Appalachain Voices and Partners Object to Backroom Deal With Kentucky Coal Company

Posted by Eric Chance | February 4, 2013 at 11:36 am


Frasure Creek owner, and billionaire, Ravi Ruia's yacht. Note the matching helicopter! Frasure Creek Mining is apparently on the verge of bankruptcy, but it's owners seem to be doing just fine. Click the image to learn more about the boat.

A coalition of citizens’ groups including Appalachian Voices filed objections to a proposed settlement between Kentucky’s Energy and Environment Cabinet and one of the state’s largest coal mining companies, Frasure Creek Mining. The agreement would legally resolve over a thousand water pollution violations from 2011 and 2012 at all of Frasure Creek’s mines across Eastern Kentucky, but the agreement will not fix the pollution problems.

Despite the fact that we are full parties to this enforcement action, this agreement was crafted entirely behind closed doors without us. Over and over again the cabinet has made every effort to exclude us and aid polluters. One of our objections to this settlement is that it has violated our right to due process since our names are on this agreement yet we had no say in it whatsoever.

Some of Frasure Creek's false conductivity values

Even more alarming, we expect that if this agreement is entered the cabinet will likely try to argue that this makes another ongoing case that we are involved in moot. That case is primarily based on blatantly false water monitoring reports submitted by Frasure Creek. Prior to that legal action, Frasure never admitted having pollution problems like the ones at issue in this case. It was not until they came under increased scrutiny, following our initial court filing, that they began reporting more truthful water monitoring data, uncovering the pollution violations at issue in this settlement.

The citizens’ groups—Appalachian Voices, Kentuckians For The Commonwealth, Kentucky Riverkeeper, Waterkeeper Alliance, and several individual citizens—are represented by Mary Cromer of the Appalachian Citizens’ Law Center (Whitesburg, KY), Lauren Waterworth of Waterworth Law Office (Boone, NC), and the Pace Law School Environmental Litigation Clinic (White Plains, NY). We are concerned that the agreement is too lenient, and will not ensure that Frasure Creek will clean up its pollution problems.

The citizens’ objection letter, filed in the state administrative court, states:

Approval of this Agreed Order would not appropriately penalize Frasure Creek or deter future violations, but instead it punishes the citizens of Kentucky. The Agreed Order sends a message to Frasure Creek and other coal companies that they can come into Kentucky, enjoy a near amnesty from state and federal environmental regulation, plunder the state’s natural resources, annihilate mountains and destroy rivers and streams, endanger the lives of the people living downstream, all before leaving without being held accountable for the destruction they have wrought. To enter the Agreed Order would be to endorse to this shameful scam.

Polluted water leaving a Frasure Creek reclaimed mine

Claiming concern that Frasure Creek will declare bankruptcy and abandon unreclaimed mines, the state has agreed to waive $440,000 of the total $660,000 penalty if certain conditions are met. Frasure creek currently has about $54 million in bonds to cover their reclamation costs. The real problem is that the Federal Office of Surface Mining (OSM) has found that Kentucky does not set high enough bond amounts to cover the true costs of reclaiming their mines. Since the bond amounts are too low, the state is afraid of being saddled with the excess reclamation costs if Frasure Creek goes bankrupt. That means the state will go along with whatever Frasure Creek wants if it means they are any less likely to abandon their mines.

Frasure Creek has made numerous statements indicating that it was in financial trouble and unable to pay penalties in another settlement, but has failed to substantiate these claims and the cabinet has failed to require them to do so. They have not provided any financial information, and merely cite other documents where they claim financial problems as proof.

This bankruptcy argument would be believable if Frasure Creek were owned by a few people in Kentucky, but that is far from the case. In fact, Frasure Creek is owned by Essar Group, an India-based multinational conglomerate that made over $15 billion last year and projects to double its profits over the next year.

Essar Group is owned by the Ruias, a family of billionaires. Forbes estimates that Shashi and Ravi Ruia have a net worth of $8.1 billion and are the 9th richest people in India and 133rd worldwide. India’s equivalent of the FBI has filed charges against the Ruia brothers for criminal conspiracy as part of what has been dubbed the 2G spectrum scam. The scam involved the Indian government undercharging companies an estimated $32 billion to use cell phone frequencies.

Because Frasure Creek is organized as a limited liability company or LLC, its owners have limited responsibility for the company. Under US law, that makes it easier for that company to declare bankruptcy, while its owner makes billions of dollars.

So while the Ruia brothers rake in billions of dollars while cruising the south of France in their yacht, their little subsidiary, Frasure Creek, is supposedly on the verge of bankruptcy. Frasure has been polluting unchecked for years, and now that someone is watching, they are doing everything they can to weasel out of it. Even worse, the cabinet is playing right along.

Looking up at one of Frasure Creek's many Valley Fills

How we feel about this case can be summed up with this statement from Ted Withrow, of Kentuckians For The Commonwealth, “the citizens of Kentucky demand that these foreign scofflaws play by the rules. This settlement is a license to break the law and dump poisons into our drinking water again and again. The citizens of Kentucky want an end to backroom deals and demand that we have our day in court so we can stop this sham.”

>> Click here to view the press release
>> Click here to see our objection letter
>> Click here to see the inadequate proposed settlement
>> Click here to visit our litigation page and learn more about this and other related cases

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