SEVENTH AMENDMENT
TO
COAL PURCHASE AND SALES AGREEMENT
This SEVENTH AMENDMENT is made and entered into as of July 1,
1994, between ORANGE AND ROCKLAND UTILITIES, INC., a New York
corporation ("Buyer"), RAWL SALES AND PROCESSING COMPANY, INC.
(withdrawing "Seller"), and MASSEY COAL SALES COMPANY, INC., a
Virginia corporation (substituted "Seller").
RECITALS
1. Buyer and Seller, together with Rawl Sales & Processing
Company, Inc. ("Rawl"), an affiliate of Seller, entered into a Coal
Purchase and Sales Agreement on March 9, 1984 (the "Agreement"),
and have amended the Agreement on six previous occasions, July 30,
1986, July 1986, September 1986, January 1987, January 1990, and
July 1, 1991.
2. Buyer and Seller are mutually interested in continuing
their relationship under the Agreement and agree to amend the
Agreement to effect the amendments herein.
3. Buyer, Seller, and Rawl agree that Rawl no longer should
be a party to the Agreement inasmuch as the coal supplied to Buyer
hereunder is, pursuant to the Agreement, supplied by various
affiliates of Seller. These affiliates of Seller and Seller shall,
unless otherwise stated, be collectively referred to as the
"Seller."
4. Buyer and Seller agree that the requirements of the Clean
Act Amendments of 1990, effective May 15, 1995, and certain
equipment installations attendant thereto, require new coal quality
standards and strict future adherence thereto, including resourcing
of coal if and when necessary to comply.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, and for other good and valuable consideration,
the parties hereto agree as follows:
1. The Agreement is amended to delete Rawl Sales & Processing
Company, Inc. as a party and to substitute Massey Coal Sales
Company, Inc. as the Seller. Rawl agrees to have Massey Coal Sales
Company, Inc. substituted as Seller with respect to performance
hereunder, and Buyer likewise agrees to such substitution. The
Agreement shall be further amended to delete all references to the
Seller's Agent wherever it appears throughout the Agreement.
Seller agrees to perform all obligations of both the Seller and the
Seller's Agent under the Agreement, as amended herein. Upon
execution hereof, Rawl agrees to waive all rights and privileges it
may have under the Agreement.
2. Article I of the Agreement is deleted in its entirety and in
substitution thereof a new Article I is added to read as follows:
ARTICLE I
Amount of Coal - Term of Agreement
1.1 Seller agrees to sell, and Buyer agrees to purchase, coal
of the quality and in quantities hereinafter stated and upon
the terms and conditions herein set forth. Seller will
deliver such coal to Buyer (f.o.b. cars at Seller's Mines
(hereinafter defined)) for a period of twenty (20) years from
the Initial Shipment Date (hereinafter defined), subject to
earlier termination as hereinafter provided.
1.2 The quantity of coal to be sold by Seller to Buyer and
purchased by Buyer from Seller hereunder shall be a base
tonnage of 440,000 tons (hereinafter defined) per Contract
Year (hereinafter defined). Buyer shall have the right to
vary the actual annual tonnage from the base tonnage by no
more than +/- fifteen percent (15%), or between 374,000 and
506,000 tons. At least ninety (90) days prior to the
commencement of each Contract Year, Buyer shall give written
notice to Seller of the quantity of coal to be shipped under
this Agreement during the next succeeding Contract Year. In
no event shall Buyer increase or reduce its annual tonnage
declaration by more than fifteen percent (15%) of the
preceding Contract Year's annual tonnage declaration.
Buyer shall have the option to purchase an additional 100,000
tons per Contract Year. Buyer must exercise its option at
the same time the annual declaration is made for tonnage to
be shipped in the next succeeding Contract Year. The
optional tonnage shall be shipped at the then-current
contract price.
1.3 In the event that Buyer is required or elects to
purchase some amount of coal from another supplier with whom
it currently has a contractual dispute, Buyer's above-
described annual purchase obligation shall, for the period
that Buyer is required or elects to purchase coal from such
supplier, be reduced by the amount Buyer is so required or
elects to purchase, but in no event shall Buyer's purchase
obligation hereunder be reduced to fewer than 300,000 tons
per Contract Year.
1.4 As used in this Agreement, the following terms shall have
the meaning indicated:
(1) "Contract Year" shall mean each 12-month period beginning
on July 1, 1994, and ending on June 30, 1995, and for every
12-month period thereafter during the term of this Agreement.
(2) "F.O.B. cars" means coal free on board railroad cars at
Seller's Mines.
(3) "Initial Shipment Date" shall be July 31, 1987.
(4) "Price per ton FOB cars" means the price of coal as
loaded in railroad cars at Seller's Mines.
(5) "Seller's Mines" means all coal mines located on the
properties owned by or otherwise available to Seller in the
vicinity of Mingo County, West Virginia (see Exhibit A) from
which the coal to be shipped hereunder is to be produced at
Seller's rail-loading site at La Voy, West Virginia.
(6) "Shipment" means a trainload of coal, shipped from
Seller's Mines in any single day.
(7) "Ton" shall mean a net weight of 2,000 pounds avoir-
dupois.
1.5 (a) Notwithstanding any other provision of this
Agreement, if during any calendar month during the term of
this Agreement the cost of the Alternative Fuel (as defined
on Schedule A) available to Buyer is less than the cost of
coal under this Agreement, then Buyer during the ensuing ten
(10) days may elect to suspend further shipments of coal, on
sixty (60) days' written notice, until the end of the first
calendar month during which the price of such coal remains
equal to or less than the price of the Alternative Fuel then
supplied to Buyer.
