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Transcript of Don Blankenship interview, Part 1

EDITOR'S NOTE: Massey Energy CEO Don Blankenship was interviewed by Editor/publisher Nanya Friend and Capitol reporter Ry Rivard at a Massey office building off Corridor G near Chapmanville, Boone County. Below is an excerpted transcript. 

Friend: Thank you for having us today. We appreciate your time.

Blankenship: You're welcome. As you know, our time has been in great demand, obviously. We've tried to communicate properly, but it is hard to choose what to do from one moment to the next. We appreciate you having an interest. We'll answer your questions as best we can.

Friend: Why don't we start out by just letting you say what you'd like to say.

Blankenship: I have met individually with so many families, and having spent so much time on that aspect of this tragedy, that is still on my mind. Just yesterday I talked with one of the widows on the phone for 45 minutes, and she, of course, was real concerned about her child, about loss of income, but she is just heartbroken about, as she calls it, the half of her life. Those types of things are on my mind anytime I pause, but where I am not able to pause much, I just deal with whatever issue is being thrown at me next, which can be anything from the investigation to shareholders to employee issues. By way of example, I just now learned that our COO had gone to a funeral only to find out that it has been changed. He's upset, so even as I am walking toward this interview, I'm concerned about him because I know how torn up he is. He is wanting to know where the communication broke down in his knowledge of the funeral services. That's just to give you an example of the diversity of what is going on.

Friend: Are your people trying to go to all of the funerals?

Blankenship: I hate to sound businesslike and organized about it, but with so many of them we put together a 20-person team of two apiece and tried to list ranking Massey executives and so forth to show honor, dignity and respect for the families. Given how much overlap there is, we've had trouble keeping up and servicing them all. But I think we've done fairly well at that, and to my knowledge we've had good representation of the company at each of the services, whether it be the wake or the funeral. In addition to that, we've made sure the families were taken care of in terms of food and all of that. We've been dealing with benefit communication face-to-face with family members who feel they are ready for that.

Friend: I believe I read that Massey is paying for all of these funerals. Is that correct?

Blankenship: Yes, I think there is actually a story there ...We have made special benefit arrangements beyond even our norm because of the nature of this tragedy, and we have gone to the trouble of fully interrupting our complicated benefits for each individual family. So we took a family, took their file, took their dependents, had people go through our benefits program and instead of them having to sort it out or ask a lot of questions, we specifically handed them their situation, not the math for determining their life insurance or the math for determining their workers comp or their ongoing pay. But we actually told them what it would be already. So that took a burden and a worry off them as well as gave them a professional interpretation of how their particular situation fit into the benefits, which is always complicated.

Friend: As far as their financial security, are these families going to be OK? I know there are fundraising efforts going on, too.

Blankenship: I'm always careful to say that they will be OK financially. I think that they will be OK if we get past the trauma and the other issues. They will get sizeable life insurance payments because it will be about five times their pay. They'll get a workers comp check, and we will make up any difference between their workers comp amount per month and their straight time pay at Massey for life for widows. We will pay for childcare, I think, up to $5,000 a year for so many years. I don't know each detail, but the life insurance, the ongoing medical coverage are a minimum of 20 years, in some cases for life. Full pay on a straight-time basis, large life insurance, the funeral expenses that you mentioned. So the benefits by any measure are very good. We're very proud of the benefits, although we realize that doesn't help much.

Friend: Do you happen to know how many children were affected?

Blankenship: ... I asked the question, too, and I don't know the answer (for sure)...but I think it is 16.

Friend: Some of the miners were very young, as young as 21.

Blankenship: Yes, a young man in training. We also had some other young men who were in electrical training or an educational aspect, and we had some 20-some year veterans. We considered these particular coal miners to be among our best because they were with us, some of them, since 1994 at that particular mine, not just with Massey. Some of them longer with Massey, but at that mine since 1994. They were sort of an A team.

Friend: Does Massey have about 6,000 employees?

Blankenship: Yes, and we are still working on closing this Cumberland acquisition, which will add another 1,500 direct ... We're probably above 6,000 and expect with this acquisition we'll probably be 8,000 to 8,500. That's a lot of people.

Friend: Can you give us a sense of how important this particular mine is to the company, how big an operation it is?

