Supreme Court Holds CITGO Is Liable In 2004 Philly Oil Spill – Must Pay for Clean up

Boats travel through Athos Spill 2004     Photo: Philadelphia Enquirer

The Supreme Court ruled on Monday that under the Oil Pollution Act and the terms of its contract with the shipping company, CITGO Asphalt Refinery must repay the government and the shipper for the $133 million they spent to clean up the 6000 barrel oil spill that occurred when the oil tanker hit an abandoned anchor in the Delaware River. CITGO argued that merely doing its best to ensure that that harbor was safe was sufficient, but the Court disagreed in a 7-2 decision that interpreted customary contract language for shipping contracts to hold the oil company/shipper liable.

Why This Matters:  Oil companies that own large industrial facilities and “berth” big oil tankers are now liable — they can’t just pass off responsibility for spills on the shipping company when the terms of the contract between them provide that the purchaser will provide “safe berth” in the port.  The oil companies will certainly try to rewrite shipping contracts to put the burden more squarely on the shipper.  There are thousands of oil spills in U.S. harbors each year and cleaning up the major spills like this one is expensive. Shippers generally don’t have deep pockets to pay for cleanups (the taxpayers had footed much of the bill in this case) but oil companies do, and they should not be able to shirk these costs.

Massive Spill

According to the Philadelphia Enquirer, hole the anchor caused in the hull of the enormous 748-foot vessel, the Athos I, released 264,000 gallons of heavy crude oil into the Delaware river, affecting hundreds of miles of shoreline and impairing shipping for days. In addition, the Salem Nuclear Power Plant temporarily shut down because it could not draw cooling water from Delaware Bay.  Plus, more than 180 birds died, the Enquirer reported.  CITGO sold the refinery in 2008 and it has changed hands again several times in the meantime.  It is now used to store and produce low-sulfur marine fuel.

The Oil Company Argument

CITGO claimed that they should not be held responsible because the existence of the abandoned anchor in the harbor that the tanker hit was “unknown and unknowable” by them.  By extension, they could be subject to unlimited liability of any mishap in the harbor could be found to be their fault.  But the majority of the Justices were not persuaded and in oral argument kept returning to the language of the agreement between CITGO and the shipper.  Bloomberg News reported that during the argument “Justice Elena Kagan said the case should be decided on the terms of the charter, not on what CITGO thinks would be ‘sensible.’”  That argument about the terms of the contract apparently was dispositive.  The Court rejected the company’s assertion that ship captains had a duty to analyze the chartered route and reject it based on safety when their contract stated otherwise.

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