Enforcement a sham under agreement with Nally & Hamilton

An agreement negotiated in secret between state Energy Cabinet officials and Nally & Hamilton allows the coal company to pay minimal fines for thousands of violations of the Clean Water Act, gives pre-approval to vague remedial actions and does nothing to prevent continued violations of the law.

That's the conclusion of KFTC and a number of our allies who studied the agreement. The charges were outlined in a letter delivered to Cabinet Secretary Len Peters on Wednesday, backed by nearly 200 pages of exhibits.

"Basically, this agreement is a get-out-of-jail-free card," for Nally and Hamilton. explained Ted Withrow, a member of KFTC's litigation team. "The cabinet is sweeping tens of thousands of violations under the rug."

For at least the past five years, Nally & Hamilton has been submitting false and incomplete water discharge reports to the cabinet regarding pollution from its eastern Kentucky mines. Appalachian Voices, Kentucky Riverkeeper, the Natural Resources Defense Council and KFTC brought these violations to the cabinet's and public's attention in March.

The cabinet, which had previously ignored these reports, investigated and filed an administrative enforcement action. It was generally understood that the cabinet did this to protect Nally & Hamilton by pre-empting a federal lawsuit the groups planned to file.

KFTC and our allies asked to intervene in the administrative proceeding, and in July the hearing officer granted the groups intervenor status. That made the groups full parties in the case. However, cabinet officials ignored the hearing officer's order and negotiated a settlement with Nally & Hamilton without notifying or involving the intervening parties.

"We weren't in the negotiations and cabinet refused our discovery," Withrow said. "The cabinet is once again shielding the coal company and not letting the public know what's going on."

Once the intervenors got as copy of the agreement, it was easy to understand why citizens groups were excluded from the negotiations. As stated in the letter to Peters:

• the cabinet seems not to have investigated the possibility that Nally & Hamilton's violations were the result of intentional fraud;
• there is no evidence that the cabinet calculated what civil penalty amount is necessary to deter future violations (the fines were less than 1% of what they could have been);
• the agreement does not list or even describe what violations are being resolved; it isn't clear the cabinet even knows what violations this settlement would resolve;
• but the agreement also resolves tens of thousands of additional, unspecified violations;
• the agreement leaves most remedial measures completely undefined, requiring only that Nally submit proposed remedial measures only after the agreement is signed; this makes it impossible to determine whether those remedial measures will fix Nally's violations.

"Kentucky citizens deserve to know the truth about the cause of these violations, and how a coal company could get away with filing patently false discharge reports year after year," stated the letter, sent by attorneys with the Natural Resources Defense Council. "The cabinet never prosecuted the case."

Secretary Peters has not yet signed the order although the hearing officer (an employee under Peters) has.

A copy of the letter to Peters is available here.