(b) Seller reserves the right upon the receipt of such
notice of suspension or at any time during such suspension,
on thirty (30) days' prior written notice either to (i)
reduce the then-current price of coal under this Agreement to
match on a month-to-month basis the cost of such Alternative
Fuel, in which event Buyer shall be required to purchase coal
from Seller under this Agreement in lieu of such Alternative
Fuel so long as the price of coal continues to match the
lower cost of such Alternative Fuel; or (ii) if Seller elects
not to reduce the price of coal, Seller shall have the right
to supply for such period No. 6 fuel oil at a price that
matches Buyer's cost of such Alternative Fuel.
(c) Whenever the cost of Alternative Fuel becomes higher
than the cost of coal under this Agreement, and in the event
Seller has not elected either option as provided in
subsection (b), deficiencies in tonnage delivered shall be
made up, subject to the next succeeding sentence, during the
ensuing twenty-four (24) months by increasing the quantity of
coal shipped by Seller above the quantity specified in
Section 1.2 of this Agreement according to a shipment
schedule mutually acceptable to Seller and Buyer. Buyer
shall not purchase coal on the spot market or enter into
contracts with new suppliers for additional contract coal
unless it is willing to accept sufficient additional tonnage
to make up such deficit tonnage during such period, provided
that if Seller is not willing to ship additional tonnage
requested by Buyer to satisfy such requirement, then the
deficit tonnage shall be reduced by the tonnage requested but
not shipped. Coal delivered in any calendar quarter shall be
credited first against deliveries due to that quarter and
then against any deficit tonnage. If during such twenty-four
(24) month period, Buyer has not requested sufficient
additional tonnage to make up such deficit tonnage, then,
subject to the last sentence of this subsection (c), the
then-current price of coal under this Agreement shall be
increased by $2.00 per ton for each ton thereafter delivered
under this Agreement until Buyer shall have accepted at such
adjusted price up to an aggregate number of tons equal to the
remaining deficit tonnage. Notwithstanding the foregoing,
the price shall not be increased above an amount which would
make the cost of coal higher than the cost of Alternative
Fuel available to Buyer.
(d) For purposes of this Section 1.5, the cost of oil,
gas and coal shall each be determined in accordance with
Schedule A attached to this Amendment.
3. Article III of the Agreement is deleted in its entirety and
in substitution thereof a new Article III is added to read as
follows:
ARTICLE III
Price and Price Adjustments
3.1 Unless and until it is adjusted solely in accordance with
the provisions hereinafter set forth in this Article III, the
price per ton F.O.B. cars at Seller's Mines for all coal sold
hereunder shall be $32.00 effective as of July 1, 1994
(hereinafter referred to as the "initial price"), except as
provided in Section 3.3(e) herein. After any such
adjustments have been made, the price per ton f.o.b. cars at
Seller's Mines shall be the initial price as so adjusted.
The initial price includes all costs associated with
compliance with all Federal, State, and local laws and
regulations as of the effective date of this Amendment as
they are now interpreted and enforced in Producing District
8, as defined in the Federal Bituminous Coal Act of 1937, as
amended.
3.2 Seller shall give Buyer notice of any proposed adjustment
hereunder of the initial price within thirty (30) days after
Seller has determined the need for and extent of such
adjustment, together with all documentation required to
permit Buyer to substantiate the adjustment.
3.3 The initial price shall be subject to adjustment (without
duplication) for changes in Seller's mining or other costs,
as set forth below. Such adjustments shall be made using the
methodology illustrated in Exhibit B.
(a) Beginning January 1, 1995, the initial price shall
be revised as of January 1, April 1, July 1, and October
1 of each year to reflect changes to the nearest mil per
ton of coal arising out of changes occurring during the
immediately preceding quarter in the following costs as
they apply to coal sold by Seller.
(1) Labor Costs
(A) The amount included in the initial price as the
cost for labor on January 1, 1995, is $9.60 per ton of
coal.
(B) Effective as of January 1, April 1, July 1, and
October 1 of each year, Seller shall determine the
percentage increase or decrease in the Average Hourly
Earnings-Bituminous Coal & Lignite Mining Index (as first
published by the United States Department of Labor,
Bureau of Labor Statistics in the Employment and Earnings
publication). The decimal equivalent of such percentage
of increase or decrease shall be multiplied by $9.60, and
the resultant amount shall be added to or subtracted
from, as the case may be, the initial price (as adjusted
pursuant to all other provisions of this Agreement) in
substitution for and in lieu of all previous adjustments
pursuant to this Subsection (1). The first-published
(i.e. October published during December, January
published during March, April published during June, and
July published during September) index for the third
month (i.e., October, January, April, and July)
immediately preceding the month in which the adjustment
date occurs shall be used to make such determination.
The base index for adjustments hereunder shall be that
for July, l994.
(2) Capital Equipment
(A) The amount included in the initial price as the
cost for depreciation of capital equipment on January 1,
1995, is $6.40.
(B) Effective as of January 1, April 1, July 1, and
October 1 of each year, Seller shall determine the
percentage increase or decrease in the Implicit Price
Deflator of the United States Gross Domestic Product (as
first published by the United States Department of Labor,
Bureau of Labor Statistics, in the Economic Indicator
publication) after January 1, 1995. The decimal
equivalent of such percentage of increase or decrease
shall be multiplied by $6.40, and the resultant amount
shall be added to or subtracted from, as the case may be,
the initial price (as adjusted pursuant to all other
provisions of this Agreement) in substitution for and in
lieu of all previous adjustments pursuant to this
Subsection (2). The quarterly index for the calendar
quarter two quarters prior to the quarter in which the
adjustment date occurs and first published during the
second month (i.e., November, February, May, and August)
immediately preceding the month in which the adjustment
date occurs shall be used to make such determination.
