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Potential Lawsuit To Claim Kentucky Broke the Law in Permitting Coal Mine

polluted water

An Eastern Kentucky resident says he’ll sue the state and federal government next month over coal mining permits he says were illegally issued.

For the past decade, Rick Handshoe has watched the two streams on his property in Floyd County turn colors — orange, black. There’s been a mysterious foam in the water, too. He’s conducted his own water sampling, and found high levels of chemicals including iron, manganese and aluminum.

Handshoe said the situation got so bad that he had to leave his property — and abandon his plans to build a house on the land to leave to his daughter. He said the water pollution came from several nearby coal mines, and the Kentucky Division of Water has cited coal company Laurel Mountain Resources several times for the pollution.

Handshoe sued Laurel Mountain Resources in 2013 for the property damage and health concerns he says stemmed from the water pollution. But a few months later, Laurel Mountain parent company James River Coal filed for bankruptcy, which meant that Handshoe’s only possible remedy was to recoup his losses through Laurel Mountain’s insurance policy.

And that’s when his attorneys noticed that the insurance policy wouldn’t cover his claims.

“They’re supposed to have insurance to cover everything,” Handshoe said. “Well, when they came out of bankruptcy, the insurance company sends us a paper, and they have what you’d call a $150,000 deductible. And they don’t cover water pollution.”

In fact, the policy didn’t cover any bodily injury or property damage. From the Notice of Intent to Sue:

“The policy contains a $150,000 self-insurance retention and excludes any coverage for “‘bodily injury’ or ‘property damage’ which would not have occurred in whole or part but for the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of ‘pollutants’ at any time.' Laurel Mountain’s counsel has represented that Mr. Handshoe will be unable to recover from the policy because of the self-insured retention. Because Mr. Handshoe’s personal injury and property damage are caused by high levels of pollutants in waters flowing onto his property from Laurel Mountain’s permitted sites, it also appears that any coverage above $150,000 would be denied under the pollution exclusion.”

“But the federal law says that they’re supposed to cover everything before they can give them a permit,” Handshoe said, citing the Surface Mining Reclamation and Control Act of 1977, or SMCRA.“So either the insurance company lied to the state or the state let them give them a permit without having the adequate bonding.”

The law says that mining permits can’t be granted unless the company proves it has satisfactory insurance coverage to cover “all personal injury and property damage resulting from surface coal mining and reclamation operations.” So Handshoe and his attorneys plan to sue unless the Kentucky Division of Natural Resources issues a cessation order to Laurel Mountain and changes its practices to not issue mining permits unless companies can prove they have adequate insurance.

“I’m shafted, you know. I can’t win either way,” Handshoe said. “And we don’t know if this is the only company they’ve let do that, or is that a regular practice.”

A spokesman for the Energy and Environment Cabinet said the cabinet “will review the notice and respond accordingly through the legal process.”

Erica Peterson is WFPL's Director of News and Programming.