Coal Billionaire and EPA’s Chief Share Cozy Ties

LEXINGTON, Ky. — It was one of the biggest games of the University of Kentucky basketball season, and Scott Pruitt had scored two of the best seats in the arena: a few feet from the action, in a section reserved for season-ticket holders who had donated at least $1 million to the university.

The special access for Pruitt, the administrator of the Environmental Protection Agency, also included watching from the players’ entrance as the team streamed onto the court, and posing for a photo with a star player in the locker room area.

But there was more to the game in December than a superfan experience for Pruitt and his son, who joined him. They sat in seats belonging to Joseph W. Craft III, a billionaire coal executive who has engaged in an aggressive campaign to reverse the Obama administration’s environmental crackdown on the coal industry. Craft and his wife donated more than $2 million to support President Donald Trump's candidacy and inauguration.

Pruitt’s attendance at the game, the details of which have not been previously reported, followed a year of regulatory victories for Craft, who maintains close ties to Pruitt even as he has lobbied the EPA on issues important to his company, Alliance Resource Partners. And unlike other executives with whom Pruitt is known to have close ties — like oilman Harold Hamm or coal mogul Robert E. Murray — Craft has stayed relatively under the radar.

A major contributor to Pruitt’s campaigns in Oklahoma when Pruitt served in state government, Craft saw Pruitt at least seven times during his first 14 months at the EPA, agency records and emails show, and they were scheduled to appear together on at least two other occasions. That is more than Pruitt has met with representatives of any environmental group.

The relationship is so close that the two men trade text messages, with Craft proposing in one July 2017 exchange a possible “long-awaited” dinner and another visit with his company’s executives.

It has been an auspicious turnaround for Alliance and for Craft, who in nearly four decades in the coal industry had felt unwelcome at the EPA, apparently never even setting foot in the agency’s headquarters, one executive told an energy conference last November.

Pruitt’s mostly behind-the-scenes relationship with Craft is emblematic of his unorthodox approach to leading the EPA, where he often blurs the lines between personal and official relationships and has created the impression at times that he does the bidding of the industries the agency regulates. As administrator, he has become the subject of a dozen ethical and other investigations, including several focused on his ties to lobbyists and others with business before his agency.

In October, Pruitt traveled to Craft’s childhood hometown, Hazard, Kentucky, where, with Craft in the audience, he announced the repeal of the Clean Power Plan, an Obama-era policy to curb greenhouse gas emissions from power plants. A month earlier, Pruitt postponed enforcement of a rule barring coal-powered plants from dumping toxic metals into rivers, a move requested by a coal industry group with Craft on its board.

Emails and schedules show that Craft and Pruitt planned to meet at the Ritz-Carlton resort in Naples, Florida, for a gathering of the National Mining Association’s board of directors. Pruitt even met with the board of Craft’s company in a private dining room at the Trump International Hotel near the White House, according to schedules and emails made public by the EPA in response to records requests.

There was no mention on Pruitt’s official calendar of the Kentucky basketball game outing, but it was documented in photos and video footage, as well as university communications obtained by The New York Times through public records requests. Pruitt was accompanied not only by his security detail on the trip, but also by Kentucky state police, according to an email exchange between university police officers.

Heath Lovell, vice president for public affairs at Alliance, said that Pruitt had wanted to take his son to the game while visiting Lexington, and had reached out to Craft, who sold him the tickets at “market value.”

Jahan Wilcox, an EPA spokesman, said that Pruitt paid $130 in cash for each ticket. An email from the EPA ethics office approving in advance the purchase of the tickets said that payment would be made by check, but since it was a cash transaction, there is no receipt.

“Administrator Pruitt and Joe Craft are longtime friends,” Wilcox said. He did not respond to follow-up questions about why Pruitt paid in cash.

Craft gained access to the tickets as a major financial backer of the university, having donated more than $10 million to the school to help build basketball and football training facilities, both of which bear his name. His wife, Kelly Knight Craft, was previously a trustee of the university and a prolific Republican fundraiser until she was appointed by Trump last year as U.S. ambassador to Canada.

Craft, 67, and Pruitt, 50, have deep ties to Kentucky. Pruitt, who was born and raised in the state, briefly played baseball at the University of Kentucky on a scholarship; Craft, also a Kentucky native, earned both his undergraduate and law degrees from the university. Both men later advanced their professional lives in Oklahoma, where Alliance has its corporate headquarters and where Pruitt served as a Republican state lawmaker and attorney general before joining the Trump administration.

The two met in Oklahoma in the mid-2000s, Lovell said, when Pruitt sought out the coal executive after his hearing about his connection to Kentucky sports. Craft owns a mansion in Tulsa about a mile from Pruitt’s home.

Their targeting of the Obama-era controls imposed on the coal industry has angered environmentalists, who praised efforts by the EPA under the Obama administration to reduce lead and other toxic substances in power plant emissions, while also addressing climate change concerns related to carbon dioxide releases.

“The slash-and-burn approach Pruitt is taking to regulation may not materially affect outcomes in the coal industry,” said Tom FitzGerald, director of the Kentucky Resources Council, an environmental advocacy group. “But it’s not going to stop them from trying in the short term, health and safety be damned.”

