Massey Shares Skid on Water Pollution Suit

May.15.07 | About: Alpha Appalachia (MEE)

Shares of U.S. coal producer Massey Energy Co. fell 14% to $26.08 on Monday, after several analysts said the company might face fines in the billions as a result of a federal lawsuit over water pollution. The Environmental Protection Agency's suit against Massey charges it with 4,633 violations of the Clean Water Act over the past six years, an allegation that analyst David Gagliano contends could result in fines of $2 billion. Banc of America Securities analyst Daniel W. Scott ballparks the worst-case payout at $2.24 billion. The government claims Massey poured pollutants from its mines into West Virginia and Kentucky waterways, and asks for fines of either $27,500 or $32,500 for each of the 4,633 days of violation. Massey has responded that "the vast majority of incidents at issue had little or no impact on water quality," and claims it was in compliance on all the occasions cited by regulators. "Massey Energy has been, and continues to be, respectful of the environment in which we operate," said President and CEO Don Blankenship. The company said Monday it does not expect the suit to be material to its prospects.

Sources: Bloomberg, MoneyCentral, MarketWatch
Commentary: Why I'm Bullish On Coal StocksCoal Stocks Heating UpCarbon Economics: Coal vs. Natural Gas
Stocks/ETFs to watch: Massey Energy Co. (NYSE:MEE). Competitors: Arch Coal Inc. (ACI), CONSOL Energy Inc. (NYSE:CNX), Peabody Energy Corp. (BTU). ETFs: iShares S&P SmallCap 600 Value Index (NYSEARCA:IJS)

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