1016-00006 · Dunmore Energy Holdings · Correspondence

quarterly-status-report-q3-2025.docx DOCUMENT M&A / Corporate

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CALDERWOOD & HARKNESS LLP Attorneys at Law 1200 McKinney Street, Suite 4100 Houston, Texas 77010 Telephone: (713) 554-8200

July 15, 2025

VIA SECURE ELECTRONIC TRANSMISSION

Mr. Gavin Rourke Chairman & Chief Executive Officer Dunmore Energy Holdings Ltd. 4th Floor, Harbour Place 103 South Church Street George Town, Grand Cayman, KY1-1002 Cayman Islands

Re: Dunmore Wharton Terminal — Voluntary Remediation, Regulatory Compliance, and Cost-Recovery Status Report (Q3 2025)

Matter No.: 1016-00006

Site: 14200 FM 1301, Wharton, Wharton County, Texas 77488

TCEQ VCP Tracking No.: VCP-2517

Dear Mr. Rourke:

This letter provides a quarterly status update on all active workstreams related to the environmental remediation and cost-recovery efforts at the Dunmore Wharton Terminal site located at 14200 FM 1301, Wharton, Wharton County, Texas 77488 (the "Site"). As you are aware, Calderwood & Harkness LLP ("C&H" or the "Firm") opened this engagement on June 25, 2025, pursuant to the executed engagement letter of the same date, and we have been working diligently across multiple fronts since that time.

This report covers five principal workstreams: (1) Regulatory / TCEQ Voluntary Cleanup Program; (2) Site Access Negotiations with Calera Properties Group LLC; (3) Cost Recovery Against Rowan Creek Fuel Distributors, Inc.; (4) Insurance; and (5) Budget and Fees. Each of these workstreams is addressed in detail below, together with our assessment of current status, emerging issues, and recommended next steps.

We note at the outset that no third-party materials are attached to this letter. Any documents referenced herein, including correspondence, environmental reports, policy documents, and agreements, are maintained on file with Calderwood & Harkness and are available for your review upon request. This letter constitutes a privileged and confidential attorney-client communication and should be treated accordingly.

I. Regulatory — TCEQ Voluntary Cleanup Program

A. VCP Application Status

On June 25, 2025, Calderwood & Harkness filed a Voluntary Cleanup Program application with the Texas Commission on Environmental Quality ("TCEQ") on behalf of Dunmore Energy Holdings Ltd. ("DEH") as applicant and successor-in-interest to Dunmore Terminal Services, Inc. ("DTS"). DTS was a Texas corporation that was dissolved effective December 31, 2017, as reflected in the records of the Texas Secretary of State. DEH, as DTS's parent company and successor-in-interest, has assumed responsibility for the environmental liabilities associated with the Site and is pursuing voluntary remediation under the TCEQ's VCP framework.

The application fee of $1,000 was paid simultaneously with the filing. The complete application package submitted to TCEQ included the following:

• Completed VCP Application Form (TCEQ Form No. 10400);

• Site location map depicting the 48.7-acre parcel and its relationship to surrounding land uses;

• Legal description of the Site, identified as Lots 3 and 4, H.T. & B.R.R. Survey, Abstract No. 241, Wharton County, Texas, as conveyed by deed recorded at Volume 1892, Page 417, Official Public Records, Wharton County, Texas;

• Summary of known contamination and release history at the Site, detailing the five documented releases spanning 1996 through 2014;

• Executive summaries of the Phase I Environmental Site Assessment and Phase II Environmental Site Assessment, both prepared by Pinehill Environmental Consulting LLC ("Pinehill");

• Evidence of DEH's financial capability to complete the remediation, including audited financial statements for fiscal year 2024 and a letter from DEH's Chief Financial Officer confirming the availability of dedicated remediation reserves;

• Documentation of site-access arrangements with the current fee owner of the Site, Calera Properties Group LLC ("Calera"), including a preliminary access authorization letter executed by Calera's managing member.

The TCEQ has assigned VCP Tracking No. VCP-2517 to the Site. Based on current TCEQ processing timelines, we anticipate receiving a formal acknowledgment letter from the TCEQ approximately in August 2025. The acknowledgment letter will confirm DEH's acceptance into the VCP and assign a TCEQ project manager to oversee the remediation.

We note that TCEQ oversight fees are billed at a rate of $225 per hour. Based on comparable VCP projects and the scope and complexity of the contamination at the Site, we project total TCEQ oversight costs of approximately $135,000 over the life of the project. This estimate encompasses TCEQ review of the Affected Property Assessment Report, the Voluntary Cleanup Work Plan, periodic progress reports, and the final Certificate of Completion application. These oversight costs are separate from C&H's legal fees and from Pinehill's consulting fees, and will be invoiced directly by the TCEQ to DEH.

B. APAR Preparation

The next major deliverable in the VCP process is the Affected Property Assessment Report ("APAR"). We have established a target submission date of October 31, 2025 for the APAR. Pinehill Environmental Consulting LLC, under the direction of Dr. Lena Vasquez, P.E., P.G. (Principal-in-Charge), is actively preparing the APAR. Dr. Vasquez is a licensed Professional Engineer and Professional Geoscientist in the State of Texas, and she brings extensive experience with TCEQ VCP submissions.

The APAR will incorporate findings from the Phase I Environmental Site Assessment (commenced January 2024) and the Phase II Environmental Site Assessment (completed June 2024), as well as supplemental investigation data collected by Pinehill during the first quarter of 2025. The APAR will present a comprehensive characterization of the nature and extent of contamination at the Site, including a detailed analysis of source areas, migration pathways, and potential receptors. The key contamination parameters to be documented in the APAR are summarized as follows:

Contaminants of Concern. The primary contaminants of concern ("COCs") at the Site are benzene, toluene, ethylbenzene, and xylenes (collectively, "BTEX"); total petroleum hydrocarbons ("TPH"); methyl tert-butyl ether ("MTBE"); and dissolved-phase lead.

Soil Contamination. TPH concentrations in soil have been detected at levels up to 14,200 mg/kg in the Tank S-7 area of the southern tank farm and up to 8,750 mg/kg in the Tank N-3 area of the northern tank farm. Benzene concentrations in soil have been measured at levels up to 42 mg/kg, which significantly exceeds the TCEQ Tier 1 Protective Concentration Level ("PCL") of 5.3 mg/kg applicable to commercial and industrial land use.

Groundwater Contamination. A dissolved benzene plume has been delineated extending approximately 2,400 feet downgradient (south-southwest) of the southern tank farm. The maximum benzene concentration detected in groundwater is 3.8 mg/L, which represents approximately 760 times the federal Maximum Contaminant Level ("MCL") of 0.005 mg/L for benzene in drinking water. MTBE has been detected in groundwater at concentrations up to 1.2 mg/L. Dissolved lead has been detected at concentrations up to 0.087 mg/L, exceeding the federal MCL of 0.015 mg/L for lead.

Affected Aquifer. The affected aquifer is the Chicot Aquifer, shallow zone, which was encountered at approximately 22 feet below ground surface during the Phase II investigation. The Chicot Aquifer is a regionally significant drinking water aquifer in the Texas Gulf Coast region, and its involvement is a factor that will receive close scrutiny from the TCEQ during the VCP review process.

Nearest Receptor. The nearest identified potential receptor is a residential water supply well located at 16405 FM 1301 (the "Ingram Property"), approximately 3,100 feet south-southwest of the current leading edge of the dissolved benzene plume. Pinehill conducted sampling of the Ingram Property well in February 2025, and no COCs were detected above their respective MCLs at that time. Nonetheless, we will continue to monitor the plume migration trajectory and the Ingram Property well as part of the ongoing investigation and remediation program.

The APAR will also provide a detailed account of the five known release events at the Site, which are summarized as follows:

1. 1996 — Tank S-4 Release. An estimated 8,000 gallons of diesel fuel were released from Tank S-4 in the southern tank farm. No TCEQ incident number was assigned at the time, as the release was not formally reported to the TCEQ. This release was documented in internal DTS operational records.

2. 2001 — Tank S-7 Release. An estimated 3,200 gallons of gasoline were released from Tank S-7 in the southern tank farm. This release was reported to the TCEQ and assigned Incident No. 142876.

3. 2003 — Tank N-3 Release. An estimated 1,500 gallons of gasoline were released from Tank N-3 in the northern tank farm. This release was reported to the TCEQ and assigned Incident No. 158432. This release occurred in the northern tank farm, which was under DTS's direct operational control.

4. 2008 — Tank S-11 Release. An estimated 5,600 gallons of diesel fuel were released from Tank S-11 in the southern tank farm. This release was reported to the TCEQ and assigned Incident No. 197503.