The base index for adjustments hereunder shall be that
for the second quarter l994 as published in the August
Economic Indicator. E.g., effective January l, l995, the
third quarter l994 index published in November, l994,
shall be compared with the second quarter l994 index
published in August, l994.
(3) Materials and Supplies
(A) The amount included in the initial price as the
cost for materials and supplies is $12.80 per ton of
coal, which amount has been calculated by allocating such
costs to the categories as set forth in the Composite
Index below, which Composite Index is composed of indexes
from the Producer Prices and Price Indexes (as first
published by the United States Department of Labor,
Bureau of Labor Statistics):
BLS
Code No. Index Weight
* - Industrial Commodities 62.5%
*1192-03 Drills and other Mining 12.5%
Machinery
*1192-5301 Mining Machinery Parts, 12.5%
Excluding Drills
**498l-l32 Industrial Power, 500 KW 12.5%
Demand, Mid-Atlantic
Weighted Index Total 100%
* These shall be taken from Table 6 - Producer Price Indexes
and percent change for commodity groupings and individual
items in the Producer Price Index publication.
** These shall be taken from Table 5 - Producer Price Indexes
for the net output of selected industries and their products
in the Producer Price Index publication.
(B) Effective as of January 1, April 1, July 1, and
October 1 of each year, Seller shall determine the
percentage increase or decrease in the Weighted Index
Total from the level thereof computed for the month of
January, l995, as set forth in the Composite Index in
Subsection 3(A). The decimal equivalent of such
percentage of increase or decrease shall be multiplied by
$12.80, and the resultant amount shall be added to or
subtracted from, as the case may be, the initial price
(as adjusted pursuant to all other provisions of this
Agreement) in substitution for and in lieu of all
previous adjustments pursuant to this Subsection (3).
The first-published indexes for the second month (i.e.,
November, February, May, and August) immediately
preceding the month in which the adjustment date occurs
shall be used to make such determination. The base index
for adjustments hereunder shall be that for August, l994.
(4) Fixed Costs
Seller has determined that the other indirect costs
of producing and selling coal hereunder is $3.20 per ton
of coal, and this amount is included in the initial
price. This amount shall remain fixed during the term of
this Agreement unless the parties mutually agree
otherwise.
(5) Cost of Complying with New Federal, State or Local
Regulations
(A) In the event of the imposition on or after July
1, 1994 by Federal, State, or local legislation or
regulations, of any new requirements or change in the
interpretation and enforcement of existing requirements
that affect the cost of production of coal at Seller's
Mines or otherwise, the party proposing a change shall
compute the change in cost per ton of coal produced
resulting therefrom. Seller and Buyer shall agree to an
adjustment in the initial price (as adjusted pursuant to
all other provisions of this Agreement) to reasonably
reflect such change in cost. Seller and Buyer may agree
to a tentative change in the initial price, subject to
retroactive adjustment, to be utilized until the parties
agree on a reasonable final adjustment.
(B) The party proposing a change shall submit
detailed documentation in support of its request for any
such adjustment, and, in the event Seller and Buyer are
unable to agree within ninety (90) days of receipt by the
other party of the proposing party's documentation as to
the amount the price per ton should be increased or
decreased, then the matter shall be submitted to a firm
of mining engineers or independent certified public
accountants mutually agreeable to the parties for final
determination of the amount of the increase or decrease,
if any, which shall be binding upon the parties. The
cost of any such study by an outside consultant shall be
shared equally by Buyer and Seller.
(C) Without limiting the foregoing, the parties
acknowledge that the initial price includes Seller's
costs incurred prior to July 1, 1994, under the Coal
Industry Health Benefit Act of 1992 ("the Act") and the
1950 and 1974 UMWA Pension Plans (collectively, "the
Plans"). The initial price shall be adjusted pursuant to
the provisions of this Subsection (5) for further
governmental imposition relating to the Act and the Plans
only to the extent arising on or after July 1, 1994.
(b) Should any of the indexes specified in Section 3.3(a) be
discontinued, the parties hereto mutually determine that any
of the indexes have become inappropriate, or the basis of the
calculations of such indexes be modified, appropriate indexes
shall be substituted or adjustments made by mutual agreement
of the parties hereto.
(c) Seller agrees that the production and delivery of coal
under this Agreement shall, at all times, be conducted
efficiently and economically and in such manner that the costs
thereof will be kept to a minimum consistent with good
operating practices within the limits set by governmental
regulations and proper mining and engineering techniques.
(d) In the event that a change in any of the above-
enumerated costs occurs which affects the price of coal under
this Agreement, the Seller shall promptly furnish to Buyer
computations showing the effects of such change on the price
of coal under this Agreement.
(e)(1) The initial price, as adjusted according to the
provisions of Section 3.3(a), shall be subject to review by
Buyer and Seller as of July 1, 1996, and every two (2) years
thereafter (each such review date being hereinafter referred
to as a "Review Date"). Sixty (60) days prior to each Review
Date, Buyer and Seller shall begin negotiations in good faith
to reach agreement on a new initial price effective as of the
Review Date for the next succeeding two (2) year period. If
Buyer and Seller are unable to reach agreement by the
applicable Review Date, this Agreement shall automatically
terminate one hundred twenty (120) days after the applicable
Review Date unless Buyer and Seller agree otherwise in
writing. During such one hundred twenty (120) day period,
Seller shall deliver and Buyer shall accept the quantity of
coal provided for in this Agreement at the initial price
prevailing on the last day immediately preceding the Review
Date in question, subject to adjustment as provided for in
Subsection 3.3(a) of this Agreement.
