Ambre looks to explore Montana coal, battles with Cloud Peak

Australia’s Ambre Energy Ltd. is seeking an exploration license from the U.S. Bureau of Land Management on 9,474 acres of unleased federal coal in Big Horn County, Mont., said BLM in a Dec. 4 notice in the Federal Register.

Any party seeking to participate in this exploration program and share program expenses with Ambre must send written notice to both the BLM and Ambre Energy by Jan. 3, 2013, or 10 calendar days after the last publication of this notice in the Sheridan Press newspaper, whichever is later.

“The purpose of the exploration program is to gain additional geologic knowledge of the coal underlying the exploration area for the purpose of assessing the coal resources,” said the BLM notice. “The exploration program is fully described and will be conducted pursuant to an exploration license and plan approved by the BLM. The exploration plan may be modified to accommodate the legitimate exploration needs of persons seeking to participate.”

Ambre co-owns 50% of the Decker strip mine in Big Horn County, with Cloud Peak Energy (NYSE: CLD) controlling the other, non-operating 50%. U.S. Mine Safety and Health Administration data shows that Decker produced 2.1 million tons of coal in the first nine months of this year and 3.1 million tons in all of 2011.

Ambre and Cloud Peak have lately been in federal court battling about the Decker mine. Ambre has said Cloud Peak wants to close it out, with the mine to shut after a final contract to supply Detroit Edison expires. But Ambre, which bought its 50% of the mine in 2011 in a buy of KCP Inc. from Level 3 Communications, wants to extend the mine life, largely to serve the export market, and has accused Cloud Peak of trying to get Decker shut to eliminate competition for Cloud Peak’s wholly-owned Spring Creek strip mine nearby, and for new mining operations Cloud Peak wants to develop in the area, including the Youngs Creek mine project. Cloud Peak has accused Ambre of taking actions, without its approval, to extend the mine’s life.

Cloud Peak, Ambre argue about jurisdiction of Montana court

The Cloud Peak lawsuit against Ambre Energy Ltd. (Ambre Ltd.) was filed July 9 by Cloud Peak’s Western Minerals LLC at the U.S. District Court for the District of Montana. The latest filing in the case as of Dec. 4 was Cloud Peak’s Nov. 14 brief arguing against Ambre’s motion to dismiss.

In that Nov. 14 brief, Cloud Peak said that Ambre has argued that is not subject to specific personal jurisdiction in Montana because Michael Mewing’s (an Ambre Ltd. board member) visit to Montana to market coal from the Decker mine to prospective South Korean customers did not result in any agreement. Ambre’s new argument about its agreement (or lack thereof) with South Korean power generators both contradicts its own press releases and is irrelevant to the jurisdiction analysis, Cloud Peak wrote.

“Here, a large part of the harm alleged by Western in its complaint relates to Ambre Ltd.’s assistance to KCP in its breach of its fiduciary duties, in large part to allow Ambre Ltd. – instead of the Decker Coal Company – to reap the benefit of the proposed plan to export Montana-based coal,” said the Nov. 14 Cloud Peak brief. “Thus, all of Ambre Ltd.’s activities directed to the Montana-located Decker Coal Mine count for jurisdictional purposes so long they were designed to have an effect in Montana. In addition to Mewing’s visit to Montana to solicit what Ambre Ltd. has represented is a multi-billion dollar agreement, Ambre Ltd. (1) issued press releases and marketing materials touting Ambre Ltd.’s ownership of the Decker Coal Company with the express purpose of generating an export market for Montana-based coal; (2) commissioned a detailed and substantial report on Montana coal reserves in order to further its efforts to solicit customers for Montana-based coal; (3) authorized the expenditure of funds for a dragline tub to be used by the Decker Coal Company in Montana even though the Decker Coal Company itself had not approved such a purchase; and (4) solicited equity investments that Ambre Ltd. specifically represented would be used to fund general maintenance at the Decker Coal Mine. Thus, there can be no doubt that Ambre Ltd. purposefully injected itself into Montana to a significant degree.”

Ambre is represented by the same Montana and Utah lawyers as KCP and has already demonstrated that those lawyers can adequately arrange for declarations from Australia-based executives when necessary, Cloud Peak said. Moreover, modern advances in communications and transportation have significantly reduced the burden of litigating in another country, it added.

Cloud Peak says it does not necessarily want to close Decker

Ambre is making an “inflammatory and false allegation” that Western/Cloud Peak’s purpose in bringing this action is to close the Decker mine, said the Nov. 14 brief. “As far back as 2010 and as recently as August 31, 2012, Western has repeatedly reiterated to Ambre Ltd., and its subsidiaries, that as a 50% owner of the Decker Coal Company, Western has been, and continues to be, prepared to evaluate any economically viable proposal to extend the life of the Decker mine beyond the existing Detroit Edison contract in a manner that serves the best interests of the Decker Coal Company and both of its owners,” it added. “Ambre Ltd.’s characterization of Western’s position in this litigation is both wrong and misleading.”

Cloud Peak later added: “Montana certainly has a paramount interest in determining whether Ambre Ltd. is inappropriately and illegally meddling in the operation of a Montana-based company. And even if Ambre Ltd.’s characterization of this lawsuit was correct – and it unequivocally is not – it is hard to imagine why Montana would not have a substantial interest in a lawsuit supposedly orchestrated to shut down a Montana-based business.”

Ambre points out that Australian courts provide an alternative forum for any dispute between Western and Ambre but makes no attempt to address how separate and parallel litigation in Australia would result in the most efficient judicial resolution of this controversy, Cloud Peak added. “Separate lawsuits in Montana and Australia would hardly be efficient for the parties or the public courts of both countries. Western’s claims against Ambre Ltd. arise out of the same facts and involve the same evidence and witnesses as its claims against KCP and Ambre North America. Resolving this controversy in a single proceeding in Montana is the most efficient. There is no logical argument to the contrary.”

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.