When A Coal Mine Shuts Down, Locals Get The Shaft

from Bloomberg News and iHeart Radio. I'm West Gasova today. What happens when big coal decides stop, pack up and leave town. As America's long dependence on coal winds down, some companies that made fortunes in that industry are looking to move on, and they're leaving behind a big, filthy mass all across cold country, ruined land and poison water that someone's got to pay to clean up. And that's when the game of past the buck begins. So who

does wind up footing the bill? Bloomberg reporters Zachary Mider and Josh Saul went to find out. They joined me now from New York. Josh Saul, Zach Mider, thanks so much for being here. Thanks for having us west. You tell your story in part through the eyes of retired miner. His name is Miles Hatfield, and he lives in eastern Kentucky. Can you tell us about him? Sure? I first found Miles after a lawyer I was talking to suggested I look at complaints that were made um around some of

the specific minds that we were looking at. He describes a really sad story. He lived in the house where he raised his kids. They lived there for decades, and then the runoff from the Love Branch mine started affecting his home. The moment that really almost made me gasp is when he described a few years ago walking through his house and the water had weakened his floor in the structure under his house, and he was walking into

his dining room and he fell through the floor. He fell through and got sort of pinned up to his hips. I didn't know what was under the house until it fell in, and then there wasn't no doubt about it. Then the Love Branch mine was a coal mine, and underground coal mine, so you can imagine just a deep shaft going into the ground. What happens with these kind of minds is they can change the hydrologic balance, or change the way that the water flows underground, so above

Miles house. Instead of the water flowing the way it had for decades, where it flowed, you know, to the sides of his house and down through natural natural creeks and under underground caverns, it started flowing, you know, right through his right through his yard and eventually under his house. Miles Hatfield described what happened to him. There wasn't no warning when it fell, but it went wall to wall kitchen cabinets. For the lower kitchen cabinets, they're suspended in

the air. The floor fell out from underneath those. Uh, this is in a bad of an eye. I was in four foot of water, which I didn't know was there until I went in. I had a cell phone with me, no signal. It took me about twenty minutes to get out of the hole that I was in. The stuff and it fell in, was floating in the water, and I kept stepping on things to try to push myself up, and it took me about, i'd say twenty minutes just to get up out of the kitchen. And

I went upstairs and told my wife. She couldn't believe it. She come down and where we did have a kitchen and dining room didn't have it anymore. Now you've got to use your machine. Nice on the wrist of it. And so I went down. They got electric stove. He had hit me in the back of the head. So I was thinking, what would been imbursing too if it was in the paper man drowns and kitchen, which I wouldn't know about it. It's not exactly the way I

don't want to go. He said. It felt like, you know, in an old, an old cowboy movie when they when they hang a guy and he falls to the platform of the floor, you know. He said, it felt like falling into a swimming pool. And uh it basically it basically ruined his house. He had to move. He now lives a few miles away in a rental, which really burns him. He's very unhappy that. You know, he spent

all so much of his life. He actually worked as a coal miner before he retired, and spent a lot of his life making money to pay off the mortgage on his house, and then now he's paying rent, you know, for a different house. Um, it's pretty unhappy about that. It costs a hundred sixty dollars a month to run upon to pump this water down, and uh, I hope to make it back. I hope the house can be fixed, but we won't know until we're empty it to see what we have inside. And what happened to him is

really what your story is all about. That this mine no longer in use, is sitting there and it's causing all kinds of trouble and it's supposed to get fixed. So just what happens when mine closes down? Yeah? Yeah, So you might think like, okay, they they're done with the coal, like whatever. They just kind of close up the entrance and and that's it and everything's fine. But in reality, an old coal mine leaves a huge mess.

And so one thing that very frequently happens is that because of that activity of pulling all the coal out, you you sort of unearth all these noxious chemicals that are naturally occurring but that would never cause a problem unless something like mining happened to sort of cause them to come out all at once. It's super common for the area around the coal to have like material that when water flows in their water and air that that

were never there before. They essentially become highly acidic, and then the the acid water picks up things like metals like iron and aluminum, which is why the water that flows out of old mines is typically bright orange or very often bright orange, because it's it's so laden with iron, and that's just kind of a signal that something's wrong. But it's the acidity that typically will kill any aquatic life or something that would want to live in it.

