Alpha Says Safety Improving at Legacy Massey Mines

November 4, 2011

The number of mine injuries has been cut in the five months since Alpha Natural Resources bought Massey Energy, which had owned the coal mine where 29 men died in a blast last year, Alpha’s CEO said Thursday.

“The year-to-date incident rate for legacy Massey operations has decreased by more than 13 percent compared to the incident rate of these operations in 2010,” Kevin Crutchfield said without elaborating.

“Alpha operations have typically experienced a violation rate of something on the order of 0.5 to 0.6 per inspector day, where Massey’s have been in the 0.8 to 1.0 (range).

“I would expect to see that fall over time as we continue to emphasize that we are going to need to do the right thing,” Crutchfield told Wall Street analysts on a conference call to discuss Alpha’s third-quarter results.

The company’s stock rose 12.2 percent to $26.86 after the better-than-expected profit was announced.

Alpha acquired Massey June 1 in a deal worth $7 billion, creating the second-biggest U.S. coal producer, with about 150 mines and 40 preparation plants.

But with Massey’s assets, Alpha inherited liabilities from pending litigation over the Upper Big Branch mine accident in West Virginia, the worst U.S. mine disaster in four decades.

Massey had a checkered record with its federal regulator, the Mine Safety and Health Administration (MSHA), and Crutchfield was asked Thursday how relations now stood with MSHA.

“I always said that MSHA was not going to cut us any slack, and they did not.

“I think MSHA is doing what they think is right, and what we are going to do is demonstrate that we know how to run these operations … in compliance,” he said.

“I would expect over time that you will see the violation rate fall, the incident rate continue to trend down — not as a function of MSHA backing off, but as a function of … we are doing the right things.”

He gave no numbers for the violation or incident rates, but said MSHA had cited two former Massey mines in West Virginia for potential pattern of violation, or PPOV, status.

“Not surprisingly, the Randolph and … Justice #1 mines in Coal River West, have been under intense regulatory scrutiny since being placed on PPOV by MSHA.

“We have a specific and detailed action plan to address the compliance issues at these mines, and Alpha is committed to getting all of our mines running right, not just operating in compliance with applicable laws and regulations,” Crutchfield said.

Alpha has a mine safety program called Running Right, in which employees are encouraged to report potential violations.

“The Running Right culture, which at its core is centered on employee engagement, not only fosters a safer work environment, it also has direct implications for morale, employee retention and ultimately productivity and improved operational performance,” said Crutchfield.

He said already, the workforce turnover rate had dropped to about 10 percent in September at legacy Massey operations, down from a peak of more than 20 percent earlier in the year.

“We still have a great deal of work to do in order to get the Massey operations in line with legacy Alpha in terms of safety, compliance and overall employee involvement.

“But the improvement is measurable, and the trend is consistently in the right direction,” said Crutchfield.

(Reporting by Steve James, editing by Gerald E. McCormick)

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