Will Alpha improve Massey safety and environmental performance?
CHARLESTON, W.Va. -- Alpha Natural Resources' buyout of troubled Massey Energy creates a coal giant that will rank among the top three in the country, have significant operations in several major coal basins, and dominate the U.S. market for coal that is used to make steel.
But will Alpha reverse a culture at Massey that critics of the company say frequently put coal production ahead of worker safety and environmental protections?
United Mine Workers President Cecil Roberts -- among Massey's most vocal longtime critics -- certainly hopes so.
"Massey had come to represent all that was wrong with the coal industry, whether it be safety and health issues, environmental issues or simple respect for its workers, their families and the communities where they live," Roberts said. "While Alpha inherits those problems from Massey, one hopes that Alpha recognizes that sorry record and has a plan in place to move swiftly toward resolving many of those issues."
The Alpha-Massey deal, announced Saturday, creates a coal giant worth $15 billion, with the second-largest private coal reserves in the country, and likely to take over a slot as the second- or third-largest producer in the nation.
Abingdon, Va.-based Alpha plans to keep its own team of top executives and its own board of directors, but the plans for operational management of regional units and individual mines has not been announced.
Alpha CEO Kevin Crutchfield said his company planned to introduce its own safety, environmental and production programs -- under the title "Running Right" -- at Massey's operations.
"From a safety perspective, 'Running Right' means engaging all of our employees to work toward the common goal of returning every employee home safely every day," Crutchfield said. "From an environmental perspective, 'Running Right' means a collective commitment on the part of our entire workforce to not only remain in compliance with, but often exceed regulatory environmental standards in leaving the environment in a condition that is at least as good or better than we found it."
During the same call, outgoing Massey CEO Baxter Phillips said the two companies found their corporate cultures "to be extremely compatible with each other" and would work together to "reduce regulatory impediments" on the industry.
Joe Lovett, director of the Appalachian Center for the Economy and the Environment, said he's not sure what Phillips -- who is expected to become an Alpha consultant of some sort -- is talking about.
"I don't think the regulatory impediments are as strong as they should be in the first place," Lovett said. "That certainly is code for 'We don't want to protect the environment.'"
Massey's history dates back to 1920, and the company has been operating as a publicly traded firm since 2000 under the controversial leadership of CEO Don Blankenship. Following a strike in the mid-1980s, Massey has operated mostly with non-union workers and has been at odds with the UMW.
Safety advocates and environmental groups have long complained about Massey's practices, and its subsidiaries have admitted several times to criminal violations of both safety and water pollution laws.
Scrutiny of Massey increased after two mines died in a January 2006 fire at Massey's Aracoma Mine, an incident that produced record safety fine of $4.2 million in civil and criminal fines.
But it was the April 5, 2010, explosion that killed 29 workers at Massey's Upper Big Branch Mine that began a downward financial spiral, with Blankenship retiring in early December and Massey's board agreeing less than two months later to a buyout.
While Alpha has avoided a huge disaster like Upper Big Branch, the company came dangerously close to such an incident in May 2009, when seven workers were trapped underground for more than 24 hours by a mine flood in Mingo County. Federal regulators cited the company for improper maintenance of outside drainage systems that allowed heavy rain to inundate the underground tunnels.
And in January 2007, Alpha's Brooks Run subsidiary was cited for major safety violations following a roof collapse that killed two workers at an underground mine in McDowell County.
In terms of production, Alpha already ranked higher than Massey among U.S. coal operators, largely because more than half of its 84 million tons of 2009 coal output came from two huge surface mines in Wyoming's Powder River Basin.
Alpha ranked fourth in 2009 West Virginia production. Corporate disclosures listed about 1,700 employees in the state.
Formed in 2002, Alpha grew over the next decade by purchases of Pittston Coal -- another old UMW foe -- from Brinks, and of Coastal Coal, Nicewonder Coal, Progress Fuels and of some West Virginia operations of Arch Coal.
Two years ago, Alpha also purchased some of the holdings of Foundation Coal, including two large underground mines that employ more than 1,000 UMW members in Greene County, Pa.
Roughly three-quarters of Alpha's employees and slightly more of its production base are still "union free," and the company warns shareholders that additional unionization "could adversely affect the stability of our production and reduce our profitability."
Roberts, the UMW president, said that unlike at Massey, his union has "open lines of communications" with Alpha.
On the Upper Big Branch disaster, Alpha officials said that they had carefully examined Massey's estimates of the potential financial impacts of the disaster, any litigation and any government investigations and were "comfortable with the risk" involved in buying Massey.
"It was a tragic event and what we would hope for is resolving the matter in the foreseeable future," Crutchfield said.
Reach Ken Ward Jr. at email@example.com or 304-348-1702.