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CITGO Petroleum Corp. to Pay Over $19 Million for Injuries to Natural Resources Resulting from its Oil Spill at Lake Charles Refinery

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Acting United States Attorney Alexander C. Van Hook
announced that Houston, Texas-based CITGO Petroleum Corporation has agreed to pay
$19.69 million to resolve federal and state claims for natural resource damages under the
Oil Pollution Act and the Louisiana Oil Spill Prevention and Response Act.

The United States and Louisiana concurrently filed a civil complaint along with
the proposed consent decree. The complaint seeks money damages under the Oil
Pollution Act and Louisiana Oil Spill Prevention and Response Act for injuries to natural
resources resulting from CITGO’s major oil discharge into the Calcasieu River in June of
2006 from its wastewater treatment facility at its Lake Charles refinery. The complaint
alleges that CITGO discharged millions of gallons of waste (slop) oil and oily wastewater
from two ten-million-gallon storm surge and wastewater tanks at its treatment facility at
the Lake Charles refinery. Approximately 150 miles of shoreline were polluted with
CITGO’s oil, including residential and marsh areas. The discharged oil killed birds and
fish and other aquatic life, contaminated aquatic and shoreline habitats, forced the closure
of the ship channel, and disrupted recreational uses of the impacted river and lakes.

“While oil and gas producers are a major source of employment in Louisiana, they
have a sacred obligation to protect our environment and use our resources wisely,” stated
Acting United States Attorney Alexander C. Van Hook. “This settlement sends a clear
signal that those who pollute our environment will be held accountable.”

“Oil companies have a responsibility to protect our waters, people, wildlife, and
diverse habitats from oil spills, and those who violate that duty will be held accountable
for the harms they cause,” said Acting Assistant Attorney General Jean E. Williams for
the Justice Department’s Environment and Natural Resources Division. “We are glad to
work with our federal and state natural resource partners on this major effort to help
restore and enhance the environment in Louisiana.”

Of the $19,688,149.83 CITGO is required to pay under the consent decree, $19.16
million is for natural resource damages for the spill, which the federal and state trustees
will jointly use to plan, design, and perform restoration projects to compensate for the
harms caused by the oil spill. The consent decree also secures payment from CITGO for
the trustees’ remaining unpaid injury assessment costs, which total over $528,000.

Today’s action was filed by the Department of Justice and the state on behalf of
the federal and state trustees for natural resources. The designated federal trustees for
the natural resources impacted by CITGO’s oil spill are the U.S. Department of
Commerce’s National Oceanic and Atmospheric Administration and the U.S.

Department of the Interior’s Fish and Wildlife Service. The designated state trustees are
the Louisiana Oil Spill Coordinator’s Office, Department of Public Safety & Corrections,
the Louisiana Department of Wildlife and Fisheries, the Louisiana Department of Natural
Resources, the Louisiana Department of Environmental Quality and the Louisiana
Coastal Protection and Restoration Authority. The federal and state trustees have worked
together to perform substantial injury assessment work and are engaged in joint
restoration planning efforts.

In an earlier related Clean Water Act enforcement trial spearheaded by the United
States on behalf of the Environmental Protection Agency, the district court determined
that the cause of this avoidable disaster was CITGO’s gross negligence in the operation
and maintenance of its wastewater treatment facility and the lack of adequate storage and
treatment capacity. CITGO had been improperly using the tanks to accumulate oil,
sludge, and oily wastewater at its treatment facility for years. Due to the lack of proper
operations and the inadequate storage and treatment capacity at the facility, the tanks
overflowed during a rainstorm. At least 54,000 barrels of slop oil (2,268,000 gallons) and
untold millions of gallons of oily wastewater breached the faulty secondary containment
berm around the tanks and flowed into the waterways, including the adjacent Indian
Marais waterway, the Calcasieu River, and the Calcasieu Estuary.

The court found that CITGO “does not appear to have recognized the importance
of compliance, pollution control, environmental responsibility, and the overall duty
imposed on businesses to operate safely.” The court found that CITGO’s oil spill was
“massive, excessive, and a tragedy” and that CITGO “failed to inform the Coast Guard
of the true nature of the incident.” CITGO was ordered to perform substantial corrective
actions to improve its wastewater treatment facility’s storage and treatment capacity and
operations, to pay a state penalty of $3 million to the Louisiana Department of
Environmental Quality for the discharge and chronic violations of the company’s
discharge permit, and to pay a federal Clean Water Act civil penalty of $81 million. Under
a separate criminal plea agreement, CITGO paid a $13 million criminal fine.

The proposed consent decree is subject to a 30-day public comment period and
court review and approval.

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