5. 2014 — Loading Rack Release. An estimated 600 gallons of diesel fuel were released from the loading rack area. This release was reported to the TCEQ and assigned Incident No. 251044. The loading rack was a shared facility under the 1991 Joint Operating Agreement.

The foregoing release history will be presented in the APAR with supporting documentation, including TCEQ incident reports, internal DTS records, and Pinehill's independent investigation findings. This release history is also relevant to the cost-recovery effort against Rowan Creek Fuel Distributors, Inc., as discussed in Section III below.

C. Anticipated VCP Milestones

Based on our experience with the TCEQ's VCP process and the specific characteristics of this Site, we have developed the following projected timeline for the VCP milestones:

We note that the TCEQ's review periods are approximate and subject to the Commission's staffing and workload. The 120-day review period for the APAR is based on current TCEQ guidance, but actual review times may vary. We will maintain regular communication with the assigned TCEQ project manager to facilitate timely reviews and minimize delays.

As discussed in Section IV below, the Bridgemont Pollution Legal Liability policy (Policy No. ENV-BIC-2024-07821) runs through March 1, 2034, providing insurance coverage through the anticipated Certificate of Completion date. This alignment between the policy period and the projected VCP timeline is significant and was a factor in structuring the current remediation approach.

II. Site Access — Negotiations with Calera Properties Group LLC

A. Background on Calera

Calera Properties Group LLC ("Calera") is a Texas limited liability company managed by Rebecca Strand. Calera is the current fee owner of the 48.7-acre Site. Calera acquired the Site at a tax foreclosure sale conducted by Wharton County in March 2019 for a purchase price of $612,000. The property had become delinquent on ad valorem taxes following DTS's dissolution in 2017 and the subsequent cessation of all terminal operations.

Since its acquisition, Calera has made no operational use of the Site. The property has remained idle, with Calera's involvement limited to maintaining the perimeter security fencing, contracting for periodic security patrols, and paying property taxes. Calera has incurred approximately $285,400 in post-acquisition carrying costs since the March 2019 acquisition. These costs are documented in invoices and tax receipts that Calera's counsel has provided to us in the course of the current negotiations.

Calera is not a responsible party for the contamination at the Site. Calera had no involvement in the terminal operations that gave rise to the releases, and its acquisition at tax foreclosure is generally consistent with the innocent landowner defense under CERCLA § 101(35). However, Calera controls site access, which is essential for the remediation program. Without Calera's cooperation, DEH would be required to seek a court order for access, which would be both time-consuming and costly. Accordingly, a negotiated site-access arrangement is strongly preferable.

Calera is represented in this matter by Nora Fujimoto, Partner (Real Estate & Environmental) at Kerrigan, Pace & Sullivan LLP ("KPS"), located at 700 Milam Street, Suite 2000, Houston, Texas 77002. We have found Ms. Fujimoto to be a constructive and experienced negotiating counterpart, and the negotiations have proceeded in a professional and productive manner thus far.

B. Draft Site Access & Cost-Sharing Agreement

A draft Site Access & Cost-Sharing Agreement (the "Access Agreement") has been circulated between Calderwood & Harkness and Kerrigan, Pace & Sullivan. The parties have made significant progress toward finalizing the Access Agreement, and we are optimistic that the remaining open issues can be resolved in the near term. The following summarizes the key terms that have been agreed upon and the issues that remain under negotiation.

Agreed-Upon Terms. The following principal terms have been substantively agreed to by the parties:

• Irrevocable License. The Access Agreement will grant DEH and its contractors (including Pinehill and any other environmental consultants, remediation contractors, and subcontractors engaged by DEH) an irrevocable license to access the Site for purposes of environmental investigation, remediation, and long-term monitoring through anticipated project completion (estimated 2033). The license will be irrevocable for the duration of the VCP process, subject to specified termination events (e.g., issuance of the Certificate of Completion, mutual agreement of the parties, or material breach).

• Insurance Requirements. DEH will maintain commercial general liability and pollution liability insurance throughout the project. The primary pollution liability coverage is provided under the Bridgemont Pollution Legal Liability Policy No. ENV-BIC-2024-07821, which carries a $15 million aggregate limit. Calera will be named as an additional insured under this policy to the extent required by the Access Agreement.

• Incremental Carrying Cost Reimbursement. DEH will reimburse Calera for documented incremental carrying costs that are directly attributable to remediation activities at the Site. This reimbursement is intended to cover additional costs that Calera incurs as a result of the remediation program above and beyond the carrying costs Calera would incur in the ordinary course (e.g., increased security costs during active remediation, temporary road repairs necessitated by heavy equipment, and similar items).

• Indemnification by DEH. DEH will indemnify, defend, and hold harmless Calera against third-party claims arising from remediation work conducted at the Site. The scope of this indemnification is the subject of ongoing negotiation, as discussed below.

• Deed Restrictions and Institutional Controls. Calera will cooperate in the execution and recording of any deed restrictions or institutional controls that the TCEQ may require as a condition of the Certificate of Completion. This is a critical term, as TCEQ VCP closures frequently require the recording of activity and use limitations ("AULs") on the property, and the fee owner's cooperation is necessary to effectuate such restrictions.

Open Issues Under Negotiation. Two significant issues remain unresolved:

• Scope of Indemnification. Calera's counsel has requested a broad indemnification clause extending to any and all environmental claims arising from DEH's or its contractors' activities at the Site, regardless of fault. Calderwood & Harkness has proposed limiting the indemnification to claims caused by the negligence of DEH or its contractors in the conduct of remediation work, and expressly excluding liability for pre-existing contamination conditions. This is a commercially significant distinction. The broad indemnification sought by Calera could potentially expose DEH to liability for claims that are attributable to the pre-existing contamination rather than to remediation activities, effectively shifting Calera's own risk to DEH. We believe our proposed formulation is reasonable and consistent with market practice in comparable site-access agreements, and we will continue to advocate for this position.

• Escrow Terms. The parties have agreed in principle that DEH will deposit remediation cost funds into an escrow arrangement to provide Calera with assurance that remediation funds are available. The escrow will be maintained through Lone Star Title & Escrow Co., located at 3400 Bissonnet Street, Suite 100, Houston, Texas 77005. However, the parties are still discussing the specific deposit amounts, the schedule of deposits, and the conditions under which escrowed funds will be released to DEH or its contractors for remediation expenditures. Calera has proposed a lump-sum deposit of $2.0 million; we have proposed staged deposits aligned with the remediation work plan milestones, beginning with a smaller initial deposit of $500,000.

We expect that the Access Agreement will be finalized during Q3 2025, and we are targeting execution prior to the APAR submission deadline of October 31, 2025. Having a fully executed Access Agreement in place at the time of the APAR submission will demonstrate to the TCEQ that DEH has secured the site access necessary to implement the remediation program, which will strengthen the application and facilitate TCEQ's review.

III. Cost Recovery — Rowan Creek Fuel Distributors, Inc.

A. Pre-Suit Demand

On May 12, 2025, Calderwood & Harkness sent a pre-suit demand letter to Rowan Creek Fuel Distributors, Inc. ("RCFD"), directed to the attention of Malcolm Griggs, President, at RCFD's principal office located at 1150 Lavaca Street, Suite 600, Austin, Texas 78701. A copy of the demand letter was simultaneously transmitted to RCFD's outside counsel, Thomas Kessler, Partner (Environmental Litigation) at Whitfield Barr LLP, 500 West 5th Street, Suite 3200, Austin, Texas 78701.

The demand letter set forth DEH's position that RCFD is liable as a former operator and responsible party under both federal and state environmental laws for its equitable share of the costs of investigating and remediating contamination at the Site. The demand totaled $4,647,000, broken down as follows:

RCFD's Allocated Share of Remediation Costs: $4,260,000

• Southern tank farm soil excavation and disposal: $3,420,000

• 50% of groundwater treatment system installation and operation: $1,075,000

• 50% of long-term groundwater monitoring: $530,000

• 50% of institutional controls implementation: $90,000

• Less: project management and contingency costs not credited to RCFD: ($855,000)

DEH's Investigative Costs Incurred 2024–2025: $387,000

• This amount represents reimbursement of Pinehill invoices for the Phase I Environmental Site Assessment, Phase II Environmental Site Assessment, and supplemental investigation activities.

The legal bases cited in the demand letter were Section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9607(a), and Section 361.344 of the Texas Health & Safety Code. The demand letter established a 60-day response deadline of July 11, 2025.

The demand letter set forth in detail RCFD's status as the former operator of the southern tank farm, consisting of Tanks S-1 through S-12 and encompassing approximately 18 acres of the 48.7-acre Site, with a total storage capacity of approximately 315,000 barrels. RCFD operated the southern tank farm pursuant to the 1991 Joint Operating Agreement ("JOA") between DTS and RCFD, which was in effect from 1991 through 2010. Under the JOA, RCFD had exclusive operational control over the southern tank farm, including responsibility for tank maintenance, product handling, and spill prevention.

