MTBE Settlement Costly to Oil Firms

Sept. 15, 2002

Oil companies pay $28 million for MTBE contamination

," Shell Oil Co., Equilon Enterprises LLC and Texaco Inc. announced a settlement of $28 million to resolve liability for contamination of California's South Lake Tahoe water supply with methyl tertiary butyl ether (MTBE). The Aug. 5, 2002, settlement, combined with earlier out-of-court settlements, brings the MTBE-related settlement total to $69 million. In April, jurors found the three companies responsible for MTBE pollution that closed one- third of the utility's drinking water wells. Other parties reaching earlier out-of-court settlements include Tosco (now owned by Phillips Petroleum), ExxonMobil Corp., Atlantic Richfield Co., Unocal Corp. and Chevron USA. MTBE commonly is used as a gasoline oxygenate to help fuel burn cleaner, as required by the Clean Air Act. In California, it is being phased out ," a 1999 study found the additive poses a serious threat to public health and the environment. Nearly all California oil companies have announced plans to transition from MTBE to ethanol.

New GAO report criticizes EPA's knowledge of facility response plans

," A new report issued by the General Accounting Office (GAO) criticizes the U.S. Environmental Protection Agency (EPA) for knowing too little about recently submitted Risk Management Plans (RMPs). Businesses storing certain chemicals in quantities greater than threshold quantities are required to submit such plans to EPA and state and local emergency planning committees under Section 112(r) of the Clean Air Act. According to the July 31 report, Chemical Safety: Emergency Response Community Views on the Adequacy of Federally Required Chemical Information, EPA has reviewed approximately 15 percent of the roughly 15,000 plans and does not have a comprehensive picture of the accuracy of the data submitted. The report also states that EPA has not yet determined the exact number of facilities required to submit the data, but believes most facilities have complied. The agency does not know the extent to which local responders are receiving RMPs and inventory reports, the report added. The report also makes clear that EPA is faced with resource constraints and recognizes the need to review more reports. In response, EPA said it is considering a program to allow facilities to hire agency-certified auditors to perform on-site inspections. The report is available at

Court puts time limit on civil penalty pursuit

," Chief Judge Larry McKinney of the U.S. District Court for the Southern District of Indiana recently ruled that the federal government cannot pursue civil penalties for violations that are more than five years old. In a New Source Review (NSR) case brought by the United States against Southern Indiana Gas and Electric Co. (SIGECO), McKinney found that the federal statute of limitations at 28 U.S.C. Section 2462 precludes the government from seeking civil penalties for violations stemming from 1991 and 1992 construction projects. Although the government can seek a judgment that SIGECO violated the law, it can seek only injunctive relief to correct the violations ," not any applicable penalties under the law. The same court also ruled that the United States can pursue alleged NSR violations against SIGECO for its operation of a power plant even though the Indiana Department of Environmental Management had informed the company that NSR provisions did not apply. In motions filed before the court, SIGECO contended that the United States cannot pursue penalties for modifications the company made in 1991 and 1992 because the government filed the charges more than five years later. The government responded that because SIGECO continues to operate the plant, its failure to get permits in 1991 and 1992 are ongoing violations and are not covered by the statute of limitations. The case confirms what environmental practitioners routinely advocate ," that the United States can recover civil penalties for only a five-year period following the alleged violation. According to Kevin Gaynor, who works for Vinson & Elkins and represents SIGECO, the statute of limitations ruling makes it more difficult for the government to argue that power plants need to install today's most stringent emissions control technology for violations that occurred years ago. CP

Grayson is a partner with Jenner & Block, Chicago, working in the firm's Environmental Law practice group, Contact her via e-mail at [email protected].