IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MONTANA BILLINGS DIVISION

Transcription

1 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 1 of 28 Kathleen L. DeSoto GARLINGTON, LOHN & ROBINSON, PLLP 350 Ryman Street P. O. Box 7909 Missoula, MT Telephone (406) Telefax (406) kldesoto@garlington.com Attorneys for Defendant IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MONTANA BILLINGS DIVISION EXXON MOBIL CORPORATION, a New Jersey corporation, v. Plaintiff, NORTHWESTERN CORPORATION dba NORTHWESTERN ENERGY, a Delaware corporation, CV SPW-CSO ANSWER OF DEFENDANT NORTHWESTERN CORPORATION d/b/a NORTHWESTERN ENERGY TO PLAINTIFF S COMPLAINT AND DEMAND FOR JURY TRIAL Defendant. Defendant NorthWestern Corporation d/b/a NorthWestern Energy ( Defendant or NWE ), by and through counsel, and for its Answer to the Complaint by Plaintiff ExxonMobil Corporation ( ExxonMobil ), states as follows:

2 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 2 of 28 NATURE OF THE CASE 1. ExxonMobil is the world s largest refiner and marketer of petroleum products, owning or having an interest in 37 refineries in 21 countries. It owns seven crude oil refineries in the United States, including one in Billings that started operations in ExxonMobil s Billings Refinery receives its electricity through two feeds from NorthWestern Energy ( NWE ), a 50kV line from the NWE Rimrock electrical substation to the ExxonMobil ring bus connected to the ExxonMobil electrical substation and a separate 50kV line from the NWE Steam Plant electrical substation to that same ring bus. 3. Because it has long known that no electrical supply is infallible, ExxonMobil has backup electrical generation equipment at some of its other refineries that are capable of providing sufficient steam and electricity to enable safe and orderly shutdowns at those refineries in the event of electrical interruptions. 4. At the Billings Refinery, however, ExxonMobil deliberately decided to assume the risk of an electrical outage rather than take the necessary steps and make the necessary investments to provide backup electrical protection in the event of a power interruption or outage. 5. ExxonMobil periodically conducts risk assessments to determine how

3 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 3 of 28 to plan for and respond to adverse events, including the loss of electrical power. Instead of having adequate electrical backup power, ExxonMobil decided to forego such protection at the Billings Refinery for economic reasons. 6. For example, ExxonMobil has a 60% ownership interest in the YELP/BGI co-generation plant located about 1/2 mile from the Billings Refinery. That co-generation plant, which burns petroleum coke (a waste product generated by the refinery), generates more than enough steam and electrical power to fully operate the Billings Refinery and to provide for a safe and orderly shutdown if required. ExxonMobil decided, however, not to route any of the co-generation plant electricity to the refinery because it is more profitable for ExxonMobil to purchase electricity from the market and sell the electricity produced by the cogeneration plant at a higher rate. 7. Similarly, although it received permission from the Montana Public Service Commission to install three diesel powered General Electric turbines at the Billings Refinery to generate all of the electricity it would need to operate the refinery, ExxonMobil decided not to do so because buying electricity from the market was cheaper. 8. On January 25, 2014, an electrical fault at the Billings Sewer Plant caused a protective device on the NWE power system to de-energize NWE s 50kV Rimrock line. Shortly thereafter, an operational error by an employee at the

4 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 4 of 28 Billings Sewer Plant transferred the Billings Sewer Plant fault to the NWE s 50kV Steam Plant line, causing the protective device on NWE s system to de-energize that line. The ExxonMobil refinery was without electrical power for about 96 minutes. ExxonMobil was unable to continue operating or have an orderly shutdown because of its prior decisions to rely exclusively on NWE to deliver power rather than have a backup electrical power supply available. 9. There was a second electrical outage at the ExxonMobil Billings Refinery on the afternoon of January 13, The initiating event occurred when an employee of GE Energy Management Inc. ( GE ), a contractor for the City of Billings Sewer (the City ), was testing the sewer plant s switchgear breaker and relays. Contrary to promises by GE and the City to de-energize any equipment connected to NWE s system before working on it, a GE technician attempted to work on an energized device, creating a voltage fluctuation that tripped the high speed ground switch in the City s sewer electrical system. NWE s protective relays recognized the electrical fault and de-energized the Rimrock and Steam Plant lines, setting in motion a series of events that interrupted power to the refinery for about 53 minutes. 10. ExxonMobil was at fault for failing to take reasonable steps to prepare for and mitigate the damages from the types of electrical interruptions and outages that are inevitable

