Exclusive: Mexico state utility bought coal from uninspected mines, including fatal site -records

OAXACA CITY, Mexico, Sept 7 (Reuters) - Mexico's state-owned power utility has been buying coal from new mines that have not yet been visited by labor inspectors, according to a Reuters analysis of coal contracts and inspection records, including the mine where 10 people died last month after flooding trapped them below ground.

Mexican law does not require prior labor inspections for mines that supply Federal Electricity Commission (CFE). But the disaster at the El Pinabete mine, which triggered a huge rescue effort that has yet to retrieve the victims, highlights the dangers faced by thousands of low-paid Mexican miners who work in narrow, primitive mine shafts digging out coal with hand drills and shovels. read more

Many such mines were heading towards extinction until President Andres Manuel Lopez Obrador announced he would "rescue" both Mexico's coal industry and CFE.

In a bid to increase the country's energy independence and combat inequality, Lopez Obrador ordered CFE to buy coal directly from small-scale producers in the northern border state of Coahuila, circumventing the typical bidding process. read more

Researchers, activists and politicians have criticized the policy for lacking transparency, doubling down on dirty energy production, and boosting primitive coal mines prone to fatal accidents.

"It results in the exploitation of pits without the necessary safety (measures) to be able to take care of the workers' lives," said Coahuila Governor Miguel Riquelme in an August press conference.

It also resulted in coal being bought from mines that had not yet been inspected by labor officials.

Of 67 companies in Coahuila that CFE contracted in 2020 and 2021, at least 30 had not been inspected by the Mexican Labor Secretary prior to receiving a contract, according to inspections records of mines obtained by Reuters that date from 2016 through March 2022.

Those 30 suppliers received just under a third of the 3.15 billion Mexican pesos ($157.38 million) that CFE awarded in coal contracts in 2020 and 2021.

The records show that labor inspectors visited most of those mines the year after they received contracts. But three companies have never been inspected.

Among them is El Pinabete, where the disaster occurred, which received a contract from CFE in 2021 for 33.61 million pesos ($1.68 million) worth of coal.

In response to a request for comment, a Labor Secretary spokesperson said they had never sent inspectors to the El Pinabete mine because they were unaware the company operated there. The spokesperson added that inspectors had visited the two other mines, only to find that "at the time of the visits they were out of operation."

The Labor Secretary does not get involved in CFE's procurement process, nor does it have the legal power to, the spokesperson said.

Before signing a contract, CFE requires coal companies to declare under oath that they comply with all mining safety regulations, but is not required to take additional steps to verify.

CFE did not respond to requests for comment.

However, in a July news conference, CFE Subdirector of Procurement Miguel Lopez said the energy company required Coahuila coal mines to provide proof of a positive rating by the Secretary of Labor during a new round of coal contracts awarded to 52 mines this summer. It is unclear whether any of those mines lacked a safety inspection before receiving a contract, because the records reviewed by Reuters do not include inspections past March 2022.

Aleida Azamar, an Autonomous Metropolitan University professor who studies the mining industry, said CFE's policy has led dangerous, small-scale coal mines to "sprout up everywhere" in the coal region, inspiring locals to call them "milpas," or cornfields.

In some cases, Azamar said, beneficiaries of CFE contracts are actually prominent coal companies that registered new mines – often dug in previously abandoned mining zones – under borrowed names.

At the fatal El Pinabete mine, the name of the man who was registered as the employer in Social Security records, Cristian Solis, may have been used to conceal the identity of the real owner, President Lopez Obrador said in an August press conference. Reuters was not able to reach Solis for comment.

The Attorney General's Office announced on Sunday that it obtained arrest warrants for Solis and two others allegedly responsible for "illegal coal exploitation" at the mine.

($1 = 20.0149 Mexican pesos)

Reporting by Jackie Botts; editing by Stephen Eisenhammer and Marguerita Choy

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