Environment Investigations

This is the second story in a two-part investigation. The first story can be found here.

Rick Handshoe used to dream about building a house on his 50-some acres of property in Floyd County. He put a trailer there and raised his daughter. He planted an apple orchard and a garden. For years, he’d stand on the banks of the two small streams that met on his Eastern Kentucky land and catch crawdads and minnows.

“It’s a beautiful place,” Handshoe said gesturing to his land one afternoon in August. “But this is poison.” He pointed to the water.

Almost a decade ago, Handshoe began to notice strange colors in the water. Sometimes the creeks ran orange. Sometimes there was an odd sheen, or white foam floating downstream. He thought he knew the cause: In recent years, a coal company had begun mining in the area, nearly surrounding the property with surface mines.

Handshoe spent years trying to get state regulators to take the water pollution he saw seriously. He bought a monitor and began testing the water whenever it changed colors. Sometimes he complained to the Kentucky Department for Natural Resources — which regulates mining — and sometimes to the Kentucky Department for Environmental Protection. Both are part of the Kentucky Energy and Environment Cabinet.

But besides a violation for tracking dust on the road in 2007, state regulators didn’t cite Laurel Mountain Resources or impose any penalties until 2010 — five years after Handshoe first documented the pollution.

Eventually, the pollution and health concerns forced Handshoe to move away from Floyd County. And the DEP did eventually begin citing and fining the company for water pollution — $167,000 in total. But Laurel Mountain parent company James River Coal was worth more than a billion dollars when it filed for bankruptcy last year, and the fines and increased scrutiny don’t seem to have brought about any change in behavior.

A few months ago, the creek next to Handshoe’s property was still running orange, spotted with patches of white foam. Handshoe pointed to what’s left of a thick metal pipe carrying one of the streams under his driveway.

“This was actually a thick gas pipe, and now it’s being eat away [sic] by the acid,” he said. “And now, at some point I won’t have any driveway because that pipe will be gone. It shocks me, looking at it now, how much it’s deteriorated since I was here two months ago.”

Handshoe is fed up.

“I’m madder at the state enforcement agencies than I am at the coal company,” he said. “Because they’re the police agency.”

More Polluted Waterways

For the last 11 years, Kentucky’s DEP has been increasingly unlikely to take legal action against polluters, according to an analysis of data obtained by WFPL News through the Kentucky Open Records Act.

The administrations of both Democratic Gov. Steve Beshear and his predecessor, Republican Ernie Fletcher, have sent far fewer environmental enforcement cases to court than the two governors before them. They have also had fewer enforcement cases against coal mining companies and other industries operating in Kentucky.

At the same time, both administrations have cut staff and resources for the commonwealth’s top environmental watchdog. In 2014, the general fund appropriation to the DEP was 42 percent less than the amount the department received in 1992, adjusted for inflation.

Not surprisingly, as the DEP’s enforcement measures have declined, so have some measures of water quality in the commonwealth.

The state is required to submit a report on water quality to Congress every two years. According to data submitted by the state, six out of the 10 river basins assessed (excluding large multi-state basins like the Mississippi, Ohio and Tennessee rivers) had fewer miles that supported aquatic life in 2012 than they did in 1996. Together, those basins — the Green, Licking, Lower Cumberland, Big Sandy and Little Sandy rivers, as well as Tygarts Creek — represent nearly 1,100 stream miles that appear to be more polluted now than they were two decades ago.

“What we’ve seen is an enormous increase in the amount of streams impaired for conductivity, for heavy metals, and other issues commonly associated with surface mining,” said Tim Joice, water policy director of the Kentucky Waterways Alliance.

He said the state has made gains in reducing the amount of organic material — like sewage — in waterways, but the amount of pollution from mining and other heavy industrial activities has clearly increased.

While Kentucky waterways may be more polluted now than they were, advances in water quality testing could also be revealing more degradation than was previously known, Joice said. But in other areas, he said, water quality has clearly diminished.

Data Kentucky provided to the Environmental Protection Agency show more stream miles impaired by coal-related activities in 2012 (the latest year available) than in 2008, when Beshear took office.

“I wouldn’t conclude personally, based on what I know, that water quality has worsened,” said DEP Commissioner Bruce Scott. “While surface water quality hasn’t improved at the rate that perhaps people would like, what we’ve seen is a maintaining of water quality — it’s gotten better in some places, but it’s maintained in other places — despite growth in population in some cases.”

Standards are also more stringent, which could help explain the growing number of polluted stream miles, Scott said.

He also pointed to gains made in some areas. Since 2008, nearly 300 bodies of water and stream segments in Kentucky have been removed from the federal government’s list that tracks severely impaired waters. There have been numerous bodies of water that state officials have newly designated as “outstanding state resource waters” or classified as “exceptional.”

But another set of data raises more concerns. A decade’s worth of state water quality monitoring reported to Congress shows several areas for which the percentage of stream miles supporting their designated use has declined. The 10-year period from 2002 to 2012 saw drops in the percentages of Kentucky’s assessed waterways that could fully support fish consumption, swimming, and warm and cold aquatic habitats.

