Coal mining in Appalachia causes tremendous environmental harm: landslides, ruined drinking-water wells, blasting damage from mountaintop removal mines. Perhaps worst of all are the thousands of miles of polluted waterways. Mining companies dump the blasted rubble that once formed the mountain into the nearest valley, burying the headwater streams and causing a water quality crisis throughout Appalachia. The water that percolates through these enormous “valley fills” is polluted with toxic levels of heavy metals and salts, which destroy the stream quality for miles below.
Eastern Kentucky has thousands of valley fills, and the water flowing from them forms the creeks and rivers on which residents rely. Because the toxic mix of metals and salts in the water cannot be filtered through conventional means, much of it ends up in drinking water. Many residents know about the poor water quality but cannot afford to filter it or to buy bottled drinking water. Nearly a quarter of Appalachian Kentuckians live in poverty, the highest rate of all Appalachian states (Appalachian Regional Commission, Poverty Rates, 2006–2010 (n.d.)).
The Clean Water Act protects against pollution by requiring entities that discharge pollutants into streams to file self-monitoring reports (33 U.S.C. § 1341(d)). Under the Act, a coal company must test the water flowing from every pond at the foot of a valley fill at least twice monthly and report the results to the Kentucky Division of Water, the state’s Clean Water Act authority. Kentucky does not regularly do any of its own testing. Instead Kentucky relies on the coal operators’ self-reports to determine any pollution problems and how to remedy them. The integrity of the Clean Water Act depends entirely on honest and accurate self-reporting and Kentucky’s response to the reports it receives.
Here I describe ongoing litigation over two coal companies’ falsely reported Clean Water Act discharge monitoring reports and the state agency’s response to our clients’ attempts to secure remediation of the problem. Although we now have a coalition of plaintiff groups, we first represented Kentuckians for the Commonwealth, a statewide grassroots organization representing the interests of its members who were directly harmed by these mines. Many of its members are poor and at a disadvantage in ensuring that their interests in clean, safe water are protected by the state.
In spring 2010 staff members from Appalachian Voices, a citizen environmental group, began investigating Clean Water Act self-monitoring reports of Kentucky’s two largest mountaintop removal coal mining companies. At the time of the investigation the two companies held over one hundred mining permits covering thousands of acres in the eastern part of Kentucky.
Using Kentucky’s Open Records Act, Appalachian Voices sought the companies’ recent discharge monitoring reports. Despite repeated formal requests for information, Appalachian Voices received only a fraction of the records it requested. To retrieve the missing reports, Appalachian Voices staff members began visiting Kentucky’s Division of Water and its mine agency in search of the records. After visiting numerous offices, they found stacks of discharge monitoring reports from various coal companies. The reports had never been reviewed. After going through the reports, the staff members found many, but not all, of the discharge monitoring reports for the two coal companies in question.
The records that Appalachian Voices found, however, contained false reports. Obvious false reporting consisted of duplicated data in reports submitted in consecutive quarters. Many reports had been submitted without any company employee certifying the accuracy of the reports. Many had been submitted with impossible date information crossed through and hand-corrected. More significant, over a two-year period, no reports showed any violations of Clean Water Act discharge standards (beyond typographical errors). The companies were reporting perfect compliance with the Clean Water Act for all of their large mountaintop removal mines.
Realizing the breadth of the violations uncovered and the degree of Kentucky’s failure to enforce the Clean Water Act, Appalachian Voices assembled a team to determine how to cure the problems it found. The team consists of Kentuckians for the Commonwealth, Waterkeeper Alliance, Appalachian Voices, and Kentucky Riverkeeper. The legal team consists of lawyers from the Appalachian Citizens’ Law Center, Pace Environmental Litigation Clinic, and Waterkeeper Alliance along with two private-practice attorneys. Most team members are from Kentucky, but some participate from North Carolina and New York.