The demand letter specifically identified four documented releases attributable to RCFD's operations in the southern tank farm: the 1996 Tank S-4 diesel release (~8,000 gallons), the 2001 Tank S-7 gasoline release (~3,200 gallons), the 2008 Tank S-11 diesel release (~5,600 gallons), and, by implication, the broader contamination conditions found in the southern tank farm area that are consistent with years of product handling and storage operations under RCFD's control.

For context, the total estimated remediation cost for the entire Site is $9.74 million, based on the April 2025 cost estimate prepared by Pinehill. The Pinehill estimate reflects a most-probable-cost figure within a range of $7.81 million to $12.18 million, accounting for uncertainty in final remedial design, actual waste volumes, and long-term monitoring requirements.

B. RCFD Response

RCFD, through its counsel Thomas Kessler at Whitfield Barr LLP, delivered a written response dated July 8, 2025 — three days before the 60-day deadline. The response was transmitted via both email and certified mail to Calderwood & Harkness.

In the response letter, RCFD denied liability for the contamination at the Site and asserted the following principal defenses:

• Statute of Limitations. RCFD argued that certain of DEH's claims are time-barred under the statute of limitations provisions of CERCLA § 113(g)(2), which provides a six-year limitations period for cost-recovery actions measured from the date of completion of a removal action, or a three-year period measured from the date of completion of a remedial action at a facility on the National Priorities List. RCFD also invoked Texas state limitations periods, arguing that any state-law claims are subject to a four-year statute of limitations. We note that these limitations arguments have potential weaknesses: the VCP remediation has not yet been completed, and the limitations clock for a cost-recovery action under CERCLA typically does not begin to run until the response action is complete.

• Allocation Arguments. RCFD disputed the cost-allocation methodology set forth in our demand, contending that DEH's allocation assigns a disproportionate share of remediation costs to RCFD. In particular, RCFD argued that DTS and, by extension, DEH bear significant responsibility for contamination at the Site, citing the 2003 Tank N-3 release in the northern tank farm (which was under DTS's direct operational control) and the 2014 loading-rack release (which occurred at a shared facility). RCFD's position is that a proper equitable allocation should reflect DTS/DEH's own contribution to the contamination, and that any allocation methodology should account for the totality of operations and releases at the Site over the full operational history.

RCFD's response included a counter-proposal of $750,000 as a global settlement in full resolution of DEH's claims. This counter-offer represents approximately 16.1% of the $4,647,000 demand and approximately 7.7% of the total estimated remediation cost of $9.74 million. The offer was characterized by RCFD as a "nuisance value" payment intended to avoid the costs and distraction of litigation, and was made without any admission of liability.

C. Recommended Next Steps

Calderwood & Harkness recommends that DEH reject the $750,000 counter-offer as inadequate relative to RCFD's allocated share of remediation costs of $4.26 million. The counter-offer does not reflect a good-faith negotiating position proportionate to RCFD's operational responsibility for the southern tank farm contamination. We note that RCFD's four documented releases in the southern tank farm involve a combined volume of approximately 20,000 gallons of petroleum product, and the southern tank farm is the primary source area for the dissolved benzene plume that constitutes the most significant groundwater threat at the Site.

Additionally, based on publicly available financial information, RCFD has estimated annual revenue of approximately $89 million, indicating that RCFD has the financial capacity to fund a settlement that is substantially higher than the $750,000 counter-offer. RCFD's financial condition does not support a "nuisance value" characterization of its exposure.

We are evaluating the following strategic options for the next phase of the cost-recovery effort:

Option 1: Counter-Proposal. DEH could deliver a counter-proposal in the range of $3.0 million to $3.5 million, reflecting a negotiated discount from the full $4.647 million demand but substantially preserving DEH's position. A counter-proposal at this level would signal willingness to negotiate while maintaining a figure that is anchored to the cost-allocation analysis. This option has the advantage of keeping the negotiation process alive and avoiding the costs and risks of litigation, but carries the risk that RCFD may continue to negotiate from a position of aggressive undervaluation.

Option 2: Initiation of Litigation. DEH could authorize the filing of a complaint asserting claims under CERCLA § 107 and the Texas Health & Safety Code. Venue options include the United States District Court for the Southern District of Texas, Houston Division, for the federal CERCLA claims, or alternatively the District Court of Wharton County, Texas, for the state-law claims. Federal court is generally the preferred venue for CERCLA cost-recovery actions due to the well-developed body of case law in the Fifth Circuit. Filing a complaint would impose immediate litigation costs and would require DEH's sustained commitment to the litigation process, but would place maximum pressure on RCFD and create the framework for formal discovery, which could yield additional evidence supporting DEH's allocation position.

Option 3: Continued Negotiation Concurrent with VCP Progress. DEH could pursue further negotiation with RCFD while the VCP remediation progresses, using advancing remediation as leverage to demonstrate actual costs and strengthen the cost-recovery position. As remediation costs are incurred and documented, DEH's cost-recovery claims will become more concrete and potentially more difficult for RCFD to contest. This approach has the advantage of deferring significant litigation costs, but carries the risk that delay may complicate the limitations analysis and allow RCFD to marshal additional defenses.

A detailed response strategy memorandum has been prepared internally by the C&H team and will be discussed with you at the next scheduled call. The memorandum analyzes each of these options in further detail, including litigation cost projections, an assessment of strengths and weaknesses of the parties' respective positions, and a recommended course of action.

We also confirm that a litigation hold notice was issued internally within DEH on June 27, 2025, two days after the engagement was opened. The litigation hold directed the preservation of all documents and electronically stored information ("ESI") related to the Site, including but not limited to records concerning DTS operations, the 1991 Joint Operating Agreement, RCFD operations, TCEQ incident reports, correspondence with regulatory agencies, environmental reports, tank maintenance records, and product inventory records. It is essential that DEH continue to enforce this hold and ensure that no relevant documents or ESI are destroyed, deleted, or altered.

IV. Insurance

A. Bridgemont PLL Policy Notice

On June 30, 2025, Calderwood & Harkness submitted a formal notice of environmental condition to Bridgemont Insurance Company, directed to the attention of Paul Neumann, Senior Vice President — Environmental Lines, at Bridgemont's offices located at 200 Galleria Parkway, Suite 1800, Atlanta, Georgia 30339. The notice was transmitted via certified mail, return receipt requested, and simultaneously via email to the address on file for Mr. Neumann's office.

The notice was provided under Pollution Legal Liability Policy No. ENV-BIC-2024-07821, which is effective from March 1, 2024, through March 1, 2034 (the "Bridgemont Policy" or the "PLL Policy"). The Site is identified as a scheduled known-condition location under the Bridgemont Policy, and the policy was specifically underwritten with knowledge of the general environmental conditions at the Site based on the Phase I ESA that was available at the time of policy inception.

The key terms of the Bridgemont Policy relevant to this matter are as follows:

• Aggregate Limit: $15,000,000

• Self-Insured Retention ("SIR"): $500,000

• Coverage: On-site and off-site cleanup costs; third-party bodily injury and property damage arising from pollution conditions at the scheduled location

• Policy Period: March 1, 2024, through March 1, 2034

The notice submitted to Bridgemont summarized the contamination profile at the Site, including the nature and extent of soil and groundwater contamination, the identified contaminants of concern, and the current status of the VCP application. The notice also referenced the $9.74 million total estimated remediation cost prepared by Pinehill. Based on the current cost allocation, DEH's asserted share of the remediation costs is approximately $5.48 million. Because this amount exceeds the $500,000 SIR, Bridgemont coverage should be triggered once the SIR is exhausted by qualifying remediation expenditures.

As of the date of this letter, we are awaiting acknowledgment of the notice and assignment of a claim number from Bridgemont. We anticipate receiving a response from Bridgemont's environmental claims unit within the next 30 to 45 days. Upon receiving the claim number, we will coordinate with Bridgemont regarding the SIR tracking process, the documentation requirements for covered costs, and any consent-to-remediate provisions that may be applicable under the policy.

We will continue to meticulously monitor and document all remediation expenditures incurred by DEH to track SIR exhaustion and to establish the basis for Bridgemont's coverage obligations once the SIR is met. All Pinehill invoices, contractor invoices, TCEQ oversight fees, and related remediation expenditures are being catalogued in a dedicated tracking system maintained by the C&H engagement team.

B. Historic CGL Policies

DEH's historical comprehensive general liability ("CGL") policies covering the period from 1974 through 2000 were carried by Piedmont Mutual Insurance Co. ("Piedmont Mutual"). These policies would potentially have provided coverage for certain of the environmental liabilities associated with the earlier operational periods at the Site, including the 1996 Tank S-4 release.