5 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 5 of Here, as elsewhere, instead of investing in equipment to prevent or reduce the impact of an electrical interruption, ExxonMobil apparently prefers to sue its electrical suppliers in an effort to foist the costs of its own poor planning onto others. For example, it recently sued electric utility Southern California Edison for over $30 million dollars for losses it claimed arose from power interruptions. Following a month-long trial, the jury in that case returned a verdict in favor of the electric utility. 12. ExxonMobil is also attempting to renege on the Distribution Agreement it has with NWE, which provides that NWE is not be liable for any consequential damages, such as the lost profits that ExxonMobil claims in the event of a power outage. ANSWER TO EXXONMOBIL S ALLEGATIONS 1. Defendant admits that this action arises out of events that occurred at the ExxonMobil oil refinery located in Billings, Montana ( Billings Refinery or Refinery ), but is without sufficient information to form a belief as to the truth of the remaining allegations in paragraph 1 of Plaintiff s Complaint. NWE denies that it negligently failed to exercise reasonable care in designing, constructing, managing, maintaining and operating its electrical distribution system and denies that it breached any contractual or legal duty to provide reliable electric power to the Refinery

6 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 6 of Defendant admits that it owns and operates two 50 kilovolt ( kv ) electric lines, one originating from the NWE Billings Rimrock Substation (the Rimrock Substation ) and the other from the NWE Billings Steam Plant Substation (the Steam Plant Substation ). Defendant further admits that in order to operate the Refinery, ExxonMobil obtains electric power distribution delivered from both of these NWE lines pursuant to an Agreement for Electric Distribution Service dated March 1, 1999 ( Distribution Agreement ). Defendant denies the remaining allegations in Paragraph 2 of Plaintiff s Complaint. 3. Defendant admits that ExxonMobil is in the best position to know that the Refinery, and the sophisticated equipment operated within the Refinery, requires reliable electric power in order to function safely and efficiently and to take appropriate protection measures for variances and interruptions. Defendant further admits that ExxonMobil contracted in the Distribution Agreement subject to the Montana Electric Tariff for Contract Demand of electric power to the Refinery. Defendant denies all remaining allegations in Paragraph 3 of the Complaint. 4. Defendant admits that ExxonMobil is in the best position to know that electric power is critical to Refinery operations, and that Refinery equipment operates under extremely high heat and pressure conditions; that an unplanned power dip or outage at the Refinery can cause damage to Refinery equipment and

7 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 7 of 28 create hazardous conditions, but that ExxonMobil failed to take appropriate and necessary steps and precautions to mitigate against and/or avoid these damages, dangers and risks based on well-known normal and expected operational characteristics of the power distribution system. Defendant denies all remaining allegations in Paragraph 4 of Plaintiff s Complaint. 5. Defendant denies the allegations in Paragraph 5 of Plaintiff s Complaint. 6. Defendant denies that this lawsuit is necessitated by NWE s refusal to accept responsibility for any misconduct or to abide by its obligations as a service provider, and Defendant affirmatively asserts that the consequences of power outages to the Refinery were due to ExxonMobil s own decisions, practices and failures to take appropriate measures to incorporate backup generation and/or operational steps to mitigate or avoid damages to the Refinery. THE PARTIES 7. On information and belief Defendant admits that ExxonMobil Corporation is a New Jersey Corporation having its principal place of business located at 5959 Las Colinas Boulevard, Irving, Texas 75039, and that ExxonMobil was formed in 1999 as a result of the merger between Mobil Oil Corporation and

