Citgo Settles With New Hampshire in Water Pollution Case

Citgo Petroleum Corp. agreed to pay $16 million to New Hampshire to settle a lawsuit alleging oil companies were responsible for the contamination of the state’s groundwater with the gasoline additive MTBE.

Citgo, the Houston-based unit of Venezuela’s state-owned oil company, was dismissed last month by New Hampshire Superior Court Judge Peter Fauver from a trial in Concord so the company could discuss a possible settlement with the state. The agreement, dated Feb. 12, was filed in superior court yesterday.

The money “will be placed into an account to be used for projects related to the remediation of MTBE in groundwater and drinking water in the state of New Hampshire,” according to the proposed order dismissing all claims against Citgo.

Exxon Mobil Corp. is the last defendant on trial in the $818 million lawsuit filed by the state in 2003. The state has said it would seek damages based partly on the oil companies’ market shares of gasoline sales in New Hampshire during the period covered by the lawsuit. The number of wells found to be contaminated with the additive methyl tertiary butyl ether is another factor in determining damages.

Citgo’s market share ranged from 3.1 percent to 8.7 percent, New Hampshire said. Based on those figures, the state might have sought $25 million to $71 million from Citgo.

Exxon Mobil’s market share of gasoline sales was about 30 percent, the state said. Based on the estimated cost of $818 million to test, monitor and clean groundwater, New Hampshire could be seeking about $245 million from the company.

Cleanup Funds

The state has received $213 million from oil companies for two MTBE cleanup funds since 1989 through a 1.5 cent-a-gallon fee on all gasoline imported into the state. The funds have $4 million left in them, the state said in court.

Exxon Mobil, based in Irving, Texas, has argued in court 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.

The state was aware of MTBE’s risks when it opted into a federal clean-air program in 1991 because there had been studies of the additive for several years before that, Exxon Mobil said in court.

New Hampshire banned the additive as of January 2007.

Vehicles, Junkyards

MTBE is highly soluble in water and can be carried great distances from where it leaked, Jessica Grant, a lawyer for New Hampshire, told the jury. It leaked from gas stations, vehicle junkyards, underground storage tanks and pipe fittings, according to the state.

New Hampshire also sued Shell Oil Co., Sunoco Inc., ConocoPhillips, Irving Oil Ltd., Vitol SA and Hess Corp. Those companies settled before the trial began.

New Hampshire had received more than $100 million in settlements from defendants before the agreement with Citgo, according to court papers.

This is one of scores of cases involving MTBE filed in the U.S. since 2000 against oil refiners, fuel distributors and chemical makers. MTBE lawsuits have been consolidated in federal court in New York for pretrial evidence-gathering and motions.

In 2009, a federal jury ordered Exxon Mobil to pay New York City $104.7 million after finding it liable for polluting wells. Exxon Mobil has appealed that verdict.

The New Hampshire trial began Jan. 14. The state said it expects to rest its case Feb. 21. Exxon Mobil would then present 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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