A massive sludge waste pond from Massey Energy's mining operations in Naoma, W.Va. Aerial photo by Vernon Haltom. Flight by SouthWings.org.
Dark-haired with deep jowls, Massey Chairman and Chief Executive Don L. Blankenship, 59, will explain the difficult year the nation's No. 4 coal producer has faced and why pay cuts are needed. If previous annual meetings are any indication, he'll defiantly turn aside complaints and shareholders' resolutions on any number of bitter controversies, from devastating mountain-removal strip mining to coal's role in global warming.
Massey Energy may indeed be the most notorious company that many Richmonders have never heard of. Massey merits only a few occasional paragraphs in the daily newspaper's business section. Headquarters is a glum-looking, gray building at Fourth and Main streets downtown.
Locally, the venerable Massey name conjures up positive images of cancer centers and philanthropy, the legacy of the family that founded the company in 1916 and later sold its interests. But Massey Energy's reputation resonates throughout the Central Appalachian coal fields and in offices of eco-friendly investors from San Francisco to Manhattan in an altogether different way.
The $2.6 billion company is constantly being cited or sued for safety violations and deaths at its deep mining operations. Its strip mining destroys thousands of acres of mountaintops. Its huge and sometimes fragile sludge ponds of mining waste have put it under constant attack from grass-roots environmentalists such as the Coal River Mountain Watch in Whitesville, W.Va., and the Ohio Valley Environmental Coalition in Huntington, W.Va. “Massey has, in my opinion, the most unconscionable coal mining operation in Appalachia,” according to Julia Bonds, co-director of the Coal River group.
At next week's meeting in Richmond, Blankenship will urge shareholders to vote down resolutions from ecology-minded institutional investors, including those in Boston and New York who call for the company to disclose its greenhouse gas emissions and how it will deal with global warming. Mountaintop removal — the process of literally removing the mountain's top like a bottle cap to mine for coal — threatens Massey's loans from Bank of America and Citigroup.
Blankenship may explain the millions of dollars in campaign contributions that his company has given in recent years to judicial candidates who may hear Massey cases in West Virginia. And he's certain to face queries about Massey's record $20 million civil penalty for Clean Water Act violations last year. The largest-ever settlement in the United States testifies to Massey's major environmental problems at some of its 66 mines, most of which are in southern West Virginia or eastern Kentucky, where Blankenship was born in the tiny hamlet of Stopover in 1950.
A Massey preparation mine in Raleigh County, W.Va. prepares coal for shipment by rail. The coal comes in on conveyor belts that are sometimes miles long. Photo by Scott Elmquist.
“We don't want to go down that road,” says Roger Hendrickson, Massey's manager for investor relations.
Yet Blankenship is anything but shy when it comes to answering his critics. While many chief executives hide behind smooth spin agents, Blankenship goes right for the jugular. He's dubbed as “crazies” and “greeniacs” such critics as Democratic House Speaker Nancy Pelosi and former Vice President Al Gore, who won a Nobel Peace Prize for his work on global warming. When an ABC television crew dropped by a Massey office in Kentucky last year to ask about the politically inflammatory photographs showing Blankenship vacationing at glitzy Monaco on the French Riviera with Elliott “Spike” Maynard, then chief justice of the West Virginia Supreme Court, Blankenship personally and roughly shooed them away, according to ABC.
Oddly, Blankenship's in-your-face public style contrasts with his sophisticated, marquee-name board of directors. Members include Bobby Ray Inman, a former Navy admiral who headed the super-secret National Security Agency and was No. 2 at the CIA. Another is Lady Barbara Thomas Judge, an American lawyer with a British title who chairs the United Kingdom's Atomic Energy Authority.
And while Blankenship plays hardball politics in West Virginia, where the core of Massey's operations is located, he's been generous with corporate giving in the local hills and hollows of Appalachia and elsewhere.
His micromanaging style dominates the company. Blankenship rarely comes to the Richmond corporate headquarters and is relatively unknown in local social and business circles. Residing atop a hill overlooking the railroad town of Williamson, W.Va., he prefers to run the company not far away from the small, corrugated metal office building with a heliport and a high-security electric fence just off U.S. 119 in Belfry, Ky.
The corporate headquarters may be in Richmond, but Massey Chairman and CEO Don L. Blankenship runs the company from a modest, trailer-sized building in Belfry, Ky. AP Images/Photo by Jeff Gentner.
Blankenship maintains the coal company's traditional anti-union stances. And when it comes to the hard-bitten residents of Central Appalachia, Blankenship insists that he is one of them, knows them intimately and has their interests at heart.
