This excerpt taken from the MRO 10-Q filed Aug 7, 2007.
Item 1. Legal Proceedings
On April 12, 2007, Marathon Petroleum Company LLC (MPC) was notified by the Division of Enforcement of the Commodity Futures Trading Commission (the Commission) of its intent to recommend that the Commission name MPC in an enforcement action alleging that on November 26, 2003, MPC attempted to manipulate the price of West Texas Intermediate crude oil. The proposed enforcement action involved allegations that on the day mentioned in the notice MPC offered to sell crude oil in a physical cash market at a price lower than contemporaneous bids. There were no allegations of false reporting. After consideration of all relevant factors, and without admitting or denying the findings in the settlement order dated August 1, 2007, MPC reached a settlement with the Commission. Under the terms of the settlement, MPC shall pay a civil monetary penalty of $1 million.
This excerpt taken from the MRO 10-Q filed May 7, 2007.
Item 1. Legal Proceedings
On April 12, 2007, Marathon Petroleum Company LLC (MPC) was notified by the Division of Enforcement of the Commodity Futures Trading Commission of its intent to recommend that the Commission name MPC in an enforcement action alleging that on November 26, 2003, MPC attempted to manipulate the price of West Texas Intermediate crude oil. It is Marathons understanding that the proposed enforcement action involves allegations that on the day mentioned in the notice MPC offered to sell crude oil in a physical cash market at a price lower than contemporaneous bids and, further, that there are no allegations of false reporting. Marathon intends to vigorously defend the proposed enforcement action.
This excerpt taken from the MRO 10-Q filed Nov 4, 2005.
Item 1. Legal Proceedings
The Ohio Attorney General, on behalf of the Ohio Environmental Protection Agency, has notified SSA of its intention to bring an enforcement action for alleged wastewater violations at three of its locations in Ohio. SSA personnel have been in discussions with Ohio officials in an attempt to resolve this matter.
This excerpt taken from the MRO 10-Q filed Aug 8, 2005.
Item 1. Legal Proceedings
Product Contamination Litigation
A lawsuit was filed in the United States District Court for the Southern District of West Virginia and alleges that MAPs Catlettsburg Refinery sold defective gasoline to wholesalers and retailers, causing permanent damage to storage tanks, dispensers and related equipment, resulting in lost profits, business disruption, and personal and real property damages. Plaintiffs seek class action status. In 2002, MAP conducted extensive cleaning operations at affected facilities, but denies that any permanent damages resulted from the incident. MAP previously settled with many of the potential class members in this case and intends to vigorously defend this action.
SEC Investigation Relating to Equatorial Guinea
As previously disclosed, during 2004 the United States Securities and Exchange Commission (SEC) commenced an inquiry into payments made to the government of Equatorial Guinea, or to officials and persons affiliated with officials of the government of Equatorial Guinea. Marathon has been voluntarily producing documents requested by the SEC in that inquiry. On August 1, 2005, Marathon received a subpoena issued by the SEC pursuant to a formal order of investigation requiring the production of the documents that have already been produced or that are in the process of being identified and produced in response to the SECs prior requests, and requesting additional materials. Marathon has been and intends to continue cooperating with the SEC in this investigation.
This excerpt taken from the MRO 10-Q filed May 9, 2005.
. Legal Proceedings
We are a defendant along with many other refining companies in over forty cases in eleven states alleging methyl tertiary-butyl ether (MTBE) contamination in groundwater. All of these cases have been consolidated in a multi-district litigation in the Southern District of New York for preliminary proceedings. The judge in this multi-district litigation ruled on April 20, 2005 that some form of market share liability would apply. Market share liability enables a plaintiff to sue manufacturers who represent a substantial share of a market for a particular product and shift the burden of identification of who actually made the product to the defendants, effectively forcing a defendant to show that it did not produce the MTBE which allegedly caused the damage. The judge further allowed cases to go forward in New York and eleven other states, based upon varying theories of collective liability and predicted that a new theory of market share liability would be recognized in Connecticut, Indiana, and Kansas. The plaintiffs generally are water providers or governmental authorities and they allege that refiners, manufacturers and sellers of gasoline containing MTBE are liable for manufacturing a defective product and that owners and operators of retail gasoline sites have allowed MTBE to be discharged into the groundwater. Several of these lawsuits allege contamination that is outside of our marketing area. A few of the cases seek approval as class actions. Many of the cases seek punitive damages or treble damages under a variety of statutes and theories. We stopped producing MTBE at our refineries in October 2002. The potential impact of these recent cases and future potential similar cases is uncertain. We will defend these cases vigorously.
