By October 11, 2016 Read More →

Marathon suit attempts to renegotiate Texas City refinery purchase terms

Texas City refinery

BP closed the sale of its Texas City refinery to Marathon Petroleum Corp. in February, 2013.  BP photo.

Marathon says problems at Texas City refinery breached sale agreement

Oct 11 (Reuters) – BP Plc on Tuesday said it would vigorously defend itself against a federal civil suit by Marathon Petroleum Corp alleging that it had failed to deliver the Texas City refinery and three products terminals in the condition promised under a $2.4-billion sales agreement signed in 2012.

“This suit is nothing more than an attempt by Marathon to renegotiate the terms of the Texas refinery purchase of almost four years ago,” Geoff Morrell, BP’s senior vice president of U.S. communications and external affairs, said in an emailed statement.

Marathon took over the 459,000 barrel-per-day (b/d) refinery in Texas City, Texas, and terminals when the transaction closed on Feb. 1, 2013, and began finding problems that breached the sale agreement, according to the lawsuit filed on Monday.

When sold in 2013, the Texas City refinery fulfilled the terms of the sale agreement and met all commitments BP had made to federal regulators, Morrell said, adding BP tried to resolve Marathon’s complaints through mediation.

“It is disappointing that immediately following the first mediation session, Marathon chose to go to court.”

Marathon also alleged BP planned to carry out an overhaul of an aromatics recovery unit prior to the sale being complete, but did not do so after signing the sale agreement, according to the lawsuit.

However, BP said it spent billions of dollars in the years before the sale to upgrade the Texas City refinery.

“Marathon insisted on and received a discounted sales price so it could make some additional capital investments,” Morrell said. “Marathon conducted extensive due diligence and was given virtually unrestricted access to documents and equipment at the refinery.”

The BP Texas City refinery was the site of a March 23, 2005, explosion that killed 15 workers and injured 180 others. BP was fined $84.6 million by the U.S. Occupational Safety and Health Administration between 2005 and 2012 for safety rules violations found at the refinery in investigations following the blast.

BP pleaded guilty to a federal environmental law violation and paid $50 million to the U.S. Justice Department in 2009. BP also paid more than $2 billion to settle lawsuits stemming from the 2005 explosion.

Monday’s lawsuit was filed in the U.S. District Court for Southern Texas in Galveston, Texas by Marathon subsidiary Marathon Petroleum Co LLC against BP subsidiaries BP Products North America Inc and BP Pipelines (North America) Inc.

(Reporting by Erwin Seba in Houston and Vijaykumar Vedala in Bengaluru)

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