Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze the July 8, 2025 response letter from Rowan Creek Fuel Distributors, Inc. ("RCFD"), received via its counsel Whitfield Barr LLP (Thomas Kessler, Partner, Environmental Litigation), in response to Calderwood & Harkness's pre-suit demand letter dated May 12, 2025 on behalf of our client, Dunmore Energy Holdings Ltd. ("DEH"). This memorandum evaluates RCF

II. Background and Procedural Posture A. The Site and Contamination The Dunmore Wharton Terminal (the "Site") is a 48.7-acre former petroleum bulk-storage terminal located at 14200 FM 1301, Wharton, Wharton County, Texas 77488. The Site is legally described as Lots 3 and 4, H.T. & B.R.R. Survey, Abstract No. 241, Wharton County, Texas, as recorded in the deed at Volume 1892, Page 417, Official Public Records, Wharton

III. Analysis of RCFD's Response The July 8, 2025 response letter from Whitfield Barr LLP raises four principal defenses and includes a counter-offer of $750,000. Each is analyzed in turn. A. Denial of Liability RCFD categorically denies that it is a "responsible party" or "covered person" under CERCLA § 107(a) or a liable party under Texas Health & Safety Code § 361.344. RCFD characterizes its role at the Site as th

1. CERCLA § 113(g)(2). RCFD contends that any CERCLA cost-recovery claim under 42 U.S.C. § 9607(a) is barred by the limitations period set forth in 42 U.S.C. § 9613(g)(2). Under CERCLA § 113(g)(2)(B), a cost-recovery action under § 107 must be commenced within six years after initiation of on-site construction of the remedial action, or within three years after completion of a removal action. Our assessment: RCFD's s

2. Texas Limitations Periods. Under Texas Health & Safety Code § 361.344, which provides a state-law cause of action for contribution among responsible parties, the limitations period is two years from the date the plaintiff knew or should have known of the facts giving rise to the claim. RCFD may argue that DEH (as successor to DTS) knew or should have known of the contamination at the Site based on the historical T

IV. Strategic Options Based on our analysis of RCFD's response and the strength of DEH's claims, we present three strategic options for client consideration. These options are not mutually exclusive and may be combined as circumstances warrant. Option 1: Counter-Proposal in the Range of $3.0M–$3.5M A negotiated resolution of DEH's claims against RCFD offers significant advantages in terms of cost avoidance, timeline

V. Recommended Approach Based on our analysis of RCFD's response, the strength of DEH's claims, and the strategic considerations discussed above, we recommend the following course of action: Primary recommendation: Pursue Option 1 (counter-proposal) concurrently with Option 3 (continued negotiation tied to VCP milestones), with Option 2 (litigation) held in reserve. This combined approach maximizes DEH's negotiating

1. Reject and counter-demand (by July 18, 2025). Send a written response to Whitfield Barr LLP (Thomas Kessler) formally rejecting the $750,000 counter-offer as grossly inadequate and presenting a counter-demand of $3,500,000. The response should be firm but professional, and should convey DEH's seriousness of purpose without foreclosing further negotiation.

2. Factual and legal summary. Include with the counter-demand a detailed summary of the factual and legal basis for RCFD's operator liability, emphasizing the release volume data (87% from RCFD-operated facilities), the contamination concentration differentials between the southern and northern tank farms, the JOA terms establishing RCFD's exclusive operational control, and the witness evidence from Craig Pemberton.

3. Negotiation window. Propose a 45-day negotiation window, through approximately September 1, 2025, for good-faith discussions aimed at resolving the matter without litigation. If RCFD is receptive, propose a face-to-face meeting of principals — including Gavin Rourke (DEH) and Malcolm Griggs (RCFD), together with counsel — to explore settlement options. In-person negotiations with the decision-makers often prove mo

4. Litigation preparation. Simultaneously continue preparation of litigation materials so that suit can be filed promptly if negotiations fail to produce an acceptable resolution by the September 1, 2025 decision point. Cynthia Ho should begin drafting the CERCLA § 107 complaint by July 25, 2025, and Devon Archer should develop a preliminary litigation discovery plan by August 1, 2025. Having a substantially complete

5. Witness development. Coordinate with Devon Archer on further witness development, including identification and outreach to additional former DTS and RCFD employees who may have personal knowledge of RCFD's operations at the southern tank farm, the circumstances of the releases, and RCFD's maintenance and reporting practices. Corroborating testimony from multiple witnesses will strengthen DEH's litigation position

6. VCP coordination. Coordinate with Pinehill (Dr. Lena Vasquez, Project Manager) to ensure APAR preparation proceeds on schedule, with a target submission date of October 31, 2025. TCEQ's acceptance and review of the APAR will validate the remediation scope and cost estimates that underpin DEH's claims. This regulatory milestone is an important element of DEH's negotiating strategy, as it will make RCFD's cost-alloc

7. Litigation hold. Confirm that the litigation hold issued on June 27, 2025 remains in effect and adequate in scope. The litigation hold should cover all DEH personnel and systems that may contain documents or electronically stored information relevant to the Site, the JOA, DTS's historical operations, the releases, and communications with RCFD. If necessary, the hold should be refreshed and expanded to cover any ad

8. Insurance coordination. Monitor the status of DEH's claim under the Bridgemont Insurance Company Pollution Legal Liability ("PLL") policy. A formal notice of claim was sent to Paul Neumann at Bridgemont on June 30, 2025, under PLL Policy No. ENV-BIC-2024-07821. This policy provides $15 million in aggregate coverage with a $500,000 self-insured retention ("SIR"). Any recovery from RCFD may implicate Bridgemont's su

VI. Insurance Considerations DEH maintains a Pollution Legal Liability insurance policy with Bridgemont Insurance Company, Policy No. ENV-BIC-2024-07821, effective March 1, 2024 through March 1, 2034. The policy provides an aggregate limit of $15,000,000, subject to a self-insured retention of $500,000. The policy covers third-party claims arising from pollution conditions at covered sites and, depending on policy te

VII. RCFD's Financial Capacity A critical consideration in evaluating DEH's settlement and litigation strategy is RCFD's ability to pay. Based on available information, RCFD appears to have substantial financial capacity to satisfy a judgment or settlement in the range of $3.0 million to $4.6 million. RCFD's estimated annual revenue is approximately $89 million. RCFD is an active Texas corporation with ongoing fuel d

VIII. Budget and Fee Implications We provide the following summary of current and projected engagement economics for the engagement team's consideration and discussion with the client. Current engagement terms. The engagement is billed at blended hourly rates as follows: • Partner: $895 per hour • Senior Associate: $625 per hour • Associate: $475 per hour • Paralegal: $275 per hour A retainer of $150,000 was received

IX. Action Items and Timeline The following table summarizes the key action items, responsible team members, and target dates for the recommended strategy. Each team member should review these action items and confirm their ability to meet the stated target dates. If any conflicts or capacity constraints are anticipated, please notify Sandra Tung immediately so that workload can be reallocated as necessary.

X. Conclusion The $750,000 counter-offer from RCFD is grossly inadequate and should be rejected without equivocation. At approximately 16.1% of DEH's total claimed recovery and approximately 7.7% of total estimated remediation costs, the offer bears no reasonable relationship to RCFD's proportional responsibility for the contamination at the Dunmore Wharton Terminal Site. DEH has a strong cost-recovery claim against