Coal companies have welcomed what they consider a sea change in the federal government’s approach to balancing business interests with environmental protections. The industry, a shadow of its former self in terms of production and employment, views the Trump administration as offering it an overdue lifeline.

“The fact that industry no longer has an adversary in its government, and specifically at the EPA, is a huge step forward in common-sense regulation,” said Ashley Burke, a spokeswoman for the National Mining Association.

Lovell said that while Alliance welcomed the changes Pruitt had brought to the EPA, the coal company had not been treated differently from its industry peers.

“We did not receive any special treatment from the EPA,” Lovell said.

For years, coal companies have struggled with the industry’s decline.

There has been a fundamental shift in the way electricity is generated in the United States, with cleaner energy sources such as natural gas, wind and solar power ascendant. And many older coal-burning power plants are reaching the end of their useful lives.

Since 2010, 628 coal-burning units at power plants in 43 states — totaling almost 115,000 megawatts of electrical capacity, roughly equivalent to the entire electricity supply of Texas — have closed or are scheduled to, according to an industry count.

But with the arrival of the Trump administration, Alliance Resource Partners, the country’s seventh-largest coal mining company, and many others in the industry sounded the alarm — and ever since have directed their efforts at getting Pruitt to intervene on their behalf.

“It is critically important to preserve the fleet of existing coal-fired power plants,” the American Coalition for Clean Coal Electricity, an industry group where Craft is a board member and a past chairman, said in a letter in April to the EPA.

When Pruitt announced the repeal of the Clean Power Plan in October, miners in attendance cheered as he declared, “The war on coal is over.” The EPA was no longer in the business of “picking winners and losers,” he added, a reference to the Obama-era restrictions that the industry has argued put coal producers at a disadvantage.

In the audience, Craft spoke glowingly about the new direction. “It gives us the opportunity to protect the coal fleet,” he told a local broadcaster.

As the industry has retreated in recent years — total employment was just over 50,000 in January, down from 90,000 in 2012 — Alliance has fared better than most. As of December, it had 3,321 full-time employees at its headquarters and eight mines in Illinois, Indiana, Kentucky and West Virginia.

The company increased production in 2017 by nearly 7 percent, in part because it specializes in a relatively cheap, high-sulfur coal that can be scrubbed with existing pollution controls at most power plants.

“They’ve chosen some good mines, so their costs are not being driven up like others,” said Tom Sanzillo, a researcher at the Institute for Energy Economics and Financial Analysis, a clean energy think tank.

Craft wants to grow even more — allowing “existing fleets to expand their capacity,” he said during an earnings call in January 2017, and exporting more coal — and he moved quickly in 2017 to get Pruitt on board, according to public records.

Craft sat front and center in Washington as Trump signed an executive order in March 2017, unwinding some of the Obama administration’s climate change efforts directed at the coal industry. “You know what it says, right? You’re going back to work,” the president gushed to a group of miners, a smiling Pruitt by his side.

The next month, Craft and his wife were both listed as attending the board meeting of the National Mining Association in Florida, where 100 or so coal industry executives gathered.

“It will be wonderful to see the Crafts,” Sydney Hupp, then an aide to Pruitt at the EPA, said in an email setting up the event.

After Pruitt spoke to the group, the board backed the Trump administration’s decision to leave the Paris climate agreement. The EPA’s inspector general is investigating an allegation that the board’s decision came at Pruitt’s request, which could amount to a violation of anti-lobbying laws. The allegations, first reported by Politico, were denied by Burke, the spokeswoman for the association.

And just two days after the Florida trip, Pruitt spoke to members of the Alliance board and other top executives at a restaurant at the Trump hotel in Washington.

Knight Craft, who helped plan the event, wrote to Pruitt’s staff the night before. “Joe will be waiting for Scott at the designated entrance,” she said in an email, signing off, “Sent by my coal powered iPad.”

Wilcox, the EPA spokesman, said that Pruitt’s appearance had been cleared by agency ethics officials and that he did not eat dinner at the event.

Documents show that Craft and others in the industry have sought the EPA’s help, particularly in decreasing costs related to air and water pollution controls at coal-powered plants.

The companies have asked the agency to roll back at least eight Obama-era rules regulating water pollution, climate change, coal ash and air pollution, among other measures. Almost all the rules affect the 30 plants that burn coal supplied by Alliance, including a plant that powers Henderson, Kentucky, about 200 miles west of Lexington.

Alliance’s Warrior Coal mine, which has a contract to supply coal to the Henderson plant, is 30 miles away in western Kentucky, where the stillness of the hills is interrupted by the drone of the mine’s ventilation fan and the occasional movement of rail cars.

To continue burning the coal under current regulations, Henderson must build a $34 million water treatment plant to keep toxic metals from discharging into a nearby river. And it must spend $21 million more to clean up its handling of coal waste — which now sits in a giant unsightly pond near the plant — as well as $16 million to overhaul electricity-generating turbines.

“It certainly doesn’t make sense to keep them operating as is,” said Chris Heimgartner, general manager of the Henderson utility that owns the plant, as steam billowed from the aging dual-stacks in the distance behind him. “There is just too much cheap energy.”

