Bloomberg News

Exxon Mobil Witness Says MTBE Benefits Outweighed Risks

March 05, 2013

An Exxon Mobil Corp. (XOM:US) witness told a New Hampshire jury that will decide whether the company is liable for contaminating groundwater with MTBE that the gasoline additive was extensively researched and its benefits outweighed risks.

The Irving, Texas-based oil company will try to convince a jury that federal law required the use of the additive, methyl tertiary butyl ether, and that it didn’t harm anyone in New Hampshire. The company began presenting its case yesterday in Concord. The trial started Jan. 14.

Victor Dugan, a former Exxon executive, testified that the company sought input from experts for 15 months before recommending the addition of MTBE to gasoline in 1985 as a means of reducing air pollution. He also said the company spent $150 million to replace storage tanks before approving its use.

“We were charged by our vice president to turn over every rock and address all concerns that had been raised,” said Dugan, who retired last year. “It was an outstanding blending component. Never caused any problems.”

Barbara Mickelson, another retired Exxon Mobil executive, testified yesterday as the company’s first witness that although she filed a report in 1984 stating that adding MTBE to gasoline might result in significant cleanup costs if it leaked into the groundwater, she changed her opinion after further research.

Possible Dangers

Dugan said today that Mickelson’s memo was taken seriously by the company and that his department concluded that the benefits outweighed the risks. He also said that gasoline dealers and distributors were warned of the possible dangers of the additive.

Exxon Mobil is the last defendant in the state’s $818 million lawsuit (XOM:US) alleging oil companies knew MTBE would contaminate groundwater and didn’t alert the state to the risks.

“There is simply no MTBE crisis,” Charles Engelmann, an Exxon Mobil spokesman, said in an e-mail. “MTBE hasn’t been used in the state since 2005 and there is not a single personal injury being claimed in this lawsuit.”

The state seeks damages from Exxon Mobil based on its share of gasoline sales in New Hampshire during the period covered by the lawsuit. An economist testified for the state that it was about 30 percent. Based on an estimated cost of $818 million to test, monitor and clean up wells, New Hampshire might be seeking at least $245 million from the company. Exxon Mobil challenged the estimate and said using refinery data would have shown a market share as low as 6.9 percent.

Two Cases

In Maryland last week a court of appeals reversed two jury verdicts against Exxon Mobil. The plaintiffs won $1.65 billion in two cases alleging financial and property damage from an underground leak in 2006 that released MTBE into the water. The appeals court said Exxon Mobil hadn’t made fraudulent statements and the plaintiffs failed to show physical harm.

Exxon Mobil is the sole defendant on trial in New Hampshire since Citgo Petroleum Corp., the Houston-based unit of Petroleos de Venezuela SA, the country’s state-owned oil company, agreed to a $16 million settlement last month. Exxon Mobil executives have said they are committed to continuing the case in court.

New Hampshire’s suit is one of scores of cases involving MTBE filed since 2000 against refiners, fuel distributors and chemical makers. Other MTBE lawsuits were consolidated in federal court in New York for pretrial evidence-gathering and motions. In 2009, a federal jury ordered Exxon Mobil to pay New York City $104.7 million after finding it liable for polluting wells in the city. Exxon Mobil has appealed.

Federal Regulations

In 2003, New Hampshire sued Exxon Mobil, Shell Oil Co., Sunoco Inc., ConocoPhillips (COP:US), Irving Oil Ltd., Vitol SA, Hess Corp. (HES:US) and Citgo. All have settled except Exxon Mobil.

Exxon Mobil has argued in court that in adding MTBE to gasoline it was complying with federal regulations, which pre- empt state law. The additive was used to make gasoline burn more thoroughly to reduce air pollution, as required under the 1990 Clean Air Act.

Studies by the American Petroleum Institute were cited in court showing that at mid-to-high levels of ingestion or inhalation MTBE elevated the risk of brain tumors, liver cancer, blood cancer and kidney cancer in mice and rats. Exxon Mobil said there has been no evidence that MTBE causes illness in humans.

MTBE, which New Hampshire banned in January 2007, is highly soluble in water and can be carried great distances from the source of leaks. It leaked from gas stations, vehicle junkyards, underground storage tanks and pipe fittings, the state said.

The state estimated that about 40,000 New Hampshire wells are contaminated with MTBE and that 5,590 have levels determined to be unfit for drinking. The state said that level is 13 parts of MTBE per billion parts of water.

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

To contact the reporters on this story: Sarah Earle in Concord, New Hampshire, at sarah_earle@comcast.net; 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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Companies Mentioned

  • XOM
    (Exxon Mobil Corp)
    • $102.52 USD
    • -1.03
    • -1.0%
  • COP
    (ConocoPhillips)
    • $85.19 USD
    • -0.60
    • -0.71%
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