Business

Coal producers upset with MSHA

CHARLESTON, W.Va. — After a string of mine accidents that left dozens dead in recent years, coal operators say the federal Mine Safety and Health Administration has become extremely heavy-handed in an effort to counteract accusations of lax oversight.

During the first 10 months of fiscal 2008, MSHA says, it has slapped mine operators with $97.4 million in fines — a 141 percent increase over last year's total. Citations and orders for various infractions are up nearly 8 percent as well.

Producers say the spike in enforcement has stifled productivity, increased costs and prevented mine operators from cashing in on soaring international demand.

Prices, particularly for metallurgical-grade coal for powering steel blast furnaces, have tripled over the past year in response to the weak U.S. dollar, foreign shipping bottlenecks, ocean freight rates and other factors.

Still, signs that Massey Energy Co., Arch Coal Inc., Alpha Natural Resources and other top U.S. producers were chafing under the oversight began about a year ago, just as MSHA was drawing renewed criticism from Congress and organized labor over enforcement. Critics said the agency had failed to perform mandatory inspections at underground coal mines despite fatal accidents including the Sago Mine explosion in 2006 that killed 12, an explosion that killed five in Harlan County, Ky., later that year and the Crandall Canyon mine collapse and rescue attempt that killed nine in Utah.

"Some of these citations or violations are extremely petty and probably in no way contribute to safer conditions," said National Mining Association spokesman Luke Popovich.

MSHA director Richard Stickler dismisses the notion that stricter enforcement isn't improving safety. "Certainly, when you find an unsafe condition and you require the operator to correct that condition, that has to be making the mine safer," Stickler said. "We're making more inspections, we're writing more violations and we're assessing higher penalties. That's our job. One of the tools we have is enforcement."

MSHA's own statistics show the agency began increasing the pressure beginning in 2007.

Citations and orders issued for various infractions jumped 2 percent to 78,687 between fiscal 2006 and 2007. Through the first 10 months of fiscal 2008, MSHA says, citations and orders were up 7.7 percent to 84,744.

Fines doubled to $40.4 million from fiscal 2006 to 2007 before this year's big increase.

Stickler said the agency was able to hire 170 inspectors and also cited federal legislation allowing increased fines across the board for better regulation.

Forcing a coal operator to stop mining even briefly is at the heart of the complaints. MSHA inspectors have the authority to order evacuations.

When a mine shuts down, costs per ton of coal removed spikes because miners are still paid.

U.S. Department of Energy numbers show eastern coal production was down 0.6 percent through mid-August from a year earlier. Western coal production was up 0.9 percent over the same period.

Patriot Coal recently told Wall Street analysts that MSHA enforcement has increased costs as much as $1.25 a ton. For the second quarter, for instance, Patriot's per-ton costs jumped more than 8.6 percent.

"If you go to any meeting of industry people, industry people involved with the operations area, we're all seeing the same thing, which is just there is a much heavier presence of regulators and inspectors and people who are involved in your mine," said Peter Socha, James River Coal Co. chief executive, during the company's latest earnings call with securities analysts.

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