Audit, Compliance and Risk Blog

Citizen Suit Against Exxon Yields $20 Million Penalty For Refinery’s Clean Air Act Violations

Posted by Jon Elliott on Tue, Jun 06, 2017

On April 26, a federal district judge in Houston issued an order assessing Exxon Mobil nearly $20 million in civil penalties for thousands of Clean Air Act (CAA) violations at Exxon’s massive Baytown, Texas refinery and petrochemical complex. This decision is the latest in a long-running “citizen suit” enforcement case, seeking additional penalties to claw back the “economic benefits from noncompliance,” on top of nearly $1.5 million in civil penalties already assessed by the Texas Commission on Environmental Quality (TCEQ) for the same violations. This decision illustrates the power of these private enforcement cases, which may become more important if the Trump Administration eases its own enforcement efforts.

CAA Permits and Enforcement

The Exxon complex contains a number of “stationary sources” of air pollutants, required to secure CAA permits from TCEQ (Texas’ administrative and enforcement agency for CAA provisions), which limit emissions and provide extensive monitoring and requirements to report. The complex holds five broad operating permits, which the court notes provide roughly 120,000 identifiable conditions. Exxon’s permits include explicit prohibitions against emissions that exceed permit conditions, and to report all exceedances. TCEQ has CAA authority to investigate each reportable exceedance, and to determine whether to undertake enforcement and seek penalties.

CAA provides for a wide range of potential civil and criminal penalties for violations of permits and permit conditions. The statute provides for civil penalties of up to $25,000 per day for most violations, although EPA periodically increases increased those maximum penalty amounts with inflation – during the period covering the violations involved in this lawsuit, most had escalated to $32,500 per violation per day. EPA/TCEQ can also seek court injunctions against future violations.

CAA also allows “any person” to bring a civil suit for a variety of reasons, including against any person (including private entities or agencies) alleging a violation of any “emission standard or limitation.”

What Happened in This Case?

TCEQ investigated Exxon’s reports of hundreds of “reportable events” and nearly 4,000 lesser “recordable events” at the complex around 2005-2007. These included hundreds of “deviations” and “exceedances.” TCEQ ultimately decided to prosecute many and not to prosecute others, and ultimately assessing total penalties of $1,423,632. In addition, in 2012 Exxon and TCEQ stipulated to an enforcement order resolving past violations, specifying penalties to be assessed for certain categories of future violations, and committing the company to undertake a number of “environmental improvement projects” intended to reduce emissions and improve CAA compliance. The parties cited specifically to an ongoing trend toward improved compliance, in part to reward the company’s good faith efforts and justify the relatively low penalty level.

While this agency prosecution was underway, in 2010 the Environment Texas Citizen Lobby and the Sierra Club filed a citizen suit in federal district court covering violations from 2005 until the day they filed their case. The plaintiffs used Exxon’s reporting documents to identify thousands of violations of permit conditions and emission limits, and sought the maximum possible penalties for each plus an injunction against future violations to be supervised by a court-appointed special master. After extensive discovery, the district court judge held a 13-day bench trial (i.e., with no jury).

In 2014 the district court issued an order dismissing most of the private allegations as unproven or irrelevant. For the few dozen violations found to be actionable, the judge chose not to assess any monetary penalty. He based that determination in part on a finding that Exxon had not collected any economic benefit from noncompliance.

The plaintiffs appealed, and in 2016 the Fifth Circuit Court of Appeals reversed important parts of the district judge’s order. It found many more of the violations potentially actionable, and also found that the record indicated that Exxon had reaped considerable economic benefits from the many incidents of noncompliance. Accordingly, the Circuit Court vacated the district judge’s decision and remanded to him to calculate and assess penalties for the actionable violations.

Last month the district court issued an order meeting those requirements. It found economic benefits of over $21 million, subtracted the amounts already paid TCEQ, and assessed $19,951,278 in additional penalties. The decision also allows the plaintiffs to apply to recover their attorney fees, expert witness fees, and court costs.

What Impact Might This Decision Have?

This decision strongly reaffirms the potential power of so-called citizen suits, not just when an agency has failed to enact or enforce requirements, but even when such enforcement provides polluters with leniency. If EPA and some states reduce their enforcement activities, this decision will encourage more such suits. Readers should note the inherent time lags, however; this case spans 12 years from the first reported violations to last month’s decision.

Self-Assessment Checklist

Does the organization operate facilities subject to CAA permits issued by EPA or the state?

  • Do these facilities have any other environmental permits or compliance requirements set under federal law, by EPA or the state?

  • If so, do the facilities submit required reports, including reports that document violations of permit requirements or regulations?

  • Have the facilities been subject to agency enforcement for documented violations?

  • Have the facilities been subject to private enforcement, including “citizen suits” allowed under applicable statutes, for documented violations?

Where Do I Go For More Information?

Information available via the Internet includes:

  • District Court decision (4/26/17) 

  • Fifth Circuit decision (5/27/16) (824 F.3d 507) 

Specialty Technical Publishers (STP) provides a variety of single-law and multi-law services, intended to facilitate clients’ understanding of and compliance with requirements. These include:

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About the Author

Jon Elliott is President of Touchstone Environmental and has been a major contributor to STP’s product range for over 25 years. He was involved in developing 13 existing products, including Environmental Compliance: A Simplified National Guide and The Complete Guide to Environmental Law.

Mr. Elliott has a diverse educational background. In addition to his Juris Doctor (University of California, Boalt Hall School of Law, 1981), he holds a Master of Public Policy (Goldman School of Public Policy [GSPP], UC Berkeley, 1980), and a Bachelor of Science in Mechanical Engineering (Princeton University, 1977).

Mr. Elliott is active in professional and community organizations. In addition, he is a past chairman of the Board of Directors of the GSPP Alumni Association, and past member of the Executive Committee of the State Bar of California's Environmental Law Section (including past chair of its Legislative Committee).

You may contact Mr. Elliott directly at: tei@ix.netcom.com

photo credit: Wguayana Refinería Jusepín via photopin (license)

Tags: climate change, ghg, Environmental, Environmental risks