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Oil Giant Citgo Gets Slap On the Wrist for 10 Years of Illegal Operations

A foreign oil company convicted of polluting a Texas community's air with dangerous chemicals has gotten off easy in a criminal case that could undercut the prosecution of environmental crimes in the U.S. The case revolves around Venezuelan-owned Citgo Petroleum’s decade-long violation of the federal Clean Air Act at its refinery in Corpus Christi.

The Citgo refinery in Corpus Christi, TX. Photo credit: U.S. Chemical Safety Board

In 2007, the Citgo refinery became the first to be criminally convicted of violating the Clean Air Act by a U.S. jury. The refinery had spent a decade illegally operating two giant oil-water separator tanks without any emission controls. Every day for 10 years, nearby residents breathed noxious fumes emitted from the roofless tanks, including the carcinogen benzene.

It took another seven years, until February, before the judge in the case finally sentenced the company. U.S. District Judge John D. Rainey fined Citgo a little more than $2 million—a penalty prosecutors said would not deter Citgo from committing future crimes since, they argued, the company made $1 billion in profit as a result of its illegal operation. Corpus Christi residents were disappointed with the fine, but disappointment quickly turned into fear and confusion when the judge refused to announce in court that day his ruling on how much restitution must be paid to the refinery’s neighbors.

On April 30, people who had been awaiting a decision for years finally found out what they would receive from Citgo: absolutely nothing.

“When I walked out of [the courtroom] I knew what it was gonna be: he was going in Citgo’s favor,” says Thelma Morgan, who lived two blocks away from Citgo for more than 35 years and whose husband and son were also exposed to toxic chemicals. “When he said ‘I’ll notify you all by letter’ I said then, ‘You’re against us, so we can forget it.’”

Morgan, 79, says she was regularly sick during the time she lived near Citgo, but her husband got the worst of it. A host of health problems forced him into early retirement, so he was home more than she was. One day he was gardening when he suddenly broke out in blisters. Doctors asked if he’d been exposed to any chemicals. He later developed colon cancer and died in 2003, just two years after the family moved out of the Hillcrest neighborhood bordering the refinery.

On one occasion, Morgan says, Citgo paid her after she was exposed to a chemical that came from the refinery. She says she couldn’t stop vomiting and thought she had the flu until she was diagnosed with pneumonia. She doesn’t remember the amount Citgo offered her but thinks it was about $450.

People who live in the Hillcrest and Oak Park neighborhoods nearest the refinery have been hit hardest. Many have stories about exposures that led to respiratory problems, burning eyes and noses, scratchy throats, nausea and sometimes vomiting and severe headaches. Foul odors penetrate their homes and can linger for days. Residents say the worst episodes happen at night: that’s when the strongest odors come, sometimes following explosions or flares. A 2009 blast nearly sent a cloud of hydrogen fluoride, a deadly gas, into the neighborhoods.

Residents’ complaints to the Texas Commission on Environmental Quality—more than 200 of them during the 10-year period—led the agency to inspect Citgo repeatedly, but the company covered its tracks. During the conviction phase of the federal trial, the Justice Department showed that Citgo employees removed the oil from the uncovered tanks each time the refinery was due for an inspection, so that by the time an investigator arrived, the company was operating legally. It wasn’t until a TCEQ investigator arrived unannounced that the agency realized Citgo was operating the tanks illegally.

The Justice Department proved that Corpus Christi residents’ ailments occurred as a result of Citgo’s actions. It was the first time sufferers of effects from air pollution had ever been recognized as crime victims in the U.S.

Bill Miller, a former U.S. Environmental Protection Agency (EPA) lawyer who worked with the Justice Department on the Citgo prosecution and has since retired, says air pollution cases are much harder to prove than water contamination cases. It’s difficult to establish that a company’s emissions caused specific people’s health problems and deaths, he says, even if courts broadly acknowledge that exposure to toxic chemicals is harmful to human health.

Following that line of thought, Judge Rainey initially denied 20 victims’ request to be granted restitution under the Crime Victims' Rights Act, but the 5th Circuit Court of Appeals ordered him to reconsider. Eventually, Rainey granted crime victim status to more than 800 residents, which allowed them to give oral testimony in court at the beginning of the sentencing hearing last fall. Morgan was one of about 160 people who shared their stories.

