ome of the world's largest coal and energy companies are bypassing strict U.S. environmental controls in the Appalachian Virginia coalfields through indirect use of an exemption meant for two-acre "pick and shovel" mines.
The Pittston Co., a major U.S. coal producer, Sun Co. Inc., formerly Sun Oil, and W.R. Grace & Co., an international chemicals and natural resources enterprise, are among those connected through subsidiaries and contractors to the widening controversy. Federal officials have repeatedly accused contractors for subsidiaries of these companies and numerous other Virginia coal operators of environmental abuses.
The exemption was aimed orginally at small coal operators but has buttressed an economic alliance between large and small companies: A big company hires a small contractor to mine its coal; the contractor invokes the small operators' exemption to avoid thousands of dollars in reclamation costs; then the small operator sells the coal back to the large operator. Both businesses make money--and environmental regulations that require controlled drainage, preservation of topsoil and restoration of the site to its approximate original contours are avoided.
Federal officials and records indicate that coal operators claiming the exemption have left mountains scarred with barren stretches of sandstone and exposed coal seams, rubble strewn on slopes, mining roads and gullies muddy and endangering Appalachian waterways, thick black mine runoff flowing unfiltered into streams, and crevices that could cause future landslides, erosion and pollution.
The controversy centers on hundreds of tiny underground and surface mines in southwestern Virginia and neighboring Appalachian states--mines that yield millions of tons of coal and significant profits annually. Virginia's reclamation laws have been historically among the weakest in the nation, and while most states impose environmental standards on small mines, Virginia's often go unregulated. Thus far an estimated 2,000 acres have been mined at the exemption-claiming sites.
And in a state where coal interests have contributed about $250,000 to each of the state's gubernatorial candidates, the tiny mines continue to be a hot political issue with neither candidate firmly supporting tougher environmental controls.
James R. Harris, the Reagan administration's surface mining chief who denounces "overburdensome" federal regulation, has cited the exemption as one of the "loopholes" in the 1977 Surface Mining Control and Reclamation Act. "This circumvents the spirit of the act and it occurs in Virginia most frequently," said Harris, who heads the Interior Department's Office of Surface Mining. "These abuses will be stopped."
Contracting is a long-standing industry practice predating the 1977 law. Industry executives defend the arrangement, saying it provides work for the small operators the exemption was designed to protect. They contend that environmental damage is minimal and that many of the sites, which may produce between a sixth to half of Virginia's coal, would no longer be profitable if tough environmental standards were imposed.
"We think the intent of the law is to help the small guy," said I.C. Spotte, chairman of the Pittston Coal Group, the Pittston Co.'s coal subsidiary. Federal regulators and environmentalists, he said, are "trying to put them out of business." Pittston contractors alone employ 307 workers at sites claiming the two-acre exemption, a spokesman said.
One Virginia consultant estimated the costs of complying with U.S. rules at a small mine site as $17,000 to $30,000 for engineering studies, drainage control, land reclamation and other environmental measures. Another consultant put costs at $4,000 to $11,000 for preparatory studies and at least several thousand dollars more for reclamation work. Small operators often mine less than 100,000 tons of coal a year, reportedly earning $1-$2 a ton, and such reclamation costs would quickly cut into profits.
"If I had to do all this stuff according to OSM," said Mike Yates, 29, whose Heritage Mining Co. is digging tens of thousands of tons of deep coal from a 1.73 acre exemption-claiming site near Nora, Va., "I'd have to close the door." He employs 13 workers as a contractor for Pittston's Clinchfield Coal division.
At least 383 deep mines and 89 surface mines have claimed the two-acre exemption in southwestern Virginia, incomplete OSM records show. Virginia reclamation officials estimate the total in recent years at 900 to 1,000, although they have records on only about half of these.
The 1977 reclamation law was aimed at curbing strip mine abuses, but it also regulates the surface areas of deep mines. Most of the sites claiming the exemption are underground mines, OSM records show. The exemption permits operators to mine free of all federal reclamation controls at sites measuring two acres or less.
Most states impose their own regulations on two-acre sites, although these rules frequently are less stringent than OSM's. But in Virginia many small mines are wholly unregulated. Some operators voluntarily impose environmental controls, but many others have been cited for reclamation abuses by OSM inspectors who dispute the operators' two-acre exemption claims.
Abuses have occurred in other states such as Tennessee and Kentucky, OSM officials said, but these have been caused largely by wildcat operators rather than contractors.
Virginia opposed the 1977 reclamation act and unsuccessfully challenged its constitutionality in court. In 1979, the legislature also added a two-acre exemption to state reclamation law, which had previously regulated all surface--but not deep--mines regardless of size.
