Patriot Coal sues Keystone Industries over coal contract

The Patriot Coal Sales LLC unit of Patriot Coal (NYSE: PCX) filed suit June 1 against Keystone Industries LLC, a coal producer and marketer, over alleged breach of a coal supply contract.

Keystone Industries is incorporated under the laws of Maryland with a principal place of business in Fort Myers, Fla., Patriot noted in the lawsuit, filed in the U.S. District Court for the Southern District of West Virginia. West Virginia Secretary of State records has the company’s sole member as Tom Scholl. Keystone had not responded to the lawsuit as of June 6.

On or about Dec. 7, 2011, Patriot and Keystone entered into a contract under which Keystone agreed to purchase coal from Patriot, with that deal called the Coal Confirmation.  Because the Coal Confirmation contains a confidentiality provision, Patriot filed a copy of it with the court under seal. Under the Coal Confirmation, Keystone was to take delivery of, and pay for, coal from Patriot upon certain specified terms and conditions during 2012. Those terms and conditions required Keystone to take monthly delivery of its total purchase obligation on a pro rata basis, Patriot said.

“It is Patriot’s understanding that Keystone intended to resell the Patriot coal to its own buyer,” Patriot wrote. “Keystone’s obligations under the Coal Confirmation were not contingent, however, upon Keystone identifying or contracting with a buyer nor are Keystone’s obligations contingent upon the performance of its buyer. Keystone has not taken or paid for any coal as it is obligated to do under the Coal Confirmation.”

On May 11, Patriot said it sent a letter notifying Keystone that it was in breach and default of the Coal Confirmation. The notice provided Keystone 30 days to cure its default under the Coal Confirmation. “As of the date of this Complaint, Keystone has not cured its breach and default of the Coal Confirmation,” Patriot added. “Keystone failed to take or pay for a single ton of coal as it is obligated to do under the Coal Confirmation despite having contracted to take and pay for hundreds of thousands of tons of coal by the date of this Complaint. By its words and actions, Keystone has repudiated the Coal Confirmation in its entirety.”

Patriot is asking for: damages representing the present value of the loss of sales to Keystone in the quantities and prices specified in the Coal Confirmation, in an amount to be determined at trial, but in any event in excess of the jurisdictional minimum; pre- and post-judgment interest; and any further and additional relief as the court deems just and proper.

Said the Keystone website about the company: “Keystone Industries has a 140 year history in coal production. Financially strong and privately held, Keystone sells coal and petcoke in the United States as well as the international markets. Keystone has multiple terminal operations at Keystone Terminal Jacksonville, Florida and Keystone Terminal Ironton, Ohio. Keystone Mineria in Colombia, South America, has acquired coal concessions and with exploration is proving reserves. … Keystone Development in West Virginia, USA has 6,000 acres of coal reserves; production there began in 2001.”

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.