In a colossal case of surprise back-billing Mobil Oil was caught off guard by a $6 million charge for seven years of wharfage fees at the Port of Saipan.

The Commonwealth Ports Authority said it would take Mobil to court if it does not agree to the latest and final settlement proposal by Aug. 31. CPA and Mobil have been negotiating a settlement and terms of payment since the error was discovered and the surprise bill delivered in August 2004.

“That was something we overlooked in terms of billing Mobil for fuel cargo ” said Carlos H. Salas executive director at the Commonwealth Ports Authority which runs the airports and seaports in the Northern Mariana Islands. “It was an oversight on our part. From a personal level we feel really bad about this. I wish there was some other way than back-billing these folks. We’re operating under a tariff — statutory regulations and federal maritime filings of rates; so we couldn’t turn our heads away from it. It’s got to be billed.

“They used the services for that period of time and they have to pay for it. From a management standpoint we have no authority to waive the fees whether it might be from an oversight or a typographical error. If it’s truly old — but the public is entitled to it so be it. The point is like all of us we are subject to find the money if we owe it. Have you ever been back-billed for a power bill?”

Jeffrey C. Borja president and country manager for Mobil Oil Guam Inc. and Mobil Oil Mariana Islands Inc. called the back-billing “pretty shocking numbers.” Borja said confidential negotiations with CPA were ongoing and were protracted. “In the end we will have to recover this amount from the marketplace. He said Mobil is attempting to make an adjustment to the settlement amount.

The amount — approximately $6 million — is for wharfage fees going back to October 1997 when the Saipan Harbor Improvement Project was completed and fuel ships were first able to hook up to portside underground fuel-supply lines — and should have started paying wharfage fees. Prior to that time fuel ships pumped gas supplies from their anchorage to Mobil and Shell tank farms in Puerto Rico Saipan using floating throughput lines. Wharfage is charged to all ships at $5.50 per revenue ton of delivered goods. Part of the back-billing is for charges from West Tinian Harbor. CPA does not charge for fuel deliveries at Rota which has no dock-face fuel facility. Ships making fuel deliveries at Rota use floating throughput lines.

An oil-industry expert said had Mobil known of the port charges it would have figured them into the cost of doing business and thus the cost of fuel to customers. Because they were not included in billings over the last seven years Mobil was unable to figure that added cost into its pricing. Now the charges will be hard if not impossible to entirely recoup.

Mobil which does business in Saipan as Mobil Oil Mariana Islands Inc. and Shell Marianas maintain large gasoline-storage tanks next to the Port of Saipan. They pump gasoline from ships at the fuel facility at the pier into those nearby tanks.

The back-billing debacle has a wider reach than the accounts-payable office at Mobil. Mobil oil tankers during the seven years covered by the back-billing shipped all fuel to the Marianas and Shell purchased gas during that period from Mobil and most likely will be required to pay a share of the settlement. Shell said it is Mobil’s fight but acknowledged to the Journal that Shell may be responsible for part of the back-billed wharfage fees.

Phil Stalker president of Shell Guam Inc. and Shell Marianas said Shell is in discussions with Mobil and CPA about the charges but preferred not to comment while the negotiations are under way.

Mobil is trying to figure out if the airlines might share in the surprise port charges. Mobil said it might be able to go back to the airlines which use Mobil jet fuel at the Saipan International Airport because commercial contracts in place may allow the passing along of certain taxes and charges.

Salas said no one would be fired or reprimanded because of the billing oversight. “Because of the possibility of going into litigation I don’t want to provide any further basis for what happened except to say that it was an oversight.”

Salas spoke in broad terms about the final settlement offer in the hands of Mobil. The $6 million amount was arrived at after some “deductions for other considerations ” such as fuel used for public utilities. He said “the statute of limitations was a consideration ” but wouldn’t elaborate. Salas said the settlement would allow Mobil to spread payments over several years. “We’ve given them the best deal we can at this point. We’re working with Mobil to make it as painless as possible. It was the call of the board members at CPA but the settlement negotiations have been a two-way street with Mobil. Hopefully they will sign off on it. There is no surprise in the settlement.” MBJ