Supreme Court Takes Up Citgo Liability in Oil Spill

(CN) – The Supreme Court agreed Monday to decide whether three Citgo-affiliated companies must pay most of the $100 million-plus bill for cleaning up a 2004 oil spill in the Delaware River.

The oil tanker Athos, laden with Venezuelan crude, was only inches from docking at a port in New Jersey in November 2004 when it was discovered to be leaking. A subsequent investigation found a breech had been torn into the vessel by an abandoned nine-ton anchor in the navigation channel.

The vessel’s owner, Frescati Shipping Company Ltd., and the U.S. government paid $143 million for the cleanup in the immediate aftermath of the spill. However, the Oil Pollution Act of 1990 allows the government to recoup the funds from liable parties after the fact.

The government and Frescati sued Citgo Asphalt Refining Company, Citgo Petroleum Corporation and Citgo East Coast Oil Corporation – collectively referred to as CARCO – which controlled the port in Paulsboro, New Jersey. 

U.S. District Judge Joel Slomsky in Pennsylvania found that Citgo only had to pick up half of the spill costs, but the Third Circuit reversed last year.

The Philadelphia-based appeals court found that the lower court was mostly correct in its ruling, but that it erred in apportioning responsibility for the cleanup costs.  It rejected Citgo’s argument that it was the Coast Guard’s responsibility to keep the waterways clear, and when the Athos hit the abandoned anchor, the agency’s failure to remove the obstruction removed its liability.

In a petition for a writ of certiorari, Citgo asked the U.S. Supreme Court to decide whether, under federal maritime law, a safe-berth clause in a ship charter contract guarantees a ship’s safety, as the Third Circuit ruled.

“The court of appeals’ strict liability rule is unsound, both as a matter of contract interpretation and maritime policy, and imposes onerous and unwarranted liability on blameless charterers,” the petition states. “Nowhere is that more starkly illustrated than in this case, where CARCO faces potential liability for more than $140 million in damages based on a safe berth provision, even though it is undisputed that CARCO bears no fault for the oil spill.”

Per their custom, the justices did not comment on the decision to take up the case.

An attorney for Frescati declined to comment. Citgo’s attorney did not immediately respond to an email request for comment.

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