Craft and other coal industry executives fear this conclusion will mean shutting down the coal-burning furnaces. That’s why, in May 2017, they complained to the EPA that the water treatment requirement was “projected to cost electricity generators hundreds of millions to billions of dollars.” Ten days later, Pruitt announced that he would postpone the rule for at least two years.

Basketball is king in Lexington, and on a bitterly cold afternoon in December, Pruitt was in the middle of the action as Kentucky beat its in-state rival, the University of Louisville, in a nationally televised game.

Because his seat was so close to the court, he was visible during the telecast. A video clip on Twitter and Instagram showed Pruitt and his college-age son, Cade, standing in the players’ entrance as the team walked to the court.

Emails show that a security agent from Pruitt’s staff coordinated with university police to make arrangements for his visit. Matt Bevin, Kentucky’s governor, a Republican, planned to be part of Pruitt’s group, and they were to be accompanied by an EPA security detail and Kentucky state police officers, the emails said. Police were also informed of Pruitt’s premium seats and his plans to visit the Crafts, along with the locker room complex largely funded by Craft and named for him. In a message on Twitter, Knight Craft posted a photo of herself with Pruitt and Shai Gilgeous-Alexander, the player of the game. “Great to see @EPAScottPruitt,” she wrote, using his Twitter handle. The Crafts, who have 26 season tickets, did not sit with Pruitt and his son during the game. (The season tickets used by Pruitt cost $1,300 each, the equivalent of $130 per game, the university said.)

The Crafts are larger-than-life figures at the University of Kentucky. In addition to supporting the facilities bearing his name, Craft led a $7 million fundraising effort for a dormitory for the basketball team that he requested be called Wildcat Coal Lodge.

At a university where there is a statue of one legendary coach and an arena named for another, the current coach, John Calipari, is one of the most well-known figures in the game. Closely aligned with the Crafts, he has visited Alliance mines and spoken effusively about the company.

Tony Oppegard, a lawyer based in Lexington and a former Kentucky mine safety prosecutor, described Craft as a powerful presence in a state with weak safety and environmental oversight that relies on federal regulations and enforcement.

“He wields a lot of influence,” Oppegard said.

At the federal level, Craft bet big on Trump.

The Crafts donated more than $1 million to political committees supporting Trump’s presidential bid, campaign finance records show, and held a fundraiser for him in Lexington in July 2016. Craft, through a trust, also donated $1 million to his inauguration.

“The Trump administration does appreciate the value that coal-fired electricity brings to the nation,” Craft told investors soon after Trump was sworn in as president.

Craft backed Pruitt when he ran for Oklahoma attorney general in 2010.

As attorney general, Pruitt directed state officials to challenge the EPA, including a lawsuit that accused the agency of improperly trying to compel two Oklahoma coal-burning power plants to overhaul their emissions systems to improve air quality in nearby federal wilderness areas. That regulation affected plants fueled with coal from Alliance’s mines.

By 2013, Craft, his company and nearly a dozen other coal industry lawyers, consultants and executives were contributing to Pruitt’s bid for a second term, even though he faced no real opposition. Many of those donations came in November 2013, just weeks after Pruitt disclosed that he would ask the Supreme Court to take up the case involving the Oklahoma power plants. Pruitt ultimately lost that case.

The next year, Alliance helped host a meeting in Miami of the Republican Attorneys General Association, which Pruitt had led as chairman. Separately, the clean coal electricity group, where Craft was formerly chairman, donated $388,550 to the attorneys general organization during the final three years that Pruitt was a member. Even with the changes under Pruitt’s EPA, the coal industry faces formidable obstacles, particularly because of the abundance of cheap natural gas.

The Henderson plant is already moving toward a likely shutdown of its coal-burning units, Heimgartner said, making it one of at least nine power plants supplied by Alliance in the past year that are considering closing or have announced partial or complete shutdowns, an analysis by the Sierra Club shows.

Pruitt continues to work through the industry wish list, pleasing Craft and his team, whose allies also include Ryan Zinke, the interior secretary, and Rick Perry, the energy secretary. Craft supports an effort by Perry to force electric grid operators to buy power from struggling coal-burning plants, even if it means higher rates for consumers.

“The Trump administration has done amazing things,” Lovell, of Alliance, said at the energy conference in Houston in November. “We are well on the way.”

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By the Numbers

628: Since 2010, 628 coal-burning units at power plants in 43 states — totaling almost 115,000 megawatts of electrical capacity, roughly equivalent to the entire electricity supply of Texas — have closed or are scheduled to close, according to an industry count.

50,000: Total employment in the coal industry was just over 50,000 in January, down from 90,000 in 2012. As of December, Alliance, a major coal company, had 3,321 full-time employees at its headquarters and eight mines in Illinois, Indiana, Kentucky and West Virginia.

$2 million: Joseph W. Craft III, a billionaire coal executive, and his wife, Kelly Knight Craft, the ambassador to Canada, donated more than $2 million in support of Trump. They gave $1 million to political committees backing his presidential bid, campaign finance records show, and also donated $1 million to his inauguration.