Vancouver – Fines for safety violations at American mines soared to an all-time high in 2008. Over the past three years, ever since President George W. Bush signed a new mining code into law, the value of penalties has more than quintupled from US$35 million in 2006 to US$194 million in 2008.
The lofty penalty levels signal a change in strategy at the US Mine Safety and Health Administration (MSHA), the wing of government that regulates American mines, over how to enforce compliance with its rules. In the hopes of making mines safer the MSHA has started hitting companies where it hurts most – their bank accounts.
“Because we’re having a financial impact on the bottom-line of mine operators, they’re going to realize it’s cheaper to hire somebody to clean up that coal spillage (for example) than to wait for the MSHA to find it and then pay a fine,” says Richard Stickler, acting assistant secretary of labor for mine safety (the head of the MSHA).
But critics argue that the MSHA’s strategy may end up having the opposite effect. Mark Savit, a partner in the law firm Patton Boggs, and a former MSHA mine inspector who now represents clients fined by the MSHA, believes the mine regulator’s strategy may lead to operations that are in fact less safe.
“I’ve since come to think that, more importantly, what it’s done is take resources away from safety,” he says. “It seems to me not just a disincentive by moving dollars away from safety into compliance but that it makes the industry less willing to buy into (the strategy) as whole.”
The 2006 Miner Act
The MSHA received its more punishing penalty powers after passage of the 2006 Miner Act. At the June law-signing ceremony Bush was not kidding when he said, “In a few moments I’m going to sign into law the most sweeping overhaul of federal mine safety…in nearly three decades.”
There is no doubt what the catalyst for the act was; in January that same year 12 trapped coal miners succumbed to carbon monoxide poisoning following an underground explosion in a closed off area of the Sago coal mine in West Virginia.
Though it has proven impossible to say for sure why the explosion occurred, an MSHA investigation pointed to the possibility that a lightning strike above ground traveled along underground cables and ignited methane gas that had seeped into the sealed area.
The ensuing explosion collapsed adits and shattered seals between the closed and active areas. Combusted air, stripped of its oxygen, flooded the 13 trapped men awaiting rescue. One survived.
That man was at the law-signing ceremony and Bush noted it before he penned his name to the 2006 Miner Act. Bush recounted how “…in January, Americans watched and prayed – a lot of Americans prayed – with the people of West Virginia for the 13 miners that were trapped underground by the explosion in the Sago mine. Only one man came out, and he’s with us today – Randal McCloy, and his wife, Anna.”
McCloy’s presence underscored the general feeling towards mine operators that year. The tone of media was incredulous – how could such disasters happen in the US? – and the mood of the public and in Congress was angry. Though in the years leading up to the disaster there had been some support in the Senate and the House of Representatives to beef up MSHA regulations, it was the Sago disaster that galvanized action.
The first part of the act was uncontroversial. In an effort to prevent future Sago-like disasters it mandated safety measures such as stronger seals between active and closed areas of mines and more sensitive monitoring of air quality behind those seals.
The second part of the act was more earth-shaking. It did away with the old penalty structure which included a $60 flat-rate fine for what the MSHA calls non-significant and substantial violations (non-S&S). It replaced the flat-rate with a sliding scale system that bases the value of a fine on the size of a mine operator and the number and kind of violations it incurs. These kinds of fines can now hit several thousand dollars.
It also set new minimums for significant and substantial violations and raised the maximum fine for flagrant offences – where repeated violations occur that could result in serious injury – from US$60,000 to US$220,000.
Comply or pay
Stickler believes that the old set of regulations – especially with the flat-rate non-S&S penalty structure – was at the heart of a culture where mine operators had no reason to follow the rules.
“Across the board the penalty structure really did not provide an incentive for operators to spend the resources to prevent these violations from occurring or correcting them before the MSHA finds them,” he says. “It was more cost effective to simply let the MSHA be their safety department by making inspections, by finding violations, and (then) the operator would correct and pay a very small fine.”
He says bigger fines provide an incentive to change that “culture”. And while he acknowledges that the evidence for improved safety in mines since the adoption of the 2006 Miner Act is slim so far, he argues that it is going to take time for the new regulations to have an effect. He believes mine operators will come to see that it is simply cheaper to comply than to violate, that “at the end of the day it’s going to cost them a whole lot more money if they don’t.”
Savit doesn’t wholly disagree with Stickler on that point. “But it becomes compliance for compliance sake,” he says. He argues that the perverse effect of the strict penalties may in fact end up being a decreased priority for safety. “So the safety guys have now become compliance people,” he says.
