Bloomberg News

Exxon Mobil Knew Gas Additive Was Risky, N.H. Jury Told

April 09, 2013

Exxon Mobil Corp. (XOM:US) should pay New Hampshire $236 million in damages for contaminating its drinking water with the gasoline additive MTBE, the state’s lawyers told a jury that is set to begin deliberations today.

The oil company knew that MTBE was hazardous and would pollute the groundwater and still approved its use for economic reasons, lawyers for New Hampshire told the jury during closing remarks yesterday in Concord.

“Exxon disregarded the recommendations of the very people they tasked with studying MTBE,” Jessica Grant, a lawyer for the state, said to the jury. “They had red flags going up left and right and they never reconsidered using MTBE.”

Exxon Mobil, the last defendant in the state’s $816 million lawsuit over the additive, has argued that it was complying with a federal mandate to reduce air pollution when it added MTBE, or methyl tertiary butyl ether, to gasoline and that the chemical hadn’t harmed anyone in the state. The company also said the state was aware of the chemical’s risks when it entered a federal program designed to fight air pollution.

“They’re looking for a lot of money, and most importantly they’re looking for a scapegoat,” James Quinn, a lawyer for Irving, Texas-based Exxon Mobil, said in his closing statement yesterday. “There’s nothing strange or nefarious or secretive about it. Everybody was involved in these decisions.”

Grant later responded by saying, “Exxon Mobil is not a scapegoat. This is a case about Exxon’s deliberate choices.” The choice was made for economic reasons, she said.

Market Share

The state is seeking monetary damages from Exxon Mobil based on its share of gasoline sales in New Hampshire from 1988 to 2005, which it estimated at about 30 percent.

New Hampshire’s lawyers told the jury yesterday it would cost $305 million to sample wells, $218 million to clean up high-risk sites, $142 million to pay for past cleanup costs and $150 million to treat drinking water in contaminated wells, for a total of about $816 million. Based on its market share, Exxon Mobil should pay $236 million.

Exxon Mobil has challenged that market-share estimate and said that using refinery data would have resulted in a figure as low as 6.9 percent.

A 12-person jury will be asked to determine Exxon Mobil’s market share for that period if it finds the company liable for damages. The trial started Jan. 14.

Exxon Mobil is the sole defendant since Citgo Petroleum Corp., the Houston-based unit of Venezuela’s state-owned oil company, agreed to a $16 million settlement in February.

Suits Consolidated

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 have been 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 appealed and is awaiting a ruling from the U.S. Court of Appeals.

Maryland’s court of appeals in February reversed two jury verdicts against Exxon Mobil. The plaintiffs had won $1.65 billion in two cases that alleged financial harm and property damage from an underground gasoline leak in 2006 that released MTBE into the water. The appeals court said Exxon Mobil hadn’t made fraudulent statements and the plaintiffs hadn’t shown they were physically harmed by the leak.

Vehicle Emissions

Exxon Mobil has argued in New Hampshire that it was complying with federal regulations, which pre-empt state law, when it added MTBE to gasoline. The additive made gasoline burn more thoroughly, thus reducing air pollution from vehicle emissions, as required under the 1990 Clean Air Act.

New Hampshire witnesses testified that oil companies could have used a chemical other than MTBE to increase the oxygen content of the fuel, such as ethanol. They said that Exxon Mobil’s own research showed MTBE would contaminate groundwater and be costly and difficult to remove.

Exxon Mobil said in court that ethanol wasn’t a good choice as an additive because at the time of the federal mandate it wasn’t widely available. The company said it went ahead with MTBE despite a staff memo warning of its hazards because the benefits, in reducing air pollution, outweighed the risks.

Health Risks

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 of MTBE-caused illness in humans.

MTBE, which New Hampshire banned in January 2007, is highly soluble in water and can be carried a great distance 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 5,590 New Hampshire wells have levels of MTBE determined to be unfit for drinking, which it said is 13 parts of MTBE per billion parts of water.

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 settled before the trial began except Exxon Mobil and Citgo.

Exxon Mobil fell 41 cents to $88.60 yesterday in New York Stock Exchange composite trading (XOM:US). The stock has risen 2.4 percent this year.

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 sarahearle.nh@gmail.com; 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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  • XOM
    (Exxon Mobil Corp)
    • $99.49 USD
    • -0.03
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  • COP
    (ConocoPhillips)
    • $79.91 USD
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