However, Piedmont Mutual entered receivership in 2012 pursuant to an order of the Superior Court of Fulton County, Georgia. The receivership proceedings have been ongoing, and recovery prospects for policyholders are negligible. Based on publicly available information regarding the receivership estate and the priority of claims, we do not expect any meaningful recovery from the Piedmont Mutual policies.

Accordingly, no further action is recommended regarding the Piedmont Mutual policies. We will continue to monitor the receivership proceedings on a periodic basis and will advise you if any material developments occur that might alter this assessment, but we consider this a remote contingency.

V. Budget and Fee Update

A. Engagement Team

The Calderwood & Harkness engagement team for this matter is as follows:

In addition, senior associate time is billed at $625 per hour and paralegal time is billed at $275 per hour, as applicable. The engagement team will be supplemented as needed with additional attorneys possessing expertise in environmental litigation and insurance coverage, consistent with the terms of the engagement letter.

B. Fees Incurred to Date

Total legal fees incurred from the engagement opening date of June 25, 2025, through the date of this letter (July 15, 2025) are approximately $87,500. This amount reflects time incurred across all five active workstreams during the initial three-week period of the engagement, including the preparation and filing of the VCP application, commencement of site-access negotiations with Calera/KPS, analysis of the RCFD response, preparation and submission of the Bridgemont notice, and general case administration and strategy development.

The original retainer of $150,000 was received from DEH on June 25, 2025, contemporaneously with the execution of the engagement letter. After application of fees incurred to date, the current retainer balance is approximately $62,500. Per the terms of the engagement letter, billing is rendered monthly and payment is due Net-30 from the date of invoice.

C. Projected Fees Through Year-End 2025

We estimate that remaining legal fees through December 31, 2025, will be in the range of $175,000 to $225,000. This estimate reflects the anticipated activity across all workstreams during the second half of 2025, and is based on our current assessment of the work required to advance each workstream toward its near-term milestones.

The key cost drivers for the remainder of 2025 include the following:

• Regulatory Workstream — APAR Preparation Support. C&H will continue to coordinate with Pinehill on the preparation and submission of the APAR, including review of draft APAR sections for legal sufficiency and regulatory compliance, coordination with the TCEQ project manager, and strategic guidance regarding the characterization of contamination and the positioning of the remediation approach.

• Site Access Workstream — Finalization of Access Agreement. The remaining open issues in the Site Access & Cost-Sharing Agreement with Calera/KPS must be resolved, and the agreement must be finalized, executed, and, if appropriate, recorded in the Official Public Records of Wharton County.

• Cost Recovery Workstream — RCFD Negotiations and Potential Litigation. Depending on the strategic direction selected by DEH, this workstream may involve preparation of a counter-proposal, further settlement negotiations, or, alternatively, preparation and filing of a complaint and related litigation filings. If litigation is authorized, the initial phase will include complaint drafting, service of process, and preliminary motion practice.

• Insurance Workstream — Bridgemont Claims Coordination. Following receipt of the Bridgemont claim number, C&H will coordinate with the Bridgemont claims team regarding documentation requirements, SIR tracking, and consent-to-remediate protocols.

• Litigation Preparation Workstream — Witness Development. C&H is commencing witness development work, including identification and interviews of former DTS employees who may have knowledge of the operational history at the Site, the circumstances of the release events, and RCFD's operations in the southern tank farm. This information is essential both for strengthening DEH's cost-recovery position against RCFD and for supporting the APAR's characterization of the release history.

D. Overall Fee Estimate

Total estimated legal fees through VCP Certificate of Completion or litigation resolution remain in the range of $1.1 million to $1.6 million, as initially projected in the engagement letter dated June 25, 2025. This estimate encompasses all C&H legal fees across the regulatory, site-access, cost-recovery, insurance, and litigation-preparation workstreams. It does not include Pinehill's consulting fees, TCEQ oversight fees, remediation contractor costs, or other non-legal expenditures.

This estimate will be refined as the VCP progresses, the cost-recovery negotiation or litigation trajectory becomes clearer, and actual remediation costs are incurred. The width of the current range reflects the significant uncertainty regarding the path of the RCFD cost-recovery effort. A negotiated settlement would fall toward the lower end of the range, while protracted litigation with discovery and trial preparation would push fees toward the upper end.

We note that Gresham & Alford CPAs, PLLC (engagement partner: Christine Lau, CPA) is separately advising DEH on the accrual and disclosure of environmental liabilities under ASC 410 (Asset Retirement Obligations) and ASC 450 (Contingencies). Ms. Lau's firm is working with DEH's internal finance team to ensure that the remediation liabilities are properly reflected in DEH's financial statements. The fees for Gresham & Alford's accounting advisory services are not included in the Calderwood & Harkness fee estimate.

E. Retainer Replenishment

Based on the current trajectory of fees and the volume of work anticipated across all active workstreams, the current retainer balance of approximately $62,500 will be depleted before the end of Q3 2025. We anticipate that fees incurred during the remainder of July and throughout August 2025 will fully exhaust the current balance, given the intensive work required to advance the APAR preparation, finalize the Calera Access Agreement, and develop the RCFD response strategy.

To ensure continuity of work across all active workstreams and to avoid any disruption to the remediation timeline, we respectfully request that DEH consider replenishing the retainer to the original $150,000 level at its earliest convenience. A supplemental retainer deposit of approximately $87,500 would restore the retainer to the full amount. We would be happy to discuss alternative arrangements if a full replenishment is not feasible at this time, but we emphasize that adequate retainer funding is important to maintaining momentum across all workstreams, particularly as we approach the October 31, 2025, APAR submission deadline.

VI. Next Steps and Upcoming Milestones

In summary, the following action items and milestones are before us for the upcoming quarter:

1. Strategy Call with Mr. Rourke. Schedule a call with Mr. Rourke to discuss the RCFD response strategy in detail, including review of the internal response strategy memorandum and determination of settlement authority parameters. We propose scheduling this call during the week of July 21, 2025.

2. Finalize Site Access & Cost-Sharing Agreement. Complete negotiations with Calera/KPS on the remaining open issues (indemnification scope and escrow terms) and execute the Access Agreement. Target: August 2025.

3. TCEQ Acknowledgment Letter. Receive and review the TCEQ acknowledgment letter confirming DEH's acceptance into the VCP and identifying the assigned project manager. Anticipated: August 2025.

4. APAR Preparation and Submission. Continue coordination with Pinehill on APAR preparation, including review of draft sections and regulatory strategy discussions. Target submission: October 31, 2025.

5. Bridgemont Claim Number. Follow up with Bridgemont Insurance Company to obtain acknowledgment of the notice of environmental condition and assignment of a claim number. Initiate SIR tracking procedures upon claim number assignment.

6. RCFD Counter-Proposal or Litigation Filing. Following the strategy call with Mr. Rourke, formulate and deliver a counter-proposal to RCFD through Whitfield Barr LLP or, if authorized, prepare a complaint for filing in the appropriate court.

7. Witness Development. Continue identification and interviewing of former DTS employees with knowledge of Site operations and release history. Prioritize witnesses with direct knowledge of RCFD's operations in the southern tank farm.

8. Next Quarterly Report. The next quarterly status report will be provided in October 2025 and will cover developments through the end of Q3 2025, including the status of the APAR submission, the outcome of the Calera negotiations, and the trajectory of the RCFD cost-recovery effort.

We remain available to discuss any aspect of this report at your convenience, and we are committed to advancing each of these workstreams as efficiently and effectively as possible. Please do not hesitate to contact Sandra Tung directly at (713) 554-8247 or stung@calderwoodharkness.com with any questions, comments, or concerns, or to schedule the recommended strategy call regarding the RCFD response.

