In what officials say is the largest ever settlement in a government investigation of a mine disaster, Alpha Natural Resources agreed to pay $209 million in restitution and civil and criminal penalties for the role of its subsidiary, Massey Energy, in a 2010 mine explosion that killed 29 men in West Virginia.
That amount includes $46.5 million allocated to the families of the victims and those who were injured in the blast, and includes terms that protect Alpha — but not individual Massey executives — from prosecution, said Steven Ruby, an assistant United States Attorney for the Southern District of West Virginia.
The settlement, first reported by the Charleston Gazette, follows months of investigative work by federal officials from the Departments of Justice and Labor, as well as an independent commission appointed by the former West Virginia governor. The findings that had been made public placed the blame for the blast squarely on Massey and what investigators said was its reckless disregard for safety standards, but had stopped short of assigning criminal blame.
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Tuesday’s announcement was made after federal investigators met with families of the victims in West Virginia.
“We believe this can change the way mining is done,” said R. Booth Goodwin II, the United States attorney for the Southern District of West Virginia. Mr. Goodwin said there had been no discussions between federal prosecutors and Massey about a settlement before Alpha bought Massey in June.
In a statement, Kevin Crutchfield, chief executive of Alpha Natural Resources, said: “We believe the agreements we’ve reached represent the best path forward for everyone.”
In the past, Massey had dismissed investigators’ charges that its actions led directly to the disaster.
“It’s a record-level settlement,” said a former federal mine safety chief, J. Davitt McAteer, who conducted the independent state investigation, which issued the first findings about the explosion this year. “This is an amount that will get companies to pay attention. It has to affect their bottom line, otherwise it doesn’t mean anything.”
The settlement does not protect individual Massey managers, including the former chief executive, Don L. Blankenship, who have not been charged. In all 18 executives refused to be interviewed by federal investigators, invoking their Fifth Amendment rights.
In addition to the $46.5 million payout to victims and families, the agreement includes $80 million to bolster safety and infrastructure in all underground mines owned by Alpha and Massey; $48 million to establish a mine health and safety foundation; and about $35 million in fines and fees that Massey owed to the Mine, Safety and Health Administration, the branch of the Department of Labor that oversees the mining industry.
“We were shooting for something that was constructive and wasn’t just writing a check to the federal treasury,” said Mr. Ruby, the assistant United States attorney.
The agreement also required Alpha to put in place a plan that guarantees it has enough safety equipment, ventilation and methods of clearing potentially explosive rock dust out of its underground mines within 90 days.
The company will be required to build a state-of-the-art training facility in West Virginia, including a mine lab where it will be able to simulate mining disasters.
The agreement does not preclude victims and their families from filing civil lawsuits in the case.
The initial response from Wall Street analysts was positive for Alpha.
“It’s an amount of money Alpha can pay,” said Lucas Pipes, vice president and senior coal analyst at Brean Murray, Carret and Company, a research and investment banking firm. “Investors were not sure what the liability could possibly be but now it seems this chapter is coming to an end.”
Mr. Pipes said the accident, and the more rigorous federal enforcement that followed, had already driven home the point that mine safety needed to be taken even more seriously. “Today’s penalties are a reminder that safety also saves you money,” he added.
The report released in March by the independent team appointed by former Gov. Joe Manchin III of West Virginia and led by Mr. McAteer determined that the disaster could have been prevented if Massey had observed minimal safety standards.
That finding was in line with previous inquiries by federal officials who have said that in the year prior to the explosion, Upper Big Branch was cited by safety inspectors 515 times and ordered to shut down operations on 52 occasions.
The McAteer report accused Massey of having engaged in a pattern of negligence, which allowed a “perfect storm” of poor ventilation, equipment whose safety mechanisms were not functioning and combustible coal dust.
The investigators dismissed Massey’s claims that the blast had occurred because a sudden burst of methane had bubbled from the ground, saying evidence contradicting that theory included the bodies of the miners found near the main explosion. Only two had methane in their lungs.
Federal investigators have also said that Massey kept two sets of books so that accounts of hazardous conditions in Upper Big Branch would be kept hidden from inspectors.