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Last week, federal and state authorities announced a $5.1 million settlement with two subsidiaries of ExxonMobil over the rupture of the Pegasus pipeline in Mayflower, which occurred just over two years ago. Approval of the consent decree, which is still subject to a 30-day public comment period and review in U.S. district court, would mark the first resolution of a major lawsuit related to the Mayflower spill. However, a number of other suits are still winding their way forward.
On March 29, 2013, an underground segment of the Pegasus split apart along a seam in the pipe, sending a small river of diluted bitumen — a heavy Canadian crude oil mixed with large quantities of noxious solvents — down a residential street and into a cove of nearby Lake Conway. The Times, like most media, consistently reported the size of the spill as around 210,000 gallons, which was Exxon's best estimate at the time. Now we have a new, smaller number from the consent decree: 134,000 gallons. That's significant in part because the federal government assesses penalties on oil spills under the Clean Water Act based on the volume of material discharged.
The settlement is between Exxon and the Justice Department, the U.S. Environmental Protection Agency and the Arkansas attorney general for violations of environmental law both on the federal level (the Clean Water Act) and the state level (the Arkansas Water and Air Pollution Control Act and the Arkansas Hazardous Waste Management Act). Exxon will pay $3.19 million in federal civil penalties, $1 million in state civil penalties, $600,000 for a project to improve water quality at Lake Conway and $280,000 to the Arkansas AG's office for litigation costs. Katherine Benenati, a spokesperson at the Arkansas Department of Environmental Quality, said that the nature of the Lake Conway water quality project has yet to be worked out with Exxon, but it will be subject to ADEQ review and approval.
The agreement also requires Exxon to take additional precautionary measures to prevent future spills on the Pegasus and to enhance its disaster response efforts along the pipeline, including additional training for first responders and the placement of "three caches of spill response supplies and equipment at three strategic locations," one of which is Mayflower. The portion of the Pegasus running through Arkansas has been shut down since the 2013 spill (a southern leg of the pipeline has been restarted) and it's not clear when, or if, Exxon will take steps to restart the full line.
One of many things left unresolved by last week's settlement is the question of culpability. Any pipeline carries some risk of spillage, but should Exxon have been able to tell that the Pegasus was especially susceptible to failure? Did it turn a blind eye to known defects in the 65-year-old pipe itself — specifically, the fact that the pipe's manufacturer used a welding technique that made the seams in the metal susceptible to the development of dangerous microscopic cracks? Did the company carry out the proper integrity tests before deciding to use the Pegasus to accommodate the southward flow of Canadian oil in 2006? (The pipeline originally transported light, conventional crude oil northward from the Gulf of Mexico.)
The consent decree requires Exxon to "henceforth treat the northern segment of the Pegasus Pipeline ... as 'susceptible to longitudinal seam failure' ... for all risk assessment and operational purposes." And yet, presumably in a concession to the oil company's desire to minimize its explicit admission of liability, the agreement then states, "This paragraph does not address whether Defendants were required to make such a determination prior to the Mayflower oil spill under existing regulations applicable to the Pegasus Pipeline."
Attorneys for hundreds of Mayflower landowners say that the company most definitely fell down on its job of ensuring the line's safety.
"If they had done in 2010 or 2011 what they are going to be required to do now, it's possible this problem would have been detected," said Ross Noland, an attorney for McMath Woods P.A. in Little Rock. Meanwhile, Sam Ledbetter of McMath Woods, another plaintiffs' attorney, argues that the language in the consent decree amounts an admission "that the pipeline was susceptible to seam failure. ... They determined what they had to do to make the pipeline safe for operation."
Ledbetter said McMath Woods is working in coordination with two other firms, which together represent some 130 households. Most of those plaintiffs are individuals in single-family homes in Mayflower, Ledbetter added, although some are business owners and nonresident landowners. Claims should begin going to trial in Faulkner County Circuit Court in October.
In addition to the plaintiffs represented by McMath Woods and the other two firms, a number of other Mayflower residents are seeking damages against Exxon. A separate class-action suit involving landowners all along a 600 mile length of the Pegasus — which would include Mayflower and also many other landowners in Arkansas, Illinois, Missouri and Texas — was dismissed by a federal judge in March of this year, but attorneys for the plaintiffs have filed a motion asking the judge to reconsider, given the release by Exxon of new documents.
The federal regulator responsible for protecting the public from pipeline disasters, the Pipeline Hazardous Materials Safety Administration, appears to believe Exxon made at least some mistakes in its maintenance of the Pegasus. In late 2013, PHMSA issued $2.6 million in fines against Exxon for operations and maintenance violations related to the Mayflower spill. The company has appealed the PHMSA fines, despite the fact that it's a smaller sum than last week's $5.1 million settlement, perhaps because Exxon is loath to admit liability in a way that might open the door to private suits, both in Mayflower and in other communities that have been affected by pipeline failures.
Both the PHMSA penalty and the settlement announced last week are miniscule when compared with Exxon's overall budget; the company generated $87.3 billion in revenue in 2014. But, for a global corporation engaged in a messy, dangerous business, any admission of liability sets an unhappy precedent.
Richard Kuprewicz, a pipeline consultant who has worked with Central Arkansas Water on the Mayflower spill, said that the presence of the manufacturing defect that led to the rupture of the Pegasus along its seam weld shouldn't have been a surprise to Exxon.
"None of this is new information," Kuprewicz said. "This is a well-known threat factor to pipelines, for many decades." He said that a pipeline operator should be able to assess the existing weaknesses in its infrastructure, as long as it uses the proper tools.
"There is some logic behind why they should be defensive," he said, "but the integrity management tools are pretty clear: You know your threats and then choose the right tools to assess." In the years before the Pegasus spill, the records Exxon has made public show that it performed some assessments on the line — with mixed results. Given the known susceptibility of this vintage of pipe, Kuprewicz questioned why the company evidently declined to pursue a more rigorous inspection after that. "In rupture investigation after rupture investigation ... we see this creativity in which some companies, not all, try to excuse not doing the right thing."
In addition to the various private lawsuits proceeding against Exxon, the company also faces additional legal action from public agencies under what's called a Natural Resources Damages claim.
Last year, on the one-year anniversary of the spill, then-Attorney General Dustin McDaniel explained to the Times that such a civil suit is intended to recoup "damages as to the broader scope of what's the long-term impact to the environment — what are the financial costs to all of this." An NRD claim is intended to compensate the public for harm done to natural resources — such as Lake Conway and the fish and waterfowl inhabiting it — and it's to be initiated by the trustees designated to safeguard those resources. In this case, that means the ADEQ, the Arkansas Game and Fish Commission and the U.S. Fish and Wildlife Service.
Ricky Chastain, a deputy director with the Game and Fish Commission, said the NRD claim is distinct from the violations of environmental law that were covered by last week's consent decree. "It is two trains running down parallel tracks. You have the criminal side, which is a violation of rules and regulations, and that's what was just settled. ... And then there's assessing the natural resource damages."
Chastain said the trustees are still in the process of assessing damages, but that a number should be finalized in the next month or two. "Then we'll approach Exxon to sit down and try to start talking," he said. "We'll see if there's a reasonable way to come to a conclusion."
If a settlement can't be reached, he said, "the alternative is to enter into litigation ... I'm hoping this is not a long, drawn-out deal. I'm hoping we can lay our assessment on the table and they can lay out their data. ... That saves everybody time and energy and money not to go through the full legal process."
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