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West Virginia environmental regulators are proposing to reduce the fines that a coal company owned by the state’s governor could pay for water pollution violations that are the focus of a federal court case. The move comes after the company stopped paying penalties required as part of a settlement four years ago to clean up its mines across the Appalachian coalfields.

Environmental groups allege that the Red Fox Mine, a large strip-mining site in southern West Virginia owned by Gov. Jim Justice’s Bluestone Coal Corp., continues to exceed discharge limits for harmful substances. The suit could result in substantial payouts — the maximum potential federal penalties are nearly $170 million — that would go to the U.S. Treasury.

In the weeks before a trial in the case, lawyers for Bluestone filed documents detailing a draft deal worked out separately with the state’s Department of Environmental Protection. The state agency, whose administrator is appointed by Justice, has agreed to settle the violations for a fine of $125,000, according to a court filing by the environmental groups’ lawyers. (State and federal governments share the authority to enforce water pollution rules.)

Lawyers for Bluestone are asking the judge to throw out the federal case, saying the state settlement and hundreds of thousands of dollars in federal fines the company already paid for the same violations should resolve the matters.

Lawyers for the Ohio Valley Environmental Coalition and other groups say the state settlement doesn’t moot their suit, and they urged a federal judge not to grant Bluestone’s request to throw out the case. They called the state action “a self-dealing administrative order” and said the proposed penalties “are insufficient to deter future violations, leaving a realistic prospect of continued noncompliance.” At best, the lawyers say, the amount paid would offset potential fines in the federal court action.

The fight to force Justice’s empire to follow pollution rules, the groups say, symbolizes the larger ongoing fight over how aggressively to regulate an industry that remains politically powerful, even as its economic influence declines.

The state’s environmental regulators are seen as friendly to coal companies, so the reduced fines are in keeping with prior actions. In one significant example from a decade ago, a $20 million federal settlement with Massey Energy revealed that West Virginia officials were not even reviewing disclosures that Massey had filed reporting thousands of water pollution violations.

“Coal companies pollute,” said Vivian Stockman, executive director of the Ohio Valley Environmental Coalition. “There seems to be little consequence to carrying on business in disregard for the law. This has been the case over decades.”

The proposed settlement is the latest in which government agencies overseen by Justice have had to regulate businesses owned by Justice, a billionaire whom Forbes has labeled the richest person in the state. He owns a vast array of businesses, including coal mines, resort hotels and agricultural interests, many of them regulated by the state agencies that report to him.

An investigation this year by ProPublica found that companies run by the governor’s family have accumulated $128 million in judgments and settlements in cases brought by vendors and other businesses and government entities over unpaid bills. Justice companies that own or are affiliated with the historic Greenbrier Resort have said in court filings that they are “near financial insolvency.”

Mike Carey, a lawyer for Bluestone Coal, called any suggestion that the company is getting preferential treatment “completely baseless.”

The court records filed in the federal case indicate that state regulators first proposed the settlement more than a year ago, and that it then included a suggested penalty of $883,000. But in its new proposal, which must face public comment before it is finalized, WVDEP proposed a $2.1 million fine, but then dropped that to $125,000. The agency noted that’s the maximum allowed under state law but did not explain why it had earlier proposed a larger amount.

While Justice’s adult children have day-to-day control over the family’s business operations, the governor continues to guide the empire. Justice has repeatedly said his role as governor poses no conflict, and he wants nothing from the state for his businesses or his family.

The last tussle over the governor’s coal mines came to a head in 2016, when weeks before Justice won that year’s general election, his company agreed to pay a $900,000 fine for past violations, penalties for future violations and millions of dollars for new pollution control measures.

The deal resolved more than 23,000 water pollution violations between 2009 and 2014 by Justice mines in West Virginia, Virginia, Tennessee, Kentucky and Alabama, then under the umbrella corporate parent, Southern Coal Corporation, according to court records filed as part of that settlement. (Southern Coal, like Bluestone, was also owned by the Justice family.)

“This settlement is designed to bring the companies into compliance with the Clean Water Act and requires actions that should prevent future violations,” Assistant Attorney General John Cruden said at the time.

