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Justice company sued in coal shipment dispute

 

Gov. Jim Justice’s family coal operation is facing a multimillion-dollar legal action over its alleged failure to live up to coal supply contracts with a Canadian steel mill, according to federal court records.

The Justice family’s Southern Coal Sales Corp. denied the allegations in a legal answer filed Thursday, and is seeking to have the case moved from bankruptcy court in Delaware to federal district court in New York.

Filings in the case had previously been on hold, as the two sides said they were “engaged in discussions concerning a potential settlement.” It’s not clear if those talks are still ongoing, and both sides declined to comment on the matter.

In the case, Essar Steel Algoma Inc., also known as Algoma Canada, alleges that Southern Coal did not provide the amounts or quality of coal required by several agreements it made with Southern. Lawyers for Essar Steel Algoma filed the case in U.S. Bankruptcy Court in Delaware in early March, in conjunction with its bankruptcy reorganization in the Canadian court system.

Algoma Canada is an integrated steel producer with its main operation in Sault Ste. Marie, Ontario, Canada. It is a unit of a unit of the Indian conglomerate Essar Global Fund Ltd

According to the lawsuit, Southern Coal and Algoma Canada had agreed to annual contracts that called for coal to be shipped by train from Southern’s mines to Ohio, where it would be shipped across the Great Lakes. The suit said that Algoma Canada needs to build up a sufficient inventory of coal before the winter months, when the lakes freeze and shipment that route is impossible. Algoma Canada uses the coal it purchases from Southern to make metallurgical coke.

“Timely coal delivery is very important for Algoma Canada’s production of coke and could cost Algoma hundreds of millions of dollars should coke production be forced to stop due to lack of sufficient, timely coal deliveries of the right quality,” the lawsuit states. “If the coke batteries are forced to stop production due to lack of coal, it would cost Algoma Canada hundreds of millions of dollars to repair and restart them.”

The suit says that Southern Coal had agreed to supply Algoma with 780,000 tons of coal between April 2016 and May 2017, but only provided just less than 250,000 tons. It also alleges that Southern Coal provided coal to Algoma that did not meet the specifications required by the contract. The suit says that Southern Coal has refused to pay penalties required by the contract and that Southern still has a $6.1 million deposit that was paid by Algoma.

The lawsuit seeks $6.5 million in damages for a shortfall under one agreement with Southern, $7 million for a shortfall in coal under another agreement, and $2.5 million in damages for coal that did not meet specifications.

Southern Coal’s lawyers counter in court documents that Algoma defaulted on a contract prior to November 2015 and failed to pay Southern Coal more than $6 million owed to the coal company.

Justice and the governor’s office have said that Justice was turning over handling of day-to-day control of his coal holdings to his son, Jay Justice, and of his hospitality businesses, such as The Greenbrier resort, to his daughter, Jill Justice.

During last year’s gubernatorial campaign, Justice was repeatedly dogged by criticism about environmental and mine safety fines, unpaid taxes and legal disputes with vendors and other companies about unpaid bills — all while he spent millions on his own political campaign. Most significantly, National Public Radio reported last October about $15 million in unpaid taxes and safety fines related to Justice’s companies.

Reach Ken Ward Jr. at kward@wvgazettemail.com, 304-348-1702 or follow @kenwardjr on Twitter.