LAWSUITS BY THE BARREL
BP CLAIMS BREACH OF CONTRACT IN $59 MILLION CASE
BP Products North America is suing Trainer’s Monroe Energy LLC for no less than $59 million, citing breach of contract over the delivery of crude oil and a discrepancy regarding its quality.
In a suit filed Thursday in the U.S. District Court of Southern New York, BP Products attorneys allege they had a three-year contract with Monroe Energy to provide monthly deliveries of certain types of crude oil as feedstock for the Delaware County facility.
Court documents noted a July 18, 2016, letter from Monroe Energy that BP said “wrongfully terminated” the agreement because “the crude BP supplied did not meet certain quality specifications before delivery to the (r) efinery.” BP maintained that the agreement outlined that the quality specifications had to be met at the time of delivery.
Monroe Energy officials declined comment and BP Products officials could not be reached on Tuesday.
Court documents present a series of letters between the two companies last summer arguing about the quality of crude sent to the refinery.
On Aug. 25, 2014, Monroe and BP entered into an agreement in which Monroe would pay for crude oil provided by BP from Oct. 1, 2014, through Sept. 30, 2017.
The crude was to come from the Eagle Ford oil basin or the Bakken oil basin as separate products The oil from the two basins was not to be commingled or blended.
For almost two years, that arrangement seemed to work.
According to court documents, on June 17, 2016, Monroe sent BP a letter stating that the agreement had been breached as the Eagle Ford crude had been “intentionally commingled and/or blended with other crude oil or blend-stocks” and that such blending caused material damages to Monroe.
The lawsuit said Monroe said the Eagle Ford crude did not meet the standards set forth in the agreement at the load port in May and possibly in January 2016 as well as a shipment that was to arrive at the refinery between June 22 and 24.
Six days later, BP sent a response rebutting those allegations, stating, “BP had not blended Eagle Ford (c) rude with any other crude oil or feedstock.”
BP did say that the company “from time to time, blended batches of crude oil originating from the Eagle Ford basin together prior to delivery,” which met the standards specified in the agreement.
The documents said as early as Aug. 19, 2014, Monroe acknowledged the blending of the Eagle Ford crude would be acceptable.
On June 28, 2016, Monroe Energy sent BP another letter, stating its position that it did not agree to the blending of the Eagle Ford crude and reiterated the breach of the agreement.
In this letter, Monroe also allegedly pointed out BP’s refusal to allow Monroe personnel to witness the loading of the upcoming crude oil shipment.
The court documents said Monroe claimed this refusal was another agreement violation while BP officials said no such provision exists, that only an independent inspector, picked by both parties, was permitted to measure the quality of the delivery at the refinery.
On June 30, 2016, BP sent another letter to Monroe, denying the allegations.
On July 18, 2016, Monroe notified BP that it was terminating the initial agreement due to these issues.
At the time, BP had a cargo of crude on its way to the refinery and alternative delivery arrangements had to be made to the cost of $368,163.75, the lawsuit maintained.
In the suit, BP states that their crude has always met the quality specifications outlined in the agreement by the time it was delivered to the refinery docks and that prior to the letters last summer, Monroe had not said there was an issue otherwise.
BP is asking the court for not less than $59 million because of damages resulting from the termination of the agreement as well as costs emanating from the lawsuit.
BP maintains that the suit can be filed in the Southern New York court because Monroe conducts business in New York and that both parties consented to have the case heard in this court, as pursuant to the agreement.