So in Appalachia there's thousands of miles of creeks and streams that are affected by what they call acid mind drainage. In addition to that, you have selenium, which is a necessary nutrient, but in high enough quantities it could become toxic to birds and insects, and so in some parts of West Virginia Kentucky you have creeks that are also poisoned with that, and it's extremely difficult to get rid of. So just from the activity of digging things up, you

have all these really profound problems. And then, of course, in addition, you have what Josh was talking about was just the drainage of actually affecting people who live nearby, and you also have in in mountaintop removal mining, you have just these giant piles of rock that are basically what's left of the mountain when it's been kind of blown up. You're actually just kind of blowing the top off a mountain and then kind of dumping it into

the nearest valley. And so what you're left with is this. You know, where you before you had a forest that had things growing on it. Now you've just kind of like the surface of the moon or something. So we all know that mining, and you do a great job of describing, and it is dirty business. Um. And so when mines are done, the mining companies are supposed to

make it right. What are they supposed to do? There's a federal law that mining companies have to when they're done mining, when they're done taking coal out of the ground, they have to restore the land to it's roughly to its original contours, you know, so it has a similar, similar or the same shape in terms of there was

a mountain here in a valley here. They have to plant vegetation so that there are something growing there, and they have to make sure that there's not water runoff that is bad for people or animals or plants or wildlife that live nearby or downstream. So that's both making sure that the water is not running in some totally different way like with flooding, and also that it's not

poisoned or laden with chemicals. You spoke to an advigate called Aaron Savage with a group called Apple lachin voices, right right, right, Yeah, here's what she had to say about the process of reclamation. After nineteen seventy seven, coal companies became legally required to reclaim the minds that they had started. The law past regulate coal mining is called the Surface Mining Control and Reclamation Act. We commonly refer to it as smackra. Some of it's simpler in terms

of moving dirt around. That's at least like pretty easily understandable, and you can see when you're done that, Okay, that's maybe not as pretty as it was before. But the water treatment which wrote about is really a long term and really a difficult thing. When when I was in West Virginia, I went out with some guys who try to keep track of the clean up of these acid mind drainage streams and to give you a sense of

the kind of long term environmental consequences here. One of the places we went to there was a stream that had been poison since the eight nineties and it was still acidic until just a couple of years ago when the state finally got around to cleaning it up. And what they're doing it turns out to be very expensive and long term expensive because if you think of it, it's it's basically it's acid, just like household vinegar. If you want to clean it up, you essentially just have

to apply a base to neutralize it. And so what they do is they typically install these like giant silos along the stream with a machine that's kind of constantly dumping this limestone powder into the creek. And so that's expensive. It's like electricity and material that could easily be needed for another hundred years. And I went out with these guys to test some samples of water and see how

things were going. And one of them said, you know, if this machine were to break down for twenty four hours, this whole stream is back to square one everything and it dies and we'll have to start over. It's almost like the stream is on life support. Yeah, it's it's it's depending on the machine. But they have signs out with the roads saying it is poison they've told the people in the hollow, don't let your kids play in it,

and don't let your animals drink from it. But this water goes to the river, they treat it down there, and they send it back to us as drinking water. I still don't know who posted a sign out there tell them about the water. But if I put polluted water in the creek, I'm sure somebody'd be after me. Cold companies can they're a little bit lax the hold

of them, you know, accountable. And there are so many streams, you know, not just rivers, but streams that are anywhere from a flow to a trickle that you can't put machinery on all of them. Some of these decisions are kind of up to regulators point of view, regulator's decision. One long time regulator I talked to, he actually ended

up being Obama's head of mind reclamation. He said that when he was when he was coming up, when he was a young regulator in Pennsylvania, one a guy he worked with had a had a unique method for deciding whether or not a stream was big enough or important enough to be protected. And he said, if you could piss across it, that it wasn't big enough to warrant protection.

