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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Tesoro Alaska Company v. Union Oil Company of California (7/26/2013) sp-6802

Tesoro Alaska Company v. Union Oil Company of California (7/26/2013) sp-6802

        Notice: This opinion is subject to correction before publication in the PACIFIC  REPORTER . 

        Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts, 

        303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email  


TESORO ALASKA COMPANY,                         ) 

                                               )       Supreme Court Nos. S-14122/14132 

                        Appellant and          ) 

                        Cross-Appellee,        )       Superior Court No. 3AN-08-05877 CI 


        v.                                     )       O P I N I O N 


UNION OIL COMPANY OF                           )       No. 6802 - July 26, 2013 

CALIFORNIA, UNOCAL PIPELINE                    ) 

COMPANY, and UNOCAL                            )

CORPORATION,                                   )


                        Appellees and          )

                        Cross-Appellants.      )


                Appeal from the Superior Court of the State of Alaska, Third 

                Judicial District, Anchorage, Peter A. Michalski, Judge. 

                Appearances:        Robin   O.   Brena   and   Kevin    G.  Clarkson, 

                Brena,     Bell    &      Clarkson,     P.C.,    Anchorage,         for 

                Appellant/Cross-Appellee.  Stephen M. Ellis, Delaney Wiles, 

                Inc., Anchorage, for Appellees/Cross-Appellants. 

                Before:     Carpeneti,     Chief    Justice,   Fabe,   Winfree,    and 

                Stowers, Justices. 

                CARPENETI, Chief Justice. 


                In 2001 an oil producer on the Alaska North Slope entered into a contract 

to sell its oil to another oil company.  Under the contract the buyer took title at the North 

----------------------- Page 2-----------------------

Slope, but agreed to use a pipeline company associated with the supplier to transport the 

oil through the Trans-Alaska Pipeline.          The price per barrel was calculated as the West 

Coast   market   price   less   marine   transport   and   pipeline   tariff. The   contract   made   no 

mention of whether the pipeline tariff was tied to the ultimate destination of the oil.  At 

the time, the interstate and intrastate pipeline tariffs were the same.   The buyer shipped 

the oil to an in-state refinery and paid the tariff to the pipeline company.              The supplier 

duly subtracted the tariff amount from the market price of the oil less marine transport 

and   sent   invoices   to   the   buyer.  Meanwhile,   the   buyer   successfully   challenged   the 

intrastate tariff as unjust and unreasonable and the pipeline company issued a refund, 

including 10.5% interest. Then, the supplier claimed that it was entitled to the tariff 

refund   under   the   contract.   The   superior   court,   on   motions   for   summary   judgment, 

awarded the principal amount of the refund to the supplier and the interest to the buyer. 

                Both parties appeal.      The buyer claims that the reference to tariffs in the 

contract related to interstate tariffs because the price of the oil was a netback price to the 

Los Angeles market.   The supplier asserts that the contractual reference to tariffs meant 

the actual tariff amount paid.  In its cross-appeal, the supplier asserts that because it was 

awarded the principal amount, it should have received the statutory interest as well.  We 

hold that the pricing term was a netback price to the Los Angeles market referencing the 

interstate    tariff. Accordingly,       we   reverse   the  superior    court's  grant   of  summary 

judgment to the supplier and remand for entry of judgment in favor of the buyer.  In light 

of our conclusion, we do not reach the issues raised in the cross-appeal. 


        A.      Facts 

                1.      Background and Regulatory Commission of Alaska proceedings 

                This appeal concerns two crude oil purchase contracts between Tesoro 

Alaska Company (Tesoro) and Union Oil Company of California (Union Oil).                         Under 

                                                   -2-                                            6802

----------------------- Page 3-----------------------

the contracts Tesoro agreed to purchase all of Union Oil's Alaska North Slope (ANS) 

crude   oil   production   in   2000,   2001,   and   2002.    The   first   contract   was   executed   in 

November 1999, covering January 1, 2000 through December 31, 2000.                           The second 

contract     was    executed    in  November       2000;    it  covered    January     1,  2001    through 

December 31, 2002.         Under the contracts, title and risk of loss transferred to Tesoro at 


the outlet flange of Pump Station No. 1  of the Trans-Alaska Pipeline System (TAPS). 

