Mountaintop Removal Mining (MTR) has been growing emerging trend within the coal mining industry. MTR is less labor-intensive and for miners, less dangerous since workers are not sent into the bowels of the earth. Opponents, however, are often appalled at the results: beyond a scarred landscape, companies who engage in MTR leave behind a horrific mess that pollutes surrounding land and water.
Organizations like the National Resources Defense Council (NRDC) have pushed banks the last few years to end financing of companies that carry out MTR. The results offer some encouragement to those who abhor the process. Six large financial institutions developed guidelines that advocated a restriction on banking relationships with companies that use MTR mining practices. But despite an overall direction away from MTR the past two years, the NRDC has found that banks including Citibank, JPMorgan Chase, and Bank of America still support companies who include that form of mining within their operations.
In determining the banks’ relationships with the mining companies, the NRDC combed through the seven largest MRT coal producers’ publicly disclosed securities filings. The results are mixed. The six large banks (add Wells Fargo, Credit Suisse, and Morgan Stanley to the three mentioned above), stepped away from financing Massey Energy. Five of the six banks also declined new agreements with the International Coal Group, the second largest MTR coal producer after Massey. Several of the banks, however, have engaged in lending and financial relationships with other large firms like Patriot Coal, Arch Coal, and TECO Energy. On one hand banks appear overall to shift resources away from MTR mining. Critics of MTR, however, may just view the banks’ actions as moving resources from a few firms to others.
The NRDC gives a thumbs-up to Credit Suisse for its “exemplary” approach towards firms who adopt MTR—CS has a policy that clearly rejects any financing for the mining process. Wells Fargo is the runner-up with a limited relationship with such firms. As for the other banks, NRDC hopes to nudge JPMorgan, Bank of America, Citibank, and Morgan Stanley to distance themselves from the practice.
While the pictures and testimonials that show the aftermath of MTR are clear, the NRDC also emphasizes the financial risks that companies and their lenders face from the controversial practice: a hit to a firm’s brand and image; legal liability from environmental violations; poor relations with local businesses and stakeholders; and uncertainty from delayed operations due to an uncertain regulatory climate. If integrated reporting becomes the norm in the future, this episode may be Exhibit A.