Alliance Resource Partners LP and units of Allegheny Energy Inc. filed an April 9 lawsuit against Donegal Township in Washington County, Pa., with Alliance saying a new township ordinance endangers both its Tunnel Ridge and Penn Ridge longwall mine projects.

The plaintiffs said that the township, in violation of the commerce clause of the U.S. Constitution, passed an ordinance in December 2007 that seeks to ban mining in the township. "The Anti-Mining Ordinance has a substantial impact on interstate commerce because it has the effect of curbing the supply of coal, which is an important natural resource, at a time when demand for coal is growing substantially," said the plaintiffs. The lawsuit also said the ordinance violates the contracts and equal protection clauses, due process rights and the First Amendment of the U.S. Constitution. It is also an illegal taking without adequate compensation, the plaintiffs contend.

The anti-mining ordinance is called "An Ordinance to Protect the Health, Safety, and General Welfare of the Citizens and Natural Environment of Donegal Township By Banning Corporations from Engaging in Mining Within the Township; By Banning Corporate Ownership of Land and Mineral Estates Used for Mining Within the Township; By Banning Persons From Using Corporations to Engage in Mining; By Banning the Exercise of Certain Powers By Mining Corporations; By Recognizing the Rights of Ecosystems and Natural Communities; and By Providing for Enforcement of Those Rights." The lawsuit also disputes a companion anti-corporation ordinance enacted by the township.

The lawsuit was filed in the U.S. District Court for the Western District of Pennsylvania. The lawsuit said that both Alliance's planned Tunnel Ridge mine, which would have an entry in neighboring Ohio County, W.Va., and its Penn Ridge mine, with an opening in Pennsylvania on the Buffalo coal reserve, would eventually work coal reserves in Donegal Township. Both mines would tap the high-sulfur Pittsburgh seam and would be aimed primarily at newly-scrubbed power plants in the region.

"Penn Ridge Coal plans to develop, open and operate a coal mine to extract coal from the Buffalo Reserve," said the lawsuit. "The estimated capital costs to Penn Ridge Coal to develop the mine in the Buffalo Reserve are between $165 million and $175 million." Penn Ridge Coal LLC is a unit of Alliance, as is Tunnel Ridge LLC.

Alliance had obtained this reserve earlier this decade from Allegheny Energy and Allegheny Energy's Allegheny Pittsburgh Coal Co. unit. "Pursuant to the Sales Agreement, Penn Ridge Coal agrees to sell and Allegheny Energy and Mon Power agree to purchase up to 20 million tons of coal to be mined by Penn Ridge Coal from the Buffalo Reserve," said the lawsuit. "Allegheny Energy and Mon Power anticipate using the coal supplied by Penn Ridge Coal under the Sales Agreement to generate electricity at their coal-fired power plants, including those located in Greene County, Pennsylvania and Monongalia County, West Virginia." Mon Power is Allegheny's Monongahela Power Co. unit.

The lawsuit added: "The terms of the Anti-Mining Ordinance purports to render invalid any permit that Penn Ridge Coal would obtain to allow Penn Ridge Coal to mine the portion of the Buffalo Reserve that is within Donegal Township. Even if Penn Ridge Coal were to obtain a valid permit to mine the portion of the Buffalo Reserve within Donegal Township, the Anti-Mining Ordinance purports to require Penn Ridge Coal and Allegheny Pittsburgh to divest themselves of their property interests in those reserves."

As for the Tunnel Ridge project that will start in West Virginia, the lawsuit said: "Tunnel Ridge leases approximately 30.1 million tons of recoverable coal reserves within Donegal Township. These reserves are part of approximately 70.5 million tons of recoverable coal reserves that Tunnel Ridge leases in Donegal Township and surrounding areas (the 'Tunnel Ridge Reserve'). Tunnel Ridge pays an annual advance royalty of approximately $3 million to lease the coal in the Tunnel Ridge Reserve. Tunnel Ridge plans to operate a mine located in West Virginia to begin mining the Tunnel Ridge Reserve (the 'Tunnel Ridge Mine'). The course of the mining will be toward Pennsylvania and specifically Donegal Township."

The lawsuit added: "Tunnel Ridge has substantially prepared an application to be submitted to the Pennsylvania Department of Environmental Protection seeking a permit (the 'Permit') to conduct mining operations in the Tunnel Ridge Mine within Donegal Township and surrounding areas. The Permit sought by Tunnel Ridge will allow Tunnel Ridge to extend the Tunnel Ridge Mine from West Virginia into Pennsylvania and Donegal Township. The estimated capital cost to Tunnel Ridge to develop the Tunnel Ridge Mine is between $210 million and $235 million. Tunnel Ridge anticipates mining approximately 5 to 6 million tons of coal per year from the Tunnel Ridge Mine which coal will be sold to utility companies for electrical generation."

The lawsuit further noted: "The terms of the Anti-Mining Ordinance purport to render invalid the Permit that Tunnel Ridge would obtain to allow Tunnel Ridge to mine the portion of the Tunnel Ridge Reserve that is within Donegal Township. Even if Tunnel Ridge were to obtain the Permit to mine the portion of the Tunnel Ridge Reserve within Donegal Township, the Anti-Mining Ordinance purports to require Tunnel Ridge to divest its property interests in all coal reserves within Donegal Township."

The court has granted the township an extended deadline of June 16 to reply to the suit. On May 27, the court issued a case management order setting a Sept. 2 deadline for pleadings. There was also a May 27 order issued putting this dispute into mediation in front of mediator Donald Ziegler.