The price was set as follows: 

                 The price . . . shall be the average ANS [crude oil] closing 

                 price as quoted by Reuters and Telerate for each trading day 

                 of the month prior to the delivery . . . less $1.35 per barrel for 

                 marine transportation less one of the following: 

                 a.) Tesoro will, at Unocal's direction, nominate and ship the 

                 Quantity of [crude oil] onto Unocal Pipeline space on TAPS 

                 and   the   Unocal   [Pipeline]   TAPS   tariff   shall   apply   to   all 

                 [Union     Oil]   Crude    shipped     on  Unocal     [Pipeline]    space. 

                 Tesoro agrees to pursue any such nomination diligently and 

                 absolutely   until   or   unless   prorated   out   of   Unocal   Pipeline 


                 b.) If not directed by Unocal, Tesoro shall use its best efforts 

                 to nominate and ship the Quantity of [crude oil] on the TAPS 

                 so    as   to   minimize,      to  the    extent    practical,   pipeline 

                 transportation costs. The weighted average tariff rates paid by 

                 Tesoro shall then apply. 

                 TAPS carries oil from the Alaska North Slope to Valdez.                   The owners of 

the pipeline are allocated space and share costs according to the portion of the pipeline 

owned.  Some pipeline owners are affiliated with oil producers.  Here, Unocal Pipeline 

        1        Pump Station No. 1 is the beginning of the Trans-Alaska Pipeline.  The 

Center   for   Land   Use   Interpretation,  The   Trans-Alaska   Pipeline,   LAY          OF   THE  LAND 

NEWSLETTER  (Spring 2009), 


                                                    -3-                                                 6802 

----------------------- Page 4-----------------------

was owned by the same parent company as Union Oil, Unocal Corporation.             Pipeline 

owners are considered common carriers.  Subject to regulatory oversight, each pipeline 

owner determines a tariff for oil shipped through its space.        The pipeline tariffs are 

subject to different regulation depending upon whether the   oil is ultimately shipped 

interstate or intrastate.   The Federal Energy Regulatory Commission regulates interstate 

tariffs, while the Regulatory Commission of Alaska (RCA) regulates intrastate tariffs and 

is tasked with setting "just and reasonable rates."     Throughout the duration of these 

contracts the intrastate and interstate tariffs were the same. 

              Tesoro challenged the TAPS intrastate tariffs, including that of Unocal 

Pipeline, in two RCA proceedings, one covering tariffs from 1997 to 2000 and another 

covering tariffs from 2001 to 2003.     In December 1997, Unocal Corporation's counsel 

placed himself on the distribution list for matters concerning the tariff rate proceedings 

and received RCA orders.  After Tesoro's challenge was initiated the RCA issued orders 

accepting the filed tariff rates as "temporary" and collectable but "subject to refund." 

              In the meantime, Union Oil delivered the oil and Union Oil's affiliated 

pipeline company, Unocal Pipeline Company, shipped it.          Unocal Pipeline Company 

invoiced Tesoro using the published pipeline tariff rates for the duration of the contract. 

Tesoro paid all invoices. Ultimately, the RCA found that the intrastate tariffs were unjust 

and unreasonable.2    In 2008, as a result of Tesoro's rate protest, Unocal Pipeline was 

required to issue a refund to Tesoro of over $24 million in principal and interest. 

       2      The pipeline companies appealed one of the orders, which was affirmed by 

this court in Amerada Hess Pipeline Corp. v. Regulatory Comm'n of Alaska , 176 P.3d 

667, 669 (Alaska 2008).  The pipeline companies declined to appeal the other order.  In 

2008 the pipeline companies issued appropriate refunds. 

