EKPC battles two coal producers, but close to settling with one

East Kentucky Power Cooperative (EKPC) is still embroiled in two long-running lawsuits with coal suppliers Appalachian Fuels LLC and Argus Energy LLC, said EKPC in a semi-annual fuel adjustment clause filing at the Kentucky Public Service Commission.

The Feb. 16 filing covers fuel activities during the period May-October 2011.

The Appalachian Fuels contract in dispute is dated December 2001 and covers coal to be delivered to Spurlock Units 1-2. The coal contract with Argus is dated July 1994 and also covers deliveries to Spurlock Units 1-2.

The potential liability of Appalachian Fuels, which has been in bankruptcy since mid 2009, is $24.4m, plus pre-judgment and pre-petition interest and other costs, said EKPC. The potential liability of Argus to EKPC is in excess of $10.2m plus other damages, interest and costs, including attorneys’ fees.

Appalachian breached its agreement to deliver coal to Spurlock and there is a question of whether Appalachian breached its agreement to provide a performance bond to provide further security to EKPC in the event of default or failure to deliver, EKPC said.

EKPC filed a motion for partial summary judgment in March 2008 in the Clark County, Ky., Circuit Court proceeding against Appalachian. While that motion was pending, Appalachian made an assignment for benefit of creditors in May 2009. In June 2009, certain creditors of Appalachian placed Appalachian in involuntary bankruptcy. EKPC filed a proof of claim in that proceeding. The bankruptcy court stayed the Clark Circuit Court proceeding and EKPC said it intends to pursue its claims against Appalachian in the bankruptcy proceeding.

The issues regarding Argus are whether Argus breached its obligation to supply EKPC with coal and whether Argus made material misrepresentations in inducing the electric cooperative to enter into Amendment No. 11 to the contract. The Argus dispute is in the process of being settled, EKPC noted.

EKPC’s coal inventory as of Oct. 31, 2011, was within its target range of 25-40 days’ supply. The Dale inventory was slightly below the target range of 25-40 days’ supply due an intentional inventory reduction warranted by reduced load demand. The Cooper plant’s inventory was within its target range of 25-40 days’ supply. The Spurlock inventory was slightly lower than its range of 25-40 days’ supply due to restricted receipts caused by the failure of its barge unloader.

In October 2011, a shaft in the barge unloader at Spurlock broke and the machinery was immediately shut down. EKPC was able to continue unloading coal from three temporary sites while the unloader was under repair. Because of an adequate stockpile of coal at Spurlock, coupled with coal unloaded at the temporary sites, the production of electricity was not disrupted. The barge unloader was repaired and returned to full service on Dec. 5, 2011.

The filing lists EKPC’s coal contracts of one year or more in length that were in effect during the review period. The contracts are broken down by destination power plant.

Dale:

Trinity Coal Marketing, source mining operations in Perry County, Ky. This is a seven-year contract starting in December 2005. The 2011 contracted tonnage was 120,000 tons, at a base price under the original contract of $53.50/ton, but with escalation since then to a current price in 2011 of $61.18/ton.

Perry County Coal, December 2009 contract that runs for four years. The contracted tonnage in 2011 was 240,000 tons, with a base contract price of $76.75/ton, but escalation from there to a current price in 2011 of $93.95/ton.

Cooper:

National Coal, mine origins in Campbell County, Tenn. This is an October 2004 contract with a seven-year, three-month duration. No actual contract tonnages are shown in the 2009-2011 period, but small amounts of coal were actually delivered during those three years, including 7,079 tons in 2011. The base and current prices are both $56.01/ton.

Trinity Coal Marketing, origins in Perry County, Ky. This is an August 2006 contract with a duration of six years. The contracted tonnage in 2011 was 99,400 tons, with a base contract price of $93.50/ton and a current price in 2011 of $94.94/ton.

Mountainside Coal, origins in Campbell County, Tenn. This is a September 2008 contract with a duration of three years. The 2011 contracted tonnage was 90,000 tons, with a base contract price of $93/ton and a current price in 2011 of $95.67/ton.

