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Thursday, May 10, 2012 03:28 pm

Attorney general questions Macoupin mine permit

Concerns come as Foresight Energy announces IPO

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Foresight Energy is poised to become the state’s largest coal producer with mines such as this one in Williamson County.

While one of the state’s largest coal-mining companies prepares to go public, state regulators are examining whether one of the company’s mines near Carlinville has a proper pollution permit.

St. Louis-based Foresight Energy plans to raise $300 million though an initial stock offering, the company announced last month. But regulators are raising questions about a key permit for the Macoupin County mine that produces about two million tons of coal a year.

In documents filed with the U.S. Securities and Exchange Commission, the company says that it has invested $1.6 billion in four Illinois mines, including the mine near Carlinville, which a division of Foresight acquired in 2009 from Monterey Coal Company, a division of ExxonMobil.

Monterey Coal ceased mining at the Macoupin County mine in 2007. Foresight’s division resumed mining operations in 2009 under a permit that was originally given to Monterey Coal by the Illinois Environmental Protection Agency.

Now the state attorney general’s office is asking whether that permit was legally transferred.

Condition 4 in the mine’s wastewater discharge permit issued in 1996 to Monterey Coal by the EPA sounds clear enough:

“This permit may not be transferred or assigned. Any subsequent operator shall obtain a new permit from the Illinois Environmental Protection Agency.”

The EPA considered the matter a “name change only” in 2009 when it gave the permit to Foresight’s mining company, according to an April 25 letter to Julie Armitage, EPA acting chief legal counsel, from Thomas Davis, chief of the attorney general’s environmental bureau.

“Please explain how the June 2009 permit action complied with the permit condition prohibiting permit transfer and assignment,” Davis wrote in his letter to Armitage. “In other words, did the Illinois EPA ignore Condition 4?”

Maggie Carson, EPA spokeswoman, said that the EPA was not prepared to comment on the attorney general’s inquiry. A woman at Foresight offices in St. Louis said the company had no comment. A message left with Foresight’s law firm in New York was not returned.

A new wastewater permit would require public hearings and would have to be issued under current standards designed to protect streams and other bodies of water, which have grown stricter over the years, as Foresight acknowledges in Securities and Exchange Commission filings required as part of its stock offering.

“The adoption of new…regulations in receiving streams could hamper or delay the issuance of…permits, and if issued, could require new effluent limitations for our coal mines and could require more costly water treatment, which could adversely affect our coal productions or results of operations,” the company says.

In his letter to Armitage, Davis asks what wastewater standards are applicable to Foresight’s mine, which discharges water from coal-washing operations into Smith Lake, which was created from a tributary to Spanish Needle Creek. Davis also questions the EPA’s designation of Smith Lake as a “treatment works.”

“Please explain why the Illinois EPA has apparently determined that this accumulation of water should not be protected from untreated discharges…,” Davis writes. “Please explain what treatment (other than dilution) is afforded by Smith Lake.”

This is not the first time that the attorney general’s office has questioned the validity of a coal-mining permit issued by the state. After the Department of Natural Resources in 2007 issued a permit for a strip mine in Fulton County, the attorney general appealed the decision, and the permit was ultimately denied.

Lisa Salinas, who owns property near the Macoupin County mine, said that she contacted the attorney general after reviewing the pollution permit and finding the clause restricting permit transfer.

“When citizens do bring to my attention something as important as permit issuance and compliance, we check into it,” Davis said.

Salinas said that Foresight should disclose the attorney general’s concerns to prospective investors.

In SEC filings, Foresight says it has 3 billion tons of coal reserves in the Illinois Basin. The company was founded by Chris Cline, a coal magnate from West Virginia who bought mineral rights in Illinois within the last decade. Phil Gonet, president of the Illinois Coal Association, said that he expects Foresight to become the biggest coal producer in the state within a year.

Foresight is already a big player in funding politicians. Since 2009, the company has contributed more than $657,000 to Illinois politicians and political parties, including more than $100,000 to Gov. Pat Quinn and Lt. Gov. Sheila Simon, at least $30,000 to the state Democratic Party, at least $30,000 to a fund for Democratic state senators and at least $32,500 to a fund for Republican House members.

Salinas said that she has no faith in the Illinois EPA or the state Department of Natural Resources to regulate Foresight, and she’s counting on the attorney general and federal regulators to step in. She blames Foresight’s mine for groundwater contamination discovered beneath her property. She says the company should be required to apply for a new permit, and the state should hold hearings.

“You better believe I would have something to say,” Salinas said.

Contact Bruce Rushton at brushton@illinoistimes.com.

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