Flying J, Valero agree to settle oil pipeline shipment lawsuit

By Caroline Salls

Pittsburgh, March 2 - Flying J Inc. requested court approval of a settlement agreement with debtor Longhorn Partners Pipeline, LP and Valero Marketing and Supply Co., according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

According to the motion, Valero entered into contracts in February 2007 to purchase products that Flying J was transporting to El Paso, Texas, from the Gulf Coast.

However, Flying J said Longhorn lacked the pipeline capacity to meet Valero shipment requests made between February and March of 2007.

As a result, Valero filed a complaint against Flying J and Longhorn with the Federal Energy Regulatory Commission alleging that they had conspired to violate provisions of the Interstate Commerce Act applicable to common carrier oil pipelines.

Specifically, Valero claimed that Longhorn's failure to honor Valero's shipment requests while allegedly honoring shipment requests made by Flying J showed unreasonable preference.

Valero alleged that it had suffered $15.8 million in damages as a result of being unable to ship product over the Longhorn pipeline.

Under the settlement, Valero will have a $6 million general unsecured claim on account of the FERC claims and an $11.05 million administrative claim and a $99,318 general unsecured claim for refined fuel products and services.

A hearing is scheduled for March 23.

Flying J, an Ogden, Utah, fully integrated oil company, filed for bankruptcy on Dec. 22, 2008. Its Chapter 11 case number is 08-13384.

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