Johnson City Press from Johnson City, Tennessee • 31

JOHNSON CITY PRESS-CHRONICLE Sunday Oct 7 1984 Page 31 a 0 agin suit centers ute re' I Kings or ly 11 gas su damages to $50 million Shell denied the charges saying neither the company "(n)or anyone on its behalf authorized the sale of gasoline other than that of Shell" But it said that if other gas brands were delivered to King's Automotive the station knew about it and encouraged such r- 1166 A By Mary Alice Basconi P-C Business Welter KINGSPORT A lawsuit filed by a Shell Oil distributor here against a local service station that refused to pay gas bills has escalated into a $50 million legal battle that may have far-reaching implications At the heart of the case is whether the distributor proper ly substituted one brand of gas for another in supplying fuel to the service station The Shell distributor says it violated no contract in occasionally interchanging brands of gasoline claiming the quality was equal The station however says the practice was fraudulent and misleading that it shouldn't have to pay for the gas in question and claims the distributor and Shell violated the Tennessee Consumer Protection Act King's Automotive and Wrecker Service on Center Street is asking Law Court Judge Roger Thayer to demand 00000 in compensatory damages and $50 million in punitive damages from the dis King alleged the practice took place over a number of years Upon making that discovery' King alleged he switched brands He said he lost customers "on account of the poor performance of their vehicles occasioned by the use of an inferior product" King who charges the company with "acts of fraud" initially sought $50000 in compensatory and $50000 in punitive damages In response Kingsport Fuel 'said its 1982 contract with King did not require "exclusive supplying of Shell products" The pact shows King agreed to buy 60000 to 750000 gallons from Kingsport Fuel annually Kingsport Petroleum a unit of Kingsport Fuels was to have paid the dealer commissions of three cents on the gallon of regular gas 325 cents for unleaded and 35 cents for super while setting prices for gas it supplied "Nowhere in the agreement does either party agree that there shall be a restrictive distribution of gas" wrote Kingsport attorney David Blank enship who represents Kingsport Fuel He admitted that Kingsport Fuel "on occasion delivered a different brand of gasoline" to King but that it "competitively priced" to Shell gas and not of inferior quality Blankenship accused King of breaching a contract with Kingsport Fuel by not paying certain bills And he asked for proof that King lost customers who used the "inferior gasoline" Last month Shell Oil Co was added to the suit In court papers King's attorneys said a statement taken from Kingsport Fuel president Ron Coven indicates Shell knew about the distributor's practices and approved of them Attorneys for King say Shell's alleged participation during the time in question made the company's product advertisements fraudulent deceptive and misleading and in violation of Tennessee's Consumer Protection Act King's lawyers alleged a conspiracy existed between Shell and Kingsport Fuel and raised demand for punitive "My guess is this case probably won't go to trial until March" said Dick Currie a Kingsport attorney representing Shell "We feel that Shell Oil doesn't have any business in this lawsuit and the allegations are groundless It really isn't as important as it appearsit's just that (King's) attorney picked a large number out of the sky" Currie said He said he was "surprised that Shell Oil had been brought in and surprised of the amount (sought in damages)" Attorneys for Kingsport Fuel and for King refused to comment on the case for publication before the trial King's station no longer sells Shell gas tion discovered the switch then refused to pay bills for the gas court records show Kingsport Fuel initially sought to have a $1443643 bill paid by King but later revised the amount to $3804963 King counter-sued admitting the indebtedness but saying "inferior gasolines" had been ship ped to the station "at the same costs as Shell products" tributor and from Shell Oil As lawyers on all sides in the case of Kingsport Fuel vs Ralph King vs Shell Oil prepare for trial court papers have been filed outlining the circumstances that led Kingsport Fuel a Shell "jobber" in this area to file against King the service station owner in February 1983 The suit began after the sta Agreement may lower impact of suit Oil exploration costs fall to five-year low By Steven Rosenfeld AP Business Writer "Regardless of whose brand you have if it's a similar octane it has a similar quality" By Mary Alice Beacon' P-C Business Writer demand declining for oil exploration became too costly a gamble for many investors Smaller oil companies were especially hard pressed to finance drilling The decline in demand for oil in part is a result of permanent change in habits by consumers put off by high prices and because of technological advances In addition a global economic recession deepened in 1982 curbing industrial demand for oil at a time when oilfield services capacity was reaching an all-time high "Prices for oil and gas fell in late 1982 and throughout 1983: This in turn reduced cash flows to producers and reduced the values of oil and gas reserves Accumulated debt burdens further restricted the ability of producers to conduct exploration As a result new investment dropped sharply" the accounting firm of Arthur Andersen Co said this week in releasing results of a survey of 375 publicly held oil companies ----41 dgill 0 IN7 ''-0 A ''1: F'''' 'kkttain4 '1 I 64 1 I 1 SEPV't" t- krrt '4-444 r)'-1- 41 1 nntF-ire119-apgr 4-to 440" 2 4 3 i rt fp 1 1 VII 1- 4 I Trrk r11461: l' l' 171 31P 314eowa 4 k'7 1) 1 i vte 4 44'' t--: -7 -7 -7I L---" Rele Amwoo-'At aliFitoP4 0 4 0 4 1 19 8 0 1 4 70 4 4 I' 881 7: 8 1480 '8 8" 470 4' 4 0 11 4 84 4 a 1 44' i NEW YORK The cost of finding oil in the United States has tumbled to its lowest level in five years something that has increased the chance for turning a profit by hunting for oil and natural gas That should be good news to a nation that was preoccupied with threatened oil shortages and a desire to become energy-independent as the 1980s began But instead of an exploration boom the oil industry only recently has begun a mild recovery from a severe drilling slump Even with a pickup in drilling in recent months activity is nearly half the industry's peak capacity Hereare some questions and answers about oil exploration in the United States: What happened to the drive for energy self-sufficiency? A It ran out of gas Soaring oil prices in 1979 and 1980 and expectation's that prices were on a one-way upward path led to an unprecedented surge in exploration investment in the United States Domestic exploration and development expenditures shot up more than 30 percent between 1980 and 1981 straining the capacity of drilling companies to keep up with the oil industry's demand for their equipment and services The report said that US exploration and development spending peaked at $455 billion in 1981 then tumbled to $439 billion in 1982 and fell another 23 percent last year to $339 billion Hasn't demand for oil increased since then? Stair Photo by Larry Zicherman A Kingsport businessman is embroiled in a battle over a gas supplier allegedly delivering inferior products A Kingsport lawsuit over whether a supplier may vary brands of gas he sells to service stations may have little bearing on future gas sales if dealers respond to a recent out-of-court settlement allowing service station dealers to shop around for gas in that agreement reached between oil companies and in recent weeks any gas may be sold at branded stations but only in specially marked "debranded" pumps The station's "home" brand is the only gas to be sold from branded pumps Nevertheless the suit could draw attention to other distributors and their past delivery practices and may pave the way for other litigation if stations object to gas they say was unwittingly received from brands other than their own Under trademark laws anyone who hangs a brand sign at his station must use that brand in his pumps or face termination of his contract Sources in the oil industry who request anonymity say Ralph King the Kingsport gas retailer involved in the suit may have "opened a can of worms" by fighting Shell and its distributor They say the substitution of one brand for another raises questions about oil company advertising campaigns which suggest certain brands of gasoline enhance vehicle performance But gas distributors interviewed claim that substituting one gas brand for another rarely occurs for a variety of reasons First they say a distributor or "jobber" has contracts with major oil companies that stipulate a certain amount of gas must be purchased A sudden dip in gas orders prompts the oil company to ask questions said Robert liarger general manager for Golf Oil Products CAE in Nashville "I don't know how often it occurs it's naive to say it doesn't happen" he said "It isn't something unheard of but it certainly is a minority one or two percent" Ile concedes