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Marathon sues BP for breach of contract in Texas oil refinery sale

Marathon Petroleum’s Texas City refinery. Photo courtesy of Marathon Petroleum.

(Reuters) Marathon Petroleum Corp. alleged BP failed to deliver a Texas oil refinery and three products terminals in the condition promised under a $2.4-B sales agreement signed in 2012, according to a federal lawsuit filed Monday.

Marathon took over the 459-Mbpd 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.

"After assuming operation of the refinery, Marathon Petroleum discovered that, in numerous respects, the refinery and the terminals were not in compliance with environmental laws," according to the lawsuit.

BP also failed to maintain process safety information on 3,756 pressure vessels at the refinery, Marathon alleged.

BP began a project in 2010 to compile the process safety information on the pressure vessels, "but it abandoned this project in April 2012 having only completed documentation for 555 of the vessels," according to the lawsuit.

Marathon also said 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.

Marathon also wants to terminate payments, as of July 31, 2016, it has been making to BP for servicing retail stations Marathon received as part of the sale, according to the suit.

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 MM by the US 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 MM to the US Justice Department in 2009.

BP also paid more than $2 B to settle lawsuits stemming from the 2005 explosion.

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

Reporting by Erwin Seba; Editing by Christian Schmollinger

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