Environment Texas
Law 360
Kat Greene

Exxon Mobil Corp. will have to face a $641 million suit brought by environmentalists over emissions at its Baytown, Texas, refinery, the Fifth Circuit said Friday in an opinion that panned portions of the trial court’s ruling in Exxon's favor as “irreconcilably inconsistent.”

A three-judge panel revived the suit brought by Environment Texas Citizen Lobby Inc. and the Sierra Club contending Exxon should have to pay penalties for more than 18,000 actionable
violations of environmental laws, concluding that U.S. District Judge David Hittner had unevenly analyzed the groups’ claims, according to Friday’s decision.

Judge Hittner had ruled on one aspect of the environmentalists’ case that the violations listed in Exxon’s own reports were undisputed but in another portion of his ruling found them to be “uncorroborated,” the panel said. “We find this differential treatment of [the claims] irreconcilably inconsistent,” the panel wrote. “We accordingly conclude that the district court erred in requiring ‘corroboration’ for violations that, in a different portion of the same order, it explicitly found to be undisputed.”

The panel also balked at Judge Hittner’s finding that, though there were 94 actionable violations by his count in the record, no penalty was warranted, ordering the court on remand to tally up penalties to match the actionable violations found.

A spokesman for Exxon said that the company is still analyzing the Fifth Circuit decision and the available options.

"The important aspect of today's decision is the appellate court affirmed the district court's determination that ExxonMobil has acted in good faith and established a favorable compliance
record which does not necessarily warrant any civil penalties," the spokesman said. "In addition, the appellate court affirmed the district court's finding that none of the events in question actually or potentially harmed public health or the environment."

The groups filed suit in December 2010, claiming that the Baytown facility — an integrated refinery, olefins and chemicals plant — emitted millions of pounds of pollutants into the air over the past several years, well in excess of legal limits. Some of the pollutants — including sulfur dioxide, carbon monoxide, nitrogen oxides and benzene — are carcinogenic, cause or aggravate respiratory illnesses, or contribute to the formation of smog, according to the suit.

Judge Hittner in December 2014 ruled in favor of Exxon after a 13-day bench trial, finding that even though its emissions went above the permitted limit at times, it wasn’t enough to warrant a penalty. The judge found that Exxon conducted extensive internal investigations and implemented appropriate corrective actions after each reportable event. And there wasn’t evidence to show that any of the events or deviations had resulted from a recurring pattern, or that improvements could have been made to prevent recurrence, he said.

On appeal, the environmentalists contended that Judge Hittner erred by not finding that the company’s own reports proved more than 18,000 days of actionable violations. Moreover, he
didn’t order any remedy for 94 violations of the law that he did find actionable, the groups said. They said the judge wrongly used a larger number of smaller violations as grounds to discount more serious violations.

For its part, Exxon argued that even though its massive Baytown refinery will never be able to operate completely pollution-free, it remains a "leader in environmental compliance." The Baytown complex, occupying some 3,400 acres, includes 10,000 miles of pipe and can process more than 550,000 barrels of crude oil each day. Given those facts, Exxon said, complete
elimination of harmful emissions is impossible. But the EPA knows this, and the Clean Air Act takes that inevitability into account by allowing industrial facilities like the Baytown complex to emit a certain level of pollutants during their normal operations, Exxon said. 

The city of Houston, joined by Harris County and advocacy group Air Alliance Houston, argued in an amici brief in May 2015 that Judge Hittner “committed errors of law and fact” in finding that the amount of pollution released from the facility did not adversely affect human health or the environment and that the oil giant’s reporting, record-keeping and emission testing violations were not serious.

The Texas Oil & Gas Association, Texas Chemical Council, U.S. Chamber of Commerce and others filed an amici brief in support of Exxon in September arguing that the environmental groups are attempting to dramatically expand the scope of citizen suit provisions in the Clean Air Act by overriding the EPA and its state counterparts, and forcing district courts to determine how to regulate individual oil refineries and processing plants.

Representatives for the environmentalists didn’t immediately respond to requests for comment after business hours on Friday.

Circuit Judges Fortunato P. Benavides, James L. Dennis and Leslie H. Southwick sat on the panel for the Fifth Circuit.

The environmental groups are represented by Philip H. Hilder of Hilder & Associates PC, Charles C. Caldart and Joshua R. Kratka of the National Environmental Law Center and David A. Nicholas.

Exxon is represented by Russell S. Post, Fields Alexander, David M. Gunn, Eric J.R. Nichols, William R. Peterson and Bryon A. Rice of Beck Redden LLP and Albert R. Axe Jr. and Keith Alan
Courtney of Winstead PC.

The case is Environment Texas Citizen Lobby Inc. et al. v. ExxonMobil Corp. et al., case number 15-20030, in the U.S. Court of Appeals for the Fifth Circuit.
--Additional reporting by Kurt Orzeck, Vidya Kauri and Caroline Simson.