This letter constitutes a privileged and confidential attorney-client communication. The information contained herein is intended solely for the use of the addressee and is protected by the attorney-client privilege and the work product doctrine. This letter should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Sandra Tung Partner 1200 McKinney Street, Suite 4100 Houston, Texas 77010 Telephone: (713) 554-8247

Email: stung@calderwoodharkness.com

cc: Oliver Mackenzie, Calderwood & Harkness LLP Cynthia Ho, Calderwood & Harkness LLP Devon Archer, Calderwood & Harkness LLP

Matter No. 1016-00006 PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

Milestone	Projected Date
APAR Submission	October 31, 2025
TCEQ APAR Review Period (~120 days)	November 2025 – February 2026
Voluntary Cleanup Work Plan Submission	April 2026
Active Remediation Phase	June 2026 – December 2028
Post-Remediation Monitoring	January 2029 – December 2032
Certificate of Completion ("CoC")	2033
Attorney	Role	Practice Area	Billing Rate
Sandra Tung	Responsible Partner	M&A	$895/hr
Oliver Mackenzie	Billing Partner	M&A	$895/hr
Cynthia Ho	Lead Associate	Real Estate	$475/hr
Devon Archer	Working Associate	Labor & Employment	$475/hr

CALDERWOOD & HARKNESS LLP Attorneys at Law 1200 McKinney Street, Suite 4100 Houston, Texas 77010 Telephone: (713) 554-8200 | Facsimile: (713) 554-8201 www.calderwoodharkness.com
July 15, 2025
VIA SECURE ELECTRONIC TRANSMISSION
Mr. Gavin Rourke Chairman & Chief Executive Officer Dunmore Energy Holdings Ltd. 4th Floor, Harbour Place 103 South Church Street George Town, Grand Cayman, KY1-1002 Cayman Islands
Re: Dunmore Wharton Terminal — Voluntary Remediation, Regulatory Compliance, and Cost-Recovery Status Report (Q3 2025)
Matter No.: 1016-00006
Site: 14200 FM 1301, Wharton, Wharton County, Texas 77488
TCEQ VCP Tracking No.: VCP-2517
Dear Mr. Rourke:
This letter provides a quarterly status update on all active workstreams related to the environmental remediation and cost-recovery efforts at the Dunmore Wharton Terminal site located at 14200 FM 1301, Wharton, Wharton County, Texas 77488 (the "Site"). As you are aware, Calderwood & Harkness LLP ("C&H" or the "Firm") opened this engagement on June 25, 2025, pursuant to the executed engagement letter of the same date, and we have been working diligently across multiple fronts since that time.
This report covers five principal workstreams: (1) Regulatory / TCEQ Voluntary Cleanup Program; (2) Site Access Negotiations with Calera Properties Group LLC; (3) Cost Recovery Against Rowan Creek Fuel Distributors, Inc.; (4) Insurance; and (5) Budget and Fees. Each of these workstreams is addressed in detail below, together with our assessment of current status, emerging issues, and recommended next steps.
We note at the outset that no third-party materials are attached to this letter. Any documents referenced herein, including correspondence, environmental reports, policy documents, and agreements, are maintained on file with Calderwood & Harkness and are available for your review upon request. This letter constitutes a privileged and confidential attorney-client communication and should be treated accordingly.
I. Regulatory — TCEQ Voluntary Cleanup Program
A. VCP Application Status
On June 25, 2025, Calderwood & Harkness filed a Voluntary Cleanup Program application with the Texas Commission on Environmental Quality ("TCEQ") on behalf of Dunmore Energy Holdings Ltd. ("DEH") as applicant and successor-in-interest to Dunmore Terminal Services, Inc. ("DTS"). DTS was a Texas corporation that was dissolved effective December 31, 2017, as reflected in the records of the Texas Secretary of State. DEH, as DTS's parent company and successor-in-interest, has assumed responsibility for the environmental liabilities associated with the Site and is pursuing voluntary remediation under the TCEQ's VCP framework.
The application fee of $1,000 was paid simultaneously with the filing. The complete application package submitted to TCEQ included the following:
• Completed VCP Application Form (TCEQ Form No. 10400);
• Site location map depicting the 48.7-acre parcel and its relationship to surrounding land uses;
• Legal description of the Site, identified as Lots 3 and 4, H.T. & B.R.R. Survey, Abstract No. 241, Wharton County, Texas, as conveyed by deed recorded at Volume 1892, Page 417, Official Public Records, Wharton County, Texas;
• Summary of known contamination and release history at the Site, detailing the five documented releases spanning 1996 through 2014;
• Executive summaries of the Phase I Environmental Site Assessment and Phase II Environmental Site Assessment, both prepared by Pinehill Environmental Consulting LLC ("Pinehill");
• Evidence of DEH's financial capability to complete the remediation, including audited financial statements for fiscal year 2024 and a letter from DEH's Chief Financial Officer confirming the availability of dedicated remediation reserves;
• Documentation of site-access arrangements with the current fee owner of the Site, Calera Properties Group LLC ("Calera"), including a preliminary access authorization letter executed by Calera's managing member.
The TCEQ has assigned VCP Tracking No. VCP-2517 to the Site. Based on current TCEQ processing timelines, we anticipate receiving a formal acknowledgment letter from the TCEQ approximately in August 2025. The acknowledgment letter will confirm DEH's acceptance into the VCP and assign a TCEQ project manager to oversee the remediation.
We note that TCEQ oversight fees are billed at a rate of $225 per hour. Based on comparable VCP projects and the scope and complexity of the contamination at the Site, we project total TCEQ oversight costs of approximately $135,000 over the life of the project. This estimate encompasses TCEQ review of the Affected Property Assessment Report, the Voluntary Cleanup Work Plan, periodic progress reports, and the final Certificate of Completion application. These oversight costs are separate from C&H's legal fees and from Pinehill's consulting fees, and will be invoiced directly by the TCEQ to DEH.
B. APAR Preparation
The next major deliverable in the VCP process is the Affected Property Assessment Report ("APAR"). We have established a target submission date of October 31, 2025 for the APAR. Pinehill Environmental Consulting LLC, under the direction of Dr. Lena Vasquez, P.E., P.G. (Principal-in-Charge), is actively preparing the APAR. Dr. Vasquez is a licensed Professional Engineer and Professional Geoscientist in the State of Texas, and she brings extensive experience with TCEQ VCP submissions.
The APAR will incorporate findings from the Phase I Environmental Site Assessment (commenced January 2024) and the Phase II Environmental Site Assessment (completed June 2024), as well as supplemental investigation data collected by Pinehill during the first quarter of 2025. The APAR will present a comprehensive characterization of the nature and extent of contamination at the Site, including a detailed analysis of source areas, migration pathways, and potential receptors. The key contamination parameters to be documented in the APAR are summarized as follows:
Contaminants of Concern. The primary contaminants of concern ("COCs") at the Site are benzene, toluene, ethylbenzene, and xylenes (collectively, "BTEX"); total petroleum hydrocarbons ("TPH"); methyl tert-butyl ether ("MTBE"); and dissolved-phase lead.
Soil Contamination. TPH concentrations in soil have been detected at levels up to 14,200 mg/kg in the Tank S-7 area of the southern tank farm and up to 8,750 mg/kg in the Tank N-3 area of the northern tank farm. Benzene concentrations in soil have been measured at levels up to 42 mg/kg, which significantly exceeds the TCEQ Tier 1 Protective Concentration Level ("PCL") of 5.3 mg/kg applicable to commercial and industrial land use.
Groundwater Contamination. A dissolved benzene plume has been delineated extending approximately 2,400 feet downgradient (south-southwest) of the southern tank farm. The maximum benzene concentration detected in groundwater is 3.8 mg/L, which represents approximately 760 times the federal Maximum Contaminant Level ("MCL") of 0.005 mg/L for benzene in drinking water. MTBE has been detected in groundwater at concentrations up to 1.2 mg/L. Dissolved lead has been detected at concentrations up to 0.087 mg/L, exceeding the federal MCL of 0.015 mg/L for lead.
Affected Aquifer. The affected aquifer is the Chicot Aquifer, shallow zone, which was encountered at approximately 22 feet below ground surface during the Phase II investigation. The Chicot Aquifer is a regionally significant drinking water aquifer in the Texas Gulf Coast region, and its involvement is a factor that will receive close scrutiny from the TCEQ during the VCP review process.
Nearest Receptor. The nearest identified potential receptor is a residential water supply well located at 16405 FM 1301 (the "Ingram Property"), approximately 3,100 feet south-southwest of the current leading edge of the dissolved benzene plume. Pinehill conducted sampling of the Ingram Property well in February 2025, and no COCs were detected above their respective MCLs at that time. Nonetheless, we will continue to monitor the plume migration trajectory and the Ingram Property well as part of the ongoing investigation and remediation program.
The APAR will also provide a detailed account of the five known release events at the Site, which are summarized as follows:
1. 1996 — Tank S-4 Release. An estimated 8,000 gallons of diesel fuel were released from Tank S-4 in the southern tank farm. No TCEQ incident number was assigned at the time, as the release was not formally reported to the TCEQ. This release was documented in internal DTS operational records.
2. 2001 — Tank S-7 Release. An estimated 3,200 gallons of gasoline were released from Tank S-7 in the southern tank farm. This release was reported to the TCEQ and assigned Incident No. 142876.
3. 2003 — Tank N-3 Release. An estimated 1,500 gallons of gasoline were released from Tank N-3 in the northern tank farm. This release was reported to the TCEQ and assigned Incident No. 158432. This release occurred in the northern tank farm, which was under DTS's direct operational control.
4. 2008 — Tank S-11 Release. An estimated 5,600 gallons of diesel fuel were released from Tank S-11 in the southern tank farm. This release was reported to the TCEQ and assigned Incident No. 197503.
5. 2014 — Loading Rack Release. An estimated 600 gallons of diesel fuel were released from the loading rack area. This release was reported to the TCEQ and assigned Incident No. 251044. The loading rack was a shared facility under the 1991 Joint Operating Agreement.
