Bloomberg News

Citgo to Settle New Hampshire Gas-Additive Lawsuit

January 17, 2013

Citgo Petroleum Corp. reached an agreement with New Hampshire to be dismissed from an $816 million trial over groundwater contamination while a settlement is completed, as a witness testified that 2 percent of the state’s private wells are polluted with hazardous levels of the chemical MTBE.

“The parties stipulate that Citgo Petroleum shall be severed from the above captioned case until such time as a consent agreement between Citgo and the state is filed with the court,” the parties said in a court filing dated Jan. 15 and signed by Nate Eimer, a lawyer for Citgo, and New Hampshire Assistant Attorney General Mary E. Maloney.

Under the agreement, the parties have until Feb. 15 to complete an accord before Citgo is reinstated to the case, unless they agree to an extension. Yesterday, a person familiar with the matter said Citgo and New Hampshire reached a deal over claims the oil company polluted the state’s water with MTBE, a gasoline additive. The person asked not to be identified because the matter isn’t public. Citgo’s lawyers didn’t appear in court yesterday as the trial resumed.

New Hampshire Superior Court Judge Peter Fauver approved the motion yesterday to sever Citgo from the case.

A settlement would leave ExxonMobil Corp. (XOM:US) as the last defendant in the state’s lawsuit alleging oil companies knew the chemical would contaminate groundwater. New Hampshire’s suit is one of scores of cases involving MTBE, or methyl tertiary butyl ether, filed since 2000 against refiners, fuel distributors and chemical makers. A trial of the case began Jan. 14.

Market Share

The state is seeking damages from the companies based on their market share of gasoline sales in New Hampshire during the period covered by the lawsuit.

New Hampshire said Citgo’s market share during that time ranged from 3.1 percent to 8.7 percent. Based on the state’s estimated cost of $816 million to clean up the contamination, it could be seeking between $25 million and $71 million from Citgo.

The New Hampshire attorney general’s office declined to comment on specific terms of any proposed settlement. Fernando Garay, a spokesman for Citgo, declined to comment on the matter.

Asked about a possible settlement of its case, ExxonMobil spokeswoman Claire Hassett said, “Nothing has happened that would change our approach to this litigation.”

Federal Regulations

The state contends that the oil companies knew MTBE presented a risk of groundwater contamination when they decided to use it. ExxonMobil and Citgo, the Houston-based unit of Petroleos de Venezuela SA, the country’s state-owned oil company, have argued that they were complying with federal regulations that pre-empt state law, and that the additive, meant to make gasoline burn more thoroughly and thus reduce air pollution, never caused any New Hampshire resident to become ill.

In 2003, New Hampshire sued ExxonMobil and Citgo along with Shell Oil Co., Sunoco Inc., ConocoPhillips (COP:US), Irving Oil Ltd., Vitol SA and Hess Corp. All had settled before this week’s trial began, except Irving, Texas-based ExxonMobil and Citgo. Shell and Sunoco agreed to pay New Hampshire $35 million in a settlement announced in November.

MTBE lawsuits have also been consolidated in federal court in New York for pretrial evidence-gathering and motions. In 2009, a federal jury ordered ExxonMobil to pay New York City $104.7 million after finding it liable for polluting wells in the city. ExxonMobil has appealed.

Wells Contaminated

The state’s first witness, Graham Fogg, testified yesterday about how he calculated MTBE groundwater contamination in New Hampshire. Fogg, a professor of hydrology at the University of California, Davis, estimated that about 40,000 wells are contaminated with MTBE in the state, and an estimated 2 percent are contaminated at levels determined to be unfit for drinking, he said.

“We had a lot of input from experts on data analyses,” Fogg said. In addition to analyzing random samplings of New Hampshire wells, Fogg said he consulted U.S. Geological Survey data. He said that his numbers are more conservative than those cited in other studies.

Defense lawyers have questioned his numbers and methodology.

Beginning his cross-examination of Fogg yesterday, David Lender, a lawyer for ExxonMobil, asked how many New Hampshire wells he had sampled.

“I didn’t make any field trips in connection with the case,” Fogg replied. “I’m relying on the existing data others have collected.”

Fogg’s cross-examination is set to continue today.

The case is State of New Hampshire v. Hess Corp. (HES:US), 03- C-0550, New Hampshire Superior Court, Merrimack County (Concord).

To contact the reporters on this story: Sarah Earle in state court Concord, New Hampshire, at sarah_earle@comcast.net and; Don Jeffrey in New York at djeffrey1@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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