The legislature also allowed counties to declare operators' coal "haul roads" to be part of the public road system. The move decreased mine surface areas and allowed many more sites to fall within the federal two-acre exemption. OSM, however, has challenged the legitimacy of this maneuver. State and some industry officials, troubled by controversy about the two-acre exemption, now support modest state regulation of small mine sites.
Democratic gubernatorial candidate Charles S. Robb has said the state "may want" to establish "adequate safeguards" for two-acre sites, though he said environmental protection should be balanced against economic problems of small operators. His Republican opponent, J. Marshall Coleman, supports the federal two-acre exemption and favors state regulation of tiny sites only if they are shown to cause environmental damage, a spokesman said.
But OSM has already cracked down in Virginia. In a key decision last December, Administrative Law Judge Tom M. Allen accused four Virginia coal companies of engaging in a "transparent attempt to circumvent the environmental standards of the act and escape any responsibility for destruction of the environment."
The companies operated as contractors for Norton Coal Co., a partly held W.R. Grace subsidiary. Allen said the four contractors mined coal seams leased to Norton, used the same Norton-owned slate pile, were allowed to use Norton engineers at an apparently reduced rate, sold their coal to Norton and delivered it to a Norton-owned tipple.
"These companies have carefully tailored each operation to be less than two acres of land, so as to be free from liability under the act for any destruction or damage to the environment," Allen concluded. He denied the contractors the two-acre exemption, terming them a collective business organization.
Despite OSM's moves to stem the alleged abuses, three Appalachian-based environmental groups sued Interior last month in U.S. District Court in Washington. They charged that Interior had illegally withdrawn Carter administration regulations trying to halt the exemption's misuse. OSM Director Harris called the Carter regulations flawed and said new rules would be issued in a few months.
Although it is not known how many contractors for large or middle-sized companies have claimed the exemption, these examples from interviews and OSM records indicate how the interests of large and small coal operators intertwine:
Pittston executives said the company's large Clinchfield Coal division currently has contracts with independent operators at 27 Virginia mines eligible for the two-acre exemption. These mines, the company said, produced 292,874 tons of coal in the first three months of this year, about 15 percent of Clinchfield's total production.
W.R. Grace, operating through partly held subsidiaries, is currently dealing with contractors claiming the two-acre exemption at about 20 Virginia sites, a company spokesman said. These mining contracts are arranged by Rapoca Energy Co. and its subsidiaries. W.R. Grace owns a 47.5 percent interest in Rapoca. Another 47.5 percent is held by the Cleveland-based Hanna Mining Co.
A Sun Co. subsidiary, Jewell Smokeless Coal Corp., currently has contracts with operators claiming the exemption at about eight to 10 Virginia mines, a spokesman said. OSM records connect Jewell Smokeless with at least 17 mines claiming the two-acre exemption in recent years, but some of these may no longer be in operation.
United Coal Co., the largest privately held, independent U.S. coal firm, relies almost exclusively on contractors. About a third to a half of its approximately 50 Virginia mines are eligible for the two-acre exemption, said United general counsel Tom Fowlkes. OSM records indicate that at least 21 sites at which the exemption was claimed in recent years are connected with United or its subsidiary, Wellmore Coal Corp.
South Atlantic Coal Co. Inc., a modest-sized coal producer based in Bluefield, W.Va., has been connected in recent years with at least 52 Virginia mines claiming the two-acre exemption, according to OSM records.
Small mines clearly account for a significant part of Virginia's coal output, which totaled 41 million tons last year. McLynn Sharpe, the state's chief mine inspector, said possibly "the majority" of Virginia's production comes from mines with about two acres of surface area, although industry officials said it is much less.
Evidence of environmental violations at small mines was apparent in visits to several sites, interviews with OSM and Virginia officials and federal reports and photographs made available to The Washington Post through the Freedom of Information Act.
Mine operators, including contractors for large companies, were frequently cited by OSM for improperly dumping rubble over mountain slopes, failing to preserve topsoil necessary for reclamation, providing inadequate drainage control and failing to restore mountainsides to the way they looked before mining began.
An outlet into the Levisa River was "running thick with black water" from a mine claiming the two-acre exemption, an April 1980 OSM report said. Another report last March said discharge from an exemption-claiming site was "making the Pound River visibly turbid for several miles downstream."
"It's almost a foregone conclusion that it's going to be worse than had it been regulated," said Fred Kaurish, a Virginia water control specialist.
Amid the debate, enforcing the mine reclamation law at small sites is not easy. At one mine last year, the president of a contracting company allegedly tore up OSM violation notices, grabbed an inspector around the waist, cursed him and then tried to slam a truck door against his leg.
"It's pretty rough in Virginia as far as enforcing the law is concerned," said OSM supervisor Willis Wagner. "The two-acre sites are the biggest problem we've got."