On March 26, the West Virginia Department of Environmental Protection (WVDEP) filed suit against ERP Environmental Fund Inc., the company that acquired more than 100 mining permits out of Patriot Coal Corp.’s bankruptcy in October 2015. The overwhelming number of ERP’s permits are in West Virginia, with others in Kentucky, Illinois and Tennessee.
The suit, filed in the Circuit Court of Kanawha County, alleged that ERP had accumulated 160 violations of the state’s environmental laws, had failed to abate 118 cessation orders, and is the subject of 41 orders to show cause why its permits should not be revoked. The suit sought the entry of injunctive relief barring ERP from violating the state’s environmental laws and asked the court to appoint a special receiver to assume control of ERP’s assets, operations and affairs to ensure its compliance with the environmental laws.
The WVDEP also sought immediate injunctive relief and the temporary appointment of the special receiver, pending further proceedings in the suit. The WVDEP’s requested temporary order would also bar ERP’s creditors and other parties in interest from taking actions against ERP’s assets and interfering with the special receiver’s actions.
According to the WVDEP’s motion, ERP laid off all its employees and management on Friday, March 20, and ceased all operations, leaving its mining sites abandoned.
The WVDEP has proposed that Doss Special Receiver LLC be appointed as ERP’s receiver. Doss Engineering Inc. and its principal, R.B. (Barry) Doss, are the principals behind Doss Special Receiver and will perform the functions of the receiver. Indemnity National Insurance Co., which issued approximately $125 million in surety bonds backing ERP’s obligations under its mining permits, has agreed to provide $1 million in funding to Doss Special Receiver to fund its operations for an initial period of 90 days.
WVDEP Cabinet Secretary Austin Caperton said, “ERP essentially walked off from its operations on Friday, leaving the public exposed to health and safety concerns. The WVDEP had no option but to step in to seek the appointment of a receiver to take control of ERP’s operations to protect the public health and safety.”
After an emergency hearing held on March 27 despite the closure of the court due to the coronavirus, the state court entered a temporary order appointing a special receiver over ERP Environmental pending further proceedings in the case. In addition to appointing the special receiver, the court enjoined creditors and other parties with interests in ERP Environmental from commencing or continuing litigation against ERP Environmental or the special receiver.
The court indicated that further proceedings would be held in the case at a time to be determined, both in view of the coronavirus emergency affecting the court and the possible referral of the case to the West Virginia Business Court Division.
ERP is associated with the Virginia Conservation Legacy Fund, a nonprofit operated by businessman Tom Clarke. In addition to the Patriot mines, Clarke also purchased mines from Cleveland Cliffs, Walter Energy and Alpha Natural Resources.