VERNON HALTOM, however, doesn't buy it. Dressed in a dark suit with shoulder-length, salt-and-pepper hair, he sits in the scuffed-up waiting room at a court magistrate's office in Beckley, W.Va., on a recent afternoon.
Haltom has been summoned for his arrest in early February, when he and other environmental protestors approached a guard shack at Massey Energy's Marfork Mine near Pettus, W.Va., to present a plan that would put windmill electricity generators atop Marfork Mountain, where Massey plans a huge mountaintop-removal surface mine.
Company security guards contacted the state police, conveniently located at a barracks just across a road, to have Haltom and the other protestors arrested for trespassing.
But it was a diversion. While Haltom and other members of the Coal River Mountain Watch were cited and handed court summonses, another group of environmentalists pulled a devious flanking maneuver. Eluding guards, five reached the top of a nearby mountain and chained themselves to earth-moving equipment at Massey's Bee Tree Surface Mine. Fourteen people were arrested that day.
“I've been here before,” Haltom says, smiling, while he waits for the magistrate to see him. A former Air Force officer from Oklahoma, Haltom married a local woman with long ties to the Coal River Valley along Route 3, where Massey has several huge operations. Haltom fell in love with the area and taught English at Mountain State University in Beckley before getting involved with activism.
Overhearing Haltom's conversation, one man in the courtroom for a traffic violation spits out: “Massey. They own West Virginia.” Haltom is eventually called before the magistrate. He can go. The state trooper who cited him has failed to show up for the hearing.
COAL RIVER IS an epicenter of sorts for the kinds of ecological trauma that has long been inflicted on the Appalachian coal fields. Dust and remnants from the blasting cover and crack nearby housing, and the area is in danger from the giant sludge pools that mine companies use to corral mine waste. Managing sludge — the excess earth, usually filled with pollutants, removed during mining operations — is a recurring problem for Massey.
Sludge ponds exist at several local Massey sites and can be threats. Of special concern to Haltom is a sludge pond as much as 9 billion gallons of waste that Massey has built near his home. “Massey blasts late in the afternoon and I can see the dust clouds drop down from the mountain. They are blasting close to the big dam,” he says.
The most notorious sludge pond disaster involved Buffalo Creek, W.Va., and Pittston, another company with ties to Richmond. On Feb. 26, 1972, a coal sludge impoundment erected by Pittston breached its dam. A 30-foot-high wall of filthy water raced down a steep hollow, inundating 16 coal hamlets, killing 125 people and injuring 1,121. More than 4,000 people were left homeless.
In 2000, Massey figured in another sludge spill judged to be 25 times the size of the Exxon Valdez oil tanker disaster in Alaska. The company operated a sludge lake with 2.2 billion gallons of coal mine waste in Martin County, Ky. A dam broke and 306 million gallons of sludge rushed into an abandoned underground mine beneath the impoundment and eventually ended up in the Big Sandy River. The disaster was a factor in the Environmental Protection Agency's mammoth civil penalty against the company. In December, the Tennessee Valley Authority had to deal with a sludge disaster when a coal sludge pond broke up and polluted acres of nearby private property.
Environmentalists such as Haltom worry that the combination of surface mine blasting and area sludge ponds could threaten a series of villages along the Coal River. Of particular concern is the Marsh Fork Elementary School, which is in the flood path and also stands near a coal silo operated by Massey's Edwight mine. The silo is believed to generate coal dust that schoolchildren breathe, Haltom says. Another point of protest is that Massey plans to build a second silo near the school.
Yet coal is king in West Virginia, Haltom says, and regulators historically have had a light touch. “The Environmental Protection Agency oversees the state officials on this,” he says. “But there is no regulation. And while Massey may get a notice of violation, they get extension after extension.”
Activist Vernon Haltom lashes out at a group of coal executives at a morning conference in Beckley, W.Va., in late April, 2009. The topic: "Coal Industry: The New Challenge." Photo by Scott Elmquist.
Even so, there's no denying the enduring importance of coal. About 55 percent of all electricity generated in the United States comes from coal-fired plants. Although such plants are arguably the biggest single emitters of carbon dioxide that contribute to global warming and climate change, politics and economics remain in their favor.
