Environmental groups object to Patriot Coal selenium delay motion

Three environmental groups filed an objection on Oct. 4 at Patriot Coal’s bankruptcy court to a company effort to delay implementation of a selenium-reduction program previously ordered by the U.S. District Court for the Southern District of West Virginia.

Patriot, which has been in Chapter 11 protection since July 9 at the U.S. Bankruptcy Court for the Southern District of New York, on Sept. 28 asked the bankruptcy court to essentially delay compliance deadlines for cleaning up polluted water runoff from certain mine sites. Patriot argues that the delay will save it money and help its finances.

The Ohio Valley Environmental Coalition, West Virginia Highlands Conservancy and Sierra Club, which had gotten the West Virginia court to order this clean up, on Oct. 4 told the bankruptcy court that any compliance delay by Patriot’s Apogee Coal Co. LLC, Catenary Coal Co. LLC and Hobet Mining LLC subsidiaries should not be allowed.

The environmental groups said they have been attempting to force defendants to comply with federal environmental laws prohibiting their selenium discharges since 2006. “This motion is the latest instance of Movant Debtors repeated efforts to delay that compliance,” they said about Patriot’s Sept. 28 motion. “For example, Movant Debtors were required to cease most of the illegal discharges at issue in Civil Action Number 3:11-cv-115 by April 5, 2010, failed to do so, and colluded with the state regulatory authority to gain yet another extension of time. Similarly, the United States District Court for the Southern District of West Virginia characterized Hobet’s efforts to gain extensions to its deadline to cease the illegal discharges at issue in Civil Action Number 3:09-cv-1167 as ‘stalling tactics.’”

The Patriot companies have asked the bankruptcy court to lift its automatic stay on all outside litigation against Patriot in a very limited way so that they can ask the West Virginia court to extend the deadlines by which they must stop violating federal environmental law, said the environmental groups. “Notwithstanding their statement in their motion they ‘have made significant progress in bringing the relevant mining outfalls into compliance with the required permit conditions,’ Movant Debtors remain in violation of federal law,” the groups added. “At the outfall at issue in Civil Action No. 3:09-cv-1167, Hobet still has not treated a single drop of water to remove selenium and will not do so until it completes the construction of its treatment plant—the very action that it seeks to delay. The same is true at most of the outfalls at issue in Civil Action No. 3:11-cv-115, the exception being a small number of outfalls where Movant Debtors are conducting pilot testing of treatment systems.”

Groups say W.Va. court cases not connected with bankruptcy

The environmental proceedings in the West Virginia court lack any connection with and will not interfere with the bankruptcy case, the groups argued. “Because the orders in the Environmental Proceedings compel the Movant Debtors to take the necessary steps to remedy ongoing violations of federal environmental law—i.e., violations that have continued to occur post-petition—the obligations imposed by the orders in the Environmental Proceedings are not dischargeable in bankruptcy,” they added.

Extension of the compliance deadlines would permit the Patriot subsidiaries to seek to delay the installation of costly selenium treatment facilities during this critical period of their chapter cases, Patriot told the bankruptcy court in its Sept. 18 motion. If automatic stay relief is denied, the Patriot units may be required to expend significant amounts of their limited resources, particularly cash, in order to meet the upcoming compliance deadlines.

Specifically, such compliance would require them to expend about $17m in cash in the immediate future in order to meet the compliance deadlines in the Hobet 22 compliance order, and another approximately $12m to meet the compliance deadlines in a consent decree. Extending these deadlines would provide them with the opportunity to conserve valuable resources during their chapter 11 cases and may provide adequate time for the necessary technology to mature before full implementation is required, potentially lowering their ultimate costs of compliance, Patriot added.

“In total, the Debtor Movants estimate that if the West Virginia District Court modifies the compliance deadlines as requested, the Debtor Movants could defer up to $29 million in costs through the end of 2013, thereby providing clear tangible benefits to the Debtor Movants’ estates and their creditors,” Patriot argued.

Patriot is a major coal producer at a number of mines in western Kentucky, southern West Virginia and northern West Virginia.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.