8 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 8 of 28 Exxon Corporation. 1 Defendant further admits that ExxonMobil s Billings Refinery has provided customers in the region, including Montana, Wyoming, Utah, Colorado, South Dakota, Washington and Idaho, with gasoline, aviation fuels and other materials for more than 66 years. 8. Defendant admits that NorthWestern Corporation d/b/a NorthWestern Energy is a Delaware corporation having its principal place of business located at 3010 West 69th Street, Sioux Falls, South Dakota and that NorthWestern Corporation acquired the energy distribution and transmission business of the former Montana Power Company to form NWE. 2 Defendant admits that on its website ( NWE represents that it delivers electricity to more than 416,100 customers daily in Montana, South Dakota, Nebraska and Wyoming, and its service territory covers approximately 107,600 square miles or about 73% of Montana s land area. JURISDICTION AND VENUE 9. Defendant admits that this Court has diversity jurisdiction pursuant to 28 U.S.C. 1332(a) because the parties are citizens of different states and the matter in controversy exceeds $75,000 exclusive of interest and costs. 1 For purposes of this Answer, ExxonMobil, and its predecessors, Mobil Oil Corporation and Exxon Corporation, are collectively referred to as ExxonMobil. 2 For purposes of this Answer, NWE and Montana Power Company are collectively referred to as NWE

9 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 9 of Defendant admits that this Court has personal jurisdiction over NWE because NWE resides in this State, maintains offices in this State, does business in this State, and has otherwise established contacts within this State making the exercise of personal jurisdiction proper. Defendant denies the remaining allegations contained in Paragraph 10 of the Complaint. 11. Defendant admits that the monetary claims asserted by ExxonMobil do not fall within the jurisdiction of the Montana Public Service Commission, but affirmatively states that the Montana Public Service Commission has jurisdiction over the tariff and contract terms. Defendant further denies that ExxonMobil has submitted claims to NWE in connection with the matters described herein in the proper manner described in the Distribution Agreement and further denies that such claims and all other attempts to resolve this dispute have been unreasonably rejected by NWE, thus necessitating the filing of this action by ExxonMobil. Defendant affirmatively asserts that ExxonMobil failed to follow the proper Dispute Resolution Procedures in the applicable contract documents and failed, despite repeated requests, to offer in good faith meaningful supporting information regarding its claims. 12. Defendant admits that venue is proper in this District under 28 U.S.C. 1391(b)(1)-(2) because a substantial part of the events or omissions giving rise to the action occurred in this District

10 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 10 of 28 FACTUAL BACKGROUND 13. On information and belief, Defendant admits that for more than six decades, ExxonMobil s Billings Refinery has provided customers throughout the region, including Montana, Wyoming, Utah, Colorado, South Dakota, Washington and Idaho, with gasoline and similar products and that since the Refinery s beginning, it has been a facility distributing refined products such as gasoline and diesel fuel across the region. Defendant is without sufficient information to form a belief as to the truth of the remaining allegations in Paragraph 13 of the Complaint and therefore denies them. 14. Defendant is without sufficient information to form a belief as to the truth of the allegations in Paragraph 14 of the Complaint and therefore denies them. 15. Defendant is without sufficient information to form a belief as to the truth of the remaining allegations in Paragraph 15 of the Complaint and therefore denies them. 16. Defendant is without sufficient information to form a belief as to the truth of the remaining allegations in Paragraph 16 of the Complaint and therefore denies them. 17. Defendant admits that it currently delivers electric service to the Refinery, pursuant to the Distribution Agreement and has done so since that

11 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 11 of 28 agreement was entered into on March 1, Defendant further admits that the Refinery is one of NWE s larger customers because the Refinery is a large consumer of electric power. Defendant denies the remaining allegation contained in Paragraph 17 of the Complaint. 18. Defendant admits that more than twenty years ago in the 1980 s and early 1990 s, ExxonMobil s Refinery experienced some power outages and voltage dips. Defendant further admits that although both parties have long been concerned with improving the reliability of the Refinery s power supply, ExxonMobil deliberately failed to take reasonable steps of its own to mitigate against or avoid the magnitude of the damage caused to the Refinery by normal and expected power outages and service interruptions. Defendant further admits that ExxonMobil requested and NWE agreed to undertake a joint analysis of the power delivery system to the Refinery, and Defendant affirmatively asserts that a number of action items were completed and that those which were not completed were well known to ExxonMobil from the mid-90 s as continuing, remote risks associated with a complicated and growing electric distribution system. Defendant denies the remaining allegations in Paragraph 18 of the Complaint. 19. Defendant admits that as part of this analysis, NWE and ExxonMobil together identified certain electrical system concerns and recommended specific actions be taken to address those concerns in order to improve the reliability of the

