War over fuel farm lease could land Islanders with £10 million lawsuit

Friday 11 March 2016

Taxpayers could be hit by a lawsuit worth more than £10 million if a controversial deal to renew the lease on the fuel farm which has split the Council of Ministers doesn’t go through the Royal Court today, Bailiwick Express has learned.

Infrastructure Minister Eddie Noel says that the contract to renew the lease with a company owned by fuel suppliers Rubis must pass today – the Council of Ministers is said to have backed his position in four recorded votes, although ministers are far from united over the deal.

Over the last days and weeks, Assistant Chief Minister Philip Ozouf has been lobbying hard behind the scenes to get the deal pulled over his concerns that it will keep petrol prices artificially high, and has been briefing States Members against the renewed deal with Rubis, and against Deputy Noel.

One of Rubis’ competitors – a fuel firm called ATF - has been trying to stop the contract from going through.

They say that Rubis are making huge profits out of operating the fuel farm, and that they could reduce those costs and drop the price of fuel for Islanders. They say that the current costs of using the fuel farm to all operators are around 3.4 pence per litre - but say it's not clear why that number is so high, especially when comparative costs in places such as the Isle of Wight are significantly lower.

ATF is widely-believed to be owned by 1(1)k billionaire hedge fund manager Peter de Putron, although a Director of ATF would not confirm that when interviewed by Bailiwick Express yesterday.

The Council of Ministers has apparently been briefed that delaying the contract for the fuel farm – which is used by almost all fuel distributors to import and store fuel – being passed before the court could leave the States open to a lawsuit from Rubis. It has been estimated that the cost of the suit could be £10 million, or even more.

Deputy Noel has tried to reassure States Members that he has built protections into a new operating agreement to ensure that whoever runs the fuel farm can’t abuse their position to extract profit from it. That operating agreement places competition regulators CICRA in the middle of the deal to act as a ‘policeman’ to resolve disputes between the fuel firms who use the farm.

But ATF have expressed reservations about that element of the deal - correspondence confirms that ATF have raised concerns repeatedly about charges at the fuel farm as far back as October last year, and that CICRA dismissed their requests for an investigation. But Rubis reject those claims, and point to a CICRA report which says there are no excessive profits being made. 

ATF have made it clear that they want an open, transparent tender process for the operation of the fuel farm. The reason that hasn’t happened is that the States effectively had a window two years ago to give Rubis notice of a tender, but didn’t take it up.

The States own the land that the fuel farm sits on but not the equipment, which is owned by a company ultimately owned by Rubis. 

What they say…

Infrastructure Minister Eddie Noel – the politician in charge of the lease for the fuel farm…

“Islanders are better served by a new operating agreement attached to the new lease. It gives other companies using the facilities access to arbitration, and if the operators break the competition law CICRA has the power to correct the problem. If that isn’t sufficient the States now have the ultimate sanction of terminating the lease and buying the equipment without any compensation for loss of future business, then alternative arrangements would be put in place. It also allows the imposition of damages if any required safety work is not done to a tight timescale.  Competition issues will continue to be monitored closely and if any party raises valid concerns there is provision under the competition law to take further action and carry out detailed investigations into how the fuel farm impacts on fuel supply in the island. CICRA have already included in their work programme for 2016 a review of the effectiveness of the conditions they imposed at the fuel farm.”

La Collette Terminal Ltd - the fuel farm owners ultimately owned by Rubis, who want to renew their lease…

“La Collette Terminal Ltd (LCT) is the owner of the infrastructure at the fuel farm at La Collette and is currently in the final stages of renewing the lease (on similar terms) for another 10 years. LCT is following the process set out by the States of Jersey. LCT has been made aware of some defamatory comments and misinformation being circulated by parties with a vested interest to disrupt the renewal of the lease, these claims are untrue and without substance. It is worthwhile drawing attention to a section in CICRA’s Review of the Fuel Market in Jersey (November 2015), which states: ‘the gross margins and return on capital for the terminal over the past four years are not out of line with the margins found to be reasonable in analysis undertaken by the CMA (Competition & Markets Authority UK) and Oxera in their energy sector modelling work.’ This report highlights that CICRA has found no evidence that the public of Jersey have been charged excessive margins. LCT looks forward to continuing with its significant investment plan at the fuel farm. Over £10 million have been spent upgrading facilities so far, which will help safeguard this strategic asset for generations of Islanders to come.”

ATF – a fuel firm who say that the current system is unfair to Islanders and who want the fuel farm lease put out to an open, transparent tender process…

“ATF has endeavoured to engage with States’ Members, including the Infrastructure Minister, Deputy Eddie Noel, but without any, or any constructive response. ATF is aware that a number of States’ Members are concerned that due process has not been followed in relation to the proposed passing of a new lease before the Royal Court on Friday the 11th of March 2016. ATF continues to invite States’ Members to respond to its correspondence and to engage in consideration of other options before entering into a new lease. ATF emphasises that such views as are expressed within this letter are expressed in good faith and in accordance with ATF’s understanding of the situation. ATF recognises that it will not been seen to be a neutral party but believes that the matters referred to above should, at the very least, be canvassed publically, with greater openness and with time for proper consideration."