The ongoing saga of coal mine giant Massey Energy took a much-rumored turn this weekend with an agreement to merge with Alpha Natural Resources, a Virginia-based company, which already owns 26 underground coal mines in Appalachia and Wyoming.
Alpha will absorb Massey and its 61 underground mines in a deal valued at $8.5 billion. Approval by the boards of both companies and the Securities and Exchange Commission and Justice Department will result in a coal mining behemoth that will dominate production of metallurgical coal in Appalachia.
Met coal, as it's called, is used to make steel and demand right now is very high.
The new company will retain the Alpha name, management team and board of directors.
The Massey name will be gone. But what about the company's aggressive resistance to federal regulation and a safety record that is one of the worst in the industry?
"Massey has been historically pretty aggressive in its dealings. Maybe even contentious would be the right word," says Meredith Bandy, the coal equity analyst at BMO Capital Markets. "Alpha's management team tends to be professional and sort of restrained. They're much more low key."
An NPR analysis of federal records finds that Massey violates mine safety regulations at a rate that is a third higher than the violation rate for Alpha. And when compared with violations nationwide, Alpha is 20 percent lower than the national average.
"I think that we've demonstrated through our track record that we've created a fair amount of credibility," said Alpha CEO Kevin Crutchfield in a conference call with industry analysts Monday.
Alpha also has a senior safety and production executive who once worked at the Mine Safety and Health Administration (MSHA) and has been buddies with MSHA coal mine safety chief Kevin Stricklin. Neither Stricklin nor Allen Dupree, Alpha's Vice President for Running Right and Business Excellence, would talk Monday about their working relationship.
"Running Right" is an Alpha program that makes the company's miners and managers responsible for safety problems. The company says the program encourages mine workers to report problems.
"I know that some top management at Alpha has better relationships than Massey management does, less confrontational relationships," says Tony Oppegard, a former MSHA official who represents coal miners suing mining companies. "I hope that that would help when the two sides sit down to discuss safety problems."
Some of Alpha's mines are union mines so the United Mine Workers of America (UMWA) represents about 1,500 of the company's miners. That experience has UMWA spokesman Phil Smith cautiously optimistic about the merger.
"I don't think there's a coal company that likes regulation and… the enhanced regulations that have been the hallmarks of the last several years," Smith says. "That said, Alpha has not been out front trying to wipe out increased enforcement and also not trying to run away from their record like Massey has been trying to do."
Massey insisted it put safety first in its mines even as it amassed thousands of safety citations, violations and fines. The company's Freedom Mine in Kentucky was considered so dangerous federal regulators sought a first-ever federal court injunction that would have put the mine under a judge's supervision. Massey agreed to that supervision in a settlement and announced it would close the mine.
A federal grand jury has been investigating the explosion at Massey's Upper Big Branch mine in West Virginia last April. Company officials and board members are also targets in wrongful death suits filed by relatives of two of the disaster's 29 victims.
But that financial and public relations liability did not deter Alpha.
"There's a worldwide scarcity of metallurgical coal," notes Bandy. "And so when you put these two companies together you get a pretty powerful met coal platform."
Oppegard says the kind of company that emerges will depend on what Alpha does with Massey's management team.
"If Alpha keeps the Massey management team intact in the Appalachian coal fields, then I think we're going to continue to see safety problems at those mines," Oppegard says. "It's hard, but not impossible, to change the thinking of long-time managers just because there's been a corporate change."
Alpha CEO Crutchfield told industry analysts that the company has yet to determine what the combined management team will look like.
Massey's stock skyrocketed Monday, rising nearly 10 percent. It has completely recovered from a 50 percent loss in the aftermath of the April explosion and is now valued higher than the price quoted the day before the blast.
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