Owens Illinois Inc.’s apparent decision to pull out of a Cayuga County gas-drilling contract puts Bell Independent Power Corp. in line to collect a termination fee of more than $10 million, Bell IPC maintains.
Bell IPC, which has its headquarters in Canandaigua, is a gas-drilling firm that also provides natural-gas storage and biomass-generated gas and solar-generated power storage services. It also provides technical support to Rochester Gas and Electric Corp. on a project to refurbish RG&E’s Station 2 hydropower turbine.
Bell IPC attorney James Wolford of the Wolford Law Firm LLP declined to comment.
In a complaint filed Jan. 4 in U.S. District Court in Rochester, Bell IPC accuses Owens Illinois, an Ohio-based maker of glass containers and the owner of the Owens-Brockway Glass Container Inc. plant in Auburn, Cayuga County, of failing to abide by terms of a 2006 contract giving Bell IPC exclusive rights to drill new wells in an Auburn oilfield and to supply fuel gas to the Owens-Brockway facility.
Owens Illinois officials did not respond to a request for comment.
As cited in Bell IPC’s court papers, the contract gives Bell IPC exclusive rights to develop new wells in the gas field through 2016. The rates Owens Illinois would pay for gas were to be determined once a well was producing.
The gas-supply arrangement would transfer to a new owner if Owens Illinois sells the Auburn plant, and Bell IPC would be allowed to sell excess gas to other customers, the agreement states. An amendment added in December 2006, some eight months after the pact was originally signed, acknowledges that drilling costs were higher than initial estimates and calls for Bell IPC to invest at least an additional $175,000 per well.
While it has not expressly canceled the agreement, Owens Illinois abruptly stopped communicating with Bell IPC in December 2011 and has maintained silence since then, Bell IPC states in the court complaint.
Among Bell IPC’s court papers is a terse, one-sentence Dec. 6 email from Tony Sutherland of Dufco Inc., an Auburn pipeline company official hired by Owens Illinois to work with Bell IPC, sent in response to Bell IPC’s requests for information.
“I have been instructed not to entertain or enter into any conversations with Bell IPC at this time,” Sutherland said.
Owens Illinois’ lack of response amounts to a cancellation of the agreement, and it has damaged Bell IPC’s reputation and cost it unspecified losses, including profits not earned, the plaintiff asserts in its court complaint. Components of the termination fee demanded by the drilling firm include its well-development costs, lost revenues and the value of gas in the ground that it will not be able extract.
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