water pollution reporting.
• Company has gone through bankruptcy and has no active mining operations in Kentucky%2C according to state officials.

Kentucky environmental regulators are so understaffed they can no longer effectively enforce clean-water rules, Franklin Circuit Court Judge Phillip J. Shepherd ruled on Monday in a high-profile coal mining case.

The Kentucky Energy and Environment Cabinet also turned a blind eye toward evidence of environmental harm in its investigation of Frasure Creek mining, with operations in the polluted Big Sandy watershed of eastern Kentucky, Shepherd ruled.

Shepherd tossed out a $310,000 proposed agreement between the Kentucky Energy and Environment Cabinet and Frasure Creek mining and, in a separate ruling, determined that environmental organizations that first brought the company's violations to the attention of state officials four years ago are entitled to participate in hearing to resolve the matter.

"The Court concludes that the consent decree ... is not fair, reasonable or in the public interest," Shepherd found. He wrote that violations "so systemic and pervasive almost inevitably lead to degradation of the environment," and creates a "regulatory climate where cheating pays."

Under the Clean Water Act, the company could have faced penalties of as much as $38 million, he wrote.

This is the latest turn in a major battle between several environmental groups and the state over how Kentucky regulators enforce such laws as the Clean Water Act at strip mines in the mountains of eastern Kentucky. The groups including Appalachian Voices, Waterkeeper Alliance, and Kentuckians for the Commonwealth, found in 2010 that some mining companies were faking water quality reports, adding up to potentially thousands of violations.

The groups were allowed to be a party in that case, and in 2012, they and the state reached an agreement with one of the companies, Arch Coal. An agreement with Frasure Creek was delayed because the company went through bankruptcy and reorganization, state officials have said. The company was once a major player in eastern Kentucky but state officials say it has no current active mining in the state.

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Anne Adams Chestnut with Bingham Greenebaum Doll was among the attorneys who represented Frasure Creek during the state's enforcement action. Monday, she said Frasure Creek is no longer a client, and she declined to comment on the ruling.

Frasure Creek is based in West Virginia and lists a post office box as a contact.

Environmentalists praised the ruling.

"With each false entry on these reports, the company is deceiving regulators and the public about the pollution it may be discharging into Kentucky waters," said Erin Savage, central Appalachian campaign coordinator with Appalachian Voices. "The judge's orders confirm what citizens have known for some time, that the state is failing to enforce the Clean Water Act in eastern Kentucky," he said.

In a written statement, state officials acknowledged their tightening budget as well as "an obligation to monitor and enforce regulations and laws related to mining."

The cabinet and other state programs have funding needs that are weighed by the governor and the lawmakers, the statement said.

"On multiple occasions," energy cabinet secretary Len Peters and other cabinet officials "have relayed to the legislature that the impacts of continued cuts to the cabinet will eventually manifest in ways that would affect personnel and programs," the statement read.

In his 24-page ruling, Shepherd, who once led the cabinet, concluded that the cabinet was no longer capable of doing a very good job enforcing clean water rules.

"With only a handful of enforcement personnel, and a dwindling number of field inspectors ... it is impossible for the cabinet to effectively regulate permitees such as Frasure Creek who systematical violate the (Clean Water Act)," Shepherd wrote.

The cabinet has fewer staff today than it did in 1990, and more responsibility, he wrote, citing testimony from R. Bruce Scott, commissioner of the Department for Environmental Protection.

Shepherd also found that the cabinet focused on administration violations, while ignoring evidence of actual water pollution from Frasure Creek mines.

"If the cabinet suspects pollution violations but only investigates and assess penalties for administrative reporting violations, then cabinet creates incentives for inaccurate reporting or failing to report, as opposed to honest reporting that reveals pollution violations," he found.

Last week, the groups alleged Frasure Creek in the last year had gone back to faking water pollution reports, claiming some 28,000 new violations. The company has 60 days to respond to those claims.

Reach reporter James Bruggers at (502) 582-4645 or on Twitter @jbruggers.