By Avi Meyerstein

Early one recent morning while you were sleeping, Congress was wide awake, moving toward increased reporting requirements and exposure for large mine operators and those with large parent companies. Just after 5:00 a.m. on June 25, House and Senate conferees emerged from an all-nighter with an overhaul of the U.S. financial regulatory system. Tucked inside were a series of provisions imposing new requirements not on banks, but on mines.  

The bill’s mining provisions, which start on page 2,293 of the conference report, apply to any “issuer” (a company that issues securities) that (1) is required to submit reports to the Securities and Exchange Commission (SEC) under Sections 13(a) or 15(d) of the Securities and Exchange Act of 1934, and (2) is a mine operator or owner. For the first time, the bill would require that such firms report in their SEC disclosures a number of detailed items relating to their mining and health and safety compliance records.

First, companies covered by the new provisions would have to add to their SEC reports their total number of: Significant and Substantial (S&S) citations, Mine Act Section 104(b) withdrawal orders (for failure to abate violations), unwarrantable failure citations and orders, flagrant violations, imminent danger orders, and mining-related fatalities, as well as the total dollar value of proposed Mine Safety and Health Administration (MSHA) assessments. These SEC filings also would have to list each mine that received a written notice from MSHA of an actual or potential pattern of S&S violations.  In addition, companies would have to report any pending legal action before the Federal Mine Safety and Health Review Commission.

Second, following enactment of the financial reform bill, issuers of securities that are mine operators or owners of mine operators will have to file a current report with the SEC (probably Form 8-K). The report must disclose receipt of a Mine Act Section 107(a) imminent danger order, as well as receipt of any notice from MSHA of an actual or potential pattern of S&S. The SEC will treat any failure to follow these new reporting requirements as a violation of the securities laws and regulations.

So, what does all of this mean for you? First, it means much greater corporate and public scrutiny of a mine operator’s MSHA dealings. Today, corporate and parent company officials, not to mention investors, likely know very little of an operator’s routine dealings with MSHA. These stakeholders don’t follow every proposed or even final MSHA penalty, S&S citation, or withdrawal order. Now they will.

Second, as a result of the regulations, successful mining or safety managers will not only have to increase safety compliance and reduce violations, but also focus on internal education and outreach. Investors and many corporate higher-ups are unfamiliar with the ins-and-outs of MSHA enforcement and litigation. Many may know only what they see and read in the media following a mining disaster. They lack the context to understand how common a citation or S&S violation is in the industry or within a company, or how the number of citations relates to hours worked, material produced or, most importantly, inspection intensity. They may not understand the litigation process that ultimately finds many proposed penalties and citations unwarranted. They will see your MSHA citation record printed as prominently as the company’s disclosure of litigation so serious that it is material to the company’s financial statements. They will only hear the negatives; they won’t know, unless you tell them, about positive trends or improvements in health and safety, as well as compliance, in your company. You will need to educate them on the proper context and impact of these MSHA matters on the company.

Third, the new bill would also make you focus—probably for the first time—on dealing with a new regulator and new source of potential liability. At a minimum, your incentive would at least double for having record-keeping and reporting practices and systems that are well-planned and well-implemented. Sophisticated citation and safety tracking systems will become essential as the law will require accurate reporting of these events, and two separate watchdog agencies will be scrutinizing mine operators’ compliance. The bill would require reports even of preliminary MSHA allegations (in the form of citations, orders, and proposed assessments, which a judge may later strike down). As a result, the bill further increases the incentive to expand and improve internal, company-wide and mine-specific compliance, training, oversight, and auditing.

Fourth, the bill would not become law in a vacuum.  Members of the U.S. House and Senate also recently released a draft of the “Miner Safety and Health Act of 2010.” That major legislation proposes more frequent MSHA inspections, a much lower threshold for classifying a violation as S&S (requiring only that any injury be reasonably likely, not just serious ones), increased criminal and civil penalties, expanded whistleblower protections and incentives, and greater MSHA investigative authority. With the combination of both bills, should they pass, many mines will have more reporting requirements and more MSHA encounters to report.

The impetus behind the mine reporting provisions in the financial reform bill apparently is to create pressure from investors and corporate leaders to improve health and safety compliance. Indeed, when the late Senator Robert Byrd (D-WV) introduced these provisions to become part of the financial reform bill, he said it would “ensure that we can all make a reasonably informed assessment of whether companies are getting too close to crossing the line on worker safety and health.”  

The new provisions are not yet law. Ironically, it is Sen. Byrd’s death that has now delayed final Senate passage of the bill until either a 60th senator, such as Scott Brown (R-MA), commits to support it or until the governor of West Virginia appoints as Byrd’s successor someone expected to support the measure. Until then, mine operators have a preview of a significantly more complicated regulatory and reporting world, as well as a “heads-up” to put an even finer point on their safety and health compliance programs and record-keeping.

Meyerstein is an associate with Patton Boggs LLP. He can be reached at 202-457-6623 or by e-mail at