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ExxonMobil Corp. (Exxon) operates a refinery complex in Baytown, Texas, which is the largest petroleum and petrochemical complex in the U.S. This Complex is governed by Title V operating permits issued by the Texas Commission on Environmental Quality (TCEQ). In a 2010 citizen lawsuit, Environmental Texas Citizen Lobby Inc. and the Sierra Club alleged that, since 2005, equipment breakdowns, malfunctions and other non-routine incidents at the Complex caused illegal emissions of benzene, hydrogen chlorides, sulfur dioxide, hydrogen sulfide, carbon monoxide, and other substances. Plaintiffs sought $641 million in damages. On December 17, 2014, the District Court, [enhanced version available to lexis.com subscribers], declined to impose any penalty, finding that the $1.4 million penalty and stipulation on future corrective action that Exxon previously agreed to with TCEQ was sufficient.
The case illustrates that a proactive EHS effort can pay real dividends in defending against citizen suits or enforcement actions, even if the number of violations are not in the company’s favor. By way of background, all parties stipulated to Exxon’s indications of noncompliance, described as:
• 241 “reportable emissions events” (i.e., those events “that release greater than a certain threshold quantity of pollutants” and are reported to TCEQ);
• 3,735 “recordable emissions events” (i.e., those events “that release less than the aforementioned threshold quantity of pollutants” but are not reported to TCEQ); and
• 901 Title V deviations.
TCEQ investigates all reportable emissions events. After investigating, TCEQ assessed about $1.1 million in penalties against Exxon, and Harris County assessed about $0.3 million in penalties. Furthermore, in 2012, TCEQ and Exxon entered into an agreed enforcement order, which stipulated penalties for future reportable emissions events and mandated four environmental improvement projects. The projects would cost about $20 million.
Finding as a threshold matter that not all of Plaintiffs’ counts were actionable, the court declined to assess penalties for any of Plaintiffs’ remaining counts. The Court was not persuaded that the number of events and deviations meant anything: “Despite good practices, it is not possible to operate any facility—especially one as complex as the Complex—in a manner that eliminates all Events and Deviations.” Rather, the Court was persuaded that Exxon’s efforts to conduct an internal investigation and implement corrective actions after every discovery of a potential non-compliance event, which conformed to or exceeded industry practice, meant that Exxon “made good faith efforts to comply with the CAA.” Furthermore, the Court was not persuaded that the violations were serious or lengthy in duration, nor was it persuaded that Exxon gained any economic benefit from non-compliance. The Court entered judgment for Defendants.
The findings of fact are available here.
By Alexander J. Bandza, Associate, Jenner & Block
Read more at Corporate Environmental Lawyer Blog by Jenner & Block LLP.
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