(2) Notwithstanding Section 3.3(e)(1), if Buyer is willing
to accept a ten percent (10%) increase in the initial price as
adjusted in accordance with Section 3.3(a) of this Agreement,
or Seller is willing to accept a ten percent (10%) decrease in
the initial price as adjusted, the initial price effective as
of the applicable Review Date shall be increased by ten
percent (10%) if acceptable to Buyer or decreased by ten
percent (10%) if acceptable to Seller. If Buyer is limited to
a ten percent (10%) price decrease by Seller on any Review
Date, or if Seller is limited to a ten percent (10%) price
increase by Buyer on any Review Date, then the party so
limited shall not be limited in like manner on any subsequent
Review Date for the remaining term of this Agreement.
4. ARTICLE V of the Agreement is deleted in its entirety and in
substitution thereof a new Article V is added to read as follows:
ARTICLE V
Quality of Coal
5.1 The coal to be purchased and sold hereunder shall conform
to the following:
(a) Preparation and Top-Size
Said coal shall be washed coal, free of extraneous
materials, produced by surface or deep mining methods and
meeting the specifications set forth in Section 5.1(b) of
this Article V and having a maximum top-size of two
inches.
(b) Quality Specifications
(1) The quality of the coal delivered hereunder "as
received" at Buyer's Lovett Plant, determined by sampling
and analysis made in conformity with the provisions of
Article VIII, shall be as follows:
REPRESENTATIVE COAL SPECIFICATIONS (AS RECEIVED BASIS)
Moisture 7.0%
Fixed Carbon 52.0%
Volatile Matter 33.0%
Ash 8.0%
Hardgrove Grind 46
Ash Softening Temp.
(Initial Defor.) 2700o F
Ash Fluid Temp. 2700o F
Sulfur (SO2) 1.0 lbs. SO2/mm Btu max.
Btu/lb. 13,000
(2) The level of sulfur dioxide in the coal (lbs. SO2/mm
Btu) shall be calculated based on a 2.5% credit that
Buyer is allowed for sulfur dioxide capture in ash by
Buyer's environmental regulations. The formula to be
used for calculating SO2 in the coal is:
Lbs. SO2/mm Btu = 19.5 x % Sulfur x 1000
Btu/lb
5.2 (a) Buyer's ability to use the coal being dependent on
the coal meeting the specifications set forth in Section 5.1
above, it is agreed that Buyer shall have the right to reject
any and all shipments which, based on the procedures defined
in Article VIII, fail to meet any of the individual shipment
rejection limits shown below:
Individual Shipment Rejection Limits (As Received)
Volatile Matter 30.0% min.
AST (Initial Deformation
in reducing atmosphere 2500o min.
Sulfur (SO2) 1.0 lbs. SO2/mmBtu max.
Moisture 8% max.
Btu/lb 12,800 min.
Hardgrove Grind See below
Moisture Above 7% 7% and below
(maximum 8%)
or and
Heat Content Below 13,000 Btu/lb. 13,000 Btu/lb.
(minimum 12,800 Btu/lb) and Above
then then
HGI 46 or Above 45 Minimum*
* This limit is subject to the exception that one shipment
during any 90-day period can have an HGI of 44 or above. The
moisture associated with this shipment must be 7% or lower and the
Btu content 13,000 Btu/lb. or higher. If a shipment having a 44
HGI is delivered, another shipment of 44 HGI may not be delivered
for another 90 days.
Seller shall pay all freight, diversion, demurrage, testing
and other expenses in connection with any such rejected shipment,
or shipment found by Seller to be non-conforming unless such
shipment is accepted by Buyer. Furthermore, Seller certifies that
it will not make any shipment shown by sampling to exceed the
maximum allowable SO2 levels.
(b) In addition to the limits for individual shipments shown
above, the delivered coal must meet the following specifications
over each thirty (30) and ninety (90) day period:
30-Day Suspension Limits (As Received):
Ash 10% max.
Volatile 30% min.
AST 2500o min.
90-Day Suspension Limits (As Received):
Moisture 7.0% max.
Btu/lb. 12,800 min.
HGI In accordance with
following formula:
Btu/lb. x HGI Index > OR = 600
1000
If the coal delivered hereunder, as determined by sampling and
analysis made in conformity with Article VIII, does not meet the
thirty (30) day limits on specifications on an average for a thirty
(30) day period, or does not meet the ninety (90) day limits on
specifications on average for a ninety (90) day period, Buyer shall
thereupon have the right to suspend delivery under this Agreement
until Seller furnishes reasonable assurance to Buyer in writing
that the deviation from the specifications can and will be
corrected. If Seller fails to promptly furnish reasonable
assurance that such correction can and will be made within sixty
(60) days after Buyer's suspension of deliveries (or within such
longer period as shall be reasonably requested by Seller and agreed
to by Buyer), or if corrections are not made within such sixty (60)
day period (or such longer period agreed to by Buyer), Buyer shall
have the right at any time thereafter to terminate this Agreement
by giving written notice of such termination to Seller, and
thereupon Buyer shall stand discharged of any and all further
obligations or liability under the terms of this Agreement or as a
result of such termination without waiver of any rights that Buyer
may have under this Agreement. If Buyer, after having suspended
shipments for a period of one hundred eighty (180) days, has not
elected to terminate this Agreement, then Seller shall have the
option of terminating this Agreement by giving written notice of
such termination within sixty (60) days after the expiration of
such 180-day period. Nothing in this Section 5.2(b) shall be
construed to relieve Seller of its obligation to conduct its mining
and coal cleaning operations in a competent manner, consistent with
good coal industry practices, so as to produce a product which will
meet the specifications set forth in Section 5.1 above.
The thirty (30) day and ninety (90) day suspension limits
shall be calculated by the Buyer on a weighted average. In
addition, the ninety (90) day weighted averages shall be computed
on a rolling tri-monthly basis. For example, the ninety (90) day
weighted average for the month of May shall consist of the
deliveries during the months of March, April, and May. In a
similar fashion, the ninety (90) day weighted average for the month
of June shall consist of the deliveries actually completed at
Buyer's plant during the months of April, May and June. Exhibit C
sets forth illustrations of how the weighted suspension limits
shall be calculated hereunder.
