pre-suit-demand-letter-rcfd.docx

1016-00006 · Dunmore Energy Holdings · Cost Recovery

pre-suit-demand-letter-rcfd.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) 458-7200 Facsimile: (713) 458-7201 www.calderwoodharkness.com

Matter No. 1016-00006

May 12, 2025

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED AND ELECTRONIC MAIL

Mr. Malcolm Griggs, President Rowan Creek Fuel Distributors, Inc. 1150 Lavaca Street, Suite 600 Austin, Texas 78701

Thomas Kessler, Partner Whitfield Barr LLP 500 West 5th Street, Suite 3200 Austin, Texas 78701

Re: Demand for Cost Recovery — Dunmore Wharton Terminal Site, 14200 FM 1301, Wharton, Wharton County, Texas 77488; CERCLA § 107(a), 42 U.S.C. § 9607(a); Texas Health & Safety Code § 361.344

Dear Mr. Griggs:

I. Introduction and Purpose of Letter

This firm represents Dunmore Energy Holdings Ltd. ("DEH"), a Cayman Islands exempted company (Registration No. MC-318574), and successor-in-interest to Dunmore Terminal Services, Inc. ("DTS"), a dissolved Texas corporation (EIN 76-0384291). We write on behalf of DEH to make a formal demand for contribution and cost recovery from Rowan Creek Fuel Distributors, Inc. ("RCFD") (EIN 74-2951683) arising from environmental investigation and remediation costs at the Dunmore Wharton Terminal site located at 14200 FM 1301, Wharton, Wharton County, Texas 77488 (the "Site").

This demand is made pursuant to 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 and Safety Code, commonly known as the Texas Solid Waste Disposal Act. As set forth in detail below, RCFD bears substantial responsibility for the release of hazardous substances at the Site during its nearly two decades of operational control over the southern tank farm. DEH has retained qualified environmental consultants, conducted thorough investigation of the nature and extent of contamination, and developed a comprehensive remediation strategy. Based on equitable allocation principles and the documented facts, DEH demands that RCFD pay the total sum of $4,647,000 in allocated remediation and investigation costs.

This letter constitutes a formal pre-suit demand. DEH expressly reserves all legal rights and remedies available to it under federal and state law, in equity, and at common law, including, without limitation, the right to seek recovery of the full remediation costs on a joint-and-several-liability basis. DEH's decision to make this demand before initiating litigation reflects its preference for a prompt, cooperative resolution and should not be construed as any limitation on the claims or damages DEH is entitled to pursue.

II. The Site — Description and History

A. Site Description

The Dunmore Wharton Terminal (the "Site") is a petroleum bulk-storage terminal facility commonly known by that name, located at 14200 FM 1301, Wharton, Wharton County, Texas 77488. The legal description of the Site is a 48.7-acre tract being Lots 3 and 4 of the H.T. & B.R.R. Survey, Abstract No. 241, Wharton County, Texas, as more particularly described in a deed recorded at Volume 1892, Page 417, Official Public Records, Wharton County, Texas. The tax parcel identification number is WC-0241-0034. The property is situated in unincorporated Wharton County and is zoned Heavy Industrial (HI) under the applicable county land-use regulations.

B. Site Improvements

The Site historically consisted of two principal tank farm areas, together with ancillary loading, distribution, and administrative infrastructure:

Northern Tank Farm. The northern portion of the Site contains twelve (12) aboveground storage tanks ("ASTs") with a total combined capacity of approximately 420,000 barrels. This tank farm was operated exclusively by DTS throughout the life of the facility.

Southern Tank Farm. The southern portion of the Site, comprising approximately eighteen (18) acres, contains twelve (12) ASTs designated as Tanks S-1 through S-12, with a total combined capacity of approximately 315,000 barrels. From 1991 through 2010, this tank farm was operated exclusively by RCFD pursuant to the Joint Operating Agreement described below.

Ancillary Facilities. The Site also includes a truck loading rack (decommissioned in 2015), pipeline interconnects to the Colonial Pipeline right-of-way (Disconnected in 2016), and an administrative building (currently abandoned). These facilities were used in connection with both the northern and southern tank farm operations during their respective periods of active use.

C. Operational History

The relevant operational history of the Site is as follows:

1974: DTS commenced petroleum bulk-storage terminal operations at the Site, initially operating the entire facility for the receipt, storage, and distribution of refined petroleum products.

1991: DTS and RCFD entered into a Joint Operating Agreement (the "JOA") pursuant to which RCFD assumed operational control of the southern tank farm, encompassing Tanks S-1 through S-12 and the approximately eighteen (18) acres surrounding those tanks. Under the JOA, RCFD was responsible for all aspects of day-to-day operations at the southern tank farm, including product receipt, storage, and distribution; tank inspection and maintenance; spill prevention, control, and countermeasure planning; and environmental compliance.

1991–2010: During this approximately nineteen-year period, RCFD continuously operated the southern tank farm. RCFD received, stored, and distributed refined petroleum products — principally diesel fuel and gasoline — through the southern tank farm facilities. Throughout this period, RCFD exercised exclusive operational control over the southern tank farm infrastructure and was responsible for environmental stewardship of that portion of the Site.

2010: The JOA was terminated, and RCFD ceased all operations at the Site. Upon termination, RCFD vacated the southern tank farm without performing any decommissioning remediation or conducting a comprehensive environmental assessment of the areas under its control.

2015: DTS ceased all remaining terminal operations at the Site, including operations in the northern tank farm.

October 15, 2017: DTS executed a Plan of Dissolution and Assignment of Liabilities, pursuant to which DTS assigned all of its liabilities — including, expressly, environmental obligations related to the Site — to DEH as successor-in-interest.

December 31, 2017: DTS was formally dissolved with the Texas Secretary of State, with DEH assuming all successor liability.

March 2019: The Site was acquired by Calera Properties Group LLC ("Calera") at a tax foreclosure sale for the sum of $612,000. Calera has made no operational use of the Site and has not engaged in any activities that contributed to the contamination. Calera is not a responsible party for the contamination that is the subject of this demand.

The foregoing chronology establishes that RCFD was the sole operator of the southern tank farm — the primary source area for subsurface contamination at the Site — for approximately nineteen years. During that period, RCFD bore exclusive responsibility for the condition of the southern tank farm facilities, including the integrity of tanks, containment structures, and associated piping systems.

III. RCFD's Status as a Responsible Party

RCFD is a responsible party liable for the response costs demanded herein under both federal and state law.

Under CERCLA § 107(a)(2), 42 U.S.C. § 9607(a)(2), any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of is liable for all costs of removal or remedial action incurred by any other person consistent with the National Contingency Plan. The term "disposal" has been broadly construed by the federal courts to encompass the release, discharge, deposit, or leaking of hazardous substances into the environment, including passive migration of previously released contaminants. See, e.g., Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599, 611 (2009); United States v. CDMG Realty Co., 96 F.3d 706, 714 (3d Cir. 1996).

Under Texas Health and Safety Code § 361.344, a "responsible party" includes any person who was the operator of a solid waste facility at the time of processing, storage, or disposal of solid waste. Section 361.344 provides a statutory cause of action enabling a party that undertakes remediation to recover costs from other responsible parties, including former operators. Texas courts have recognized that the definition of "solid waste" encompasses petroleum-contaminated soils and groundwater, thereby providing an independent basis for recovery that is not subject to CERCLA's petroleum exclusion. See Severin Corporation v. Pluff, 94 S.W.3d 22, 27 (Tex. App.—Tyler 2002, pet. denied).

RCFD satisfies the definition of a "responsible party" and "operator" under both federal and state law by virtue of its operational control of the southern tank farm (Tanks S-1 through S-12) from 1991 to 2010 under the JOA. During its period of operation, RCFD exercised day-to-day management and control over all aspects of petroleum product handling, tank maintenance, spill prevention, and environmental compliance for the southern tank farm. RCFD directed the activities of its own personnel at the Site, contracted with its own subcontractors for maintenance and inspection services, and maintained its own Spill Prevention, Control, and Countermeasure ("SPCC") Plan for the southern tank farm facilities. There can be no genuine dispute that RCFD was an "operator" within the meaning of CERCLA and Texas law during this period.

