Not “Too Big to Fail.” Too Big to Comply.

Last year, the 5th Circuit Court of Appeals vacated the decision by District Judge David Hittner not to impose any penalties on ExxonMobil for violations alleged in a Clean Air Act citizens’ suit concerning ExxonMobil’s Baytown facility.  At the time, I asserted that the case was largely a win for ExxonMobil.

Last week, Judge Hittner, in an opinion which was admirably scrupulous in not trying to dodge the 5th Circuit remand, imposed a $20 million penalty against ExxonMobil.  I still think ExxonMobil should declare victory.

Why?

Because Judge Hittner reiterated all the same issues I noted last May:

  • Deviation reports, by themselves, do not constitute evidence of violations
  • There is no need for a declaratory judgment
  • There is no need for an injunction
  • ExxonMobil demonstrated good faith efforts to comply.

Ultimately, the court simply utilized the available evidence concerning the economic benefit of noncompliance, determined that benefit to be approximately $14 million, added a 50% multiplier, and set the penalty at the resulting $20M.  Given that he found more than 16,000 days of penalties and the maximum penalty was more than $500M, it indeed seems like a pretty good result for ExxonMobil.

The complexity of Baytown is almost beyond comprehension.  It is subject to more than 120,000 separate permit conditions.  Exxon spends more than $500M annually on maintenance at Baytown; the $20M is thus only 4% of the annual Baytown maintenance budget — just a drop in the bucket.

This is not a criticism of Judge Hittner or ExxonMobil.  The Judge was clearly sympathetic to ExxonMobil, but I still think he took the remand order seriously and did a thorough job in assessing the violations and determining the appropriate penalty.  It appears that he was justified in concluding the ExxonMobil had made good faith efforts to comply.

The bottom line is that ExxonMobil is just too big to comply.  Maybe the big banks should have tried that argument.

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