5.3 Seller shall apply material of quality, in a quantity,
and by method acceptable to Buyer, without delaying loading,
to inhibit the freezing of coal in railroad cars during
periods of cold weather, or for other purposes deemed
necessary by Buyer. Buyer shall provide Seller reasonable
advance notice of the dates for commencement and termination
of such application(s) during each Contract Year. Only the
cost of the freeze-inhibiting materials shall be for Buyer's
account. Such costs shall be accounted for separately by
Seller. Seller shall also invoice Buyer separately for the
costs of these materials.
5. Article VI of the Agreement is deleted in its entirety and in
substitution thereof a new Article VI is added to read as follows:
ARTICLE VI
Alternate Source
Seller shall, at its sole option, have the right, but not the
obligation, to supply all or a portion of the coal required
under Article I hereof from other mines, provided that
shipments from such mines shall (a) enable Seller to meet the
quality specifications of this Agreement and in particular the
environmental regulations of the Clean Air Act Amendments of
1990 (See Supplemental Agreement, dated July 1, 1994), (b)
meet all the other requirements of this Agreement, (c) not
result in higher cents/mm Btu delivered cost to Buyer of coal to
be delivered to Buyer under this Agreement, (d) pass a burn
test at the Lovett Plant to Buyer's satisfaction, and (e) not
adversely affect Buyer's ability to meet tonnage requirements
under its then-effective coal transportation agreements so as
to increase the delivered price per ton of coal under such
agreements or otherwise result in Buyer incurring penalties or
other additional charges under such agreements.
6. Article VIII of the Agreement is deleted in its entirety and
in substitution thereof a new Article VIII is added to read as
follows:
ARTICLE VIII
Sampling and Analysis of Coal
8.1 Each shipment of coal shall be sampled by Seller. Seller
shall determine, by proper analyses made in its laboratory and
at its expense, the quality and characteristics of the coal.
The sampling and analyses shall be performed in accordance
with methods approved by the American Society for Testing and
Materials (ASTM) and Buyer and Seller shall agree on
alternates within the ASTM standards or on other methods.
Buyer shall have the right to have a representative present at
any and all times to observe the sampling and take check
samples at the mine, and Buyer may also analyze the coal
either from its own samples or from samples taken by Seller.
Seller shall retain for a period of sixty (60) days a portion
of each coal sample ("Referee Sample") taken so that Buyer or
a commercial laboratory may analyze such samples.
8.2 The results of the sampling and analyses by Seller shall
be accepted as the quality and characteristics of the coal
delivered hereunder, provided, however, that if either Buyer
or Seller questions the correctness of Seller's analysis, then
Buyer or Seller shall have the right to have the Referee
Sample analyzed by an independent testing laboratory selected
by Buyer from an agreed-to list of such laboratories, not
including a laboratory used by either party on the original
sample. Said laboratory shall use methods approved by ASTM or
such other procedures as may be accepted in writing by Buyer
and Seller.
The parameters for determining the acceptability of an
analysis and use of the Referee Sample shall be in accordance
with ASTM reproducibility standards, except for Btu and HGI
specifications. The results of duplicate determinations
carried out by different laboratories on representative
samples taken from the same bulk sample after the last stage
of reduction will be considered suspect if any of the
analytical determinations differ by more than the
reproducibility standards set by ASTM, except for Btu
specifications where if the "as received" Btu differs more
than 100 Btu's, the Referee sample shall be sent out. If the
analysis obtained by the independent laboratory selected by
Buyer meets the ASTM reproducibility standards and/or the "as
received" Btu is within 100 Btu's, then Seller's original
analysis shall be binding on the parties with regard to both
coal quality and rejection and suspension limits. However, in
the event that the analysis obtained by the independent
laboratory selected by the parties does not meet the ASTM
reproducibility standards and/or the "as received" Btu differs
by more than 100 Btu's, then the analysis obtained by said
independent laboratory shall be binding on the parties with
regard to both coal quality and rejection and suspension
limits.
If the correctness of the grind (HGI) is questioned, the save
split of the sample shall be divided three (3) ways and tested
by three (3) independent laboratories to be selected from a
previously established list of mutually acceptable
laboratories. The average of the results shall govern. The
results of such sampling and analyses shall be accepted as the
quality and characteristics of the coal delivered hereunder in
the period during which the sampling and analyses is thus
performed by the commercial testing laboratory.
No variations in the minimum standards for Hardgrove Grind are
permitted due to error tolerances assumed by testing
laboratories. However, if the standards used by ASTM for
evaluating Hardgrove Grind are changed, the parties agree that
the minimum specifications herein set forth shall be adjusted
to maintain a comparable minimum specification using the new
ASTM standards.
The cost of the analysis made by the independent testing
laboratory shall be borne by the Buyer if Seller's analysis is
confirmed to meet ASTM reproducibility standards and/or the
"as received" Btu is within 100 Btu's and by the Seller if it
is not.
