Massey Energy - A series of articles

 

Massey Energy stock sinks 11% after mine explosion

Julianne Pepitone

 

April 7, 2010


CNN Money


http://money.cnn.com/2010/04/06/news/companies/massey_energy_stock/index.htm?source=cnn_bin&hpt=Sbin

 

NEW YORK (CNNMoney.com) -- Shares of Massey Energy plunged over 10% Tuesday, one day after an explosion at one of the company's coal mines in West Virginia killed at least 25 workers and left 4 missing.

 

The blast took place at the Upper Big Branch Mine, about 30 miles south of Charleston, during a shift change Monday afternoon.

 

Shares of Massey (MEE) tumbled 11.4% to close at $48.45 on Tuesday. Still, the company's stock is up almost 20% year-to-date. Richmond, Va.-based Massey operates 44 mines, making it the fourth-largest U.S. coal company.

 

The cause of the explosion, the deadliest U.S. mining disaster in 25 years, was unknown Tuesday.

 

Massey was previously fined for violations at the Upper Big Branch and other mines, said David Lipschitz, a senior analyst at Credit Agricole Securities.

 

"Massey has probably had more fines and other issues than its competitors," Lipschitz said.

He expects the disaster will hurt only the company's 2010 earnings. Even if the Upper Big Branch mine is shut down for nine months or a year following the accident, he doesn't expect it to affect the bottom line in 2011 or 2012.

 

The stock should bounce back in the coming weeks, Lipschitz said, just as it did following a dip that occurred after a 2006 mine fire that killed two workers.

 

"The price will lag for a few days as people absorb the tragedy," Lipschitz said, "but we'll soon get back to focusing on strong market fundamentals."

 

The company said it will not be providing any comment on the accident right now, since all information is being coordinated at the site and it is focusing on recovery and the families.

 

Past violations

 

Although it's not clear what caused Monday's blast, Davitt McAteer, former director of the Mine Safety and Health Administration during the Clinton administration, told CNN Tuesday the company's safety record was "checkered."

 

For its part, Massey claims on its Web site to have one of the best records of any coal company.

Three other deaths have occurred at Upper Big Branch in the past 12 years, and the mine has been cited for several safety violations.

 

Records compiled by the Mine Safety and Health Administration show that proposed penalties assessed against the mine reached nearly $1 million last year -- three times more than any other year on record.

 

Last year, the mine also had more than 50 "unwarrantable failure" violations, which are among the most serious findings an inspector can issue. Among those were citations for escape routes for miners and air quality ventilation. The company has been fined for several incidents at its facilities, some of which were fatal.

 

"What that suggests to you, just on the face of it, is that there are problems here, and the problems are not being addressed," he said. The size of the blast, he added, suggests a large accumulation of methane that "shouldn't be allowed to accumulate in that volume."

 

The 2006 fire occurred at the Aracoma Alma No. 1 Mine in Logan County, W. Va. Two years after the accident Massey agreed to pay $4.2 million in penalties, the largest settlement in industry history, for safety violations including inadequate water supply to the fire hoses.

 

More scrutiny ahead

 

Other analysts said the regulatory run-ins and political climate in Washington could prove problematic for the company in the wake of this tragedy. The top two federal officials that regulate mine safety once worked for unions, said Kevin Book, a managing director at ClearView Energy Partners, a Washington, D.C.-based policy research firm.

 

"Massey Energy has historically taken a strong anti-union stance," Book wrote in a research note Tuesday, outlining possible political outcomes of the mine disaster. "This could increase prospects that [federal regulators] might target Massey for scrutiny or strong regulatory response without attacking the industry across the board."

 

Book also said the industry as a whole could be subject to congressional hearings and stricter regulations following Monday's disaster. The 25 deaths renewed calls for tighter regulations and steeper fines among some members of the coal community.

 

Massey Energy has been cited for environmental violations as well.

 

In January 2008, Massey paid $20 million in fines for Clean Water Act violations at coal mines in West Virginia and Kentucky. The Justice Department and U.S. Environmental Protection Agency said it was the largest civil penalty in EPA's history levied against a company for wastewater discharge permit violations.

 

The complaint, filed in May 2007, alleged that Massey violated its Clean Water Act permits more than 4,500 times between January 2000 and December 2006. The government said Massey discharged excess amounts of metals, sediment, and acid drainage into bodies of water in West Virginia and Kentucky -- some at levels more than 10 times over the limit.

 

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Deaths at West Virginia Mine Raise Issues About Safety

 
Ian Urbina and Michael Cooper
New York Times
 
April 6, 2010
http://www.nytimes.com/2010/04/07/us/07westvirginia.html?ref=us
 

MONTCOAL, W.Va. — Rescue workers began the precarious task Tuesday of removing explosive methane gas from the coal mine where 25 miners died the day before. The mine owner’s dismal safety record, along with several recent evacuations of the mine, left federal officials and miners suggesting Monday’s explosion might have been preventable.