But hundreds of times since that 2016 federal deal, those mines discharged more solids, iron, manganese, aluminum and other pollutants than allowed by their environmental permits, the company’s own public reports show.

Justice’s companies have paid hundreds of thousands of dollars in fines for those violations, which are fairly common and seen as a cost of doing business in the coal industry. In August 2019, the environmental groups filed suit against Bluestone, alleging excess discharges of selenium, which can be toxic to fish and other aquatic life.

State and federal agencies have somewhat overlapping authority to regulate coal industry pollution. Federal law also allows citizens to file suit over Clean Water Act violations, both to seek fines, payable to the government, and to force measures to stop further violations.

Then, this year, the Justice companies “apparently stopped paying” some of the stipulated penalties, citing the lawsuit, according to a court filing by the plaintiffs. In a May report to federal regulators, Bluestone Coal marked a list of some of those selenium violations as “in litigation payment not applied.”

A federal judge has cited that report and noted unpaid stipulated penalties for 40 selenium violations that date back to July 2018.

A spokeswoman for the Environmental Protection Agency said that the earlier settlement does not allow Bluestone to stop paying stipulated penalties, but she declined to say what action, if any, federal officials might take “because this is an active enforcement case.”

Carey said that the report indicating those fine payments were being held back because of the litigation “was an error.”

In a court filing Tuesday, Carey indicated that a $35,000 payment for some of the fines was made on Sept. 4. Carey also alleged that the environmental groups had offered during settlement negotiations to resolve their lawsuit, and give the company three years to come into compliance, if Bluestone Coal would donate $600,000 and 850 acres of land near the New River Gorge, a scenic area, to the West Virginia Land Trust, a group that tries to protect wilderness in the state.

Bluestone Coal lawyers had earlier tried to have the selenium case dismissed, arguing that it was preempted by the 2016 settlement.

But in a ruling in June, U.S. District Judge David A. Faber in Bluefield, West Virginia, declined to throw out the case, saying that the continuing violations, and Bluestone Coal’s failure to comply with a timeline for installing a treatment system, showed the need for the citizen suit. Then, in July, Faber issued a second ruling that found Bluestone liable for the selenium violations. The judge noted that Bluestone Coal could be liable for more than 3,000 days of water permit violations, which could amount to a maximum fine of $169.2 million, according to the citizen groups.

On Tuesday, Faber postponed a Sept. 23 bench trial meant to determine a remedy for the violations. Instead, he scheduled a hearing that day on Bluestone’s request to have the case thrown out.

Like his political ally President Donald Trump, Justice has been clear that he wants to curb government regulations meant to protect the environment, especially as those apply to the coal industry and other fossil energy operations.

In his first State of the State address in February 2017, Justice said that, under his administration, the state Department of Environmental Protection would stop saying “no” to business and industry. A week later, he belittled WVDEP inspectors when he told a natural gas industry group that they would have to stop showing up for work with “a tank top and flip-flops on” and looking like they “haven’t shaved in three months.”

At the WVDEP, Justice put in charge a former coal company executive and energy industry consultant, Austin Caperton. In an early speech once he took office as WVDEP secretary, Caperton said he “doesn’t trust” the science that says human activities such as burning fossil fuels are warming the planet, a position that puts him at odds with mainstream science.

As recently as 2017, the federal Office of Surface Mining Reclamation and Enforcement issued a report outlining continuing failures by the state to police water pollution by coal companies. OSMRE has said it is continuing to monitor WVDEP’s efforts to improve oversight of the coal industry.

Over the years, selenium pollution has been especially tricky for coal companies to deal with, presenting expensive and long-term treatment challenges. Violations have prompted other citizen group lawsuits like the one against Bluestone and scientific studies that warned of stream damage from the selenium discharged by mining operations.

In response to questions about Bluestone Coal and its policing of the coal industry more broadly, the WVDEP provided a statement that indicated it was considering a change in the selenium limits for the Red Fox permit that, if approved, would “resolve that component of the enforcement action for the site.”

Ken Ward Jr. is a co-founder, senior investigative reporter and editor-at-large, and is a reporter with our partner, the nonprofit newsroom ProPublica. Ken spent nearly three decades reporting for The...