GALVESTON, Texas (CN) — BP misrepresented the condition of a southeast Texas oil refinery it sold to Marathon Petroleum for $2.4 billion, Marathon claims in a lawsuit it filed after walking away from mediation.
Marathon sued two U.S. subsidiaries of the British oil company, BP Products North America and BP Pipelines (North America), on Monday in Federal Court.
Marathon paid BP $2.4 billion for the refinery on Galveston Bay, which can process 450,000 barrels a day, and other assets in a deal that closed on Feb. 1, 2013.
The purchase price also bought Marathon three pipelines linked to the refinery, four terminals in North Carolina, Tennessee and Florida where refined petroleum products are stored and sold, and a contract to supply fuel to 1,200 branded gas stations.
Marathon claims in the lawsuit that BP left the refinery in a state of disrepair, with incomplete "process safety information documentation," which regulators need to ensure equipment is maintained.
"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," the complaint states.
Marathon says it had to produce documentation for 3,021 pressure vessels, which hold oil and natural gas, an expensive and time-consuming job that BP abandoned before consummating the sale.
The Ohio-based company also claims it had to implement a program to replace 550 electric components and 51 buildings that house those electronics at the refinery, another job BP punted in violation of the contract.
Geoff Morrell, BP's senior vice president of U.S. communications, said in a statement that Marathon is suffering from a bout of slow-onset buyer's remorse.
Before the sale, BP spent billions of dollars on upgrades to the refinery and even gave Marathon a discount so it could invest in upgrading refinery equipment, Morrell said.
"Marathon conducted extensive due diligence and was given virtually unrestricted access to documents and equipment at the refinery," Morrell said. "When BP transferred ownership of the refinery to Marathon, it had satisfied all commitments made to federal regulators and was in full compliance with the terms of the purchase agreement."
Morrell said that despite BP's adherence to the contract, it agreed to mediation to resolve Marathon's concerns, only to have Marathon go to court after the first mediation session.
"We will defend ourselves vigorously against this attempt by Marathon to rewrite the economic terms of the sale and avoid their remaining payments under the agreement," he added.
Marathon spokesman Brandon Daniels declined comment when asked why the company waited so long to sue BP, citing a company policy against talking about pending litigation.
Marathon wants more than $75,000 damages for breach of contract. It also seeks a declaration it does not owe $1.5 million that BP billed it under the gas station service agreement.
BP can't seem to consummate its divorce from the refinery as the relationship is lingering in court. BP acquired the refinery in 1999 when it merged with Amoco.
BP is in settlement talks with attorneys representing more than 25,000 people in Galveston County Court, who claim they were harmed when BP released more than 500,000 lbs. of toxic chemicals from the refinery over 40 days in 2010.
A series of explosions and fires there in March 2005 killed 15 workers and injured 180, resulting in a $21 million fine and an OSHA settlement agreement.BP agreed to pay the government a $50 million fine in August 2010 after regulators found it had not corrected safety violations in compliance with the 2005 settlement.Follow @cam_langford
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