 

In the past two months, miners had been evacuated three times from the Upper Big Branch due to dangerously high methane levels, according to two miners who asked for anonymity for fear of losing their jobs. Nick J. Rahall II, a Democratic congressman whose district includes the mine, said he had received similar reports from miners about recent evacuations at the mine, which as recently as last month was fined at least three times for ventilation problems, according to federal records.

 

The Massey Energy Company, the biggest coal mining business in central Appalachia and the owner of the Upper Big Branch mine, has drawn sharp scrutiny and fines from regulators over its safety and environmental record. Several of its violations have been for improperly ventilating methane.

 

In 2008, one of its subsidiaries paid what federal prosecutors called the largest settlement in the history of the coal industry after pleading guilty to safety violations that contributed to the deaths of two miners in a fire in one of its mines. That year, Massey also paid a $20 million fine — the largest of its kind levied by the Environmental Protection Agency — for clean water violations.

 

It is still unclear what caused Monday’s blast, which is under investigation. But the disaster has raised new questions about Massey’s attention to safety under the leadership of its pugnacious chief executive, Don L. Blankenship, and also why stricter federal laws, put into effect after a mining disaster in 2006, failed to prevent another tragedy.

 

Kevin Stricklin, an administrator with the federal Mine Safety and Health Administration, said the magnitude of the explosion — the worst mining accident in 25 years, which also left four people missing — showed that “something went very wrong here.”

 

“All explosions are preventable,” Mr. Stricklin said. “It’s just making sure you have things in place to keep one from occurring.”

 

Representative Rahall said even veteran rescue workers had told him they were shocked by what they saw inside the mine.

 

Mr. Rahall said the rescue workers, some with decades of experience, had commented that they had never witnessed destruction on that scale, or dealt with the aftermath of an explosion of that magnitude.

 

“It turned rail lines into pretzels,” he said. “There seems like there was something awfully wrong to make such a huge explosion.”

 

Gov. Joe Manchin III of West Virginia and members of Congress said the state and the federal government would begin investigating the explosion’s cause.

 

In an interview with the Metronews radio network in West Virginia, Mr. Blankenship said that despite the company’s many violations, the Mine Safety and Health Administration would never have allowed the mine to operate if it had been unsafe.

 

“Violations are unfortunately a normal part of the mining process. There are violations at every coal mine in America, and U.B.B. was a mine that had violations,” he said, referring to Upper Big Branch.

 

“I think the fact that M.S.H.A., the state and our fire bosses and the best engineers that you can find were all in and around this mine, and all believed it to be safe in the circumstances it was in, speaks for itself as far as any suspicion that the mine was improperly operated.”

 

The front page of Massey’s Web site also contains a defense of its safety record, with a passage saying that 2009 was the seventeenth year out of 20 that the company has scored above the industry average in safety.

 

But miners and other workers in the mine took issue with Mr. Blankenship’s reassurances.

 

“No one will say this who works at that mine, but everyone knows that it has been dangerous for years,” said Andrew Tyler, 22, an electrician who worked as a subcontractor two years ago at the mine on the wiring for the coal conveyer belt. Mr. Tyler said workers had regularly been told to work 12-hour shifts when eight hours is the industry standard. He also said live wires had been left exposed and an accumulation of coal dust and methane was routinely ignored.

 

“I’m willing to go on record because I am a subcontractor who doesn’t depend on Massey for my life,” Mr. Tyler said.

 

J. Davitt McAteer, the former Mine Safety and Health Administration, said the Massey company “is certainly one of the worst in the industry” when it came to safety, and called recent violations at the mine for substandard ventilation and other problems “cardinal sins.”

 

“The Massey record is without doubt one of the most difficult in the industry from a safety standpoint,” Mr. McAteer, now the vice president of Wheeling Jesuit University, said in an interview. He said other large, diversified coal operators had far better safety records than Massey.

 

In 2008, the Aracoma Coal Company, a subsidiary of Massey, agreed to pay $4.2 million in criminal fines and civil penalties and to plead guilty to several safety violations related to a 2006 fire that killed two miners at a coal mine in Logan, W.Va. After the fire broke out, the two miners found themselves unable to escape, partly because the company had removed some ventilation controls inside the mine. The workers died of suffocation. Federal prosecutors at the time called it the largest such settlement in the history of the coal industry.

 

The company’s commitment to safety came under scrutiny in 2005 after Mr. Blankenship sent a memorandum to his deep mine superintendents.