Blankenship: It is a very important mine to us because it is one of the higher-quality, higher-priced metallurgical coal market mines. But when you are as big as we are, it represents about 4 percent of our production. It is not a financial disaster, but it is a very important mine. Of course, we don't know what the future holds for it until we see how the investigation goes.

Friend: It produces metallurgical coal, right?

Blankenship: Yes.

Friend: I believe there was a falloff in production after 2005. Was that due to the met market?

Blankenship: I don't know if it was so much. It was partially market-related, but to oversimplify, when we went into the mine, we went into the body or the center of the mine, and we longwalled the mines to the south because that was the better geological part of the mine. And after we got to the south, we moved to the north, and there was a lapse in time where we didn't have a longwall operation ... We had to develop sort of like a new mine to the right and to the north and that period of time - that runs together on me -  but the wall wasn't in as thick a coal seam as it was back in the early 2000s. So production was less even once the wall started.

Friend: Could you give us some sense of the size of this mine?

Blankenship: It's probably 9 square miles. These are big coal mines, and we run big coal mines ... It is probably bigger than that. I think it was maybe 2 miles to the head gate 22 that was spoken of so much, where those guys were, maybe three. And then it would have been an equal distance in the other direction. So it may be 20-some square miles. So it's big.

Friend: Is it one of the bigger mines?

Blankenship: I would say it is one of the three or four bigger ones that we have. It is not as big as perhaps some of the northern App, where Pennsylvania underground mines are.

Friend: Were there miners inside when the explosion occurred who got out OK?

Blankenship: Yes, there's been some uncertainty about the exact number, but I believe that number is 32, and I think the reason there is some inexactness about that is some guys were coming out of shift change. So whether you were right at the drift mouth or had just gotten outside or whether you were 5,000 feet inside and come out, I don't think anybody knows exactly, but it is my understanding that there were 60 people working in the mine that shift. It is about a 230-person coal mine on all shifts and rotations. And of the 60-some that were working underground at that time, about half of them came out.

Friend: Have they shed any light on what might have happened?

Blankenship: I think they felt the percussion or maybe heard something, but they weren't close enough to shed any light on it that I know. Maybe in the investigation somebody can. There was one survivor off the mantrip that had several victims on it and whether he has any better idea or not, I don't know. I would doubt that any of them can be helpful other than just saying what they thought, you know, and I doubt they know where it came from because it would still have been a mile or two deeper than they were.

Friend: Two men were injured but survived - one who has gone home and one who hasn't. Do you know how he is doing?

Blankenship: We've heard ...I don't know how much we should say about that to the press because I don't know what the family wants. I have heard he had damages that were life-threatening. Having now heard that he has made it through a week and is giving some signals back, I'm encouraged by what we have learned.

Friend: What about the fellow who went home?

Blankenship: All I know is that he apparently was able to walk around, even when he first came out of the mines. If it is the same individual that was described to me, he has been released and as far as I know, he is OK.

Friend: But nobody has talked to him?

Blankenship: I have not talked to him. I'd say he has talked to his friends at the mines and his supervisors, but not the officials.

Friend: Do you have any theory as to what happened at this point?

Blankenship: No, as they always say about investigations, if you fixate yourself on one theory, you might overlook something else, so we've been careful. Honestly, everybody talks about what could have happened, but I don't think publicly like this it is wise for me to speculate because I want the investigative team to look at every possibility with an equal evaluation.

Friend: How many investigations will there be?

Blankenship: I can think of five, but there will probably be more. You'll have the regular state, the regular federal and the regular company, so that gives you three that almost occur in any situation like that. And then, of course, the magnitude of it, I'm sure will draw in Congress, and I read at least in the press that the governor has selected Davitt McAteer to independently do an evaluation. I don't know if that is part of the state evaluation or totally separate, but it appeared in the press to be separate.

Friend: Will there be a company investigation?

Blankenship: Yes, it is the normal course. And, of course, with the size of this one it will be more extensive, but obviously the Massey board and the management team wants to find the exact causation if it's possible ... We're full of experts and we also have relations with consultants in other companies so we think it is important that we have a parallel investigation to see if we both come to the same conclusions, sort of like a double check.

Friend: Can that get confusing, with all these investigations going on simultaneously?

Blankenship: It can. MSHA and Massey already had one alignment session. The type of thing that needs to happen is we need to both develop it independently, but we also need to share data and make sure that we are getting the same evidence, if you will. Most of the time when there is a federal inspector investigating, there will be a company guy with him, and they will try to both make sure that the fact is documented exactly the same so that there won't be any difference in discoverable facts and then they both reach independent conclusions.

