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Publication: THE CHARLESTON GAZETTE
Published: Sunday, March 17, 1985
Page: P1C P5C
Byline: PAUL NYDEN
P=ETRODOLLARS from Royal DutchShell began pumping into A.T. Massey's Appalachian coal mines five years ago, when a little-understood deal created a new partnership - the Massey Coal Co As more than $700 million in oil company assets began flowing, A. T. Massey Coal became the region's fastest-growing coal company.
Massey, which owns a billion tons of high-quality, low-sulfur reserves, is now the nation's fifth-largest producer and second-leading exporter.
The Massey partnership created in 1980 also became part of a vast international marketing network controlled by the Netherlands-based oil company with assets of $75 billion.
Massey's capacity jumped from 16 million to 25 million tons a year between 1978 and 1983, according to a company promotional pamphlet. Production rose 51 percent from 1981 to 1982 alone, according to the Keystone Coal Industry Manual.
A.T. Massey, founded in West Virginia in 1916, is the state's third-largest producer. It mines 6.5 millions tons of coal a year _ 70 percent of it non-union.
E. Morgan Massey, president of A.T. Massey, claims his Richmond, Va., firm is nothing but a sales broker for scores of subsidiaries and affiliates. Operating companies in West Virginia and Kentucky, says Massey, make their own business decisions.
But the "Massey Coal Company Partnership Agreement" does not portray a loose network of independent coal-mining operations.
It reveals the existence of a highly centralized corporate hierarchy controlled by an eight-member "partnership committee." The agreement, signed Oct. 31, 1980, was filed with the Securities and Exchange Commission. The 102-page document was obtained last week by the Sunday Gazette-Mail from the United Mine Workers.
The UMW argues Massey is a "common employer" and should be required by the National Labor Relations Board to negotiate as one company, not a series of independent mining and processing operations Massey is currently conducting 15 separate sets of negotiations for mines which signed the 1981 National Bituminous Coal Wage Agreement.
Job security - the right to transfer seniority and job rights from one mine to another - has become the central issue in the 5-month-old strike against Massey's mines in Southern West Virginia and eastern Kentucky.
Decisions about all major capital expenditures, development and expansion of mines, purchase of new mining properties and most sales agreements are placed clearly in the hands of the "partnership committee" established in 1980.
A.T. Massey itself, moreover, may not "assume any liability or obligation whatsoever" or "sell or otherwise dispose of any of the assets of the partnership" without the committee's approval.
In a four-step process, decisions reached by individual operating units must be approved by one of 10 regional "resource groups," then by A.T. Massey Coal and finally by the partnership committee itself.
Massey Coal Co.'s partnership committee is a 50-50 venture between two other specially created partnerships, according to the agreement: The St. Joe Partnership Group composed of St. Joe Minerals and St. Joe Carbon Fuels contributed coal assets - including its mines, cleaning plants and reserves - from A.T. Massey, Tennessee Consolidated Coal and Mansfield Carbon Products to the new partnership.
St. Joe Minerals acquired A.T. Massey in 1974 and Tennessee Consolidated in 1976. St. Joe was itself acquired in 1981 by Fluor Corp., the nation's largest construction firm.
The Scallop Partnership Group composed of Scallop Coal Corp.
and Justin Coal Corp. agreed to contribute $680 million in cash and its existing coal assets. About $537 million in cash had been given to Massey Coal as of Oct. 31, 1984, with the balance earning interest as specified in the agreement.
The agreement requires A.T. Massey and its subsidiaries to prepare an annual "development program and budget, and an operating and capital expenditure budget, for the next fiscal year, which shall be submitted for review and approval by the partnership committee.
"Upon review of such submissions, the partnership committee shall each year establish an overall development program and budget and an operating and capital expenditure budget. The partnership committee shall also establish procedures for the development of long-term financial and business forecasts and for the authorization of major or long-term commitments, expenditures and contracts," the agreement continues.
The Massey Coal Co. partnership is also designed to file consolidated financial statements and income tax returns.
