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Flint v. Williams remanded to Superior Court Supreme Court reverses statute of limitations for off-property sulfolane contamination, upholds on-property, equitable conclusions KRISTEN NELSON Petroleum News
The Alaska Supreme Court has partially reversed and partially affirmed Superior Court rulings in the case Flint Hills Resources brought against Williams Alaska Petroleum and The Williams Companies over sulfolane contamination at the Flint Hills North Pole refinery and on adjacent property.
Flint Hills acquired the refinery from Williams in 2004.
In its decision, issued Aug. 26, the Supreme Court said that Williams Alaska Petroleum, which owned the North Pole refinery until 2004, knew that the then-unregulated chemical sulfolane, a solvent, was present in groundwater on refinery property, but did not know that it had migrated off the property.
Almost immediately after Flint Hills purchased the refinery it was notified by the Alaska Department of Environmental Conservation that sulfolane was to be a regulated chemical and that Flint Hills needed to find the source of sulfolane in the refinery groundwater.
Flint Hills was also warned by its environmental contractor that sulfolane could be leaving the refinery property and that more work was needed to determine the extent of the problem, the court said.
Flint Hills drilled perimeter wells in 2008 and discovered that sulfolane was migrating beyond refinery property and contaminating drinking water in North Pole.
A resident sued Flint Hills and Williams and Flint Hills cross-claimed against Williams, the court said. The Superior Court dismissed Flint Hills’ claims as time-barred and Flint Hills appealed.
The Supreme Court said it affirmed Superior Court rulings on the damages’ cap provisions in the sales contract, and on Flint Hills’ equitable claims, but found the Superior Court was in error on time barring part of its statutory claims.
Sulfolane found in 2001 The court said Williams discovered sulfolane in the refinery’s groundwater in 2001, but at that time sulfolane, a solvent used to strip out parts of crude oil used to make gasoline, was not a regulated chemical.
When it purchased the refinery in 2004 Flint Hills agreed to assume responsibility for existing and known contaminants on refinery property, including sulfolane. At that time the parties believed sulfolane was only on refinery property.
Flint Hills requested a study on subsurface contamination from Shannon & Wilson in 2004 and in 2005 Shannon & Wilson proposed groundwater monitoring wells, which were installed. In 2006 Shannon & Wilson told Flint Hills it believed sulfolane likely to travel with groundwater and recommended sentry wells at the property boundary and in 2008 Flint Hills installed monitoring wells which confirmed that sulfolane had migrated beyond the refinery property.
A North Pole homeowner sued Flint Hills and Williams in 2010 over sulfolane contamination in his drinking water and Flint Hills filed a cross-claim against Williams for costs of remediation efforts.
Supreme Court ruling The Supreme Court ruled that the Superior Court was in error when it ruled contractual indemnification claims were time-barred and concluded that a six-year statute of limitations applied for statutory claims arising from sulfolane leakage off the refinery property, but also found that a two-year statute of limitations applied for sulfolane on the Flint Hills refinery property.
The Supreme Court said there was no benefit to Flint Hills in waiting to seek indemnity from Williams and said in the context of a breach of contract, “the statute of limitations begins to run when the indemnifying party refuses the indemnified party’s request for indemnification.”
It said it agreed with the Superior Court that Flint Hills’ statutory claim is time-barred for sulfolane contamination on the refinery property, but found that liability to owners of property outside the refinery boundaries is subject to a six-year statute of limitations for trespass claims.
The Superior Court said Flint Hills should have concluded long before May 2008 that sulfolane had migrated beyond sampling disclosed in its agreement with Williams, and barred the claim based on the two-year statute of limitations.
But, the Supreme Court said, Flint Hills’ statutory claim for contamination on neighboring properties is subject to the six-year statute of limitations, and was timely because it was filed within the six-year period beginning in July 2004.
Flint Hills’ claims for damages on its own property, however, are barred by the two-year statute of limitations.
The Supreme Court reversed the Superior Court’s ruling that Flint Hills’ contractual indemnity clause claim and its statutory claim for off-site damages are time-barred, while affirming other Superior Court rulings, and remands the case to Superior Court for further proceedings.
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