Huff on Massey – Regulatory Capture Across-the-Board

Former Massey Energy Co. CEO Don Blankenship

Huffington Post has a blog entry on Massey Coal that’s worth reading:

Justice — of sorts — was finally delivered as Donald Blankenship, the former Chairman and CEO of Massey Energy, was convicted (with a maximum fine of $250,000 and up to one year in prison) of conspiring to willfully violate mine safety standards at the Upper Branch Mine in West Virginia, where 29 workers died in April 2010. Here’s a blog I wrote about it a few months after the disaster.

Huffington makes the point that the Upper Big Branch mine explosion is much like the 2008 financial crisis because they both have the same root cause: elected officials who should have been creating a regulatory system that protects workers (or investors, or the public) instead created a system whose first priority is to protect the corporations it was meant to watch over.

Read the full Huff Post entry here.

It’s also the same as the BP Deepwater Horizon, whose regulator was the Minerals Management System, or MMS. The MMS was a bureau within the U.S. Department of the Interior (DOI):

MMS’s biggest problem was agency capture. In 2008, MMS was caught in a scandal in which the Department of Interior’s inspector general found that regulators had “inappropriate relationships with industry that could compromise their objectivity.” Those inappropriate relationships allegedly included sharing alcohol at industry functions, using drugs, and sexual relationships between regulators and industry professionals. [17] The inspector general also characterized MMS as dependent on industry’s greater expertise with the technology of deepwater and ultra-deepwater drilling, and thus reliant on industry’s judgment of appropriate safeguards to incorporate in regulations.[18] Essentially, the oil industry’s deep pockets gave it strong leverage over MMS decisions.

Yep. MMS was literally in bed with the company it was supposed to regulate. And as they said on the bridge of the Titanic, that’s just the tip of the iceberg.

From: Changing Direction: How Regulatory Agencies Have Responded to the Deepwater Horizon Oil Spill (Part I of II)

 

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Massey Coal CEO Convicted

Former Massey Energy CEO Don Blankenship departs the Robert C. Byrd United States Courthouse following the second day of jury deliberation in Charleston, W.Va., Wednesday, Nov. 18, 2015. Blankenship is charged with conspiring to break safety laws at the mine and defraud mine regulators, and with lying to financial regulators and investors about company safety in the years before an explosion killed 29 men at the Upper Big Branch mine in southern West Virginia in 2010. (AP Photo/Walter Scriptunas II)

Earlier this morning a federal court jury in West Virginia convicted Don Blankenship, the former CEO of Massey Coal, of conspiracy in connection with an April 2010 coal mine explosion that killed 29 coal miners more than a thousand feet underground. The explosion in Massey’s Upper Big Branch Mine was the worst mine explosion in the U.S. since 1970, when 38 miners were killed in an explosion in a coal mine in Kentucky.

Months after the explosion,  Blankenship stated to the media that

What we’re trying to do is actually avoid the focus on culpability and figure out what happened…. The focus ought to be on the physics, the chemistry, the math, the science … and figure out what we could do to prevent it from happening again, rather than try and point fingers.

(Massey CEO: Explosion probe needs to be completed, Associated Press State & Local Wire, November 20, 2010.)

Blankenship took the position that changes in the mine’s ventilation plan ordered by the federal Mine Health and Safety Administration contributed to the blast, and said a sudden release of natural gas flooded the mine and sparked the explosion. (Id.)

In other words, according to Blankenship, one principle that we must exclude at the outset is that of accountability.

The 2006 Mine Improvement and New Emergency Response Act boosted the number of mine inspectors, enhanced fines and imposed stricter safety regulations for the nation’s coal mines. However, the mining companies adopted a strategy of contesting every citation issued by the inspectors, and Massey Coal was the leader in clogging the Federal Mine Safety and Health Review Commission docket. In April 2010, the FMSHRC had 46,822 contested violation proceedings on its docket. Of that number, Massey was the leading challenger of citations, contesting 3,741 violation citations, which accounted for more than 11% of the dollar value of fines involved. Contests brought by Massey and other coal companies caused a backlog of cases that overloaded the FMSHRC.

An independent investigation completed in 2011 stated:

The story of Upper Big Branch is a cautionary tale of hubris. A company that was a towering presence in the Appalachian coalfields operated its mines in a profoundly reckless manner, and 29 coal miners paid with their lives for the corporate risk-taking. The April 5, 2010, explosion was not something that happened out of the blue, an event that could not have been anticipated or prevented. It was, to the contrary, a completely predictable result for a company that ignored basic safety standards and put too much faith in its own mythology.

Upper Big Branch, Report to the Governor, May 2011, pg. 108 

Perhaps instead of litigating every citation, Massey should have paid more attention to “the physics, the chemistry, the math, the science … [to] figure out what [Massey] could do to prevent [explosions] from happening….” The Wall Street Journal will no doubt seek to portray Blankenship as an object of pity, a martyr for the cause of fighting over-regulation. They might even insist that he not be crucified on a Cross of Carbon.

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