The foregoing release history will be presented in the APAR with supporting documentation, including TCEQ incident reports, internal DTS records, and Pinehill's independent investigation findings. This release history is also relevant to the cost-recovery effort against Rowan Creek Fuel Distributors, Inc., as discussed in Section III below.
C. Anticipated VCP Milestones
Based on our experience with the TCEQ's VCP process and the specific characteristics of this Site, we have developed the following projected timeline for the VCP milestones:
We note that the TCEQ's review periods are approximate and subject to the Commission's staffing and workload. The 120-day review period for the APAR is based on current TCEQ guidance, but actual review times may vary. We will maintain regular communication with the assigned TCEQ project manager to facilitate timely reviews and minimize delays.
As discussed in Section IV below, the Bridgemont Pollution Legal Liability policy (Policy No. ENV-BIC-2024-07821) runs through March 1, 2034, providing insurance coverage through the anticipated Certificate of Completion date. This alignment between the policy period and the projected VCP timeline is significant and was a factor in structuring the current remediation approach.
II. Site Access — Negotiations with Calera Properties Group LLC
A. Background on Calera
Calera Properties Group LLC ("Calera") is a Texas limited liability company managed by Rebecca Strand. Calera is the current fee owner of the 48.7-acre Site. Calera acquired the Site at a tax foreclosure sale conducted by Wharton County in March 2019 for a purchase price of $612,000. The property had become delinquent on ad valorem taxes following DTS's dissolution in 2017 and the subsequent cessation of all terminal operations.
Since its acquisition, Calera has made no operational use of the Site. The property has remained idle, with Calera's involvement limited to maintaining the perimeter security fencing, contracting for periodic security patrols, and paying property taxes. Calera has incurred approximately $285,400 in post-acquisition carrying costs since the March 2019 acquisition. These costs are documented in invoices and tax receipts that Calera's counsel has provided to us in the course of the current negotiations.
Calera is not a responsible party for the contamination at the Site. Calera had no involvement in the terminal operations that gave rise to the releases, and its acquisition at tax foreclosure is generally consistent with the innocent landowner defense under CERCLA § 101(35). However, Calera controls site access, which is essential for the remediation program. Without Calera's cooperation, DEH would be required to seek a court order for access, which would be both time-consuming and costly. Accordingly, a negotiated site-access arrangement is strongly preferable.
Calera is represented in this matter by Nora Fujimoto, Partner (Real Estate & Environmental) at Kerrigan, Pace & Sullivan LLP ("KPS"), located at 700 Milam Street, Suite 2000, Houston, Texas 77002. We have found Ms. Fujimoto to be a constructive and experienced negotiating counterpart, and the negotiations have proceeded in a professional and productive manner thus far.
B. Draft Site Access & Cost-Sharing Agreement
A draft Site Access & Cost-Sharing Agreement (the "Access Agreement") has been circulated between Calderwood & Harkness and Kerrigan, Pace & Sullivan. The parties have made significant progress toward finalizing the Access Agreement, and we are optimistic that the remaining open issues can be resolved in the near term. The following summarizes the key terms that have been agreed upon and the issues that remain under negotiation.
Agreed-Upon Terms. The following principal terms have been substantively agreed to by the parties:
• Irrevocable License. The Access Agreement will grant DEH and its contractors (including Pinehill and any other environmental consultants, remediation contractors, and subcontractors engaged by DEH) an irrevocable license to access the Site for purposes of environmental investigation, remediation, and long-term monitoring through anticipated project completion (estimated 2033). The license will be irrevocable for the duration of the VCP process, subject to specified termination events (e.g., issuance of the Certificate of Completion, mutual agreement of the parties, or material breach).
• Insurance Requirements. DEH will maintain commercial general liability and pollution liability insurance throughout the project. The primary pollution liability coverage is provided under the Bridgemont Pollution Legal Liability Policy No. ENV-BIC-2024-07821, which carries a $15 million aggregate limit. Calera will be named as an additional insured under this policy to the extent required by the Access Agreement.
• Incremental Carrying Cost Reimbursement. DEH will reimburse Calera for documented incremental carrying costs that are directly attributable to remediation activities at the Site. This reimbursement is intended to cover additional costs that Calera incurs as a result of the remediation program above and beyond the carrying costs Calera would incur in the ordinary course (e.g., increased security costs during active remediation, temporary road repairs necessitated by heavy equipment, and similar items).
• Indemnification by DEH. DEH will indemnify, defend, and hold harmless Calera against third-party claims arising from remediation work conducted at the Site. The scope of this indemnification is the subject of ongoing negotiation, as discussed below.
• Deed Restrictions and Institutional Controls. Calera will cooperate in the execution and recording of any deed restrictions or institutional controls that the TCEQ may require as a condition of the Certificate of Completion. This is a critical term, as TCEQ VCP closures frequently require the recording of activity and use limitations ("AULs") on the property, and the fee owner's cooperation is necessary to effectuate such restrictions.
Open Issues Under Negotiation. Two significant issues remain unresolved:
• Scope of Indemnification. Calera's counsel has requested a broad indemnification clause extending to any and all environmental claims arising from DEH's or its contractors' activities at the Site, regardless of fault. Calderwood & Harkness has proposed limiting the indemnification to claims caused by the negligence of DEH or its contractors in the conduct of remediation work, and expressly excluding liability for pre-existing contamination conditions. This is a commercially significant distinction. The broad indemnification sought by Calera could potentially expose DEH to liability for claims that are attributable to the pre-existing contamination rather than to remediation activities, effectively shifting Calera's own risk to DEH. We believe our proposed formulation is reasonable and consistent with market practice in comparable site-access agreements, and we will continue to advocate for this position.
• Escrow Terms. The parties have agreed in principle that DEH will deposit remediation cost funds into an escrow arrangement to provide Calera with assurance that remediation funds are available. The escrow will be maintained through Lone Star Title & Escrow Co., located at 3400 Bissonnet Street, Suite 100, Houston, Texas 77005. However, the parties are still discussing the specific deposit amounts, the schedule of deposits, and the conditions under which escrowed funds will be released to DEH or its contractors for remediation expenditures. Calera has proposed a lump-sum deposit of $2.0 million; we have proposed staged deposits aligned with the remediation work plan milestones, beginning with a smaller initial deposit of $500,000.
We expect that the Access Agreement will be finalized during Q3 2025, and we are targeting execution prior to the APAR submission deadline of October 31, 2025. Having a fully executed Access Agreement in place at the time of the APAR submission will demonstrate to the TCEQ that DEH has secured the site access necessary to implement the remediation program, which will strengthen the application and facilitate TCEQ's review.
III. Cost Recovery — Rowan Creek Fuel Distributors, Inc.
A. Pre-Suit Demand
On May 12, 2025, Calderwood & Harkness sent a pre-suit demand letter to Rowan Creek Fuel Distributors, Inc. ("RCFD"), directed to the attention of Malcolm Griggs, President, at RCFD's principal office located at 1150 Lavaca Street, Suite 600, Austin, Texas 78701. A copy of the demand letter was simultaneously transmitted to RCFD's outside counsel, Thomas Kessler, Partner (Environmental Litigation) at Whitfield Barr LLP, 500 West 5th Street, Suite 3200, Austin, Texas 78701.
The demand letter set forth DEH's position that RCFD is liable as a former operator and responsible party under both federal and state environmental laws for its equitable share of the costs of investigating and remediating contamination at the Site. The demand totaled $4,647,000, broken down as follows:
RCFD's Allocated Share of Remediation Costs: $4,260,000
• Southern tank farm soil excavation and disposal: $3,420,000
• 50% of groundwater treatment system installation and operation: $1,075,000
• 50% of long-term groundwater monitoring: $530,000
• 50% of institutional controls implementation: $90,000
• Less: project management and contingency costs not credited to RCFD: ($855,000)
DEH's Investigative Costs Incurred 2024–2025: $387,000
• This amount represents reimbursement of Pinehill invoices for the Phase I Environmental Site Assessment, Phase II Environmental Site Assessment, and supplemental investigation activities.
The legal bases cited in the demand letter were Section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9607(a), and Section 361.344 of the Texas Health & Safety Code. The demand letter established a 60-day response deadline of July 11, 2025.
The demand letter set forth in detail RCFD's status as the former operator of the southern tank farm, consisting of Tanks S-1 through S-12 and encompassing approximately 18 acres of the 48.7-acre Site, with a total storage capacity of approximately 315,000 barrels. RCFD operated the southern tank farm pursuant to the 1991 Joint Operating Agreement ("JOA") between DTS and RCFD, which was in effect from 1991 through 2010. Under the JOA, RCFD had exclusive operational control over the southern tank farm, including responsibility for tank maintenance, product handling, and spill prevention.