Friend: Can you give us come perspective on the violations that are being written about? These numbers are thrown out and the average person doesn't know what it means.

Blankenship: Without dealing with it in specific numbers, let me give you some thoughts and see if it is helpful. Prior to Sago the level of violations, say it was at the level of violations today in terms of dollars, the numbers may be 10 times X. So between 2006-07 and 2009-10 the number of violations is much higher across the industry and across Massey.

This particular mine I don't think is very abnormal in terms of total violations in that respect. It has had during '09 a lot of violations and issues related to ventilation. But all of those violations have to be abated, and both the state and federal and company all agree that the abatement is satisfactory and the mine is safe before you continue to work.

That is the reason it is a difficult question when somebody says, 'Did the violations have anything to do with the accident?' They should not, because every violation is abated and agreed to by everyone before there is any further mining. So you would not think that any violation of the past had any relevance.

But there has been a major change between the past and current time, post Sago and the numbers throughout the industry. UBB (Upper Big Branch mine) is fairly normal, it has had a lot of ventilation focus in the past several months, and we don't know really whether any of that played any role at all because all of those violations have been abated and are always abated before the mine starts back.

Friend: What led to the increased focus on ventilation?

Blankenship: I'm getting into speculation there because MSHA, of course, any time you change a President, you change the head of MSHA. The same thing would be true of a company or state or whatever, and sometimes people emphasize different things. And sometimes mines have particular challenges, but I would be speculating to say exactly what was driving the ventilation focus over the last few months.

Friend: I have read that this was considered a hot mine.  There was a large amount of methane. Is that accurate as compared to other mines?

Blankenship: It is a subjective answer. It would be inaccurate relative to mines in Pennsylvania or lowball mines in Wyoming and McDowell County in south West Virginia. It would perhaps be accurate if you were comparing it to an above-drainage, hillside, central-App. coal mine. So, it is not gassy by any level that is not manageable because far more gas is managed throughout many other mines in the United States. But it is more gassy than a one-section driven mine up here on the side of the hill.

Rivard: I've heard questions about why the methane detectors didn't shut everything down, why there would be a spark, why there would be equipment still operating up to the explosion.

Blankenship: This again is speculation. We don't know where the spark came from, or where the explosion occurred or what happened, but the methane monitors, to our knowledge, would have been functioning normally. The investigation will determine whether they were or they weren't. Keep in mind the methane monitors are on the equipment and in various other locations, but they are not throughout 20 square miles of the mine. So you don't really know whether the methane monitors had an opportunity to discover the issue or not.

Rivard: Some people believe the monitors on the equipment might have been disabled or short-circuited or not allowed to detect methane in order to keep things running.

Blankenship: The electricians typically refer to that as bridged out. I think that is the word you were looking for, but if the equipment was not so damaged by the explosion, that ought to be easy to figure out - if there were any short-circuited or tampered with. It should be something that is clear. Hopefully, the equipment is in a condition - if that's the case, and I don't know whether it is or not, certainly if that were the case, it would be a horrible thing.

Friend: And that would be something that was done improperly?

Blankenship: If that were the case, we have no tolerance for it. It would be a bad thing. We don't expect that to be the case, but then again I don't know that.

Rivard: Has anybody come to you to say, 'I'm sorry, this is what we were doing?'

Blankenship: I think that guy would be in big trouble. We hear, much like you probably hear, rumors and speculation, and of course, in a situation like this everybody thinks they are an expert. We have not heard anything from anybody that would have knowledge as to any bridging out or short circuiting or anything.

Friend: How about the number of withdrawal orders within the last 15 months? Is that something of concern?

Blankenship: I am sure I was aware when these go idle but it hasn't caught my attention that we would have been on withdrawal orders in any meaningful way. But I'm understanding from both what I am reading in the press and what little time I've had to talk to people that had had a number, it is actually a positive thing in the sense that it shows in some cases we were probably self-reporting our issues and MSHA was involved.

There are things that when you are in my role you have to take come comfort you have professionals, the federal government has professionals, the state has professionals, and you have to at some extent rely on what they are doing. Hopefully, whatever was going on there was all appropriate. I'm sure it was.