The nation's energy generation infrastructure favors huge, base-loaded plants, such as the $1.6 billion, coal-fired monster that Dominion Virginia Power is building in Wise County. An even larger one is on the drawing board not far from Richmond near Williamsburg on the south side of the James River. The Henrico County-based Old Dominion Electric Cooperative plans a $6 billion coal-fired power station in Surry County that will generate 3,085 tons of nitrogen oxide emissions and 3,685 tons of sulfur dioxide emissions every year.
Energy producers say that technologies such as ones that capture emitted carbon dioxide and shoot it deep in the earth could make coal plants much smaller contributors to global warming. But hardly any of the technology is in operation. Companies such as Dominion say that plants such as the one in Wise County use modern pollution abatement, but, in fact, most of it is decades old.
While new technologies lag, the coal industry remains solidly entrenched in the Central Appalachian coal fields. Coal there is low in sulfur and high in heat, making it the coal of choice for generating plants. A market also still exists for metallurgical purposes such as making coke — a substance made from coal with impurities such as coal tar and coal gas burned off — which is used to make steel.
The problem is that coal beds are getting smaller, sometimes less than 3 feet thick in the best fields of Southwest Virginia, southern West Virginia and eastern Kentucky. By contrast, beds of coal in Wyoming's Powder River Basin, the country's top coalfield, can be 80 feet thick, although the coal is of poor quality. It's also situated in rolling hills, not the steep hollows of the Appalachians, making reclamation — the process of restoring the mountain or hill after mining — easier.
REACHING THE APPALACHIAN low coal by traditional deep mining means can be prohibitively expensive, especially as coal beds get thinner. That is why coal operators prefer the new mountaintop removal surface mining methods that promise to do more than any other type of mining to change the face of the region. Some surface mines near Coal River are more than 1,800 acres.
Strip mining has been around since at least World War II. After the war, the military had lots of surplus earth-moving equipment used to cut jungles and put up airfield runways on distant Pacific Islands and in Europe. That equipment was put on the market and sold to strip miners. At first, strippers carved out the sides of hills and, given lax enforcement and few federal reclamation laws, left miles-long gashes along ridges. Sulfur from leftover coal polluted streams and killed wildlife until the late 1970s, when federal laws required surface miners to restore mountains to their original contour.
Mountaintop removal put an end to that in the 1990s. New, much larger earth-moving gear could be put atop a mountain peak, steadily chopping down on blasted-free earth until it reached the coal beds. Coal operators won permission to place the massive amounts of waste into streambeds and weren't required as before to restore the mountains' shape. The hills are forever changed. Environmentalists say that watersheds are permanently damaged, not to mention the wildlife habitat destroyed.
Because its effects are so dramatic and photogenic, mountaintop removal leads the list of abuses that the anti-coal movement wants to target. Activists are taking new, modern approaches to fight the practice.
Some of them, while pushing the Obama administration to alter radically surface mining rules, have taken their protest to more sophisticated levels. The Rainforest Action Network, an environmental group based in San Francisco, sidesteps the usual protest routes of denouncing permit applications at public hearings and filing lawsuits.
Instead, the group goes to the heart of the issue by targeting the mining companies' financing by pressuring banks such as Bank of America, Citigroup and JPMorgan Chase to stop lending to companies engaged in mountaintop removal.
“We are not targeting Massey specifically but we are highlighting Massey,” says Becky Tarbotton, head of the network. To get its message out, the group uses the Web, electronic messaging and Twittering. It also courts media outlets.
The effort seems to be having some effect. Bank of American publicly announced this winter that it would no longer provide funding to coal companies involved in mountaintop removal. Tarbotton says her group monitors regulatory filings and has noted a decrease in loans in the past six months.
The battle also is joined at shareholders' meetings. Green investors routinely buy shares in companies such as ExxonMobil or Massey Energy so they can lobby from within. At the May 19 shareholders meeting, for example, investors including the New York City Comptrollers Office and Ceres, a Boston-based institutional investor, plan to present resolutions asking Massey why it hasn't disclosed its greenhouse gas emissions and the long-term financial risks it faces related to climate change.
They claim that Massey has not made such disclosures, even though it has promised to do so, while other major mining companies such as BHP Billiton, Rio Tinto and Peabody Energy made the disclosures. Green shareholders also want a fuller explanation of Massey's environmental record, including the record $20 million water fine.
Marsh Fork Elementary School in Naoma, W.Va. is threatened by coal dust from a nearby coal storage silo and possible sludge spills, say activists. Photo by Scott Elmquist.
“Don Blankenship is very controversial and says the wrong things many times,” the 83-year-old Massey says from his office in late April.