 

“If any of you have been asked by your group presidents, your supervisors, engineers or anyone else to do anything other than run coal (i.e., build overcasts, do construction jobs, or whatever), you need to ignore them and run coal,” said the memo, a copy of which was obtained from Bruce E. Stanley, a lawyer who represented the widows of the victims of the Aracoma mine fire. “This memo is necessary only because we seem not to understand that coal pays the bills.”

 

In a follow-up memo a week later, Mr. Blankenship said that some superintendents might have interpreted his first memo as implying that safety was a secondary consideration; in the second memo he called safety the company’s “first responsibility.”

 

In Washington on Tuesday during an Easter prayer breakfast, President Obama offered his condolences to the families of the victims and said the federal government was ready to help in whatever way needed.

 

Thirty-one miners were in the mine on Monday when the explosion occurred around 3 p.m. . Some died from the explosion. Others suffocated from the fumes, state safety officials said. Seven of the bodies have been removed, and 14 have not yet been identified,

 

Four of the miners who were believed to have been further back in the mine remained unaccounted for late Tuesday. Officials said there was still a possibility, though slim, that the men had able to reach airtight chambers after the explosion, where there are stockpiles of food, water and oxygen.

 

Governor Manchin said at an afternoon news conference that four drills were in place to begin drilling holes behind the rescue chambers, an effort that began in earnest later in the day. It may not be until Wednesday night that rescue workers can regain entry to the mine after the first ventilation hole is drilled, he said.

 

“Everyone is going to cling on to the hope of that miracle,” the governor said of the four missing miners. “The odds are against us. These are long odds. They know. These are mining families. They know methane, they know about air.”

 

As the families of the miners waited Tuesday, frustrations grew. State and mine officials were taking a long time to confirm the names of the dead, many of the miners said. Families also voiced frustration that they had learned about the disaster from news reports rather than from Massey officials.

 

Some of these tensions boiled over Tuesday morning around 2 a.m. when Mr. Blankenship arrived at the mine to announce the death toll to families who were gathered at the site. Escorted by at least a dozen state and other police officers, according to several witnesses, Mr. Blankenship prepared to address the crowd but people yelled at him for caring more about profit than miners’ lives.

 

After another Massey official informed the crowd of the new death toll, one miner threw a chair, a father and son stormed off screaming that they were quitting mining work, and several people yelled at Mr. Blankenship that he was to blame, before he was escorted away from the scene.

 

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Mines Fight Strict Laws by Filing More Appeals

 

Gardiner Harris and Erik Eckholm

 

New York Times
 

April 6, 2010

http://www.nytimes.com/2010/04/07/us/07company.html
 

Armed with tougher federal mining laws passed in 2006, federal investigators had new powers to crack down on mines with persistent violations.

 

But mining companies have been able to fend off this tougher regulatory approach by challenging more of the charges brought against them.

 

As recently as March, for example, federal mine inspectors found dangerous coal dust accumulations during two separate inspections at the Massey Energy Company’s Upper Big Branch mine, the site of an explosion on Monday that killed 25 miners.

 

And throughout last year, the mine was cited for failing to conduct inspections that would have spotted dangerous piles of coal dust and other unsafe conditions. Massey appealed most of the most serious safety violations issued last year. Of the 50 serious infractions for which federal inspectors cited the mine in Montcoal, W.Va., in 2009, the company appealed at least 37.

 

At a hearing in February, Representative George Miller, Democrat of California, complained that the growing number of appeals by coal companies threatened to “render the federal efforts to hold mine operators accountable meaningless.” Mining safety experts have expressed similar concerns.

 

One in four violations issued against coal mines are now appealed by operators — three times the appeal rate before the law, according to regulators. The result is a backlog of 18,000 pending appeals and $210 million in contested penalties.

 

The appeals “are also allowing miners, in some cases the worst operators, to escape liability for which they are in fact liable and continue to put miners in harm’s way,” Mr. Miller said during the hearing.

 

Mine operators blamed the government for the increasing appeals. Bruce Watzman, senior vice president of the National Mining Association, called the government’s citation process “irrational” but said appeals do nothing to endanger the safety of miners.

 

Officials at Massey did not respond to a telephone call seeking comment. The company’s Web site says that its safety record is better than the industry’s average when it comes to accidents that result in lost time.

 

And Don L. Blankenship, the company’s chief executive, cautioned in a radio interview Tuesday against reading too much into the Upper Big Branch mine’s history of violations.

 

“Violations are unfortunately a normal part of the mining process,” Mr. Blankenship said in the interview with the West Virginia MetroNews radio network, adding that there are violations at every coal mine in the country.

 

Although all mining companies have filed appeals, Massey — and Mr. Blankenship in particular — have developed a reputation for an aggressive style.

 

Mr. Blankenship has taken on unions, believers in global warming, and even, in West Virginia, the trade association representing coal mining companies. He unintentionally set a new national legal precedent last year when the United States Supreme Court ruled that judges must disqualify themselves from cases involving people who spent unusually large sums to elect them.

