Hot gas (or hot air)?
Last August, reporters at the Kansas City Star broke the story about hot gas — the practice of selling gas to customers at temperatures higher than 60 degrees, which the paper said was costing consumers $2.3 billion annually. Over the next year, the story picked up some steam, gaining attention in other media outlets and even Congress which loves to rally around this sort of thing.
Early on, several lawsuits were filed by outraged consumers in California, New Jersey and in Missouri and Kansas. But it wasn’t until I read the 10-K that The Pantry (PTRY) filed late Friday that you saw just how many lawsuits had been filed over this: more than 45, according to the filing. The Pantry says that it has been named as a defendant in seven of these cases:
The plaintiffs in the lawsuits generally allege that they are retail purchasers who received less motor fuel than the defendants agreed to deliver because the defendants measured the amount of motor fuel they delivered in non-temperature adjusted gallons which, at higher temperatures, contain less energy. These cases seek, among other relief, an order requiring the defendants to install temperature adjusting equipment on their retail motor fuel dispensing devices. In certain of the cases, including some of the cases in which we are named, plaintiffs also have alleged that because defendants pay fuel taxes based on temperature adjusted 60 degree gallons, but allegedly collect taxes from consumers in non-temperature adjusted gallons, defendants receive a greater amount of tax from consumers than they paid on the same gallon of fuel. The plaintiffs in these cases seek, among other relief, recovery of excess taxes paid and punitive damages. Both types of cases seek compensatory damages, injunctive relief, attorneys’ fees and costs, and prejudgment interest.
As the filing notes, the lawsuits have been consolidated in U.S. District Court in Kansas. The Pantry goes on to say that “there are substantial factual and legal defenses to the theories alleged in these lawsuits” and that it’s too early to estimate the company’s exposure or liability.
All of this is pretty interesting, but what I found really interesting is that Murphy Oil (MUR), which is named as the lead defendant in three of the suits that Pantry mentions in its filing, never mentions the potential liability in its filings, including the 10-Q it filed earlier this month. Nor does Marathon Oil (MRO), which also filed a Q earlier this month. Granted, both Murphy and Marathon are much bigger than the Pantry, so the lawsuits probably didn’t meet the materiality test. But when you learn about potential liabilities at one company by reading another company’s filings, it’s never a good thing.
RSS
January 11th, 2008 at 10:09 am
Was scrolling through your archive and this note rang a bell- I don’t know how many other related issues and payments are out there, but thought it was interesting.
Nice site!
————————————————
Kinder Morgan to Pay $25 Million to Settle U.S. Civil Claims
2007-11-28 18:23 (New York)
By Robert Schmidt
Nov. 28 (Bloomberg) — Kinder Morgan Energy Partners LP, the
second-biggest publicly traded pipeline partnership, agreed to
pay $25 million to settle U.S. allegations it improperly sold
coal meant for the government and other clients.
The government alleged that Kinder Morgan, which contracted
with the Tennessee Valley Authority to store coal at terminals in
Illinois and Kentucky, used two different weighing methods that
allowed it to ship out less coal than it received. The
difference, which could be between 2 percent and 3 percent, was
then sold by Kinder Morgan as its own “Red Lightning” brand
coal between 1997 and 2001, the Justice Department said.
The agreement was announced today by the U.S. attorney’s
office in Fairview Heights, Illinois. The company will pay $19.8
million to the U.S. and $5.2 million to its private customers,
the Justice Department said.
Kinder Morgan, based in Houston, said in a statement that it
believed the coal sales were proper under its contracts. The
company said it “agreed to the settlement in order to avoid the
costs of litigation and to maintain a positive relationship with
significant customers.”
–Editors: Laurie Asseo, Robin Meszoly.
To contact the reporter on this story:
Robert Schmidt in Washington at +1-202-624-1853 or
rschmidt5@bloomberg.net.
To contact the editor responsible for this story:
Michael Forsythe at +1-202-624-1940 or
mforsythe@bloomberg.net
——————————————————————————
KINDER MORGAN ENERGY PARTNERS ANNOUNCES COAL SETTLEMENT
2007-11-28 17:41 (New York)
(The following is a reformatted version of a press release issued by
Kinder Morgan Energy Partners, received via electronic mail.)
KINDER MORGAN ENERGY PARTNERS ANNOUNCES COAL SETTLEMENT
HOUSTON, Nov. 28, 2007 - Kinder Morgan Energy Partners, L.P. (NYSE: KMP)
today announced it has reached a civil settlement with the U.S. Attorney’s
office for the Southern District of Illinois involving certain coal sales
that occurred at its Cora, Ill., and Grand Rivers, Ky., terminals between
1997 and 2001. Through 1999, KMP collected and, through 2001,
subsequently sold excess coal (gain in coal resulting from moisture
absorption or scale inaccuracies) as it believed it was entitled to do
under then-existing contracts. Likewise, under the terms of those
contracts, KMP bore the risk of coal losses resulting from moisture loss
and scale inaccuracies. During the period of time in question, each
customer at the terminals received at least as much coal back from each
terminal as it delivered to the terminal for storage and handling.
To settle the matter, KMP will pay approximately $25 million to the
Tennessee Valley Authority and other customers of the two terminals from
1997 through 1999. The company initially announced this matter was under
investigation in June 2005. KMP further disclosed in its recently filed
quarterly report on Form 10-Q that it had reached an agreement in
principle to settle this matter and that it had recorded an expense in the
third quarter of approximately $25 million to reflect the liability
associated with the settlement. KMP’s internal investigation of the
matter did not reveal inappropriate actions and, accordingly, KMP made no
admission or acknowledgement of improper conduct as part of the
settlement. Nonetheless, KMP agreed to the settlement in order to avoid
the costs of litigation and to maintain a positive relationship with
significant customers.
Kinder Morgan Energy Partners, L.P. (NYSE: KMP) is a leading pipeline
transportation and energy storage company in North America. KMP owns an
interest in or operates more than 24,000 miles of pipelines and 150
terminals. Its pipelines transport natural gas, gasoline, crude oil, CO2
and other products, and its terminals store petroleum products and
chemicals and handle bulk materials like coal and petroleum coke. KMP is
also the leading provider of CO2 for enhanced oil recovery projects in
North America. One of the largest publicly traded pipeline limited
partnerships in America, KMP has an enterprise value of approximately $20
billion. The general partner of KMP is owned by Knight Inc. (formerly
Kinder Morgan, Inc.), a private company.
This news release includes forward-looking statements. Although Kinder
Morgan believes that its expectations are based on reasonable assumptions,
it can give no assurance that such assumptions will materialize.
Important factors that could cause actual results to differ materially
from those in the forward-looking statements herein are enumerated in
Kinder Morgan’s Forms 10-K and 10-Q as filed with the Securities and
Exchange Commission.
Larry Pierce Mindy Mills
Media Relations Investor Relations
(713) 369-9407 (713) 369-9490
http://www.kindermorgan.com
(jkt)NY
##
-0- Nov/28/2007 22:41 GMT