My conversation with Zachary Miter and Josh Saul continues, after the break, that's got to be pretty expensive work to restore what has been upturned by mining for you know, decades. Often the problem with Smacker at this point is that the work fuirements for reclamation are unclear, and there isn't

enough money available to do the reclamation. Aaron Savage has done some work to try to figure out how big this whole problem is of cleaning up Appalachian coal country, and she estimates that it's going to cost something like eight or ten billion dollars to clean up all the

minds that still have to be reclaimed. And then she went in and tried to figure out how much money is available to do that, and it doesn't look good because there's some bond money set aside that these companies have to post, but it's not nearly as much as

their obligations. And so if these companies fail, as a lot of them do, that difference is going to have to be borne by somebody else, and so it will either be that the work doesn't get done and it's sort of borne by the environment, or it has to be paid for by you know, state reclamation funds, which are sometimes funded by taxes on coal, so it's kind of funded by the industry. But if those run out, then ultimately it would be the taxpayers that would have

to come up with a difference. All our companies willing to at least try. Companies often don't want to do the cleanup. It's hard, it's expensive, it takes a long time, it takes equipment away from the profitable activity of actually

mining coal. Uh So, something that they prefer to do and are reporting found often have been doing, is instead of cleaning up that land, they instead offload or transfer or sell those mining permits to another company, often to a smaller company that's willing to take on those clean

up obligations. They can do that by selling the mining permits, or they can also do that by basically giving the mining permits, and sometimes they do give along a substantial chunk of money so that the smaller company has some

kind of resources to do the cleanup. But you have a situation where you have smaller companies with a lot fewer people, with less expertise, and they then suddenly have sometimes hundreds of mining permits that they're responsible for cleaning up, and we found that those companies have been, for the most part, at least in the main case that we looked at, not cleaning up many of the minds and

also racking up huge numbers of environmental violations. You read about one company in particular and how they did exactly what you're describing, Zac. Can you tell about how that happened. Alpha was one of the biggest coal companies in the country.

Basically the whole industry sort of went broke in the mid two thousands because of the collapsing demand for coal because of cheaper competition from natural gas, and so in the course of sort of working its way out of bankruptcy and just afterwards, Alpha undertook this transaction where they said, well, we have all these old coal mines in in Appalachia that basically I don't have any coal that's worth mining anymore, and so we're going to shift them to this small

company that actually didn't have a lot going on at all until Alpha transferred all these mines to it, so hundreds of mining permits and um they handed over some some money as well, and the plan was, you know this this company Lexington. What es such a just be in the business of of cleaning up all these old mines.

That's that's what I was gonna do. This was the smaller company that took on all these permits, That's right, Yeah, And that that ended up being a great deal for Alpha because you know, is now publicly traded company again and they can tell their investors, look, we don't have this legacy obligation of uncertain costs that will be burdened with, you know, for a long time while while all this

cleanup happens. Instead, we can just focus on the future, focus on the minds we have now they're still operating with with coal in them, and you don't have to worry about any of those old clean up jobs. These asset transfers and this this strategy, this playbook has been tremendously profitable for a lot of these companies. A number

of these big coal companies have had record profits. Alpha specifically, it's executives have earned tens of millions of dollars over say the past decade or so, and the company's stock is up something like seven So Alpha is just one of several companies um involved in minds that need to be cleaned up. The example you use with Alpha is

just one example. Absolutely yeah, and Alpha is just one of many coal companies that use the same playbook and effectively offloaded or passed off it's clean up obligations, which is all entirely legal because it's approved by state regulators. That's right. Now. Why would Lexington, a smaller company, not a lot of assets, take over essentially spent minds and tons and tons of obligations. What is the incentive for them? I think there's there's two. There's two incentives for Lexington

in a situation like that. The first is that some of the minds do have coal left in them, and coal can be mined profitably, especially when coal prices are high like they are right now. To to abstract away from Lexington to kind of all of these companies in general that are taking on these obligations, they don't necessarily have that much money in the game. In other words, they're taking on a huge amount of obligation, but if things go south then they fail, they haven't actually that

much on that outcome. Whereas if it turns out to be less expensive, or if coal prices recover dramatically, some of those defunct minds become useful again. They kind of get all that upside. Well, one thing that you describe in the story is that in some cases, these smaller companies don't have enough money, and then taxpayers wind up