Friend: You mentioned the number of violations since Sago had increased dramatically. Is that a result of regulations that were passed in the wake of Sago?

Blankenship: Again, you can get me in trouble easily here. I think it is a combination of the new laws, which of course added new things to be inspected and a heartfelt, earnest effort on the part of the regulatory agencies to be tougher and listening and so forth. There are violations, certainly, that have been written now that would not have been written in years past, both associated with maybe a stricter enforcement as well as additional law. But how much of each of them, I don't know.

Friend: There has also been talk of the appeal process. Is there a chance this maybe did some harm as well as good?

Blankenship: I've said that prior to the accident, and I guess if I'm totally truthful and transparent, I think so. But I don't want to offend my friends at MSHA and so forth, because I think they are doing what they need to do, but it has created a lot of paperwork. We established a five-person team to try to sort through the violations and hazard reduction. We are trying to make a positive out of that for the last year, year and a half - I guess it has been 16 months.

Once I realized how many we were getting, we put this committee in place and began to try to weed out the violations - weed out may not be a good choice - but try to categorize them and understand them and assign different individuals in that committee to different elements, and we're trying to find corrective actions we could take ... it did make it difficult to sort through the huge numbers.

Rivard: If the increased number of violations and paperwork didn't work - and you're going to get more now - what do you need to not have this happen again?

Blankenship: You're going to get me in trouble, Ry. What would truly work is difficult to have out there in the public. We really need more cooperation rather than one side, i.e. the government, either the state or the federal government and the companies being at loggerheads.

It is just really difficult to get the right answers when one party feels like they are the subject and the other party feels like they are in an aggressive position, so we just need to work better together. Of course, if you know me, I'm a pragmatist. I believe in pragmatism. I believe in finding causation, and I believe that physics and chemistry and so forth are the same every day regardless of what the political atmosphere is.

When we find causations of accidents or so forth, we need to take actions directed toward that and not actions that are meant to demonstrate power or authority or that are to gain public attention. I'm hopeful that in this case there will be a lot more working together and a lot more physical, actual laws come out of it, as opposed to things that are developing perhaps politically.

Rivard: Did you ever, at this mine or any other, ask any inspectors to leave?

Blankenship: We can't ask them to leave ... There's people that get along, people that don't get along. There's former Massey people inspecting. There's former MSHA people on Massey's payroll. There's human interaction - it's there and we all know it's there. I can't say that we've ever asked anyone to leave, we're sometimes suggested that maybe we're not getting a fair break, but it is not horribly common. There are always frictions between different people at different moments of time.

Rivard: You have been criticized for being a ruthless businessman. How do you prove that you are not?  

Blankenship: The thing that I have always known in my life is that people who know you best and know what you actually do, their opinions are more important than those that get their opinions second, third, or fourthhand, or off the TV, and you won't find anybody, in my opinion, that's honest that knows Don Blankenship or Massey's management team that won't tell you that we go way beyond the law.

We spend a lot more money on our continuous miners, on our roof bolters, mantrips and so forth to put safety features on them that are not required by the law. The fact that other companies do not put on the equipment, we demonstrated that at the Charleston (?) event this last few weeks.

The other part of that is that there is no way that you would risk anyone being injured or killed in the position I'm in, because I know if something like this ever did happen, that had I run any risk like that, that I would be in big trouble, so I sit here today and know very comfortably that I would never do that. I'm smarter than to ever take the risk of putting somebody at risk over dollars.

You look at our history. In general, this mine, to my understanding, hadn't even had a lost-time accident so far this year for us. So, I feel very good about what we've done ...we spend millions of dollars beyond what others spend. In fact, we had the first continuous miners with proximity devices on them in manufacture as this accident occurred, which is an idea I had 15 years ago. It's taken me that long to get it through all of the processes it has to go through. We're in the process of designing a new helmet that is costing us a lot of money. That will be a big improvement. There's no truth to any accusation that we put money over safety.

Friend: Kevin Stricklin of MSHA said last week that all explosions are preventable. Do you agree?

Blankenship: Again, this is where sometimes my nature runs afoul of political or public popularity. This area, by way of example, has lots of natural resources. It has natural gas; it has coal. People start fires by rubbing flints together. And you can create tremendous heat by sandstone rubbing together. And mines liberate gas and all that, so I don't disagree, but I think what Kevin's saying is the right thing to say, and hopefully it's true, but there are limitations to mankind. Man can't do what God can do.

