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Defendant Shell Pipeline Co ‘acted with malice, oppression or fraud’

A verdict returned June 14 states defendants Shell Pipeline Co. and Alon USA Paramount Petroleum Corp. “acted with malice, oppression or fraud”…

BY JOHN COX [email protected]

A federal jury has awarded $40.6 million to Bakersfield developers who sued after discovering three petroleum pipelines under a property they were planning to turn into a logistics center just north of Meadows Field Airport.

A verdict returned June 14 states defendants Shell Pipeline Co. and Alon USA Paramount Petroleum Corp. “acted with malice, oppression or fraud” in connection with three pipelines found to have trespassed on land purchased in 2013 from Chevron USA Inc. by developers C&C Properties Inc., JEC Panama LLC and Wings Way LLC.

The 138-acre property, now home to a construction site called the Landings Logistics Center LLC, includes the 2.6 million-square-foot distribution center Amazon is having built along Merle Haggard Drive.

Houston-based Shell said by email Friday it “respectfully disagrees” with the verdict in U.S. District Court in the Eastern District of California.

“Shell did not breach any legal obligations toward C&C Properties,” it wrote. “Shell is assessing its options and cannot comment further on future litigation.”

Alon, based in Dallas, did not respond to a request for comment Friday.

The pipelines at issue in the case — two high-pressure oil pipelines owned by Shell and a natural gas pipeline belonging to Alon — were moved off the property in 2016. The lawsuit was filed in November 2014 after the pipelines were alleged to have interfered with plans to develop the land into an industrial complex.

No punitive damages were awarded in the case. Shell was ordered to pay $33.2 million for benefits it obtained from its pipelines’ trespass, plus $670,824 for the trespass itself. Alon, meanwhile, was told to pay $6 million for its benefits and an additional $670,824 for the trespass.

A summary of the case by news service Law360 says Chevron had earlier granted Shell and Alon easements allowing the pipelines on the property. But the new owners wanted the conduits moved, which the summary says Shell and Alon initially refused to do.

Law360 reported that C&C, JEC Panama and Wings Way asked a federal judge for sanctions against the pipeline owners in April 2016, arguing Shell had delayed and Alon had missed a deadline for moving the underground structures.

Two months later, the pipeline owners filed legal papers saying they had tried to remove the pipelines but had run into permitting obstacles raised by Kern County officials, Law360 reported. It said Shell had already invested $1.3 million in an attempt to relocate its pipelines.

But U.S. District Judge Dale A. Drozd, ruling in the defendants’ favor in May 2016, decided the delays had been justified and the pipeline owners had not acted in bad faith, Law360 reported.

The developers then pursued a summary judgment on their contention the pipeline companies had illegally trespassed on the property and therefore broken the easement’s terms, according to Law360. Drozd declined to render such a decision, however, leading to a trial that began May 29 and ended 10 days later.

John Cox can be reached at 661-395-7404. Follow him on Twitter: @TheThirdGraf. Sign up at Bakersfield.com for free newsletters about local business.

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