                                             -4-                                        6802 

----------------------- Page 5-----------------------

                2.     The first contract 

               Union Oil contracted with ARCO for the sale of Union Oil's ANS crude 

for 1998 and 1999.       Under the contract ARCO was required to ship the oil on Unocal 

Pipeline space "so that [Unocal Pipeline] would be assured of at least some revenues to 

offset its ongoing TAPS expenses."  The pricing mechanism on the ARCO contract was 

based on a West Coast delivery point.   Therefore, although ARCO was required to take 

title and risk of loss at Pump Station No. 1 and ship on Unocal Pipeline space, according 

to Unocal, ARCO could deduct "the theoretical transportation cost of moving the ANS 

crude to Valdez" and the marine transport cost from Valdez to Los Angeles. 

               As the ARCO contract neared expiration Tesoro began negotiations with 

Union   Oil.   The   contract   between   Union   Oil   and   Tesoro   was   essentially   the   same 

contract that Union Oil had previously negotiated with ARCO.              Point of sale was on the 

North Slope and title and risk of loss passed at Pump Station No. 1.            Tesoro agreed to 

ship on Unocal Pipeline space if space was available and the tariff would be deducted 

from the price charged.      The contract contained no mechanism for retroactive pricing 

adjustments and no definitions section. However, there was a reservation for retroactive 

adjustment of taxes. 

               When the contract circulated within Union Oil and was passed to Tesoro, 

there was no indication that either party discussed the meaning of the "Unocal [Pipeline] 

TAPS Tariff" term.      Internal Union Oil emails do not indicate that Union Oil reserved 

the right to seek a refund; they also do not clarify whether the pricing mechanism was 

tied to the interstate tariff.  The emails give an overview of the pricing mechanism and 

key contract terms, such as maintaining sale at Pump Station No. 1 and shipping on 

Unocal Pipeline space, and note the then-current interstate (and intrastate) tariff.        A post- 

contract Unocal email refers to "netback" pricing stating, "[h]ere are the pipeline netback 

numbers you requested," and requests verification of the tariff amounts. 

                                                 -5-                                          6802

----------------------- Page 6-----------------------

                 Union Oil claims that it understood the pricing mechanism as a "penny for 

penny pass-through payment," where Union Oil would reimburse Tesoro for the actual 


transportation costs; Tesoro claims that the pricing mechanism was a netback price  tied 

to the West Coast market, simply a convenient way to price crude oil purchased in an 

untraded market that was not tied to the actual transportation costs. A November 3, 1999 

Union   Oil   email   noting   the   successfully-negotiated   deal   with   Tesoro   refers   to   "our 

netback North Slope price." 

                 Union Oil admits that it did not expressly state its intention that the price 

would reflect actual costs, but claims that it understood that Tesoro would be able to 

deduct no "more than the actual TAPS transportation cost it incurred."                      A Union Oil 

employee also admitted that "Tesoro . . . would be allowed to deduct the theoretical 

transportation cost of moving ANS crude to Valdez, irrespective of the actual destination 

for   the   oil.   The  TAPS   tariffs   were   selected   as   that   was   deemed     to   be   the   TAPS 

transportation cost that Tesoro would actually incur." 

                 Tesoro's     oil  industry    expert   reviewed     the   contract   and   found    that  it 

contained a standard netback pricing mechanism.                 He testified that "[c]onsistent with 

industry practice, the [Union Oil] and Tesoro contracts agree to deduct the 'theoretical 

transportation costs,' " subtracting the interstate tariff rate regardless of where the oil 

shipped.     The netback formula accounts for the fact that the seller did not bear the cost 

of shipping the oil to market; under the scheme the seller gets the net amount it would 

have gotten if it had shipped the oil to market and sold it there. 

        3        An expert for Tesoro testified that netback pricing is used in places like 

Alaska's      North    Slope    where    there   is  no   widely-traded      market    for   oil.  It   is  a 

" 'theoretical' or surrogate price at Pump Station [No.] 1 net backed from a widely- 

traded market. A netback is the assumed final destination price less the assumed delivery 

charges to this hypothetical destination (e.g., the Los Angeles basin)." 

