Tesoro Alaska Company v. Union Oil Company of California

In 2001, Union Oil Company of California entered into a contract to sell its oil to Tesoro Alaska Company. Under the contract the Tesoro took title at the North Slope, but agreed to use a pipeline company associated with Union to transport oil through the Trans-Alaska Pipeline. The price per barrel was calculated as the West Coast market price less marine transport and pipeline tariff. The contract made no mention of whether the pipeline tariff was tied to the ultimate destination of the oil. At the time, the interstate and intrastate pipeline tariffs were the same. Tesoro shipped the oil to an in-state refinery and paid the tariff to the pipeline company. Union subtracted the tariff amount from the market price of the oil less marine transport and sent invoices to the buyer. Meanwhile, Tesoro successfully challenged the intrastate tariff as unjust and unreasonable and the pipeline company issued a refund, including 10.5% interest. Union claimed that it was entitled to the tariff refund under the contract. The superior court, on motions for summary judgment, awarded the principal amount of the refund to Union and the interest to Tesoro. Both parties appealed. Upon review of the dispute, the Supreme Court held that the contract's pricing term was a netback price to the Los Angeles market referencing the interstate tariff. Accordingly, the Court reversed the superior court's grant of summary judgment to Union and remanded for entry of judgment in favor of Tesoro. View "Tesoro Alaska Company v. Union Oil Company of California" on Justia Law