12 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 12 of 28 delivery of power to the Refinery. Defendant affirmatively asserts that those actions were completed, and that those which were not completed were known to ExxonMobil as continuing, remote risks, but that ExxonMobil failed to address these issues any further or take internal steps to avoid or mitigate against those risks. Defendant denies the remaining allegations contained in Paragraph 19 of the Complaint. 20. Defendant admits that one of these concerns was that a single fault within one of the two City of Billings Sewer Plant substations could result in a loss of power on both NWE 50kV circuits and that ExxonMobil and NWE considered replacing the ground switches at the two City of Billings Sewer Plant substations with circuit switches and investigated the arrangement of the distribution voltage switchgear at the City of Billings Sewer Plant, but that this action was not completed for good reasons and was known to ExxonMobil as a continuing, remote risk, but that ExxonMobil accepted this risk and failed to address these issues any further or take internal steps to avoid or mitigate against the risk. The consequences of power outages to the Refinery were due to ExxonMobil s own decisions, practices and failures to take appropriate measures to incorporate backup generation and/or operational steps to mitigate or avoid damages to the Refinery. Defendant denies the remaining allegations in Paragraph 20 of the Complaint. 21. Defendant admits that, in addition, NWE concluded that it should

13 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 13 of 28 revise existing or prepare written operating and maintenance procedures, to minimize human errors and to maximize preventive maintenance benefits, which NWE accomplished as part of the joint review and was known to ExxonMobil. Defendant denies the remaining allegations in Paragraph 21 of the Complaint. 22. Defendant admits that NWE s provision of electric distribution service to the Refinery is currently governed by the Distribution Agreement. The Distribution Agreement expressly requires NWE to provide Contract Demand subject to the terms and conditions of that Distribution Agreement and the Montana Electric Tariff. The parties separately contracted via the Transmission Agreement for network integration transmission services under NWE s FERC Electric Tariff, Sixth Revised Volume No. 5 ( Open Access Transmission Tariff or OATT ) for transmission of electric power separately purchased from another party by ExxonMobil from the Colstrip generation plant over 100 miles away. Defendant denies all remaining allegations in Paragraph 22 of the Complaint. 23. Defendant admits that The Transmission Agreement obligates NWE to provide Network Integration Transmission Service from [ExxonMobil s] Network Resources to serve Network Load, and ancillary services (defined as those services that are necessary to support the transmission of capacity and energy from resources to loads in accordance with Good Utility Practice ), pursuant to the OATT. Defendant further admits that under the Distribution Agreement, Rule

14 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 14 of 28 8 of the Montana Electric Tariff, which therefore forms part of the Distribution Agreement, provides that [NWE] shall make a reasonable effort to avoid interruptions of service. Defendant affirmatively asserts that it at all times made such reasonable efforts in compliance with its obligations, and denies all remaining allegations in Paragraph 23 of the Complaint. 24. Defendant admits that the Refinery is a large consumer of electric power, drawing on average approximately 20,000,000 kilowatt hours of electricity per month, and thus NWE collects over a million dollars a year from ExxonMobil pursuant to the Distribution Agreement to provide power distribution to the Billings Refinery. Defendant denies the remaining allegations in Paragraph 24 of the Complaint. 25. Defendant admits that it delivers power pursuant to the Distribution Agreement to the Billings Refinery through two 50kV electric lines, one running from the Rimrock Substation and the other from the Steam Plant Switchyard Substation, that are connected to a substation located at the Refinery known as the Billings ExxonMobil Substation. Defendant further admits that due to affirmative choices by ExxonMobil to either not generate its own power, despite obtaining permits to do so, or to provide for suitable backup generation, these lines are the only sources of electrical power to any of the Refinery process units. Defendant further admits that due to ExxonMobil s own affirmative choices, the Refinery