                                                    -6-                                               6802

----------------------- Page 7-----------------------

                Union Oil submitted invoices using the base rate of the West Coast price 

and subtracting the marine transport and the weighted average TAPS rate (that is, the 

tariff). Tesoro paid the tariff to Unocal Pipeline or to other pipeline owners if shipped 

by another carrier.     Neither party disputes that the invoices were paid as billed. 

                3.      The second contract: 2001-2002 

                In   2000,   the   second   contract   was   negotiated   for   2001-2002.      During 

negotiations, an internal Union Oil email provided an outline of the contract stating 

"Tesoro will ship on Unocal [Pipeline]'s space . . . ([Union Oil] will reimburse Tesoro 

for pipeline tariff)."    No mention of a reimbursement plan was made to Tesoro.                  There 

was no reservation for possible tariff refunds.          In the end, the second contract was the 

same as the first except for a change in the date.           As with the 2000 contract Union Oil 

invoiced Tesoro and the invoices were paid. 

        B.      Proceedings 

                After Union Oil formally requested the RCA-ordered refunds, Tesoro filed 

a declaratory action to establish its rights.   Union Oil counterclaimed, seeking the funds 

under the contracts.4       Both parties   filed cross-motions for summary judgment.   The 

superior court granted summary judgment for Union Oil "as to refunds for tariffs paid 

on barrels of oil shipped intrastate."       RCA-ordered tariff refunds have both a principal 

and   a   10.5%   interest   rate   component.     The   superior   court   awarded   Union   Oil   the 

principal amount plus prejudgment interest based on a breach of contract theory but 

found that Union Oil was not entitled to the 10.5% statutory interest.  Tesoro appealed, 

arguing   that   the   contract's   pricing   mechanism   was   a   netback   price   tied   to   interstate 

        4       As noted above, there are two contracts at issue in this appeal.  Because the 

relevant provisions are identical in the two contracts, this opinion occasionally refers to 

"the contract." 

                                                   -7-                                               6802 

----------------------- Page 8-----------------------

tariffs.   Union Oil cross-appealed the superior court's conclusion that it was due only 

contract-based prejudgment interest rather than the 10.5% RCA-ordered interest. 


                "We   review   a   grant   of   summary   judgment   de   novo."5    All   reasonable 

inferences are drawn in favor of the nonmoving party.6                Summary judgment will be 

entered   "if   there   is   no   genuine   factual   dispute   and   the   moving   party   is   entitled   to 

judgment as a matter of law." 7        "The moving party has the initial burden of offering 

admissible evidence showing both the absence of any genuine dispute of fact and the 

legal right to a judgment."8     Once that burden is satisfied, the non-moving party, to avoid 

summary judgment, must produce "admissible evidence reasonably tending to dispute 

or contradict the movant's evidence."9         The non-moving party may not, however, "rest 

upon mere allegations, but must set forth specific facts showing that there is a genuine 

issue of material fact."10    "To create a genuine issue of material fact there must be more 

than a scintilla of contrary evidence."11 

        5       Anderson v. Alyeska Pipeline Serv. Co. , 234 P.3d 1282, 1286 (Alaska 2010) 

(citing Parker v. Tomera , 89 P.3d 761, 765 (Alaska 2004)). 

        6       Id. (citing Moore v. Allstate Ins. Co. , 995 P.2d 231, 233 (Alaska 2000)). 

        7       Id. 

        8       Cikan v. ARCO Alaska, Inc., 125 P.3d 335, 339 (Alaska 2005). 

        9        Philbin v. Matanuska-Susitna Borough , 991 P.2d 1263, 1265-66 (Alaska 

 1999) (citing Jennings v. State , 566 P.2d 1304, 1309 (Alaska 1977)). 

        10      Cikan, 125 P.3d at 339. 

        11      Id.  (quoting Martech Constr. Co. v. Ogden Envtl. Servs., Inc. , 852 P.2d 

 1146, 1149 n.7 (Alaska 1993)). 

