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May 01 2017

ExxonMobil Hit with $20 Million Fine; Economic Benefit a Key Issue

May 1, 2017 (Houston)

James SmithBy James Smith – “Environmental Alert” (Schirrmeister, Diaz-Arrastia, Brem LLP)

Based largely on a determination that ExxonMobil received a multi-million dollar benefit from delaying certain pollution prevention projects, a trial judge issued revised Findings of Fact and Conclusions of Law (“Revised Findings”) and assessed a $20 million civil penalty for Clean Air Act violations.  This is the latest development in the citizen suit, Environment Texas Citizen Lobby v. ExxonMobil.

Rigorous Analysis of Economic Benefit

This case illustrates the rigor that trial judges must employ in determining the economic benefit of non-compliance with environmental requirements.  The U.S. Court of Appeals for the Fifth Circuit, which covers Louisiana and Texas, has made clear in recent opinions that trial courts must estimate the economic benefit of non-compliance, or make specific findings to support a finding of no benefit.  (See my prior alert regarding U.S. v Citgo and my prior alert regarding the Fifth Circuit’s opinion in this case)

Initial Decision Reversed for Inadequate Findings on Economic Benefit

In the initial ExxonMobil decision, the trial judge determined that ExxonMobil did not receive any economic benefit from its Clean Air Act violations, and assessed no penalty.  The Fifth Circuit reversed, holding that the judge failed to make the specific findings necessary to support a determination of no economic benefit.

Based on the Fifth Circuit’s opinion, the trial judge determined that ExxonMobil received an economic benefit from its violations of over $14 million, and issued Revised Findings to that effect.  This represented the largest component of the $20 million penalty.

General Correlation to Economic Benefit Is Adequate

In arriving at the economic benefit determination, the judge focused on four projects that ExxonMobil allegedly delayed in implementing at its Baytown, Texas refining/petrochemical complex.  The judge ruled that a precise correlation between those projects and the violations was not necessary.  Rather, the Revised Findings indicate that the projects would generally have ameliorated the violations, and that this was sufficient to use the benefit of delaying the projects as the basis for the economic benefit determination.

Additional Factors in Final Penalty Determination

In the Revised Findings, the trial judge also looked at other factors, including the number of days of violations (16,386) and the quantitative severity of the excess emissions (approximately 10 million pounds), and increased the penalty by 50% above the economic benefit.  After reducing the penalty for $1.4 million already paid to TCEQ, the final penalty was slightly less than $20 million.  This was approximately half of what the plaintiffs had suggested.

For a copy of the Revised Findings click here.

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