Everything Just Fine

According to an Associated Press (AP) story out of Washington, Alpha Natural Resources Inc. (ANR) and dozens of its subsidiaries have agreed to pay a $27.5 million fine as well as spend $200 million to reduce illegal toxic discharges across Appalachia. This agreement will cover a five state region comprised of Pennsylvania, West Virginia, Virginia, Kentucky, and Tennessee - arguably the heart of Appalachia and the focal region of this blog.

According to the Environmental Protection Agency (EPA), this will be the largest fine ever levied by the federal agency - and it's about time. Frequently referred to as an environmental sacrifice zone, Appalachia has powered the lights and relentless consumer lifestyle of city slickers and suburbanites by destroying its resource-laden lands for over a century.

While the fine may seem significant and even hefty when compared to other infractions, it becomes a drop in the bucket when looking at ANR's financials - the company pulled in an impressive $1.1 billion in 2013.
Which means the fine is an astonishing 0.003% of ANR's net income in 2013. Not gross income or operating income, but NET INCOME - the amount the company reports as profit.

So basically what we're seeing is a ladybug landing on the wrist of an industrial behemoth. To believe this fine is sending a message is naive. To believe we're hitting them where it hurts is idiotic. ANR, like now-defunct Massey Energy and many other destructive companies before them, will happily pay this fine and continue business as usual. After all, it is financially smarter for companies to pay fines as opposed to the expensive practice of obeying safety standards and enacting proper remediation techniques. Considering the massive profits many of these companies rake in year after year, perhaps it is time to end the practice of fines and require that these regulations be actively followed and shutdown facilities indefinitely that violate- or have responsible parties face jail time. If federal employees can be sentenced to jail for negligence or fraud, why should private managers and executives who knowingly eschew public safety not face the gavel?

What raises the need for further research and discussion is the $200 million in waste reduction fees. The AP story simply mentions that the mine operators will install wastewater treatment systems and "take other measures" aimed at reducing pollutant discharge from 79 active mines and 25 coal processing states in the region. The scope of this agreement will dictate its financial impact on ANR and its environmental impact on Appalachia. If ANR is ponying up these dollars as part of an accelerated program to implement federal mandates, then the cost does not have a net negative effect. If this agreement is a penalization on Alpha, then we need to view it as a sunken cost because the damage has already been done, and these systems should have been in place and operational decades ago.