                                                  -8-                                            6802

----------------------- Page 9-----------------------


        A.       It Was Error To Grant Summary Judgment To Union Oil. 

                 The main issue in this case is which party is entitled to the RCA refunds. 

The key to this issue is the meaning of "Unocal [Pipeline] TAPS tariff" in the contract's 

pricing mechanism.         Tesoro asserts that the contract used a netback pricing mechanism 

subtracting the filed interstate tariff (and marine transportation costs) reflecting the West 

Coast crude oil market price, fixed at delivery.            In short, it is a theoretical market price 

not tied to any actual tariff paid on a particular barrel of oil.            Union Oil asserts that the 

term was defined by reference to the particular tariff applicable to a given barrel of oil, 

and that therefore any refund from TAPS would flow back to Union Oil.                      The superior 

court found that the contract was "ambiguous as to price" and ultimately agreed with 

Union Oil's interpretation. 

                 When   resolving   disputes   concerning   the   meaning   of   an   agreement,   we 

"begin[] by viewing the contract as a whole and the extrinsic evidence surrounding the 

disputed terms, in order to determine if those terms are ambiguous - that is, if they are 

reasonably   subject   to   differing   interpretation[s]."12      Where   an   ambiguity   exists,   we 

resolve the ambiguity by determining "the reasonable expectations of the [contracting] 

parties" in light of the "language of any disputed provisions, other provisions, relevant 

extrinsic evidence, and case law interpreting similar provisions."13 

        12      Hartley v. Hartley , 205 P.3d 342, 347 (Alaska 2009) (quoting Zito v. Zito, 

969 P.2d 1144, 1147 n.4 (Alaska 1998)) (internal quotation marks omitted); Rockstad 

v. Erikson , 113 P.3d 1215, 1222 (Alaska 2005). 

        13      Keffer   v.   Keffer ,   852   P.2d   394,   397   (Alaska   1993)   (internal   citations 

omitted); see   Monzingo   v.   Alaska   Air   Grp.,   Inc.,   112   P.3d   655,   660   (Alaska   2005) 

("Courts   look   to   the   language   of   the   contract   as   a   whole,   the   objects   sought   to   be 

accomplished by the contract, the circumstances surrounding its adoption, and case law 


                                                    -9-                                              6802

----------------------- Page 10-----------------------

                 We look first to the language of the contract itself.  Tesoro argues that the 

language is a standard netback pricing14 formula.  Union Oil claims that while the pricing 

mechanism set out a pricing formula it did not fix the actual price.  Neither interpretation 

is required by the contract language, and the contract does not illuminate the meaning of 

the   term   as   there   is  no  definition   section   or   any  direction   for   managing     possible 

retroactive adjustments. 

                 Other provisions in the contract are likewise inconclusive because, although 

they explicitly address retroactive adjustments, they do not resolve the issue before us. 

For example, one such provision in the contracts allows Union Oil to retroactively collect 

taxes.   Tesoro argues that the existence of other provisions providing for retroactive 

adjustments proves that Union Oil did not intend to include the ability to retroactively 

adjust   price   under   the   maxim   "expressio   unius   est   exclusio   alterius."15    We   are   not 

convinced that these other provisions are helpful in this case.  First, the maxim, while it 

may be used in contract interpretation, is not applicable here.16             It applies when "parties 

        13       (...continued) 

interpreting its provisions to ascertain the reasonable expectations of the parties." (citing 

Craig Taylor Equip. Co. v. Pettibone Corp., 659 P.2d 594, 597 (Alaska 1983))). 

        14       As    noted   above,    a  netback    formula    deducts    from    the  assumed     final 

destination price the assumed delivery charges to this hypothetical destination. See supra 

note 3.    Here, the assumed final destination price was the monthly average of prices 

reported by Reuters and Telerate.          The assumed delivery charges were comprised of a 

preset marine transportation charge ($1.35/barrel) and the applicable pipeline tariff. 

