CMS Energy, DTE Energy ties to Appalachian coal raise concerns

Mountain top removal mining in Appalachia (Photo courtesy of Flickr: nrdc_media)

The electric companies that burn coal to generate the electricity used by most people in Michigan have close ties to Massey Energy, the Appalachian coal company that fought environmental and safety regulations before an explosion killed 29 workers at the company’s Upper Big Branch mine in West Virginia this month.

Together CMS Energy and DTE Energy serve 4.5 million Michigan homes and businesses, and 2008 state energy reforms guarantee these companies 90 percent of the ratepayers in their service areas.

But some are questioning the companies reliance on coal for power and their social and financial ties to a mining company that has defied environmental and safety regulation and spent heavily on lobbying to continue to weaken those regulations in order to increase its profits.

Richard Gabrys of Bloomfield Hills, retired vice chairman of the accounting firm Deloitte and former Wayne State University economics professor, has occupied a position on the CMS Energy board of directors since 2005 and been a member of the Massey board since 2007.

Massey is the largest coal company in Central Appalachia and the fourth largest coal company in the nation.

Gabrys would not comment on his role with the companies.

CMS spokesman Jeff Holyfield said that 80-90 percent of the coal used by the company comes from Western states. Holyfield would not say whether and/or how much coal the company buys from Massey. “For competitive reasons,” he said, “we don’t discuss coal contracts publicly.”

CMS is required to share information about its suppliers with the U.S. Dept. of Energy, and according to records maintained by DOE’s Energy Information Administration CMS’s 2009 contracts do not include deals with Massey.

Those same records show that DTE Energy buys coal from Massey to fuel power plants in River Rouge and Monroe.

Though CMS doesn’t appear to have any contracts with Massey, the company does spend a great deal of money on Appalachian coal.

According to the CMS 10-K filings with the Securities and Exchange Commission in 2009 the company generated 96 percent of its energy by burning 9 million tons of coal at its four coal generation sites.

As of December 31, 2009 Consumers had six long-term and three spot-price contracts to purchase low-sulfur western coal through 2012; these contracts total $233 million. Consumers also had four long-term and three spot-price contracts to purchase Appalachian coal through 2012; these contracts totaled $215 million.

Massey and other Appalachian coal companies practice mountain top removal mining, in which the tops of mountains are blown off so that coal can be more cheaply extracted.

The waste generated by blasting off the tops of mountains fills valleys and streams, causing permanent ecosystem damage and rendering streams unfit for swimming, drinking and fishing.

The U.S. EPA estimates that almost 2,000 miles of Appalachian headwater streams have been buried by mountaintop coal mining.

Mountain top removal also causes health problems for people in Appalachia by contaminating groundwater and spreading airborne toxins.

David Holtz, executive director of the group Progress Michigan, which is running a clean energy campaign to counter the development of new coal power in Michigan, said that Gabrys’ relationship with Massey does not bode well for Michigan’s environment or ratepayers because the companies share a corporate culture of careless behavior.

Holtz said that the presence of Gabrys on the board at CMS is troubling because it shows that the company is too deeply linked to the coal industry. Ratepayers and CMS shareholders would be better served if the company would find board members with expertise in alternative energy rather than coal, he said.

“Given what has gone on in West Virginia and the recent report on the price of new coal development for ratepayers, we have to ask why a company would continue to go down this path,” Holtz said. “One of the major reasons is that at least one person on the board who is in a position to influence direction of company has a financial stake in coal. He recently was awarded 2081 shares of Massey stock at 43.21 cents per share and was given 5000 shares of CMS stock.”

Consumers Energy is proposing to build a new coal plant in Bay City, despite warnings from state regulators that the plant is not needed, he said. The company has also allowed arsenic and other toxins from its coal ash waste piles to migrate into the groundwater around its Karn Weadock facility and into Lake Huron.

Jerry Davis, professor of management at U-M’s Ross School of Business, said that an interlocking directorship — a situation where multiple companies share a director — is more likely to have social meaning than a direct impact on contracts involving the two companies.

A member of the CMS board such as Gabrys is unlikely to be involved in negotiations between CMS and other companies such as Massey, he said, however interlocking directorships do create a mechanism for practices to be legitimized and spread.

“An outside director could certainly have an influence over issues of environmental quality and safety,“ he said by email. “There are many instances in which an interlocking director takes ‘best practices’ (or, indeed, worst practices) observed at one company and advocates for them at the other companies on whose boards they serve.”