Coal company asks court to void contract with Enron

HARRISBURG, Ill. -- The American Coal Co. has asked a Saline County Court to throw out a seven-year sales contract with Enron Corp., saying its longtime customer breached the terms of the agreement when its credit rating slipped amid bankruptcy and scandal last year.

The Ohio-based American Coal sells several million tons of coal to the Houston-based energy company from mines in Southern Illinois, Washington County, Pa., and Belmont County, Ohio, according to court documents.

Enron, which filed for Chapter 11 bankruptcy protection in December, also helped finance American Coal's purchase of Illinois' Galatia mine from Kerr-McGee in 1998.

But in a lawsuit filed May 23, American Coal said Enron breached the sales agreement when its credit rating slipped below set minimum levels late last year, shortly before the energy company declared bankruptcy, according to court documents.

American Coal notified the company in November that it planned to terminate the contract the next month, according to the documents.

Enron lawyer Mark Greenberg sent a letter back demanding the two sides adhere to the contract, and demanding American Coal pay the Houston company $1.8 million in "default payments," according to court files.

Enron spokesman Eric Thode said Friday the company would not comment on pending litigation.

The purchasing contract was to be in effect from July 24, 1998, to Dec. 31, 2005, according to the documents.

American Coal spokesman Steven Cohen said the privately held company can sell the coal to other customers if the court grants its request to dump Enron.

"We're covered through 2003 and we've got some open tons beyond that," Cohen said. "But we've got other buyers."

The Galatia mine produces around 7 million tons of coal annually, company officials said. American Coal's Maple Creek Mine in Washington County, Pa., produces around 3 million tons, and its Powhatan No. 6 Mine in Belmont County, Ohio, produces around 5.5 million tons of coal a year, Cohen said.