Exxon Mobil Is Found Neligent in New Hampshire MTBE Use

Source: By Don Jeffrey & Sarah Earle, Bloomberg • Posted: Wednesday, April 10, 2013

Exxon Mobil Corp. (XOM) will appeal a $236 million New Hampshire verdict in a case over the use of the gasoline additive MTBE, after having gotten a much larger award in a similar dispute thrown out by a court in Maryland.

After an almost three-month trial, a jury in Concord took about three hours to find Exxon Mobil (XOM) negligent for putting the additive in gasoline without warning the state of its risks, and that the company should pay for contaminating New Hampshire’s groundwater.

David Lender, a lawyer for Irving, Texas-based Exxon Mobil, the largest U.S. oil company, said his client has strong arguments to make on appeal. New Hampshire Superior Court Judge Peter Fauver ruled against Exxon Mobil before and during the trial on the admissibility of certain evidence.

“We appreciate the jurors’ service during this long trial, but erroneous rulings prevented them from hearing all the evidence and deprived us of a fair trial,” Lender said yesterday in a statement.

New Hampshire’s suit was one of scores of cases over methyl tertiary butyl ether, or MTBE, filed since 2000 against refiners, fuel distributors and chemical makers. Some MTBE lawsuits have been consolidated in federal court in New York for pretrial evidence-gathering and motions.

Maryland Reversal

Exxon Mobil’s biggest MTBE victory on appeal came in February when a Maryland court rejected two jury verdicts against the company. The plaintiffs had won $1.65 billion over allegations of 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.

In 2009, a federal jury ordered Exxon Mobil to pay New York City $104.7 million after finding it liable for polluting wells. Exxon Mobil appealed and is awaiting a ruling.

“It’s historically been Exxon’s pattern in litigation of this type to go into full-resistance mode and appeal major verdicts,” said Albert Locher, a lawyer with the Sacramento County District Attorney’s office in California. When the county sued a group of oil companies over MTBE, Exxon settled without a trial for $100,000 because its market share in the area was low, Locher said yesterday in an interview.

New Hampshire projected costs of $816 million to test, monitor and clean up wells and to test drinking water. The jury determined that Exxon Mobil should pay 29 percent of that, or $236 million, based on its market share, which is the amount the state asked for.

Third Largest

The $236 million Exxon Mobil verdict is the third-biggest in the U.S. this year, behind the $524 million awarded in a Nevada lawsuit against two units of UnitedHealth Inc. involving a negligent doctor, and one from February for $400 million in a price-fixing case against Dow Chemical Co (DOW). that is subject to tripling under U.S. antitrust law.

New Hampshire Attorney General Michael Delaney said at a press conference yesterday that the award was the largest verdict obtained by New Hampshire in the history of the state.

“We have made history with this case,” he said. In light of Exxon Mobil’s expected appeal, Delaney said he didn’t yet have details on how or when the money will be spent. “Our plan is to present a comprehensive proposal.”

Exxon Mobil told New Hampshire jurors that it was complying with a federal mandate to reduce air pollution when it used MTBE. The additive made gasoline burn more thoroughly, thus reducing air pollution from vehicle emissions, as required under the 1990 Clean Air Act.

The company also argued that fuel distributors had adequate warnings about the risks of MTBE and that the chemical hadn’t harmed anyone in the state.

Ethanol Possible

New Hampshire’s 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 very costly and difficult to remove.

Exxon Mobil said 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 even after a staff memo warning of its hazards because the benefits, in reducing air pollution, outweighed the 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 was no evidence of MTBE-caused illness in humans.

Highly Soluble

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. That level is 13 parts of MTBE per billion parts of water, the state said.

In 2003, New Hampshire sued Exxon Mobil, Shell Oil Co. (SHOI), Sunoco Inc. (SUN), ConocoPhillips (COP), Irving Oil Ltd., Vitol SA, Hess Corp. (HES) and Citgo Petroleum Corp. (PDVSA), the Houston-based unit of Venezuela’s state-owned oil company. All settled before the trial began except Exxon Mobil and Citgo, which agreed to a $16 million settlement in February.

Exxon Mobil rose 17 cents to $88.77 yesterday in New York Stock Exchange composite trading. The stock has climbed 2.6 percent this year.

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