Massey sold the last of his stock in the company in 2000 and formed a new coal company that has projects in Venezuela, Colombia and, until recently, China. The offices of the new venture, Evans Energy, are festooned with giant maps of Latin America and Asia. Although the two companies aren't connected, the Evans offices are on the first floor of the Massey Energy headquarters.
That the Massey name has become synonymous with environmental hedonism is bothersome to the elder Massey, whose grandfather hailed from Fayetteville, W.Va., and arrived in Richmond in 1910 to sell coal from the Mountain State's rich New River Valley fields. Trading made sense because, then and now, the coal mainline of the old Chesapeake & Ohio railroad, now CSX, runs to Newport News through Richmond.
In Richmond, the Massey name graces a number of high-profile charities, such as the VCU Massey Cancer Center and the Massey Foundation, which donates millions of dollars to higher education, including Virginia Tech, Pennsylvania State and Marshall. “They approached my family some years ago and said that if we'd put up so many millions, the National Institutes of Health would match it,” Massey says. “So we did.”
“I was much more paternalistic when I ran the coal company,” says Massey, who took over in 1972. “I used to keep people in their jobs virtually forever,” he says. “That's not the case now.” His coal company was sold to St. Joe's Minerals in 1974, which in turn was bought by the global engineering company Fluor in 1987. “Coal made up about one-third of their revenue and I was on the board,” he says. “I had to fly out once a month to California for board meetings. I'd sit there for 10 hours and they'd give me 20 minutes to talk about coal.”
Fluor's practice was to select big-name, politically connected board members, which is how such luminaries such as Bobby Ray Inman and Lady Judge became directors. Fluor, which spun Massey Energy off as an independent company in 2000, was also more focused on short-term earnings to please Wall Street. That's when a young Blankenship came into power in the 1980s and '90s, Massey says. “Don could always tell you exactly what the numbers were,” he says. “The numbers drive every decision he makes.”
“I may enjoy a little better reputation,” Massey adds. “I was hands off and didn't try to run the mines from Richmond.”
Massey, however, was no shrinking violet when it came to labor unions. An overriding goal when he was boss was to drive the United Mine Workers of America from company mines. He succeeded: Today's company is about 1.8 percent unionized.
And while the elder Massey doesn't completely support Blankenship, he says that a lot of the hoopla and bad press comes from Democratic politicians and union leaders who encourage a better-organized environmental movement to be constantly on the attack.
“That's absolutely ludicrous and false,” retorts Phil Smith, communications director for the mine workers' union. He notes that A.T. Massey paid millions from the 1960s to the '80s to bust up union locals while other central Appalachian mining companies such as Consol and Peabody worked with them.
Massey is unapologetic for the company's mining practices, such as mountaintop removal. “There are lots of pretty, green mountains with wildlife in West Virginia,” he says. “They will stay that way. You can always go to them. Some mountains were just made for coal.”
SO WHAT'S NEXT for Massey Energy? Financially, the past year was troubled. The company had revenues of $2.6 billion last year, but less electricity use and lower steel prices dropped its net income from $94 million in 2007 to $56 million in 2008. This year looks tough as well, but at least in the short term, Massey's coal will be in great demand.
The Obama administration, however, is shifting ground regarding coal. It's overturning a number of George W. Bush initiatives to allow mountaintop removal waste to fill up streambeds and to avoid linking coal to global warming. A number of surface mine permits approved during the Bush years are up for review. And Environmental Protection Agency officials have held high-level meetings with Joe Manchin III, West Virginia's pro-coal governor, presumably to discuss what some people say is lax regulation by state safety and environmental regulators.
It's too early to know how far Obama will be willing to go to toughen regulation on coal companies or wean the country from its dependence on fossil fuels.
As for Massey Energy, the board has quietly told Blankenship to cool it with the political controversies. He'd put more than $6 million during the past decade into West Virginia political campaigns, going so far as to personally oversee media campaigns and write ads. In 2006 he was on the radio more often than the head of West Virginia's Republican Party. But E. Morgan Massey says last year the board put the nix on such activity and Blankenship's involvement in 2008 elections noticeably dropped off.
Despite his rough edges and hurricane-wind profile, Blankenship is secure in his job, Massey believes. To combat the recent financial troubles, in fact, Blankenship cut his own pay by 10 percent, down to $900,000 a year, a move that will likely endear him further with shareholders. Blankenship gets results and few can match his passion.
“The board backs him,” Massey says. “I don't think they have anybody to replace him.” So the Bad Boy of Big Coal is likely to stay around for a while.