CITGO Settles with Federal and State Natural Resource Trustees for Claims Arising from 2006 Oil Spill

US DOJ recently announced a settlement of federal and state natural resource damage (NRD) claims asserted by federal and state trustees under the Oil Pollution Act (OPA) and state law against CITGO Petroleum Corporation arising from the June 2006 spill from the oil refinery in Lake Charles, Louisiana.[1]  Under the consent decree, the company agrees to pay $19,688,149.83 to settle NRD claims, with most of the money ($19,160,000) going to pay for restoration projects selected by the natural resource trustees, and the remainder ($528,149.83) to pay for unpaid trustee assessment costs. 

The spill happened on June 18 and 19, 2006, when wastewater storage tanks overflowed during heavy rain. In all, according to the government, 54,000 barrels of waste oil and millions of gallons of oily wastewater escaped the facility and flowed into the Indian Marais waterway and shorelines and then into the Calcasieu River and estuary. The government asserted that the spill killed or injured birds, fish, invertebrates and other animals, damaged marsh, subtidal and intertidal habitats, and caused losses of recreational uses in the river and estuary. This settlement resolves the last outstanding government claims against the company for the spill and brings the total in fines, penalties and damages paid to the US and Louisiana to over $116 million. 

Under the Oil Pollution Act (OPA), “responsible parties” like the owners or operators of onshore facilities are strictly liable for natural resource damages arising from oil spills, subject to certain limited, enumerated defenses.[2] The President designates federal officials to act on behalf of the public to recover damages for injury to, destruction of, loss of, or loss of use of natural resources in the event of an oil spill. States, tribes, and foreign governments may designate trustees to bring claims.[3] Natural resource damages are also recoverable under state law. The natural resource trustees are charged with assessing the damages to natural resources and developing and implementing plans to restore, rehabilitate, replace, or acquire the equivalent of the damaged natural resources. 

Projects or Money? This consent decree illustrates some of the options that companies have in resolving NRD claims. In particular, some companies may wish to be heavily involved in the process of proposing or implementing specific restoration projects as part of a settlement.[4] This can be efficient where companies have internal capacity to evaluate suitable restoration projects – for example when they already have personnel who specialize in environmental remediation, and when they have good information on which organizations in the community have existing needs. In other cases, like this consent decree, companies may decide to agree to a monetary settlement only. Such settlements can be efficient because they allow a company to satisfy its obligations without any other commitment of internal resources. 

Assessment Costs are Part of Natural Resource Damages. This consent decree also serves as an important reminder to companies that the costs that the natural resource trustees incur in assessing NRD are themselves recoverable and can often represent a substantial proportion of the total damage demand. Responsible parties often incur assessment costs on their own (as CITGO did here), and may reimburse trustees for assessment costs over time before a settlement is reached. Thus, the full cost of assessment is often higher than the final amounts reflected in a consent decree. 

At Wiley we have substantial experience negotiating with natural resource trustees and resolving such claims. If you are involved in a potential or an active NRD claim, we can assist you in evaluating your options. 

[1] https://www.justice.gov/enrd/consent-decree/file/1405156/download

[2] These are: act of God, act of war, and the act or omission of a third party under certain circumstances.  Here, a judge found that the spill was caused by the company’s failure to maintain the tanks over time.

[3] Here, the National Oceanic and Atmospheric Administration (NOAA) and the US Fish & Wildlife Service were the designated federal trustees.  Louisiana has designated five state trustees that brought claims here: Louisiana Oil Spill Coordinator’s Office, Department of Public Safety & Corrections; Louisiana Department of Natural Resources; Louisiana Department of Environmental Quality, Louisiana Department of Wildlife and Fisheries; and the Louisiana Coastal Protection and Restoration Authority.

[4] These restoration projects should not be confused with “supplemental environmental projects” (SEPs), which are voluntary and which companies may agree to as part of a settlement of civil penalty claims.  For a discussion of recent policy changes regarding SEPs at the federal level, see our recent alert at https://www.thewell.law/in-epa-civil-enforcement-supplemental-environmental-projects-back-on-the-table.  In contrast, under OPA and other statutes, trustees are charged with implementing restoration projects as one potential option to recover for damages to natural resources.

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