United States District Court, D. Utah, Central Division
ORDER AND MEMORANDUM DECISION RE: PENALTY
CAMPBELL U.S. District Court Judge
2010, crude oil from Plaintiff Chevron Pipe Line
Company's (CPL) pipeline leaked into Red Butte Creek.
Individual residents sued CPL and Defendant Rocky Mountain
Power (RMP), and the companies filed claims against each
other. A portion of CPL's claimed damages against RMP
includes $3 million paid to the Utah Water Quality Board
(UWQB) and Salt Lake City Corporation (City) to settle damage
asks the court to dismiss CPL's claim for $3 million.
According to RMP, the $3 million is a civil penalty that may
not be recovered from a third party under statute, common
law, or public policy. The court agrees. Accordingly,
RMP's motion for partial summary judgment concerning
CPL's claim to recover the civil penalty payment is
2010, an electrical arc from RMP's electrical transition
station created a hole in CPL's pipeline from which crude
oil leaked into Red Butte Creek in Salt Lake City and flowed
into Liberty Park Lake and the Jordan River. In December
2010, another release from the pipeline polluted the creek,
but RMP had no connection to the December spill.
UWQB issued two notices of violation (NOVs) to CPL alleging
violations of the Utah Water Quality Act (UWQA). The first
NOV addressed the June 2010 release, and the second NOV
concerned the December 2010 release.
November 10, 2011, CPL entered into a global settlement
agreement (Agreement) with the UWQB and the City to settle
the NOVs and claims under City code. Among other things, the
settlement required CPL to pay $3 million to fund
“Mitigation Projects” “as a part of the
penalty assessment pursuant to Utah Admin. Code
R317-1-8.4.” (Agreement ¶ 5.ii (emphasis added),
attached as Ex. 3 to Motion, Docket No. 197-3.) That $3 million
was calculated based on consideration of penalty criteria set
forth in Section R317-1-8.2 of the Utah Administrative Code
(UAC). The Agreement did not allocate the $3 million between
the two spills.
Mitigation Projects were designed “to enhance and
protect waterways that may have been affected by the Releases
or otherwise relate to the Releases, ” (id.
¶ 5.ii), “by improving conditions for one or more
of the following: wildlife, habitat, native vegetation, water
quality or emergency response.” (DWQ Proposal Request
at 2, Ex. E attached to CPL's Opp'n, Docket No.
206-5.) The UDWQ, not CPL, selected the Mitigation Projects.
of that selection process, third parties submitted project
proposals to the State, and the State selected seventeen for
funding. As the selected applicants conducted the mitigation
projects, CPL paid invoices out of the $3 million.
Mitigation Projects enhanced the areas affected by the
spills, and, in some cases, extended beyond those areas to
places that were not in the path of the spills. The projects
included, for example, educational outreach projects,
installation of educational signs along the waterways, new
water control structures, purchase of emergency equipment,
construction of an improved boat dock and additional floating
islands in Liberty Park Lake, removal of weeds to improve
soil conditions for native plants, and construction of new
filtration wetlands to address water stagnation issues.
(See RMP's Reply at pp. xvi-xviii, 5-7, Docket
agreed “not to attempt to gain or generate any positive
publicity, and further agree[d] not to deduct or otherwise
attempt to obtain a tax benefit from the [Mitigation Project]
funding or the Mitigation Projects and/or the total penalty
amount.” (Agreement ¶ 6.iii.) The Agreement also
required CPL to pay “any unexpended mitigation funds to
the State of Utah as a civil penalty in accordance
with Paragraph 5.i [titled ‘Civil Penalty Paid to the
State'].” (Id. ¶ 6.iv (emphasis
of the $3 million did not relieve CPL of other obligations.
To make that clear, the UWQB and the City carved out an
exception to the settlement in the “Ongoing
Obligations” section of the Agreement:
Nothing in this Agreement shall constitute or be considered
as a release from any obligation CPL has to submit
information, conduct sampling and monitoring, implement work
plans, or is otherwise required under the NOVs[.] . . . CPL
shall continue to complete all clean up, remediation actions,
and mitigation work for Red Butte Creek or any property that
has been, or is ...