BEAVER, PA – A breach-of-contract bench trial that began Monday related to a massive pipeline explosion near Pittsburgh pits Dallas law firms Reese Marketos and Lynn Pinker Hurst & Schwegmann against one another.
Cardinal Midstream II LLC, represented by Reese Marketos, is asking Beaver County Court of Common Pleas Judge James J. Ross to award it $33 million in damages it alleges Energy Transfer and its affiliate ETC Northeast Pipeline LLC owe for the incident
Cardinal Midstream says it’s entitled to the eight-figure earnout pursuant to a Feb. 3, 2017, purchase agreement. The purchase agreement ensured a $55 million post-closing earnout payment if Cardinal Midstream’s affiliate PennEnergy Resources delivered a volume of more than 200,000 cubic feet of natural gas per day during any consecutive 45-day period from August 31, 2018, to March 31, 2019.
But a landslide triggered by Tropical Storm Gordon ruptured Energy Transfer’s Revolution Pipeline on Sept. 10, 2018, 10 days into the earnout period, making the gas delivery impossible, Cardinal Midstream says. The explosion destroyed a home, a barn and several vehicles and prompted an evacuation.
Energy Transfer is to blame for the explosion, Cardinal Midstream argues, because it was negligent in overseeing construction of the pipeline.
Before the agreement, Energy Transfer dismissed warnings that it needed a geotechnical engineer, selected a route with unstable slopes and a known history of landslides and ignored landslides that occurred during construction, Reese Marketos partner Joel Reese said in opening statements.
Regulatory investigations after the explosion resulted in a ban on Energy Transfer construction permits, which “turned a weekslong problem into a yearslong problem,” Reese said.
Pennsylvania’s Department of Environmental Protection issued a $30 million fine, one of its largest-ever civil penalties, to Energy Transfer in 2020 after finding it violated numerous regulations during construction of the pipeline.
The state attorney general charged ETC Northeast Pipeline with nine counts of environmental crimes related to the construction.
“Environmental violations were within their control,” Reese said, arguing Energy Transfer’s negligence resulted in the condition of the contract not being satisfied.
But Jason Dennis, a Lynn Pinker lawyer representing Energy Transfer, said PennEnergy failed to deliver 200,000 cubic feet in “a single day, much less 45” in a row.
“What Cardinal wants here is a handout not an earnout,” Dennis said in opening statements.
Dennis disputed Reese’s claim there were prior landslides along the route where the pipeline was built, but instead said there were slips at the topsoil that did not cause its environmental inspector concern about the stability of the natural ground.
Energy Transfer will call an expert who will testify about the excessive amount of rain brought by the tropical storm, Dennis said. The judge should find the force majeure clause applies in favor of Energy Transfer, he said.
Much of the trial is going to be spent on “red herrings,” Dennis said.
“This side doesn’t care about environmental issues,” Dennis said. “That’s a complete red herring from what this case should be about.”
PennEnergy’s affiliate, PER Midstream, settled with Energy Transfer earlier this year. Cardinal Midstream and Energy Transfer are based in Dallas.
The trial is expected to last three weeks. A contract between Cardinal Midstream and Energy Transfer contains a jury trial waiver, lawyers said.
Cardinal Midstream is also represented by Pete Marketos, Josh Russ, Adam Sanderson and Whitney Wendel of Reese Marketos and James Corbelli and Mark Dausch of Babst Calland.
Energy Transfer is also represented by Chris Patton, Leo Park, Sara Chelette and Erin Elms-Nemec of Lynn Pinker Hurst & Schwegmann and John Gisleson of Morgan Lewis and Kenneth Cushing of Cozen O’Connor.
The case number is 10523 of 2021.