The core team consists of about twenty individuals. The challenges of working with a team of this size were apparent from the beginning. Information sharing became the biggest team-building priority. Team members agreed on two primary information-sharing techniques. First, the team uses an e-mail list to ensure that information is disseminated equally to all members. Second, and more important, the team holds weekly strategy and progress calls, which often last between one and two hours. Participation from each of the team’s core members is expected. With a highly participatory approach, the team agreed early on to seek the opinions of and give deference to team members who are most closely affected by the problems uncovered.
Preparing for Litigation
With the mechanisms for working together in place, the team decided that litigation was likely the best route for solving the problems uncovered. While the team recognized that enforcement of the Clean Water Act is primarily the job of the state agency and the Environmental Protection Agency (EPA), the evidence of the state’s complete failure to oversee its Clean Water Act program for coal mines indicated that the matter would likely be swept under the rug if left to the regulatory agencies to resolve. Because the Clean Water Act’s citizen suit provision requires a sixty-day notice period during which regulatory agencies may prosecute any alleged violations, Kentucky would have an opportunity to take appropriate enforcement action if it chose to do so (33 U.S.C. § 1365(b)). Citizens have the right to bring the enforcement action in court only if the state regulatory authority or EPA fails to prosecute enforcement diligently in state or federal court within the sixty-day period.
The team worked together during the summer and fall of 2010 to prepare for litigation and draft the notices of intent to sue. We sent the notices in October 2010 and prepared to file suit in federal court on Monday, December 6, 2010, the date on which the notice period ran. On Friday, December 3, 2010, I received a phone call from the Kentucky Energy and Environment Cabinet informing me that Kentucky had filed complaints against both companies in state court. The state and the companies had also presented the court with signed consent judgments and moved for their entry. In briefing on the motion to enter, the state and one of the companies referred to the state court’s duty to enter the settlements as “ministerial.”
The State’s Enforcement Action
The state’s complaints alleged over 2,700 Clean Water Act reporting violations by the two companies. The state’s investigation validated each of the allegations made in the citizens’ notices of intent to sue and alleged further violations, including 680 instances of failing to turn in quarterly discharge monitoring reports.
Still, Kentucky assessed penalties at less than 1 percent of the maximum allowable penalty under the Clean Water Act. For their years of false reporting, the two companies were asked to pay a fine of $660,000. By statute, the money was to go into the Kentucky Heritage Land Conservation Fund, which all but assured that none of the penalty moneys would be spent fixing water pollution problems in eastern Kentucky (Ky. Rev. Stat. Ann. § 224.10-250). The citizen groups believed these penalties were a mere slap on the wrist.
Besides the inadequacy of the fine, the consent judgments lacked effective remedial requirements. Despite uncovering a wholesale failure on the part of the companies to report their pollution discharges truthfully, the state did not require the companies to submit to any kind of ongoing auditing or compliance assurance procedures beyond the first quarter of 2011.
After learning of the lawsuit and proposed consent judgments, the team agreed quickly that the best course of action would be to intervene in the state-court lawsuits and to object to the settlements. Filing a separate lawsuit in federal court carried significant risks since the federal court could hold the suit in abeyance or dismiss it in view of the state-court enforcement action. The team decided that the state-court venue with the state as a party would garner greater scrutiny of the state’s failures and present the best opportunity to advocate stringent enforcement against the two violators.
The citizens filed their motion to intervene in Franklin Circuit Court under Kentucky Rules of Civil Procedure Rule 24.01, which mirrors federal rule 24(a). Under the state rule, as with the federal rule, the intervening party must include with the motion to intervene a “pleading setting forth the claim or defense for which intervention is sought” (see Fed. R. Civ. P. 24(c)). Kentucky has no right of intervention or citizen suit provision under its delegated Clean Water Act authority. The citizens therefore filed their motions to intervene along with intervening complaints alleging that the Franklin Circuit Court had concurrent jurisdiction over the groups’ federal Clean Water Act citizen suit claims.
