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Coal companies use bankruptcy and asset transfers to shed obligations

AILSA CHANG, HOST:

This week we're taking a look at coal company bankruptcies and mine reclamation as part of a joint investigation taken on by reporters from Bloomberg News and NPR. Coal companies have used bankruptcy and asset transfers to shed their obligations to their workers and to the environment. One of these companies is Alpha Metallurgical Resources. NPR's Dave Mistich brings us this look at Alpha and how environmental cleanup is going at sites they used to own and how it's affected the local community.

JUNIOR WALK: Today we're going to be going up on Sundial.

DAVE MISTICH, BYLINE: Junior Walk of Coal River Mountain Watch is an annoyance to coal companies with mines near his home in Raleigh County, W.Va. A few years back, he was arrested for sitting on one of Alpha's properties to keep them from mining. Walk, who's lived all 32 years of his life in this area, spends his days trying to hold operators to environmental regulations. Around these parts, he says underground mining has been mostly phased out in favor of mountaintop removal.

WALK: This just erases tracts of land, turns them from one of the most vibrant, biologically diverse forests on the entire planet into a bare rock moonscape where nothing will ever really grow again.

MISTICH: We load up in Walk's green Subaru station wagon to drive around the area as he keeps an eye on nearby mining operations. Many mines here are owned by Alpha or used to be. Walk takes us up a narrow dirt road. Tree branches and briars scrape across the hood and roof of the car.

WALK: All righty.

MISTICH: After a short hike up a hill, we make our way to a clearing.

WALK: Go to the left right here.

MISTICH: Here, to avoid the risk of trespassing, Walk puts a drone up in the air to get a look at the Ed White Mine, a giant surface mine once owned by Alpha.

(SOUNDBITE OF DRONE BUZZING)

MISTICH: When they see something potentially off, Walk and the others at Coal River Mountain Watch send their concerns to state regulators. Sometimes small fines are handed down. Other times, though, Walk says, regulators just give these companies, especially the most profitable ones, a warning or simply work with them to revise the terms of permit. For Walk, who worked for a short time in the coal industry when he was younger, his current mission is personal. He points to a giant map on the wall of the offices of Coal River Mountain Watch, noting the potential dangers that loom nearby. That includes the Brushy Fork Impoundment, an enormous dam owned by Alpha that holds back coal slurry.

WALK: Holds back 7.8 billion gallons of toxic waste. And my parents' house is right here. So if you look at the top of that field, if it was to burst open and come right out this holler, they'd be some of the first people to die.

MISTICH: Alpha says on its website that its impoundments are constructed and inspected under federal regulations. The company filed for bankruptcy in August 2015. Since then, the company has transferred more than 300 mining permits to smaller companies. That's more than it currently holds. Along with those permits, Alpha also got rid of its responsibility to reclaim the land it mined. Coal companies are supposed to restore the land under federal law. This is all spelled out in the Surface Mining Control and Reclamation Act of 1977, known as SMCRA. But University of Chicago assistant law professor Josh Macey says through corporate maneuvers like bankruptcy and asset transfers, many big coal companies have been able to shed all sorts of liabilities.

JOSH MACEY: The basic idea was that coal companies tried to silo or separate many of their environmental and labor obligations into subsidiaries or certain affiliates and place the coal mines that they viewed as valuable assets into other affiliates.

MISTICH: Congress has been forced to step in time and again to fund worker obligations like pensions and black lung benefits, passing most of the cost onto taxpayers. To get a mining permit, coal companies need to be insured for the reclamation that's supposed to happen when they're done mining. But those policies don't always cover the full cost of cleanup. Because of that, Macey says taxpayers could end up footing the bill for these obligations, too.

MACEY: And it's very, very hard to see how that promise will be fulfilled in a world in which coal mining companies rarely have the resources to pay for reclamation right now.

MISTICH: In a deal approved by regulators in West Virginia and Kentucky, Alpha handed over about 230 mining permits to the smaller Lexington Coal Company along with more than $300 million to fund the environmental cleanup. Since taking over these permits, Lexington Coal has racked up a slew of violations for not securing potential environmental hazards. And this lack of cleanup has created some costly problems for those who live near these mines.

MILES HATFIELD: All of my land has always been dry as powder. There wasn't no water whatsoever on it.

MISTICH: That's 70-year-old Miles Hatfield of Hardy, Ky. Hatfield, a former coal miner, lived next to the Love Branch Mine, once owned by Alpha and now on the hands of Lexington. Over time, he started to notice polluted red mine water.

HATFIELD: After they shut down the mines, that's when it kind of started appearing little by little.

MISTICH: A couple of years ago, water from the mine damaged his home to the point where he fell through the floor of his dining room. Since then, the red water from the Love Branch Mine has continued to flow into Hatfield's property, forcing him to move out and pay rent for another home.

HATFIELD: I've lost about everything - everything in my shop, everything I had stored. I kept moving it from a wet place to a dry place, and then the water would catch up. So I basically lost everything I had.

MISTICH: Regulators in Kentucky determined that the red water flowing on to Hatfield's property was from the mine and fined Lexington $30,000 in June. Similar stories next to former Alpha Mines now owned by Lexington are playing out in southern West Virginia.

GARY VANNATTER: Beautiful neighborhood. Yeah.

MISTICH: In Mingo County, W.Va., between the towns of Musick and Pie is the Mountaineer Mine. Thirty-six-year-old Gary VanNatter, another former coal miner, attributes the frequent flooding on his property to mining and a lack of reclamation.

VANNATTER: They mine underneath us. But now it's like a river underneath us. I mean, it's literally water. It comes out of the ground.

MISTICH: VanNatter shows us cracks in the foundation of his home and his aboveground swimming pool that's sinking into the earth. Just across a fence, the ground is opening up in his neighbor's yard.

VANNATTER: I might have to move. I might not get what I got in this home here, you know? And if I have to leave here, that's just - man, that's gut-wrenching.

MISTICH: The Mountaineer Mine hasn't produced any coal since 2013. But Lexington Coal Company wound up with the permit and the responsibility to clean up the land as part of the deal with Alpha. State regulator documents say the Mountaineer Mine has contributed to the flooding on VanNatter's land. He says he isn't surprised that Alpha offloaded that permit and the others.

VANNATTER: They done that because they knew that there's going to be future problems. In my mind, why would you - and Lexington - I can't believe that Lexington was crazy enough to buy all these mines knowing that, hey; it's all going to have to be supposedly restored back to the way it was before you mined it. And it can never go back.

MISTICH: In a statement to both Bloomberg and NPR, Alpha says it has conducted itself ethically throughout the course of its operations and noted the funding it has provided to smaller operators, like Lexington, who have taken over its mines. Alpha also pointed out that these asset transfers were approved by multiple regulators. Lexington didn't answer questions but has said in the past that it strives for full compliance with environmental regulations. Dave Mistich, NPR News.

(SOUNDBITE OF KACEY MUSGRAVES SONG, "SLOW BURN") Transcript provided by NPR, Copyright NPR.

Dave Mistich
Originally from Washington, W.Va., Dave Mistich joined NPR part-time as an associate producer for the Newcast unit in September 2019 — after nearly a decade of filing stories for the network as a Member station reporter at West Virginia Public Broadcasting. In July 2021, he also joined the Newsdesk as a part-time reporter.