Joice said this decline suggests a negative trend.

“I think that can lead to an assumption that things are not necessarily getting better, and in fact, they may be getting worse,” he said.

Budget Cuts Send a Message

So, how has this happened?

Kentucky Resources Council director Tom FitzGerald said a lot of the DEP’s problems stem from budget cuts — and the message those cuts send to employees.

“Any of these administrations are influenced to a greater or lesser extent by the priorities of the elected officials that appoint the agency staff, by the budget that’s allocated them by the General Assembly, by the budgetary priorities of the governors,” he said. “Gov. Beshear has made it abundantly clear by the budgets he’s submitted to the legislature that he does not view the protection of the air, land and water of the commonwealth as a priority.”

Beshear spokesman Terry Sebastian countered that, saying Kentucky’s environment is a priority for the governor.

“But as governor during the worst recession of our lifetimes, he has not had the luxury of being a one-issue advocate like Tom FitzGerald,” Sebastian said via e-mail. “Instead, Gov. Beshear has had to balance the state budget 15 times while making sure that other priority areas, like education, public safety, job creation and health care, are also adequately addressed.”

The DEP received 42 percent less from Kentucky’s general fund in 2014 than it did in 1992, adjusted for inflation. Since Beshear has taken office, the appropriation to the DEP has fallen by 27 percent. In an agency run by political appointees, former regulators say these budgetary priorities can trickle down to the rank-and-file and end up influencing environmental enforcement.

“Enforcement is a little bit a reflection of your supervisors leading all the way up to the governor’s office, what is it that they’re comfortable with,” said former DEP Deputy Commissioner Russ Barnett, who was in the position from 1988 until 1996. “And in some cases, they may not be comfortable with strong enforcement actions against a particular company or a particular type of company. And it’s up to the agency to kind of know how far can we go.”

Both Barnett and former DEP Commissioner Bob Logan said a decline in enforcement actions could be the result of a lack of political will. But there could be another reason: a lack of scientific data.

“When you’re bringing someone into the legal system to take an enforcement action, you’ve got to have high-quality data, you’ve got to have quality-assured information that you can prove your case,” said Logan, who served under both the Jones and Patton administrations. “And then, you can win in the system.”

The DEP’s own data show the agency’s Division of Environmental Support — the laboratories that analyze samples including water, soil and fish tissue — has analyzed fewer samples in recent years than it did in 2003-2007. The division analyzed about 4,800 samples in 2014, down from a high of about 7,500 samples in 2007.

Scott said a large part of that drop is because the DEP began outsourcing its air sample analyses to save money.

“That’s part of the reason,” he said. “But it’s also fair to say that’s another area we’ve had to scale back in terms of some of our staffing levels.”

A lack of resources also likely contributed to thousands of water pollution violations in the Big Sandy watershed between 2008 and 2010. During that time, Eastern Kentucky coal mines belonging to ICG and Frasure Creek submitted allegedly fraudulent reports recording the pollution they released into local waterways. For years, state regulators failed to detect anything amiss.

Finally, in 2010, a coalition of environmental groups found the inconsistencies in reports from both companies. They found missing reports and identical water quality measurements reported from one quarter to another, even though it’s virtually impossible for the numbers to remain the same.

In all of these cases, Kentucky regulators hadn’t noticed blatant violations and patterns of fraudulence.

“There’s no indication that the cabinet would have caught the violations if we hadn’t brought them to their attention,” said Mary Cromer of the Appalachian Citizens Law Center, who filed suit against ICG and Frasure Creek on behalf of the environmental groups.

Scott doesn’t disagree with that.

In both cases, state regulators originally assessed fines that either environmental intervenors or a judge later deemed too low to change behavior.

Enforcement Philosophy Shifts

Money — in the form of significant, meaningful fines — is one way environmental regulators convince companies to comply with regulations.

“The bottom line is where most of these folks are concerned with,” Logan said. “And if you’re affecting the bottom line, the behavior will modify.”

Former Division of Water Director Jack Wilson, who was in the position from 1988 to 2001, echoed that.

“If it didn’t hurt, it didn’t matter to the regulated entity,” he said. “If it hurts, it makes a difference and has a tendency to change behavior. And it was behavior change we were after. Not large sums of money, frankly.”

DSC_0002Erica Peterson | wfpl.org

Pipe on Rick Handshoe’s property.

This is a well-established theory, according to Victor Flatt, director of the Center for Law, Environment, Adaptation, and Resources at the University of North Carolina. Fines should be high enough to counteract any savings a company might find by breaking the law.

Without this, “the business would have absolutely no incentive to comply, because it would be cheaper just not to comply, and it turns the fine into just a tax,” Flatt said.

In an interview, Scott defended the fines his DEP initially levied on ICG and Frasure Creek.

“I would disagree that the cabinet did not assess penalties commensurate with what these violations reflected,” Scott said, citing confidential negotiations on which he couldn’t elaborate.