        15      Expressio unius est exclusio alterius instructs that when parties list specific 

items any item not so listed is excluded.  See Vanvelzor v. Vanvelzor, 219 P.3d 184, 188 

(Alaska   2009)   (citing  Ranney   v.   Whitewater   Eng'g ,   122   P.3d   214,   218-19   (Alaska 


        16       See,   e.g., Bentley   Mall   Assocs.   v.   ADC   Distrib.   Corp. ,   Mem.   Op.   &   J. 


                                                   -10-                                              6802

----------------------- Page 11-----------------------

list specific items in a document, [and instructs that] any item not so listed is typically 

thought to be excluded."17     Second, although the existence of the provisions suggests that 

Union Oil could make retroactive contract adjustments, the omission of such a provision 

expressly related to tariffs does no more than show that Union Oil did not foresee a need 

for retroactive adjustment of tariffs.  It does not resolve the underlying question, that is, 

"what     does   the   term   'Unocal     [Pipeline]   TAPS     tariff'  mean    in  this   contract?" 

Accordingly, we do not give much weight to the fact that the parties included other 

retroactive pricing adjustments. 

                The circumstances surrounding the adoption of the contract also are not 

useful   in  interpreting    the  term.   Neither    party  paid   much    attention   to  the  pricing 

mechanism; each simply adopted the pricing mechanisms in the original ARCO contract 

with an adjustment for marine transport cost.          Further, internal emails from Union Oil 

suggest that netback pricing was contemplated, but they do not clarify whether the tariff 

deduction was tied to the ultimate destination of the oil.           One email that announced the 

successful contract negotiations described the final "netback North Slope price" Union 

Oil could expect under the new contract.           However, the email is silent on the issue of 

whether the tariff refers to interstate or intrastate tariffs.  There simply is little indication 

that the parties considered a retroactive adjustment in the tariffs, either intrastate or 

interstate, at the time the contract was signed. 

                The objective of the contract, however, supports Tesoro's position.  Union 

Oil argues that the contract's objective was to shift the cost of the tariff to it.  Tesoro 

responds that the pricing term did not shift the cost of transportation, but rather sought 

        16      (...continued) 

No. 865, 1997 WL 33812770, at *1 (Alaska, Oct. 15, 1997). 

        17      Id. 

                                                 -11-                                              6802 

----------------------- Page 12-----------------------

to provide a netback price so Tesoro was paying a West Coast market price for the oil. 

The superior court found that the contract "neutralize[d] the tariff cost [so that] Tesoro 

.   .   .   was   not   actually   affected   by   the   unjust   intrastate   tariffs." It   further   found   that 

because   the   contract   was   negotiated   when   the   interstate   and   intrastate   tariffs   were 

identical,   there   was   no   need   for   the   parties   to   differentiate   between   the   two   in   the 


                  The contract's objective was to set a price for the oil that reflected the price 

that could be obtained in a widely-traded market.   Union Oil's insistence that its affiliate 

pipeline   be   used   to   transport   the   oil   does   not   change   the   fundamental   goal   of   the 

contract's pricing term: setting a price for the oil.              While Union Oil is correct that the 

contract   shifts   the   cost   of   the   tariff   to   it,   that   fact   does   not   mean   the   contract   was 

designed to insulate Tesoro from the tariffs. The parties were engaged in the buying and 

selling of oil.    The focus of the contract and therefore its objective was necessarily the 

pricing     of   the   oil.   If   the   parties   had    intended     the   pricing    scheme      to  provide 

reimbursement         for   the  actual    costs   incurred    by   Unocal,     the   contract    would     have 

contemplated other actual costs associated with the transportation of oil.                        This would 

include   the   actual   marine   transportation   costs   (instead   of   setting   a   standard   rate   of 

$1.35/barrel throughout the life of the contract) and interstate tariffs that depend on the 

final destination of the oil. 

