Providing coverage of Alaska and northern Canada's oil and gas industry
June 2023

Vol. 28, No.23 Week of June 04, 2023

Alaska Supreme Court affirms in most part North Pole case ruling

kristen Nelson

Petroleum News

In a May 26 decision the Alaska Supreme Court affirmed a superior court decision in a case brought by Williams Alaska Petroleum and The Williams Cos. against the state, Flint Hills Resources and Flint Hills Resources of Alaska over contaminants at the North Pole Refinery. The refinery, on leased state land, was owned and operated by Williams from 1977 until 2004 when it sold the refinery to Flint Hills.

In its decision the Alaska Supreme Court said following release of hazardous substances that contaminated local groundwater, the state and previous and current owners of the refinery litigated contract and statutory damage claims.

"The superior court rejected the previous owner's claims against the State and the current owner, found the previous owner strictly liable, and ordered it to pay damages to the State and make contributions to the current owner for its remediation costs."

The previous owner, Williams, appealed the ruling, contending, among other things, that the court erred in concluding the substance at issue was hazardous and in awarding costs and damages for loss of groundwater access.

"We affirm the superior court's decision except that we remand the grant of injunctive relief for more specificity as required by rule," the Supreme Court said in its ruling.

Sulfolane, PFAS

The court said Williams began using sulfolane in its refining process in 1985. The court described sulfolane as "highly soluble in water" and easily able to seep into groundwater, with low volubility so it does not readily evaporate and remains in groundwater without attaching to soil.

Williams allowed sulfolane to migrate into groundwater at the refinery through various means - it was recycled to the extent feasible, but some remained in water from the refinery process and was diverted into the wastewater system, the court said, citing poor upkeep at the refinery, with foot-wide tears in wastewater lagoon linings repaired with pieces of lumber, and several wastewater storage units leaked sulfolane into soil and groundwater. There were also, the court said, direct sulfolane spills, with multiple accidental releases of solutions containing sulfolane involving hundreds of gallons of solutions from 60% to 100% sulfolane.

In 1996, the court said, Williams' lab manager found sulfolane in samples of groundwater in concentrations of 250,000 to 2,700,000 parts per million, not reported to the Alaska Department of Environmental Conservation until October 2001, when a consultant for Williams prepared a report for the company to address environmental concerns about the refinery.

By 2001 sulfolane was generally recognized in the scientific community for low levels of toxicity, "but there otherwise was a dearth of available information about sulfolane, and DEC did not regulate it as a hazardous substance," the court said, although DEC did advise "Williams about this uncertainty regarding sulfolane's toxicity and cautioned Williams about sulfolane's high mobility in groundwater," instructing the company to continue groundwater sampling until it found the source of the contamination.

DEC told Williams that if the data didn't change and it couldn't find a contamination source it could reduce sampling frequency. "Williams was not able to determine the specific source and stopped sampling altogether in July 2002."

The court said Williams used aqueous foams in fire response practices, foams which contained "per- and polyfluoralkyl substances, commonly called "PFAS"," which included a wide range of synthetic chemicals, including perfluorooctanesulfonic acid, PFOS, and perfluorooctanoic acid, PFOA.

"Testing of the groundwater and soil at the refinery shows that, at the time of trial, they contained several PFAS, including PFOA and PFOS," the court said.

Flint Hills

Williams sold the refinery to Flint Hills in 2004 in an agreement which, among other things, made Flint Hills responsible for sulfolane releases beginning after the sale. Later that same year DEC informed Flint Hills that it considered sulfolane a regulated contaminant and said it would be adopting regulations.

The court said that by April 2019 sulfolane in the groundwater had traveled laterally, "creating a plume approximately two miles wide, three and a half miles long, and over three hundred feet deep, and spreading offsite from the refinery," extending into groundwater in the City of North Pole and expected to continue to flow away from the refinery.

A variety of steps have been taken - by the state and Flint Hills - to mitigate damages, the court said, including alternative water sources, well testing, community outreach and drafting site characterization and correction action plans, with the most significant action expansion of North Pole's piped water system.

State suit

In 2014 the state sued Williams and Flint Hills over oil and sulfolane discharges.

In response, Williams claimed the state was the responsible landowner and couldn't transfer sulfolane liability to Williams because the state hadn't regulated sulfolane while Williams owned the refinery.

Flint Hills claimed the state and Williams were the responsible parties.

The City of North Pole also filed suit in 2014, a suit, along with one brought earlier by a North Pole resident, were consolidated with the state's suit.

The Supreme Court ruled in 2016 in a case brought by Flint Hills against Williams, finding that Flint Hills' claims "were time-barred with respect to onsite sulfolane contamination, but not offsite sulfolane contamination."

Flint Hills settled with the state and the city in 2017, "agreeing to partially fund an extension of piped water to affected residents," the court said.

Meanwhile, the court said the state and Flint Hills added claims against Williams for offsite PFAS following its discovery in 2018, with the offsite PFAS claims ultimately referred to DEC.

In 2019 the superior court deconsolidated the state and North Pole cases against Williams, with the state's case proceeding to a bench trial.

Superior court decision

The superior court found sulfolane a hazardous substance and found Williams liable for its release as well as for onsite PFAS and oil releases, allocating responsibility for 75% of offsite sulfolane and onsite PFAS and oil releases to Williams and ordered the company to pay the state's costs for response and oversight, "as well as the natural resource damages caused by the loss of the public's access to groundwater due to sulfolane contamination."

The superior court also found Williams responsible for 75% of the state's future costs for the piped water system and DEC's future oversight costs.

Flint Hills was found not responsible for PFAS contamination at the refinery.

The superior court found that Williams retained liability for offsite sulfolane existing at the time Flint Hills acquired the refinery and granted Flint Hills recovery from Williams for its share of past offsite sulfolane response costs and its share of future costs for the piped water system and other offsite sulfolane costs.

The superior court dismissed all of Williams' claims against the state and against Flint Hills.

Supreme Court ruling

The Supreme Court said it found that the superior court "did not err" in concluding that sulfolane is a hazardous substance under Alaska statutes. It also found that the superior court correctly awarded response costs to the state and Flint Hills. It agreed with the superior court in awarding damages for loss of access to groundwater due to sulfolane.

The court did find, however, that: "It was error to issue injunctive relief by reference to supporting documents, but the superior court did not err by granting declaratory relief." It remanded the injunctive relief judgment to superior court "for more clarity and to explicitly incorporate - not by reference - the language from the Memorandum of Decision, statutes, administrative code, and other documents to which the superior court refers."

The court said Williams' due process right was not violated.

"Imposing civil liability for past releases was not an unconstitutional taking," the court said.

On Flint Hills' claims, the court agreed with the superior court that Flint Hills' liability was limited by the purchase agreement, and also agreed that "Williams retained responsibility for offsite sulfolane" and that Flint Hills "could pursue contribution" and said the contribution allocations by the superior court "were not erroneous."


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