Massey Energy Settles Case for $20 Million

Massey Energy Co., based in Richmond, Va., on Jan. 17 announced that it has settled a Clean Water Act lawsuit filed in May 2007 on behalf of the U.S. Environmental Protection Agency. The $20-million settlement avoids expensive litigation, resolves questions about the company's potential liability and enhances Massey's environmental protection efforts.

"We believe this agreement will benefit the environment as well as our shareholders," said Baxter F. Phillips, Jr., a member of Massey Energy's board of directors and the company's executive vice president and chief administrative officer. The company is the fourth largest coal company in the United States based on produced coal revenue.

The company worked with EPA to make technology a key component of future environmental compliance efforts. It developed a computer tracking system that will provide accelerated notification of potential water quality problems, automated leak detection systems for coal preparation plants, and an enhanced environmental auditing program.

Massey Energy also agreed to perform 20 water quality improvement projects on the Little Coal River in West Virginia and will set aside 200 acres of riverfront property, protecting the land from future development through conservation easements.

In addition, the company asked the West Virginia-based Coal River Group for assistance in monitoring the conservation easement properties to ensure that the 200 acres are appropriately protected. The Coal River Group is a watershed group that was formed to preserve history and develop tourism and recreation on the Coal River. "We are excited about the opportunity to increase the amount of land protected by conservation easements as part of our efforts," said Bill Currey, president of the Coal River Group.

Phillips noted that the $20-million dollar settlement is higher than the company's initial estimate but far lower than the published estimates of some analysts. "When we factored in the costs and uncertainties of litigation and the absorption of management time on the matter, we concluded that our shareholders would be best served by a timely settlement that eliminated any continuing concern caused by the estimates of some sources regarding our potential exposure," said Phillips.

The company had previously established a $5-million reserve for the lawsuit. An additional $15 million will be reflected in the company's fourth-quarter results.

EPA said in the settlement agreement that it considered the outcome "fair, reasonable, and in the public interest." The agreement was filed with the U.S. District Court for the Southern District of West Virginia and must be approved by the court before it becomes final.

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