We note for the record that RCFD is a Texas corporation currently in active status, maintaining its principal offices at 1150 Lavaca Street, Suite 600, Austin, Texas 78701. Based on publicly available financial information, RCFD has estimated annual revenues of approximately $89 million and is financially capable of satisfying its environmental obligations. RCFD's ability to pay is relevant to the reasonableness of this demand and to any future equitable allocation analysis a court may undertake.

IV. Documented Releases from RCFD-Operated Facilities

The environmental investigation conducted at the Site has identified multiple documented releases of petroleum products from tanks and infrastructure within the southern tank farm during the period of RCFD's operational control. These releases are the primary sources of the subsurface contamination requiring remediation.

A. 1996 Release — Tank S-4

In 1996, approximately 8,000 gallons of diesel fuel were released from Tank S-4, an RCFD-operated aboveground storage tank in the southern tank farm. The release was reported to the Texas Commission on Environmental Quality (formerly the Texas Natural Resource Conservation Commission) ("TCEQ"). RCFD performed a partial cleanup in the immediate vicinity of the release; however, subsurface contamination was not fully remediated, and residual impacts to soil and groundwater persisted. The incomplete nature of the 1996 response action has contributed to the long-term contamination burden at the Site.

B. 2001 Release — Tank S-7

In 2001, approximately 3,200 gallons of gasoline were released from Tank S-7, an RCFD-operated aboveground storage tank in the southern tank farm. This release was reported to TCEQ under Incident No. 142876. The Tank S-7 release is of particular significance because the gasoline release introduced benzene, toluene, ethylbenzene, xylenes (BTEX constituents), and methyl tert-butyl ether (MTBE) into the subsurface in the vicinity of the shallow Chicot Aquifer. The subsequent environmental investigation has confirmed that the 2001 Tank S-7 release is a significant — and likely the primary — source of the dissolved benzene plume that has migrated approximately 2,400 feet downgradient from the southern tank farm through the shallow groundwater zone.

C. 2008 Release — Tank S-11

In 2008, approximately 5,600 gallons of diesel fuel were released from Tank S-11, an RCFD-operated aboveground storage tank in the southern tank farm. This release was reported to TCEQ under Incident No. 197503. The Tank S-11 release contributed additional total petroleum hydrocarbons to the already impacted soils and groundwater in the southern tank farm area, compounding the contamination attributable to the earlier 1996 and 2001 releases.

D. Additional RCFD-Attributable Release

In addition to the three releases described above, the environmental investigation has identified a fourth documented release originating from RCFD-operated infrastructure in the southern tank farm. This release is consistent with the pattern of operational releases that occurred during RCFD's tenure and further demonstrates that the contamination in the southern tank farm area is attributable to RCFD's management and operations. Detailed records concerning this release will be produced in connection with any litigation or formal cost-recovery proceeding.

E. DTS-Attributable Releases

For purposes of completeness and transparency, DEH acknowledges that DTS experienced releases from its own facilities in the northern tank farm. Specifically, in 2003, approximately 1,500 gallons of petroleum product were released from Tank N-3 in the northern tank farm (TCEQ Incident No. 158432), and in 2014, approximately 600 gallons were released from the truck loading rack (TCEQ Incident No. 251044). DEH does not seek to attribute these releases to RCFD. However, the volume and nature of the DTS-attributable releases are substantially smaller than the releases from RCFD-operated facilities, and the predominant source of subsurface contamination — particularly the soil contamination in the southern tank farm and the extensive downgradient dissolved-phase groundwater plume — is attributable to RCFD's operations. This distinction is central to the cost allocation analysis set forth in Section VI below.

V. Nature and Extent of Contamination

A. Environmental Investigations

Following the assumption of DTS's environmental obligations, DEH retained Pinehill Environmental Consulting LLC ("Pinehill"), a qualified Texas environmental consulting firm, to conduct comprehensive environmental investigations at the Site. Pinehill's work has been led by Dr. Lena Vasquez, P.E., P.G., who serves as the firm's Principal-in-Charge and who possesses extensive experience in the investigation and remediation of petroleum-impacted sites in the Texas Gulf Coast region.

Pinehill commenced a Phase I Environmental Site Assessment ("ESA") in January 2024 and completed a Phase II ESA in June 2024. The Phase II ESA included the advancement of soil borings, installation of groundwater monitoring wells, collection and laboratory analysis of soil and groundwater samples, and delineation of the extent of subsurface contamination. Supplemental investigations — including additional monitoring well installation, quarterly groundwater sampling, and focused soil characterization — continued through April 2025. The findings of these investigations are summarized below. Executive summaries of the Phase II ESA and the remediation cost estimate are enclosed with this letter.

B. Contaminants of Concern

The environmental investigations have identified the following contaminants of concern ("COCs") in soil and groundwater at the Site:

• Benzene, toluene, ethylbenzene, and xylenes ("BTEX");

• Total petroleum hydrocarbons ("TPH");

• Methyl tert-butyl ether ("MTBE"); and

• Dissolved-phase lead.

Each of these constituents has been detected at concentrations exceeding applicable regulatory standards, as described below.

C. Soil Contamination

Soil sampling in the southern tank farm — the area operated by RCFD — has revealed elevated concentrations of TPH and BTEX constituents. In the vicinity of Tank S-7, TPH concentrations in soil have been measured at concentrations up to 14,200 mg/kg, representing severe petroleum-impact to the vadose zone soils. By comparison, soil sampling in the northern tank farm — the area operated by DTS — in the vicinity of Tank N-3 has revealed TPH concentrations up to 8,750 mg/kg. While both areas exhibit contamination, the magnitude of impact in the RCFD-operated southern tank farm substantially exceeds that of the DTS-operated northern tank farm, both in concentration and in areal extent.

Benzene concentrations in soil have been measured at levels up to 42 mg/kg. This concentration exceeds the TCEQ Tier 1 Protective Concentration Level ("PCL") for residential land use (1.8 mg/kg) by more than twenty-three (23) times, and the commercial/industrial PCL (5.3 mg/kg) by approximately eight (8) times. These exceedances demonstrate that the soil contamination poses an unacceptable risk to human health and the environment under all applicable land-use scenarios and requires active remediation.

D. Groundwater Contamination

The environmental investigation has delineated a significant dissolved-phase contaminant plume in groundwater beneath and downgradient of the Site. The affected aquifer is the Chicot Aquifer (shallow zone), which is encountered at approximately 22 feet below ground surface. The Chicot Aquifer is a regionally significant water-bearing unit that serves as a source of drinking water for rural residents and agricultural operations in Wharton County.

The dissolved benzene plume extends approximately 2,400 feet downgradient (south-southwest) from the southern tank farm — the area formerly operated by RCFD. The maximum dissolved benzene concentration detected in groundwater is 3.8 mg/L, which is 760 times the federal Maximum Contaminant Level ("MCL") of 0.005 mg/L established under the Safe Drinking Water Act. 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 by a factor of approximately 5.8.

The spatial orientation and geochemical characteristics of the dissolved-phase plume confirm that it originates primarily from the southern tank farm area operated by RCFD. The plume's geometry, the location of peak concentrations in the immediate vicinity of Tanks S-4, S-7, and S-11, and the presence of MTBE (a gasoline additive consistent with the 2001 Tank S-7 gasoline release) all corroborate this conclusion. While some contribution from the DTS-operated northern tank farm area cannot be excluded, Pinehill's analysis indicates that the RCFD-operated facilities are the predominant source of the groundwater contamination.

