Corporate Buyouts of Mines Play Part in Safety Issues
The recent history of the Sago Mine is not unlike that which has become of other major industries in the 21st century, with individual companies and its workers left victim to bankruptcy or corporate takeover. But unlike other businesses, the lack of a new owner's experience in the mining business can mean the difference between life and death.
West Virginia was the second largest producer of coal in the United States in 2005, producing 160 million tons or 13% of total production, while Wyoming was number one, producing 380 million tons, approximately 35% of the nation’s total coal production. However, the coal produced by West Virginia is more in demand than that which is produced in western states as it is considered a cleaner burning coal.
With demand for alternative energy sources in the U.S. at an all time high, the price of coal doubled over the past two years, as natural gas and oil prices have sky rocketed with supplies diminishing, especially in the wake of Hurricane Katrina in the Gulf of Mexico in August of 2005. The Gulf produces nearly 40% of the nation’s natural gas and refines nearly 30% of the nation’s oil and is still hampered by the storm’s devastation. In 2006, coal is expected to provide over 50% of the energy necessary for U.S. electric utilities and speculators expect the future of the coal industry to extend its growth over the next decade, returning to its rate of production prior to the 1970’s.
The tragedies of the 2005 hurricane season along the Gulf Coast as well as the subsequent flooding of New Orleans, LA served to expose flawed emergency services systems on all levels of government in addition to failed levee maintenance. Victims who endured Hurricane Katrina and Hurricane Rita as well as several other storms in Louisiana, Mississippi, parts of Texas as well as Florida, have been promised that government and its respective agencies would be examined and mistakes made would be corrected. Yet it remains to be seen if proper funding oversight will be followed through or if indeed lessons will be learned.
Similarly, the mining explosion of Sago Mine in Tallmansville, WVA, in which 12 miners lost their lives on January 2, 2006, with one surviving miner who still remains in a coma as of a week later, will be steeped in paperwork and months of several independent investigations, including federal and state hearings. While it would appear that running a mining operation is fairly straight forward, the fact that the work in this underground mine is done 25 stories below the surface of the earth, makes it ripe for facts to be less than forthcoming. But maybe the legacy of the tragedy of Sago will unveil the real cost of the purchase of mining operations in the 21st century, by investors with little or no interest in the history of mining or its real inherent risks.
The evolution of mining technology as well as the work of the United Mine Workers Association (UMWA) has led the way for miners’ safety rights vastly improving the lives of miners throughout the U.S. The UMWA was largely responsible for the advent of the Federal Coal Mine Health and Safety Act of 1969, known as the Coal Act, which established health and safety standards for miners both in underground and above-ground mines. The Bureau of Mines was given the power to levy fines and criminal penalties on mines in violation of the law. In addition, free chest x-rays were available for underground miners as well as a compensation fund.
The Coal Act was amended in 1977 in what is now known as the Federal Mine Safety and Health Act, or the Mine Act, which is the prevailing legislation today. The Mine Act helped strengthened the Coal Act with better enforcement of its statutes and combined federal safety and health regulations for all mines, coal and non-coal, under the same piece of legislation. In addition, a new agency within the Department of Labor, known as the Mine Safety and Health Administration (MSHA) was established with a director appointed by the president of the U.S.
The UMWA was founded in Columbus, OH in 1890 with the merger of the Knights of Labor Trade Assembly No. 135 and the National Progressive Union of Miners and Mine Laborers. Its initial constitution “barred discrimination based on race, religion, or national origin.” It was a leader in fighting racism and ethnic discrimination before the turn of the 20th century. Also included in their early fights, the UMWA fought for the 8-hour day in 1898, followed by collective bargaining rights in 1933, health and retirement benefits in 1946 and the eventual health and safety protections resulting in the federal legislation in 1969.
And perhaps most important to the UMWA’s accomplishments was its plowing the way for the National Industrial Recovery Act, which granted workers the right to form unions and bargain collectively with their employers. And after the success of organizing the nation’s coal miners, the UMWA extended its work to the steel and auto industries in order to help those workers organize.
While fatalities in the mines have fallen significantly over the past century and working conditions improved, by the 1980’s many of the smaller mines went out of business, with more nuclear power plants coming online and with the oil crisis of the 1970’s supposedly over. Coal became less of a necessity. Many mines which remained opened decided to hire only non-union personnel. With fewer jobs available in rural communities, workers became willing to forego union benefits and guaranteed pension plans. They sacrificed the transparency with management regarding safety concerns which the union provided them and without fear of retribution.
Today, according to Cecil E. Roberts, President of the UMWA, only 32-35% of all mines are union shops. With the majority of today’s miners comprised of an aging workforce in their late 40’s and 50’s facing retirement, cash bonuses and higher salaries are luring the next generation, now in their 20’s. In the past 20 years as mines shut down and union-busting was rampant, workers were headed to other cities for more lucrative manufacturing jobs. But with steel mills on the decline, textile mills losing out to overseas manufacturing and impending layoffs of automakers, the coalmines are becoming the last bastion for those living in communities where the average annual salary is $25,000. Non-union miners can look forward to earning twice that amount.
However, the recent history of the Sago Mine as well as others its size is not unlike that which has become of other major industries in the 21st century, with individual companies and its workers left victim to bankruptcy or corporate takeover. The Sago Mine, which had 145 employees prior to January 2nd, was operated by Anker West Virginia Mining Co. until November 2005. The International Coal Group Inc. (ICG), purchased it in April 2005, and completed its purchase in November 2005 at which point it took over Sago’s operation.