B&W Resources, Manchester loadout in eastern Kentucky. This a four-year deal that was effective in November 2009. The 2011 contracted tonnage was 240,000 tons, with a $64.06/ton base price and a current price in 2011 of $83.07/ton.

Trinity Coal Marketing, origins in Perry County, Ky. This is a May 2010 contract that runs for four years. The 2011 contracted tonnage was 165,600 tons, with a base price of $69.17/ton and a current price in 2011 of $71.09/ton.

Jamieson Construction, origins in Bell County, Ky. This is a May 2010 contract that runs for three years. The 2011 contracted level was 96,000 tons, with a base price of $72/ton and a current price of $84.25/ton.

Spurlock:

Oxford Mining, source mines in Ohio. This deal dates from November 2004 and runs for 10 years. The 2011 contracted tonnage was 600,000 tons. The base price was $25/ton, with a current price in 2011 after escalation of $44.76/ton.

Armstrong Coal, origins in Ohio County, Ky. This is an October 2007 contract due to run for three years and nine months. The 2011 contracted amount was 540,000 tons, with a base price of $27.82/ton and a current price in 2011 of $32.74/ton.

B&N Coal, mines in Ohio. This is a July 2008 contract with a duration of six years. The 2011 contracted tonnage was 230,100. The base price was $39/ton, with a current price in 2011 of $38.87/ton, plus two cents per ton of severance tax and $1/ton surcharge.

B&N Coal, mines in Ohio. This February 2011 contract runs for five years and three months. The 2011 contracted tonnage was 163,050. The base price is $37.41/ton, with a current price in 2011 of $42.93/ton, plus a $1/ton surcharge.

Williamson Energy, with a coal source of the Pond Creek longwall mine in Illinois. This is an August 2008 contract that runs for nine years. The 2011 contracted tonnage was 240,000 tons, with a base price of $48/ton and a current price in 2011 of $59.50/ton.

Oxford Mining, Ohio mines. The contract dates from August 2008 and runs for eight years, five months. The 2011 contracted level was 360,000 tons. The base price is $51.50/ton, with a current price in 2011 of $51.82/ton.

White County Coal, source is Pattiki deep mine in Illinois. This is a September 2008 contract that runs for six years. The 2011 contracted tonnage was 240,000 tons, with a base price of $71.99/ton, and an unusual decrease in the current price in 2011 down to $51.75/ton.

Alpha Coal Sales, Black Castle operations in Boone County, W.Va. This is an August 2009 contract that runs for three years. The 2011 contracted tonnage was 180,000, with a base price of $41.99/ton and a current price in 2011 of $55.71/ton.

Consolidation Coal, Shoemaker longwall mine in northern West Virginia. This is an August 2009 contract that runs for three years. The 2011 contracted tonnage was 257,446 tons, with a base price of $52.50/ton and a current price in 2011 of $55.50/ton.

Alpha Coal Sales, Black Castle operation in Boone County, W.Va. This is a May 2010 contract that goes for three years. The 2011 contracted tonnage was 120,000, with a base price of $44.99/ton and a current price in 2011 of $51.20/ton.

James River Coal Sales, operations in Pike County, Ind. This is a 2.5-year deal that dates from May 2010. The 2011 contracted tonnage was 120,000, with a base price of $37.50/ton and a current price in 2011 of $43.71/ton.

Peabody COALSALES, Highland mine in western Kentucky. This is a June 2010 contract that runs for 1.5 years. The 2011 contracted tonnage was 300,000, with a base price of $38.75/ton and a current price in 2011 of $40.67/ton.

Peabody COALSALES, Somerville mine in Indiana. This July 2010 contract runs for three years. The 2011 contracted tonnage was 180,000, with a $45.45/ton base price and a current price in 2011 of $52.63/ton.

American Energy, Galatia operation in Illinois. This six-year contract was effective in September 2010. The 2011 contracted tonnage was 120,000 tons, with a base price of $46.18/ton and a current price in 2011 of $47.57/ton.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.