CHARLESTON, W.Va. — While West Virginia tries to identify every dollar it can put toward improving roads, the state remains locked in a legal battle with asphalt companies over allegations that they suppressed competition and drove up prices.
“The unnecessarily high prices for asphalt and asphalt paving services in West Virginia has secondary and perhaps more detrimental impacts,” wrote outside counsel for the state Department of Transportation.
“The State may be forced to either delay road construction repairs or not pursue them at all, causing immeasurable consequential economic damage and unconscionable public safety risks. West Virginia’s ability to finance its road construction and maintenance is strained.”
West Virginia’s deteriorating highways have been the subject of vigorous discussion in recent weeks, with Gov. Jim Justice publicly vowing, “I told the people of this state we were going to fix the damn roads.”
A couple of weeks ago, the governor described gathering $240 million or so to shore up local roads through three sources: diverting some from the $915 million in bond money West Virginia has already drawn down for “Roads to Prosperity” projects, using some “pay-as-you-go” revenue that had been intended to pay down future road bond debt and applying portion of state general revenue surplus.
The condition of West Virginia’s 38,000 miles of publicly-owned roads and bridges is based on a mix of factors, including deferred maintenance, weather conditions, the labor force, equipment and heavy use by the natural gas industry.
But another factor is the cost of the material required to pave West Virginia’s roads.
The lawsuit backed by Attorney General Patrick Morrisey makes the case that suppressed competition in the asphalt industry drives up the cost of paving West Virginia’s roads. The private firm Bailey & Glasser is heading up the case.
“Any corporate conspiracy aimed at driving out competition must be stopped,” Morrisey stated in 2017 when the lawsuit was filed. “Such predatory schemes inflate prices and come at a tremendous cost.”
This week, Morrisey’s office indicated its stance remains the same.
“Our position is unchanged,” stated Curtis Johnson, spokesman for the Attorney General’s Office.
The Department of Transportation initially sued nearly a dozen asphalt companies, claiming they’re all inter-related.
The lawyer for West Virginia Paving and its affiliates is Booth Goodwin, a former U.S. attorney for the Southern District of West Virginia who faced off against Justice in the 2016 Democratic primary for governor.
“My clients continue to vigorously contest the allegations,” Goodwin stated this week. “They have proudly continued to serve and provide the people of West Virginia with quality asphalt and asphalt paving services.”
The asphalt case was filed initially in Kanawha Circuit Court, which handles lawsuits involving state agencies. But it was moved a year ago to the Business Court Division under the supervision of Judge James Young.
A trial date is set for next September. Meanwhile, Judge Young set a July 25 date to try mediation or some other type of dispute resolution such as binding arbitration.
“The resolution judge encourages all participants to keep an open mind in order to reassess their previous positions and to find creative means for resolving the dispute,” Young wrote.
As initially filed, the lawsuit makes the case that the asphalt companies that serve West Virginia swallowed each other up over the years, establishing minimal competition and pushing prices ever higher.
The lawsuit claims West Virginia Paving, Southern West Virginia Paving, Southern West Virginia Asphalt, Kelly Paving, Camden Materials, American Asphalt of West Virginia and Blacktop Industries and Equipment control the market in at least 30 counties.
Over time, the lawsuits claim, the defendants gained control of at least 15 asphalt plants that at one time directly competed against each other.
The companies, operating under the umbrella of the Dublin, Ireland-based corporation CRH, gained dominant market shares, the lawsuit contends.
For example, in the southwest market that includes the Kanawha-Cabell corridor and surrounding counties, CRH operates all the DOH-compliant hot mix plants. CRH has averaged 79 percent of market share, totaling more than $87 million in contracts.
In the northcentral market, which includes Monongalia and the counties on down Interstate 79, Kelly Paving’s market share averaged 62 percent, amounting to $23.4 million in contracts. Competitors Lash Paving and Klug Brothers Paving continue to bid and win DOH paving contracts.
The competition is similarly out of balance in other regions of West Virginia, too, the lawsuit contends.
“Through its market power in DOH-approved asphalt concrete and asphalt-concrete paving, CRH has created substantial barriers to those who might consider entering the asphalt manufacturing or paving markets,” the lawsuit states.
That has meant the costs per ton for DOH-approved asphalt increased from about $83 to $87 a ton in 2010 to $110 a ton in several regions of the state, the lawsuit claims.
“The accelerated increase in DOH approved asphalt prices per ton cannot be explained by anything other than the lack of competition,” the lawsuit contends.
Responses by West Virginia Paving have characterized its business practices as reasonable, considering West Virginia’s challenging conditions.
“All of WP’s conduct at all times was reasonable and pro-competitive in light of the product markets, geographic markets, other competitors and all other economic factors,” lawyers for West Virginia Paving stated.
West Virginia Paving also lays blame on the state Department of Highways.
“Any increase in the price of asphalt to Plaintiff or the putative class was caused by the requirements and regulations and practices of the West Virginia Department of Transportation and Division of Highways.”
As all this is laid out in the courts, the asphalt plants have been warming up for another season of paving West Virginia’s roads.
“Obviously the industry is geared up,” said Mike Clowser, executive director of the Contractors Association of West Virginia. “We’re opening up plants next week and contractors are getting ready to get back to work, pave the roads, fix the roads and put a lot of people to work in the next few weeks.”