FRANKFORT — A Franklin Circuit Judge Friday pleaded with coal companies, the state Energy and Environment Cabinet, and environmentalists to resolve their dispute over Clean Water Act violations by mediation rather than force him to rule on a settlement negotiated by the cabinet and coal companies.



Judge Phillip Shepherd said the evidence presented in the three-day hearing   underscored “difficult and novel issues that are likely to keep the problem in litigation for a long time.”



In October, Appalachian Voices, Kentuckians for the Commonwealth, Kentucky Riverkeeper, Waterkeeper Alliance and three private citizens announced their intent to sue Frasure Creek Mining and ICG, now a subsidiary of Arch Coal, for what they alleged are thousands of violations of the CWA. They found evidence the two companies submitted inaccurate – the environmentalists called them “fraudulent” – reports of pollution discharges into Kentucky streams.



The cabinet conducted its own investigation and in December sought to enter a consent judgment in Franklin Circuit Court with the two coal companies which fined ICG $350,000 and Frasure Creek $310,000. The cabinet’s investigation concluded most of the problems centered on outside labs used by the coal companies to collect and test water samples.



The environmental groups went to court asking to intervene, contending the fines are too small to provide any incentive for the coal companies to comply with the CWA. Shepherd granted their motion but ordered the parties to mediation. But the mediation ended abruptly after only one session when the parties found themselves far apart.



These same groups filed similar notices of intent to sue against Nally and Hamilton Enterprises, which operate surface mines in southeast Kentucky.  Late Friday afternoon, CNHI News obtained a copy of  a letter from EPA Region 4 to Steven Hamilton requesting “all documents concerning effluent discharges from January 1, 2011.”  The letter is dated August 22 and signed by Denisse Diaz, Chief Clean Water Enforcement Branch,

 Water Protection Division in Atlanta.”



Anne Chesnutt, an attorney for Frasure Creek, told Shepherd Friday that mediation only places the intervening environmental groups in the position that the cabinet rightfully occupies and the coal companies have already negotiated a “fair, adequate and reasonable” settlement with the cabinet. The cabinet’s attorney, Mary Stephens, said the environmental groups are “intransigent.”



Mary Cromer, an attorney for the environmentalists, agreed that regardless of how Shepherd rules, “This will be appealed and go on for years.” She said she couldn’t divulge the environmentalists’ position on an appropriate fine because the mediator ordered the parties not to discuss their positions publicly.



Shepherd gave all parties 30 days to submit post-trial findings and conclusions and said he wants to meet individually with counsel for each of the three parties to discuss mediation.



The cabinet and two coal companies defended the settlement with their own witnesses Friday. Commissioner of Environmental Protection Bruce Scott vigorously defended the cabinet and the settlement. He expressed deep offense at some of the charges made against his staff and criticized media reports of the case. He said the expense, staff and time demands and uncertainty of the continuing suits prevent his agency from inspecting other environmental problems and performing its usual duties.



But as he did on the first day of the hearing, Scott again conceded the threats to sue by the environmental groups uncovered violations the cabinet had not found.



“The allegations confirmed concerns that we had not addressed,” Scott said. “We should have been doing something and we weren’t. But we’ve taken action since then.” Later while defending the size of the penalties and settlement with Frasure Creek and ICG, Scott said, “It is consistent with other (previous) settlements in like matters.”



Jeff Cummins, Assistant Director of the Division of Environmental Protection, said the cabinet consulted with the federal Environmental Protection Agency on whether the violations should be the subject of a criminal investigation. Robert F. Kennedy, Jr., of Waterkeeper Alliance, has said the inaccurate pollution reports submitted by the coal companies constitute criminal fraud.



But Cummins said Dan Weese of EPA’s criminal investigation unit said there was no evidence of criminal intent.



The two companies each called one witness who said the problems were largely result of shoddy work by the contract laboratories used to test discharges from mining sites into waterways.



Ken Hodak, Sr. Vice President and CEO of Frasure Creek, said the company was caught off guard by the charges in the notices of intent to sue and conducted its own investigation which confirmed the problems cited by the environmentalists. But Hodak said the company took immediate action to correct those problems, including changing testing labs, and cleaning up sediment ponds cited in the NOIs.



He and Don Gibson, Director of Permitting and Regulatory Affairs for Arch Coal, said they found additional violations during their internal investigations and self-reported those to the cabinet. Each said his company has implemented the corrections plans in the consent judgments even though the court has not yet entered them.



“We voluntarily implemented the corrections plan regarding the labs,” Hodak said. “We recognized it was the right thing to do.”



Ronnie Ellis writes for CNHI News Service and is based in Frankfort, Ky. He may be contacted by email at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.