Despite strong opposition from Kentucky and the two coal companies, the Franklin Circuit Court granted intervention but held the intervening complaints in abeyance pending the court’s ruling on the merits of the proposed consent decrees. The court allowed a period of limited discovery on whether the proposed consent decrees were fair, adequate, reasonable, and in the public interest (see United States v. Lexington-Fayette Urban County Government, 591 F.3d 484, 489 (6th Cir. 2010)). The court ordered a hearing on the matter for late summer. In the meantime the court ordered the parties to mediation.
Immediately, Kentucky and both coal companies filed a mandamus action in the Kentucky Court of Appeals and asked the court to rule that the Franklin Circuit Court had no authority to allow the citizens to intervene. When the court of appeals ruled against them, Kentucky and one of the coal companies appealed to the Kentucky Supreme Court (Commonwealth v. Shepherd, Nos. 2011-CA-000342 and 2011-CA-000343, 2011 WL 3586410 (Ky. Ct. App. July 19, 2011)). The Kentucky Supreme Court denied the appeal in a forcefully worded opinion a year after the intervention was allowed.
Getting Ready for Mediation—Round 1
Mediation was conducted during the discovery period and the lead-up to the hearing on the adequacy of the state’s proposed consent judgments. At the same time the lawyers were arguing in the court of appeals whether the Franklin Circuit Court had the authority to allow intervention. As a result, the attorneys and the parties were answering discovery, conducting and defending depositions, briefing the intervention and concurrent jurisdiction issues to the appeals court, and preparing for a trial on the state’s failures, while at the same time trying to explore the possibility of compromise.
The coincidence of litigation and mediation required that the team focus simultaneously on preparing the best case for why the state’s proposed settlements were insufficient to punish the violators and cure the underlying problems and on fashioning a compromise that would satisfy the team’s goals. As the arguments for trial were strengthened by information learned through discovery and as the state argued against the citizens’ right to be involved in the litigation, the team itself began to have trouble agreeing internally on the desirability and terms of a possible settlement.
During this period between the state’s proposed settlements and the first formal mediation, the companies reported new discharge monitoring reports. The new reports were markedly different from anything the companies had reported in the past. During the first quarter of 2011, the companies self-reported over four hundred effluent-limit violations, in stark contrast to the zero reported effluent violations in the previous two and one-half years. That evidence led the team to conclude that the companies had not truthfully reported any of their discharges during the period at issue. To make matters worse, we realized during discovery that Kentucky understood these failures but had no mechanism for catching the types of reporting problems discovered during Appalachian Voices’ investigation.
These facts made settlement difficult to pursue. The team’s distrust of the state increased as the team learned more about the agency’s internal workings and relationships with the regulated industry. The team was concerned that if it settled, the state’s enforcement would not improve. Some members of the team concluded that any settlement must deter other coal companies from this type of wrongdoing and that the only way to do so was to require a high financial penalty. Others in the team remained more concerned with ensuring an ongoing auditing plan for the two companies, with stepped-up penalties for future violations, and designing a supplemental environmental project that would use the penalty moneys to correct pollution problems in eastern Kentucky.
The court’s mediation order required team members to have an agreed-upon method of reaching consensus during mediation so that no group or group member not present would have veto power. The team held its first face-to-face meeting about two weeks before formal mediation was scheduled. Everyone who regularly participated in the team calls attended the all-day meeting. The attorneys attempted to facilitate the meeting and explained how mediation would work. However, the team failed to agree on what it wished to achieve during mediation. Team members agreed on the general goal of ending the problem of false reporting and ineffective enforcement but lacked clear consensus on the details of these goals. Team members agreed to hold another face-to-face meeting on the day before mediation.
The attorneys attempted to facilitate the second meeting. Team members tried to reach consensus on how to approach mediation, including the details of what to present as an opening offer and the bottom lines required for any settlement agreements. Throughout both meetings, the attorneys stressed the importance of flexibility during mediation.
On the day of mediation, the two dozen or so team members arrived at the mediator’s office, along with the delegations from Kentucky and the two coal companies. The mediator’s office was not equipped to handle such a large number of participants. The citizen group was split up, and a considerable amount of time was spent setting up audiovisual aids to ensure that each team member could at least watch the mediation. The actual mediation was short and ended soon after the team made its initial offer.
