New Reporting from Citi on their Mountaintop Removal Financing

Written by Amanda Starbuck

Topics: Coal

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In 2009 RAN urged Citi to stop financing mountaintop removal (MTR) coal mining, the environmental tragedy that is destroying the Appalachian landscape and poisoning communities.

Citi’s initial response, a statement on their website that the bank had “has implemented a robust MTR Environmental Due Diligence Process” was a disappointment to us. While Citi had at least acknowledged that MTR mining is a critical issue, we were not hearing any commitment from the bank to end their financing.

However one line, gave a glimmer of hope. “Based on implementation experience, we will review and revise our MTR Environmental Due Diligence process over time and as regulations change.”

We’ve been talking to Citi over the past year, urging the bank to strengthen this policy, to adopt a strong identifiable threshold for transactions that they will not accept and to publicly report on the policy’s implementation.

Yesterday, the bank released their 2009 Citizenship report and there is a significant section on their MTR policy.

Our assessment is that Citi is making some progress, but still has a way to go.

One of the things that I like is their reporting on the number of MTR company transactions that have been through Citi’s ‘enhanced due diligence process’ (3) and the number of transactions that were approved and closed (2). This tells us that there is some substance to the policy and that there is at least one MTR company Citi is not prepared to do business with.

I am not going to speculate on the identity of the company that Citi didn’t do business with, however a few hours of research on Bloomberg gives a picture of whom Citi will fund. Since August 2009, when Citi adopted their MTR policy, Citi has done business with at least two MTR mining companies: TECO Energy (the 7th largest producer of MTR coal in 2009) and CONSOL Energy (11th largest).

The Citi policy is an interesting contrast to one released by Bank of America, in December last year, which sets out a clear performance standard “We will phase out financing of companies whose predominant method of extracting coal is through mountain top removal.” This is easier at-a-glance to hold the bank to account over, however we’ve yet to see the level of transparent reporting that Citi are giving us.

A similar Bloomberg search on Bank of America transactions reveals financial transactions with TECO and CONSOL, since their policy was adopted, plus the information that Bank of America is listed as the largest stockholder of shares in Alpha Natural Resources (the 3rd biggest producer of MTR coal in Appalachia).

So Citi and Bank of America both have a way to go before they can say they are no longer financing Appalachian mountain destruction. Yet, for now, they can hold their heads up a little higher than Chase bank, the biggest US financier of MTR coal mining, who has no policy on mountaintop removal mining at all. It seems to me that Chase is missing an opportunity here.

3 Comments For This Post I'd Love to Hear Yours!

  1. john doe says:

    What does it matter saying “We will phase out financing of companies whose predominant method of extracting coal is through mountain top removal”, when there’s not a coal company of any magnitude on earth that “predominately” extracts it’s coal through mountain top removal – case in point, BAML and Citi 2 weeks ago financed through a bond and by being their largest lenders, Patriot Coal which is in the top 2 co’s with most production on an absolute basis coming from MTR

    Also, you should maybe educate yourselves on what the rules, regulations and laws are for MTR – the law states that the MT must be put back on the same contour and a like or improved vegitative state than it did prior to initial disturbance for mining. the industry had some poor practices 30 years ago, that’s not the case today – that is true for most every coal company.

    Your efforts would be much better served trying to curb world hunger or end poverty…

  2. Amanda says:

    John Doe:
    Thank you for your comment. Informed debate is very welcome here!

    You raise a number of different issues, which may be partially addressed by our “Report Card on Banks and Mountaintop Removal”, which we released today in conjunction with the Sierra Club and BankTrack.

    You can access the report and supporting information here:
    http://www.ran.org/reportcard

    You state that:
    “there’s not a coal company of any magnitude on earth that “predominately” extracts it’s coal through mountain top removal”

    I disagree. Bank of America appears to be assessing predominance across each company’s U.S. operations. Using that criteria, the following companies publicly-held “predominantly” extract their coal through mountaintop removal:
    Massey Energy (50%), TECO Energy (50%), Arcelor Mittal (60%) (Figures are 2009 coal production from opensourcecoal.org)

    However, it makes far more sense to me to assess “predominance” across a company’s operations in Central Appalachia, which is currently the only region in the U.S. where mountaintop removal is practiced. Otherwise, the bank’s policy is discriminating against the smaller coal mining companies who only operate in Central Appalachia.

