Exxon Ordered To Pay $105M Over MTBE Contamination

By Jesse Greenspan

Law360, New York (October 19, 2009) -- A federal jury has ordered Exxon Mobil Corp. to pay $105 million in compensatory damages for contaminating New York City's groundwater with the gasoline additive methyl tertiary-butyl ether.

After an 11-week trial, the jury in the U.S. District Court for the Southern District of New York found Exxon Mobil liable for failure to warn people about the dangerous nature of its product, as well as trespass, public nuisance and negligence, New York City officials said Monday.

They said the city's drinking water supply system included 68 wells in the borough of Queens, and that the installation and upgrade of water treatment stations to remove MTBE would help provide drinking water to Queens residents when portions of the upstate reservoir system were out of service, or during droughts.

After the MTBE is removed from the groundwater, the wells will be able to provide drinking water to Queens residents that is of the same quality as that provided to other city residents, according to the officials.

“Our water supply is one of our most vital resources — and we will work to protect it and go after those who damage it,” said New York Mayor Michael R. Bloomberg. “Victories like this demonstrate our commitment to using taxpayer resources to protect New Yorkers.”

“This is an important result for cities and water utilities everywhere,” added Victor Sher of Sher Leff LLP, who served as outside counsel to the city. “It makes clear that even the biggest corporation in the world must protect drinking water and pay to clean it up when their products pollute it.”

For its part, Exxon Mobil said it was disappointed with the decision and would be considering all of its legal options.

“As we’ve maintained throughout, our service stations were not the source of the MTBE contamination at the Station 6 wells and the city’s own principal expert identified three non-Exxon Mobil sources,” the company said. “We do not believe we should be required to compensate the city of New York for someone else’s contamination.”

New York City first filed the case in 2003 against 23 major oil companies, but all of them but Exxon Mobil eventually settled.

At trial, the city alleged that Exxon Mobil added MTBE to its gasoline knowing that it would contaminate groundwater when the gasoline leaked and knowing that underground storage tanks at gas stations regularly leak.

The city also accused the oil giant of ignoring warnings from its own scientists and engineers not to use MTBE in areas of the country, like Queens, that use groundwater for drinking water.

Last Wednesday, Judge Shira Scheindlin ruled that the city had not presented sufficient evidence to allow the jury to rule on punitive damages. But by that point, the city had already prevailed in the first two phases of the trial, convincing jurors that it had a good faith intent to build water treatment plants at wells in Queens, and that the water beneath the wells would be contaminated with MTBE for some years to come.

The city had asked for about $250 million in compensatory damages.

Refiners added MTBE to gasoline at varying levels between 1979 and 2007 as an antiknock agent to replace lead, though about 20 states have now banned it.

New York's case was the first to go to trial from a multidistrict litigation that consolidated suits over chemical leaks from tanks throughout the United States. In March 2008, 13 oil companies, including BP Amoco Corp., Atlantic Richfield Co., Chevron USA Inc., ConocoPhillips Co., Shell Petroleum Inc., Marathon Oil Co., Valero Energy Corp., Citgo Petroleum Corp. and Sunoco Inc., agreed to pay $422 million to settle the claims against them.

More settlements have trickled in since then, and the MDL is winding down against most of the defendants.

The city is represented in the matter by Sher Leff LLP, Greenberg Glusker Fields Claman & Machtinger LLP and its own lawyers.

Exxon Mobil is represented by McDermott Will & Emery LLP.

The case is City of New York v. Amerada Hess Corp. et al., case number 04-03417, in the U.S. District Court for the Southern District of New York.

The multidistrict litigation is In re: Methyl Tertiary-Butyl Ether Products Liability Litigation, case number 00-1898, in the U.S. District Court for the Southern District of New York.

--Additional reporting by Richard Vanderford