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Walter emerges from accident

Six months ago, Walter Industries Inc. of Tampa suffered one of the country's worst coal mining disasters: Thirteen men died in a methane-fueled inferno 2,140 feet below tiny Brookwood, Ala.

The explosions barely registered on Wall Street. The company's stock price is up 45 percent since then, and analysts continue to rate it a "buy." Insurance blunted most of the financial impact. Walter expects to resume some mining activity within weeks, pending federal approval.

"We've had dramatic improvements in productivity, which really helped us battle the recession," spokesman Kyle Parks said. "I think people are noticing that."

But as the government nears the end of its post-accident investigation, fissures are appearing in the previously united front between union, company and federal officials.

In a recent letter to the federal Mine Safety and Health Administration, union officials accused the government of lax oversight at the Alabama mine. Survivors of six deceased miners have filed wrongful-death lawsuits against Walter, coal mining subsidiary Jim Walter Resources Inc. and numerous company employees.

It also remains to be seen whether Walter has eliminated the sort of conditions that led to the deadly accident, or if that's even possible. Mine No. 5 is the deepest of its type in North America. Methane levels are greater at such depths, and the occasional spark is virtually unavoidable. In the month preceding the accident, federal safety officials noted three other ignitions at the mine.

"Mother Nature is always causing problems" said Arnhold and S. Bleichroeder analyst Barbara Allen.

Yet miners who survived the accident are back at work, repairing damage and preparing for the day they resume scraping coal from the lustrous Blue Creek seam. And they are happy to be back at wages that average just under $20 an hour. Local union president Gary Tramell said his daughter begs him to quit the mines, but he refuses.

"That's what I like to do," said Tramell, 56, "and I'm too old to change careers."

Alabama's worst coal mine accident since 1943 took place on a Sunday, usually a quiet day at Mine 5. Just 32 of 402 workers were on duty. Most were there to fix equipment or buttress the mine's 6-foot-tall tunnels, prep work for a week of excavation.

According to eyewitness accounts, at least one crew was installing secondary wooden roof supports called cribs. At about 5:15 p.m., the crew jarred some rocks loose. One rock fell and struck a large machine used to recharge mining equipment. A spark was struck, igniting the air.

Several miners were injured in the explosion, and one was unable to escape on his own. Twelve co-workers laboring elsewhere in the mine, longtime employees averaging 50 years of age, volunteered to rescue him. On the way they were struck by a second, more powerful blast. Their bodies were not recovered until November, when safety precautions, such as pumping 33.5-million gallons of water into affected areas of the mine, were completed.

Walter Industries itself has suffered little collateral damage from the accident. One likely reason: the Sept. 11 terrorist attacks, which preceded it by 12 days. Media coverage of the accident was mostly local and focused on the heroism of the 12 would-be rescuers. Few observers could resist comparing them to the New York City firefighters who bravely scaled the World Trade Center.

Financially speaking, Walter is well-insulated. It has written off just $10.8-million in accident-related expenses. Business interruption insurance is compensating for revenues lost due to the mine's temporary idling. Other policies are expected to cover the cost of litigation. Mining is a small and profitable sideline for Walter, but it hopes to exit the business to focus on other core operations. At full capacity, its three Brookwood mines accounted for just 12 percent of fiscal 2000 revenues.

Walter avoided a public relations meltdown, adopting a message that might be summarized as "charity, not culpability." Without accepting blame for the accident, it assigned a different employee to each accident victim's family, started a trust fund that has raised nearly $1.3-million (half of it from the company), participated in a memorial service at the local high school and provided health insurance and other benefits to the widows.

That effort continues, aided by Atlanta crisis consultant the Ledlie Group. This month, Walter sponsored a lunch in Brookwood to honor 88 rescue workers. "We gave them each a pewter statuette of a mine rescue worker, which we had custommade based on photos of actual mine rescue workers," spokesman Parks said.

If containing the event is the goal, however, Walter has its work cut out for it.

Wrongful-death suits filed by survivors of six of the dead miners could multiply. Meanwhile, a recent letter from United Mine Workers of America safety chief Joseph Main to federal mine safety director Dave Lauriski cited a number of alleged improprieties by government safety officials, such as letting Walter know ahead of time about pending inspections.

"There's a lot of people asking a lot of different questions about different safety violations," said Tramell, the local union president.

Company officials said they did everything possible to avoid an accident in a business that, as United Mine Workers president Cecil Brooks said, has "inherent dangers." Spokesman Parks said the mine's nonfatal injury rate was half the national average until the September accident, and added that the company's safety record has "dramatically improved" in recent years. He also noted that a team of union, government and company safety monitors were and are on duty at all times at Mine No. 5.

"Safety is the most important thing to us," he said.

As for preventing future accidents, Walter will not finalize its plans until the government issues its findings. A current project is to install reinforced steel cages around all rechargers, an attempt to limit sparks from falling rocks.

One thing Walter needn't worry about is burdensome government fines, however.

Said Mine Safety spokeswoman Amy Louviere, "We're not going to fine them so heavily that they have to go out of business"

_ Scott Barancik can be reached at baranciksptimes.com or (727) 893-8751.

Lax oversight?

The federal Mine Safety and Health Administration is expected to release a report on Walter Industries Inc.'s Sept. 23 coal mine accident within the next couple months. But the United Mine Workers of America already has reached some conclusions about the explosion, which killed 13.

A March 4 letter obtained by the Charleston (W.Va.) Gazette and written by Joseph Main, the union's occupational health and safety administrator, accused the agency of lax oversight at the nation's coal mines, including Walter's. Company and government representatives decline to comment.

Among the allegations concerning Walter's Mine 5:

"Serious violations such as thousands of feet of combustible materials and float coal dust and disruptions in the mine's ventilation system (which can lead to mine explosions) cited as minor infractions"

"Failing to return to the mine to check on violations"

"Not responding to requests by the miners for increased inspections when serious hazards existed"

"Advance notice of inspections locations"

"MSHA supervisor diverting an inspector away from an area of the mine that had known ventilation problems just prior to the explosion"

Coal Facts

Coal mining and methane gas sales play a minor role at Walter Industries Inc., a Tampa company best known for its homebuilding efforts. Though profitable, the businesses are risky and expensive to maintain. Recent attempts by Walter to sell the units have been unsuccessful. Mine 5, site of the Sept. 23 accident, has reopened solely for repairs. Mines 4 and 7 are fully operational.

Coal mining subsidiary: Jim Walter Resources Inc.

Year formed: 1976

Number of active mines: 3

Location: Brookwood, Ala. (pop. 1,483)

Depth: Mine 5 is 2,140 feet (deepest in North America)

Employees: 1,353

Key customers: Alabama Power, foreign steelmakers

Fiscal 2000 revenues (including methane gas sales): $238.6-million

Revenues as a percentage of company total: 12 percent

Source: Company Web sites, SEC filings

Mining Profits

Despite a deadly coal mine accident on Sept. 23, Walter Industries Inc.'s stock price and profits are soaring.

Closing stock price, one day before the accident: $8.95

Closing stock price, one day after the accident: $8.61

Monday's closing stock price: $12.95

Calendar year 2001 net income: 95 cents per share

Calendar year 2000 net income: 57 cents per share

Source: SEC filings, Yahoo.com

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