POLITICAL ECONOMY

Congressional hearings, tough action anticipated after U.S. coal mine disaster

The nation's worst mine disaster in 26 years is expected to result in tougher federal actions to enforce U.S. mine safety.

RENO, NV - 

As rescue operations at Upper Big Branch coal mine were placed on hold at least until this morning, the U.S, mining industry is bracing itself for yet another round of tough sanctions as federal lawmakers and regulators vowed Tuesday to investigate the deaths of 25 miners in the worst U.S. mining disaster since 1984.

Analysts are already predicting the disaster at the Performance Coal Co.'s Upper Big Branch coal mine will lead to even tougher federal regulations on underground mining.

Performance Coal is a subsidiary of the nation's fourth largest coal miner Massey Energy. Thirty-one miners were underground at the time of the explosion at the time of a shift change. Four unidentified miners are still missing.

Two miners are now hospitalized, while the bodies of seven of those killed have been identified and removed from the mine. Fourteen bodies still in the mine have not been identified.

As of Mineweb's deadline early Wednesday morning, two 1,100-feet holes are being drilled in order to vent explosive gas from the mine. Rescuers who entered the mine Monday encountered high methane, low oxygen conditions, which forced them to retreat to safety.

After 12 miners died in the Sago mining disaster in West Virginia and other seven other miners perished at the Aracoma Alma Mine No. 1, and Darby Mine No. 1 in early 2006, the U.S. Congress enacted the federal Mine Improvement and New Emergency Response Act (MINER Act).

Congress increased the number of MSHA inspectors and strengthened the penalties for safety violations.

Nonetheless, in response to reporters' questions regarding the deaths of at least 25 miners at Massey Energy's Upper Big Branch mine, an MSHA official onsite at the disaster said the agency lacked the authority to close the mine.

The Upper Big Branch coal mine received 458 citations from federal inspectors last year. Former MSHA director Davitt McAteer noted, "They had a doubling of the number of site citations from 2008 to 2009 and a doubling or tripling of the penalties"

 Last month, the mine received 50 citations alleging poor ventilation of dust and methane, failure to maintain proper escape ways, and the accumulation of combustible materials. Massey CEO Don Blankenship told CNN, "We would take great exception to the fact that someone would claim Massey's mines aren't generally safer than competitor coal mines."

"Certainly violations are a bad indicator, but they're not a sole source for judging safety performance," he said. Massey operates 44 underground and surface mines in West Virginia, Kentucky, Virginia and Tennessee. The company is the largest mine operator in central Appalachia.

Massey paid a record $4.2 million in fines and penalties after pleading guilty to criminal charges in connection with the deaths of two miners during a 2006 fire at Alma Mine No. 1. Monday's explosion at the Upper Big Branch Mine was the fourth fatality at that operation in 12 years.

In a statement published Tuesday, the International Brotherhood of Teamsters General President James P. Hoffa said the violations at the Upper Big Branch mine "paint a frightening picture of corporate indifference to the safety of miners."

The President of Teamsters Local 175 in South Charleston, W.Va., Ken Hall, said, ‘These tragedies have become all too common in West Virginia, and we must do everything possible to prevent another single death in a mine."

On Tuesday the powerful chairman of the House Natural Resources Committee, Rep. Nick J. Rahall, D-West Virginia, asked House Education and Labor Chairman George Miller, D-California, to hold hearings on the exploration at the Upper Big Branch mine. Miller agreed to hold a hearing to examine the matter.

In a statement published on his website, Rahall said, "I want to know why this tragedy happened; there will be a thorough investigation."

"We will seek answers about the cause of this disaster. We will look for inadequacies in the law and enforcement practices, and I will work to fix any we find," he added. "We will scrutinize the health and safety violations at this mine to see whether the law was circumvented and miners' precious lives were willfully put at risk, and there will be accountability."

Chairman Miller and Rep. Lynn Woolsey, D-California, the chair of the Workforce Protections Subcommittee, issued a joint statement Tuesday. "Working with the Department of Labor and the federal Mine Safety and Health Administration, we intend to look into this tragedy and convene hearings at the appropriate time. However, the only job that matters right now is the job of reaching trapped miners while limiting, as much as possible, the risk to those brave rescuers."

Sen. Jay Rockefeller, D-West Virginia, vowed, "We will leave no stone unturned in determining how this happened and in taking action for the future."

"I ask that Americans pause today to consider the scope of our coal miners' contributions and tenacity-what their work means to the quality of life of every single one of us-and to try to understand how deeply personal this loss is to our state, our people, and Appalachia," he added.

Sen. Robert Byrd, D-West Virginia, who is the most senior member of the U.S. Senate in terms of tenure, said, ""At least 25 coal miners have died inside a mine that has over time amassed scores of safety violations including 57 citations just last month. West Virginia's coal miners are the backbone of a great nation that depends on their work. They deserve nothing less than a safe working environment, and an employer who respects and values their safety."

"We must reexamine the health and safety laws we have put into place and what more may need to be done to avoid future loss of life," he said.

U.S. Secretary of Labor Hilda L. Solis said, "The federal Mine Safety and Health Administration will investigate this tragedy, and take action."

"Miners should never have to sacrifice their lives for their livelihood," she declared.

FINANCIAL IMPLICATIONS

At this stage, it is not possible to quantify the earnings impact of the disaster on Massey Energy, or how long the mine will remain closed. The probability of government action against the company may prove costly. Any possible lawsuits filed by family members of the deceased and injured miners may also hurt Massey's bottom line.

In 2009 the Big Branch mine produced 1.2 million tons, while Massey mined 7.4 million tons of metallurgical coal.

Increased scrutiny and regulation of underground mines by MSHA could, in turn, result in higher production costs for all underground miners.

In an update published Tuesday Standard & Poor's placed Massey Energy on "Watch Negative" after the explosion, stating the accident "will likely result in the mine remaining out of operation for a significant period and up to 1.2 million tons of lost metallurgical coal sales."

"The incident could result in significantly heightened regulatory scrutiny for the company's underground mines in Central Appalachia, which could affect Massey's production from other steam and met coal mines in the near term," said S&P credit analysts Sherwin Brandford and Maurice Austin.

The analysts said Massey's current $550 million liquidity will be sufficient to meet a near-term cash outlay of less than $10 million, which S&P says will be associated with the accident.  "However, uncertainty exists regarding the impact on the company's workers' compensation liability and any impact potential lawsuits brought against the company may have on its overall financial profile."