This article originally published by The Charleston Gazette
May 15, 2007
Massey downplays lawsuit
Coal company predicts little harm to bottom line; stock falls by 14%
By The Associated Press
Facing an estimated $2.4 billion in threatened fines, Massey Energy Co. on Monday downplayed the environmental harm done by thousands of alleged U.S. Clean Water Act violations at its West Virginia and Kentucky coal operations.
Massey, the nations fourth-largest coal producer, also predicted no major effect to its bottom line from last weeks lawsuit filed by federal prosecutors against the Richmond, Va.-based company and 27 subsidiaries.
But analysts warned investors otherwise in the lawsuits wake. Massey shares lost 14 percent of their value in afternoon trading Monday, falling $4.25 to $26.08.
Citing the $2.4 billion figure as the worst case for Massey, analyst Daniel W. Scott at Banc of America Securities coupled the lawsuit with a federal judges recent rulings blocking key permits at four Massey mines in West Virginia.
But with two major environmental lawsuits in the news, and with Massey as the target of both, we arent surprised the stock is under pressure, Scott said in a Monday note to clients. The concern for us is that these overhangs are likely to remain for some time.
Filed on behalf of the U.S. Environmental Protection Agency, the federal lawsuit alleges Massey operations have illegally poured pollutants into West Virginia and Kentucky waterways about 4,633 times within the last six years. These discharges in excess of average monthly or maximum daily permit limits equal about 69,071 days worth of violations of the U.S. Clean Water Act, federal prosecutors contend.
The lawsuit threatens seven Massey subsidiaries with fines of $27,500 for each day in violation before March 15, 2004, and of $32,500 for each day afterward.
Massey President, CEO and Chairman Don Blankenship said Monday that his company strives to comply with all federal and state regulations.
For the permits in question, the Company believes it achieved a compliance rate of 99% or better, Massey said in a statement. Importantly, the vast majority of incidents at issue had little or no impact on water quality.
The company also said that EPA has suggested that Massey Energy is part of a wider enforcement effort across the industry.
The federal government is dedicated to enforcing the laws on the books, including the Clean Water Act, U.S. Justice Department spokesman Andrew Ames said Monday.
Three of the four prosecutors assigned to the case are lawyers from the departments Environment & Natural Resources Division in Washington, D.C.
Filed Thursday, the lawsuit follows the levying of $1.5 million in fines against Massey by the U.S. Mine Safety and Health Administration. Those penalties are for 25 violations stemming from a fire at the companys Aracoma Alma No. 1 Mine in Logan County that killed two miners.
The January 2006 fire remains the subject of a federal criminal probe. West Virginia regulators have fined the company $70,000 over Aracoma violations, while the miners widows have sued Massey, several subsidiaries and Blankenship.
A civil lawsuit by environmental groups, meanwhile, yielded the March decision that rescinded valley fill permits at four Massey operations in southern West Virginia. U.S. District Judge Chuck Chambers ruled that the U.S. Army Corps of Engineers violated federal law by issuing the permits for the mountaintop removal mines without adequately determining whether the environment would be harmed.
Chambers agreed to suspend his ruling as it pertained to three of those operations last month, pending Masseys appeal of his overall decision to the 4th Circuit Court of Appeals.