Mediation Round 2
After the first mediation, the team focused exclusively on trial preparation. The three-day trial was well covered by the media (see, e.g., James Bruggers, State Tries to Explain Deal in Fines in Coal Pollution Trial, Louisville Courier-Journal, Aug. 31, 2011; Ronnie Ellis, Judge Pleads for Mediation in Coal Case, Ashland Independent, Sept. 2, 2011). At the end of the trial the judge ordered the parties back to mediation. Four months after the first mediation, the team returned to mediation with the coal companies.
The four-month reprieve allowed time for self-reflection and gave the team an opportunity to reassess the overall goals. The team considered the trial a success and believed that the team was able to present evidence, primarily through the testimony of state officials, demonstrating that the state’s proposed settlements were not designed to ensure the companies’ ongoing compliance with the Clean Water Act. The question that arose again and again was, What then? If we succeeded in nullifying the proposed consent judgment between Kentucky and the coal companies, that would be only the beginning of the actual litigation against the companies. “Winning” seemed less defined as time went on.
The court’s second mediation order was more specific. The team was to have no more than three representatives at mediation, and those representatives were to have full decision-making authority. Choosing the three representatives and reaching consensus on their scope of authority at the mediation table was difficult and crucial. One aspect, and what distinguished the second round from the first round of mediation, is that the attorneys stepped back and told the team members that they must decide on the goals. This adjustment gave the team members more ownership over the mediation—a decisive step for all concerned.
After the trial, a new client representative, who is also an attorney, came on board, and one of the group members who had at times been forceful left the team. The new client representative took the lead in facilitating communication between the clients and the attorneys and doing the hands-on work needed to achieve consensus on who the three representatives would be and the scope of their negotiation authority. Team members continued weekly calls, but with a better sense of respective duties. Team members worked together to choose the three representatives and to prepare a written statement of goals and priorities to guide the representatives and the attorneys during mediation.
By all accounts and for a variety of reasons, the second round of mediation went more smoothly than the first. The second formal mediation session ended with a preliminary agreement on the general terms of settlement with the state and the two companies. Over the next few months, the team was able to work through the details of a settlement agreement with one of the companies. Under the terms of that agreement, the company must pay stipulated penalties for future Clean Water Act violations; must submit to and pay for ongoing, independent auditing of its contract laboratories and its Clean Water Act reporting; and must pay the state’s assessed penalty. Penalty money is directed to two water quality projects in eastern Kentucky. One of the projects grants money directly to low-income eastern Kentuckians for septic system upgrades; the other funds the state to monitor water quality near mine sites. The team has yet to reach agreement with the second company, which claims to be financially insolvent.
The team-building approach of this advocacy was sound. Engaging in a highly participatory manner from the beginning led to success. The foundation of participation by all groups and all attorneys allowed us to navigate the difficulties that arose as team members attempted consensus on settlement terms. While some among the groups remained focused on the high-impact value of the litigation, the team as a whole was grounded by the stated desire to defer to those most directly affected by the pollution at issue. The first round of mediation would have benefited from a less intensive focus on “bottom lines” and more focus on the overall goals underlying different settlement alternatives.
The attorneys’ decision to step back and have the clients develop and present a memorandum of priorities and desired outcomes to be used by the attorneys and the chosen representatives was critical to the success of the second round of mediation. The team relied on that document during each key decision point in negotiations from that point forward. It centered discussions that at times were difficult and guided each member as to the underlying values and goals at work in each decision that had to be made.
The success of the mediation was due in no small part to the Franklin Circuit Court’s understanding of and responsiveness to the difficulties of multiparty representation. The court’s order requiring the team members to choose representatives with full decision-making authority in many ways forced the team to revise its own internal workings several weeks before the second round of mediation. Paradoxically, delegation increased the internal decision-making power of the team because it forced team members to think systematically through the goals behind different settlement alternatives and arrive at consensus on those goals beforehand rather than attempting consensus on specific settlement offers in a reactive manner.