E. Receptors at Risk

The nearest residential receptor to the leading edge of the dissolved benzene plume is the Ingram Property, located at 16405 FM 1301, approximately 3,100 feet south-southwest of the plume's current downgradient extent. The Ingram Property utilizes a private water well for domestic water supply, drawing from the same Chicot Aquifer (shallow zone) that is impacted by contamination from the Site.

In February 2025, Pinehill sampled the residential well at the Ingram Property as part of its supplemental investigation. As of that date, no COCs were detected above applicable MCLs in the Ingram well sample. However, given the current rate and direction of plume migration, the contamination poses a material risk of future impact to the Ingram Property well and potentially other downgradient receptors. The existence of this risk underscores the urgency of remedial action and the reasonableness of DEH's decision to proceed with remediation through the TCEQ Voluntary Cleanup Program.

VI. Remediation Costs and Allocation

A. Remediation Cost Estimate

Pinehill prepared a detailed remediation cost estimate in April 2025, projecting total remediation costs of $9,740,000, with a confidence range of $7.81 million to $12.18 million depending on site conditions encountered during implementation. The cost estimate encompasses the following major components:

The remediation plan includes soil excavation and off-site disposal at a permitted facility for impacted soils in both the southern and northern tank farm areas, in-situ groundwater treatment utilizing a combination of in-situ chemical oxidation ("ISCO") and enhanced bioremediation in the source area and along the plume centerline, long-term groundwater monitoring over an eight-year period (consisting of thirty-two quarterly sampling events), implementation of institutional controls and deed restrictions to manage residual risk, and ongoing project management, reporting, and regulatory coordination with TCEQ.

B. Cost Allocation — RCFD's Share

DEH has performed an equitable cost allocation analysis taking into account the factors identified by Congress in the legislative history of CERCLA — commonly known as the "Gore factors" — including (i) the ability of the parties to demonstrate that their contribution to the release can be distinguished, (ii) the amount and toxicity of the hazardous substances involved, (iii) the degree of involvement of the parties in the generation, transportation, treatment, storage, or disposal of the hazardous substances, and (iv) the degree of care exercised by the parties with respect to the hazardous substances. DEH has also considered the operational responsibilities delineated in the JOA and the documented sources of contamination identified through Pinehill's investigation.

Based on this analysis, DEH has determined RCFD's fair and reasonable share as follows:

Southern tank farm soil remediation (100% RCFD responsibility, as all documented releases in this area occurred during and as a result of RCFD's operations): $3,420,000

In-situ groundwater treatment (50% RCFD share, reflecting the commingled nature of the groundwater plume while recognizing the predominant contribution of the southern tank farm as the source area): $1,075,000

Long-term groundwater monitoring (50% RCFD share, consistent with the groundwater treatment allocation): $530,000

Institutional controls and deed restrictions (50% RCFD share): $90,000

Project management, reporting, and regulatory liaison costs ($1,060,000) and northern tank farm soil remediation costs ($1,870,000) have not been allocated to RCFD, representing a credit of $855,000 in project management costs and the entirety of the northern tank farm remediation costs that DEH has assumed as its own responsibility.

RCFD Subtotal — Allocated Remediation Share: $4,260,000

DEH emphasizes that this allocation is conservative and favorable to RCFD. The evidence strongly supports that RCFD-operated facilities are the predominant source of both the soil contamination in the southern tank farm and the dissolved-phase groundwater plume. A court applying the Gore factors could reasonably allocate a substantially greater share of costs to RCFD, potentially including the full $9,740,000 on a joint-and-several-liability basis.

C. DEH's Investigation Costs

In addition to the prospective remediation costs, DEH has already incurred $387,000 in environmental investigation costs through Pinehill from January 2024 through early 2025. These costs include the Phase I ESA, Phase II ESA, supplemental investigation activities (including additional monitoring well installation, soil boring advancement, groundwater sampling, and laboratory analysis), and preparation of the remediation cost estimate. These investigation costs constitute necessary response costs that are recoverable under CERCLA § 107(a) and Texas Health and Safety Code § 361.344.

D. Total Demand

The total amount demanded from RCFD is calculated as follows:

VII. Legal Bases for Recovery

A. Federal Law — CERCLA § 107(a), 42 U.S.C. § 9607(a)

RCFD is liable under CERCLA § 107(a)(2) as a former operator of a facility — the southern tank farm at the Site — at the time hazardous substances were disposed of or released. CERCLA imposes strict, joint and several liability on responsible parties for all costs of removal or remedial action, without regard to fault. Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599 (2009); United States v. Monsanto Co., 858 F.2d 160 (4th Cir. 1988).

The petroleum products released at the Site — including benzene, toluene, ethylbenzene, xylenes, MTBE, and dissolved lead — constitute "hazardous substances" as defined under CERCLA § 101(14), 42 U.S.C. § 9601(14). DEH acknowledges that CERCLA contains a petroleum exclusion under § 101(14); however, benzene and lead, as individual hazardous-substance constituents listed under CERCLA, and MTBE, which is not a naturally occurring fraction of crude petroleum, may fall outside the scope of the petroleum exclusion under applicable case law. See Wilshire Westwood Assocs. v. Atl. Richfield Co., 881 F.2d 801, 810 (9th Cir. 1989) (holding that hazardous substances that happen to be present in petroleum products may be recoverable when they are released as individual constituents); see also Mid Valley Bank v. N. Valley Bank, 764 F. Supp. 1377 (E.D. Cal. 1991). To the extent any portion of the contamination is subject to the petroleum exclusion under CERCLA, DEH relies on Texas state law as an independent and co-extensive basis for recovery, as described below.

DEH has incurred and will continue to incur necessary costs of response consistent with the National Contingency Plan ("NCP"), 40 C.F.R. Part 300. DEH's enrollment in and compliance with the TCEQ Voluntary Cleanup Program ("VCP") demonstrates consistency with applicable cleanup standards and satisfies the NCP-consistency requirement for private-party cost recovery. See Vine St. LLC v. Keeling, 460 F. Supp. 2d 728, 746 (W.D. Tex. 2006) (recognizing that participation in a state voluntary cleanup program may satisfy the NCP-consistency requirement).

B. Texas Law — Texas Health and Safety Code § 361.344

RCFD is a "responsible party" as defined under the Texas Solid Waste Disposal Act, Texas Health and Safety Code Chapter 361. Section 361.344 provides a statutory cause of action enabling a person who has undertaken or is undertaking remediation of contamination to recover costs from other responsible parties, including former operators of the facility. This state-law claim provides an independent and sufficient basis for the recovery demanded herein.

Importantly, Section 361.344 is not subject to the CERCLA petroleum exclusion and independently supports recovery for petroleum-related contamination. Texas courts have broadly construed the scope of the Solid Waste Disposal Act to encompass petroleum-contaminated soils and groundwater, ensuring that responsible parties cannot evade liability by invoking federal exclusions inapplicable under state law. DEH's Texas state-law claim therefore provides complete coverage for all categories of contamination at the Site, including those arising from petroleum product releases.

C. Joint and Several Liability

Under both CERCLA and Texas law, responsible parties are jointly and severally liable for response costs unless they can demonstrate a reasonable basis for apportioning harm. Burlington Northern, 556 U.S. at 614 (holding that apportionment is available only when there is a reasonable basis for determining the contribution of each cause to a single harm). The contamination at the Site represents a commingled plume arising from releases at both the southern and northern tank farms, and the harm is not readily divisible.

Notwithstanding DEH's entitlement to seek the full $9,740,000 in remediation costs from RCFD on a joint-and-several-liability basis, DEH has voluntarily proposed an equitable allocation and is demanding from RCFD only its proportionate share of $4,260,000 in remediation costs, plus $387,000 in investigation costs already incurred. This voluntary limitation reflects DEH's good faith and its desire to resolve this matter efficiently. DEH reserves the right to abandon this equitable allocation and pursue joint-and-several recovery of the full amount should RCFD fail to engage cooperatively.

VIII. Demand for Payment and Response Deadline

DEH hereby demands that RCFD pay the sum of $4,647,000 within sixty (60) days of the date of this letter — that is, on or before July 11, 2025.

