A legal battle between the former partners in a planned oil port off the Texas coast near Freeport has been resolved through an undisclosed settlement agreement.
Oiltanking Holding Americas and Houston-based Enterprise Products Partners and Teppco Partners have settled the lawsuit Oiltanking filed earlier this year when the other companies pulled out of the $1.8 billion project.
Terms of the settlement haven’t been disclosed but Enterprise and Teppco said in SEC filings they will each “recognize approximately $33.5 million in expense during the third quarter of 2009 in connection with the settlement.” That’s slightly less than the $34.2 million the two said they expected to have to pay when they announced they were getting out of the project.
| The Texas Offshore Port System, or TOPS, would let tankers unload oil off the coast near Freeport and bring it ashore via pipeline for storage and refining. Click here for a better view.
Despite the absence of two of the three partners of the Texas Offshore Port System, the project is still moving forward, said Oiltanking’s Carlin Conner, with permit applications in the works and a search for new investors coming to a head.
The project, announced in August 2008, would locate a platform about 36 miles offshore from Freeport to unload crude oil from two supertankers at a time into a pipeline that would come ashore near Hitchcock, where a storage facility would be built. It would be similar to the Louisiana Offshore Oil Port, which has been in operation since the mid-1970s.
Exxon Mobil Corp. and Motiva, a joint venture of Royal Dutch Shell and Saudi Arabia’s Aramco, were named as customers for the project, but in April of this year Enterprise and Teppco – which are linked to Houston billionaire Dan Duncan via their general partner Epco – said they wanted to back out of the deal. Oiltanking sued and a trial was set for April 2010 before the settlement was reached.
Attempts to build an oil port off the Texas coast date back more than 35 years. One of the earliest efforts, in 1972, known as Seadock, would have unloaded up to 2.4 million barrels per day from a location about 26 miles off Freeport. As many as 13 companies were involved in the project at its height, and the price tag ran from $650 million to $1.1 billion.
The project fell apart in 1977, though, when three of the largest firms involved – Gulf Oil, Exxon and Mobil – pulled out. Oil imports were waning at the time, and federal officials made several demands the companies considered untenable, including that the terminal be opened to shippers that weren’t part of the project.
The state of Texas tried to keep the project alive a year later by creating the Texas Deepwater Port Authority but shelved the idea because of a lack of industry interest. It was resurrected a few more times over the years.
Seadock was proposed at the same time as the LOOP, which faced the same regulatory hurdles but was smaller, with a capacity of 1.2 million barrels per day and backing by a broader mix of midsize independent oil producers. Today it’s owned by Shell, Marathon Pipe Line and Murphy Oil and handles up to 12 percent of the country’s annual oil imports.