7. Article IX of the Agreement is deleted in its entirety and in
substitution a new Article IX is added to read as follows:
ARTICLE IX
Compensation for Variations in Heating and Ash Values
9.1 Compensation for variations in heating value for coal
purchased and sold hereunder shall be determined in accordance
with the following:
(a) The F.O.B. Seller's Mines price provided for in
Article III ("Price and Price Adjustment") is based on
coal with a heating value as shown in the quality
specifications of Article V ("Quality of Coal"), namely
13,000 as received Btu per pound. In accordance with
Article VIII ("Sampling and Analysis of Coal"), the
average as received Btu per pound of coal shipped
hereunder during each calendar quarter during the term of
this Agreement shall be calculated. Compensation to
either Buyer or Seller, as the case may be, for variation
in the weighted average heating value of the coal
delivered during each calendar quarter shall be
determined as follows:
(1) If the weighted average "as received Btu" for any
calendar quarter is greater than 13,050 Btu per pound,
the additional compensation to Seller shall be computed
in accordance with the following formula:
C = P x T x B - 1
S 13,000
(2) If the weighted average "as received Btu" for any
calendar quarter is less than 12,950 Btu per pound, the
compensation to Buyer shall be computed in accordance
with the following formula:
C = P x T x 1 - B
B 13,000
(b) In the above formula:
C = Total compensation to Seller.
S
C = Total compensation to Buyer.
B
P = The F.O.B. Seller's Mine price per ton
including all adjustments provided in this
Agreement for the applicable calendar quarter.
B = The weighted average "as received Btu" for the
applicable calendar quarter.
T = The total tonnage shipped during the
applicable calendar quarter.
9.2 Within thirty (30) days after the end of each calendar
quarter, Seller shall calculate the three-month average "as
received Btu" (subject to Buyer's verification) and the
compensation to Seller or Buyer, as the case may be, in
accordance with Section 9.1 and shall forward the calculation
to Buyer. Seller shall issue an invoice for payment by Buyer
if the compensation is to Seller or shall issue a credit
memorandum (or cash payments with respect to the final quarter
of this Agreement) to Buyer if the compensation is to Buyer.
9.3 The initial price is based upon Seller supplying coal
with an ash content ("Ash Value") of eight percent (8%) by
weight of the "as received" analysis for the coal in each
shipment. The Ash Value of the coal sold hereunder may vary,
and the initial price shall be adjusted in proportion to such
variance as follows:
For coal having an Ash Value greater than eight percent
(8%), the price shall be reduced at a rate of $.30 per
ton per one percent (1%) in excess of eight percent (8%).
For coal having an Ash Value less than eight percent
(8%), the price shall be increased at a rate of $.30 per
ton per one percent (1%) below eight percent (8%).
9.4 Within thirty (30) days after the end of each calendar
quarter, Seller shall calculate the three-month average Ash
Value (subject to Buyer's verification) and the compensation
to Seller or Buyer, as the case may be, in accordance with
Section 9.3 and shall forward the calculation to Buyer.
Seller shall issue an invoice for payment by Buyer if the
compensation is to Seller or shall issue a credit memorandum
(or cash payments with respect to the final quarter of this
Agreement) to Buyer if the compensation is to Buyer.
8. Article XXV of the Agreement is deleted in its entirety and in
substitution thereof a new Article XXV is added to read as follows:
ARTICLE XXV
Disputes
If a dispute arises between the parties relating to this
Agreement, the parties agree to use the following procedures
prior to either party pursuing other available remedies.
25.1 (a) A meeting shall be held promptly between the
parties, attended by individuals with decision-making
authority regarding the dispute, to attempt in good faith to
negotiate a resolution of the dispute.
(b) If within thirty (30) days after such meeting, the
parties have not succeeded in negotiating a resolution to the
dispute, they agree to submit the dispute to mediation in
accordance with the Commercial Mediation Rules of the American
Arbitration Association. The parties shall bear equally the
cost of the mediation.
(c) The parties will jointly appoint a mutually
acceptable Mediator, seeking assistance in such regard from
the American Arbitration Association if they have been unable
to agree upon such appointment within twenty (20) days from
the conclusion of the negotiation period.
(d) The parties agree to participate in good faith in
the mediation of negotiations related thereto for a period of
thirty (30) days. If the parties are not successful in
resolving the dispute through mediation, then the parties MAY
AGREE (i) to submit the matter to binding arbitration in
accordance with the American Arbitration Association Rules or
to a private adjudicator, or (ii) the parties may mutually
agree to use any other alternative dispute resolution method,
or (iii) any party may seek an adjudicated resolution through
the appropriate court.
25.2 (a) During the term of this Agreement, if a dispute
among the parties arises and such dispute cannot be resolved
as provided for above, the parties may agree in writing that
the dispute shall be submitted to binding or non-binding
arbitration. If so submitted, except as provided for herein,
the arbitration shall be held pursuant to the Commercial Rules
or Arbitration of the American Arbitration Association.
(b) For arbitration, the parties may agree upon a sole
arbitrator, or if a sole arbitrator cannot be agreed upon, a
panel of three arbitrators shall be named. One arbitrator
shall be selected by the Buyer, and one shall be selected by
the Seller. The other arbitrator shall be selected by the two
arbitrators so appointed by the parties. If the arbitrators
previously appointed by the Buyer and Seller cannot agree upon
the third arbitrator within thirty (30) calendar days, then
the parties may apply to the presiding judge in any court
having jurisdiction in the matter for appointment of the third
arbitrator. Each party shall select its own arbitrator within
thirty (30) days of the date that the parties agree to
arbitration hereunder.
(c) The arbitrator(s) shall have no power to modify any
of the provisions of this Agreement, and their jurisdiction is
limited accordingly. The decision of the arbitrator(s) shall
be rendered within one-hundred and eighty (180) days after the
date of the selection of the arbitrator(s) or within such
period as the parties may otherwise agree.
(d) Each party shall be responsible for the expenses
incurred by the arbitrator appointed by such party, and the
expenses, fees and costs of the third arbitrator shall be
borne equally by the parties. In the event that a single
arbitrator is selected, the expenses of that arbitrator will
be borne equally by the parties.
(e) It is the intent of the parties that arbitrator(s),
pursuant to arbitration proceedings described herein, will be
precluded from awarding punitive and/or exemplary damages
against any party to this Agreement.
