Indiana’s lax mining regulation helps Indiana gain competitive edge. The largest strip mine east of the Mississippi River is treated exactly like the smallest under Indiana regs.

Beginning this year, the Bear Run Mine in southwestern Indiana is expected to produce 8 million to 12 million tons of coal annually and will become the largest coal mine in the eastern United States.

The mine also is a key piece in Gov. Mitch Daniels’ strategy to make coal a viable industry in Indiana.

But Bear Run stands out for another reason.

Because of a decision made by the state, Bear Run will be among the least regulated coal mines in the nation, saving its owner perhaps millions of dollars while raising the potential for putting Hoosiers and aquatic life at risk.

Indiana’s handling of Bear Run’s water pollution permit has been harshly criticized by environmentalists and federal regulators who fear the lower level of regulation could lead to harmful pollutants entering the state’s waterways.

It also goes against what’s required by other states. There are 27 coal mines in the U.S. that produce at least 5.85 million tons of coal a year, and the states in which they are located — including Pennsylvania, West Virginia and Ohio — require them all to follow stronger requirements to test for and clean up pollutants.

But not Bear Run.

“You’re behind the times in Indiana,” said Deputy Director Lewis Halstead of the Division of Mining and Reclamation at West Virginia’s Department of Environmental Protection.

At issue is whether the state should have required Bear Run to obtain an individual permit. To do that, Bear Run would have first had to thoroughly study the mine’s wastewater to determine what toxins are present and perform a stringent analysis of nearby waterways.

Based on that information, the state would have crafted a permit that set limits on how much water pollution the mine could release and required its owner to test regularly for specific toxins identified by state regulators.

An individual permit assumes each mine has its own set of potential pollution issues that should be addressed.

The 27 largest mines in the U.S. are required to have such a permit. Bear Run is not. Instead, Indiana regulators only require the mine to follow the rules of a one-size-fits-all general permit — the same one that regulates the state’s smallest mine.

Thomas Easterly, Daniels’ appointed commissioner of the Indiana Department of Environmental Management, said he thinks the protections are sufficient.

“If it meets the requirements” of a general permit, Easterly told The Indianapolis Star, “then the environment’s protected.”

IDEM is the state regulatory agency charged with protecting the public from toxins and pollutants created by industry. It is IDEM’s decision whether to require an individual permit.

Bear Run’s owner, St. Louis-based Peabody Energy, thinks it was the right decision. Peabody is the nation’s largest coal company and is responsible for roughly half of the 36 million tons of coal mined annually in Indiana.

“Peabody has an excellent reputation for environmental stewardship,” company spokeswoman Meg Gallagher wrote in an email response to The Star. “Bear Run is continuing with these standards.”

Others strongly disagree with IDEM and say Indiana — a state with a troubling record on environmental issues — is taking yet another perilous step toward environmental harm and potential health risks to benefit industry.

One of the biggest critics of IDEM’s decision is the federal Environmental Protection Agency, which urged the state in a November 2010 letter to require Bear Run to file for an individual permit.

The EPA has three primary concerns with the way Indiana is handling Bear Run:

Without the wastewater analysis required by an individual permit, the EPA notes, Indiana regulators can’t know for sure what pollutants are coming out of Bear Run or how they would affect aquatic life in nearby rivers and streams.

A nearby Peabody mine has violated even the few rules of its general permit, racking up six violations since 2005.

Bear Run is in an area of Sullivan County where the water is already polluted, according to federal data.

There is also this to consider: Indiana’s history of lenient regulation, its strained relationship with the EPA and its poor water quality.

Indiana has the highest amount of toxic discharges to bodies of water among all states, according to a review of 2007 federal data by the policy group Environment America, the most recent such analysis. Indiana released 27 million pounds of toxic waste into its waterways that year — 49 percent more than the next highest state and more than 11 percent of the nation’s total.

Environmentalists are convinced that the EPA would provide more stringent requirements than the state, which might be another reason why IDEM is reluctant to issue an individual permit.

