Repoened rural refinery in Kentucky accuses Marathon Oil of unfair competition

A small oil refinery Southern Kentucky, recently bought in bankruptcy and reopened, is accusing Marathon Oil Corp. of unfair competition that is about to run it out of business. Marathon says a deal the refinery proposed would violate federal and state laws.

Lawrence Barker of Somerset Energy Refining wrote in an open letter to Marathon, dated Dec. 15 and published in the Dec. 26 Somerset Commonwealth Journal, that trucker-brokers who once delivered to Somerset are going 172 miles northeast, to the Marathon refinery on the Big Sandy River at Catlettsburg, because Marathon is paying them "additional incentives that SER simply cannot match." Barker said Barrett Oil of Albany has "threatened to divert to Marathon" Jan. 1, and "This refinery will close without the Barrett deliveries."

"Barker asked Marathon to refuse future purchase of regional crude reserves, and to cease the trucker’s incentives, instead giving local producers a higher price for their crude," Commonwealth Journal Editor Ken Shmidheiser wrote, calling Barker's letter "a David-versus-Goliath challenge." In return, Barker offered to provide Marathon a rare type of crude and co-sponsor advertising that would give Marathon credit for saving Somerset's 100 jobs.

Marathon spokespersons said they had not been asked to comment on the letter until contacted today by The Rural Blog. "We deny that those allegations are appropriate or correct," spokeswoman Angelia Graves said in an interview. She said Marathon told Somerset that its proposal "violates anti-trust laws," and her company is "not going to engage in any discussion with them or anyone else in the industry that is anti-competitive." Marathon's Dec. 18 letter is posted here.

In the interview today, Graves first said "Our company pays the market price," and she was asked if that included the trucker incentives Barker mentioned. "I'm not sure what he's referencing there," she said. "I'm not familiar with the individual arrangements, but we deny there's any intent to engage in any practice that is in violation of the law."