Sides continue to dig in over salt mine dispute

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With an $11.5 million payroll spread among 230 workers, the Hampton Corners salt mine is a major employer in Livingston County. The mine is the largest U.S. producer of road salt, disgorging some 3 million tons a year.
It also is the object of a long-running, $35 million court battle.
The mine replaced the Retsof salt mine a few miles away, which, until it was shut down by Akzo Nobel Inc., also had been a major employer in the county, providing several hundred jobs.
The Netherlands-based Akzo reluctantly abandoned the mine after calling a halt to months of fruitless efforts to staunch a spring that has turned the mine into a many-chambered underground lake.
Whether a replacement for the Retsof mine would be built was for a time something of a cliffhanger. The project faced objections from home owners, environmentalists and Native Americans. Livingston County economic development officials and job seekers breathed a sigh of relief when construction finally got under way in the late 1990s.
Not yet breathing easily, however, are mine owner American Rock Salt Co. LLC and the Indiana contractors that formed a joint venture company to build the mine. The mine owner and the contractors started their courtroom face-off months before the project wrapped up and have continued the battle long after Hampton Corners’ first ton of salt saw daylight.
An April 7 hearing finally could lay the long legal battle to rest, said American Rock Salt attorney Paul Yesawich III of Harris Beach LLP. But he is not betting on it. Whichever side wins could appeal or the case could still go before a jury.
The joint-venture contractors, Frontier-Kemper Constructors Inc. and Flatiron Constructors LLC, sued American Rock Salt in 2001. At that point the contractors had fallen more than a year behind schedule and could have been on the hook for $15,000 a day in late penalties.
American Rock Salt had led it astray, the contractors claimed, by mischaracterizing project details and supplying faulty drawings. It took a court-brokered settlement, under which American Rock Salt agreed to pay for ongoing work while the legal battle continued, to complete the project in December 2001, some eight months after the contractors sued.
In past pretrial skirmishes, American Rock Salt failed to get the case thrown out. A year later, in 2002, the contractors accused the company of fraud, which did not stick. U.S. District Judge Charles Siragusa later disallowed more than $10 million in penalty claims sought by the contractors.
Two questions are to be decided at the hearing: whether the contractors legitimately added $25 million in cost overruns to the project’s $70 million bill and whether an insurer is required to pay out a $7 million project bond.
From the dispute’s start, the contractors have maintained that delays were the company’s fault. The mine owner misled them, arbitrarily changed job specifications or supplied them with faulty or incomplete information, the contractors claim.
It does not matter whose fault the delays and overruns were, American Rock Salt maintains in a brief filed last month. Frontier-Kemper/Flatiron failed to follow contractually agreed on procedures in filing most of some $25 million in overrun claims and thus is entitled to only $600,000 worth of the overrun payments.
Because the work was mostly underground it was to a large extent unpredictable, the salt company said.
“(American Rock Salt) had the unrestricted right to change the scope of the work,” the mine owner states in its brief. “Frontier-Kemper/Flatiron had the right to be paid for any extra or changed work,” it concedes. “All (the contractors) needed to do was follow the (contract’s) unambiguous provisions.”
American Rock Salt was supposed to issue change orders, which it failed to do, the contractors counter in their legal brief. The contractors also cite numerous examples of their having provided written warnings of upcoming changes in the scope of work. But in the end, they add, “(both) parties had abandoned strict compliance with (contract) procedures.”
The contractors say their contention is proved by “numerous” occasions in which American Rock Salt paid for overruns without seeing the required written documentation.
The insurance dispute concerns a $7 million policy indemnifying American Rock Salt against damages stemming from the mine project. The policy allegedly was underwritten by a Lloyd’s of London syndicate. American Rock Salt maintains in court papers that it took out the policy and paid a $250,000 premium on it at the mine project’s outset in 1998. A binder on the policy is proof it was issued, American Rock Salt claims.
Paul Cook, a divisional director of the Missouri-based Willis Corroon Corp. insurance brokerage, in an affidavit calls American Rock Salt’s claim that it received a binder on such a policy “a complete distortion of the facts.”
Negotiations among American Rock Salt representatives, Frontier-Kemper and Willis Corroon officials on such a policy took place. But he told American Rock Salt that a policy conforming to the terms it wanted could not be arranged for $250,000 and a total premium of $460,000 would be needed, Cook states in the affidavit. Though negotiations through mail and e-mail continued, Cook maintains, American Rock Salt never arranged for the policy to go into effect.
Calling itself an “erroneously named defendant,” Lloyd’s Underwriters at London, Sponsoring Syndicates concedes in a separate reply filed with the court that Willis Corroon issued a binder to American Rock Salt in 1998, but denies that any Lloyd’s syndicate issued the policy.
While the legal battle wears on, the mine is doing well, American Rock Salt vice president Joseph Bucci said. Due to somewhat “spotty” snowfalls in the Northeast this year, sales are not quite up to last year’s levels, but they are satisfactory, supplying municipalities in 14 states. And the Livingston County mine’s vast potential hardly has been tapped.
The Hampton Corners dig sits atop one of the biggest subterranean salt veins in the world, a massive 600,000-square-mile deposit stretching south to the Finger Lakes region and west to Ohio. Other U.S. mines tapping the vein are at the tip of Cayuga Lake in Lansing, and in Cleveland, where the shafts run under Lake Erie.
The Lansing and Ohio mines tie for a distant second with the Livingston County site with each turning out some 2 million tons a year, Bucci said. Only one salt mine in North America, an Ontario, Canada excavation, which yields 4 million tons to 6 million tons a year, produces more.
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02/25/05 (C) Rochester Business Journal