Famed New York investment financier and billionaire, Wilbur Ross, formed ICG in May 2004, now listed on the NY Stock Exchange, buying up coalmines belonging to Horizon Natural Resources. One of those holdings was the Sago Mine. Ross’ purchase of Sago followed his foray into the steel industry, founding the International Steel Group Inc. and buying Bethlehem Steel Corp., Acme Steel Co. and Weirton Steel Co., all in bankruptcy at the time. However, the deals depended on the United Steelworkers Union agreeing to contract concessions and billions of dollars in unfunded pension benefits which were ultimately dumped on the federal pension benefits program by Ross and now paid by the U.S. taxpayers.
Unlike the steel business, however, coal mining is dependent upon safety measures necessary to execute every 24-hours, requiring constant follow-up. It can mean the difference between life and death. The learning curve has changed with investors who did not originate from the mining industry and running mining operations, some of which have been closed for years, housing a host of unsafe conditions much less present in a maintained mine. In addition, many unskilled miners are coming into the workforce in non-union environments and lax federal government oversight, in which many citations and fines in very small amounts are doled out, rarely if ever shutting down a mine for unsafe working conditions.
Much has been publicized about the number of citations Sago Mine received in 2005. MSHA levied 208 citations, orders and/or safeguards. Half of the citations were for “significant violations” which generally commanded fines between $60.00 and $440.00. The fines totaled approximately $25,000. However, in the 11-week review ending December 22, 2005 and three times in a period of five days, MSHA cited the mine for 46 alleged violations with 18 deemed “unwarrantable failures” and with three still pending. According to Ben Hatfield, President of ICG, all violations were corrected; however, the MSHA has yet to publicly release any documents nor will comment on the three pending violations.
Serious violations which Sago was cited for included failing to enforce an adequate ventilation plan,key to preventing the buildup of methane gases which occur naturally underground, failing to conduct safety inspections before each 8-hour shift, 11 roof collapses over the course of the past year and dangerous buildup of flammable coal dust.
While ICG has skirted answering questions thus far, Ben Hatfield did lay blame on the inherited problems from the Anker group. But also important to the upcoming investigations will be if there were continued failure of safety inspections and prior to entering the mine over the New Year’s weekend, at which time the mine was shut for two days. Closed mines can be deadly especially during winter, when methane accumulates faster due to cold temperatures and changes in barometric pressure.
In addition, Sago did not keep a rescue team on site, like a good many operations due. And speculation of the delay in getting a team together was further hampered by federal and state workers who would normally be available, were not since January 2nd was an observed Monday holiday following New Year’s Day. Since Sago chose to open knowing that it was a state and federal holiday it may have put its crews at unnecessary risk, as it took 11 hours for a rescue team to be assembled. That will also be examined by the several investigations already having been announced.
The MSHA will conduct its own investigation, and West Virginia Governor, Joe Manchin, III, has hired former Director of MSHA under President Clinton, J. Javitt McAteer, to be special advisor to the investigation for the state of West Virginia. The White House will lodge another investigation with requests by Senators and House Representatives calling for hearings on Sago as well as on mine safety.
Similar to the discovered cuts in the funding of levee maintenance after Hurricane Katrina hit New Orleans, funding for MSHA for 2006 was cut $5 million from 2005. The agency also has seen a decrease of 170 staffers since 2001. Also, 17 proposed standards to further protect miners’ safety and health were denied by MSHA. The entire budget for MSHA for 2006 is $280 million. It is expected that its appropriations will be reviewed.
Senator Robert Byrd (D-WVA) has announced that the first Congressional hearing on the Sago Mine will be held on January 19, 2005, which will include federal and state mine safety officials, labor and business representatives as well as academic experts in mine safety testifying. Senator Ted Kennedy (D-MA) as well as Senator Jay Rockefeller (D-WVA) have also called for a series of Senate hearings on the broader issues impacting mine safety. Representative George Miller (D-CA) and ranking member of the House Education and Workforce Committee has requested all documents relevant to the Sago mine disaster from Labor Secretary, Elaine Chao. Rep. Miller expects to hold hearings after the Senate hearings. No reports for any of the investigations, however, are expected before July 2006.
The Government Accountability Office in 2003 found that over the past decade, inspectors had often failed to ensure that violations were corrected by deadlines. In addition, there has been criticism that political appointees running MSHA are primarily former mining executives from the private sector, and there exists a fundamental conflict of interest in issuing citations and such diminutive fines. Further, the Congress has not held one hearing in either the Senate or House on mining safety issues since 2001.
On September 23, 2001, 13 coal miners died at the Jim Walter Resources (JWR) Blue Creek No. 5 mine in Brookwood, Alabama. In June 2003, the Federal Mine Safety and Health Administration fined Walter Industries more than $400,000 for eight safety violations that "directly contributed" to the 2001 accident. The company subsequently appealed the fine. In November of 2005, an administrative law judge on behalf of MSHA threw out six of the eight safety violations and slashed the fines to $3,000. Let us hope that history does not repeat itself and that we learn from this crisis. Here is but one more opportunity to do right by our miners. They deserve at least that much.
Diane M. Grassi is an investigative and research journalist, providing topical and in-depth articles and analysis on U.S. public policy and governmental affairs; key federal and state legislation and court decisions relative to the public interests of average Americans. In addition, she reports on legal and governmental affairs relative to professional and amateur sports. She sticks to the facts on myriad issues, given short shrift by the mainstream press. With a passion for holding U.S. lawmakers and government officials accountable, Ms. Grassi has a resolve to keep readers informed in that they might become advocates on their own behalf.
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