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FirstEnergy settles coal contract dispute with Tunnel Ridge

A FirstEnergy Corp. subsidiary will pay $93 million to Tunnel Ridge LLC to settle their dispute over a dropped coal supply contract that was to run through 2020.

The Alliance Resource Partners LP subsidiary on March 15 filed a request with the Court of Common Pleas of Allegheny County, Pa., to settle, discontinue and satisfy its lawsuit against Allegheny Energy Supply Co. and several affiliates. The filing comes after FirstEnergy revealed in a Form 10-K filing with the SEC that the parties reached an agreement in principle to settle all claims in the dispute.

"Certain aspects of the final settlement agreement will be guaranteed by [FirstEnergy], including the $93 million payment," FirstEnergy wrote in its SEC filing.

Tunnel Ridge sued Allegheny Energy in 2015 after accusing the FirstEnergy subsidiary of breaching a long-term contract signed in 2008. Tunnel Ridge claimed Allegheny Energy notified the coal supplier in August 2014 that it would refuse to accept any more shipments under the supply contract, citing force majeure provisions in the agreement including the U.S. Environmental Protection Agency's implementation of the Mercury and Air Toxics Standards rule. Allegheny Energy said the rule forced the closure of several of its coal-fired power plants, including the Hatfield's Ferry and Mitchell Power Station 3 plants in 2013.

Tunnel Ridge amended its lawsuit in May 2017 to accuse Allegheny Energy and the other defendants of acting to deceive it amid other fraud claims.