Foresight, TVA strike a deal and get lawsuit dismissed

A federal judge on May 1, at the request of the parties, dismissed a May 2010 lawsuit that coal operator Chris Cline’s Foresight Coal Sales LLC had filed against the Tennessee Valley Authority in a dispute over whether TVA had formally signed a contract to take coal from a mine in Illinois.

Foresight Coal Sales (FCS) and TVA asked in an April 25 court filing that all claims and/or counterclaims in this case should be dismissed with prejudice, with each side to bear its own costs and attorney’s fees, because the dispute had been “fully resolved, settled, and compromised” between them.

The filing, made in the U.S. District Court for the Western District of Tennessee, offered no details on what that settlement entailed. The judge dismissed the case in a May 1 order. The case had been quiet since July 2011 while the sides worked on a deal.

Foresight Energy Partners LP, the parent of Foresight Coal Sales, is getting ready to go public in an IPO. It said about this dispute in an April 12 Form S-1/A filing at the SEC: “In 2010, one of our subsidiaries, FCS, filed a breach of contract action against the TVA for failure to accept and pay for any coal sold by FCS under a coal purchase confirmation executed by the parties in September 2008. The coal sales confirmation requires FCS to sell and TVA to purchase 700,000 tons of coal per year for each contract year beginning January 1, 2009 and ending December 31, 2011. This suit is stayed to allow the parties to discuss settlement.”

Foresight said in a May 2011 version of the lawsuit that TVA promised to pay Foresight $67.25 per ton F.O.B. railcar for this coal at Williamson Energy LLC’s Pond Creek Siding or $72.50 per ton F.O.B. railcar at the GRT terminal. TVA had said during the court case that it never signed a formal contract for this coal and that the people in its fuels department working on this deal had no power to bind the utility to a contract this large.

Foresight Energy Partners has four coal mining complexes in Illinois, with the coal to TVA supposed to come out of the first one to be developed, which is known variously as Williamson, Pond Creek No. 1 and Mach No. 1. It is a longwall mine in the #6 coal seam with a capacity of up to 7 million tons per year. Two other longwall complexes, Sugar Camp and Hillsboro, are in development. The fourth operation, Macoupin, is a room-and-pillar job.

In 2011, the company produced 10.4 million tons of coal and in 2010 it produced 7.2 million tons of coal. The four mining complexes (Williamson, Sugar Camp, Hillsboro and Macoupin) are designed to support up to eight longwall mining systems, giving them a combined productive capacity of up to 65 million tons of high-Btu coal per year.

“We sell a significant portion of our coal under agreements with terms of one year or longer,” said the Form S-1/A. “We market and sell our coal to a diverse customer base including electric utility and industrial companies in the eastern United States, as well as the seaborne thermal coal market. For 2012, 2013 and 2014, we have secured coal sales commitments for approximately 14.5 million tons, 13.8 million tons and 11.3 million tons, respectively, of which all in 2012, approximately 9.3 million tons in 2013 and approximately 6.9 million tons in 2014 are priced.”

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.