$8.8 Million Demand for Missing Steam

HOUSTON (CN) - A petrochemical maker claims in court it lost $8.8 million to a plant shutdown caused by a power supplier's failure to provide steam.

Equistar Chemicals, a subsidiary of LyondellBassell Industries, sued GIM Channelview Cogeneration LLC in Harris County Court.

"Equistar owns and operates a petrochemical plant in Channelview, Texas (the 'Channelview Complex')," the complaint states. "The Channelview Complex consists of two olefins units that manufacture ethylene, propylene, butadiene, and benzene, as well as other derivative units.

"These products become the building blocks for a variety of consumer products including food packaging, construction materials, household furnishings, and automotive parts.

"GIM owns and operates a cogeneration facility-generating both electricity and useful steam and heat-located entirely within Equistar's Channelview Complex.

"GIM's cogeneration facility consists of four 170-megawatt, natural-gas fired turbines coupled to a single gas turbine."

Equistar says GIM's rights to run the cogeneration turbines in its complex are governed by a Steam Supply Agreement, as both steam and electricity are needed for its operations.

"GIM is required to provide, and Equistar is required to take and pay for, 100 percent of Equistar's steam requirements," the complaint states. "In the event that GIM fails to provide steam to Equistar in the quantities set forth in the Steam Supply Agreement, Equistar is entitled to contractually specified damages from GIM for the disruption and loss of production."

GIM shut one of its cogeneration units down for maintenance on Oct. 20, 2011, Equistar says, then a problem with GIM's substation led it to shut down two more units.

"When GIM's steam production fell so dramatically, Equistar was required to perform an immediate and rapid shut down of the entire Channelview Complex," Equistar says.

Although GIM was able to restore steam production within three days, Equistar says, the "lost production and profit and incurred expenses" from the shutdown cost it $9.5 million.

Equistar says it modified its damages to $8.8 million as calculated by a formula in the Steam Supply Agreement, but GIM refused to pay.

"Instead, GIM has responded by stating that the contractual damages in Appendix D [in the Steam Supply Agreement] are based on the hours it takes GIM to restart production of steam-not on the hours Equistar's Channelview plant is unable to produce ethylene," the complaint states.

"Focusing on the time period it took GIM to restart production of steam, GIM maintains that it owes Equistar only approximately $1.2 million in damages under the Steam Supply Agreement-or less than 13 percent of Equistar's actual damages by GIM."

Equistar seeks damages for breach of contract.

It is represented by Keith Jacobs with Baker Botts in Houston.

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