Justice Dept. seeks at least $197M in fines against CITGO in Lake Charles spill

The Justice Department wants a federal judge to fine CITGO Petroleum at least $197 million in a Clean Water Act enforcement lawsuit filed in a 2006 oil spill at the company’s Lake Charles refinery.

Although the 2006 spill was dwarfed by the 2010 BP disaster in the Gulf of Mexico, the Justice Department characterized the CITGO spill in court filings this month as “one of the largest and most serious oil spills in the history of the United States.”

The case went to trial in 2011, but the penalty amount is back in play after the 5th U.S. Circuit Court of Appeals last year ordered U.S. District Judge Richard Haik to reconsider a $6 million penalty he initially handed down and give more attention to the company’s past environmental violations and its decision to delay upgrades that might have prevented the oil spill.

No new court date has been set, but the Justice Department argued in court filings this month that the legal maximum penalty hovers around $232 million and an appropriate penalty should be no less than $197 million.

Justice Department attorneys wrote that Haik’s original $6 million penalty is “an amount scarcely more than one day’s profit for CITGO at the time of the spill.”

The June 2006 oil spill happened when heavy rains caused two “slop oil” tanks at the refinery to overflow, sending a mixture of oily wastewater and other pollutants from the refinery into the Calcasieu River and other nearby waterways.

Estimates for the spill ranged from 54,000 barrels to 76,800 barrels.

CITGO did not dispute that it bore some responsibility, and at issue in the 2011 bench trial before Haik was how much money the company should pay.

Haik wrote in his 2011 ruling that there was a need to balance the seriousness of the oil spill with the oil company’s response efforts and the environmental impact, “which could have been much worse under the circumstances.”

The appeals court ruling that overturned Haik’s $6 million penalty states that he “discounted the seriousness of CITGO’s multi-year wait before it began taking the corrective measures required at this plant.”

According to the appellate court’s ruling, CITGO had been aware of the need for environmental upgrades but had put off doing the work despite the recommendations of its own employees and consultants.

CITGO has argued that any penalty should be offset by the $13 million fine the company paid in a related criminal Clean Water Act charge and by the more than $130 million the company paid in clean up costs and legal settlements with local businesses.

In addition to the $6 million federal penalty, Haik mandated several measures to prevent future spills at the refinery and imposed an additional $3 million penalty to be paid to the state Department of Environmental Quality.

CITGO did not appeal the state penalty and has paid it.