Massey suing regulator, but not over the mining disaster

FORTUNE -- It's a bold and rare move for a company to sue its regulator, but no one has ever accused the Massey Energy Company of being timid.

On June 22, Massey filed a suit against the Mine Safety and Health Administration, saying that the process that the regulator used to require Massey to install a new ventilation system in the Upper Big Branch Mine is unconstitutional.

In a letter obtained by Fortune from Massey (MEE) to the governors of several mining states, the company mentioned that the MSHA-required ventilation system circulated less air in the mine than the one Massey had in place before the changes required by MSHA were implemented on March 9, 2010. Massey has implied that the new ventilation system could have compromised the safety of the mine during the Upper Big Branch explosion in Montcoal, W. Va., on April 5 that killed 29 workers.

Massey doesn't refer to the accident at all in the legal complaint. It didn't link the accident to a ventilation problem directly after the explosion, either. A couple days after the explosion, Massey CEO Don Blankenship said that while the Upper Big Branch mine had had some safety problems in the past couple of years, the mine was safe at the time of the accident.

It looks as if it was, in terms of the ventilation system. It was up to code, and a reading taken about 20 minutes before the explosion showed that the concentration of methane in the air in the mine was well below dangerous levels.

Ventilation systems vary according to several factors, one being the type of mining. The Upper Big Branch Mine used longwall mining. Longwall mines have exposed slabs along the wall of the coalbed-they're about seven feet tall and several thousand feet long. A shearing machine passes back and forth over the slab, shaving coal to be collected. The machine can also release trapped methane, and the friction from the machine on the coal can cause a spark. To keep sparks from igniting the released gas, ventilation systems blow air along the longwall.

Regulation says that the ventilation system for the Upper Big Branch mine needs to pump at least 30,000 cubic feet of air per minute. Before the accident, the ventilation system in place produced 56,000 cubic feet of air per minute. The ventilation system that Massey had before the MSHA-mandated one pumped more -- 150,000 cubic feet per minute through the mine.

"We didn't think it was dangerous, and it wasn't illegal," says Shane Harvey, vice president and general counsel for Massey, "but we think that our plan was vastly superior."

Companies have a constitutional right to sue their regulators, says Cary Coglianese, director of the University of Pennsylvania Law School's Penn Program on Regulation. It's part of the back and forth between industry and regulators that should keep both in check, and it's fairly common. It's also less expensive than the typical legal mess that comes to mind when most people think of a lawsuit.

Lawsuits against the government mostly involve courts reviewing paper documents. They wouldn't result in investigators rifling through Massey's records or hiring an expensive attorney. They're also relatively cheap, but they do carry a non-monetary cost. "You don't want to do this frivolously," says Coglianese. "If you really don't think you have any case at all, you do have to come back and interact with these regulators in the future."

That could be one of the reasons why there isn't much of a precedent for suits like this succeeding in court, says Harvey. "It's just a natural occurrence that those who are regulated don't want to be in court with those who regulate them."

Is Massey anti-regulator, or is the regulator lax? How about both?

But Massey's been burning bridges with regulators for a while. Blankenship has spoken out against government involvement in the mining industry, adamantly. He chipped in about $1 million to fund the largely right wing, antiregulation "Friends of America" Labor Day rally in 2009. He's also refused to pay fines for previous safety violations. Massey had 10 violations in 2010 before the explosion.

After the explosion, MSHA was criticized for being too soft on companies. In a press release, Secretary of Labor Hilda L. Solis and Assistant Secretary of Labor for MSHA Joseph A. Main said that the MSHA's "pattern of violation system" that holds companies accountable for safety violations was broken and needs to be changed.

Massey, on the other hand, is saying that MSHA doesn't have the right system in place to dictate how to ventilate a mine. If the company wins its lawsuit, MSHA could be tied up in litigation that would make it difficult to enforce any penalties against Massey for safety violations.

It would be a hard win to pull off, says Coglianese. In general, "the courts are, at the end of the day, quite deferential to administrative agencies."

Why is Massey suing now?

The timing for this particular case is strange, says Joseph Tomain, an energy law expert and professor of the University of Cincinnati College of Law. It's weird that the formal complaint didn't happen before the new ventilation system was installed if Massey was worried that it jeopardized the safety of the minors.

"You don't blame the government after the fact, particularly after you've had a disaster. My instinct tells me it's purely a defensive move and they're trying to be proactive."

Massey has confirmed that part of the investigation following the incident has found cracks in the floor of the mine -- but no one has confirmed that the cracks were the source of the leak. If they were, it's possible that enough gas could have come into the mine fast enough to cause a violent explosion before the monitors could take a reading.

On June 28, Massey filed a legal challenge to MSHA's requirement that no Massy employee could take pictures or samples during the investigation of the mine. The current investigation team is made up of someone from Massey, MSHA employees, and state officials.

Massey has demanded that the team for the ongoing investigation doesn't include anyone from MSHA because of the agency's involvement with a previous investigation. In 2004, large cracks releasing dangerous amounts of methane were found in the floor of the Upper Big Branch Mine.