9. Except as amended hereby, and as previously amended, the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their duly authorized officers as of
the date first written above.
ORANGE & ROCKLAND UTILITIES, INC.
(BUYER)
By Frank E. Fischer
Title Vice President
MASSEY COAL SALES COMPANY, INC.
(SELLER)
By Thomas A. McQuade
Title Senior Vice President
RAWL SALES & PROCESSING COMPANY, INC.
By James S. Twigg
Title Treasurer
GUARANTY
A. T. Massey Coal Company, its successors and/or permitted
assigns, for sufficient and adequate consideration the receipt of
which is hereby acknowledged, unconditionally and irrevocably
guarantees and binds itself as surety to Buyer, Orange and Rockland
Utilities, Inc., its successors and/or assigns, full and timely
performance of Seller as that term is defined by the Seventh
Amendment to Coal Purchase and Sales Agreement, effective July 1,
1994, incorporated herein by reference and made a part hereof, and
assumes all obligations and liabilities of Seller under the terms
of such Coal Purchase and Sales Agreement to the extent Seller
fails to perform same.
The undersigned stipulates that he is an officer of A. T.
Massey Coal Company, Inc. and is authorized to execute same on its
behalf.
A. T. MASSEY COAL COMPANY, INC.
By Wynston D. Holbrook
Attest: Title Executive Vice President
Thomas A. McQuade Date _____8/17/94_________________
ORANGE AND ROCKLAND UTILITIES, INC.
By Frank E. Fischer
Attest: Title Vice President
Debra A. Bogin Date __9/29/94___________
SCHEDULE A
COMPUTATION OF INTERIM COAL PRICE REDUCTION
1. All pricing, coal, oil and natural gas, will be on a fuel
clause basis.
2. The price for oil or natural gas ("Alternative Fuels") for any
month shall be the weighted average monthly fuel replacement
cost of each fuel as reported to the New York Power Pool
(cents per MMBtu) for that month. This price shall be used as
the basis for calculating the per ton interim coal price
adjustment ("ICPA") for the tons of coal purchased from Seller
during the month. The weighted average monthly fuel
replacement cost for each fuel shall be the sum of the price
on each day divided by the number of days in the month. In no
event shall the weighted average price of each fuel be
adjusted to reflect the quantity purchased at a given price.
3. The BTU content of each fuel unit (Seller's coal, BTU per
pound; oil, BTU per gallon; natural gas, BTU Per thousand
cubic feet) for each month shall be the actual average monthly
BTU content of each fuel unit as computed by Buyer from its
purchase records for the prior month.
4. The full load heat rate (BTU/KWHR) for each month of oil,
natural gas and Seller's coal shall be the most current rate
as computed by Buyer and reported in its Plant Operating
Report.
5. Cost per million BTU expressed in cents shall be computed for
oil, natural gas and Seller's coal on a fuel clause basis
using the weighted average monthly fuel replacement cost of
each Alternative Fuel for the month and utilizing the
following formulas:
Coal:
Fuel Clause Price Per Ton x 106 = Cost per MM/BTU
BTU per pound x 2,000
Oil:
Fuel Clause Price Per Barrel x 106 = Cost per MM/BTU
BTU per gallon x 42
Natural Gas:
Fuel Clause Price Per McF x 106 = Cost per MM/BTU
BTU per McF
6. Cost per megawatt-hour for oil, natural gas, and Seller's coal
expressed in dollars per megawatt-hour shall be computed
utilizing the following formula:
Cost per megawatt-hour = Cost per MM/BTU x Heat Rate
1,000
7. Cost per megawatt-hour for oil, natural gas, and Seller's coal
shall be compared and if the cost for coal exceeds the cost
for oil or natural gas the ICPA for the month shall be
computed utilizing the following formula.
(Coal Cost Per Megawatt-hour - Alternative Fuel
Cost Per Megawatt-hour) x (BTU per pound x 2,000) =
Coal Heat Rate x 1,000
Interim Coal Price Reduction Per Ton
EXHIBIT A
Seller's Mines
Mingo County, West Virginia Properties
Page 1 of 2
EXHIBIT B
Base Price Adjustment
Orange And Rockland/Massey Coal Sales
January 1, 1995 *
1. Labor Cost
Average Hourly Earnings - (Base) July 1994 18.20
Bituminous Coal & Lignite Mining (SIC 122) October 1994 18.25
Increase 0.27%
Base Labor Cost 9.60
Increase ($9.60 x 0.27%) 0.03
Adjusted Labor Cost 9.63
2. Capital Equipment Cost
Implicit Price Deflator - (Base) 2nd Quarter 1994 121.70
Gross Domestic Product (August Publication)
3rd Quarter 1994 122.50
(November Publication)
Increase 0.65%
Base Capital Equipment Cost 6.40
Increase ($6.40 x 0.65%) 0.04
Adjusted Capital Equipment Cost 6.44
3. Materials And Supplies
BLS Nov. 1994 Weighted
Code No. Index Weight Index Index
Industrial Commodi 62.5% 118.3 73.94
1192-03 Drills & Other Min 12.5% 128.9 16.11
Machinery
1192-5301 Mining Machinery P 12.5% 117.8 14.73
Excluding Drills
4981-132 Industrial Power, 12.5% 103.5 12.94
Demand, Mid-Atlantic
117.72
Base Index - August, 1994 117.30
Weighted Index - November, 1994 117.72
Increase 0.36%
Base Materials And Supplies Cost 12.80
Increase ($12.80 x 0.36%) 0.05
Adjusted Materials And Supplies Cost 12.85
4. Fixed Cost
Base Fixed Cost 3.20
* indices shown are not actuals, used for illustration purposes only
Page 2 of 2
Cost Components
January 1, 1995
Base Adjusted
Cost Adjustments Price
1. Labor Costs $9.60 $0.03 $9.63
2. Capital Equipment 6.40 0.04 6.44
3. Material And Supplies 12.80 0.05 12.85
4. Fixed Cost 3.20 0 3.20
Total $32.00 $0.12 $32.12
* indices shown are not actuals, used for illustration purposes only
EXHIBIT C
a) Illustration of 30 Day Weighted Average Calculation
30 Day Weighted Averages
January 1994
Coal Train Arrival Ash Soft Ash Soft
Vendor Number Mine Date Tonnage Ash Ash % Volatile Volatiles % Temperature Temperature %
Massey UOR-2 Rawl 1/02/94 9325.45 6.52 60,801.93 33.63 313,614.88 2800 26,111,260.00
UOR-4 Rawl 1/08/94 9252.95 6.81 63,012.59 32.96 304,977.23 2800 25,908,260.00
UOR-6 Rawl 1/12/94 9119.05 6.43 58,635.49 33.42 304,758.65 2800 25,533,340.00
UOR-8 Rawl 1/25/94 8983.15 6.21 55,785.36 31.96 287,101.47 2800 25,152,820.00
Total 36,680.60 238,235.38 1,210,452.24 102,705,680.00
Total Weighted Average
Tonnage 36,680.60
Ash 238,235.38 6.49
Volatiles 1,210,452.24 33.00
Ash Soft Temp. 102,705,680.00 2,800.00
*Figures shown are not actuals; used for illustration purposes only.
