Copyright © 2020 Albuquerque Journal
A Texas-based oil firm is suing Albuquerque for breach of contract, saying it was left “holding the bag” when town aborted a gas settlement in an effort to discover a higher deal.
Davidson Oil claims town terminated its gas contract earlier this 12 months in the hunt for extra favorable costs, inflicting the corporate to lose cash on the hedge contracts it had already purchased to serve town.
However the metropolis says the transfer was within the public’s greatest curiosity and steered the corporate – the place former Albuquerque metropolis councilor and one-time mayoral candidate Dan Lewis is the director of operations – is in search of an “straightforward payday” with the lawsuit it filed final month in federal courtroom.
The swimsuit hinges on a contract the events entered into in January for unleaded gasoline and diesel gas. Davidson was to start offering town with gas on July 1 at a beforehand established mounted price, based on the settlement town offered in response to a Journal request. After signing the deal, the corporate in January purchased 12 one-month hedge contracts to assist the settlement, the swimsuit says.
However when oil costs subsequently tanked within the early days of the COVID-19 pandemic, town in March gave Davidson discover that it was exiting the association underneath the “termination for comfort” clause, based on the swimsuit, thus leaving Davidson with “no place to promote the gas oil hedge it bought to fulfill its obligations to (the) Metropolis with out incurring substantial losses.”
“Town principally stated that they had monetary causes for terminating the contract, however they threw us underneath the bus with a purpose to get monetary savings,” stated Ross Crown, an lawyer representing Davidson, including that the corporate had already spent cash to assist the contract.
Already in July and August, the corporate has misplaced $400,000 on the hedge contracts, Crown stated.
Metropolis officers cited the contract’s termination as a possible money-saver for town throughout Mayor Tim Keller’s funds information convention earlier this month. Sanjay Bhakta, town’s chief monetary officer, didn’t identify Davidson particularly however stated that town revisited its gas association after costs crashed.
“Now we’re shopping for on the market worth. That may save us some cash,” Bhakta stated on the information convention on Sept. 3.
Although the precise quantity is unknown, Bhakta stated the change might save town’s normal fund about $900,000 in fiscal 12 months 2021. When counting different departments – akin to transit and stable waste – there might be one other $1 million saved, he stated.
However Crown stated town was incorrect to depart the corporate “holding the bag.”
“The way in which town is decoding (the contract) is form of a ‘heads, I win; tails you lose’ state of affairs,” Crown stated. “They wish to interpret the contract to imply if the worth of oil goes up, they’ll insist on Davidson Oil offering oil on the mounted worth, but when the worth goes down, they declare they’ve the fitting to cancel the contract and go buy the oil for a less expensive worth elsewhere.”
Town stated in an announcement that it was obligated to seek out the very best worth for the general public. It additionally raised questions in regards to the firm’s motives.
“It’s our obligation to get the very best deal for taxpayers. It’s frequent observe to overview and consider contracts to satisfy that obligation, and naturally we might hope that an out-of-state firm affiliated with a former metropolis councilor and candidate for mayor isn’t in search of a straightforward payday on the backs of Albuquerque residents,” metropolis Financial Improvement Division spokeswoman Kinsey Cooper stated in an emailed assertion. “The financial unwanted effects of COVID-19 made this analysis course of extra vital than ever.”
Crown stated Lewis’ previous public service is “irrelevant” to the lawsuit and famous that Davidson has eight Albuquerque staff regardless of being primarily based in Texas.
“It’s merely a distraction town is attempting to lift (aside) from the true challenge involving their breach of the contract,” Crown stated.
The swimsuit seeks unspecified damages and the associated fee incurred pursuing the swimsuit.