Exxon Mobil Corp. v. United States

• Decision Date: 16 September 2020
• Docket Number: CIVIL ACTION NO. H-10-2386,CIVIL ACTION NO. H-11-1814
• Parties: EXXON MOBIL CORPORATION, Plaintiff, v. UNITED STATES OF AMERICA, Defendant.
• Court: U.S. District Court — Southern District of Texas

EXXON MOBIL CORPORATION, Plaintiff, v. UNITED STATES OF AMERICA, Defendant.

CIVIL ACTION NO. H-10-2386

CIVIL ACTION NO. H-11-1814

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

September 16, 2020

AMENDED MEMORANDUM AND ORDER ENTERING FINDINGS OF FACT AND CONCLUSIONS OF LAW

On August 19, 2020, this court issued a memorandum opinion and order in this case. (Docket Entry No. 344). The court withdraws that memorandum opinion to correct clerical errors, none of which change the court's underlying analysis. This amended memorandum and order supersedes the memorandum and order issued on August 19, 2020.

This is the third, and should be the last, opinion in these environmental pollution cases arising from World War II and the Korean War. In 2010 and 2011, Exxon sued the United States government under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq. ("CERCLA"), seeking reimbursement for some of the costs it paid, and will continue to pay, to remediate environmental damage from producing war materials at its Baytown and Baton Rouge refineries and nearby chemical plants. Deciding the factual issues required the parties and court to examine the years just before World War II up to the present. Deciding the legal issues required the parties and the court to apply relatively recent statutes and legal standards to decades-old events and activities. Instead of live percipient witnesses, the court heard from experts in forensic environmental history and engineering. Instead of electronic documents, the court examined an archive of contemporaneous prewar, wartime, and postwar correspondence, photographs, and other documents.

The detailed findings and conclusions are set out below. In summary, based on the pleadings, briefs, exhibits, testimony, arguments of counsel, equitable factors, and the applicable law, the court finds and concludes as follows:

During the war years, the full slate of products Exxon produced in connection with making avgas were essential war products. The government exerted substantial control and direction over the refineries' actions, including decisions on how to use raw materials and labor. This control and direction makes the government responsible for a share of the remediation costs, including costs related to the refineries' delays in implementing certain waste-management improvements. Based on these and other findings made by the court, the following allocation applies:

• At Baytown, the government is liable under CERCLA for an allocated share of 24.67 percent for past response costs incurred at the refinery and 36.54 percent for past response costs incurred at the Baytown Ordnance Works / Tankfarm 3000 Area.

• At Baton Rouge, the government is liable under CERCLA for an allocated share of 14.4 percent for past response costs incurred at the refinery.

Based on the evidence in the record and the parties' stipulations as to costs, the total damage award in favor of Exxon is $20,328,670. For the reasons set forth in greater detail below, these amounts are not subject to an offset for insurance recovery by Exxon because there has been no double recovery.

No later than August 28, 2020, Exxon is to submit a proposed final judgment, consistent with the findings and conclusions, after consulting with the government.

The detailed findings of fact and conclusions of law follow.

I. Introduction and Background

A. The Issues

ExxonMobil is a multinational oil and gas corporation that owns numerous chemical plants and refineries, including one in Baytown, Texas and another in Baton Rouge, Louisiana. These refineries date back to the early 20th century, when they were constructed and operated by predecessors to ExxonMobil. In the 1940s, the Baytown and Baton Rouge refineries converted with astonishing speed into aviation gas and synthetic rubber production sites. The conversion was important to the military victory over Japan and Germany. Both refineries operated under wartime contracts with the United States. In both, military needs were given priority over environmental consequences. Those consequences are the basis of these lawsuits.

In 2010 and 2011, Exxon sued the United States government under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq. ("CERCLA"), seeking reimbursement for a percentage of the costs it paid, and will continue to pay, to remediate environmental damage at the Baytown and Baton Rouge refineries and nearby chemical plants under the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. ("RCRA").¹ The statutes impose environmental standards and allow past owners and operators of facilities where hazardous substances are located to be liable for the costs needed to clean them up and prevent further harm. See 42 U.S.C. § 9607.