                  Trade usage is extremely important in interpreting the pricing term.  Tesoro 

presented an oil industry expert who stated that the contract pricing term was a netback 

designed to create a price for oil equivalent to that found in the West Coast market.  The 

expert stated that at the time the contracts were signed the "[standard] industry practice 

for a net back price would [be] the FERC interstate tariff plus the marine transportation 

price . . . subtracted from the prior month's average Los Angeles basin posted prices to 

determine the contract price or net back to Pump Station #1."  Union Oil did not present 

                                                      -12-                                                 6802

----------------------- Page 13-----------------------

evidence to rebut this expert, although it argues that trade usage is not relevant because 

the contracts are "relatively unique." 

                We   look   to   the   "general   and   accepted   usage   of   the   trade   or   business 

involved" when interpreting contracts.18 Trade usage and case law can be relevant in 

interpreting a contract because "[a] person entering into a contract in the ordinary course 

of business is presumed to have done so in reference to any existing general usage or 

custom relating to such business."19        Trade usage is helpful because it "often establishes 

a special and unusual meaning definitely in conflict with the more common and ordinary 


                In this case, trade usage is persuasive and, importantly, is not disputed. 

Standard pricing for Alaskan oil, whether title is transferred at Pump Station No. 1 or 

Valdez, is a netback to another market because there is no   widely-traded market in 

Alaska.  Tesoro's oil expert's determination that the contract provided a netback pricing 

scheme is instructive because the parties are sophisticated players in the oil industry, and 

they   are   presumed   to   have   entered   into   the   contract   with   knowledge   of   established 

practices. Here, each is presumed to know that the standard method for pricing Alaskan 

oil is a netback pricing formula referencing the interstate tariffs.             Further, the lack of 

attention   paid   to   the   pricing   mechanism   suggests   that   the   parties   shared   a   common 

understanding of the term that was based on this industry practice. 

        18      Chambers v. Scofield, 247 P.3d 982, 987 (Alaska 2011) (quoting Dominic 

Wenzell, D.M.D. P.C. v. Ingrim, D.M.D., 228 P.3d 103, 108 (Alaska 2010) (internal 

quotation marks omitted)). 

        19      Graham v. Rockman, 504 P.2d 1351, 1356 (Alaska 1972). 

        20      Jowett, Inc. v. United States , 234 F.3d 1365, 1369 (Fed. Cir. 2000) (quoting 

3 ARTHUR L. CORBIN , CORBIN ON CONTRACTS  555, at 233-34 (1960)). 

                                                  -13-                                             6802

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                As noted above, the key to resolving contractual ambiguities is the parties' 

reasonable expectations.21      At the time of contract formation, the two tariffs - interstate 

and intrastate - were the same, so neither party had a reason to indicate the destination 

of   the   oil   for   the   purposes   of   calculating  the   deduction,   and   Union   Oil   sought   to 

encourage shipping on its affiliated pipeline company to provide a revenue stream for 

the affiliate.  However, the parties entered into the contract in the context of a highly- 

developed industry standard pricing model: netback pricing to a widely-traded market. 

The reasonable expectations of the parties align with the industry practice.                 Here, the 

widely-traded market is the West Coast market and the contract's pricing term provided 

a netback price referencing the interstate tariffs.           The parties did not expect that the 

contract would be adjustable based on a change in the intrastate tariffs.               Accordingly, 

we reverse the superior court's grant of summary judgment to Union Oil. 

        B.	     Tesoro      Is  Entitled   To   Summary       Judgment       Because     There    Is  No 

                Genuine Dispute Of Material Fact That The Contracts Contained A 

                Netback Pricing Term. 

                Having determined that summary judgment was improvidently granted to 

Union Oil, we must consider Tesoro's claim that it is entitled to judgment.  Specifically, 

is there more than a scintilla of evidence that "reasonably tend[s]" to dispute Tesoro's 

position, thus creating a genuine dispute of material fact to defeat its motion for summary 

judgment? 22      Remembering   that   the   pricing   scheme   adopted   in   the   contract   -   the 

netback approach - is not tied to actual costs, only TAPS tariffs, the question is whether 

any   evidence   raises   a   genuine   issue   of   material   fact   as   to   Union   Oil's   argument   on 

        21      Keffer v. Keffer , 852 P.2d 394, 397 (Alaska 1993). 

        22      See    Philbin   v.   Matanuska-Susitna      Borough,   991     P.2d   1263,   1265-66 

(Alaska 1999) (holding that to prevent summary judgment party must set forth specific 

facts showing admissible evidence could be produced reasonably tending to dispute 

movant's evidence). 

