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Exxon asks full Fifth Circuit to nix $14M air pollution fine

Exxon argues an order affirming the Clean Air Act penalty for emissions released from its massive Houston-area complex would offer environmental groups a “roadmap for runaway citizen suits.”

(CN) — Two environmental groups sued ExxonMobil in 2010 for Clean Air Act violations. They claim that over eight years, the company released more than 8 billion pounds of pollutants from its 3,400-acre refinery and chemical complex in Baytown, 25 miles east of Houston.

The Sierra Club and Environment Texas Citizen Lobby say the hazards are tangible for their members who live near Exxon’s facility, which borders a nature preserve and is close to a community college.

Shae Cottar, who has lived in Baytown since age 3 and has asthma – so do his wife and children – testified he often smelled strong fumes that gave him headaches wafting into his home across the street from the complex. He said they cleared when the wind direction changed.

Exxon burns excess gases at its Baytown plants that cannot be recycled with flares that shoot from smokestacks, a standard practice for the petrochemical industry.

Cottar testified Exxon’s flaring sometimes rattled his bedroom windows and awakened him in the middle of the night. He said his asthma improved when he moved to another Baytown neighborhood 2 miles from Exxon’s complex.

His experience was echoed by those of other Sierra Club and Environment Texas members – one woman said her asthma was so bad it felt like she was breathing through a straw – who testified their health improved when they moved out of Baytown, and they also had grown weary of the chemical smells, black flare smoke and grayish-brown haze emanating from Exxon’s operations. 

Following a two-week bench trial, Senior U.S. District Judge David Hittner sided with Exxon in a December 2014 order and denied plaintiffs’ request for Clean Air Act penalties.

The environmental groups appealed to the Fifth Circuit. A three-judge panel of the New Orleans-based appellate court vacated Hittner’s judgment and ordered him to reassess the number of Exxon’s actionable violations and penalties.

In an April 2017 revised opinion, Hittner found Exxon liable for 16,386 days of violations and hit the company with a $20 million penalty, prompting Exxon to file an appeal of its own.

After remand from a different Fifth Circuit panel, Hittner reduced Exxon’s penalties to $14.25 million in a March 2021 order.

But the appellate court vacated its prior two decisions in February when it granted Exxon’s motion for en banc rehearing. Its 17 active judges heard arguments Tuesday.

Exxon could easily pay the fine and move on. The Irving, Texas-based company made a record annual profit of $55.7 billion in 2022, and pulled in another $11.4 billion in this first quarter of this year.

Its attorney, Russell Post of the Houston firm Beck Redden, laid out the high stakes of the litigation in his opening arguments Tuesday.

Post warned if the $14 million penalty stands “it truly would be a roadmap for runaway citizen suits,” noting that to make their case the plaintiffs relied on Exxon’s own records of emissions-permit violations, documentation state and federal regulators require of industrial facility operators.

The Clean Air Act allows citizens to sue plant owners for permit violations if local and state authorities choose not to. Penalties are paid to the federal government.

Post argued standing should not be “dispensed in gross” as Hittner did when he found the plaintiffs had standing to sue Exxon for more than 16,000 days of CAA violations involving 24 different pollutants released in excess of its complex’s 60 federal permits.

Instead, Post contended, the plaintiffs had to prove their injuries were tied to particular Exxon emission violations.

He said although many of Exxon’s violations were so minor – one involved a smoking extension cord, another a “fire” in a cigarette butt can – they could not have affected anyone outside its facility’s boundaries, the plaintiffs had requested the maximum daily penalties of up to $32,500 or $37,500 for each one, depending on the date of the transgression.

“In short these plaintiffs believe private citizens can step into the shoes of the government to relitigate every permit violation over a period of eight years, without them needing to prove those violations had actually impacted them,” Post added.

An alliance of trade groups including the American Chemistry Council, American Fuel and Petrochemical Manufacturers and U.S. Chamber of Commerce has backed Exxon in amicus briefs.

Their counsel presented arguments Tuesday and echoed the dire warnings of Exxon’s attorney.

Aaron Streett, with the Houston office of Baker Botts, said if the Fifth Circuit affirms Exxon’s $14 million penalty then the “floodgates will truly be open” with environmental groups using the case as a guide to target owners of large industrial facilities across the country.

Senior U.S. Circuit Judge Eugene Davis questioned Streett’s logic. The Ronald Reagan appointee pointed out that over the last three years, an average of just four citizen environmental suits were filed in federal courts.

“So where does your argument come from that this would release a flood of litigation?” he asked.

The Sierra Club’s and Environment Texas’ attorney, David Nicholas, of Newtown, Massachusetts, insisted Exxon’s standing argument is fatally flawed.

He said Clean Air Act claims are based on a facility’s emissions permit limits, and the plaintiffs need only prove illegal pollution from Exxon’s complex placed their members at risk of imminent future harm, such as developing cancer. But they do not have to trace injuries to specific violations.

U.S. Circuit Judge Kyle Duncan tried to poke holes in the plaintiffs’ argument the excess emissions from Exxon’s plant were an ongoing violation. The Donald Trump appointee focused on violations involving a smoldering board and a cigarette butt.

“We’re talking about discrete events,” Duncan said. “So I don’t understand the use of the word 'ongoing.'”

Nicholas said it was simple. “You look at the permit limit,” the attorney explained, “if it is being violated before the suit is filed and after the suit is filed it’s ongoing. It is the permit limit that is the focus of the ongoing violation.”

The Biden administration is supporting the plaintiffs and a Justice Department attorney argued on their behalf Tuesday.

The judges did not say when they would rule in the case.

Though the energy industry is an anchor of the Houston region's economy, its rewards come with many perils.

A worker died and two others were hospitalized Monday from injuries suffered in a fire at Marathon Petroleum's Galveston Bay Refinery. And a May 5 fire at Shell's petrochemical plant in Deer Park sent up towering plumes of black smoke and sent five workers to the hospital with heat exhaustion from being close to the blaze, the Associated Press reported. It reignited May 7 and burned for five hours before firefighters doused it.

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Categories / Appeals, Business, Environment, Regional

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