BP Energy Co. Ordered to Pay $18M to Arkansas Oklahoma Gas Corp.

A federal judge last month ordered BP Energy Co. of Houston to pay $18 million to Arkansas Oklahoma Gas Corp. of Fort Smith for breach of contract for not delivering enough natural gas during the record-breaking snow and cold of February 2021.

If you recall, AOG, a subsidiary of Summit Utilities, sued BP Energy in 2021 for failing to fulfill gas supply obligations during Winter Storm Uri.

AOG was seeking $34 million in damages, according to the lawsuit filed in U.S. District Court in Fort Smith.

BP argued that its failure to deliver the gas during the storm was excused by the contract’s force-majeure clause, which is an unforeseeable situation that prevented it from providing the gas as promised.

But AOG said in its complaint that it had a contract requiring BP to provide up to 30,000 MMBtu of natural gas per day at a specific price. AOG has about 58,000 customers in western Arkansas and eastern Oklahoma.

U.S. District Judge P.K. Holmes III held a four-day bench trial in December. He found that with the storm coming in February 2021, BP did make other arrangements to deliver gas to AOG. “But those arrangements ultimately failed; and beginning on February 15, BP failed to physically deliver onto the Ozark Pipeline sufficient quantities of gas to meet AOG’s needs,” Holmes wrote in his 32-page opinion and order filed May 24.

He also said that BP’s “inability to arrange for delivery of the full 30,000 MMBtu of gas per day to AOG during Winter Storm Uri is not excused by force majeure.”

Holmes used a complex formula that included spot price, contract price and contract quantity to calculate the damages.

One of AOG’s attorneys, N.M. Norton of Wright Lindsey & Jennings of Little Rock, told Whispers that “on balance” he was pleased with the ruling. “I’m not sure that I totally follow Judge Holmes’ arithmetic, but $18 million is a win no matter how you look at it.”

AOG’s other attorneys were Kyle Wilson and Zachary Trail of Wright Lindsey & Jennings and the law firm of Dorsey & Whitney LLP of Washington.

“The judgment is a victory for AOG and our customers in Arkansas and Oklahoma,” Stephanie Sharp, a spokeswoman for Summit Utilities, said via email. “AOG continues to review the ruling and will refrain from further comment in light of the thirty-day appeal period.”

BP was represented by Sullivan & Cromwell LLP of New York City and PPGMR Law of Little Rock.

BP said it doesn’t comment on litigation.