Two sets of general issues are presented: what amount of the environmental wastes needing remediation are attributable to World War II (and, to a lesser extent, the Korean War); and whatpercentages of that amount should Exxon and the government pay as remediation or response costs? Both sets of questions must be answered for each refinery, for the war years and beyond.

Exxon alleges that, through December 2014, it has incurred approximately $77 million in past response costs attributable to the wartime-related contamination, and that it will incur significant additional future costs. (See Docket Entry No. 261 at 6-10). Exxon's claims to recover part of the costs at the Baytown facility are governed by § 113(f), 42 U.S.C. § 9613(f). Its claims to recover part of the costs at the Baton Rouge facility are governed by § 107(a), 42 U.S.C. § 9607(a).

In 2009, Exxon filed two contract actions against the government in the United States Court of Federal Claims, seeking recovery for avgas-related environmental cleanup costs based on a reimbursement clause in the World War II avgas supply contracts between Exxon and the government. The clauses required the government to reimburse Exxon for charges incurred "by reason of" the avgas production. See Exxon Mobil Corp. v. United States, 101 Fed. Cl. 576 (2011). The contract case in the Court of Federal Claims is stayed, pending resolution of the issues here.

This case was litigated in three phases. The first addressed whether only Exxon or the government, or both, were responsible for the contamination and should pay the cleanup costs. Each party pointed the liability finger at the other. Neither wholly succeeded or failed. In 2015, the court ruled on the parties' cross-motions for partial summary judgment, holding that:

• the three-year statute of limitations under § 113(g)(2), 42 U.S.C. § 9613(g)(2), applies to Exxon's claims at Baytown;

• § 113(f)(3)(B)'s contribution provision is Exxon's exclusive remedy to seek cleanup costs incurred in response to administrative settlements with the State of Texas;

• Exxon's agreed orders with the State of Texas are "administrative settlements" under § 113(f);

• the refinery and chemical plant at each site are a single "facility" under CERCLA;

• Exxon and the government were CERCLA owners and operators of the chemical plants at both facilities;

• the government was not a CERCLA owner and operator of either refinery; and• Exxon was entitled to a declaratory judgment that "the United States is liable for its equitable share of past and future cleanup costs incurred at the Baytown and Baton Rouge sites."

See Exxon Mobil Corp. v. United States, 108 F. Supp. 3d 486 (S.D. Tex. 2015) ("Exxon I"). These determinations meant that both Exxon and the government bear a share of the liability for the cleanup costs at the Baytown and Baton Rouge facilities.

In Phase 2, the court determined how to allocate to each party its share of the remediation costs at each site. In 2018, the court ruled on the parties' cross-motions for partial summary judgment, holding that:

• Exxon's cleanup costs at the two Baytown Facility Operations Areas were "necessary costs of response" eligible for CERCLA recovery;

• Exxon's response actions at the five Baytown units and at the three Baton Rouge units were appropriately characterized as a single "removal" action at each facility, which would not be barred by the statute of limitations in 42 U.S.C. § 9613(g);

• Exxon "substantially complied" with the National Contingency Plan for three of the Baytown units and two of the Baton Rouge units;

• a deduction of the insurance-settlement proceeds Exxon received in a different case is appropriate if needed to prevent double recovery;

• the "production-based" analysis is the appropriate equitable allocation methodology to use in this case; and

• Exxon is entitled to a declaratory judgment that it is entitled to recover future cleanup costs associated with the units at which Exxon has already incurred costs.

Exxon Mobil Corp. v. United States, 335 F. Supp. 3d 889 (S.D. Tex. 2018) ("Exxon II").

As part of the holding on the allocation methodology, the court outlined the general steps to determine at the bench trial what amounts each party had to pay. Those steps are:

• assigning shares of waste to the various years of plant operation;

• determining what part of the costs were to clean hazardous wastes caused during the periods of the government's involvement and are attributable to the production of war products, for which the government is responsible, as opposed to wastes caused by Exxon's production of nonwar products for commercial sale;

• determining what part of the costs were to clean hazardous wastes caused by the delay in constructing environmental protections at the refineries and plants, and what part of the delay is attributable to Exxon or to the government; and

• assigning the wartime-related costs subject to allocation based on the parties' respective degrees of involvement with the wartime activities and other equitable factors.

See id. at 941.

The court also...