Often what we hear during quarterly earnings calls with coal company officials are concerned about how additional regulatory scrutiny on the environmental side have them worried … Today, in releasing its earnings report for the 2nd quarter of 2010, Patriot Coal pointed to increased costs from heightened safety scrutiny:
Operating cost per ton totaled $56.69 in the 2010 second quarter, compared with $52.41 in the prior year second quarter. More than 60 percent of the increase in cost per ton was a result of lower production due to more comprehensive regulatory inspections and related ventilation adjustments in a number of our mines, as well as roof falls at the Harris and Highland complexes.
In its news release, under the heading of “safety,” Patriot had this to say:
During the quarter, seven of the Company’s operations were recognized for their strong 2009 safety performance by the West Virginia Office of Miners Health, Safety & Training. Additionally, the Samples Highwall Miner operation in the Paint Creek complex was presented the 2009 District 4 Pacesetter Award by the U.S. Mine Safety and Health Administration.
The release didn’t mention the ongoing criminal probe at Patriot’s Federal No. 2 Mine, where one foreman has admitted faking key methane examinations of seals parts of the mine and has implicated other mine managers in the scandal. Patriot had previously commented on that investigation in its 1st quarter report filed with the U.S. Securities and Exchange Commission:
In late January 2010, the U.S. Attorney’s office and the State of West Virginia began investigations relating to one or more of our employees making inaccurate entries in official mine records at our Federal No. 2 mine. We are investigating this matter internally and we have terminated one employee. The terminated employee subsequently admitted to falsifying inspection records and is cooperating with the U.S. Attorney’s office. On April 21, 2010, we received a federal subpoena requesting methane detection systems equipment used at our Federal No. 2 mine since July 2008 and the results of tests performed on the equipment since that date.
Last month, Patriot announced the closure of its Harris No. 1 Mine near Wharton, W.Va., after a major roof fall at that operation.
Patriot officials said during a conference call today that federal and state regulators are more closely reviewing mine ventilation plan and roof control plan changes following the April 5 explosion that killed 29 miners at Massey Energy’s Upper Big Branch Mine.
Richard M. Whiting, Patriot’s chief executive, told industry analysts today:
There’s going to be a lingering effect. It’s more about the delays, sometimes in getting authorization for changed plans. In the old days, we may get that turned around overnight and now it may be 2 or three days where we can’t go and mine a certain section.
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