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U.S. Oil sues Tacoma Power for big money, claims power outage led to lost profits

A fire burns at a U.S. Oil and Refining Co. facility in 2015 in Tacoma. The oil refinery has sued Tacoma Public Utilities for $9 million and attorney's fees after it says a 2016 Tacoma Power outage caused the company lost profits and equipment damage.
A fire burns at a U.S. Oil and Refining Co. facility in 2015 in Tacoma. The oil refinery has sued Tacoma Public Utilities for $9 million and attorney's fees after it says a 2016 Tacoma Power outage caused the company lost profits and equipment damage. The Associated Press

U.S. Oil & Refining Co. is suing Tacoma Public Utilities for $9 million plus attorney's fees and costs after it says an April 2016 power outage that occurred during substation maintenance resulted in lost profits and damage to the refinery's equipment.

U.S. Oil, which has operated a refinery on the Tideflats since 1957, said in a lawsuit filed in Pierce County Superior Court on Thursday that after the April 28, 2016 power outage it wasn't able to return to pre-outage conditions until July 2016. It's seeking damages of no less than $9,127,981.

The company said it also wasn't notified that Tacoma Power would be doing maintenance on the Lincoln Substation — which the lawsuit says was built for the purpose of providing reliable power to U.S. Oil — as was required by a 2000 agreement between the utility and U.S. Oil.

Tacoma city attorney Bill Fosbre said the city has hired outside counsel to represent TPU and Tacoma Power in the lawsuit. The contract amount with Seattle-based Gordon Tilden Thomas Cordell is $200,000. Fosbre said that if defense costs exceed that figure, TPU’s insurance carrier will pay.

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"The city, TPU and Tacoma Power value its long-term relationship with U.S. Oil and is carefully reviewing the complaint with outside counsel," Fosbre said in an email. "However, because the matter is in litigation, I cannot provide further comment at this time."

U.S. Oil said in the lawsuit its need for reliable power has been well-established over the course of its long history with TPU. One of five oil refineries in Washington, it produces refined petroleum products including gasoline, ultra-low sulfur diesel, jet fuel, marine fuels and asphalt products and has a rated capacity of 42,000 barrels per day. According to the lawsuit, the company operates at capacity.

"A source of consistent and reliable electric power is essential to around-the-clock operation of the refinery," the lawsuit says. "Proper shutdown and start-up of the sophisticated mechanical equipment that drives the refinery's operational processes can take weeks. The machinery at the refinery is particularly sensitive to sudden and unexpected reductions in power or power outages."

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Prior to 2000, the lawsuit says, the power supply to U.S. Oil was unreliable and inconsistent, resulting in disruptions. As a result, in 2000 the city and the company entered into an agreement to supply power to U.S. Oil through a dedicated substation (the Lincoln Substation), which the utility built. U.S. Oil contributed $360,000 to the construction costs.

Part of that agreement included a provision that Tacoma Power "promptly notify U.S. Oil when Tacoma Power schedules future maintenance on any portion of Lincoln Substation that supplies U.S. Oil."

The company says it wasn't notified of the maintenance Tacoma Power was set to perform on April 28, 2016, during which a utility employee "caused a complete loss of power to the refinery." A second outage occurred shortly thereafter. Altogether, it took more than two hours for power to be restored after the initial outage, the lawsuit says.

As a result, U.S. Oil said it suffered damages including "lost profits from refinery products that were not able to be produced, costs associated with managing the excess inventory of crude stock that had been purchased on contract but which could not be processed following the outage, and increased costs and fees associated with the interruption of refinery operations."

The company said it believes it also suffered some damage to its equipment.

Candice Ruud: 253-597-8441, @candiceruud
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