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September 24, 2013
Exxon and the MTBE appeal

In a case that began in 2003, a three-judge panel of the U.S. Court of Appeals for the 2nd Circuit unaminously upheld a jury verdict and district court judgment that ordered Exxon Mobil Corporation to pay New York City $105 million to help remediate drinking well contamination resulting from spills of gasoline containing methyl tertiary butyl ether (MTBE). 

The award fell short of the city’s request for $300 million mainly because the jury refused to grant the city’s request that the payout cover both preexisting damages and pollution caused by other petroleum companies.  The 2nd Circuit also upheld the district court’s refusal to allow the jury to consider the city’s request that Exxon be ordered to pay punitive damages.

CAA oxygenate requirement

Despite the substantial reduction in the city’s award request, the verdict is considered a major defeat for oil companies that were required by the federal Clean Air Act (CAA) to use oxygenates such as MTBE in their gasoline over a 20-year period between the mid-1980s and mid-2000s.  Oxygenates increase the octane level in gasoline and improve the quality of vehicle exhaust emissions.  New York State banned MTBE as of 2004 after determining that spillage and leaks from service station gasoline tanks were contaminating sources of drinking water throughout the state.  In 2005, the U.S. Congress rescinded the oxygenate requirement. 

Station Six

The city’s claim specifically addressed MTBE contamination of Station Six Wells, a system of water wells in Queens, that were not actually providing drinking water, but that were maintained by the city for use in case of future water shortages.  The city’s active drinking water is supplied by aqueducts and underground tunnels that convey water from reservoirs north of the city.  The projected output of Station Six Wells is 10 million gallons a day, about enough to supply 80,000 people.

Three phases

The jury trial was complex and played out over the last decade in three phases.  In Phase I, Exxon argued that the city had not provided a good-faith demonstration that it ever intended to make use of Station Six Wells.  In response, the city introduced a parade of officials, including the acting commissioner of the New York State Department of Environmental Conservation, who testified that plans had been approved to build a treatment plant at Station Six.  The preponderance of evidence by the city convinced the jury.

In Phase II, the jury found that MTBE would be present in Station Six Wells at 10 parts per billion in 2033.  “This projection speaks not only to the ‘ultimate outcome of Exxon’s conduct,’ but also to the substantiality of the risk, inherent in supplying and distributing MTBE-containing gasoline, that a reasonable water provider would one day be required to decontaminate its water of MTBE,” stated the 2nd Circuit.

Phase III addressed questions of liability and damages.  Here, the jury found Exxon liable to the city under New York law for negligence, trespass, public nuisance, and failure-to-warn.  However, the jury found that Exxon was not liable for the city’s design-defect and private nuisance claims.

Exxon also argued that the city’s common law claims were exempted by the CAA, that it had no safe and economically feasible alternative to MTBE, that the city’s action was either not ripe for adjudication or barred by the statute of limitations, and that a mistrial should be declared because of alleged misconduct by one juror.  Exxon did not prevail in any of these claims.

In re: MTBE Products Liability Litigation

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