The demand letter specifically identified four documented releases attributable to RCFD's operations in the southern tank farm: the 1996 Tank S-4 diesel release (~8,000 gallons), the 2001 Tank S-7 gasoline release (~3,200 gallons), the 2008 Tank S-11 diesel release (~5,600 gallons), and, by implication, the broader contamination conditions found in the southern tank farm area that are consistent with years of product handling and storage operations under RCFD's control.
For context, the total estimated remediation cost for the entire Site is $9.74 million, based on the April 2025 cost estimate prepared by Pinehill. The Pinehill estimate reflects a most-probable-cost figure within a range of $7.81 million to $12.18 million, accounting for uncertainty in final remedial design, actual waste volumes, and long-term monitoring requirements.
B. RCFD Response
RCFD, through its counsel Thomas Kessler at Whitfield Barr LLP, delivered a written response dated July 8, 2025 — three days before the 60-day deadline. The response was transmitted via both email and certified mail to Calderwood & Harkness.
In the response letter, RCFD denied liability for the contamination at the Site and asserted the following principal defenses:
• Statute of Limitations. RCFD argued that certain of DEH's claims are time-barred under the statute of limitations provisions of CERCLA § 113(g)(2), which provides a six-year limitations period for cost-recovery actions measured from the date of completion of a removal action, or a three-year period measured from the date of completion of a remedial action at a facility on the National Priorities List. RCFD also invoked Texas state limitations periods, arguing that any state-law claims are subject to a four-year statute of limitations. We note that these limitations arguments have potential weaknesses: the VCP remediation has not yet been completed, and the limitations clock for a cost-recovery action under CERCLA typically does not begin to run until the response action is complete.
• Allocation Arguments. RCFD disputed the cost-allocation methodology set forth in our demand, contending that DEH's allocation assigns a disproportionate share of remediation costs to RCFD. In particular, RCFD argued that DTS and, by extension, DEH bear significant responsibility for contamination at the Site, citing the 2003 Tank N-3 release in the northern tank farm (which was under DTS's direct operational control) and the 2014 loading-rack release (which occurred at a shared facility). RCFD's position is that a proper equitable allocation should reflect DTS/DEH's own contribution to the contamination, and that any allocation methodology should account for the totality of operations and releases at the Site over the full operational history.
RCFD's response included a counter-proposal of $750,000 as a global settlement in full resolution of DEH's claims. This counter-offer represents approximately 16.1% of the $4,647,000 demand and approximately 7.7% of the total estimated remediation cost of $9.74 million. The offer was characterized by RCFD as a "nuisance value" payment intended to avoid the costs and distraction of litigation, and was made without any admission of liability.
C. Recommended Next Steps
Calderwood & Harkness recommends that DEH reject the $750,000 counter-offer as inadequate relative to RCFD's allocated share of remediation costs of $4.26 million. The counter-offer does not reflect a good-faith negotiating position proportionate to RCFD's operational responsibility for the southern tank farm contamination. We note that RCFD's four documented releases in the southern tank farm involve a combined volume of approximately 20,000 gallons of petroleum product, and the southern tank farm is the primary source area for the dissolved benzene plume that constitutes the most significant groundwater threat at the Site.
Additionally, based on publicly available financial information, RCFD has estimated annual revenue of approximately $89 million, indicating that RCFD has the financial capacity to fund a settlement that is substantially higher than the $750,000 counter-offer. RCFD's financial condition does not support a "nuisance value" characterization of its exposure.
We are evaluating the following strategic options for the next phase of the cost-recovery effort:
Option 1: Counter-Proposal. DEH could deliver a counter-proposal in the range of $3.0 million to $3.5 million, reflecting a negotiated discount from the full $4.647 million demand but substantially preserving DEH's position. A counter-proposal at this level would signal willingness to negotiate while maintaining a figure that is anchored to the cost-allocation analysis. This option has the advantage of keeping the negotiation process alive and avoiding the costs and risks of litigation, but carries the risk that RCFD may continue to negotiate from a position of aggressive undervaluation.
Option 2: Initiation of Litigation. DEH could authorize the filing of a complaint asserting claims under CERCLA § 107 and the Texas Health & Safety Code. Venue options include the United States District Court for the Southern District of Texas, Houston Division, for the federal CERCLA claims, or alternatively the District Court of Wharton County, Texas, for the state-law claims. Federal court is generally the preferred venue for CERCLA cost-recovery actions due to the well-developed body of case law in the Fifth Circuit. Filing a complaint would impose immediate litigation costs and would require DEH's sustained commitment to the litigation process, but would place maximum pressure on RCFD and create the framework for formal discovery, which could yield additional evidence supporting DEH's allocation position.
Option 3: Continued Negotiation Concurrent with VCP Progress. DEH could pursue further negotiation with RCFD while the VCP remediation progresses, using advancing remediation as leverage to demonstrate actual costs and strengthen the cost-recovery position. As remediation costs are incurred and documented, DEH's cost-recovery claims will become more concrete and potentially more difficult for RCFD to contest. This approach has the advantage of deferring significant litigation costs, but carries the risk that delay may complicate the limitations analysis and allow RCFD to marshal additional defenses.
A detailed response strategy memorandum has been prepared internally by the C&H team and will be discussed with you at the next scheduled call. The memorandum analyzes each of these options in further detail, including litigation cost projections, an assessment of strengths and weaknesses of the parties' respective positions, and a recommended course of action.
We also confirm that a litigation hold notice was issued internally within DEH on June 27, 2025, two days after the engagement was opened. The litigation hold directed the preservation of all documents and electronically stored information ("ESI") related to the Site, including but not limited to records concerning DTS operations, the 1991 Joint Operating Agreement, RCFD operations, TCEQ incident reports, correspondence with regulatory agencies, environmental reports, tank maintenance records, and product inventory records. It is essential that DEH continue to enforce this hold and ensure that no relevant documents or ESI are destroyed, deleted, or altered.
IV. Insurance
A. Bridgemont PLL Policy Notice
On June 30, 2025, Calderwood & Harkness submitted a formal notice of environmental condition to Bridgemont Insurance Company, directed to the attention of Paul Neumann, Senior Vice President — Environmental Lines, at Bridgemont's offices located at 200 Galleria Parkway, Suite 1800, Atlanta, Georgia 30339. The notice was transmitted via certified mail, return receipt requested, and simultaneously via email to the address on file for Mr. Neumann's office.
The notice was provided under Pollution Legal Liability Policy No. ENV-BIC-2024-07821, which is effective from March 1, 2024, through March 1, 2034 (the "Bridgemont Policy" or the "PLL Policy"). The Site is identified as a scheduled known-condition location under the Bridgemont Policy, and the policy was specifically underwritten with knowledge of the general environmental conditions at the Site based on the Phase I ESA that was available at the time of policy inception.
The key terms of the Bridgemont Policy relevant to this matter are as follows:
• Aggregate Limit: $15,000,000
• Self-Insured Retention ("SIR"): $500,000
• Coverage: On-site and off-site cleanup costs; third-party bodily injury and property damage arising from pollution conditions at the scheduled location
• Policy Period: March 1, 2024, through March 1, 2034
The notice submitted to Bridgemont summarized the contamination profile at the Site, including the nature and extent of soil and groundwater contamination, the identified contaminants of concern, and the current status of the VCP application. The notice also referenced the $9.74 million total estimated remediation cost prepared by Pinehill. Based on the current cost allocation, DEH's asserted share of the remediation costs is approximately $5.48 million. Because this amount exceeds the $500,000 SIR, Bridgemont coverage should be triggered once the SIR is exhausted by qualifying remediation expenditures.
As of the date of this letter, we are awaiting acknowledgment of the notice and assignment of a claim number from Bridgemont. We anticipate receiving a response from Bridgemont's environmental claims unit within the next 30 to 45 days. Upon receiving the claim number, we will coordinate with Bridgemont regarding the SIR tracking process, the documentation requirements for covered costs, and any consent-to-remediate provisions that may be applicable under the policy.
We will continue to meticulously monitor and document all remediation expenditures incurred by DEH to track SIR exhaustion and to establish the basis for Bridgemont's coverage obligations once the SIR is met. All Pinehill invoices, contractor invoices, TCEQ oversight fees, and related remediation expenditures are being catalogued in a dedicated tracking system maintained by the C&H engagement team.
B. Historic CGL Policies
DEH's historical comprehensive general liability ("CGL") policies covering the period from 1974 through 2000 were carried by Piedmont Mutual Insurance Co. ("Piedmont Mutual"). These policies would potentially have provided coverage for certain of the environmental liabilities associated with the earlier operational periods at the Site, including the 1996 Tank S-4 release.