Export sales are largely controlled by the partnership committee through Shell Coal International Ltd., based in England. "All steam coal that Massey shall have determined to have available for sale in the export market," the partnership agreement states, shall "be sold to SCI or other foreign group companies." On metallurgical coal exports, the agreement is stronger still, specifying the "partnership committee shall formulate the sales policy of the partnership with respect to coal exports from the United States for other than the market for steam coal." Massey was also expected, under the 1980 agreement, to transfer existing export contracts and commissions to Shell Coal International, wherever possible.
Despite statements from E. Morgan Massey that his company is merely a sales firm, A.T. Massey's own literature stresses the extent of company holdings at 26 mining complexes, 20 preparation plants and two new deepwater terminals in Newport News, Va., and Charleston, S. C., which can load 14.5 million tons of coal a year.
"The Massey Coal Company Doctrine," an internal company document dated July 1982, asserts "there is little, if any, cost advantage to be gained from being a large company in the mining business." It urges a "decentralized management design and discusses "stand alone resource units." But Massey Coal Sales Co. and Massey Coal Export Co., the doctrine adds, will integrate sales activities of all divisions, affiliates and contractors. Decisions about the availability of capital to each operating unit are also centralized.
Massey management, engineering, accounting and personnel officials, moreover, will be provided to Massey's various decentralized "resource units" as needed, says the 31-page document obtained from Charleston lawyer James M. Haviland. Expensive mining machinery may also be shifted from mine to mine.
The Massey Doctrine proposes maintaining different relationships to each of three categories of mines, differentiated according to coal quality. The most productive mines should be owned outright, while an arms-length economic distance should be kept from poorer mines, especially with respect to responsibility for labor costs.
The types are: Mines with thick seams and good quality coal, such as Massey's mining complexes at Marrowbone in Mingo County and Elk Run in Boone County - the two largest non-union mines in West Virginia Mines with average reserves and mining conditions, such as those mining coal for Sprouse Creek Processing in Lobata. With these mines, which involve greater economic risks, the doctrine proposes some combination of ownership of reserves, ownership or control over processing and transportation, negotiation of sales contracts or mining through an independent contractor.
Mines with thin coal seams and high mining costs, such as small operations under Massey's Robinson-Phillips "resource group" - Jo-Ed, Con-Lea, L&M and Bobby B Coal companies. Massey seeks only a brokerage relationship with such mines, involving no long-term financial obligations. "This is the coal," says the doctrine, "that in a weak market will be available at the lowest price and that we should buy or market ourselves rather than have it compete with us." The year after the St. Joe Minerals-Scallop Coal partnership agreement was negotiated in 1980, St. Joe itself was acquired by the Fluor Corp.
Founded in 1912, Fluor provides engineering and construction services primarily related to energy and chemical production throughout the world in countries such as WestGermany, Norway, Yugoslavia, Algeria, Saudi Arabia, India, China, South Korea and Malaysia.
Fluor recently completed sophisticated coal gasification plants in South Africa. In the United States, the company has built nuclear, coal, geothermal and solar power-generating plants.
Fluor has oil and gas interests in Canada, Argentina, Greece, Indonesia and New Guinea.
Engineering and construction provided 73 percent of Fluor's 1984 revenues of $4.4 billion. Coal provided 11 percent of its total revenue, but constitutes 26 percent of the company's assets.
St. Joe, headquartered in Clayton, Mo., is the nation's largest integrated producer of both lead and zinc, and mines iron, gold and silver as well. St. Joe has mineral mining subsidiaries in Western.
Europe, Argentina, Brazil, Peru, Australia, Canada and Chile _ where, in 1983, St. Joe established a new South American division.
Fluor's board of directors consists largely of longtime company officials, but also includes Robert V. Lindsay, president of Morgan Guaranty Trust Co. of New York, and Buck Mickel, president of Daniel International Corp., a non-union construction firm acquired by Fluor in 1977. Mickel is also a director of Monsanto, National Steel, Duke Power, J.P. Stevens and the Citizens and Southern National Bank of South Carolina.