that a West Ten dealer was cancelled in re cent years after sueh a Me VW to light hut that he was a customer Such incidents he said Cil traced by Gull "We liaN't 14'1114)1gs far our job bers" Barger said "We knov how muchi of his purthoes are paid on Gulf credit cards If it had been 25 percent mid its now no percent you know not buying the same amount from A Yes This year for ex ample US demand for oil is expected to rise for the first time in five years because of the strength of the economic expansion and cold weather early this year But a huge glut of oil and natural gas remains too But while drilling costs climbed oil prices didn't and exploration efforts were cut back he said was a 13-year-oldcase focusing on whether a dealer had to buy all his gas from a major supplier "Regardless of whose brand you have if its a similar octane it has a similar quality" he said "And there are plenty of records to substantiate that Meanwhile the outoficourt set tlement doesn't mean that dealers for major gas companies can im mediately shop around Although the settlement pro vides that Exxon and l'hillips dealer may "debrand" some of their existing pumps 13 other oil companies will have "debranding policiCit" whereby nottbratided pumps must be installed first The trade publication US Oit Week recently estimated costa St $10000 to 8100000 for a single tank flow sharp were the cutbacks? A The reductions were substantial John Lichtblau president of Petroleum Industry Re search Foundation Inc a pri vate consulting service pre dicta oil supplies will sub stantially exceed demand through 1990 "and price pressure will generally be downward" you but he's still using the credit" And Barger Nald each brand of gas has a "fingerprint" a unique chemical makeup that can be traced in a laboratory But Mehnda Fields director of consumer affairs for the state of Tennessee said there's no Indy pendent facility in the state to test the content of rat "You'd have to send it clT to a private lab" she said "We don't get many complaints alaait that type of thing" Barger noted that once when a company representative was visit mg a service station he noted on unidentified trot pulling up which aroused his suspicions "To sorne degree its hind of an honor thine he said "tholl buy your gapi somewhere else and use our marketing sign and credit card to sell The product itself only takes on the Cul( image when purrhA4e1 throurb Gulf 'Minot is" Bill Vorrell runr4sco plant super intenden I agrvod "its our knowlvde the only gas told under the Shell ign our he taid But he added you don't know hap you're outin the field If a Oilier tsild an inferior cheaper brand it could save perhaps one or two cents On the gallon which could add up to an extra $2000 a month for someone handling 100000 gal long monthly Nothing in court papers filed in this case indicates Kingsport Fuel sold cheaper gasoline to Kings Automotive The company said it Substituted only brands of equal quality But Barger of Gulf snid cm ponies would risk cancellation of their contracts by employing such practices adding that even $20o0 savingx might not worth "taking a chance" on being dropped Buddy Price of liVatauga Oil in Johnson City said his Mobil contract says "if I don't pull my amount they cancel" "Basically I'm captured" Price 0aid However he admitted cornpames occasionally buy from one onother whrtt Olort on gag "The dv4Infrutors arent the godtv ones The majors have liven known to do it too" he gaid it 0 only in an extreme tase A hurt you've got to have gas Vic Rashers! executive director of the Service Station Dealers of Atiolica sant lie was onfamihar the hutelkt1 oult The om mottled Ui 1111100011A flAttlITY The number of active drill ing rigs in the United States peaked at more than 4500 in late 1981 In the first ball of this year the average numb ber of operating rigs stood at about 2350 according to the Department of Energy And that was up 12 percent from a year rarlicr Villa was responsible for changing the exploration outlook? A With further price in crease4 becoming elusive and "Branded dealers may feel like branded rattle once they see iA hilt their ittk4lecy-4 fir the cww" the nevApaper edito Expensive failures such as the $12 billion abandoned Mukluk well in the Beaufort Sea also ihropened some en tliusisJ4r contributed to a round of multibillion-dollar oil coTfl party mergers earlier this year as a means for on oil company to increase "The '2U000() dealerii in the (lags action suit will izit about tiplece 1nl it ur paper denying them the thlince to 4E11 Witqatitivd ibt011 throu01 ttiv VIIIjtA.