Massey sets aside cash 'in the upper range' for mine disaster costs
CHARLESTON, W.Va. -- Massey Energy set aside cash "in the upper range" to cover potential lawsuit costs and possible government fines related to the Upper Big Branch Mine Disaster, company officials say.
Massey has already put the potential costs of the April 5 explosion at nearly $129 million, and CEO Don Blankenship was quizzed Wednesday by industry stock analysts about whether the tab might go higher.
David Khani, an energy analyst with the investment bank FBR Capital Markets, wondered during a Tuesday conference call if the disaster might end up costing Massey $150 million or $200 million.
"If we wake up and the $129 million number ends up being a much bigger number ... a lot of the investors we've spoken to, that's one of the number one fears in owning your stock," Khani, told Blankenship.
Blankenship assured Khani that Massey experts have worked hard to come up with an accurate number that accounts for all possibilities, including any adverse decisions in lawsuits or hefty fines from state or federal regulators.
"We've put in numbers that are at the upper range of anything we've ever experienced," Blankenship said.
Two years ago, Massey's Aracoma Coal Co. subsidiary agreed to pay a $2.5 million criminal fine and $1.7 million in civil penalties in the January 2006 fire that killed two workers. The $4.2 million total was believed to be the largest ever in a coal-mining death case. Massey also settled a wrongful death case brought by the widows of miners Don Bragg and Ellery Hatfield, but the amount of that settlement has not been made public.
Twenty-nine miners died in the April 5 explosion at the Upper Big Branch Mine in Raleigh County, making it the worst U.S. coal-mining disaster in 40 years. The explosion is the subject of multiple civil investigations, a congressional review and a federal criminal probe.
Blankenship disclosed Wednesday that Massey hopes to reopen parts of the mine that weren't damaged by the explosion and might build a new entrance to get at some of the Upper Big Branch operation's coal reserves. Details are still being worked out, but production could begin within six months, he said.
In late April, Massey said in U.S. Securities and Exchange filings that the disaster could cost it between $80 million and $150 million.
On Tuesday, the company's latest quarterly earnings statement put the costs at $128.9 million. It said the figure included charges for loss of equipment, investigative costs, workers' compensation and other compensation and benefits for the families, and charges expected to be incurred for litigation.
Massey has offered the miners' families settlements ranging from $3 million to $5 million to resolve potential lawsuits over the Upper Big Branch deaths. Blankenship did not answer an analyst's question about how many such settlements have been reached to date.
"There is always risk in litigation, but we are continuing to negotiate with the families," Blankenship said.
Reach Ken Ward Jr. at email@example.com or 304-348-1702.