Owner of Plastics Plant Asks for Limits on Settlement Payments

A plastics company urged the Fifth Circuit to rescue it from an order that will force it to pay penalties for plastic pellets that can be dislodged by animals from soil surrounding its plant.

Plastic pellets from the Formosa Plastics plants line Cox Creek in Texas. (Photo by Diane Wilson/San Antonio Estuarine Waterkeeper via Courthouse News)

HOUSTON (CN) — Formosa Plastics shouldn’t be fined for every bit of plastic found in a creek outside its Texas plant, the company told a Fifth Circuit panel Wednesday, claiming the trial judge misinterpreted a Clean Water Act settlement it reached with environmentalists.

The 2019 consent decree came from a lawsuit San Antonio Bay Estuarine Waterkeeper and its executive director filed against Formosa in July 2017 after its members spent four years collecting plastic pellets discharged from Formosa’s plant in Point Comfort on Lavaca Bay, 100 miles northeast of Corpus Christi.

The group says the pellets, which it claims are regularly found in the bellies of fish caught in the bay, are toxic to wildlife and threaten the area’s commercial fishing and tourism industries.

Formosa Plastics Corporation U.S.A., a subsidiary of its Taiwanese parent company, says it is engaged in a multibillion dollar expansion of the plant, the workplace of 1,910 company employees and 795 contractors.

The litigation centered on Waterkeeper’s challenge of a water discharge permit for the 2,500-acre plant, issued by the Texas Commission on Environmental Quality, which barred the discharge of floating solids other than trace amounts.  

After a four-day bench trial, U.S. District Judge Kenneth Hoyt found Formosa liable for Clean Water Act violations, convinced by ample evidence Waterkeeper’s members collected from kayaks in Lavaca Bay.

They collected more than 2,000 samples of plastic pallets and plastic powders, stored them in zip-lock bags and bottles marked with dates, times and locations and took thousands of photos and videos of plastic pellets in the water and along shores, all of which they packed into boxes and submitted as evidence.

Formosa agreed in the consent decree to pay $50 million over five years into a trust to fund environmental mitigation projects, hire an engineer to retrofit its plant with pollution-control equipment, hire a remediation consultant to ramp up clean-up efforts on Lavaca Bay and Cox Creek, into which the plant discharges stormwater, and retain a monitor to ensure its compliance with the settlement, with the goal of eventually having zero discharges from the plant.

The settlement has some sharp teeth. If either the monitor or Formosa documents any plastic upstream of containment booms it placed on Cox Creek, the company must pay an additional $20,000 this year, $25,000 next year and so on, escalating $5,000 per year, and report each violation to the Texas Commission on Environmental Quality, or TCEQ.

Invoking a dispute-resolution process in the consent decree, Formosa asked Hoyt to clarify it could only be fined for documented “new” discharges of plastic.

But the judge sided with Waterkeeper, finding Formosa is liable for penalties for any plastic found within the booms on Cox Creek.

Formosa claims this “absurd” interpretation would put it perpetually in violation of a never-ending decree, so long as a single plastic pellet or flake remains in the environment, despite the fact the decree recognizes only “most” plastics will be removed because getting it all is impossible.

The company appealed to the Fifth Circuit last month, and the New Orleans-based court stayed Hoyt’s dispute-resolution order and placed the appeal on an expedited track.

In arguments Wednesday at the Houston federal courthouse, Formosa’s counsel Carter Phillips of Sidley Austin in Washington said plastic escapes the plant after heavy rains through its stormwater drainage system and there are surveillance cameras at each discharge site.

He said employees of the court-appointed monitor Global Environmental Assessments and Response, or GEAR, who survey and document the containment area on the creek twice a week, should have to look at footage from the cameras and if they can’t find anything to indicate plastics were expelled, then they would know what they found was already there and it shouldn’t trigger more settlement payments for Formosa.

Phillips also said the tiny pellets are embedded in soil on the creek banks, “and animals and things that move through them are going to dislodge them.”

But Waterkeeper’s counsel Amy Johnson of Portland, Oregon, said there’s no way to determine when plastic was discharged from the plant.

She looked up at the ceiling of the wood-paneled courtroom. “Imagine if you had a camera up there and you’re looking for something smaller than an M&M,” she said.

“But you said it has to be visible,” said U.S. Circuit Judge Catharina Haynes, a George W. Bush appointee.

“You can see them,” Johnson said. “Just like I can see a speck on the ground, right here there’s a little white speck. But not from a camera up above your head. Also some of [the discharges] are at night.”

Johnson said the consent decree goes by the standard of the TCEQ: If the agency sees any plastic outside the plant, it considers that a violation of clean water regulations.

She said Formosa had several months between when the settlement became effective and when GEAR was appointed monitor to clean up plastic in the small area covered by the deal, so any plastic the monitor’s personnel find now is a violation.

Phillips, Formosa’s counsel, said no company would agree to pay a $50 million settlement and institute a cleanup program only to let someone come onto their property and say, “‘Oh and by the way every time I find a plastic I get to add to the ante of those pre-consent decree discharges by $20,000.’”

Haynes asked Johnson why Formosa’s agreement to pay $50 million should not take care of its liability for violations before it signed the settlement.

“They didn’t just say, ‘Oh we’ll clean it up but we aren’t going to pay nothing,’” the judge said.

Underscoring her main argument, Johnson replied, “If there’s evidence of plastic they go clean it up. If there are more plastics next week that’s evidence of a discharge. That’s what the agency [TCEQ] does, that’s what the judge said and that’s what we agreed to.”

Senior U.S. Circuit Judge Carolyn King, a Jimmy Carter appointee, told Phillips she could not understand why this hadn’t been worked out in settlement negotiations.

“Both sides of this thing didn’t do a good job,” she said. “It’s actually crazy that we’re all gathered here together in a situation where you had lawyers and law firms, good law firms, that were supposed to figure this thing out and get it done. And here we are.”

“Well your honor, I apologize,” Phillips said, chuckling.

“You don’t have to apologize,” King replied. “It’s what we get paid for. But I mean I keep looking at this and thinking how did these lawyers wind up handling this thing the way it was handled?”

U.S. Circuit Judge Jerry Smith, a Ronald Reagan appointee, rounded out the panel, which did not indicate when or how it will rule.

Texas RioGrande Legal Aid is also representing San Antonio Bay Estuarine Waterkeeper in the litigation.

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