15 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 15 of 28 could not generate its own power or have access to suitable backup generation if NWE was unable to deliver power. Defendant denies the remaining allegations contained in Paragraph 25 of the Complaint. 26. Defendant admits that in addition to serving the Refinery, NWE s two 50kV electric lines also serve other local distribution customers, including the City of Billings Sewer Plant. Defendant denies the remaining allegations contained in Paragraph 26 of the Complaint. 27. Defendant denies that although NWE serves other customers off these lines, it is incumbent upon NWE to maintain exclusive control and security of its electrical delivery facilities and system so that the operation of such facilities cannot be taken over by any specific customer or third party to the detriment of any other NWE customer, including the Refinery, and Defendant affirmatively asserts that the risks of an integrated electric distribution system were well known to ExxonMobil and assumed by ExxonMobil to the point where it and other NWE customers, including the City of Billings, also had the obligation pursuant to Rule 7 of the Montana Electric Tariff and industry standards and practices to avoid changes or circumstances which might overload or adversely affect the NWE facilities and others on the integrated system. Defendant denies the remaining allegations Contained in Paragraph 27 of the Complaint. 28. Defendant denies the allegations in Paragraph 28 of the Complaint

16 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 16 of Defendant denies the allegations in Paragraph 29 of the Complaint. 30. Defendant denies the allegations in Paragraph 30 of the Complaint. 31. Defendant admits that, on January 25, 2014, a fault occurred on NWE s Rimrock circuit due to a failure of one of the City of Billings Sewer Plant underground lines. As a result, the Steam Plant Switchyard circuit suddenly became the sole source of power to the Refinery and the City of Billings Sewer Plant, resulting in a partial outage at the Billings Sewer Plant. Defendant denies the remaining allegations in Paragraph 31 of the Complaint. 32. Defendant admits that a City of Billings employee using City equipment transferred the fault from the Billings Rimrock line to the Billings Steam Plant Switchyard line without consulting NWE. Defendant denies the remaining allegations in Paragraph 32 of the Complaint. 33. Defendant admits that the protective relaying on its two 50 kv circuits that serve the Refinery was set to the factory default negative sequence relay setting. Defendant denies the remaining allegations in Paragraph 33 of the Complaint. 34. Defendant denies the allegations in Paragraph 34 of the Complaint. 35. Defendant admits the Refinery experienced a power outage in January 2014 for approximately 96 minutes. Defendant is without sufficient information to form a belief as to the truth of the remaining allegations in Paragraph 35 of the

17 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 17 of 28 Complaint and therefore denies them. 36. Defendant admits that in January 2016, the Refinery experienced a power outage for approximately 52 minutes. Defendant is without sufficient information to form a belief as to the truth of the remaining allegations in Paragraph 36 of the Complaint and therefore denies them. ANSWER TO FIRST CAUSE OF ACTION (Negligence/Gross Negligence) 37. Defendant incorporates herein by reference its answers to the allegations set forth in Paragraphs 1 through 36 above. 38. NWE admits that it owed a duty and complied with its duty pursuant to the Distribution Agreement and Montana Electric Tariff to make a reasonable effort to avoid interruptions of service. Defendant denies the remaining allegations contained in Paragraph 38 of the Complaint. 39. Defendant denies the allegations in Paragraph 39 of the Complaint. 40. Defendant denies the allegations in Paragraph 40 of the Complaint. 41. Defendant denies the allegations in Paragraph 41 of the Complaint. 42. Defendant denies the allegations in Paragraph 42 of the Complaint. 43. Defendant denies the allegations in Paragraph 43 of the Complaint. 44. Defendant denies the allegations in Paragraph 44 of the Complaint. 45. Defendant denies the allegations in Paragraph 45 of the Complaint, including all subparts thereof

18 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 18 of Defendant denies the allegations in Paragraph 46 of the Complaint. 47. Defendant denies the allegations in Paragraph 47 of the Complaint. 48. Defendant denies the allegations in Paragraph 48 of the Complaint, including all subparts thereof. 49. Defendant is without sufficient information to form a belief as to the truth of the allegations contained in Paragraph 49 of the Complaint and therefore denies them. 50. Defendant denies the allegations in Paragraph 50 of the Complaint. ANSWER TO SECOND CAUSE OF ACTION (Breach of Contract) 51. Defendant incorporates herein by reference its answers to the allegations set forth in Paragraphs 1 through 50 above. 52. Defendant admits that ExxonMobil entered into the written Transmission Agreement with NWE, effective August 13, 2013, for the provision of network integration transmission services; admits that The Transmission Agreement is a valid contract between the refinery owner/operator, ExxonMobil, and NWE; but Defendant denies that the Transmission Agreement is implicated or involved under the circumstances, which are, instead, controlled by the Distribution Agreement. Defendant denies the remaining allegations in Paragraph 52 of the Complaint. 53. Defendant admits that the Transmission Agreement obligates NWE to