For ICG, state regulators proposed a penalty of $350,000. After years of litigation, the company, state government and environmental groups reached a settlement that ended up with ICG paying nearly 40 percent more: $575,000.

The Frasure Creek case remains unresolved. The more than 1,500 alleged violations at Frasure Creek’s mines could have resulted in a possible penalty of $38 million, assuming each violation was one incident and not ongoing. Scott’s DEP proposed a fine of $310,000 — or about 12,000 percent less than the maximum.

Agreeing on a smaller settlement isn’t unusual — it’s the norm. But in the Frasure Creek case, Franklin County Circuit Judge Phillip Shepherd ruled that DEP’s proposed penalty wasn’t “fair, reasonable or in the public interest.”

Shepherd, who served as the secretary of the Natural Resources and Environment Cabinet under Gov. Brereton Jones, estimated that Frasure Creek was saving $30,000 a month by using an unreliable lab to perform its water testing. In the face of years of those savings, Shepherd argued in his order rejecting the settlement, why would the company blink at paying a $310,000 fine?

“Here, the Court concludes that the proposed consent decree is unlikely to be successful in producing a change in behavior by Frasure Creek, because the economic benefit that it obtains by taking shortcuts and submitting unreliable data far outweighs the costs of compliance, or the risk of any fines and penalties that the cabinet will impose,” Shepherd wrote in his 2014 opinion. “This case demonstrates that the fines and penalties are a cost of doing business.”

The Energy and Environment Cabinet has appealed that decision to the Kentucky Court of Appeals. Frasure Creek officials could not be reached for comment.

Department Defends Record

DEP Commissioner Scott said he believes his department has a proven record of taking on the state’s biggest companies and industries.

“We’ve taken action on literally every coal industry operation in Kentucky in this administration,” he said, citing actions against some 305 coal companies.

Scott said the DEP also has changed the way companies self-report data. Now, nearly all the pollution monitoring reports the department receives are electronic, which helps regulators more easily detect fraud, he said.

The state had been working on the program before the environmental groups brought the Frasure Creek and ICG cases to his attention. “We had previously started ramping that up before then,” Scott said. “And clearly [the lawsuits] gave us a further impetus to enhance that effort. Clearly.”

Scott said since Frasure Creek and ICG, his department has been aggressive in penalizing coal companies for similar inconsistencies in their pollution reports over the past six years. He’s also put in place a lab certification program, so the state can ensure that laboratories that test and analyze samples for the department are qualified to do so. That program was approved by the legislature in 2011, and all the environmental testing labs are required to be certified by January.

“I will say that this administration has done as well or better than any of the ones that I’ve been previously involved with, and I’ve been involved with over three decades of them,” Scott said of DEP enforcement over the coal industry. He’s been working in the DEP since 1983 and has served under seven governors.

He’s right that the current administration has been more proactive in dealing with environmental violations from coal companies, at least compared with the previous administration, which is all the data the state has available. Fletcher’s regulators issued an average of about 30 wastewater Notices of Violation to coal companies each year he was in office. In each of Beshear’s seven years in Frankfort, the DEP has issued an average of nearly 200.

Even so, less than five years after intervening in the cabinet’s lawsuit over Frasure Creek’s duplicate monitoring reports, attorney Mary Cromer and several citizens’ groups have announced they’re prepared to sue again. Despite increased scrutiny, and despite the new digital reporting, the groups say they’ve once again caught Frasure Creek duplicating its pollution reports. And once again, the cabinet didn’t take action until environmental groups stepped in.

In response, the DEP filed an administrative complaint against Frasure Creek, listing more than 1,700 violations in 2013 and 2014. That matter is still pending.

“The system is not designed to require reliance on citizens to find problems and bring enforcement actions. That is a backstop,” Cromer said. “But that can’t ensure compliance and ensure that enforcement is happening. We need a robust state agency doing the enforcement. And from all appearances, we don’t have that.”

A Cloudy Future

Rick Handshoe

It’s easy for Rick Handshoe to see the effects of lax environmental enforcement on his land. On a recent summer day, there are still strange colors and foam in his creeks. The spot where his trailer once stood is empty, and the field where he once planned to build a house is bare, save chickens that belong to a neighbor.

Handshoe is angry.

“They should have protected me and my daughter,” he said of state regulators. “They knowed [sic] how bad this was. I blame them for not letting us know what was going on.”

Handshoe said the state’s inaction on Eastern Kentucky’s pollution issues has translated into fatalism for residents.

“People here have gave up on calling in to the state,” he said. “You can go up and down this neighborhood, talk to neighbors, and they’ll tell you, it doesn’t do no good. People have gave up. They don’t report it.”

Even as Eastern Kentucky’s coal mines close, the problems persist. And for people like Handshoe, there’s little hope on the horizon. Kentucky Gov. Steve Beshear will end his second four-year term on Dec. 8, and Governor-elect Matt Bevin has indicated he favors even less regulation of the state’s environment.

Erica Peterson is WFPL's Assignment Editor.