Santee Cooper wants Trinity Coal dispute out of federal court

Stating that it is an “alter ego” of the state of South Carolina, the South Carolina Public Service Authority d/b/a Santee Cooper, asked a Kentucky federal court on April 2 to dismiss a lawsuit over coal contract issues brought by Trinity Coal Corp. and Trinity Coal Marketing LLC.

The state-owned utility said that “diversity jurisdiction does not exist because Santee Cooper is an alter ego of the State of South Carolina.” The utility said that position has been affirmed in the past by both state and federal courts. It asked that the court find that Santee Cooper is immune from suit in this court under the Eleventh Amendment to the U.S. Constitution and find that the Federal Declaratory Judgment Act does not confer independent subject matter jurisdiction in the federal courts.

The Trinity companies filed suit March 19 in the U.S. District Court for the Eastern District of Kentucky. The source for this coal is the eastern Kentucky mining operations of Trinity. Trinity Coal, one of the largest coal producers in Central Appalachia, was bought in 2010 from an investment firm by India’s Essar Group.

In or about early October 2007, Trinity Coal Marketing entered into a coal supply agreement (CSA) with the defendant, under which Trinity Coal Marketing agreed to sell at least 14 million tons of coal in the 2008-2013 period. The parties subsequently amended the CSA on or about Jan. 1, 2010. A copy of the CSA was attached to the lawsuit.

Beginning in late 2010, Santee Cooper failed to take delivery of significant tonnage obligations under the CSA, ultimately refusing to accept delivery of, and pay for, hundreds of thousands of tons of coal, said the lawsuit. Furthermore, despite Trinity’s proper notice to defendant in January 2011 of governmental impositions affecting Trinity’s production costs – which impositions entitled Trinity to a price adjustment under the CSA – defendant failed to work out contract changes, the lawsuit added.

“Trinity has been providing coal to Santee Cooper since January 1, 2008,” said the Santee Cooper filing from April 2. “As Trinity’s Complaint reflects, numerous disputes exist between the parties, including whether the coal that Trinity has been supplying meets the guaranteed quality specifications set forth in the Agreement. Santee Cooper contends that Trinity has failed to meet these specifications for an extended period of time and accordingly, Santee Cooper exercised its right to terminate the Agreement by letter dated March 6, 2012. In an apparent effort to control the forum that would hear the parties’ disputes, Trinity filed its Complaint in the Eastern District on March 19, 2012. On March 27, 2012, Santee Cooper filed its own action in Berkeley County, South Carolina.”

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.