19 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 19 of 28 provide Network Integration Transmission Service from [ExxonMobil s] Network Resources to serve Network Load, and ancillary services pursuant to the OATT, but Defendant denies that the Transmission Agreement is implicated or involved under the circumstances, which are, instead, controlled by the Distribution Agreement and the Montana Electric Tariff. Defendant denies the remaining allegations in Paragraph 53 of the Complaint. 54. Defendant admits that the Distribution Agreement and Montana Electric Tariff, Rule 8 of NWE s Rules, which therefore form part of the Distribution Agreement, provide that [NWE] shall make a reasonable effort to avoid interruptions of service. Defendant admits that Rule 8 further provides that [o]nly [NWE s] duly authorized employees or agents shall be permitted to connect [NWE s] facilities to Customer s service terminal, but denies that aspect of the rule was involved in any outages at the Refinery. Defendant denies the remaining allegations contained in Paragraph 54 of Plaintiff s Complaint. 55. Defendant denies the allegations in Paragraph 55 of the Complaint. 56. Defendant denies the allegations in Paragraph 56 of the Complaint. 57. Defendant denies the allegations in Paragraph 57 of the Complaint. 58. Defendant denies the allegations in Paragraph 58 of the Complaint. 59. Defendant denies the allegations in Paragraph 59 of the Complaint. 60. Defendant denies the allegations in Paragraph 60 of the Complaint,

20 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 20 of 28 including all subparts thereof. 61. Defendant is without sufficient information to form a belief as to the truth of the allegations contained in Paragraph 61 of the Complaint and therefore denies them. ANSWER TO THIRD CAUSE OF ACTION (Breach of Covenant of Good Faith and Fair Dealing) 62. Defendant re-alleges and incorporates herein by reference its answer to the allegations set forth in Paragraphs 1 through 61 above. 63. Defendant admits that implied in the Agreements between NWE and ExxonMobil is a common contractual covenant of good faith and fair dealing, which is a contractual term imposed by Montana law on both parties. Defendant denies the remaining allegations contained in Paragraph 63 of the Complaint. 64. Defendant admits that ExxonMobil and NWE had a justifiable expectation they would both comply with the terms of their Agreements with each other. Defendant denies the remaining allegations contained in Paragraph 64 of the Complaint. Complaint. Complaint. 65. Defendant denies the allegations contained in Paragraph 65 of the 66. Defendant denies the allegations contained in Paragraph 66 of the 67. Defendant is without sufficient information to form a belief as to the

21 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 21 of 28 truth of the allegations contained in Paragraph 67 of the Complaint and therefore denies them. AFFIRMATIVE DEFENSES 68. Defendant incorporates its answers and affirmative statements in paragraphs 1 through 67 as though fully set forth herein. 69. Plaintiff s Complaint fails to state a claim or cause of action against Defendant upon which relief can be granted. 70. Defendant denies each and every allegation in Plaintiff s Complaint that has not been specifically admitted. 71. Defendant alleges that the installation, maintenance and operation of the electric lines and associated equipment in question complied with all applicable state, federal and local laws, rules and regulations in effect at the relevant time and that Plaintiff s claims are therefore barred. 72. Defendant alleges that the electric lines and associated equipment in question was manufactured, installed, maintained and operated pursuant to generally recognized and prevailing industry and governmental standards in existence at the relevant time and that the Plaintiff s claims are therefore barred. 73. Plaintiff s claims are barred because the incidents complained of by Plaintiff were caused by unforeseen and unforeseeable external factors and forces over which Defendant had no control

