Oil supply settlement reached


PORTLAND – Heads of local school districts, towns and nonprofits breathed a sigh of relief Tuesday after learning they will not be forced to pay twice for oil bought last year.

More than 10 districts, municipalities and nonprofit organizations were caught in the middle of a bankruptcy dispute when Oakland-based oil distributor Petroleum Products Co-op of Maine defaulted on more than $11 million in loans to Irving Oil Corp. earlier this year.

In an attempt to regain some of the $11 million, Irving laid claim to oil in a PPCOM tank in Winslow. The oil had been bought and paid for the previous year by the districts.

At first, Irving refused the organizations’ pleas to fill their rapidly diminishing oil tanks, but then relented with the proviso that payment, or nonpayment, for the oil would be determined in court.

Under the settlement, approved by the court last Friday, Irving agreed to deliver 160,000 gallons of the prepaid oil to the affected towns and school districts, including the towns of Oakland and Belgrade, the city of Waterville, the Kennebec Sanitary District, the Maine Children’s Home for Little Wanderers, the Harold and Bibby Alfond Youth Recreation Center, the Waterville School Department, and SADs 16 in Farmingdale, 47 in Belgrade, 49 in Fairfield and 58 in Strong.

When he was notified in March that the entrance to the Winslow tank full of his district’s remaining oil had been blocked by an Irving Oil truck, SAD 58 Superintendent Quenten Clark wondered how to complete a budget-balancing process already gone haywire due to oil prices nearly double what they were last year. Because last winter was much warmer than usual, Clark said he had banked on using leftover oil from this year during part of next winter, which would have let the district buy fewer gallons of the high priced stuff on the market today.

In a March interview, he railed against PPCOM and Irving, saying, “It seems like a wonderful arrangement, where PPCOM used our oil to settle part of its debt with Irving,” and put SAD 58 out between 19,000 and 31,000 gallons of heating oil and diesel fuel.

Under the settlement, SAD 58 will not have access to the “leftover” oil that went unused this spring. But Clark will not have to pay twice for oil already used this school year.

In addition, SAD 58 and other entities involved in the Irving dispute have reached a longer-term supply agreement with the oil giant in which the districts can buy oil at a reduced rate for the next three years, Irving counsel Gregory Poitras said Tuesday.

“We came to a collective understanding that we could forge an agreement that was reasonable and fair that would (also) allow Irving to gain an exciting group of new customers,” Poitras said.

The districts’ attorney, Melissa Hewey, of Drummond, Woodsum & MacMahon, explained she believes the settlement to be in the best interest of her clients.

“The schools are certainly happy that the case is resolved; happy that they didn’t have to go out of pocket much, if at all, for their heating needs this year,” she said.

“You can never say in a case where an entity loses as much money as my clients lost that they’re happy,” she said, explaining no one knows yet just how much was lost, but that the oil the districts and towns paid for but didn’t need this year could have added up to a significant savings next year. “There was a substantial amount of oil that they would have been able to carry over until next year, that they paid for,” she said.

“But that doesn’t lie at Irving’s feet,” she added.

As for PPCOM, Poitras says the company is in “involuntary bankruptcy” after buying hundreds of thousands of gallons of oil from Irving on credit against its assets and failing to pay up. “Irving is just one of a long list of individuals and entities who are going to suffer economically as a result of PPCOM’s broken promises,” he said. A court-appointed trustee is investigating the Oakland company and its principal, Kathleen Thompson, in search of assets with which to pay Irving and others.

Once that investigation and others into PPCOM’s history are complete, “we’re going to have a clearer picture of how this company was able to drive itself into bankruptcy,” Poitras said.

Clark was unavailable for comment Tuesday.