Jury: Company covered up spill

Pipeline company hit with $56.2 million for clean-up costs, punitive damages

by The Associated Press

Texas jury concluded July 2 that Texas-New Mexico Pipeline Co. committed fraud, gross negligence and willful misconduct in concealing a 1992 crude oil leak beneath a Midland residential subdivision before selling a pipeline to EOTT Energy in 1999.

The jury awarded EOTT $6.2 million for its costs to date to clean up the contamination and $50 million in punitive damages because Texas-New Mexico Pipeline, a subsidiary of Shell Oil Co., concealed the problems while negotiating the sale of the pipeline to EOTT.

EOTT bought the pipeline for $33 million and signed a purchase agreement assuming environmental liabilities.

But 10 of 12 jurors concluded July 2 that Texas-New Mexico Pipeline was to blame for the contamination of the Kniffen Estates subdivision water supply from the estimated 9,000 to 13,000 barrels of crude oil that leaked into the soil.

“The people of Texas have sent a message to (Texas-New Mexico Pipeline), its owner and to the industry that this is not how to run a pipeline, not the way to handle a leak and spill, and not the way to sell a pipeline to somebody else,” EOTT Energy chairman Tom Matthews said.

As jubilant EOTT officials celebrated in the courtroom, calling associates in Houston with the news, Texas-New Mexico Pipeline lawyers and officials packed their bags, leaving the courtroom quickly and silently, the Midland Reporter-Telegram reported in its July 3 editions.

“We're not going to have much to say. Obviously, we're disappointed with the jury's decision,” Texas-New Mexico Pipeline spokesman Wes Harris said.

In Houston, Texas-New Mexico Pipeline spokeswoman Helen Bow said the company expects to file an appeal.

EOTT attorney Paul Bohannan said a statutory ceiling on punitive damages could reduce that portion of the award to two times the actual damages.

Final cleanup cost not yet determined

After the contamination was discovered in 2000, EOTT paid remediation costs and provided new appliances and plumbing for some of the 130 affected residents.

The homeowners sued both companies and were paid a publicly undisclosed settlement from Texas-New Mexico Pipeline before the trial — an amount that a source close to the case told The Associated Press amounted to $9.8 million. The residents also settled with EOTT in an agreement yielding a cash value of about $1.4 million.

With the homeowners compensated, that left the companies to battle their dispute in court.

EOTT said it found two areas of underground pipe that appeared to have been recently replaced, with oil-drenched soil concealed with new soil prior to acquisition.

Just prior to trial, EOTT — acting on a tip from a former Texas-New Mexico Pipeline employee — unearthed hundreds of pages of Texas-New Mexico Pipeline documents from a 45-foot hole in southeastern New Mexico. The process of restoring the documents was recently completed.