Crude oil production company wins appeal, gets shipping credit

NEW ORLEANS – A crude oil production company won an appeal at the U.S. Court of Appeals for the Fifth Circuit concerning a lower court’s judgment in favor of a refinery company.

Anadarko Petroleum was under contract with Williams Alaska Petroleum, selling crude oil to the refinery from September 2000 to December 2002. The companies used the TAPS Quality Bank, a third-party accounting service, to assess the value of crude oil being shipped. Several years later, a Federal Energy Regulatory Commission (FERC) found that the methodology for assessing TAPS Quality Bank credits was flawed, resulting in a $9 million credit to Williams Alaska.

The district court decided that the contract between the companies called for “contemporaneous” payments, making the FERC’s new assessment inapplicable. It granted summary judgment to Williams Alaska.

The Appeals Court disagreed, nothing that nothing in the agreement “indicated that if Williams Alaska’s payment were later determined to be inaccurate, the parties would let the error stand.” The court also found that the contract clearly states that if TAPS Quality Bank’s adjustments are a credit, the price would increase.

In a per curiam opinion, Circuit Judges Jerry Smith, Catharina Haynes and James E. Graves reversed the district court’s grant of summary judgment in favor of Williams Alaska Petroleum and remanded to the district court to calculate interests and determine attorney’s fees owned to Anadarko.

It decided to render judgment in favor of Anadarko Petroleum, stating that there were no provision in the contract that contained terms to limit “William Alaska’s obligation to pay following receipt of the credit.”

Case No. 2012-020716.