19 May 2011

Acquisition of Massey Energy, worker pacts cloud compensation for victims of West Virginia coal mine disaster

Written by theenergyfix

The release of the long-awaited independent probe of the Upper Big Branch mine explosion in West Virginia that killed 29 workers last year may have produced predictable accusations and proposed fixes to ignored mine safety practices and lax regulatory enforcement. But it overshadows the June 1 deadline for families of many of the victim to accept $3 million settlement offers from the mine’s operator, Massey Energy.

Why you might ask?  Perhaps because Massey Energy is to be acquired by Alpha Natural Resources. A shareholder vote by Massey shareholders is slated for June 1.

Shane Harvey, Massey’s vice president and general counsel, has told National Public Radio, which first reported on the company’s ultimatum soon, there is no arrangement with Alpha about how the Upper Big Branch families will be treated after a takeover. “We have no agreement with them,” Harvey said.

Really?

That might be so. But speculation abounds over how the acquisition might affect the liability that Alpha presumably would inherit. One can only ask how much more difficult it will likely be for families of the victims who have not accepted a settlement to be compensated for their loss, not to mention how much in legal fees it will take to get a significant court-ordered settlement. And therein lies a reason they might accept the offer.

The acquisition also raises questions about the culpability of Massey executives and what their own shareholders might have to say about it. Are they trying to wash their hands of the disaster? What might Virginia law do to provide some cover or another line of defense for Massey and Alpha, which are based in Richmond and Abingdon, Virginia, respectively?

Cover page from the report on the investigation, which was led by the former head of the U.S. Mine Safety and Health Administration, J. Davitt McAteer.

Finding #1 of the report, which can be found here: “The disaster at Upper Big Branch was manmade and could have been prevented had Massey Energy followed basic, well-tested and historically proven safety procedures.”

Massey Energy has reported settlement agreements with seven families. Nine others have filed lawsuits. A survivor of the explosion has also filed suit. A federal criminal investigation reportedly is underway.

Despite the report’s conclusions that the explosion was “the perfect storm . . . waiting to happen,” Massey took issue with one of the report’s basic tenets that the explosion was fueled by coal dust. Rather Massey asserted it was “caused by a massive inundation of methane-rich natural gas.” Probably an important legal distinction between the two; stay tuned.

Whatever the motivations for the settlement and the merger and the timing, this report in Mine Safety and Health News points out that despite the explosion, “Massey has not changed the manner in which it operates mines.”

One glaring example of how workers’ complaints about risks of an explosion might have been suppressed, the investigation found, was leverage that management secured over them with “enhanced employment agreements.”

Under a three-year contract, Massey offers pay increases, bonuses and guaranteed employment. If a miner leaves voluntarily or if he or she is fired for any reason, the miner has to return the “enhanced pay” and all of the bonuses received under the contract. Says the report: “Even if an employee banked 100 percent of the enhanced pay, he would not have enough to buy out his contract because the net take-home pay from the bonus would always be less than the gross amount of the enhanced pay is obligated to pay back. In effect, the enhanced employment agreement¬† . . . handcuffs the employee.”

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