22 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 22 of Plaintiff s injuries and damages resulted from new, intervening, supervening and/or independent causes unrelated to any conduct of Defendant. 75. Plaintiff s claims are barred or must be reduced by the operation of Montana Code Annotated due to Plaintiff s own contributory negligence, acts and/or omissions which caused and/or contributed to cause any damages Plaintiff may have sustained. 76. Plaintiff s claims are barred or must be reduced by the operation of Montana Code Annotated due to other parties negligence, acts and/or omissions which caused and/or contributed to cause any damages Plaintiff may have sustained, including but not limited to conduct of City of Billings Sewer Department and GE Energy Management Services, Inc. as pleaded in the Third- Party Complaints against them. 77. Plaintiff s injuries and damages resulted from a force majeure and not from any negligence or fault of Defendant. 78. Plaintiff s claims are barred or must be reduced by the operation of Montana Code Annotated Plaintiff s claims are barred in whole or in part by the Electric Tariff approved by the Montana Public Service Commission, including but not limited to Rule 8-2 B, to wit: The Utility shall not be liable to Customer or others for failure or interruption of electric service due to acts of God,

23 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 23 of 28 governmental regulations, court or Commission orders, acts of the public enemy, strikes or labor difficulties, accidents, weather conditions, acts of third parties, droughts, or, without limitation by the forgoing, any other cause beyond reasonable control of the Utility. 80. Plaintiff s claims are barred in whole or in part by Article 9.2 of the Distribution Agreement, to wit: Neither Party will be liable for consequential, special, indirect or incidental damages whether arising in tort or contract, including breach or alleged breach of this Agreement. 81. Plaintiff s claims are barred in whole or in part by Article 1.8 and Article 14 of the Distribution Agreement, to wit: 1.8 Force Majeure means any act of God, labor disturbance, act of the public enemy, war, insurrection, riot, fire, storm or flood, explosion, breakage or accident to machinery or equipment, order, regulation or restriction imposed by governmental military or lawfully established civilian authorities, so long as the claiming party has not applied for, assisted in, or failed to reasonably oppose such governmental action, or any other cause beyond a Party s control. A Force Majeure event does not include an act of negligence, intentional wrongdoing or economic events, such as changes in market conditions or prices. ARTICLE 14. FORCE MAJEURE; DUTY TO MITIGATE 14.1 If either Party is rendered unable by Force Majeure to carry out, in whole or in part, its obligations under this Agreement and such Party gives notice and full details of the event to the other Party as soon as practicable after the occurrence of the event, then during the period of such Force Majeure but for no longer period, the obligations of the Party

24 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 24 of 28 affected by the event (other than the obligation to make payments then due or becoming due with respect to performance prior to the event) will be excused to the extent required. The Party affected by the Force Majeure will remedy the Force Majeure with all reasonable dispatch Each Party agrees that it has a duty to mitigate damages and covenants that it will use commercially reasonable efforts to minimize any damages it may incur as a result of the other Party s performance or non-performance of this Agreement. 82. Plaintiff s claims are barred in whole or in part by Part 10.1 of the OATT, to wit: Force Majeure: An event of Force Majeure means any act of God, labor disturbance, act of the public enemy, war, insurrection, riot, fire, storm or flood, explosion, breakage or accident to machinery or equipment, any Curtailment, order, regulation or restriction imposed by governmental military or lawfully established civilian authorities, or any other cause beyond a Party s control. A Force Majeure event does not include an act of negligence or intentional wrongdoing. Neither the Transmission Provider nor the Transmission Customer will be considered in default as to any obligation under this Tariff if prevented from fulfilling the obligation due to an event of Force Majeure. However, a Party whose performance under this Tariff is hindered by an event of Force Majeure shall make all reasonable efforts to perform its obligations under this Tariff. 83. Plaintiff s claims are barred in whole or in part by Section 8 of the Network Operating Agreement, to wit: 8.0 Service Conditions The parties recognize that operating and technical