I'm always hesitant to say like politicians do - we're going to make sure this never happens again. Because I know we're dealing with human beings and we're dealing with circumstances sometimes beyond our understanding. I can say that I believe that we will as a company find better ways, somehow, though I have no idea right now what they are.

Friend: Do you have any idea what your total liability might be?

Blankenship: We have, of course, a lot of insurance and it is the right thing to have even if the company were not financially strong ...As far as outlay of money as a result of the accident, I wouldn't expect it to be huge in relation to Massey, so there should not be any concern about Massey's financial strength. This mine would have probably generated, off the top of my head, $20 million to $50 million dollars of earnings, and we will try to mitigate that elsewhere. It's a horrible tragedy in human nature but not nearly as significant financially. 

Friend: I read that a rating agency again was recommending your stock as a "buy."

Blankenship: I saw that Standard and Poors had changed their guidance to "buy." It dropped about 16 percent, and hopefully the buy recognition will cause it to recover, but naturally it would take a hit.

Rivard: Have you thought about stepping down?

Blankenship: I think the board and the shareholders have to decide that. I mean, I know in my mind and my heart that I've done everything correctly that I was capable of as a human being. If somebody decided that either my capabilities or my presence is an issue - that's for shareholders and the board to decide. I don't think it's appropriate for me to, if you will, focus on that right now.

I'm focused on the investigation, focused on the families. We're not quitters in the sense of walking away from something like this because I think I'm the best prepared, most experienced, most familiar, and I owe it to everyone involved to help resolve the issues.

Rivard: I've heard it would be hard to replace you.

Blankenship: I've been here 26 years, 28 years, so it's hard to replace 28 years of experience. On the other hand, there's people out there that understand mining and so forth. As I said earlier, when you know you've done the best you could, you've done the right thing, and you've been involved in since you're 19 years old, and so forth, you feel confident that you can be productive and helpful going forward.

I think I will and can be, so I haven't really thought about the other thing. Hopefully, that even sheds some light on how I feel about the financial side of it. If I was out to make money, I'd be leading to hang on, I have no interest in the money aspects of it or anything, I'm just trying to get the job done.

There's no amount of money they could pay you to do this job right now that would be meaningful, because we just need to find out what happened and figure it out. I've had accidents in the past, but this is a CEO's worst nightmare.

I think that if you were to go in here and talk to our engineers, our geologists, or whatever, they would tell you that Don's very important to figuring this out, moving the company forward. They know what you all can't know, which is what we've done historically in the areas of safety and what we try to do in terms of trying to do the right thing. It would be a big disappointment to everybody else involved if I were to walk away from it.

Rivard: Is there somebody to blame - will somebody's head roll? How do we feel better?

Blankenship: I think that's the exactly the thing that we've got to avoid. We don't know what happened. We don't know if any human being of any level of intelligence, dedication or experience could have done anything about it, so we're determined to see the investigation through as best we can.

I don't think anybody's head has to roll. I think that's misplaced emphasis right now. The guys that are running these coal mines, they're heartbroken, and they're distressed and despondent, and the last thing they need is anybody pointing fingers at them right now. We don't need anybody to be more impacted than they already have been.

Friend: Have you ever worked as a coal miner?

Blankenship: Yeah, I spent a long time, I worked in the mines to get through college, back when I was 18-20 years old, and of course the technology was a lot different then, but it's probably one reason I was able to be successful in the business. Having worked in the mines and having been an accountant and having been gone for 10 years, working in two or three other industries, I think I had a broad perspective of measurement and accounting and also had some specific knowledge of mining so I was able to combine those two things. But my underground experience was very outdated.

Rivard: The governor has expressed concern that there may be other mines operating that should not be. Do you think that's the case?

Blankenship: The answer in one word would be no. We're not operating any mine that we think needs to be shut down; otherwise it would be shut down. I did idle several mines yesterday and maybe some more this week on the basis of violations since this accident to make sure we use the violations at one particular mine to assess all similar circumstances at all of our mines.

I'm not sure if it's occurred yet today or not, but there's supposed to be a conference call with all of our top managers to go over those violations since the accident to make sure we're addressing them everywhere. In addition to that, I asked that a list of all those violations that were equipment-related be reviewed for being added to our routine maintenance program, so that not only would they be corrected one-off, but there would be ongoing scrutiny of those same violations.


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