Powder River Basin Litigation
In March 2005, we sold our coal bed methane leases in Montana. As a result of no longer having an interest in these properties, Marathon has withdrawn as an intervening party from the four lawsuits filed in May 2003 by plaintiff environmental and other groups, against the U.S. Bureau of Land Management to the extent the cases deal with Montana lands.
On April 8, 2005, Shiva Singh instituted a class action in the Supreme Court of the State of New York in New York County against Ashland, and the individual members of Ashlands Board of Directors. The complaint also names Marathon, MAP and Credit Suisse First Boston LLC (CSFB) as defendants. The complaint states that Mr. Singh holds Ashland common stock and that the complaint is brought on behalf of Mr. Singh and others similarly situated. The action arises from the proposed transaction in which Ashland would transfer its entire 38% interest in MAP as well as certain other businesses to Marathon. The complaint alleges breach of fiduciary duty as well as aiding and abetting breach of fiduciary duty and negligence against Ashland, its directors, Marathon and MAP. The complaint alleges breach of fiduciary duty and negligence as well as aiding and abetting breach of fiduciary duty and negligence against CSFB.
The complaint seeks to recover from defendants an unstated sum of damages. The complaint also seeks to enjoin the proposed transaction (and any related shareholder vote) between Ashland and Marathon; to require defendants to fully disclose all material facts before completion of any such transaction; and to require defendants to obtain a current, independent fairness opinion concerning the proposed transaction. To the extent that the proposed transaction is consummated prior to the entry of the courts final judgment, the complaint asks the court to rescind such transaction(s) and award damages. The complaint also seeks reasonable attorneys fees, costs and expenses. Marathon intends to vigorously defend this case.
In January 2005, MAP received a Notice of Violation from the EPA alleging 33 violations of Clean Air Act fuels requirements. These alleged violations largely resulted from MAPs attest engagements submitted to the Agency under the Reformulated Gasoline and Anti-Dumping programs. The EPA proposed a penalty of $140,600. We have been in discussions with the EPA and we hope to resolve this matter in 2005.
This excerpt taken from the MRO 10-K filed Mar 10, 2005.
Item 3. Legal Proceedings
Marathon is the subject of, or a party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. Certain of these matters are included below in this discussion. The ultimate resolution of these contingencies could, individually or in the aggregate, be material. However, management believes that Marathon will remain a viable and competitive enterprise even though it is possible that these contingencies could be resolved unfavorably.
Natural Gas Royalty Litigation
Marathon was served in two qui tam cases, which allege that federal and Indian lessees violated the False Claims Act with respect to the reporting and payment of royalties on natural gas and natural gas liquids. The first case, U.S. ex rel Jack J. Grynberg v. Alaska Pipeline Co., et al. is primarily a gas measurement case, and the second case, U.S. ex rel Harrold E. Wright v. Agip Petroleum Co. et al, is primarily a gas valuation case. These cases assert that false claims have been filed by lessees and that penalties, damages and interest total more than $25 billion. The Department of Justice has announced that it would intervene or has reserved judgment on whether to intervene against specified oil and gas companies and also announced that it would not intervene against certain other defendants including Marathon. The matters are in the discovery phase and Marathon intends to vigorously defend these cases.
Powder River Basin Litigation
The U.S. Bureau of Land Management ("BLM") completed a multi-year review of potential environmental impacts from coal bed methane development on federal lands in the Powder River Basin in Montana and Wyoming. The Agency's Record of Decision ("ROD") was signed on April 30, 2003 supporting increased coal bed methane development. Plaintiff environmental and other groups filed four suits in May 2003 in the U.S. District Court for the District of Montana against the BLM alleging the Agency's environmental impact review was not adequate. Plaintiffs seek a court order enjoining coal bed methane development on federal lands in the Powder River Basin until BLM conducts additional studies on the environmental impact. Marathon has been allowed to intervene as a party in all four of the cases. As the lawsuits to delay energy development in the Powder River Basin progress through the courts, BLM continues to process permits to drill under the ROD. In January 2004, the Court over protests of Plaintiffs, transferred to the District Court of Wyoming, portions of two of the cases dealing with the sufficiency of the environmental impact review as to lands in Wyoming.
In May 2004, plaintiff environmental groups Environmental Defense et al, filed suit against the U.S. Bureau of Land Management ("BLM") in Montana Federal District Court, alleging the agency did not adequately consider air
quality impacts of coal bed methane and oil and gas operations in the Powder River Basin in Montana and Wyoming when preparing its environmental impact statements. Plaintiffs request that BLM be ordered to cease issuing leases and permits for energy development, until additional analysis of predicted air impacts is conducted. Marathon and Pennaco Energy, Inc. have intervened in the litigation.
