During mid-July, Cloud Peak Energy filed a lawsuit against Ambre Energy Ltd. regarding a dispute over the future of the Decker coal mine. Located near Sheridan, Wyoming, USA, in the northern Powder River Basin, the mine is adjacent to Cloud Peak’s Spring Creek mine, a leading West Coast exporter.

Australian-based Ambre became a U.S. coal producer when the company acquired the former Kiewit Coal Properties’ (KCP) 50% interests in two mines in November of 2011 from Level 3 Communications. Under terms of the agreement, Ambre operates and markets the coal for Decker. Since Ambre Energy took over mine management, it has been working toward increasing production while planning to export coal to Asian markets. According to the lawsuit, that is directly against plans agreed upon by Cloud Peak’s subsidiary, Western Minerals, LLC as well as the management team prior to Ambre’s buy-in.

According to the suit, Western Minerals wants Ambre’s mine management removed, charging that they are abusing their obligations and responsibilities. Cloud Peak’s complaint states that Ambre has engaged in various self-dealing transactions designed to give Ambre a disproportionate share of profits on Asian sales.

Cloud Peak alleges that Ambre’s export redevelopment proposition is not that the Decker Coal Co. should sell coal from the Decker mine to Asian utilities with an equal return to both 50% owners, but instead that Ambre will sell coal from the Decker mine to Ambre Entities “so Ambre Entities can retain undisclosed revenues and profits from such coal, while Western Minerals bears 50% of the expense and risk of redevelopment of the mine.”

In a further alleged breach of their contract, despite numerous requests, Cloud Peak claims that Ambre Entities has yet to provide Western Minerals with a complete and transparent business proposal for the redevelopment of the mine, including the commercial terms for the Ambre Entities’ transactions involving coal from the Decker mine.

Ambre vigorously defends both its actions and its strategy. Ambre Energy initially responded with a public statement that management has done nothing wrong, countercharging that Cloud Peak really wants the Decker mine closed because it owns the adjacent Spring Creek mine and other nearby reserves that Cloud Peak intends to market overseas. Given the recent change in management and direction, Decker now represents something of a competitor to Cloud Peak, particularly because Spring Creek has a long established reputation and position in Asian markets.

In an interview with Coal Age, Everett King, president and CEO, Ambre Energy North America, said exporting coal from Decker was always part of the deal. “Our intention in acquiring the KCP properties from Level 3 Communications late last year was to keep Decker competitive domestically but also to have available Decker coal for export to Asian markets through the ports we now have in development,” said King.

At the end of July, Ambre and KCP filed a legal counterclaim against Cloud Peak and Western Minerals. The counterclaim seeks to expel Western Minerals from the Decker partnership. Cloud Peak declined to comment on Ambre’s assertions, instead referring to the text of the lawsuit.

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