Payment should be made by wire transfer to a trust account to be designated by Calderwood & Harkness LLP upon RCFD's confirmation of its intent to pay. Wire transfer instructions will be provided promptly upon receipt of written confirmation from RCFD or its counsel.

DEH recognizes that a payment of this magnitude may require structured arrangements, and DEH is willing to discuss a reasonable payment schedule, provided that RCFD (i) acknowledges its liability as a responsible party under applicable federal and state law, (ii) commits in writing to payment of the full allocated share of $4,647,000, and (iii) provides adequate financial assurances of its ability to perform under any agreed-upon payment schedule.

In the alternative, DEH is prepared to engage in good-faith negotiations regarding cost-sharing and contribution, including the potential for RCFD to participate directly in remediation activities under appropriate oversight arrangements. However, any such discussions must proceed on the basis of RCFD's recognition of its status as a responsible party. DEH will not entertain negotiations premised on a denial of RCFD's liability.

IX. Reservation of Rights

DEH expressly reserves all rights and remedies available to it under federal and state law, in equity, and at common law, including but not limited to:

(a) The right to commence litigation against RCFD in the United States District Court for the Southern District of Texas, Houston Division, or in any other court of competent jurisdiction, including the District Court of Wharton County, Texas, or any other Texas state court of competent jurisdiction;

(b) The right to seek recovery of the full $9,740,000 in remediation costs on a joint-and-several-liability basis, should equitable allocation prove unwarranted or should RCFD fail to engage cooperatively in resolving this matter;

(c) The right to recover attorneys' fees, expert witness costs, consulting fees, prejudgment interest at the applicable statutory rate, and all other costs recoverable under applicable federal and state law;

(d) The right to seek a declaratory judgment establishing RCFD's liability for future response costs incurred at the Site, including costs arising from remedial activities not yet undertaken, additional investigation, and long-term monitoring and maintenance;

(e) The right to pursue claims for contribution under CERCLA § 113(f), 42 U.S.C. § 9613(f), including claims arising from any administrative or judicial settlement or order relating to the Site; and

(f) The right to pursue any and all other claims, causes of action, or remedies available under applicable law, including claims for nuisance, trespass, negligence, and strict liability.

Nothing in this letter shall be construed as a waiver, relinquishment, or limitation of any claim, right, defense, or remedy available to DEH, whether known or unknown, accrued or contingent, at law or in equity. DEH's willingness to engage in pre-suit discussion is offered as a courtesy and does not toll, extend, or otherwise affect any applicable statute of limitations, statute of repose, or prescriptive period. Any agreement to toll or extend such periods must be memorialized in a separate written tolling agreement executed by authorized representatives of both parties.

X. Request for Document Preservation

DEH requests that RCFD immediately institute a litigation hold and take all steps necessary to identify, preserve, and protect from destruction, alteration, or loss all documents, electronically stored information ("ESI"), and tangible items relating to the following categories:

(a) RCFD's operations at the Dunmore Wharton Terminal site from 1991 to 2010, including all operational records, daily logs, inventory records, product receipt and distribution records, and employee records;

(b) The Joint Operating Agreement between DTS and RCFD, including all amendments, modifications, addenda, side letters, and correspondence related thereto;

(c) Tank inspection, maintenance, repair, and upgrade records for Tanks S-1 through S-12, including API 653 inspection reports, ultrasonic thickness testing results, tank bottom inspection records, and cathodic protection monitoring records;

(d) Records of petroleum releases, spills, leaks, or discharges at or from the southern tank farm, including SPCC plans, spill response reports, internal incident reports, and notifications to regulatory agencies;

(e) All communications with TCEQ (and its predecessor agencies), DTS, DEH, the U.S. Environmental Protection Agency, or any other regulatory, governmental, or quasi-governmental body regarding the Site, including but not limited to compliance correspondence, inspection reports, notice of violation letters, enforcement actions, and permit applications;

(f) All environmental reports, sampling data, laboratory analytical results, remediation records, and consultant reports relating to the Site or to RCFD's operations at the Site;

(g) All insurance policies — including comprehensive general liability policies, environmental impairment liability policies, pollution liability policies, and umbrella or excess policies — that may provide coverage for RCFD's environmental liabilities at the Site, together with all correspondence with insurers regarding claims or potential claims related to the Site; and

(h) All financial records, tax returns, and corporate governance documents relevant to RCFD's operations at the Site and its ability to satisfy the demand made herein.

This preservation obligation extends to all documents and ESI in RCFD's possession, custody, or control, regardless of storage location or medium, including paper files, electronic files, email (including archived and deleted email recoverable from backup systems), databases, spreadsheets, geographic information system data, photographs, video recordings, and metadata associated with any of the foregoing.

RCFD is hereby placed on notice that spoliation or destruction of any potentially relevant evidence — whether intentional or through negligent failure to implement an adequate litigation hold — will be viewed as grounds for seeking adverse-inference instructions, sanctions, and other appropriate relief in any subsequent judicial proceeding. See Brookshire Bros., Ltd. v. Aldridge, 438 S.W.3d 9 (Tex. 2014) (addressing duty to preserve evidence and sanctions for spoliation); Zubulake v. Ashgrove Trust Bank, 220 F.R.D. 212 (S.D.N.Y. 2003).

XI. Conclusion

DEH urges RCFD to address this matter promptly and cooperatively. Protracted litigation would impose significant costs on both parties, divert resources from the important task of environmental remediation, and delay the restoration of the Site to a condition protective of human health and the environment. DEH believes that a negotiated resolution is in the mutual interest of both parties and is prepared to engage constructively toward that end.

DEH wishes to make clear, however, that it is proceeding with remediation through the TCEQ Voluntary Cleanup Program and will not delay or suspend cleanup activities pending the resolution of cost-recovery negotiations with RCFD. Remediation of the Site is necessary to protect public health — particularly the health and safety of downgradient residential receptors — and DEH will not compromise its remediation timeline to accommodate RCFD's litigation posture. All response costs incurred by DEH during this period will be carefully documented and will be fully recoverable from RCFD in any subsequent cost-recovery action.

DEH expects RCFD's written response on or before July 11, 2025. Any response should be directed to the undersigned at the address and contact information set forth below. If RCFD has retained counsel to represent it in this matter, please have counsel contact this office promptly so that we may direct future communications appropriately.

We trust that RCFD will give this matter the serious attention it warrants.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Sandra Tung, Partner

1200 McKinney Street, Suite 4100 Houston, Texas 77010 Telephone: (713) 458-7200 Direct: (713) 458-7234 Facsimile: (713) 458-7201

Email: stung@calderwoodharkness.com

cc:

Thomas Kessler, Partner Whitfield Barr LLP 500 West 5th Street, Suite 3200 Austin, Texas 78701

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

Enclosures:

1. Executive Summary — Phase II Environmental Site Assessment, Pinehill Environmental Consulting LLC (June 2024)

2. Remediation Cost Estimate Summary, Pinehill Environmental Consulting LLC (April 2025)

3. Site Location Map and Plume Delineation Figure

Remediation Component	Estimated Cost
Soil excavation and off-site disposal — Southern tank farm (RCFD-operated)	$3,420,000
Soil excavation and off-site disposal — Northern tank farm (DTS-operated)	$1,870,000
In-situ groundwater treatment (chemical oxidation and enhanced bioremediation)	$2,150,000
Long-term groundwater monitoring (8 years, 32 quarterly events at $33,125/event)	$1,060,000
Institutional controls and deed restrictions	$180,000
Project management, reporting, and regulatory liaison	$1,060,000
Total Estimated Remediation Cost	$9,740,000
Component	Amount
RCFD's allocated share of remediation costs	$4,260,000
DEH's investigation costs (Phase I, Phase II, and supplemental investigation)	$387,000
Total Demanded	$4,647,000

