In separate interviews, the Bardstown-based coal company and state officials denied the assertions raised during a March 9 conference call with reporters. The Waterkeepers Alliance and the other groups—Natural Resources Defense Council, Appalachian Voices, Kentuckians for the Commonwealth and Kentucky Riverkeeper, said they intend to sue Nally & Hamilton by early May for violating the Clean Water Act.

On December 3, 2010, the Kentucky Energy and Environment Cabinet filed a lawsuit and proposed compliance agreement in Franklin County (Kentucky) Circuit Court with two other eastern Kentucky coal operators, International Coal Group and Frasure Creek Mining, over alleged similar violations. ICG and Frasure agreed to pay $660,000 in fines—$350,000 by ICG, $310,000 by Frasure, but the environmental groups are seeking stiffer penalties.

In the most recent case, the groups said they discovered 12,000 Clean Water Act reporting violations by Nally & Hamilton from February 2008 through June 2010 at more than a dozen of the company’s mining operations in seven counties. Coal companies are required by law to file water discharge reports with the state that detail pollution levels at their operations.

“The company seems to have resubmitted previous sets of data in later reports, rather than monitoring the discharge and submitting accurate data for each month,” said Donna Lisenby, an Appalachian Voices representative. “In other cases, they just didn’t file any test results at all.”

“What Nally & Hamilton is doing is both illegal and wrong, and we plan to file a lawsuit to stop it,” said NRDC Attorney Aaron Colangelo. “The state could have stepped in and stopped it, but did not. This case is about law enforcement. This is a serious problem and Nally & Hamilton is breaking the law.”

Kennedy, son of Robert Kennedy, the late U.S. Senator from New York and attorney general, characterized Kentucky as a state where “state agencies are ‘captured’ by the companies they are supposed to regulate.”

Nally & Hamilton Secretary-Treasurer Steve Hamilton said he was “completely unaware of any such activity” as alleged by the environmental groups. “Nobody has called me to inform me of such a thing. I’m unaware of any fraudulent activity.”

The Energy and Environment Cabinet said it “has not been idle on this issue,” despite the groups’ claims. “We’ve been developing a long-term approach to the issues and working aggressively to implement the changes that will address these concerns.  Many of these procedures are already in place.”

Beshear, the Cabinet pointed out, supported the passage of legislation in the recently concluded 2011 Legislature that gives the agency authority to certify independent water testing laboratories hired by coal companies to prepare the water quality reports.