Citgo to Settle New Hampshire Gas-Additive Lawsuit

New Hampshire shouldn’t have had to trade water quality for cleaner air, a former state official told a jury in a trial over whether ExxonMobil Corp. contaminated the state’s groundwater with a gasoline additive.

Kent Colburn, the former director of the air resources division of New Hampshire’s Department of Environmental Services, testified in state court in Concord today that it wouldn’t have participated in a federal clean-air program called Reformulated Gasoline, or RFG, if Exxon had warned of the risks of the additive, methyl tertiary butyl ether, or MTBE. The trial began Jan. 14.

“DES was not in the business of transferring pollution from one medium to another,” said Colburn, who served from 1995 to 2002. Although the RFG program “created numerous health benefits,” MTBE wasn’t the reason for the air quality improvement, he said. Former DES commissioner Robert Varney testified last week that he was “shocked” to learn Exxon was aware of MTBE’s risks before adding it to gasoline sold in the state.

New Hampshire could be seeking more than $200 million from ExxonMobil, the last defendant on trial in the $816 million lawsuit filed in 2003. This is one of scores of cases involving MTBE filed since 2000 against refiners, fuel distributors and chemical makers.

Groundwater Risk

Robert Larkins, a former vice president of marketing for Exxon in the 1980s, said in taped testimony played in court last week that he approved the use of MTBE despite a colleague’s recommendation in a mid-1980s memo against using it because of its risk to groundwater. The colleague had been asked by ExxonMobil to conduct a study of MTBE.

“She did not say that you cannot or should not put it in there,” Larkins said, referring to the memo. “She said there were some concerns and she recommended against it.”

ExxonMobil has argued that it was complying with federal regulations that pre-empt state law. They said MTBE was added to gasoline to make it burn more thoroughly and thus reduce air pollution, as required under the 1990 Clean Air Act.

James Quinn, a lawyer for the company, said that the state was aware of the risks of MTBE when it opted into the RFG program in 1991 because there had been documents and data about the additive for several years. New Hampshire decided to re-enter the clean-air program in 1997.

Cross-examining Colburn today, Quinn referred to a report from Maine that Colburn received in 1995 that said MTBE had been detected in groundwater for more than 10 years and that “increased surveillance” of the chemical in water was required.

Contaminated Wells

The state was petitioning the Environmental Protection Agency to get out of the RFG program in 1999.

New Hampshire has said that about 40,000 wells are contaminated with MTBE including about 5,590 at levels determined to be unfit for drinking.

The number of contaminated wells is a factor in deciding monetary damages if ExxonMobil is found liable. The state is also seeking damages based on market share of gasoline sales in New Hampshire during the period covered by the lawsuit.

ExxonMobil’s share was about 30 percent, the state said. Based on an estimated cost of $816 million to test for, monitor and clean up the groundwater, New Hampshire could be seeking about $245 million from the company.

Settlement Talks

New Hampshire Superior Court Judge Peter Fauver agreed Jan. 15 to sever the other defendant in this trial, Citgo Petroleum Corp., while the company and the state work to complete a settlement. Citgo is the Houston-based unit of Petroleos de Venezuela SA, the country’s state-owned oil company.

Citgo’s market share ranged from 3.1 percent to 8.7 percent, New Hampshire said. Based on those figures, the state could be seeking $25 million to $71 million from Citgo. If an accord isn’t reached by Feb. 15 and no extension is approved, Citgo would be reinstated to the trial.

Besides ExxonMobil and Citgo, New Hampshire also sued Shell Oil Co., Sunoco Inc., ConocoPhillips (COP), Irving Oil Ltd., Vitol SA and Hess Corp. All settled before the trial began except ExxonMobil and Citgo. Shell and Sunoco agreed to pay New Hampshire $35 million in a settlement announced in November.

New Hampshire has received more than $100 million in settlements from defendants so far, according to court papers.

Polluting Wells

MTBE lawsuits have also been consolidated in federal court in New York for pretrial evidence-gathering and motions. In 2009, a federal jury ordered ExxonMobil to pay New York City $104.7 million after finding it liable for polluting wells in the city. ExxonMobil has appealed.

The additive leaked into New Hampshire’s groundwater from spills at service stations, vehicle junkyards and storage tanks. It can render drinking water “foul, putrid and unfit for human consumption,” according to court filings. MTBE is no longer added to gasoline.

The trial could last more than four months.

The case is New Hampshire v. Hess Corp. (HES), 03-C-0550, New Hampshire Superior Court, Merrimack County (Concord).

To contact the reporters on this story: Sarah Earle in Concord, New Hampshire, at sarah_earle@comcast.net; Don Jeffrey in New York at djeffrey1@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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