CALDERWOOD & HARKNESS LLP Attorneys at Law 1200 McKinney Street, Suite 4100 Houston, Texas 77010 Telephone: (713) 458-7200 Facsimile: (713) 458-7201 www.calderwoodharkness.com
Matter No. 1016-00006
May 12, 2025
VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED AND ELECTRONIC MAIL
Mr. Malcolm Griggs, President Rowan Creek Fuel Distributors, Inc. 1150 Lavaca Street, Suite 600 Austin, Texas 78701
Thomas Kessler, Partner Whitfield Barr LLP 500 West 5th Street, Suite 3200 Austin, Texas 78701
Re: Demand for Cost Recovery — Dunmore Wharton Terminal Site, 14200 FM 1301, Wharton, Wharton County, Texas 77488; CERCLA § 107(a), 42 U.S.C. § 9607(a); Texas Health & Safety Code § 361.344
Dear Mr. Griggs:
I. Introduction and Purpose of Letter
This firm represents Dunmore Energy Holdings Ltd. ("DEH"), a Cayman Islands exempted company (Registration No. MC-318574), and successor-in-interest to Dunmore Terminal Services, Inc. ("DTS"), a dissolved Texas corporation (EIN 76-0384291). We write on behalf of DEH to make a formal demand for contribution and cost recovery from Rowan Creek Fuel Distributors, Inc. ("RCFD") (EIN 74-2951683) arising from environmental investigation and remediation costs at the Dunmore Wharton Terminal site located at 14200 FM 1301, Wharton, Wharton County, Texas 77488 (the "Site").
This demand is made pursuant to 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 and Safety Code, commonly known as the Texas Solid Waste Disposal Act. As set forth in detail below, RCFD bears substantial responsibility for the release of hazardous substances at the Site during its nearly two decades of operational control over the southern tank farm. DEH has retained qualified environmental consultants, conducted thorough investigation of the nature and extent of contamination, and developed a comprehensive remediation strategy. Based on equitable allocation principles and the documented facts, DEH demands that RCFD pay the total sum of $4,647,000 in allocated remediation and investigation costs.
This letter constitutes a formal pre-suit demand. DEH expressly reserves all legal rights and remedies available to it under federal and state law, in equity, and at common law, including, without limitation, the right to seek recovery of the full remediation costs on a joint-and-several-liability basis. DEH's decision to make this demand before initiating litigation reflects its preference for a prompt, cooperative resolution and should not be construed as any limitation on the claims or damages DEH is entitled to pursue.
II. The Site — Description and History
A. Site Description
The Dunmore Wharton Terminal (the "Site") is a petroleum bulk-storage terminal facility commonly known by that name, located at 14200 FM 1301, Wharton, Wharton County, Texas 77488. The legal description of the Site is a 48.7-acre tract being Lots 3 and 4 of the H.T. & B.R.R. Survey, Abstract No. 241, Wharton County, Texas, as more particularly described in a deed recorded at Volume 1892, Page 417, Official Public Records, Wharton County, Texas. The tax parcel identification number is WC-0241-0034. The property is situated in unincorporated Wharton County and is zoned Heavy Industrial (HI) under the applicable county land-use regulations.
B. Site Improvements
The Site historically consisted of two principal tank farm areas, together with ancillary loading, distribution, and administrative infrastructure:
Northern Tank Farm. The northern portion of the Site contains twelve (12) aboveground storage tanks ("ASTs") with a total combined capacity of approximately 420,000 barrels. This tank farm was operated exclusively by DTS throughout the life of the facility.
Southern Tank Farm. The southern portion of the Site, comprising approximately eighteen (18) acres, contains twelve (12) ASTs designated as Tanks S-1 through S-12, with a total combined capacity of approximately 315,000 barrels. From 1991 through 2010, this tank farm was operated exclusively by RCFD pursuant to the Joint Operating Agreement described below.
Ancillary Facilities. The Site also includes a truck loading rack (decommissioned in 2015), pipeline interconnects to the Colonial Pipeline right-of-way (Disconnected in 2016), and an administrative building (currently abandoned). These facilities were used in connection with both the northern and southern tank farm operations during their respective periods of active use.
C. Operational History
The relevant operational history of the Site is as follows:
1974: DTS commenced petroleum bulk-storage terminal operations at the Site, initially operating the entire facility for the receipt, storage, and distribution of refined petroleum products.
1991: DTS and RCFD entered into a Joint Operating Agreement (the "JOA") pursuant to which RCFD assumed operational control of the southern tank farm, encompassing Tanks S-1 through S-12 and the approximately eighteen (18) acres surrounding those tanks. Under the JOA, RCFD was responsible for all aspects of day-to-day operations at the southern tank farm, including product receipt, storage, and distribution; tank inspection and maintenance; spill prevention, control, and countermeasure planning; and environmental compliance.
1991–2010: During this approximately nineteen-year period, RCFD continuously operated the southern tank farm. RCFD received, stored, and distributed refined petroleum products — principally diesel fuel and gasoline — through the southern tank farm facilities. Throughout this period, RCFD exercised exclusive operational control over the southern tank farm infrastructure and was responsible for environmental stewardship of that portion of the Site.
2010: The JOA was terminated, and RCFD ceased all operations at the Site. Upon termination, RCFD vacated the southern tank farm without performing any decommissioning remediation or conducting a comprehensive environmental assessment of the areas under its control.
2015: DTS ceased all remaining terminal operations at the Site, including operations in the northern tank farm.
October 15, 2017: DTS executed a Plan of Dissolution and Assignment of Liabilities, pursuant to which DTS assigned all of its liabilities — including, expressly, environmental obligations related to the Site — to DEH as successor-in-interest.
December 31, 2017: DTS was formally dissolved with the Texas Secretary of State, with DEH assuming all successor liability.
March 2019: The Site was acquired by Calera Properties Group LLC ("Calera") at a tax foreclosure sale for the sum of $612,000. Calera has made no operational use of the Site and has not engaged in any activities that contributed to the contamination. Calera is not a responsible party for the contamination that is the subject of this demand.
The foregoing chronology establishes that RCFD was the sole operator of the southern tank farm — the primary source area for subsurface contamination at the Site — for approximately nineteen years. During that period, RCFD bore exclusive responsibility for the condition of the southern tank farm facilities, including the integrity of tanks, containment structures, and associated piping systems.
III. RCFD's Status as a Responsible Party
RCFD is a responsible party liable for the response costs demanded herein under both federal and state law.
Under CERCLA § 107(a)(2), 42 U.S.C. § 9607(a)(2), any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of is liable for all costs of removal or remedial action incurred by any other person consistent with the National Contingency Plan. The term "disposal" has been broadly construed by the federal courts to encompass the release, discharge, deposit, or leaking of hazardous substances into the environment, including passive migration of previously released contaminants. See, e.g., Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599, 611 (2009); United States v. CDMG Realty Co., 96 F.3d 706, 714 (3d Cir. 1996).
Under Texas Health and Safety Code § 361.344, a "responsible party" includes any person who was the operator of a solid waste facility at the time of processing, storage, or disposal of solid waste. Section 361.344 provides a statutory cause of action enabling a party that undertakes remediation to recover costs from other responsible parties, including former operators. Texas courts have recognized that the definition of "solid waste" encompasses petroleum-contaminated soils and groundwater, thereby providing an independent basis for recovery that is not subject to CERCLA's petroleum exclusion. See Severin Corporation v. Pluff, 94 S.W.3d 22, 27 (Tex. App.—Tyler 2002, pet. denied).
RCFD satisfies the definition of a "responsible party" and "operator" under both federal and state law by virtue of its operational control of the southern tank farm (Tanks S-1 through S-12) from 1991 to 2010 under the JOA. During its period of operation, RCFD exercised day-to-day management and control over all aspects of petroleum product handling, tank maintenance, spill prevention, and environmental compliance for the southern tank farm. RCFD directed the activities of its own personnel at the Site, contracted with its own subcontractors for maintenance and inspection services, and maintained its own Spill Prevention, Control, and Countermeasure ("SPCC") Plan for the southern tank farm facilities. There can be no genuine dispute that RCFD was an "operator" within the meaning of CERCLA and Texas law during this period.
