Citgo to Settle New Hampshire Gas-Additive Lawsuit

ExxonMobil Corp. and New Hampshire battled before a judge over whether a jury in a trial alleging the company contaminated state water with a gasoline additive can hear how money in cleanup funds has been spent.

A reference in court yesterday about the state’s inability to pay for the cleanup using two funds reopened a debate that started before the trial began on Jan. 14. New Hampshire Superior Court Judge Peter Fauver sent the jury home today so that the two sides could argue the issue before him.

Gary Beckett, a state witness who is a hydrogeologist, testified yesterday that cost is a factor in monitoring groundwater contamination by the additive methyl tertiary butyl ether, or MTBE. “There’s not enough money to find everything out about a site,” he said.

ExxonMobil’s lawyers filed a motion today for a mistrial, claiming that Beckett’s remark made it impossible for them to comply with the judge’s order to not talk about the funds the state has to clean up sites. Fauver ruled before the trial began that no mention could be made of the funds because the jury might believe the state already has the money it needs.

The state has received $213 million from the oil companies since the funds began in 1989 through a 1.5 cent per gallon fee on oil products imported into New Hampshire. The funds have $4 million left, the state has said.

‘Hands Tied’

“Now we’re in a situation, hands tied behind our back, where we can’t say that the state does have resources for remediation,” ExxonMobil lawyer James Quinn told the judge today. Quinn asked Fauver to reconsider his ruling.

Jessica Grant, a lawyer for the state, said the ruling doesn’t prohibit witnesses from talking about why the state hasn’t been able to clean up all the groundwater.

“If they’re not allowed to say they don’t have the funds, they look negligent or incompetent,” Grant said to the judge. “Or it looks like they don’t need the money.”

Fauver said a mistrial was “unlikely.” He said he’d issue a ruling on the funds by tomorrow morning.

New Hampshire might 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 oil refiners, fuel distributors and chemical makers.

Determining Damages

The number of wells found to be contaminated with MTBE is one factor in determining damages if ExxonMobil is found liable. New Hampshire has said that as many as 5,590 wells may have more than 13 parts of MTBE per billion parts of water, a level the state has determined makes it unfit for drinking. David Lender, a lawyer for ExxonMobil, told the jury that the number of New Hampshire wells found contaminated with the gasoline additive was only 349.

ExxonMobil, based in Irving, Texas, has argued in court that it isn’t liable for damage because it added MTBE to gasoline to comply with federal regulations, which pre-empt state law. Oil companies added MTBE to make gasoline burn more thoroughly in order to reduce air pollution, as required under the 1990 Clean Air Act.

Ken Colburn, who formerly worked for New Hampshire’s Department of Environmental Services, testified that the state wouldn’t have participated in a federal clean-air program with reformulated gasoline if ExxonMobil had warned of the additive’s risks.

Additive Banned

ExxonMobil said in court that the state was aware of MTBE’s risks when it opted into the program in 1991 because there had been studies of the additive for several years before that.

New Hampshire banned the additive as of January 2007.

State witness Gary Lynn, a manager of the DES’s petroleum mediation section, testified that MTBE still shows up in wells six years after it was banned. He said the chemical moves through water quickly and unpredictably.

MTBE, which is highly soluble in water and thus can be carried great distances from where it leaked, is a “toxic chemical that does not belong in the state’s drinking water,” Grant said in opening remarks to the jury. It leaked from gas stations, vehicle junkyards, underground storage tanks and pipe fittings, the state said.

Besides the number of contaminated wells, the state is seeking monetary damages based on ExxonMobil’s market share of gasoline sales in New Hampshire during the period covered by the lawsuit.

Estimated Cost

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.

On Jan. 15, the judge agreed to dismiss Citgo Petroleum Corp., the other defendant, from this trial 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. 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, Irving Oil Ltd., Vitol SA and Hess Corp. All settled before the trial began except ExxonMobil and Citgo.

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

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.

New Hampshire’s lawyers said last week they hoped to conclude their case by Feb. 21. ExxonMobil would then begin presenting its case.

The case is New Hampshire v. Hess Corp., 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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