Home >Industry >Essar firm gets notice in US pollution suit

Mumbai: Essar Minerals, a unit of the London-listed Essar Energy Plc, has been given till 17 August to respond to, and contest, a lawsuit before a US court that alleges its “surface mining activities" in Kentucky have choked local water streams.

The lawsuit was filed on 6 June by the US Environmental Protection Agency (EPA), through the Department of Justice, against Essar Minerals and six other firms linked to the Essar group, adding to the pile of legal tussles the group has recently faced back home.

EPA, the government watchdog for environment and climate change issues, is seeking a “civic penalty" of “up to $32,500 per day for violations taking place between 15 March 2004 and 12 January 2009 and up to $37,500 per day for each violation thereafter"; restoration of environmental damage at Essar’s expense and a permanent injunction against discharging pollutants into the rivers in the future, according to the district court order in the eastern district of Kentucky, a copy of which Mint has reviewed.

An Essar spokesman said it was their “policy not to comment on pending litigation".

Besides Essar Minerals, the EPA has sued Trinity Coal Partners Llc, Trinity Coal Corp., Frasure Creek Mining Llc, Bear Fork Resources Llc, Falcon Resources Llc and Prater Branch Resources Llc.

News agency Bloomberg had reported on 6 March 2010 that Essar had acquired the Trinity Coal unit from Denham Capital Management Lp, an energy and commodities- focused private equity firm, for $600 million (around 3,312 crore today).

Trinity Coal owned and operated six mining complexes in the US states of Kentucky and West Virginia with an estimated 200 million tonnes of coking and thermal coal, it had said then.

While Trinity firms have been in the Essar fold since, the other four firms have been cited in the court filings as having the same “principal business address" of “4978 Teas Valley Road, Scott Depot, West Virginia"—indicating these are linked to the parent company.

The companies had allegedly discharged pollutants into navigable rivers without a government permit. “The dredged and/or fill material remains in streams on the sites to his date," said EPA in the court filing.

EPA spokeswoman Davina Marraccini told Mint in an email, “...that the defendants discharged fill material, including rock, dirt and soil into more than 11,000 linear feet, or over 2 miles, of perennial streams in three eastern Kentucky counties" and such “discharges...into streams, wetlands and other water bodies can destroy valuable aquatic habitat, cause an increase in pollutants in downstream waters, and threaten downstream water quality."

She declined to comment on other queries relating to the total quantum of damages that Essar may have to pay, or if this could have an impact on future mining operations by the Essar firms in the US.

“EPA does not comment on the details pertaining to ongoing litigation," said Marracini.

An Essar Energy executive, who declined to be named, said it was a “legacy issue" since the firms sued in this case were acquired by the Ruias-controlled Essar in 2010.

A sector analyst said the group did “seem beleaguered on many fronts".

“These are acquired assets and these alleged violations happened before Essar’s time. So we still need clarity on whether the responsibility (for this) will be borne by Essar Energy or the predecessor," said this Mumbai-based analyst from a foreign brokerage, who did not want to be named. “It will be a protracted litigation. It is very hard to peg the damage but a lot seems to be going against them."

Essar Oil Ltd, the group’s Indian crude refining outfit, is facing a tax liability of 6,169 crore after the Supreme Court in January set aside the company’s claim to sales tax credit as it failed to start its Vadinar refinery on time. The following month, it lost a key 3,000 crore industrial insurance claim against United India Insurance Co. Ltd for the damages caused to its Vadinar refinery due to a 1998 cyclone that hit the Gujarat coast.

In July, the oil refiner tied in a new credit facility from domestic banks of up to 5,000 crore to pay off the sales tax liability, within weeks of the Gujarat government sealing their bank accounts to expedite the recovery.

Essar Oil said on Thursday that it had received approval for exiting the corporate debt restructuring loan facility that was set up in December 2004.

From the beginning of the year till Wednesday’s close, the company’s parent Essar Energy has lost 34.2% on the London Stock Exchange while the benchmark FTSE100 gained 4.2% in the same period.

Essar Oil gained 10.9% on BSE during the same period, less than the benchmark Sensex’s 13.9% gain.

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