We note for the record that RCFD is a Texas corporation currently in active status, maintaining its principal offices at 1150 Lavaca Street, Suite 600, Austin, Texas 78701. Based on publicly available financial information, RCFD has estimated annual revenues of approximately $89 million and is financially capable of satisfying its environmental obligations. RCFD's ability to pay is relevant to the reasonableness of this demand and to any future equitable allocation analysis a court may undertake.
IV. Documented Releases from RCFD-Operated Facilities
The environmental investigation conducted at the Site has identified multiple documented releases of petroleum products from tanks and infrastructure within the southern tank farm during the period of RCFD's operational control. These releases are the primary sources of the subsurface contamination requiring remediation.
A. 1996 Release — Tank S-4
In 1996, approximately 8,000 gallons of diesel fuel were released from Tank S-4, an RCFD-operated aboveground storage tank in the southern tank farm. The release was reported to the Texas Commission on Environmental Quality (formerly the Texas Natural Resource Conservation Commission) ("TCEQ"). RCFD performed a partial cleanup in the immediate vicinity of the release; however, subsurface contamination was not fully remediated, and residual impacts to soil and groundwater persisted. The incomplete nature of the 1996 response action has contributed to the long-term contamination burden at the Site.
B. 2001 Release — Tank S-7
In 2001, approximately 3,200 gallons of gasoline were released from Tank S-7, an RCFD-operated aboveground storage tank in the southern tank farm. This release was reported to TCEQ under Incident No. 142876. The Tank S-7 release is of particular significance because the gasoline release introduced benzene, toluene, ethylbenzene, xylenes (BTEX constituents), and methyl tert-butyl ether (MTBE) into the subsurface in the vicinity of the shallow Chicot Aquifer. The subsequent environmental investigation has confirmed that the 2001 Tank S-7 release is a significant — and likely the primary — source of the dissolved benzene plume that has migrated approximately 2,400 feet downgradient from the southern tank farm through the shallow groundwater zone.
C. 2008 Release — Tank S-11
In 2008, approximately 5,600 gallons of diesel fuel were released from Tank S-11, an RCFD-operated aboveground storage tank in the southern tank farm. This release was reported to TCEQ under Incident No. 197503. The Tank S-11 release contributed additional total petroleum hydrocarbons to the already impacted soils and groundwater in the southern tank farm area, compounding the contamination attributable to the earlier 1996 and 2001 releases.
D. Additional RCFD-Attributable Release
In addition to the three releases described above, the environmental investigation has identified a fourth documented release originating from RCFD-operated infrastructure in the southern tank farm. This release is consistent with the pattern of operational releases that occurred during RCFD's tenure and further demonstrates that the contamination in the southern tank farm area is attributable to RCFD's management and operations. Detailed records concerning this release will be produced in connection with any litigation or formal cost-recovery proceeding.
E. DTS-Attributable Releases
For purposes of completeness and transparency, DEH acknowledges that DTS experienced releases from its own facilities in the northern tank farm. Specifically, in 2003, approximately 1,500 gallons of petroleum product were released from Tank N-3 in the northern tank farm (TCEQ Incident No. 158432), and in 2014, approximately 600 gallons were released from the truck loading rack (TCEQ Incident No. 251044). DEH does not seek to attribute these releases to RCFD. However, the volume and nature of the DTS-attributable releases are substantially smaller than the releases from RCFD-operated facilities, and the predominant source of subsurface contamination — particularly the soil contamination in the southern tank farm and the extensive downgradient dissolved-phase groundwater plume — is attributable to RCFD's operations. This distinction is central to the cost allocation analysis set forth in Section VI below.
V. Nature and Extent of Contamination
A. Environmental Investigations
Following the assumption of DTS's environmental obligations, DEH retained Pinehill Environmental Consulting LLC ("Pinehill"), a qualified Texas environmental consulting firm, to conduct comprehensive environmental investigations at the Site. Pinehill's work has been led by Dr. Lena Vasquez, P.E., P.G., who serves as the firm's Principal-in-Charge and who possesses extensive experience in the investigation and remediation of petroleum-impacted sites in the Texas Gulf Coast region.
Pinehill commenced a Phase I Environmental Site Assessment ("ESA") in January 2024 and completed a Phase II ESA in June 2024. The Phase II ESA included the advancement of soil borings, installation of groundwater monitoring wells, collection and laboratory analysis of soil and groundwater samples, and delineation of the extent of subsurface contamination. Supplemental investigations — including additional monitoring well installation, quarterly groundwater sampling, and focused soil characterization — continued through April 2025. The findings of these investigations are summarized below. Executive summaries of the Phase II ESA and the remediation cost estimate are enclosed with this letter.
B. Contaminants of Concern
The environmental investigations have identified the following contaminants of concern ("COCs") in soil and groundwater at the Site:
• Benzene, toluene, ethylbenzene, and xylenes ("BTEX");
• Total petroleum hydrocarbons ("TPH");
• Methyl tert-butyl ether ("MTBE"); and
• Dissolved-phase lead.
Each of these constituents has been detected at concentrations exceeding applicable regulatory standards, as described below.
C. Soil Contamination
Soil sampling in the southern tank farm — the area operated by RCFD — has revealed elevated concentrations of TPH and BTEX constituents. In the vicinity of Tank S-7, TPH concentrations in soil have been measured at concentrations up to 14,200 mg/kg, representing severe petroleum-impact to the vadose zone soils. By comparison, soil sampling in the northern tank farm — the area operated by DTS — in the vicinity of Tank N-3 has revealed TPH concentrations up to 8,750 mg/kg. While both areas exhibit contamination, the magnitude of impact in the RCFD-operated southern tank farm substantially exceeds that of the DTS-operated northern tank farm, both in concentration and in areal extent.
Benzene concentrations in soil have been measured at levels up to 42 mg/kg. This concentration exceeds the TCEQ Tier 1 Protective Concentration Level ("PCL") for residential land use (1.8 mg/kg) by more than twenty-three (23) times, and the commercial/industrial PCL (5.3 mg/kg) by approximately eight (8) times. These exceedances demonstrate that the soil contamination poses an unacceptable risk to human health and the environment under all applicable land-use scenarios and requires active remediation.
D. Groundwater Contamination
The environmental investigation has delineated a significant dissolved-phase contaminant plume in groundwater beneath and downgradient of the Site. The affected aquifer is the Chicot Aquifer (shallow zone), which is encountered at approximately 22 feet below ground surface. The Chicot Aquifer is a regionally significant water-bearing unit that serves as a source of drinking water for rural residents and agricultural operations in Wharton County.
The dissolved benzene plume extends approximately 2,400 feet downgradient (south-southwest) from the southern tank farm — the area formerly operated by RCFD. The maximum dissolved benzene concentration detected in groundwater is 3.8 mg/L, which is 760 times the federal Maximum Contaminant Level ("MCL") of 0.005 mg/L established under the Safe Drinking Water Act. 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 by a factor of approximately 5.8.
The spatial orientation and geochemical characteristics of the dissolved-phase plume confirm that it originates primarily from the southern tank farm area operated by RCFD. The plume's geometry, the location of peak concentrations in the immediate vicinity of Tanks S-4, S-7, and S-11, and the presence of MTBE (a gasoline additive consistent with the 2001 Tank S-7 gasoline release) all corroborate this conclusion. While some contribution from the DTS-operated northern tank farm area cannot be excluded, Pinehill's analysis indicates that the RCFD-operated facilities are the predominant source of the groundwater contamination.
E. Receptors at Risk
The nearest residential receptor to the leading edge of the dissolved benzene plume is the Ingram Property, located at 16405 FM 1301, approximately 3,100 feet south-southwest of the plume's current downgradient extent. The Ingram Property utilizes a private water well for domestic water supply, drawing from the same Chicot Aquifer (shallow zone) that is impacted by contamination from the Site.