25 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 25 of 28 problems may arise in the control of the frequency and in the flow of real and reactive power over the interconnected transmission systems. The Network Operating Committee may adopt operating rules and procedures as necessary to assure that, as completely as practical, the delivery and receipt of real and reactive power and energy hereunder shall be accomplished in manner that causes the least interference with such interconnected systems. A Transmission Customer interconnecting with the Transmission Provider s Transmission System is obligated to follow the same practices and procedures for interconnection and operation that the Transmission Provider uses or its own load and resources. Where the Transmission Customer purchases Control Area Services from third parties, the Transmission Customer shall have the responsibility to secure contractual arrangements with such third parties that are consistent with the Transmission Provider s Control Area Services Tariff, this Network Operating Agreement, and any applicable rules and procedures of the Network Operating Committee. 84. Plaintiff s claims are barred in whole or in part by Section 7(c) of the Network Operating agreement, to wit: (c) Each Party recognizes that a Party s proposed new interconnection or modification of an existing interconnection between that Party s system and the system of a third party may cause adverse anticipated effects on the system of the other party. The Party making such interconnection or modification shall minimize, or otherwise compensation for, adverse operational effects to the other party s system. 85. Plaintiff s claims are barred in whole or in part by its failure to mitigate its damages

26 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 26 of Plaintiff s claims are barred in whole or in part because the consequences of power outages to the Refinery were due to ExxonMobil s own decisions, practices and failures to take appropriate measures to incorporate backup generation and/or operational steps to mitigate or avoid damages to the Refinery, as well as errors and omissions by ExxonMobil in the course of shutting down and restarting the Refinery. 87. Plaintiff s claims are barred in whole or in part by the Plaintiff s intentional choices to assume the risks of power interruptions by failing to undertake appropriate measures providing for backup electrical generation, by failing to plan for obtaining backup power from the BGI/YELP cogeneration plant and/or by failing to plan and provide for other means of mitigating or avoiding damages to the Refinery in the event of a power interruption. 88. There is no basis in law or fact for the imposition of punitive damages with respect to the claims of Plaintiff against Defendant. 89. Any assessment of punitive/exemplary damages against Defendant in connection with the claims and causes of action that have been asserted by the Plaintiff in this action would violate the Montana and United States Constitutions. 90. The imposition of punitive damages in this case would violate the Due Process Clauses of the Fifth and Fourteenth Amendments to the United States Constitution because the Montana standards for determining the amount of the

27 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 27 of 28 award are unduly vague and subjective, and permit arbitrary, capricious, excessive and disproportionate punishment that serves no legitimate governmental interest. 91. The imposition of exemplary damages in this case would violate the Due Process Clauses of the Fifth and Fourteenth Amendments to the United States Constitution because Montana post-verdict review procedures for scrutinizing exemplary damage verdicts do not provide a meaningful constraint on the discretion of juries to impose punishment. 92. The imposition of punitive damages in this case based upon evidence of Defendant s wealth or financial status would violate the Due Process Clauses of the Fifth and Fourteenth Amendments to the United States Constitution. 93. The imposition of punitive damages in this case in the absence of showing a malicious intent to cause harm to the Plaintiff would violate the Due Process Clauses of the Fifth and Fourteenth Amendments to the United States Constitution. 94. Defendant expressly reserves the right to amend this Answer and add additional Affirmative Defenses based upon legal theories, facts, and circumstances that are discovered after the date of this Answer. Defendant at this time is uncertain as to which affirmative defenses may apply if this case proceeds to trial. Defendant will dismiss any affirmative defenses at the pretrial conference which do not appear to be reasonably supported by the facts or law. The purpose

28 Case 1:16-cv SPW-CSO Document 4 Filed 04/01/16 Page 28 of 28 of raising these defenses is not to create defenses where no basis for such defenses exists. Rather, it is in recognition that the pleadings, discovery and trial preparation require an examination of evolving facts and law. The decision-maker, whether it be judge or jury, should have available for consideration all applicable defenses. DEMAND FOR JURY TRIAL Pursuant to Federal Rule of Civil Procedure 38(b) and Local Rule 38.1, Defendant respectfully demands a trial by jury on all claims and issues so triable. PRAYER FOR RELIEF WHEREFORE, Defendant, having fully answered Plaintiff s Complaint, prays for relief as follows: 1. For judgment dismissing with prejudice all claims brought by ExxonMobil and against NWE; 2. That Plaintiff take nothing by its Complaint against Defendant. 3. For costs, attorneys fees and interest as allowed by law; and 4. For such other and further relief that this Court deems just and proper. DATED this 1st day of April, /s/ Kathleen L. DeSoto Attorneys for Defendant