                                                  -14-	                                           6802

----------------------- Page 15-----------------------

appeal. We have thoroughly reviewed the record and conclude that no such genuine 

dispute of material fact exists.23   Union Oil meets none of Tesoro's trade usage evidence. 

Union Oil's position is heavily reliant on affidavits crafted after litigation began, which 

detailed the subjective statements of the involved negotiators and Union Oil executives. 

These affidavits do not create a genuine dispute of material fact because "[e]xtrinsic 

evidence of parties' subjective intent, expressed during the course of litigation, does not 

establish an issue of fact regarding the parties' reasonable expectations."24  Rather  these 

affidavits are merely a restatement of the parties' positions in litigation. 

                No contemporary expression supports Union Oil's suggested interpretation. 

After the original contract with Tesoro was fully performed, a single internal Union Oil 

email was sent during negotiations for the second contract. This internal Union Oil email 

provided an outline of the contract stating "Tesoro will ship on Unocal [Pipeline]'s 

space . . . ([Union Oil] will reimburse Tesoro for pipeline tariff[.])"   However, the email 

does not tend to reasonably dispute Tesoro's position that the term is a netback pricing 

term. First, it is an internal document that evidences only an employee's subjective view 

of the contract.   Second, it is a late-arising outlier in conflict with every other Union Oil 

email referencing a netback pricing scheme.           Third, it is silent as to whether the tariff 

        23      We also note that Alaska Civil Rule 56(c) directs a party opposing summary 

judgment to provide "a  concise 'statement of genuine issues' setting forth all material 

facts as to which it is contended there exists a genuine issue necessary to be litigated, and 

any other memorandum in opposition to the motion." (Emphasis added.)                   This did not 

occur in this case.  Both parties submitted memoranda that supported their positions, but 

neither   party   submitted   a   concise   statement   of   genuine   issues.  Although   we   have 

completed an extensive review of the record, the parties would have benefitted from 

submitting such a statement, as each could have directed the review   to their specific 

interpretations of the factual dispute. 

        24      Western Pioneer, Inc. v. Harbor Enters., Inc., 818 P.2d 654, 657 (Alaska 

 1991) (citing Peterson v. Wirum , 625 P.2d 866, 870 (Alaska 1981)). 

                                                -15-                                           6802

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referenced is the interstate or the intrastate tariff.     This email is insufficient to create a 

genuine     dispute   of  material   fact  as  it  is not  more   than   a  scintilla  of  evidence.25 

Accordingly, Tesoro is entitled to judgment in its favor. 


                Because we find that there is no dispute of material fact that the contract 

employed       a  netback    pricing    scheme     subtracting    interstate   tariffs  (and   marine 

transportation costs) from a West Coast price to establish a North Slope price for the oil, 

we REVERSE the grant of summary judgment to Union Oil and REMAND for entry of 

judgment in favor of Tesoro.        Given our holding we do not reach Union Oil's cross- 

appeal regarding the RCA-ordered interest because Union Oil is not entitled to any part 

of the RCA-ordered refunds. 

        25      See DeNardo v. Bax, 147 P.3d 672, 680-82 (Alaska 2006) (holding that 

evidence     appellant    presented,   including    deposition    testimony    and   affidavits,   that 

conflicted in several respects with appellee's claims that she was afraid for her safety, 

was insufficient to produce a genuine dispute of material fact);  Yurioff v. Am. Honda 

Motor Co. , 803 P.2d 386, 389 (Alaska 1990) (holding that there was no genuine dispute 

of material fact where plaintiff presented only one piece of evidence, his own deposition 

testimony, that an accident occurred within the statute of limitations). 

                                                 -16-                                             6802 

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