 

That case was brought after Mr. Blankenship spent about $3 million in 2004 to defeat an incumbent justice on the West Virginia Supreme Court. The beneficiary of Mr. Blankenship’s spending, Brent D. Benjamin, went on to become the court’s chief justice, and he twice joined the majority in 3-to-2 decisions throwing out a $50 million jury verdict against Massey Energy.

 

More questions about Mr. Blankenship’s ties to the court were raised in 2008, when another justice on the court lost his re-election bid after photographs surfaced showing him dining on the French Riviera and in Monaco with Mr. Blankenship at a time when cases involving Massey were pending before the court.

 

Mr. Blankenship has been an active political donor. In 2006 he contributed more than $100,000 to legislative races in West Virginia, according to an analysis of campaign contributions by the National Institute on Money in State Politics, a nonpartisan, nonprofit research group based in Montana.

 

And people associated with Massey Energy, and the company’s political action committee, have donated more than $300,000 to federal candidates since 1990, with 91 percent of the money going to Republicans, according to an analysis by the Center for Responsive Politics, a nonpartisan research group based in Washington.

 

Mr. Blankenship has long seemed to revel in the role of a modern-day coal baron. He amassed coal rights when some doubted the future of Appalachian coal, and raised profits by holding down production costs, collecting dozens of environmental and safety violations along the way.

 

A self-described “street fighter,” Mr. Blankenship, a large man with a moustache and a slight drawl, has staunchly defended the practice of blasting off mountaintops to reach coal seams. He has accused state regulators of being anti-business and in cahoots with the union.

 

In 2008, according to public filings, Mr. Blankenship was paid $11.2 million in salary, bonuses and other benefits, up from $5.3 million in 2006. He lives in a relatively modest home in Rawl, W.Va. — where dozens of residents have sued Massey for, they say, poisoning the water supply.

 

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Time Again to Expose a Mining Company's Safety Record

 

Posted by Brooke Shelby Biggs on January 20th, 2006

 

http://www.corpwatch.org/article.php?id=13138

 

 

 

As we write this, two more miners are missing in West Virginia as the result of a fire inside a coal mine. This time, the company that owns the Mine is Massey Energy - a mining giant with one hell of a bad reputation in Appalachia.

 

In 2000, a coal waste reservoir operated by Massey in Kentucky sprung a leak and dumped 300 million gallons of toxic sludge into local tributaries of the Ohio River. The accident killed more wildlife and destroyed a larger geographical area that the Exxon Valdez oil spill, which amounted to "only" 11 million gallons of oil.

 

A young investigator named Jack Spadaro was sent by the Mine Safety and Health Agency to investigate the accident. Hew discovered that Massey had been fully aware of the reservoir's likelihood to fail, and yet did nothing. Instead, Massey had poured money into Republican campaign coffers, including Kentucky Senator Mitch McConnell's campaign committee and the Bush Cheney campaign. It just so happened that McConnell's wife, Elaine Chao was appointed Secretary of Labor after Bush's election. The MSHA is an agency within the Department of Labor. Furthermore, Bush appointed a former Massey executive to the MHSA's review committee which handles all legal issues related to the Coal Act.

 

Spadaro recommended that Massey be charged with criminal negligence. His superiors refused. And when Spadaro publicly questioned whether mine safety had been sold to the highest bidder under Bush, he was summarily fired.

 

 

Today, another huge Massey sludge pond at a Kentucky mine sits on a hill above an elementary school. Coal dust blankets the school yard. Neighbors want the pond decommissioned; in response Massey applied for and won permits to build coal silos even closer to the school.

 

The Citizens Coal Council says:

 

 

The company also regularly violates coal truck weight limits, sending monster trucks weighing 140,000–160,000 pounds hurtling through central Appalachia’s winding roads. These speeding, overweight trucks damage roads and kill, on average, four to six people a year in auto accidents. Recently Don Blankenship, Massey’s CEO, weighed in with his thoughts on killing innocent motorists:

 

“The truth of the matter is . . . four to six fatalities a year, with the number of miles coal trucks are traveling on these highways each year, is no worse than average.”

 

In addition to being openly anti-union (only 5 percent of Massey’s work force is represented by a union), Massey has been called one of the worst coal companies in America for miner safety by the United Mine Workers of America union, who also claim that the company uses contracted management to avoid paying workers’ compensation. Massey has been sued by its employees for overexposure to coal processing chemicals and has been investigated by the Mine Safety & Health Administration for chronic health and safety violations at its mines.

 

 

In the past 2 years, the Massey mine where yesterday's fire broke out was cited by the MSHA 204 times for safety violations, but paid less that $50,000 in fines.

 

So we have Sago, Part Two. Cronyism kills.