In February 2025, Pinehill sampled the residential well at the Ingram Property as part of its supplemental investigation. As of that date, no COCs were detected above applicable MCLs in the Ingram well sample. However, given the current rate and direction of plume migration, the contamination poses a material risk of future impact to the Ingram Property well and potentially other downgradient receptors. The existence of this risk underscores the urgency of remedial action and the reasonableness of DEH's decision to proceed with remediation through the TCEQ Voluntary Cleanup Program.
VI. Remediation Costs and Allocation
A. Remediation Cost Estimate
Pinehill prepared a detailed remediation cost estimate in April 2025, projecting total remediation costs of $9,740,000, with a confidence range of $7.81 million to $12.18 million depending on site conditions encountered during implementation. The cost estimate encompasses the following major components:
The remediation plan includes soil excavation and off-site disposal at a permitted facility for impacted soils in both the southern and northern tank farm areas, in-situ groundwater treatment utilizing a combination of in-situ chemical oxidation ("ISCO") and enhanced bioremediation in the source area and along the plume centerline, long-term groundwater monitoring over an eight-year period (consisting of thirty-two quarterly sampling events), implementation of institutional controls and deed restrictions to manage residual risk, and ongoing project management, reporting, and regulatory coordination with TCEQ.
B. Cost Allocation — RCFD's Share
DEH has performed an equitable cost allocation analysis taking into account the factors identified by Congress in the legislative history of CERCLA — commonly known as the "Gore factors" — including (i) the ability of the parties to demonstrate that their contribution to the release can be distinguished, (ii) the amount and toxicity of the hazardous substances involved, (iii) the degree of involvement of the parties in the generation, transportation, treatment, storage, or disposal of the hazardous substances, and (iv) the degree of care exercised by the parties with respect to the hazardous substances. DEH has also considered the operational responsibilities delineated in the JOA and the documented sources of contamination identified through Pinehill's investigation.
Based on this analysis, DEH has determined RCFD's fair and reasonable share as follows:
Southern tank farm soil remediation (100% RCFD responsibility, as all documented releases in this area occurred during and as a result of RCFD's operations): $3,420,000
In-situ groundwater treatment (50% RCFD share, reflecting the commingled nature of the groundwater plume while recognizing the predominant contribution of the southern tank farm as the source area): $1,075,000
Long-term groundwater monitoring (50% RCFD share, consistent with the groundwater treatment allocation): $530,000
Institutional controls and deed restrictions (50% RCFD share): $90,000
Project management, reporting, and regulatory liaison costs ($1,060,000) and northern tank farm soil remediation costs ($1,870,000) have not been allocated to RCFD, representing a credit of $855,000 in project management costs and the entirety of the northern tank farm remediation costs that DEH has assumed as its own responsibility.
RCFD Subtotal — Allocated Remediation Share: $4,260,000
DEH emphasizes that this allocation is conservative and favorable to RCFD. The evidence strongly supports that RCFD-operated facilities are the predominant source of both the soil contamination in the southern tank farm and the dissolved-phase groundwater plume. A court applying the Gore factors could reasonably allocate a substantially greater share of costs to RCFD, potentially including the full $9,740,000 on a joint-and-several-liability basis.
C. DEH's Investigation Costs
In addition to the prospective remediation costs, DEH has already incurred $387,000 in environmental investigation costs through Pinehill from January 2024 through early 2025. These costs include the Phase I ESA, Phase II ESA, supplemental investigation activities (including additional monitoring well installation, soil boring advancement, groundwater sampling, and laboratory analysis), and preparation of the remediation cost estimate. These investigation costs constitute necessary response costs that are recoverable under CERCLA § 107(a) and Texas Health and Safety Code § 361.344.
D. Total Demand
The total amount demanded from RCFD is calculated as follows:
VII. Legal Bases for Recovery
A. Federal Law — CERCLA § 107(a), 42 U.S.C. § 9607(a)
RCFD is liable under CERCLA § 107(a)(2) as a former operator of a facility — the southern tank farm at the Site — at the time hazardous substances were disposed of or released. CERCLA imposes strict, joint and several liability on responsible parties for all costs of removal or remedial action, without regard to fault. Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599 (2009); United States v. Monsanto Co., 858 F.2d 160 (4th Cir. 1988).
The petroleum products released at the Site — including benzene, toluene, ethylbenzene, xylenes, MTBE, and dissolved lead — constitute "hazardous substances" as defined under CERCLA § 101(14), 42 U.S.C. § 9601(14). DEH acknowledges that CERCLA contains a petroleum exclusion under § 101(14); however, benzene and lead, as individual hazardous-substance constituents listed under CERCLA, and MTBE, which is not a naturally occurring fraction of crude petroleum, may fall outside the scope of the petroleum exclusion under applicable case law. See Wilshire Westwood Assocs. v. Atl. Richfield Co., 881 F.2d 801, 810 (9th Cir. 1989) (holding that hazardous substances that happen to be present in petroleum products may be recoverable when they are released as individual constituents); see also Mid Valley Bank v. N. Valley Bank, 764 F. Supp. 1377 (E.D. Cal. 1991). To the extent any portion of the contamination is subject to the petroleum exclusion under CERCLA, DEH relies on Texas state law as an independent and co-extensive basis for recovery, as described below.
DEH has incurred and will continue to incur necessary costs of response consistent with the National Contingency Plan ("NCP"), 40 C.F.R. Part 300. DEH's enrollment in and compliance with the TCEQ Voluntary Cleanup Program ("VCP") demonstrates consistency with applicable cleanup standards and satisfies the NCP-consistency requirement for private-party cost recovery. See Vine St. LLC v. Keeling, 460 F. Supp. 2d 728, 746 (W.D. Tex. 2006) (recognizing that participation in a state voluntary cleanup program may satisfy the NCP-consistency requirement).
B. Texas Law — Texas Health and Safety Code § 361.344
RCFD is a "responsible party" as defined under the Texas Solid Waste Disposal Act, Texas Health and Safety Code Chapter 361. Section 361.344 provides a statutory cause of action enabling a person who has undertaken or is undertaking remediation of contamination to recover costs from other responsible parties, including former operators of the facility. This state-law claim provides an independent and sufficient basis for the recovery demanded herein.
Importantly, Section 361.344 is not subject to the CERCLA petroleum exclusion and independently supports recovery for petroleum-related contamination. Texas courts have broadly construed the scope of the Solid Waste Disposal Act to encompass petroleum-contaminated soils and groundwater, ensuring that responsible parties cannot evade liability by invoking federal exclusions inapplicable under state law. DEH's Texas state-law claim therefore provides complete coverage for all categories of contamination at the Site, including those arising from petroleum product releases.
C. Joint and Several Liability
Under both CERCLA and Texas law, responsible parties are jointly and severally liable for response costs unless they can demonstrate a reasonable basis for apportioning harm. Burlington Northern, 556 U.S. at 614 (holding that apportionment is available only when there is a reasonable basis for determining the contribution of each cause to a single harm). The contamination at the Site represents a commingled plume arising from releases at both the southern and northern tank farms, and the harm is not readily divisible.
Notwithstanding DEH's entitlement to seek the full $9,740,000 in remediation costs from RCFD on a joint-and-several-liability basis, DEH has voluntarily proposed an equitable allocation and is demanding from RCFD only its proportionate share of $4,260,000 in remediation costs, plus $387,000 in investigation costs already incurred. This voluntary limitation reflects DEH's good faith and its desire to resolve this matter efficiently. DEH reserves the right to abandon this equitable allocation and pursue joint-and-several recovery of the full amount should RCFD fail to engage cooperatively.
VIII. Demand for Payment and Response Deadline
DEH hereby demands that RCFD pay the sum of $4,647,000 within sixty (60) days of the date of this letter — that is, on or before July 11, 2025.
Payment should be made by wire transfer to a trust account to be designated by Calderwood & Harkness LLP upon RCFD's confirmation of its intent to pay. Wire transfer instructions will be provided promptly upon receipt of written confirmation from RCFD or its counsel.