Savit also disagrees with Stickler’s characterization of a mining industry lacking a culture of safety. “The question here is: what’s the industry doing as a whole?” he asks. “Is the industry trying as hard as it can to reduce coal dust or to make sure there is no ground failure or there’s not a mountain bump that kills people – the industry is clearly trying to do that.”
MSHA statistics partially support Savit’s position on this latter argument. Since 2001, for instance, before the MSHA increased penalties, the all-injury-rate in the mining industry decreased each year (the rate is the number of injuries reported per 200,000 hours). In 2001 it was 4.8 and by 2007 it fell to 3.4 – a noticeable improvement and by Savit’s reckoning the kind of statistic which shows that the mining industry already has the best interests of miners in mind when it comes to safety.
But Stickler tentatively says the penalties may already be working. He says he’s seen a slight reduction in violations per inpector hour. But he adds, “that decrease was so small last fiscal year it’s difficult to really say if that is an accurate measure.”
He also says the MSHA has recently done 23 audits out in the field “and the feedback that I’m getting is that they’re seeing that the conditions in the mines are much improved.”
Savit doesn’t buy it. He sees the increase in MSHA penalties as part of “this huge crusade and campaign to punish mining companies,’ as he puts it.
He argues that the mining industry isn’t as dangerous as it is made out to be. “If you look in the States, mining is not in the top ten deadliest industries,” he says. He believes the MSHA penalties were pushed by political imperatives. “It can’t have anything to do with overall statistics, because they don’t match up to this,” he says.
This latter point that the mining industry isn’t America’s deadliest is true – depending on how you look at it. In terms of raw number of deaths in American industries, mining does not rank high. Far more agricultural workers die each year, for instance, than do miners – thousands versus less than a hundred. By this measure mining is not particularly deadly.
Arguably, however, the more telling statistic in comparing industries is the rate of fatality in a sector, and in this regard the mining industry in the US has consistently ranked at the top of the list. In 2002, for example, the combined fatality rate for the agricultural, forestry and fishing industries was 22.7 deaths per 100,000 workers. But even pitted against three of the most dangerous sectors to work in, the mining industry still came out on top with 23.5 deaths per 100,000 workers.
From this point of view the mining industry is still one of America’s deadliest industries.
In the end, though, fatalities in the mining industry do not – or at least do not yet – clearly support forecasts made by either Savit or Stickler. Before and after the adoption of the 2006 Miner Act fatalities at US mines have not followed a particularly obvious trend. Starting in 2001 and up to and including 2008 this many miners died each year: 72, 70, 56, 55, 73, 67 and 51.
How many there will be this year is anybody’s guess.
Increased litigation
There is one area where both Savit and Stickler are in agreement: More and more fines are being contested in court and eating up resources of both the MSHA and US mining companies. Under Stickler’s watch the percentage of contested fines has tripled from 7.3% in 2006 to 23.3% in 2008.
In combating fines, litigation, or the threat of it, has always had a page in the game-book of mine operators. But it has never played such a central – or nasty – role in the always rocky relationship between the MSHA and the mining companies it regulates.
The tenor and language of opposition to penalties has grown. The American Coal Company, for instance, recently slung accusations of illegal practices at the MSHA as it announced its latest law-suit filed against the MSHA in response to US$1.5 million in penalties levied against it for violations at its Galatia coal mining complex in Saline County, Illinois.
“(Our) action is another step in a plea for relief from what the company believes are not only unfair, but illegal inspection practices that threaten the company’s ability to do business,” writes American Coal’s attorney Richard Lieberman in a statement.
To Stickler the litigation is a lost cause and a waste of MSHA time and money. “I guess we just wear each other out arguing about it,” he says. “About 98% of the contested cases get settled, sometimes not until they get to the steps of the court house. There’s a lot of posturing and taking of depositions and it really consumes an awful lot of our resources.”
But in court mining companies may be fighting an uphill battle. Historically Stickler says the MSHA has ended up collecting about 70% of the amount fined to mine operators. And he says, “I haven’t seen a change in that number.” That suggests the MSHA will rack in around US$140 million in 2008 compared to the about US$30 million brought in during 2006.
Nor does he expect penalty levels to change much in the future. Although he says he can’t predict what Congress might do, “you know my guess is that, provided there is not another major mining disaster in the near term, penalties will stay about where they are.”
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