Friday, May 27, 2016

New Judge, Same Result – $81 Million CWA Civil Penalty Appealed

Originally published by Jaclyn E. Hickman and Robert B. McNeal.

U.S. District Court Judge Dee Drell (Western District, LA) recently denied a motion to alter or amend the Court’s judgment against CITGO Petroleum Corp.– allowing an $81 million judgment against the oil company to stand.

The judgment is the latest in a suit the EPA filed against CITGO under the Clean Water Act for a 2006 spill at the oil company’s St. Charles refinery. In the original judgment, U.S. District Court Judge Richard Haik found CITGO negligent, and, based on the factors in the Clean Water Act, imposed a $6 million civil penalty. Citing the inadequacy of the penalty, the EPA successfully appealed and the Fifth Circuit vacated the judgment on grounds that the district court failed to provide a reasonable approximation of the economic benefit to CITGO, as required under the Clean Water Act. The appellate court also specifically directed the district court to “reconsider all its findings with respect to CITGO’s conduct, giving special attention to what CITGO knew prior to the oil spill and its delays in addressing recognized deficiencies.” U.S. ex rel. Adm’r of E.P.A. v. CITGO Petroleum Corp., 723 F.3d 547, 549 (5th Cir. 2013).

On remand, based on the instructions given by the Fifth Circuit, Judge Haik found that CITGO was grossly negligent and that the company’s economic benefit had been $91.7 million dollars. As a result, Judge Haik imposed a civil penalty of $1,500 per barrel spilled – for a total of $81 million – and significantly increased the penalty of $111 per barrel in his original judgment. The EPA sought a penalty of $4,300 per barrel.

In January 2016, Judge Haik retired from the bench and the case was transferred to Judge Drell. CITGO subsequently filed a motion to alter or amend Judge Haik’s judgment, arguing that there was manifest error on several accounts.

CITGO primarily argued that Judge Haik had erroneously failed to consider several facts when calculating CITGO’s economic benefit under the Clean Water Act. Specifically, the company argued that (1) the Court erred in including the cost of equipment that would not have been necessary to prevent the spill, (2) the company should not have been charged with awareness of inadequate storage facilities until the refinery expanded and its capacity increased, and (3) the capital cost rate relied on in making the calculation did not represent the least costly method of compliance, as required by the Clean Water Act. CITGO also argued that the Court should not have allowed the EPA to introduce new expert testimony at the remand hearing and that Judge Haik should have reduced the penalty so as to give CITGO credit for the monetary injunctive relief that had been imposed earlier in the proceedings.

The Court dismissed these assignments of error outright. Without addressing each argument individually, Judge Drell noted that the issues had been, or should have been, briefed extensively and addressed in argument prior to the previous judgment. Noting that a motion for alteration or amendment of a judgment is “not the proper vehicle for rehashing evidence, legal theories, or arguments that could have been offered or raised before the entry of judgment,” the Court ultimately found that “Citgo is presently attempting to essentially re-litigate this case to a new judge based on the same facts and legal theories that were fully considered by Judge Haik, which we deem to be improper under the guise of a Rule 59(e) motion.” U.S. ex rel. Adm’r of E.P.A. v. CITGO Petroleum Corp., No. 2:08CV00893, 2016 WL 1158075, at *4 (W.D. La. Mar. 18, 2016). The Court further opined, “The record reflects that Judge Haik was very well versed on this case, having first conducted a two-week bench trial, reviewed lengthy remand briefs, and then held a remand hearing to determine the correct economic benefit calculation.” Id. As such, the Court declined to consider any of CITGO’s further argument. CITGO filed an appeal of the ruling with the Fifth Circuit on May 4, 2016.

Given that in 2015 all civil enforcement actions by the EPA yielded penalties totaling $205 million (excluding settlements), the CITGO judgment stands out as unusually large. The result is consistent, however, with the EPA’s 2014-2018 Strategic Plan of focusing on large cases, and its recent pattern of pursuing fewer enforcement actions with larger resolutions. See Environmental Enforcement Results for 2015, 2015 ABA Env’t Energy, & Resources L.: Year in Rev. 48 (2015).  The Fifth Circuit’s response to CITGO’s second appeal may provide guidance on whether these types of judgments could be a trend in future Clean Water Act enforcement actions.

For more information, contact Jackie Hickman ( or Rob McNeal (

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