    Using this criteria we get a different story:
    Massey Energy (50%), Patriot Coal (61%), International Coal Group (58%), TECO Energy (50%), Arcelor Mittal (66%) (Figures are 2009 coal production from opensourcecoal.org)

    Thank you for alerting us to the Patriot Coal deal. Our report card research covered the period from Jan 2008 – April 2010 and so it does not include this deal, which was announced by Patriot on 5 May 2010. It will certainly be included in next year’s report.

    A number of the banks we reported on are involved in this deal, so how might it change the picture?

    PNC already had a recent financial relationship with Patriot, so they are still financing companies responsible for 48% of the MTR coal mined in Appalachia
    Citi and Bank of America (who had both done deals with Patriot prior to adopting their policies) are now both at 26%

    You also state “you should maybe educate yourselves on what the rules, regulations and laws are for MTR”.

    I agree, and believe me I am paying close attention, I met with an EPA regional administrator this week to get further clarification on the new MTR permit guidance that was issued by Administrator Jackson on April 1. To others who are interested in following MTR rules, regulations and laws, I highly recommend Ken Ward’s very digestible blog, “coal tattoo” in the Charleston Gazette.
    http://blogs.wvgazette.com/coaltattoo/

    You are correct that “the law states that the MT must be put back on the same contour and a like or improved vegitative state than it did prior to initial disturbance for mining.”

    Sadly, reforestation efforts on post-industrial mine sites in Appalachia have largely failed, with only a few pilot test projects showing any degree of success, and those being on small test sites. Further, the reforestation efforts often fail to use native tree species, choosing instead to “reforest” with more resilient, tougher trees such as Olive and Black Locust (which is actually somewhat native, but not consistent with the pre-mining mixed mesophytic hardwood forest that existed before mining).
    The US Government Accountability Office released a report in February 2010 that covers this issue in considerable detail
    http://www.gao.gov/new.items/d10206.pdf

    In particular the report criticizes failure by the state agencies to inspect sites after reclamation efforts prior to returning reclamation bonds. I quote:
    “For example, in its 2009 evaluation year report on West Virginia, OSM reported that it did not appear that the state was meeting requirements for inspections at bond forfeiture sites. OSM estimated that the state had completed about 55 percent of the required inspections at bond forfeiture sites.”

    However, the consequences of MTR go beyond far beyond the aesthetic appearance of the mountain contours. Even if strictly enforced, this law does not address the wide reaching health and environmental impacts of MTR extraction. Please take a look at this article, ‘Mountaintop Mining Consequnces’ by Dr Margaret Palmer, published in Science Journal in January 2010
    http://www.sciencemag.org/cgi/content/full/327/5962/148?ijkey=c6.2aOadMa2q.&keytype=ref&siteid=sci

    You state “the industry had some poor practices 30 years ago, that’s not the case today – that is true for most every coal company.”

    I wish that were true. Let’s look at the record of Massey Energy, the largest producer of MTR coal. In 2008, Massey agreed to a $20 million settlement with the U.S. Environmental Protection Agency to resolve thousands of violations of the Clean Water Act for routinely polluting waterways in Kentucky and West Virginia with coal slurry and wastewater. Their attitude to compliance with the laws governing safety has been disastrously similar.
    http://blogs.wvgazette.com/coaltattoo/2010/05/13/sen-byrd-massey-scoffed-and-laughed-at-repeated-msha-citations-at-upper-big-branch-mine-prior-to-april-5-disaster-that-killed-29-miners/

    Finally, you say: “Your efforts would be much better served trying to curb world hunger or end poverty.”

    Well, I do believe that fighting MTR in Appalachia IS fighting poverty. It is no coincidence that the counties where MTR takes place are also the poorest counties in the United States, despite the immense profits that the coal industry is extracting from them. These communities are eager to develop clean energy, sustainable tourism and green jobs, but for that to happen, coal companies must stop blasting away their mountain heritage.

    Do you agree?

  3. i believe you have a nice page here… today was my first time coming here.. i just happened to discover it doing a google search. anyway, fantastic post.. i’ll be bookmarking this page for certain.

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