DEH recognizes that a payment of this magnitude may require structured arrangements, and DEH is willing to discuss a reasonable payment schedule, provided that RCFD (i) acknowledges its liability as a responsible party under applicable federal and state law, (ii) commits in writing to payment of the full allocated share of $4,647,000, and (iii) provides adequate financial assurances of its ability to perform under any agreed-upon payment schedule.
In the alternative, DEH is prepared to engage in good-faith negotiations regarding cost-sharing and contribution, including the potential for RCFD to participate directly in remediation activities under appropriate oversight arrangements. However, any such discussions must proceed on the basis of RCFD's recognition of its status as a responsible party. DEH will not entertain negotiations premised on a denial of RCFD's liability.
IX. Reservation of Rights
DEH expressly reserves all rights and remedies available to it under federal and state law, in equity, and at common law, including but not limited to:
(a) The right to commence litigation against RCFD in the United States District Court for the Southern District of Texas, Houston Division, or in any other court of competent jurisdiction, including the District Court of Wharton County, Texas, or any other Texas state court of competent jurisdiction;
(b) The right to seek recovery of the full $9,740,000 in remediation costs on a joint-and-several-liability basis, should equitable allocation prove unwarranted or should RCFD fail to engage cooperatively in resolving this matter;
(c) The right to recover attorneys' fees, expert witness costs, consulting fees, prejudgment interest at the applicable statutory rate, and all other costs recoverable under applicable federal and state law;
(d) The right to seek a declaratory judgment establishing RCFD's liability for future response costs incurred at the Site, including costs arising from remedial activities not yet undertaken, additional investigation, and long-term monitoring and maintenance;
(e) The right to pursue claims for contribution under CERCLA § 113(f), 42 U.S.C. § 9613(f), including claims arising from any administrative or judicial settlement or order relating to the Site; and
(f) The right to pursue any and all other claims, causes of action, or remedies available under applicable law, including claims for nuisance, trespass, negligence, and strict liability.
Nothing in this letter shall be construed as a waiver, relinquishment, or limitation of any claim, right, defense, or remedy available to DEH, whether known or unknown, accrued or contingent, at law or in equity. DEH's willingness to engage in pre-suit discussion is offered as a courtesy and does not toll, extend, or otherwise affect any applicable statute of limitations, statute of repose, or prescriptive period. Any agreement to toll or extend such periods must be memorialized in a separate written tolling agreement executed by authorized representatives of both parties.
X. Request for Document Preservation
DEH requests that RCFD immediately institute a litigation hold and take all steps necessary to identify, preserve, and protect from destruction, alteration, or loss all documents, electronically stored information ("ESI"), and tangible items relating to the following categories:
(a) RCFD's operations at the Dunmore Wharton Terminal site from 1991 to 2010, including all operational records, daily logs, inventory records, product receipt and distribution records, and employee records;
(b) The Joint Operating Agreement between DTS and RCFD, including all amendments, modifications, addenda, side letters, and correspondence related thereto;
(c) Tank inspection, maintenance, repair, and upgrade records for Tanks S-1 through S-12, including API 653 inspection reports, ultrasonic thickness testing results, tank bottom inspection records, and cathodic protection monitoring records;
(d) Records of petroleum releases, spills, leaks, or discharges at or from the southern tank farm, including SPCC plans, spill response reports, internal incident reports, and notifications to regulatory agencies;
(e) All communications with TCEQ (and its predecessor agencies), DTS, DEH, the U.S. Environmental Protection Agency, or any other regulatory, governmental, or quasi-governmental body regarding the Site, including but not limited to compliance correspondence, inspection reports, notice of violation letters, enforcement actions, and permit applications;
(f) All environmental reports, sampling data, laboratory analytical results, remediation records, and consultant reports relating to the Site or to RCFD's operations at the Site;
(g) All insurance policies — including comprehensive general liability policies, environmental impairment liability policies, pollution liability policies, and umbrella or excess policies — that may provide coverage for RCFD's environmental liabilities at the Site, together with all correspondence with insurers regarding claims or potential claims related to the Site; and
(h) All financial records, tax returns, and corporate governance documents relevant to RCFD's operations at the Site and its ability to satisfy the demand made herein.
This preservation obligation extends to all documents and ESI in RCFD's possession, custody, or control, regardless of storage location or medium, including paper files, electronic files, email (including archived and deleted email recoverable from backup systems), databases, spreadsheets, geographic information system data, photographs, video recordings, and metadata associated with any of the foregoing.
RCFD is hereby placed on notice that spoliation or destruction of any potentially relevant evidence — whether intentional or through negligent failure to implement an adequate litigation hold — will be viewed as grounds for seeking adverse-inference instructions, sanctions, and other appropriate relief in any subsequent judicial proceeding. See Brookshire Bros., Ltd. v. Aldridge, 438 S.W.3d 9 (Tex. 2014) (addressing duty to preserve evidence and sanctions for spoliation); Zubulake v. Ashgrove Trust Bank, 220 F.R.D. 212 (S.D.N.Y. 2003).
XI. Conclusion
DEH urges RCFD to address this matter promptly and cooperatively. Protracted litigation would impose significant costs on both parties, divert resources from the important task of environmental remediation, and delay the restoration of the Site to a condition protective of human health and the environment. DEH believes that a negotiated resolution is in the mutual interest of both parties and is prepared to engage constructively toward that end.
DEH wishes to make clear, however, that it is proceeding with remediation through the TCEQ Voluntary Cleanup Program and will not delay or suspend cleanup activities pending the resolution of cost-recovery negotiations with RCFD. Remediation of the Site is necessary to protect public health — particularly the health and safety of downgradient residential receptors — and DEH will not compromise its remediation timeline to accommodate RCFD's litigation posture. All response costs incurred by DEH during this period will be carefully documented and will be fully recoverable from RCFD in any subsequent cost-recovery action.
DEH expects RCFD's written response on or before July 11, 2025. Any response should be directed to the undersigned at the address and contact information set forth below. If RCFD has retained counsel to represent it in this matter, please have counsel contact this office promptly so that we may direct future communications appropriately.
We trust that RCFD will give this matter the serious attention it warrants.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Sandra Tung, Partner
1200 McKinney Street, Suite 4100 Houston, Texas 77010 Telephone: (713) 458-7200 Direct: (713) 458-7234 Facsimile: (713) 458-7201
Email: stung@calderwoodharkness.com
cc:
Thomas Kessler, Partner Whitfield Barr LLP 500 West 5th Street, Suite 3200 Austin, Texas 78701
Gavin Rourke, Chairman & CEO Dunmore Energy Holdings Ltd. 4th Floor, Harbour Place, 103 South Church Street George Town, Grand Cayman, KY1-1002 Cayman Islands
Enclosures:
1. Executive Summary — Phase II Environmental Site Assessment, Pinehill Environmental Consulting LLC (June 2024)
2. Remediation Cost Estimate Summary, Pinehill Environmental Consulting LLC (April 2025)
3. Site Location Map and Plume Delineation Figure
Remediation Component | Estimated Cost
Soil excavation and off-site disposal — Southern tank farm (RCFD-operated) | $3,420,000
Soil excavation and off-site disposal — Northern tank farm (DTS-operated) | $1,870,000
In-situ groundwater treatment (chemical oxidation and enhanced bioremediation) | $2,150,000
Long-term groundwater monitoring (8 years, 32 quarterly events at $33,125/event) | $1,060,000
Institutional controls and deed restrictions | $180,000
Project management, reporting, and regulatory liaison | $1,060,000
Total Estimated Remediation Cost | $9,740,000
Component | Amount
RCFD's allocated share of remediation costs | $4,260,000
DEH's investigation costs (Phase I, Phase II, and supplemental investigation) | $387,000
Total Demanded | $4,647,000

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