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CMS Energy director faces removal campaign at Massey

May 17, 2010

(This article by Eartha Jane Melzer is re-posted from Michigan Messenger.)

Shareholders of the Massey Energy Company are warning that safety oversight failures at the company have cost investors dearly and they are recommending that three directors who served on the board’s safety committee be removed during the company’s annual shareholders meeting next week.

One of the members they are campaigning against is Richard Gabrys, who is also on the board of directors of Jackson, Michigan-based CMS Energy.

A group of nine public institutions that collectively own $64 million in Massey stock point out that in the years leading up to the Upper Big Branch mine disaster, which killed 29 workers and sent stock prices plummeting, the federal Mine Safety and Health Administration issued “significant and substantial” violations on that mine at a rate that was 19 times the national average, yet Massey’s safety committee failed to take corrective action.

Those nine public investors are the California State Teachers’ Retirement System, Office of Connecticut State Treasurer, Illinois State Board of Investment, Maryland State Pension and Retirement System, New York State Common Retirement Fund, New York City Employees’ Retirement System, North Carolina Dept. of the State Treasurer, Oregon State Treasury, and the Pennsylvania Treasury.

Rather than take action on safety warning from regulators, the investors say, Massey’s safety committee “tried to deflect criticism of it’s safety problems by emphasizing less relevant measures such as “Non-Fatal Days Lost.”’

The groups note that Risk Metrics and Glass Lewis — major proxy advisors — have both recommended votes against Gabyrs and his colleagues Dan Moore and Baxter Phillips, Jr., all of whom are up for reelection, citing the company’s record of safety violations, the Board’s failure to adequately oversee management, and poor corporate governance practices.

“In evaluating a director’s qualifications, the best way to determine whether or not a director is truly representing shareholders is to look at what they are doing in their role in committee,” said Mike Garland of the CtW Investment group which manages funds for the institutions. “It is our view the Richard Gabrys has failed in this role and bears responsibility for all of those failures. He sat on the safety committee, and this is a company with an abysmal safety record.”

Massey has appointed Gabyrs to review the company’s safety related actions/failures and the related FBI investigation, even though he sat on the safety committee that was responsible for those actions. The CtW Investment group says that this is an obvious conflict and shows ongoing bad judgment by the board and Gabrys.

The fact that Gabrys also directs one of Michigan’s biggest energy companies has raised some concerns here.

CMS has it’s own history of problems with environmental violations, and in a March filing with the Securities and Exchange Commission the company acknowledged that these violations are a liability that could cost shareholders and/or ratepayers.

In the past few years EPA has issued numerous Notices of Violation for environmental problems at the company’s coal burning power plants in Jackson, Muskegon, West Olive and Essexville.

In March 2007 EPA cited the company for violating the Clean Air Act by releasing more than the legal amount of soot from 14 of the company’s boilers for a total of 37 days between 2004-2005.

It noted, “The purpose of this visible emission limit is to help protect the public from unhealthy exposures to particulate. Particulate emissions, especially fine particulate, contribute to respiratory problems, lung damage and premature deaths.”

In October 2008 EPA issued violations to the company for violating the Clean Air Act by carrying out 10 projects at the J.H. Campbell Plant in West Olive; the B.C. Cobb Plant in Muskegon; and the D.E. Karn and J.C. Weadock Plants in Essexville without regard for the law that required them to install technology to reduce emissions (NOx and/or SO2) which cause ozone formation and acid rain.

These violations remain unresolved. In a March filing with the Securities and Exchange Commission the company wrote,

“Consumers is engaged in discussions with EPA about all of these matters. Depending on the outcome of these discussions, the EPA could bring legal action against Consumers and/or Consumers could be required to install additional pollution control equipment at some or all of its coal-fueled electric generating plants, surrender emission allowances, engage in Supplemental Environmental Programs, and/or pay fines.”

Those fines could be so substantial, the filing said, that the company “would need to assess the viability of continuing operations at certain plants” and that it “cannot predict the financial impact or outcome of these matters.”

The environmental violations cited by EPA show that Consumers Energy has long operated its coal-fired power plans without installing the modern pollution controls that are required by law in order to protect human health, Shannon Fisk, attorney with the Natural Resources Defense Council, said via e-mail, “It is far beyond time for Consumers to retire or clean up its outdated coal plants and aggressively invest in energy efficiency and cleaner energy sources that will create jobs in Michigan and protect public health.”

David Holtz of Progress Michigan expressed concern that Richard Gabrys, given his history with Massey Energy, may not be prepared to help CMS comply with environmental laws.

“Massey’s history of safety violations and now the deaths of so many miners happened under Gabrys’ watch as member of the board’s safety committee. That raises serious questions about his qualifications and judgment as a director of CMS Energy,” Holtz said.

“Gabrys’ questionable track record at this giant coal company should have shareholders at CMS Energy asking if the continued presence of Gabrys on their board is in the interests of shareholders and ratepayers or if he’s just part of an gentleman’s club of wealthy coal barons whose real interest is promoting dirty, polluting coal over clean energy and the jobs it will bring for Michigan.”

One Comment leave one →
  1. Doug Burkholder permalink
    May 17, 2010 3:22 pm
    More about toxic fallout from Coal Fired Power-Plants

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