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Coal miner that failed to restore farmlands will be shut down if it doesn’t fix its ‘fraudulent’ bond, regulators say

Alton Coal Development promised landowners that their fields would be restored to their original condition after it was done mining the site.

(Utah Division of Oil, Gas and Mining) Utah state regulators say coal miners failed to properly reclaim the site of a former open-pit coal mine outside Alton, shown in this photo shot Sept. 15, 2021. The landowners, who include Alton’s most prominent family, want Alton Coal Development to restore their land so it can be farmed again.

For the past decade coal was extracted from an open-pit mine known as Coal Hollow beside the southern Utah farming hamlet of Alton, where operations have since begun moving off private farmlands onto higher ground owned by the federal government.

Alton Coal Development promised landowners that their fields would be restored to their original condition after it was done mining the site.

This year, however, the landowners found the company’s reclamation work grossly lacking and state regulators have come across a series of troubling irregularities with Alton Coal’s bonds and disclosures.

“The land in no way resembles the original contours with appropriate slopes. lt will be impossible for us to irrigate with sprinklers, or even flood irrigate which is not reasonable with our irrigation system, with the current slopes. They are much too steep to run sprinklers or any kind of wheel lines on the property,” wrote Claren Heaton, a former Alton mayor, in a recent letter to the Utah Division of Oil, Gas and Mining (DOGM). “My opinion is that the coal company was hoping to pull a fast one on some rural farmers and leave them land that could never be used for farming again.”

His concerns were corroborated by DOGM inspectors who issued a notice of violation, alleging negligence or indifference on the part of Alton Coal, which has been ordered to pay a $3,080 fine. Fines by DOGM are set by statute.

(Utah Division of Oil, Gas and Mining) Utah state regulators say coal miners failed to properly reclaim the site of a former open-pit coal mine outside Alton, shown in this photo shot Sept. 15, 2021. The landowners, who include Alton’s most prominent family, want Alton Coal Development to restore their land so it can be farmed again.

To make matters worse, the $13.4 million in surety bonds put up by the company are invalid, according to a stern order DOGM director John Baza sent last month to the mine operators. Mining and drilling companies are required to secure surety bonds to cover reclamation costs should the companies fail to get the job done properly, as appears to be the case at Alton.

Baza’s Oct. 19 order directs the company to straighten out its bonding deficiencies and he wants biweekly updates starting Wednesday. Without proper bonding in place by the Dec. 14 deadline, mining operations are to cease.

Alton Coal has a long history of noncompliance with state mining regulations and has been cited and fined repeatedly over the years. Despite this troubling background, the BLM issued Alton a lease in 2018 to mine on 3,581 federal acres several miles west of Bryce Canyon National Park

A voicemail left at the company’s Cedar City office Friday was not returned.

The company’s main accuser is the Heaton family, which owns a 20-acre field that had been part of the surface mine. According to the family’s letters to DOGM, Alton Coal is obligated by contract to return the land to its original level condition. Instead, the company’s reclamation work has left the ground 20 feet lower than it had been with a gradient of 5% to 7%, according to the family’s May 26 letter.

To evaluate Alton Coal’s request for a bond release, DOGM had inspected the land in May and found it to be improperly reclaimed, resulting in a notice of violation.

In a response filing, the company’s lawyer James Allen claimed that the reclamation work is ongoing and will result in a net increase in farmland, from 21 to 36 acres.

Allen wrote that there was only a slight depression in the fields that can “be readily corrected.” He acknowledged that the company deviated from its approved reclamation plan, but that was because it ended its operations on that private lease before the pits were fully mined, resulting in insufficient spoils for backfilling.

In a follow-up letter, Claren Heaton rejected the company’s explanations. He demanded action from DOGM to force Alton Coal, which is currently controlled by Ohio coal magnate Charles Ungurean, to honor its commitments.

“ln essence as the land appears today, it is no different than the surrounding range land which has never been farmed or irrigated,” he wrote in the Aug. 24 letter. “The drainage is a mess, and the top soil will be lost each time it snows, rains, or floods. We were promised our farm land returned in the same condition as it was offered to the coal company. lf the contract is not honored appropriately, we are stuck forever with 20 acres of nonfarmable land, many tons of lost feed for our cattle, and a repair to the land we cannot afford.”

(Utah Division of Oil, Gas and Mining) Utah state regulators say coal miners failed to properly reclaim the site of a former open-pit coal mine outside Alton, shown in this photo shot Sept. 15, 2021. The landowners, who include Alton’s most prominent family, want Alton Coal Development to restore their land so it can be farmed again.

The Heatons are a prominent Kane County family descended from the pioneers who founded Alton, now with 200 residents, in the early 1900s.

Not long after the Heatons and other landowners complained to DOGM, Alton Coal replaced its surety bonds with instruments issued by a firm called Triangle Surety Agency under a “producers agreement” with an insurance provider called Lexington National Insurance Corp, according to DOGM’s recent order. On Sept. 14, Lexington informed DOGM that the bonds were never valid.

“Lexington alleges that none of the twelve bonds Triangle produced were preapproved by Lexington, nor were they supported by 100% collateral, as required by the producers agreement,” the order states. And nor were the powers of attorney cited by Triangle for the Alton bonds valid.

Lexington’s letters to DOGM accused Triangle of engaging in insurance fraud that it had reported to insurance authorities in Utah and West Virginia, where Triangle is based.

Regardless of who is at fault with the invalid bonds, Alton Coal must put up a legitimate $13.4 million bond in the next six weeks or shut down its operations.

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