The following is a summary of proceedings involving Marathon that were pending or contemplated as of December 31, 2004, under federal and state environmental laws. Except as described herein, it is not possible to predict accurately the ultimate outcome of these matters; however, management's belief set forth in the first paragraph under Item 3. "Legal Proceedings" above takes such matters into account.
Claims under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and related state acts have been raised with respect to the cleanup of various waste disposal and other sites. CERCLA is intended to facilitate the cleanup of hazardous substances without regard to fault. Potentially responsible parties ("PRPs") for each site include present and former owners and operators of, transporters to and generators of the substances at the site. Liability is strict and can be joint and several. Because of various factors including the difficulty of identifying the responsible parties for any particular site, the complexity of determining the relative liability among them, the uncertainty as to the most desirable remediation techniques and the amount of damages and cleanup costs and the time period during which such costs may be incurred, Marathon is unable to reasonably estimate its ultimate cost of compliance with CERCLA.
Projections, provided in the following paragraphs, of spending for and/or timing of completion of specific projects are forward-looking statements. These forward-looking statements are based on certain assumptions including, but not limited to, the factors provided in the preceding paragraph. To the extent that these assumptions prove to be inaccurate, future spending for, or timing of completion of environmental projects may differ materially from those stated in the forward-looking statements.
At December 31, 2004, Marathon had been identified as a PRP at a total of six CERCLA waste sites. Based on currently available information, which is in many cases preliminary and incomplete, Marathon believes that its liability for cleanup and remediation costs in connection with all but one of these sites will be under $1 million per site, and most will be under $100,000. Marathon believes that its liability for cleanup and remediation costs in connection with the one remaining site will be under $4 million.
In addition, there is one site where Marathon has received information requests or other indications that it may be a PRP under CERCLA but where sufficient information is not presently available to confirm the existence of liability.
There are also 131 additional sites, excluding retail marketing outlets, related to Marathon where remediation is being sought under other environmental statutes, both federal and state, or where private parties are seeking remediation through discussions or litigation. Of these sites, 14 were associated with properties conveyed to MAP by Ashland which has retained liability for all costs associated with remediation. Based on currently available information, which is in many cases preliminary and incomplete, Marathon believes that its liability for cleanup and remediation costs in connection with 25 of these sites will be under $100,000 per site, 53 sites have potential costs between $100,000 and $1 million per site, 19 sites may involve remediation costs between $1 million and $5 million per site and 8 sites have incurred remediation costs of more than $5 million per site. There are 11 sites with insufficient information to estimate future remediation costs.
There is one site that involves a remediation program in cooperation with the Michigan Department of Environmental Quality ("MDEQ") at a closed and dismantled refinery site located near Muskegon, Michigan. During the next five years, Marathon anticipates spending less than $7 million at this site. Expenditures in 2004 were approximately $391,000, and expenditures in 2005 are expected to be $600,000 as technical evaluation continues, and could be as much as $3,900,000 if soil remediation is commenced in the second half of the year. Ongoing work at this site is subject to approval by the MDEQ, and a risk-based closure strategy is being developed for approval by the MDEQ.
MAP has had a pending enforcement matter with the Illinois Environmental Protection Agency and the Illinois Attorney General's Office since 2002 concerning MAP's self-reporting of possible emission exceedences and permitting issues related to storage tanks at its Robinson, Illinois refinery. MAP has had periodic discussions with Illinois officials regarding this matter and more discussions may occur in 2005.
In July, 2002, Marathon received a Notice of Enforcement from the State of Texas for alleged excess air emissions from its Yates Gas Plant and production operations on its Kloh lease. A settlement of this matter was finalized in 2004, with Marathon and its co-owners paying a civil penalty of $74,000 and the donation of land as a Supplemental Environmental Project in lieu of a further penalty of $74,000. Marathon is owner of a 38% interest in the facilities.
In May, 2003, Marathon received a Consolidated Compliance Order & Notice or Potential Penalty from the State of Louisiana for alleged various air permit regulatory violations. This matter was settled for a civil penalty of $148,628 and awaits formal closure with the State.
In August of 2004, the West Virginia Department of Environmental Protection ("WVDEP") submitted a draft consent order to MAP regarding MAP's handling of alleged hazardous waste generated from tank cleanings in the State of West Virginia. The proposed order seeks a civil penalty of $337,900. MAP has met with the WVDEP and discussions are ongoing in an attempt to resolve this matter.
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