Citgo Oil Spill Penalty |Soars to $81 Million

     (CN) – A federal judge on Wednesday slapped Citgo Petroleum Corp. with an $81 million civil penalty stemming from a 2006 oil spill, after the Fifth Circuit tossed an earlier $6 million penalty levied against the company.
     The penalty relates to the discharge of at least 53,000 barrels of slop oil into waters adjoining Citgo’s Lake Charles Refinery in Calcasieu Parish, Louisiana.
     The slop oil flowed from two storage tanks and a containment berm at the refinery’s waste water treatment area and into the Indian Marais waterway, the Calcasieu River, the Calcasieu Ship Channel, and adjoining waterways.
     U.S. District Judge Richard Haik Sr. imposed the original penalty for Clean Water Act violations and gross negligence in Sept. 2011.
     Two years later the Fifth Circuit vacated the civil penalty, which included $3 million to cover state law violations, and remanded the case for further proceedings.
     Specifically, Haik was directed to reassess the issues of economic benefit Citgo garnered by deferring a response to known deficiencies in its operations, and the civil penalty.
     The appellate court also suggested the judge reexamine the issue of gross negligence and Citgo’s history of prior violations in light of the reevaluation, without directly reversing the court’s finding of ordinary negligence.
     On remand, Judge Haik said he did not quantify the economic gain to Citgo at the time of his original ruling because he found it “virtually impossible to do so given the evidence.”
     “Instead, it was held ‘the amount of gain to Citgo was less than the 483 million argued by the government, but more than the $719 asserted by Citgo,'” Haik wrote. “The Fifth Circuit stated, ‘In this case, based on Citgo’s history of avoiding corrective actions for years, we find it particularly inappropriate not to have made an estimate, thought admittedly difficult, of the economic benefit.'”
     Haik’s task was no easier this time around. On remain, the government submitted an updated economic benefit calculation that included multiple interpretations, based on different dates, that set the benefit at anywhere from $91.7 million to $114.2 million.
     And Citgo again submitted estimates that were considerably lower.
     This time, Haik held that the calculations and methodology set forth by the government was “more reasonable and fitting under the facts and circumstances” of the case. He later notes that “Citgo chose to keep gambling with the environment even after being put on notice of the grave risks.”
     Haik also concluded that in light of Citgo’s history of delays and avoidance in addressing known problems, the economic benefits the company realized before the disaster were $91.7 million.
     The judge then went on to address the issue of gross negligence, holding that “In a state like Louisiana, where heavy rain is a common occurrence, failing to take adequate measures to prevent a tragedy such as this, with the knowledge Citgo had in its possession, rises to the level of gross negligence.”
     “As previously held, and it is so held today, ‘Citgo is guilty of prior violations and does not appear to have recognized the importance of compliance, pollution control, environmental responsibility, and the overall duty imposed on businesses to operate safely,” Haik wrote.
     “Upon consideration of the totality of the circumstances and a full analysis of the factors set forth … it is held a per barrel penalty amount of $1,500, for 54,000 barrels, is reasonable and adequately addresses the seriousness of this incident. A total penalty of $81 million is hereby imposed against Citgo,” the judge wrote.

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