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Chevron Pipe Line Co. v. Pacificorp

United States District Court, D. Utah, Central Division

January 27, 2017



          TENA CAMPBELL U.S. District Court Judge

         In 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 claims.

         Now RMP 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 GRANTED.


         In June 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.

         The 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.[2]

         On 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.)[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.

         The 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.

         As part 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.

         The 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 No. 209.)[4]

         CPL 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 added).)

         Payment 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 ...

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