holding the bag. Right. That's the thing is that by by transferring minds from a kind of big company with a lot of coal, like Alpha, to a smaller company that doesn't really have anything else going on, what you're doing is essentially guaranteeing that whoever is going to have to pay for that long term, it won't be Alpha. Josh, what did Alpha and Lexington say when you ask them

about this? Alpha said that, you know, first of all, we're a very environmentally conscious company, and where they say that they're proud of their standards. More specifically, they say that they often pass along substantial payments to the companies that take on their clean up obligations, and they also say that all of these transfers are approved by state by state regulators. Lexington told me that they would comment,

but never actually sent along any answers to any questions. Josh, you mentioned the state regulators having to approve these deals, and that's exactly what happened. In this case right where they they spelled out this plan and the state regulators looked at it and they did approve it. And what was in the plan plan was that Lexington would take on all the obligations. Lexington would do all the clean up that Alpha had promised to do, even set aside

money to do it. But it basically passed along money to Lexington, and Lexington at that point had all the

obligations and Alpha went on its way. We haven't had a final accounting yet of how much money has actually left UM to clean this stuff up, but there's a lot of signs that it doesn't look great because these minds, rather than being owned by these coal companies that are super profitable this year, are instead owned by these like little companies we can't even really tell if they're in business or in some cases they've already gone bankrupt or

or or put in receivership already, so they they're sort of unable to benefit from the revival in the coal industry that we're seeing. So to take the kind of big picture perspective, you know, for for a hundred years in the coal industry, there were no rules about this. You could just dig in mine and then kind of walk away, and so um the federal government to this day is I mean, they just approved a big spending bill that would spend billions of dollars cleaning up those

old messes from back before there were rules. We're still cleaning that up. Since nine there's been this federal law that says the coal companies have to clean it up, and there's all these kind of checks and balances to make sure they really do. And that's what we're talking about here. There's there's so many different ways that that system can fail, and ultimately, if if it does, we could be back in a situation where the federal government has to come in and and pay for these cleanups

that we're supposed to be the private industry's responsibility. Why aren't the state boards that oversee this taking a harder line, Well, they're the state regulators are in a tough position because you know, states like Kentucky and West Virginia they want their old minds to be cleaned up, but they also want coal jobs and they want their coal companies to be healthy and profitable, and so oftentimes in the short

term there's really a trade off there. If a coal company says, hey, listen, we we need a little more time on this, or why don't you prove this deal so we can like keep all our guys at work. You know, that's very tempting to state regulator. So sometimes the regulators have to weigh on the one hand, like they want to support the industry, but that might kind of lead them to say, well, we'll think about reclamation, you know, as as our second priority, or maybe we'll

worry about that later. And so over time, that's part of the reason that they're kind of willing to approve these deals. That separates the kind of profitable part of the industry from the clean up obligations. We'll talk about where things go from here when we come back. In Appalachia, there are any number of people who are taking it upon themselves to monitor this clean up uh, to put pressure on mining companies to do it and to see

what's being cleaned up in and what's not. One of them you spoke to was a person called Junior Walk. Junior grew up kind of in the heart of coal country along the Coal River, and there's a number of coal companies operating along there. He was affected by coal kind of starting out as a kid his his grandfather

was a miner. He said he saw as a kid his grandfather welding little jack rocks, which is what coal miners would make, sort of little little caltrops out of nails to throw in the way of coal trucks during labor disputes. And coal companies also hurt his drinking water

when he was a kid. So I mean he grew up right right in the middle of all this, and he now works for an organization called Cold River Mountain Watch, and he spends he spends some of his days basically keeping an eye on patrol and keeping watch on the coal companies that operate around around around his childhood home and where he lives now. And one of the most effective ways he has for doing that is flying flying a drone. So he'll drive up. You know, he's got

an old Subaru. We we went and road with him, um, and he's sort of cowboys, you know, straight up these dirt roads up into these mountains and finds a spot and him and his organization then report those violations to state regulators and you know, try to get inspections or trying to make sure that those companies stopped doing that or make it right. What does it look like in the area surrounding spent mine, Well, it's really a mix.

