CHARLESTON — As a $12 million tax break requested by Gov. Jim Justice to save the Pleasants Power Station passed the Legislature Tuesday, the plant’s owner and a Justice-owned coal company are in a legal battle.

FirstEnergy Solutions Corp., the operators of Pleasants Power Station, filed an adversarial proceeding against Bluestone Energy Sales Corp. on Dec. 13. An adversarial proceeding is a lawsuit related to an ongoing bankruptcy case. FirstEnergy Solutions, headquartered in Akron, filed for chapter 11 bankruptcy in U.S. Bankruptcy Court of the Northern District of Ohio on March 31, 2018.

In the complaint, FirstEnergy alleges Bluestone owes $3.1 million to the power company for excess coal stockpiles Bluestone agreed to buy back. Attorneys for FirstEnergy are asking the court to turn over the final payment due by Bluestone and declare Bluestone in breach of contract.

On Oct. 10, 2016, FirstEnergy and Bluestone entered into a coal purchase agreement.

According to the agreement, Bluestone agreed to purchase 130,771 tons of coal previously purchased by FirstEnergy Generation from Bluestone. Both FirstEnergy and FirstEnergy Generation are former subsidiaries of FirstEnergy Corp.

According to the deal, Bluestone was supposed to buy back the coal it sold to FirstEnergy and agreed to pay FirstEnergy after Bluestone sold the coal to third-party customers. Bluestone agreed to pay FirstEnergy for whatever coal was left unsold by Feb. 28, 2017. The final payment date in the agreement was no later than March 7, 2017.

As part of the agreement, Bluestone agreed to pay FirstEnergy $40 per ton of coal remaining. As of March 2, 2017, there was more than 77,095 tons of coal remaining, totaling more than $3.1 million. FirstEnergy alleges that Bluestone did not submit final payment by the March 7, 2017, or by April 15, 2017, which Bluestone said it would do.

“Currently, Bluestone Energy Sales Corp. has a significant amount of coal in inventory that is waiting to ship,” wrote Summer Harrison, vice president of treasury at Bluestone in a letter dated March 2, 2017. “It is our intention to have all this coal delivered to customers by 4-15-17. Once this coal is shopped, we will be able to send payment to First Energy.”

In a letter dated Sept. 24, 2018, FirstEnergy Vice President James Mellody gave Bluestone until Oct. 15, 2018, to pay the $3.1 million for the remaining coal. According to complaint, Bluestone did not respond to that letter.

In a motion to dismiss the first count of the complaint filed Jan. 28, Bluestone admits that it had an agreement to pay for the remaining stockpiled coal, but never agreed to an amount of money. Jay Justice, son of the governor and manager of the Justice family coal interests, got involved by emails sent June 2, 2017.

“Bluestone’s principal, Jay Justice, through the use of the phrase ‘get money moving again,’ expressed Bluestone’s understanding of the parties’ agreement-that Bluestone owed FirstEnergy for purchased coal only upon Bluestone’s subsequent resale of that coal,” the motion stated.

Bluestone disputes that there was 77,000 tons of coal remaining in its stockpiles.

“Bluestone denies that any significant tons of coal remain in the stockpile and denies that any significant payment is due to FES for coal that was once in the stockpile,” according to its motion. “Bluestone specifically denies removing any coal from the stockpile and then not making an appropriate payment for that coal to FES.”

FirstEnergy filed an opposition June 17 to Bluestone’s motion to dismiss the complaint. In their response, attorneys for FirstEnergy believe that federal bankruptcy court is the proper venue to hear the case.

“Bluestone admits that it is party to the agreement, admits that the agreement terms ‘speak for themselves,’ and admits that the coal stockpile was on its property,” according to the FirstEnergy response.

Justice announced his intentions Friday to add a bill to the Legislature’s special session call to create a $12 million break on the Business and Occupation Tax for the FirstEnergy-owned Pleasants Power Station south of St. Marys on W.Va. 2. The West Virginia Legislature passed the bill, House Bill 207 on Tuesday.

Pleasants Power is the only merchant power station in the state still paying this kind of tax. It is one of only two merchant power stations, stations who sell their power on the wholesale market instead of the retail market – in the state.

Bluestone Energy Sales is one of 116 companies owned by Justice and listed on his 2019 financial disclosure with the state Ethics Commission. Only Justice’s Glade Springs Resort in Raleigh County and Wintergreen Resort in Virginia are in blind trusts, instruments used to give company control to outside parties to avoid any conflict of interest.

Brian Abraham, general counsel for Gov. Justice, said the office was unaware of a lawsuit between FirstEnergy and Bluestone, and it never came up during discussions about saving Pleasants Power Plant.

“This is the first our staff has been advised of that,” Abraham said Tuesday in a phone call. “None of our conversations with the FirstEnergy folks did that ever come up. I don’t believe the governor has any firsthand knowledge of it, because it has never come up in any of conversations with him.”

In a handout, FirstEnergy said that without HB 207, 160 jobs at the plant could be at risk, the state could lose $400 million in economic activity generated by the plant, and the state could lose out on 3.5 million tons of coal being mined and sent to the plant. Abraham said ensuring the state didn’t lose the benefits that Pleasants Power Plant provides was his only concern.

“(Justice) simply heard about the loss of jobs and the loss of tax base in the community and told use to try to assist them as we could,” Abraham said.

Steven Allen Adams can be contacted at sadams@newsandsentinel.com.