ExxonMobil Corp. (XOM) told a jury that a gasoline additive to reduce air pollution never caused illness to any resident of New Hampshire, which sued oil companies claiming the chemical polluted its groundwater.
ExxonMobil and Citgo Petroleum Corp. made opening statements today in a jury trial of an $816 million lawsuit in which the state alleges the oil companies knew the chemical would contaminate groundwater. The state court trial, which began yesterday in Concord, pits the environmental claims against assertions by companies that they were simply complying with federal pollution standards.
It’s one of scores of cases involving the additive methyl tertiary butyl ether, or MTBE, filed since 2000 against oil refiners, fuel distributors and chemical makers.
“This is not a personal-injury case,” David Lender, a lawyer for ExxonMobil, told the jury. “There’s not any evidence that anyone ever got sick or got cancer from MTBE.” He said there has been no gasoline sold in the state containing MTBE for more than six years.
The state claimed that the oil companies knew that if they added MTBE to gasoline it would increase the risk and costs associated with contamination.
“Exxon decided to disregard the recommendation of its own employees and put MTBE in gasoline,” Jessica Grant, a lawyer for the state, told jurors yesterday. “In 1984, Exxon anticipated that if it added MTBE to its gasoline, the number of contamination incidents would triple. These incidents would take longer to clean up and cost five times as much.” Each cleanup at that time would have cost as much as $7 million, she said.
The companies said the federal Clean Air Act overrides the state claims, and that by adding MTBE to gasoline, they were complying with a U.S. mandate to supply cleaner-burning fuel.
Oil refiners began adding MTBE to gasoline in the 1970s to replace lead. From 1995 to 2006, they increased the use of MTBE, which boosts the fuel’s oxygen level, making it burn more cleanly.
“We had no choice but to put oxygenates in our gasoline,” Nate Eimer, a lawyer for Citgo, said today in his opening statement. “Nothing worked better in cleaning the air than MTBE.”
Keith Hylton, who teaches law and economics at Boston University School of Law, said the oil companies are counting on pre-emption, which turns on whether federal regulators “looked at all the issues that the state would examine in a lawsuit.”
“The oil companies will say, ‘Federal law made us do that, and that pre-empts any state lawsuit,’” Hylton said.
James Quinn, a lawyer for ExxonMobil, told the jury yesterday that there were “great benefits to using MTBE but there were downsides. All of these downsides were known to all the folks involved.”
MTBE is produced by combining methanol, which is derived from natural gas, and isobutylene, a byproduct of gasoline refining. It can leak into the ground from gas stations, storage tanks and auto junkyards.
It dissolves in water and doesn’t biodegrade, so it can be carried with the water great distances from the site of a leak or spill, according to court papers. The chemical is difficult and expensive to find, treat and remove, according to filings.
According to New Hampshire case filings, MTBE can render drinking water “foul, putrid and unfit for human consumption.” The state said it petitioned the U.S. Environmental Protection Agency in 2001 to get out of its reformulated-gasoline program because of awareness of MTBE’s harmful effects. The additive has been banned in the state since January 2007.
“Despite knowing that MTBE posed a greater threat to drinking water, they never posted a single warning,” Grant said.
New Hampshire sued ExxonMobil and Citgo in 2003 along with Shell Oil Co., Sunoco Inc., ConocoPhillips (COP), Irving Oil Ltd., Vitol SA and Hess Corp. All settled but Irving, Texas-based ExxonMobil and Citgo, the Houston-based unit of Venezuela’s state-owned oil company, Petroleos de Venezuela SA. Shell and Sunoco agreed to pay $35 million in an accord announced in November.
New Hampshire said it has identified 228 sites that will require cleanup from contamination by MTBE, which according to court filings can cause cancer in animals. Tests in 2005 and 2006 found MTBE in 9.1 percent of private wells throughout the state, it said.
New Hampshire is seeking $816 million to cover cleanup and monitoring costs, Grant said, and it will ask for damages from ExxonMobil and Citgo based on their market shares of gasoline sold in the state during the time the suit covers.
ExxonMobil’s market share was about 30 percent, she said. That means the state will seek $245 million in damages from the company. Citgo’s market share ranged from 3 percent to 8.7 percent.
Lender said today that ExxonMobil’s market share in New Hampshire was only 6.1 percent during that time.
“The majority of the state’s damage claims are based on computer models and projections, not on actual testing or data,” Claire Hassett, an ExxonMobil spokeswoman, said by e- mail.
The state said the oil companies could have used safer additives, such as ethanol, and chose not to because MTBE is inexpensive to produce.
“If they had an alternative product to use and the alternative is just as good and avoids serious risk to consumers, there’s a strong argument the defendants have failed the risk-utility standard and can be held liable,” said Hylton, of Boston University.
The oil companies said ethanol wasn’t in large enough supply when an additive was being sought, and that it presents its own environmental hazards.
ExxonMobil’s Hassett said the fault lies with whoever spilled the chemically treated fuel.
“MTBE contamination has been found in New Hampshire because someone spilled gasoline in New Hampshire, not because it was added to gasoline in a refinery in another state,” she said. “The state should be suing parties responsible for spilling gasoline.”
The oil companies also said in court filings that a statute of limitations should prevent the litigation from proceeding. The state waited three years from the time it detected MTBE in sites until it sued, they said.
Superior Court Judge Peter Fauver in August rejected oil company motions seeking judgment without a trial based on the arguments they raised. Those issues can be brought up again for the jury’s consideration.
In January 2011, the New Hampshire Supreme Court denied a motion by the companies to decide the case in their favor and sent it back to the Superior Court. The state’s highest court said New Hampshire could seek damages for contamination of nonpublic sources of water, such as wells, and public sources.
The New Hampshire case had been moved to federal court in New York, where other lawsuits have been consolidated for pretrial evidence-gathering and motions before U.S. District Judge Shira Scheindlin in Manhattan. In 2007, the U.S. Court of Appeals in New York sent New Hampshire’s case back to the state court there.
Scheindlin presided over the trial of New York City’s case against ExxonMobil. In 2009, the jury in that case ordered ExxonMobil to pay $104.7 million after finding it liable for polluting wells in the city. ExxonMobil has appealed.
The cases consolidated in New York may be tried separately in courts around the U.S. if settlements aren’t reached. In the New York litigation, the New Jersey Department of Environmental Protection filed its fourth amended complaint in June. No date has been set for a trial, which would probably take place in federal court in New Jersey.
The New Hampshire trial may take more than four months, lawyers said.
After the jury was dismissed yesterday, Citgo’s Eimer asked the judge to declare a mistrial, claiming that the state’s lawyer misrepresented a document as one of Citgo’s in her remarks to the jury.
“There’s a long road ahead of us,” Fauver told the lawyers. “This will all be clarified. I don’t think it warrants a mistrial.”
The case is State of New Hampshire v. Hess Corp. (HES), 03-C- 0550, New Hampshire Superior Court, Merrimack County (Concord). The federal cases are consolidated as In re MTBE Products Liability Litigation, 00-11898, U.S. District Court, Southern District of New York (Manhattan).
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