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The Associated Press September 2, 2011, 10:53AM ET

Activists challenging coal co. settlement in court

A judge declined on Thursday to approve a $660,000 settlement between the state and two coal companies for water violations that environmental groups say should bring harsher penalties.

Franklin Circuit Judge Phillip J. Shepherd was asked by attorneys for the state's Division of Environmental Protection to halt the proceedings and endorse the state's settlement with International Coal Group and Frasure Creek Mining.

A coalition of four environmental groups says the state went too soft on the coal operators and the fines should be in the millions. Shepherd allowed the groups to intervene in the settlement proceedings.

John Horne, an attorney for the state Division of Environmental Protection, told Shepherd on Thursday that the environmentalists "have now had their day in court," but they have failed to prove the settlement is inadequate.

"The fact that the (groups) don't like the settlement is not enough," Horne said.

Shepherd will eventually make a final ruling on the settlement. But on Thursday he said he wasn't ready and denied Horne's motion for an early ruling. Attorneys for the coal companies and the state will continue with their own witnesses on Friday, the hearing's third day.

During testimony on Thursday, a state official said inspectors found discolored water near one of Frasure Creek's discharge sites.

Tom Gabbard, the Division of Water's compliance manager, read a report that said the water had an "oxidized orange discoloration" and levels of manganese that exceeded the maximum allowed under law.

The environmental groups have alleged the coal companies, from 2008 to 2009, falsified water discharge reports at the mine sites or duplicated information from previous reports.

Eric Chance, a member of North Carolina-based Appalachian Voices, testified Thursday that he observed water reports submitted by the companies "that were exact copies of others."

"As I continued to go through them, I noticed numbers were very similar to each other," Chance said. He said the groups found 42 duplicate water quality reports during their investigation of about 1,200 reports.

ICG has said the reporting errors were not intentional. Both companies have hired new labs to perform water discharge quality tests at the mine sites.

The settlement reached between the state and the coal companies requires ICG, which is now owned by Arch Coal of St. Louis, to pay $350,000 in penalties and Frasure to pay $310,000 for 2,700 violations.

Appalachian Voices, along with Kentuckians for the Commonwealth, Kentucky Riverkeeper and New York-based Waterkeeper Alliance, brought the violations to the state after seeking the documents through open records requests.

The groups made similar allegations of inadequate water discharge reporting in a federal Clean Water Act lawsuit against Bardstown, Ky.-based Nally & Hamilton Enterprises in May. That litigation is pending.

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