Global giant claims small victory in WA damages case

g2ALUMINIUM heavyweight Alcoa is a step closer to recouping more than $100 million from a claim against gas producer Apache Energy in relation to a massive explosion at the Varanus Island plant in 2008.
Alcoa began proceedings against Apache Energy in March 2011, claiming the incident caused substantial economic loss.
The WA Court of Appeal has denied Apache leave to appeal Alcoa’s claims, moving it one step closer to finalisation.
The explosion at the Apache Energy plant reduced WA’s energy supply by about one third and cost its economy an estimated $3 billion. Alcoa, which uses natural gas from the plant at its three WA alumina refineries, claimed the incident forced it to spend $138 million more than it would have under a sales agreement with Apache to acquire gas and diesel from other sources.
An official report into the explosion stated that a 30cm pipeline, maintained by Apache, ruptured and exploded at the shoreline because of corrosion; a risk that was “not only foreseeable but to some extent foreseen” by the company.
Alcoa’s claims stated that Apache Energy breached its duty of care to ensure the pipeline was well maintained. It had also made a separate claim of negligence against subsidiary Apache Northwest, which operates the facility.
Apache claimed it had included a force majeure clause in its gas supply contract and was not liable, as Alcoa was aware of the risk of a supply interruption and had no difficulty in obtaining alternative supplies.
The appeal panel, led by Justice Michael Buss, found in favour of Alcoa.
“Alcoa’s pleading of the alleged duty of care is adequate in that it pleads… that the total cessation of the supply of gas…was likely to lead to Alcoa suffering substantial economic loss and damage,” the judgement stated.
Apache Energy told media it would consider whether to seek special leave to appeal to the High Court of Australia “in order to clarify this critical branch of the law”.
“At issue is whether Alcoa is permitted to recover tort damages in addition to the contractual liquidated damages for which it contracted,” Apache Northwest stated.
“Alcoa is a large global company that was able to protect itself from gas supply disruption and did protect itself through contract liquidated damages, insurance, and other deliberate business strategies.”
Meanwhile, Apache Energy’s parent company, Apache Corporation, entered two separate agreements for the sale of Canadian assets valued at US$112 million.
Apache Corporation would sell its Hatton, St Lina, Marten Hills, Snipe Lake, Valhalla and a portion of its Hawkeye producing properties – primarily dry gas developments in Saskatchewan and Alberta. The assets comprised 4000 operated and 1300 non-operated wells that produced a daily average of 38 million cubic feet of natural gas and 750 barrels of oil, condensate and natural gas liquids.
The sales agreements were expected to close during the December quarter, and followed the announcement that Apache Corporation had sold its Nevis, North Grant Lands and South Grant Lands assets, which are also in Alberta.
Apache has announced divestments totalling more than US$7 billion, with transactions involving company properties and assets in Canada, the Gulf of Mexico and Egypt.
“In Canada, Apache is focussed on growing liquids production from a deep inventory of crude oil and liquids-rich opportunities in Canada’s Western Sedimentary Basin,” Apache Corporation president and chief operating officer Rodney Eichler said.
“Our extensive remaining acreage in these areas can generate attractive rates of return and provide for more predictable production growth.”