Third Circuit Says Citgo Must Pay Lion’s Share for Spill Cleanup

PHILADELPHIA (CN) – The Third Circuit said Thursday that three units of oil refiner Citgo must pay most of the $100 million-plus bill for cleaning up a 2004 oil spill in the Delaware River.

The decision reverses a lower court ruling that said Citgo only had to pick up half of the spill costs.

The oil tanker Athos, laden with Venezuelan crude, was only inches from docking at a port in New Jersey 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 owner of the Athos, the Fescati 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  in expends from liable parties after the fact.

The Third Circuit ruling found that the lower court was mostly correct in its earlier ruling, but that it erred in apportioning responsibility for the cleanup costs.

Citgo had argued it was the Coast Guard’s responsibility to keep the waterways clear, and when the Athos hit the abandoned anchor, the failure to remove the obstruction removed their liability to clean up costs.

But Chief U.S. Justice D. Brooks Smith, a George W. Bush appointee, said interpreting the Oil Pollution Act in such a way misconstrues the law.

“The United States seeks contractual relief, to which it is entitled by operation of [the Oil Pollution Act] … [CITGO] … seeks equitable relief, or (on another reading) essentially tort-based relief grounded in misrepresentation by the agencies,” Smith wrote. “The mismatched relief sought by [CITGO] and the United States does not support [CITGO]’s [request to split the cleanup costs].”

The rest of the liability stems from a part of the contracting between oil producer and shipping company which guarantees “safe berth” within 37 feet of the harbor. The Athos was 36′ 7″ from harbor when the incident occurred, just under the contractual amount.

“[CITGO] is liable to Frescati … in contract,” Smith wrote. “Consequently, [CITGO] is liable to the United States, the subrogee, under that very same contract.”

Representatives of Citgo could not immediately be reached for comment.

 

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