ExxonMobil’s $5 million settlement for polluting water during the Pegasus oil pipeline spill may be final as soon as this week. But many Arkansas water agencies and cities are blasting the penalty and other requirements in the pact as being too weak and too reliant on struggling federal pipeline regulators to keep the 1940s-era pipeline from failing again.
“We don’t believe the consent decree is in the public interest…it doesn’t do enough to prevent a future rupture or to make meaningful improvements to the Pegasus,” said John Tynan, public affairs director for Central Arkansas Water (CAW), the utility that manages the crucial Lake Maumelle watershed, through which more than 13 miles of the pipeline pass.
CAW, three other Arkansas water agencies, six cities and Pulaski County want the judge in the case to reject the agreement, or to delay finalizing it until pipeline regulators complete a separate proceeding on the Pegasus spill. In comments filed in federal court, the group sought to add more safety and oversight measures.
Among other things, the group asked that CAW be granted the right to enforce the terms of the consent decree; that the Pegasus be rerouted away from the Lake Maumelle watershed; that government first-responders be provided with spill response training; and that the agreement include specific safety requirements to make noncompliance a violation of the consent decree.
The public entities opposed to the ExxonMobil pact rely on water sources that could be contaminated by another spill from the Pegasus pipeline. The sources at risk provide drinking water for 750,000 Arkansas residents, according to the CAW filing from May.
The consent decree was announced in April by the U.S. Department of Justice, the Environmental Protection Agency and the State of Arkansas, which had accused the oil company of violating the federal Clean Water Act as well as state air and water statutes. The case stemmed from the March 2013 Pegasus rupture, which sent an estimated 210,000 gallons of sticky diluted bitumen (dilbit) into a Mayflower, Ark. neighborhood and nearby Lake Conway.
In a July 17 order, U.S. District Court Judge Kristine Baker gave federal and state officials two weeks to respond to the objections from CAW. The United States has previously dismissed CAW’s concerns, so it’s likely that the consent decree could be finalized by July 31.
The deal comes months after New Jersey Gov. Chris Christie settled a lawsuit against ExxonMobil for $225 million for environmental contamination, just as a judge in the case was deciding whether to assess damages of $8.9 billion sought by the state. The presidential contender was criticized for letting Exxon off the hook.
The Justice Department said it would not comment on the Pegasus case beyond its court filings. The EPA and ExxonMobil did not respond to a request for comment on the objections to the settlement.
The Deal
The 647-mile northern segment of the Pegasus, which carried dilbit from Illinois to Texas, was built in the late 1940s using pipe with known manufacturing flaws and susceptible to splitting along its lengthwise seams. The pipeline failed with a 22-foot gash along on the seam line.
The northern leg of the Pegasus has been closed since the spill. The southern section of the Pegasus, a 211-mile Texas segment that connects Corsicana to Nederland, was restarted in July 2014.
Under the settlement, Exxon would pay a $3.19 million civil penalty to the U.S. government and $1.88 million to the state of Arkansas. The state figure includes a $1 million penalty, $600,000 to improve the water quality of the lake affected by the spill, and $280,000 for litigation costs.
The agreement also requires Exxon to designate its northern Pegasus pipeline as at-risk for bursting along its lengthwise seams—a designation that requires ExxonMobil to undertake special testing, maintenance and operations. Exxon must also provide spill response training for certain Pegasus employees in 2015 and 2017, and position spill response equipment in three locations along the pipeline.
“In addition to paying significant civil penalties, ExxonMobil will provide money for safety and water-quality projects to help ensure that the residents of the affected area never have to go through an ordeal like this again,” said Chistopher R. Thyer, U.S. attorney for the Eastern District of Arkansas.
CAW is not impressed.
“The proposed consent decree does nothing to protect the vital water resources within the State of Arkansas from harm when the next segment of the Pegasus pipeline ruptures,” the water users group wrote. “Moreover, despite what has been stated in many public announcements, the proposed consent decree does not require [Exxon] to perform any corrective measures or take additional precautionary measures to prevent future spills from the Pegasus pipeline.”
CAW believes federal regulations already require ExxonMobil to treat the pipeline’s failed northern segment as prone to splitting along its seams. The agreement also notes that the oil company “intends” to comply with a remedial action plan and a federal corrective action order by the Pipeline and Hazardous Materials Safety Administration (PHMSA), but those are not finalized. The agency is under heavy criticism from Congress, watchdog groups and communities who say the regulator is unable to effectively police pipeline operators.
“The water users have little to no confidence in the ability of PHMSA to independently and thoroughly enforce the requirements of the corrective action order or the remedial work plan,” CAW told the court. In addition, the group has “no confidence in [ExxonMobil’s] ability or intent to comply with the letter or intent of the consent decree given the defendant’s history of non-compliance.”
In November 2013, PHMSA issued a notice of probable violation and proposed compliance order that included a $2.66 million civil penalty and accused the oil company of delaying a crucial inspection, putting off urgent repairs, masking pipeline threats with skewed risk data and overlooking its own evidence that the Pegasus was prone to seam failures.
PHMSA ordered the oil company to overhaul its integrity management plan to make sure that decisions affecting final risk scores “are not manipulated,” that the integrity management process is “not circumvented,” and that “conflicting budget goals” don’t affect pipeline safety priorities.
ExxonMobil denied PHMSA’s allegations and appealed the findings. A closed hearing on the case was held in June 2014, and there’s no timeline for when PHMSA will release its final ruling.
CAW and others believe there are grounds for levying higher penalties.
The consent decree cites ExxonMobil’s estimate of 3,190 barrels (or 133,980 gallons) for the amount of oil that flowed from the Pegasus. The standard Clean Water Act penalty is $1,100 per barrel, but it increases to $4,300 per barrel for cases where negligence is involved. Using ExxonMobil’s spill figure, the standard fine would total $3.5 million; while the fine for negligence would be $13.7 million.
PHMSA put the Pegasus spill at 5,000 barrels of oil, or 210,000 gallons. At 5,000 barrels, the maximum penalty would be $21.5 million.