Stepping in

When a state decides to cover a facility or project under existing general permit rules, all the EPA can do is provide information to IDEM stating why the federal agency thinks a facility should apply for an individual permit.

When a state issues an individual permit, however, the EPA can formally object to the terms of that permit and can take over the permitting process and even write the permit rules itself if the state does not resolve the EPA’s concerns.

It’s hard to imagine the Daniels administration would want to empower an agency — one the governor refers to derisively as the “employment prevention agency” — in such a way.

Bruce Jaffee, professor of business economics at the Indiana University Kelley School of Business, said he thinks IDEM’s treatment of Bear Run can be traced to the administration’s desire to create a market for Indiana coal.

The Duke Energy coal-gasification plant under construction at Edwardsport is expected to use 1.7 million to 1.9 million tons of Bear Run coal a year, according to Duke Energy spokeswoman Angeline Protogere.

Jaffee said that given the key role of Bear Run in the Duke plant, he thinks the level of regulation at Bear Run was determined by an economic calculation.

Because natural gas is cheaper than coal gas, Duke needs to buy the coal as cheaply as possible, Jaffee said, and one way to lower those costs is to lower the level of regulation — and keep the EPA at bay.

“Now, this was an effort to say: Given EPA regulations, there’s no future in Indiana coal. How can we create a future in Indiana coal? We’ll essentially do coal gasification from the relatively crummy coal we have in Indiana. All right, well, given mining restrictions and water use, that’s not going to be real cost-effective even from a Peabody mine that’s just a few miles away. So let’s maybe relax some of the water restrictions.”

David Pippen, who until last month was the governor’s general counsel and policy director for environment and energy, said Bear Run received no special treatment in the permitting process.

“IDEM’s permitting for Bear Run,” he said, “is consistent with how the agency has dealt with coal mines for decades.”

Nonetheless, William J. Mitsch, a professor of environment and natural resources at Ohio State University, said economics clearly are the motivation behind wanting to avoid an individual permit that could reveal pollution problems and require costly cleanup measures.

“The coal mine people and their lawyers, they don’t want to know because then they’d have to deal with it,” Mitsch said.

For example, at the Wildcat Hills Mine near Equality, Ill., operators estimated that one method for controlling sulfate levels in wastewater would cost more than $10 million — and that was one of the less expensive technologies

Peabody, however, says cost was not the deciding factor in why it sought to be covered under a general permit.

“The first order of business is compliance, not cost,” Gallagher, the Peabody spokeswoman, wrote to The Star. “The general permit is the approved and standard process in Indiana. Bear Run uses industry and government-accepted best-management practices.”

Permit requirements

IDEM first granted Bear Run’s request to be allowed to operate under general permit rules in 2009. The permit requires Peabody to limit the acidity, iron content and total suspended solids in wastewater flowing from the mine site and to test levels of those pollutants once a month and send the results to IDEM.

The state’s Department of Natural Resources does its own tests, usually once a month, to ensure that mining company reports are accurate.

But is that enough? EPA officials and environmental regulators in other states don’t think so. They say only an individual permit would ensure an appropriate level of continuing analysis.

Pollutants often found in mine wastewater — but not required to be monitored under general permit rules — include sulfate, selenium, arsenic, cadmium, chromium, lead and mercury.

When released into creeks and streams, these pollutants can create risks to wildlife and humans. Eating fish contaminated with mercury, for example, can cause developmental disabilities in fetuses and young children. Sulfate, which has already been found in streams near the mine in levels the federal government deems too high, can drive up the amount of total dissolved solids, threatening aquatic life.

Peabody said its own tests of the mine have determined that sulfate and mercury are “well within state limits,” and the company says — along with IDEM — that it has done all the wastewater analysis it needs to do.

Bruno Pigott, the assistant commissioner of IDEM’s Office of Water Quality, said the state also might detect problems during its occasional tests of state water bodies. And, he said, coal mines are supposed to volunteer evidence of any additional pollutants to the state.

