Dirty Industry, Dirty Fight
Bad, bad week for Big Coal, epitomized by the announcements Wednesday that two big utilities, Midwestern Generation and GenOn Energy, are to close ten coal-fired power plants in the Northeast and the Midwest, including two within the Chicago city limits.
For Massey Energy and the giant company that owns it, Alpha Natural Resources, the news was even worse. The name Massey will probably ring a bell. It’s the colossus of the Central Appalachian coalfields, and in a dirty industry it has a particularly dirty reputation, both for its fondness for tearing off the tops of mountains and for its conduct below ground. Most of its active mines are in West Virginia, and that’s where the Upper Big Branch Mine is located, in the town of Montcoal.
Twenty-nine miners died in an explosion at the Upper Big Branch in April 2010, an event now firmly inscribed in the ledger of great industrial disasters, up there with New York City’s Triangle Shirtwaist Factory fire of 1911, in which more than 100 garment workers burned, jumped, or fell to their deaths. (That of course was in the bad old days -- or good old days, depending on how you look at it -- when industry didn’t have to worry about pesky government regulations.)
But even Big Coal is subject to the law these days. Last week, U.S. Attorney Booth Goodwin filed charges of criminal conspiracy against mine superintendent Gary May, alleging that he had "plotted with others known and unknown" to conceal lethal hazards at the Upper Big Branch. A former security chief at the mine, Hughie Elbert Stover, was sentenced Wednesday to a three-year jail term for lying to federal investigators and attempting to destroy company documents by tossing them into a trash compactor.
May is accused, among other things, of deliberately disabling a methane gas monitor and pumping fresh air into sections of the mine to provide a kind of Potemkin Village tour to visiting inspectors from the federal Mine Safety and Health Administration -- an agency to which the word toothless is frequently attached -- who were there to sample levels of airborne coal dust. What makes his prosecution especially interesting is that it may go much higher than May’s pay grade. Eighteen other company officials have already refused to cooperate with investigators, invoking their Fifth Amendment rights. They include Massey’s former CEO, Don Blankenship. (Salary at the time of his resignation in December 2010: $23.7 million. Most remembered quote: "What you have to accept in a capitalist society, generally, is that I always make the comparison it’s like a jungle, where a jungle is the survival of the fittest.")
Alpha bought Massey a year and a half ago, for $7.1 billion, making it the third biggest coal company in the nation, after Peabody Energy and Arch Coal. Coming right after the Upper Big Branch, it always felt like a bizarre piece of timing for an industry battered by image problems and struggling to turn a profit in a tight market. It seemed almost to invite a run of bad karma, and last week appeared to prove the point. Two days after the conspiracy charges were filed against Gary May, Alpha announced staggering fourth-quarter losses of $733.3 million, against revenues of just over $2 billion.
Alpha CEO Kevin Crutchfield accounted for these losses, and announced major cutbacks in the company’s Appalachian mining operations, in a conference call that was full of good things for the connoisseur of black humor. (Opening words: "Alpha continued to demonstrate excellent safety performance since our last earnings call.") Crutchfield followed that with a sober summary of the reasons for the company’s miserable balance sheet: regulatory uncertainty, environmental opposition to new coal-fired power plants, higher production costs for Appalachian coal, fierce competition from natural gas, and the weather. (One byproduct of global warming and weird weather is that people burn less coal in a mild winter like this one. Truly, every cloud has a silver lining.)
But hold the celebrations, and remember that when you have a boxer on the ropes, that’s exactly when you should expect a sucker punch to the kidneys. For the coal industry, that sucker punch has always been jobs. That’s the deal that Massey offered Appalachia for almost a century. Damn black lung, damn the methane, damn the mountaintops; we’re bringing you jobs. Now, Big Coal is again trying to bludgeon its opponents with the same argument -- although this time in a different venue.
Over the past couple of years, the coal industry has become convinced that it has an ace in the hole: the surging Asian market, with its promise of sustained long-term demand. That’s why the big coal companies are hell-bent on building coal export facilities on the Columbia River and the coast of Washington State. And that’s where, from the environmental point of view, this week also brought some bad news.
One of the prime sites for a shipping terminal is in Longview, Washington, where Millennium Bulk Terminals, a subsidiary of the Australian company Ambre Energy, was denied a permit last year after it was found to have lied about the amount of coal it intended to ship from the port -- as much as 60 million tons a year. But as I predicted then, they have not given up. In fact, a day after Gary May’s arraignment and a day before Alpha’s announcement of its fourth-quarter losses, Millennium was back, filing new permit requests for a Longview terminal with local, state, and federal regulators. Worse, at the end of January, despite heavy local opposition, the Port of St. Helens, 30 miles north of Portland, approved requests from Ambre for two new coal export facilities.
This fight is far from settled. These are local permits, and they will all need state and federal approval. But the jobs argument is potent. The numbers in Oregon and Washington are modest -- each terminal will create scores of jobs, not hundreds, and many of them will be temporary construction jobs. But these are depressed communities, and, as we know, we’re talking here about the political third rail in this frail economy.
In announcing Alpha’s losses last week, CEO Kevin Crutchfield said, "By now the headwinds facing U.S. coal producers are well known to most everyone." To those who are tempted to think that this means the battle is won, I have only one piece of advice: remember that this will be a long and dirty fight, and keep those winds blowing.