b)Illustration Of 90 Day Weighted Average Calculation
90 Day Weighted Averages
January 1994- March 1994
Coal Train Arrival
Vendor Number Mine Date Tonnage Grind Grind % BTU BTU % Moisture
Massey UOR-2 Rawl 1/02/94 9325.45 46 428,970.70 13,002 121,249,500.90 6.85
UOR-4 Rawl 1/08/94 9252.95 46 425,635.70 13,205 122,185,204.75 6.39
UOR-6 Rawl 1/12/94 9119.05 47 428,595.35 13,265 120,964,198.25 6.70
UOR-8 Rawl 1/25/94 8983.15 45 404,241.75 13,150 118,128,422.50 6.44
UOR-10 Rawl 2/06/94 9120.25 46 419,531.50 13,158 120,004,249.50 6.38
UOR-12 Rawl 2/11/94 9337.65 48 448,207.20 13,126 122,565,993.90 6.30
UOR-14 Rawl 2/16/94 9102.65 48 436,927.20 13,201 120,164,082.65 6.40
UOR-16 Rawl 2/22/94 8903.9 46 409,579.40 13,148 117,068,477.20 6.49
UOR-18 Rawl 3/02/94 9103.65 47 427,871.55 13,267 120,778,124.55 6.51
UOR-20 Rawl 3/12/94 9037.65 47 424,769.55 13,209 119,378,318.85 6.89
UOR-22 Rawl 3/20/94 9138.15 46 420,354.90 13,231 120,906,862.65 6.52
UOR-24 Rawl 3/30/94 9015.75 48 432,756.00 13,109 118,187,466.75 6.56
Total 109,440.25 5,107,440.80 1,441,580,902.45
Total Weighted Average
Tonnage 109,440.25
Grindability 5,107,440.80 46.67
BTU 1,441,580,902.45 13,172.31
Moisture 715,270.69 6.54
Grind Matrix 614.74
* Figures shown are not actuals; used for illustration purposes only.
[MAP ATTACHED HERETO]
SUPPLEMENTAL AGREEMENT
This Supplemental Agreement is made and entered into as of
July 1, 1994, between Orange and Rockland Utilities, Inc. ("O&R")
a New York corporation, and Massey Coal Sales Company, Inc.
("Massey"), a Virginia corporation.
In anticipation of 1995 Clean Air Act requirements,
specifically the NOx emission limits, O&R and Massey have amended
their existing Coal Purchase and Sales Agreement, consisting of the
original contract (dated March 9, 1984) and six subsequent
amendments (dated July 30, 1986, July 1986, September 1986, January
1987, January 1990, and July 1, 1991) (the "Agreement"). Because
of the forthcoming implementation of certain provisions of the
Clean Air Act, the Seventh Amendment (dated July 1, 1994) provides
for a higher quality coal then previously required under the Sixth
Amendment. Specifically, the grind of the coal must be increased
from 43 to 46 in order to ensure compliance with the 1995
requirements. O&R will be installing low NOx burners on Lovett
Unit #4 in November 1994 and on Lovett Unit #5 in March 1995 in
order to meet the NOx emission limits. The design of these low NOx
burners is based on the knowledge that the Units will be burning a
soft coal product, specifically a grind of generally at least 46.
In the interest of purchasing the lowest cost fuel on behalf
of its ratepayers, O&R will continue to accept the lower grind coal
product from Massey's affiliate Sidney Coal Company up until the
time the NOx emission limits go into effect on May 15, 1995. The
price for this coal will be $30.25 per ton F.O.B. mine, effective
July 1, 1994. All other provisions of the Agreement will be in
effect, except the BTU deadband and ash penalty/premium. These
items will become effective when the switch to Rawl Sales &
Processing Company, another Massey affiliate, is made. O&R will
provide Massey two (2) months' advanced notice of its decision to
switch to the higher grind product from Rawl Sales & Processing
Company, Inc. O&R must allow itself adequate time to change out
the coal pile from the low grind product to the high grind product.
ORANGE AND ROCKLAND UTILITIES, MASSEY COAL SALES COMPANY, INC.
INC.
By Frank E. Fischer By Thomas A. McQuade
Title Vice President Title Senior Vice President