Federal regulators cut a deal four years ago that saved Massey Energy from potentially losing at least $85 million in coal sales to government-owned power plants, according to new court documents and records obtained under the Freedom of Information Act.
U.S. Environmental Protection Agency officials have not previously disclosed the settlement. The deal kept Massey from being barred from government contracts after two of its subsidiaries pleaded guilty in 2002 to criminal Clean Water Act violations.
Lawyers from EPA and the Department of Justice revealed the agreement's existence in a new federal court lawsuit.
Last week, EPA and DOJ sued Richmond, Va.-based Massey and more than two dozen of its subsidiaries for widespread water pollution violations in Southern West Virginia and Eastern Kentucky.
The lawsuit, filed in U.S. District Court in Charleston, alleges thousands of water pollution violations between 2000 and 2006. Massey has responded that EPA has overstated the violations, that its environmental performance is improving, and that most of the citations listed in the suit caused little if any water quality damage.
In their lawsuit, federal government lawyers stated that Massey worked out a deal with the EPA Suspension and Debarment Division prior to subsidiaries Omar Mining and Independence Coal's pleading guilty to criminal violations in December 2006.
The deal was negotiated during a private meeting in Charleston a month before the two Massey companies pleaded guilty in December 2002, records show.
It was finalized three months later, in March 2003, when Massey CEO Don Blankenship signed it, according to a copy of the 16-page agreement obtained through an FOIA request.
Without the agreement, Massey could have been barred from selling coal to the Tennessee Valley Authority, EPA and DOJ officials said this week.
TVA operates 11 coal-fired plants in Tennessee, Alabama and Kentucky, and buys about 40 million tons of coal a year.
Massey's sales to TVA represented a very small portion of the company's 40 million tons in annual coal production, records show. But Massey sales to the TVA quadrupled in the two years following the EPA deal.
Massey sold about 300,000 tons of coal to the TVA in 2001, according to TVA figures. In 2003, Massey sold the TVA nearly 900,000 tons of coal. By 2004, the figure had increased to 1.2 million tons.
Massey sales to the TVA have since dropped significantly. Between 2003 and 2006, shipments to the TVA accounted for just 1.3 percent of Massey's total coal revenues, according to corporate disclosures.
Earlier this year, Massey raised concerns about potential debarment again.