Upper Big Branch had stepped up production for its 'gassy' coal
Saturday, April 10, 2010
Production at Massey Energy's Upper Big Branch mine that claimed the lives of at least 25 miners in a Monday explosion had kicked into overdrive in the past several months, as the company strove to keep up with increasing demand for the mine's valuable type of coal, which is used to make steel.
Although Massey chief executive Don Blankenship said last week that increased production did not lead to shortcuts on safety, the southern West Virginia mine produces coal that miners call "gassy" -- shot through with potentially dangerous methane gas.
In the fourth quarter of last year, coal production at Upper Big Branch almost doubled from the previous three months, surging from 263,319 tons mined in the third quarter to 525,207 tons in the fourth quarter, according to federal data. The mine's metallurgical coal is valued at $91 a ton, according to an SEC document Massey filed Friday. Massey sells its thermal coal, which is used by power plants that generate electricity, for $57 a ton, Citi analysts said.
The higher-profit metallurgical coal makes up about 25 percent of Massey's output, J.P. Morgan analysts said last month, making the company more dependent on the kind of coal mined at Upper Big Branch than other mining companies. Massey is the nation's sixth-largest coal company. Upper Big Branch produced 1.2 million tons last year, or about 3 percent of the company's output.
Massey acquired the land that became the Upper Big Branch mine as part of a package of property, mines and coal preparation plants from rival Peabody Coal in October 1994 for an undisclosed amount. Peabody never mined the area now known as Upper Big Branch, a Peabody spokeswoman said. In its SEC filing from the time, Massey estimated that the Peabody acquisition contained 146 million tons of coal, or decades of output. Upper Big Branch was an immediate hit.
Upper Big Branch is owned by Massey subsidiary Performance Coal, which ramped up production at Upper Big Branch quickly, going from just more than 1 million tons of coal in 1995 to 3 million tons the next year. Production peaked in 1998, when the mine produced 5.7 million tons of coal, making it one of the larger mines in West Virginia.
Tonnage started going down and rapidly fell off after 2005. The mine failed to produce 1 million tons of coal again until last year, when it churned out 1.2 million tons. Employment peaked in 2001, with 239 people working the mine.
A Massey spokesman declined to answer questions on Friday about the mine's production drop-off.
"That's good-quality coal so I don't see a reason for the drop-off," said Christopher Bise, chairman of West Virginia University's College of Engineering and Mineral Resources, pointing out that the downturn came well before the recession.
Miners have described Upper Big Branch and the mines around the area as "gassy," meaning they are rich in methane, an odorless, colorless gas.
Methane lives in the cracks and natural fractures between coal, and it chemically clings to coal molecules.
"Methane has an affinity to coal," said Mitch Blake, with the West Virginia Geological and Economic Survey. "It's stuck to it like magnets."