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Shell Oil/Motiva Gas Station Lease Dispute May Draw U.S. Supreme Court Scrutiny




By Elizabeth Amon

Dec. 2 (Bloomberg) — The U.S. Supreme Court signaled interest in a case that would affect how much leverage oil companies have to change their leases with tens of thousands of independent service station owners.

The justices yesterday asked the Justice Department for advice on a bid by Massachusetts gas station owners to sue Shell Oil Co. and Motiva Enterprises LLC. A group of station owners say Shell and Motiva used rent increases to try to end their franchise arrangements so the companies could take over operation of the stations.

The case, should the high court agree to hear it, would shape the rights of the 75,000 independent service station owners in the U.S. at a time of fluctuating gasoline prices and near-record oil company profits.

“This court’s decision will be felt immediately by franchisors and franchisees across the country,” eight service stations argued in court papers urging the Supreme Court to intervene.

The case centers on the U.S. Petroleum Marketing Practices Act, a 1978 law that gave independent station owners more power in their dealings with oil companies. The station owners are suing under provisions in the law barring improper lease terminations.

Shell and Motiva contend the station owners can’t invoke those provisions because they accepted new lease terms and continued to operate their franchises.

Houston-based Motiva is a refining and marketing joint venture owned by Shell and Saudi Refining Inc. Shell, a unit of Royal Dutch Shell Plc, transferred its franchising rights to Motiva when the venture was created in 1998.

The case before the high court concerns eight of more than 50 Massachusetts station owners pressing lawsuits. The station owners object to Motiva’s decision to phase out a rent subsidy that had been tied to gasoline sales and to begin calculating rent based on the value of the station’s real estate.

A jury awarded the group $3.3 million, most for violations of the federal petroleum-marketing law. A Boston-based federal appeals court upheld part of the award.

The cases are Mac’s Shell Service v. Shell Oil Products, 08-240, and Shell Oil Products v. Mac’s Shell Service, 08-372.

Total, Four Others to Be Prosecuted Over U.K. Blast

Total SA, Europe’s third-largest oil company, and four other firms will be prosecuted in the U.K. over the “massive” 2005 explosion at the Buncefield oil-storage facility outside London.

The U.K. government’s Health & Safety Executive and the Environment Agency started proceedings following a “thorough and complex criminal investigation,” the regulators said in an e-mailed statement yesterday.

The depot, 25 miles (40 kilometers) north of London, blew up Dec. 11, 2005, in what the British government described as a blast “of massive proportions.” More than 20 tanks of jet fuel and gasoline exploded, injuring 40 people and causing widespread damage to buildings in the surrounding area. Nobody was killed.

The companies being prosecuted are Total, Hertfordshire Oil Storage Ltd., British Pipeline Agency Ltd., TAV Engineering Ltd., and Motherwell Control Systems 2003 Ltd., the regulators said. The first hearing will be on Jan. 23, according to the statement.

The companies are being charged for violating British health and safety laws, the statement said. U.K. courts can impose prison sentences and unlimited fines in the most serious of cases, the Health & Safety Executive said on its Web site.

“We are taking legal advice in relation to these proceedings,” Total said in a statement. “Once all the relevant papers have been served, we will consider our position further.”

The regulators said the prosecution “is now a matter for the court” and declined further comment.


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