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A federal judge ruled Tuesday that an Emery County mining company owes a Kansas City-based utility nearly $25 million after breaching a contract to supply coal to its power plants.
Aquila Inc., which provides electricity to parts of Missouri and Colorado, as well as natural gas utility service to four Midwest states, was asking for close to $54 million in compensation. But U.S. District Judge Tena Campbell determined that although C.W. Mining Inc. had failed to live up to its contractual obligation to supply the coal, Aquila was eligible for less than half of the damages it was seeking.
Campbell reduced the damages, contending that Aquila's alleged losses in 2007 and 2008 were "too speculative."
C.W. Mining, also known as Coop Mining Co., is affiliated with the polygamous Kingston family. Its Bear Canyon mines are near the base of Huntington Canyon. Calls to C.W. Mining and Aquila were not returned Tuesday.
Campbell's ruling said that in September 2003, C.W. Mining representative Elden Kingston signed a contract with Aquila, pledging to supply two of the utility's coal-fired power plants with 450,000 tons of coal in 2004 and 550,000 tons in 2005 and 2006. Aquila also had an option to buy an additional 550,000 tons in 2007 and 2008.
The contract specified that C.W. Mining would be paid $19.40 per ton in 2004, a figure that would steadily rise to $22.72 by 2008.
But about the time the contract was signed, C.W. Mining became embroiled in a labor dispute with its work force.
"Between 50 and 70 of [C.W. Mining's] 120 employees walked out," Campbell summarized. "Some left in protest over actions taken by [C.W. Mining] to discipline an employee, William Estrada, and some left because of dissatisfaction with wages and what the employees believed were inadequate benefits."
In addition, the judge recounted, the company began encountering problems with its coal reserves.
Roof falls in autumn 2003 prompted the federal Mine Safety and Health Administration to close the company's Bear Canyon No. 1 mine, cutting off access to 1.8 million tons of coal. C.W. Mining was unable to make up for that setback with coal from its No. 3 mine because crews there encountered an underground fire and excessive amounts of mud. And its No. 4 mine was not developed enough to supply the needed coal, Campbell said.
C.W. Mining informed Aquila in April 2005 that it was canceling the coal-supply contract, citing its ongoing labor problems as a "force majeure" that justified the termination. But the mining company did not inform the utility of the fire and mud problems that restricted production.
Ultimately, C.W. Mining supplied just 160,000 tons overall to Aquila. The utility's damage request was based on its subsequent need to buy more expensive coal on the "spot market," coal whose higher sulfur content forced Aquila to also purchase sulfur-emission credits.