JPMorgan Chase's Coal Problem
JPMorgan Chase's Coal Problem
Do we really want to keep blasting the tops off mountains, destroying forests and dumping the rubble into waterways, in order to extract and burn coal that is messing up the climate?
For now, the answer to that question is yes, despite vigorous efforts by environmentalists and activists in Appalachia to stop mountaintop removal mining. Some are behind a bill in Congress sponsored by Lamar Alexander, a Republican, to end the practice. Others are calling on big banks -- in particular JP Morgan Chase -- to stop financing mountaintop mining.
The pressure on JP Morgan Chase is coming from activist groups including the Sierra Club, the Rainforest Action Network and an Appalachian group called Climate Ground Zero which calls itself an "ongoing campaign of nonviolent civil disobedience in southern West Virginia to address mountaintop removal coal mining." All are stepping up their efforts in advance of JP Morgan Chase's annual shareholder meeting on May 18. They plan to release a list of the worst funders of MTRmining before then, and chances are Chase will be at or near the top.
What's wrong with mountaintop removal mining? Lots. Here's an overview from a coalition of anti-mining groups. This article from Science magazine (payment required) takes a more dispassionate view and concludes that it is difficult, if not impossible, to mitigate the damage caused by clearing forests, exploding the tops of mountains and choking streams with rocks and dirt. The scientists say:
current attempts to regulate MTM/VF ["mountaintop removal mining with valley fills"] practices are inadequate. Mining permits are being issued despite the preponderance of scientific evidence that impacts are pervasive and irreversible and that mitigation cannot compensate for losses.
This is not an activist group speaking. This is a publication of the American Association for the Advancement of Science.
JP Morgan Chase says all the right things when it comes to the environment. For example:
Our goal is to make a positive contribution to sustainability by integrating environmental principles into our business model.
JPMorgan Chase will assume a leadership role in the financial services industry by helping to reduce greenhouse gas emissions in our value chain
But the record does not support this overblown rhetoric. According to the many activists (see this and this and this), who cite data from Bloomberg, JP Morgan Chase has been a major financier of MTR mining, as recently in 2008 and 2009. In 2008, JP Morgan acted as lead manager (with UBS) on a $690 million bond offering and $234 million stock offering by the now-notorious Massey Energy, the largest MTR producer of coal and a company with a terrible environmental and safety record. Massey, of course, operates the Upper Big Branch deep mine in West Virginia where 29 miners died last month in the worst U.S. mine disaster in decades.
In 2009, JP Morgan helped Arch Coal, the second-biggest coal company in the U.S., raise $600 million, according to JP Morgan's War on Nature, an article in Mother Jones by Andy Kroll. Arch Coal, the article says, "mined 4.7 million tons of coal using MTR" in 2009 alone and has for a decade been trying to develop an MTR operation called Spruce that, as originally planned, would have been the largest ever. (Currently, less than 10% of Arch's coal production comes from Appalachia.) Merrill Lynch, Citigroup and Morgan Stanley also participated in the deal with Arch, according to an industry source who asked not to be identified.
I spoke last week to Mike Roselle, who helped start the Rainforest Action Network and now leads Climate Ground Zero, which is based in West Virginia coal country. The group has organized more than a dozen nonviolent protests at coal mines, at the U.S. EPA and at the offices of West Virginia environmental regulators. (Or should I say "regulators"?) Mike and his allies have been arrested, they have served jail time and they have been condemned as "domestic terrorists" by Massey. Ken Ward, the outstanding environmental reporter at the Charleston Gazette, has written extensively about the protests at his Coal Tattoo blog.
Climate Ground Zero has just launched an online campaign called Mountains Rule, asking supporters to close their Chase bank account, take video of the experience, promote the campaign on social media and spread the word by wearing this campaign badge.
"Ultimately, we have to go after their customer base -- the people who have accounts in their bank and the people who use Chase credit cards," Roselle told me. "This is something that our allies can do in their neighborhoods, without having to come down to West Virginia."
Chase, he said, should be worried about potential damage to its brand. "One thing that's important to them is their potential to grow and increase market share," he said.
Because there's no single metric against which to measure the banks, it's hard to determine which bears most responsibility for mountaintop removal mining.
The Mother Jones story says:
Wells Fargo has cut ties with coal giant Massey Energy. And a Credit Suisse official says the bank has a "global mining policy" that ensures "we explicitly do not finance the extraction of coal in a mountaintop removal setting." [Note: I couldn't find any reference to this on the Credit Suisse website.]
In 2008, after being targeted by activists, Bank of America published a coal policy (PDF) that says the bank will phase out financing for companies whose "predominant method of extracting coal is through mountain top removal" mining. This is less sweeping than it sounds because of the word "predominant." Most coal companies get most of their coal from underground mining, so under the policy, BofA could theoretically finance a lot of MTR.
Just last week, Citi reported on its mountaintop removal policy, which was released last August. The bank said that it screened three MTR transactions in 2009 for their environmental risks, with two being approved and one turned down. Citing Bloomberg records, RAN's Amanda Starbuck says Citi financed Teco Energy and Consol Energy. The bank won't say which deals it approved or turned down, citing client confidentiality.
I asked JP Morgan Chase's James Fuschetti, who is managing director of the office of environmental affairs, to respond on the record to the activists' campaign. He declined but in a letter to a Chase client obtained by RAN, he wrote:
JPMorgan Chase has made a substantial effort to better inform itself about the environmental and social impacts of mountaintop removal coal mining in Appalachia. As a result of our own analysis and benefiting from information and perspectives provided by others, our senior management's awareness of these impacts has increased significantly. Consequently, early in 2009 we took concrete action to ensure appropriate assessment and review procedures are in place to evaluate these impacts when considering working with companies engaged in MTR. We also began including our Reputation Risk Committee when examining transactions for companies engaged in MTR.
In that same letter, Fuschetti wrote that JP Morgan "has not arranged or underwritten a capital markets transaction for Massey Energy since August 2008." Interestingly, Massey raised another $425 million this past March, aided by UBS and other banks but not JP Morgan Chase. What we don't know is whether JP Morgan Chase turned down the opportunity to be part of that deal.
Fuschetti also said that finding a solution to the MTR controversy is "the proper role of representative government, not NGOs with their own agendas or banks with their business interests." This last point is questionable. People who feel a moral obligation to agitate for change -- think of the civil rights activists of the 1950s -- can't be expected to write polite letters to Congress and hope for the best.
JP Morgan Chase may have more to say at its annual meeting. One sign that it is listening to critics: Boston Common Asset Management, an institutional investor and activist shareholder, withdrew a shareholder resolution about the company's coal lending practices, after engaging in discussions with the company.
Down in coal country, Mike Roselle is confident that JP Morgan Chase will stop financing MTR mining.
"I know we'll win this campaign," he says. "It's just a question of how long it's going to take and how many mountains get blown up before we do."
[Disclosures: I was paid to speak at a JP Morgan Chase event in 2005 and more recently consulted with Citi as the bank developed an idea that it is calling responsible finance.]
GreenBiz.com Senior Writer Marc Gunther is a longtime journalist and speaker whose focus is business and sustainability. Marc maintains a blog at MarcGunther.com. You can follow him on Twitter @marcGunther.
Mining photo CC-licensed by The Sierra Club.