“If they don’t know about something being discharged,” Pigott acknowledged, “then they can’t report something.”

Breaking the rules

Without monitoring, some problems could go undiscovered well into the future. The EPA, however, is also concerned about the past.

From 2005 to 2010, Peabody’s Farmersburg Bear Run/Sullivan North Mine, which is near Bear Run, violated its general permit rules for pollutants six times, according to EPA data.

The EPA has found no such violations so far at Bear Run. But state Department of Natural Resources inspectors last summer fined Peabody $1,900 for a problem at a sediment pond. A pump being used to empty the pond came too close to the bottom of the pond and was pumping sediment — particles that the general permit limits — out into the environment.

Gallagher, the Peabody spokeswoman, did not specifically address the violations at Sullivan North but wrote: “Bear Run’s water record is excellent. This referenced incident was minimal, identified rapidly and promptly corrected.”

In its letter to IDEM, dated Nov. 19, 2010, the EPA also pointed out that waters on the Bear Run site already “do not meet water quality standards” — likely because companies have been mining in the area since at least the mid-1990s.

A list of bodies of water near the mine that federal officials sent along with the letter included nine polluted enough to be listed on a federal roster of waters requiring extra pollution controls.

In Kentucky, those conditions alone would have necessitated an individual permit.

A matter of size

Beyond conditions of nearby waterways or Peabody’s past violations, there is another issue that some say should have inspired IDEM to require an individual permit: the sheer size of Bear Run.

IDEM has a stated threshold in its own guidelines for when an individual permit is required: a project that “could have significant environmental impact.”

But IDEM doesn’t think Bear Run or any of the other roughly 60 mines in the state meets that threshold. Not one mine in Indiana has an individual permit.

Pigott, the assistant commissioner of IDEM’s Office of Water Quality, said coal mine pollution is basically predictable and can therefore be safely controlled with a one-size-fits-all set of rules.

“We look at the permit based on whether or not there are water quality issues associated with it,” he said, “not the size of the mine.”

Others say size does matter.

The North Dakota Health Department, which monitors one mine that produces 14.5 million tons of coal a year and another that produces 7.5 million tons a year, thought it best to issue each one an individual permit.

“It’s just the size and footprint of the facilities,” said Randy Kowalski, who worked with coal mine permits for almost 20 years at the North Dakota Health Department before moving to another department in June. “If we did have issues with one facility, we’re working with one permit and not trying to address it under a general permit.”

The idea that what will become the largest coal mine in the eastern U.S. is not a project IDEM thinks “could have a significant impact” is ludicrous, said attorney Jessica Dexter of the Chicago-based Environmental Law and Policy Center.

A project that size in an already polluted area, Dexter said, “warrants more than a rubber stamp from IDEM.”

The group has petitioned the EPA to take away IDEM’s power to hand out water pollution permits, citing the failure to issue Bear Run an individual permit as evidence that state regulators are not doing their job.

The EPA has the power to do just that, leaving Indiana businesses that need permits at the mercy of the federal government.

But such a drastic measure could have far-reaching political consequences and set what some would consider a dangerous precedent.

Indiana lawmakers also could step in and create tougher requirements on coal mines. That, too, is unlikely.

A year ago, Glenn Pratt of the local Sierra Club testified before the legislature’s Committee on Energy and Environmental Affairs and asked lawmakers to consider adding a requirement that coal mines seek individual permits.

Legislators barely discussed the suggestion from Pratt, who once ran the regional EPA water permitting program.

“I think the reason it wasn’t a real popular idea is because those permits, there’s nothing unique about them,” said Sen. Beverly Gard, R-Greenfield. “If IDEM saw a unique situation, they have the right to come in and require an individual permit.”

And ultimately that’s what the argument comes down to. Despite what the EPA or environmental scientists or regulators in other states think, IDEM doesn’t consider any coal mine in Indiana unique — not even one poised to become the largest mine east of the Mississippi.