However, Piedmont Mutual entered receivership in 2012 pursuant to an order of the Superior Court of Fulton County, Georgia. The receivership proceedings have been ongoing, and recovery prospects for policyholders are negligible. Based on publicly available information regarding the receivership estate and the priority of claims, we do not expect any meaningful recovery from the Piedmont Mutual policies.
Accordingly, no further action is recommended regarding the Piedmont Mutual policies. We will continue to monitor the receivership proceedings on a periodic basis and will advise you if any material developments occur that might alter this assessment, but we consider this a remote contingency.
V. Budget and Fee Update
A. Engagement Team
The Calderwood & Harkness engagement team for this matter is as follows:
In addition, senior associate time is billed at $625 per hour and paralegal time is billed at $275 per hour, as applicable. The engagement team will be supplemented as needed with additional attorneys possessing expertise in environmental litigation and insurance coverage, consistent with the terms of the engagement letter.
B. Fees Incurred to Date
Total legal fees incurred from the engagement opening date of June 25, 2025, through the date of this letter (July 15, 2025) are approximately $87,500. This amount reflects time incurred across all five active workstreams during the initial three-week period of the engagement, including the preparation and filing of the VCP application, commencement of site-access negotiations with Calera/KPS, analysis of the RCFD response, preparation and submission of the Bridgemont notice, and general case administration and strategy development.
The original retainer of $150,000 was received from DEH on June 25, 2025, contemporaneously with the execution of the engagement letter. After application of fees incurred to date, the current retainer balance is approximately $62,500. Per the terms of the engagement letter, billing is rendered monthly and payment is due Net-30 from the date of invoice.
C. Projected Fees Through Year-End 2025
We estimate that remaining legal fees through December 31, 2025, will be in the range of $175,000 to $225,000. This estimate reflects the anticipated activity across all workstreams during the second half of 2025, and is based on our current assessment of the work required to advance each workstream toward its near-term milestones.
The key cost drivers for the remainder of 2025 include the following:
• Regulatory Workstream — APAR Preparation Support. C&H will continue to coordinate with Pinehill on the preparation and submission of the APAR, including review of draft APAR sections for legal sufficiency and regulatory compliance, coordination with the TCEQ project manager, and strategic guidance regarding the characterization of contamination and the positioning of the remediation approach.
• Site Access Workstream — Finalization of Access Agreement. The remaining open issues in the Site Access & Cost-Sharing Agreement with Calera/KPS must be resolved, and the agreement must be finalized, executed, and, if appropriate, recorded in the Official Public Records of Wharton County.
• Cost Recovery Workstream — RCFD Negotiations and Potential Litigation. Depending on the strategic direction selected by DEH, this workstream may involve preparation of a counter-proposal, further settlement negotiations, or, alternatively, preparation and filing of a complaint and related litigation filings. If litigation is authorized, the initial phase will include complaint drafting, service of process, and preliminary motion practice.
• Insurance Workstream — Bridgemont Claims Coordination. Following receipt of the Bridgemont claim number, C&H will coordinate with the Bridgemont claims team regarding documentation requirements, SIR tracking, and consent-to-remediate protocols.
• Litigation Preparation Workstream — Witness Development. C&H is commencing witness development work, including identification and interviews of former DTS employees who may have knowledge of the operational history at the Site, the circumstances of the release events, and RCFD's operations in the southern tank farm. This information is essential both for strengthening DEH's cost-recovery position against RCFD and for supporting the APAR's characterization of the release history.
D. Overall Fee Estimate
Total estimated legal fees through VCP Certificate of Completion or litigation resolution remain in the range of $1.1 million to $1.6 million, as initially projected in the engagement letter dated June 25, 2025. This estimate encompasses all C&H legal fees across the regulatory, site-access, cost-recovery, insurance, and litigation-preparation workstreams. It does not include Pinehill's consulting fees, TCEQ oversight fees, remediation contractor costs, or other non-legal expenditures.
This estimate will be refined as the VCP progresses, the cost-recovery negotiation or litigation trajectory becomes clearer, and actual remediation costs are incurred. The width of the current range reflects the significant uncertainty regarding the path of the RCFD cost-recovery effort. A negotiated settlement would fall toward the lower end of the range, while protracted litigation with discovery and trial preparation would push fees toward the upper end.
We note that Gresham & Alford CPAs, PLLC (engagement partner: Christine Lau, CPA) is separately advising DEH on the accrual and disclosure of environmental liabilities under ASC 410 (Asset Retirement Obligations) and ASC 450 (Contingencies). Ms. Lau's firm is working with DEH's internal finance team to ensure that the remediation liabilities are properly reflected in DEH's financial statements. The fees for Gresham & Alford's accounting advisory services are not included in the Calderwood & Harkness fee estimate.
E. Retainer Replenishment
Based on the current trajectory of fees and the volume of work anticipated across all active workstreams, the current retainer balance of approximately $62,500 will be depleted before the end of Q3 2025. We anticipate that fees incurred during the remainder of July and throughout August 2025 will fully exhaust the current balance, given the intensive work required to advance the APAR preparation, finalize the Calera Access Agreement, and develop the RCFD response strategy.
To ensure continuity of work across all active workstreams and to avoid any disruption to the remediation timeline, we respectfully request that DEH consider replenishing the retainer to the original $150,000 level at its earliest convenience. A supplemental retainer deposit of approximately $87,500 would restore the retainer to the full amount. We would be happy to discuss alternative arrangements if a full replenishment is not feasible at this time, but we emphasize that adequate retainer funding is important to maintaining momentum across all workstreams, particularly as we approach the October 31, 2025, APAR submission deadline.
VI. Next Steps and Upcoming Milestones
In summary, the following action items and milestones are before us for the upcoming quarter:
1. Strategy Call with Mr. Rourke. Schedule a call with Mr. Rourke to discuss the RCFD response strategy in detail, including review of the internal response strategy memorandum and determination of settlement authority parameters. We propose scheduling this call during the week of July 21, 2025.
2. Finalize Site Access & Cost-Sharing Agreement. Complete negotiations with Calera/KPS on the remaining open issues (indemnification scope and escrow terms) and execute the Access Agreement. Target: August 2025.
3. TCEQ Acknowledgment Letter. Receive and review the TCEQ acknowledgment letter confirming DEH's acceptance into the VCP and identifying the assigned project manager. Anticipated: August 2025.
4. APAR Preparation and Submission. Continue coordination with Pinehill on APAR preparation, including review of draft sections and regulatory strategy discussions. Target submission: October 31, 2025.
5. Bridgemont Claim Number. Follow up with Bridgemont Insurance Company to obtain acknowledgment of the notice of environmental condition and assignment of a claim number. Initiate SIR tracking procedures upon claim number assignment.
6. RCFD Counter-Proposal or Litigation Filing. Following the strategy call with Mr. Rourke, formulate and deliver a counter-proposal to RCFD through Whitfield Barr LLP or, if authorized, prepare a complaint for filing in the appropriate court.
7. Witness Development. Continue identification and interviewing of former DTS employees with knowledge of Site operations and release history. Prioritize witnesses with direct knowledge of RCFD's operations in the southern tank farm.
8. Next Quarterly Report. The next quarterly status report will be provided in October 2025 and will cover developments through the end of Q3 2025, including the status of the APAR submission, the outcome of the Calera negotiations, and the trajectory of the RCFD cost-recovery effort.
We remain available to discuss any aspect of this report at your convenience, and we are committed to advancing each of these workstreams as efficiently and effectively as possible. Please do not hesitate to contact Sandra Tung directly at (713) 554-8247 or stung@calderwoodharkness.com with any questions, comments, or concerns, or to schedule the recommended strategy call regarding the RCFD response.
This letter constitutes a privileged and confidential attorney-client communication. The information contained herein is intended solely for the use of the addressee and is protected by the attorney-client privilege and the work product doctrine. This letter should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Sandra Tung Partner 1200 McKinney Street, Suite 4100 Houston, Texas 77010 Telephone: (713) 554-8247
Email: stung@calderwoodharkness.com
cc: Oliver Mackenzie, Calderwood & Harkness LLP Cynthia Ho, Calderwood & Harkness LLP Devon Archer, Calderwood & Harkness LLP
Matter No. 1016-00006 PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
Milestone | Projected Date
APAR Submission | October 31, 2025
TCEQ APAR Review Period (~120 days) | November 2025 – February 2026
Voluntary Cleanup Work Plan Submission | April 2026
Active Remediation Phase | June 2026 – December 2028
Post-Remediation Monitoring | January 2029 – December 2032
Certificate of Completion ("CoC") | 2033
Attorney | Role | Practice Area | Billing Rate
Sandra Tung | Responsible Partner | M&A | $895/hr
Oliver Mackenzie | Billing Partner | M&A | $895/hr
Cynthia Ho | Lead Associate | Real Estate | $475/hr
Devon Archer | Working Associate | Labor & Employment | $475/hr

July 15, 2025

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