Vectren 2013 Annual Report Download - page 18

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Mine Safety Information
The Company retains independent third party contract mining companies to operate its coal mines. Five Star Mining LLC ("Five
Star") is the contract mining company at the Prosperity underground mine and Black Panther Mining LLC ("Black Panther") is
the contract mining company at the Oaktown underground mines. The contract mining companies are the mine “operator”, as
that term is used in both the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) and the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010. All employees at the coal mines are hired, supervised, and paid by the contract
mining companies. As the mine operator, the contract mining companies make all regulatory filings required by the MSHA. In
most circumstances, however, the cost of fines and penalties assessed by MSHA are contractually passed through from the
contract mining company to Vectren Fuels. The process of settling such claims can take years in certain circumstances. During
the years ended December 31, 2013 and 2012, the Company paid approximately $1.2 million and $0.7 million, respectively,
related to assessments issued to the mine operators.
More detailed information about the Company’s mines, including safety-related data, can be found at MSHA’s website,
www.MSHA.gov. Prosperity operates under the MSHA identification number 1202249; Oaktown 1 operates under the
identification number 1202394; and Oaktown 2 operates under the identification number is 1202418. Mine safety-related data
included on the MSHA website is influenced by the size of the mine, the level of activity at the mine, and the mine inspector’s
judgment, among other factors. These factors can impact the comparability of information from mine to mine and time period to
time period.
A significant increase in the frequency and scope of MSHA inspections continues generally. Over the twelve month period
ended December 31, 2013 and as a direct result of continued focus on safe work practices, citations issued by MSHA have
decreased significantly. While there has been a reduction in overall citations, on October 11, 2013, a Prosperity mine contract
employee was fatally injured. Additionally, on October 23 and October 29, 2013, there were a significant number of
unwarrantable failure citations written at Prosperity mine. Through the contract miner and consistent with past practice, the
Company intends to fully evaluate the citations written. The process of review, challenge and resolution of any assessment
could be lengthy. However, MSHA no longer is required to wait for final orders of citations before relying on those citations to
place a mine on a Pattern of Violation (POV) status. If in the future, Prosperity mine were placed on POV status, any future
elevated citation written would result in the affected area of the mine being temporarily idled until the issue causing the citation is
resolved. While under POV status, citations written would result in more frequent downtime of portions or all of the mine,
resulting in higher costs of production. Following the receipt of a number of citations written in the fourth quarter of 2013, and in
a continuing effort to address compliance with MSHA requirements, Prosperity is in the process of finalizing a Corrective Action
Program (CAP) to be submitted to MSHA which includes a framework of meaningful measures to address the multiple citations,
a change in mine management, increased management oversight in problem areas, increased manpower dedicated to these
problem areas, and a timetable for achieving reductions.
Energy Marketing
ProLiance
The Company has an investment in ProLiance, a nonutility affiliate of Vectren and Citizens. On June 18, 2013, ProLiance exited
the natural gas marketing business through the disposition of certain of the net assets of its energy marketing business,
ProLiance Energy. ProLiance Energy provided services to a broad range of municipalities, utilities, industrial operations,
schools, and healthcare institutions located throughout the Midwest and Southeast United States. ProLiance’s customers
included, among others, Vectren’s Indiana utilities as well as Citizens’ utilities. Consistent with its ownership percentage,
Vectren is allocated 61 percent of ProLiance’s profits and losses; however, governance and voting rights remain at 50 percent
for each member; and therefore, the Company accounts for its investment in ProLiance using the equity method of
accounting. The Company contracted for approximately 52 percent of its natural gas purchases through ProLiance in 2013.
Additional information regarding the investment in ProLiance is included in Note 7 in the Company's Consolidated Financial
Statements included in Item 8.
Vectren Source
Vectren Source, a former wholly owned subsidiary, provided natural gas and other related products and services in the Midwest
and Northeast United States. On December 31, 2011, the Company sold Vectren Source for $84.3 million, excluding minor