I mean you can be driving down a road or you know, standing looking out down a ridge and it can be really beautiful. Western Virginia is a breathtakingly beautiful place, and then there could be right next to it what looks like looks like a moonscape, just like scraped not just to the ground, but like way way below the ground, just gray, gray rock. You know, if you think about the mountain like a human body, that's like, that's like cutting your arm, right, it will eventually heal back over.

But if you're talking about a massive mountaintop removal operation, then that's like cutting your whole arm off. It's not going to grow back. If we were to take a place like that that you just described, what would a reclamation project look like? How would they bring it back? What what steps would be involved in doing that? I

guess I'd give you an acenario and ab scenario. According to some of the advocates we talked to, I mean that a scenario of you know, a perfect reclamation, which would be extraordinarily expensive, would be you know, restoring the original contours of the land, bringing in you know, deep top soil and then planting native vegetation that would take a long time to grow to the kind of level or height that it was before. Um. That's very very rarely done except for some sort of um, you know,

pr projects or show pieces. So a lot of these minds can become productive forest again, but it takes effort and time and money to do that, and a lot of the coal companies want to avoid putting that much effort in. It's usually what's done when reclamation is done. The there's you kind of a very rough push of the landscape back into a topography that won't slide, you know, that won't fall apart in a rainstorm and slide down

on somebody, and some dirt added to the top. And then mostly a sort of sort of top soil spray and grass seeds spray added to the top, which can make pretty quickly some uh sort of chest high grass through there. And then um, maybe an addition of some some non native species like like a Russian olive, some kind of thorny you know, not really that nice plans

that are very hardy and grow really fast. Um, and you know kind of provide the appearance pretty quickly of some some vegetation there, But according to the people who live around there, don't really make a nice place to you know, go for a walk or hunt for deer or you know, do the sort of activities that they, you know, like to enjoy in the in the actual forests around there. So just a bare minimum to keep

it from becoming a mud slide forever, that's the idea, right. Yeah, So all the areas over there that look like a nice green meadow with no trees, that's all bare rock that has had hydro seed sprayed on it. And hydro seed is essentially grass seed mixed with fertilizer and like chopping up newspaper, and that'll grow on literally anything. It'll grow on a bare piece of rock. And that's what it's doing over there. What happens from here, How, if at all, does this get fixed? Uh? I know, it's

a big question. We don't really know. For the most part, the the minds we're talking about have not been abandoned by their owners. Right there are still companies on paper that's say they're responsible for these minds. They're just companies that are racking up a lot of violations, and it's kind of unclear whether they're ever going to have the

money to do it. So if those companies fail, then typically the next step is, well, they have bonds that were posted at some point that that money can be used to clean them up, but the bonds are often not enough and as also as we reported, we're not even sure if the insurance companies that back those bonds will actually have the money. And then if there's still not enough money, then the states have funds that are backup funds that are supposed to be able to help out.

But that whole system kind of wasn't set up envisioning a world in which coal was just ending. And in the meantime, the people who live near these minds are having a rough go of it. We've seen minds in our area that have been idled for nearly a decade, so they are not getting reclaimed and they're also not producing coal, and as they sit, they create more pollution, have more erosion issues and other problems because they're not being maintained. That's that's them doing everything to the letter

of the law. I don't think the news companies going in burst some enough to that they would do anything. They're in the business to make money, not give it out. You know, I look out at something like that and I think about my family, and I think about how certain members of my family have made a living, you know, never held down an one to five job in their entire lives, but just by going out in the woods and digging jin saying, or digging blood root and yellow

root and things like that. And I think about how much of that stuff was lost on a permit like that. You could imagine that there just won't be enough money in those funds that are funded by coal taxes to pay for this kind of growing clean up obligation with kind of falling coal revenue. And so then you're gonna have to look to, you know, the state taxpayers, of the federal taxpayers who all lee. We'll have to decide

if they want to pitch in. Jess and zach Mider, thanks so much for taking the time to talk to me. Thanks West, Thank you. You can read Zachary Miter and Josh Saul's reporting at Bloomberg dot com. Thanks for listening to us here at the Big Take. It's the daily podcast from Bloomberg and I Heart Radio for more shows from My Heart Radio, visit the I Heart Radio app, app podcast, or wherever you listen. Read Today's story and subscribe to our daily newsletter at bloomberg dot com. Slash

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