Judge approves Exxon settlement

Sen. Lesniak, environmentalists vow to appeal $225 million decision

UNION COUNTY, NJ — A superior court judge approved the $225 million settlement between the state and ExxonMobil last week, and while the governor’s office and Exxon are praising the news, there are many people that had hoped for a different outcome and are vowing to continue their fight.

In an 81-page decision, Superior Court Judge Michael Hogan said “the court finds that the proposed consent judgement is fair, reasonable, in the public interest, and consistent with the goals of the Spill Compensation and Control Act. It therefore approves the Consent Judgement.”

The case involves two petroleum sites in Northern New Jersey, one of them the Bayway Refinery in Linden, and 16 additional facilities across the state and about 1,700 retail gas stations. The state has alleged all along that Exxon is responsible for decade’s worth of environmental pollution, but in the settlement, Exxon admits no wrongdoing.

The settlement brings to an end a legal case that has been on the books for more than a decade, and been in the public eye for the better part of 2015. Originally, the state was asking for $8.9 billion, and critics of the settlement have continued to remind the public that the state allegedly settled for pennies on the dollar.

Some critics have taken it even further, like Sen. Ray Lesniak, who has continued to criticize the settlement. Lesniak, along with a handful of environmental groups, has filed motions to intervene that were denied. But despite continued setbacks, the senator and environmental groups vow to continue their pursuit.

When asked last week about his disappointment over the settlement, Lesniak did not mince words.

“Disappointment is an understatement. I’m extremely disappointed with the settlement and the judge for approving it,” he said. “But I knew going in that it’s rare that a judge does not approve a settlement brought by the state because it has a strong presumption of validity.”

Lesniak is optimistic, mostly because of one big detail that he thinks the judge overlooked.

“There is a huge issue out there that I am convinced is a reversible error,” he said. “And that is the cleanup of Morses Creek.”

According to the 41-page settlement between the state and Exxon, ExxonMobil does not have to clean up Morses Creek until Phillips 66, which now owns the refinery, closes the Linden Bayway Refinery. And no one expects the facility to close anytime soon.

“The settlement allows Exxon to defer cleanup responsibility until refinery operations cease at that site,” said Lesniak. “Operations have been going on since 1909 and are likely going to continue for another 100 years.”

And the settlement, Lesniak says, violates the Spill Act, although Judge Hogan clearly disagreed.

In the conclusion to his 81-page decision approving the settlement, Hogan wrote “Exxon’s payment represents a reasonable compromise given the substantial litigation risks the DEP faced at trial and would face on appeal. Furthermore, the Consent Judgement is faithful to the Spill Act’s goals and in the public interest.”

The Spill Act, short for the Spill Compensation and Control Act, was enacted in 1975 and clearly states the intentions of the government in passing the law.

“The Legislature intends by the passage of this act to exercise the powers of this State to control the transfer and storage of hazardous substances and to provide liability for damage sustained within this State as a result of any discharge of said substances,” the Act reads, “by requiring the prompt containment and removal of such pollution and substances, and to provide a fund for swift and adequate compensation to resort businesses and other persons damaged by such discharge, and for the defense and indemnification of certain persons under contract with the State or federal government for claims or actions resulting from the provision of services to mitigate or clean up a release or discharge of hazardous substances.”

Notably, the Act states the “prompt containment and removal of such pollution.” It is unclear how promptly Judge Hogan expects the Linden refinery to close.

Moreover, the Act also states that “the legislature finds and declares that it is the public policy of this State to safely and expeditiously handle, treat, remove and dispose of hazardous substances released or spilled to the environment.”

The site at Morses Creek in Linden, however, is expeditiously growing, and it’s owner is promptly spending hundreds of millions of dollars upgrading the facility. Closure of the site is by no means imminent.

Phillips 66 Partners, a limited partnership formed by Phillips 66, is a growing company. It took over the refinery in Linden in 2014, and another refinery in Washington state the same year, and according to their website, the company plans on spending $340 million on upgrades to both facilities over the next five years and to develop a new pipeline system to ship oil.

Breaking Energy, an online forum that covers the energy industry, noted early this year that Phillips 66 Partners could easily see a 2015 distribution growth in excess of 20 percent given the refineries acquired in Linden and Washington.

As of last spring, the refinery in Linden was producing 238,000 barrels a day of crude oil.

The closing of other refineries along the east coast of the United States has also helped the Linden refinery, and in the first quarter of 2013, the company reported earnings of $1.4 billion, compared to $636 million in the first quarter of 2012.

Also notable is that while many of the refineries on the east coast are considered a dying breed because they can only process the highest grade oil, the Bayway refinery in Linden has an advantage because it can handle a variety of crude oils.

“I will be filing a request to appeal and intervene before Judge Hogan,” said Lesniak last week. “We will be appealing to overturn the entire settlement. This issue is the lynchpin because it is a clear violation of the law. This is the lynchpin that would overturn the entire settlement and put the damage amount in the hands of the judge where it should have been in the first place.”

While Lesniak and environmental groups hope the Morses Creek issue will overturn the settlement, there are other major complaints they have about the agreement between the oil giant and the state.

“There’s another giveaway to Exxon that enables them to deduct as their business expense from their taxes on federal and state,” Lesniak said, “which reduces the settlement from $8.9 billion to 1.9 cents on the dollar.”

In addition to the tax write off that will see Exxon essentially paying $150 million instead of the settled upon $225 million, critics also point out that only $50 million of the settlement money needs to be spent on the environment. The rest can be used by Gov. Chris Christie as he sees fit. Christie has not publicly said how the excess funds will be spent, which will come out around $125 million after legal fees, but he did veto legislation that would have increased the cap on the mandatory amount of money being spent on the environment.

It has been expected that the governor will use the remainder to balance the general operating budget, but Christie’s office has not made this clear.

“It should be used for restoration of the environment,” said Lesniak. “In any event, it’s a drop in the bucket for what needs to be done and for the damage Exxon has done for over 100 years. I’m optimistic the appellate division is going to realize the judge made a fatal error.”

Jeff Tittle, director of the New Jersey Sierra Club, could not be reached for comment for this article, but he shared his distrust of the settlement with LocalSource in April.

“Who does this benefit other than ExxonMobil?” he said.

3 Responses to "Judge approves Exxon settlement"

  1. Barbara Metzler   September 8, 2015 at 1:38 pm

    ExxonMobil SHOULD BE FORCED to PAY THE ENTIRE AMOUNT!!!!!

  2. Ellen McC   September 8, 2015 at 1:44 pm

    It needs to be repealed!!!

  3. kimijye   September 8, 2015 at 2:48 pm

    Patrick, this article is weird. Starts good and then throws a hodgepodge of facts in the mix that are not explained well enough for anybody to stand them. Also spelling and grammar errors – no time for proofreading any more?