Experts say the judge’s refusal to grant the victims restitution last month sets a dangerous precedent for similar cases, particularly if the government doesn’t appeal the ruling.

“I think it’s clear that the judge never wanted to consider them victims in the first place,” says Melissa Jarrell, a criminal justice professor at Texas A&M-Corpus Christi who studies environmental crime. “Why that’s concerning to me is that ultimately the judge was the victims’ safety net—he was the one that could really help them and he didn’t.”

Too Big to Punish

Rainey, a former director of the Angleton, TX, Chamber of Commerce, was appointed to federal judgeship by President George H.W. Bush in 1990. He was recommended for the position by Phil Gramm, the former Texas senator who was instrumental in engineering the “Enron loophole” that deregulated electronic energy trading, and whose wife served on the board of Houston-based Enron, an energy-trading company that collapsed in the wake of an accounting scandal in 2001.

Rainey rejected the residents’ and the government’s requests for restitution, which would have included funding for annual cancer screenings and other diseases linked to chemical exposure. The Justice Department also had asked that Citgo set up one trust fund to cover property buyouts and relocation costs and another for victims’ future medical expenses, attorney’s fees and other administrative costs, at a total cost of $55 million.

In an April 30 statement that baffled many, Rainey wrote that victims would be better off receiving nothing from Citgo than waiting for the court to determine what they are owed. That echoed his earlier decision to fine Citgo only $2 million for four violations of the Clean Air Act, a fraction of the potential penalty.

The Justice Department had argued that the Corpus Christi refinery made $1 billion as a direct result of illegally operating the tanks. It wanted to fine the company using a provision that allows punishment of twice the “gross, pecuniary gain” realized by violating the law, which would have allowed for a fine of up to $2 billion. But Rainey—after nearly seven years of delays in sentencing—ruled that empaneling a jury to determine Citgo’s exact profits would “unduly prolong” the sentencing process.

The Crime Victims' Rights Act allows the residents to appeal the judge’s ruling on restitution, but only 20 have legal representation. Their lawyers say they plan to file their appeal this week. It’s up to the government to appeal the sentence on behalf of the more than 800 other victims. The Justice Department declined to comment on the matter.

“It doesn’t look like the Department of Justice has any intention of appealing the sentencing of Citgo, which is a crime in itself in my opinion,” Miller says. “It basically emasculates environmental crime prosecution in the U.S. completely.”

If the Justice Department doesn’t appeal Citgo’s sentence by the end of the month, Miller says, it will send the message that some corporations are too big to punish. Environmental crime cases rarely go to trial because most corporations settle out of court. When the government succeeds in prosecuting them—and, even more seldom, secures a conviction—it should take that opportunity to show that it will aggressively punish environmental violators, Miller says.

“If you’re not going to do anything about it then it behooves every large corporation who gets caught violating a complex statute like Clean Air Act to go to trial and hide behind complexity of it,” he says. “If I was a company like Citgo and I got caught doing something like this again, I’d litigate it.”

Continued Violations

The Justice Department offered evidence during the sentencing hearing that Citgo made $150 billion in profits during the 10 years its Corpus Christi refinery was violating the law. The 165,000-barrel-per-day refinery stands in stark contrast to the low-income, mostly minority neighborhoods in its shadow. People simply can’t afford to move out—most of the homes there are appraised at $30,000 to $40,000 and residents say to move even a few miles away from the refinery would cost them upwards of $100,000.

Citgo didn’t respond to requests for comment, but has previously said that it is proud of its environmental record and its role in the Corpus Christi community.

Residents say they don’t feel safe around a company that continues to expose them to harmful chemicals. Citgo may have covered the oil-water separator tanks years ago, but the company has had a less-than-stellar track record since.

Image from surveillance video of the 2009 explosion at the Citgo refinery. Photo credit: U.S. Chemical Safety Board

In July 2009, an explosion at the refinery alerted residents that something was terribly wrong. An equipment failure in the alkylation unit had caused a release of hydrogen fluoride—a highly corrosive and potentially deadly chemical that about 50 U.S. refineries still use, despite safer alternatives. The release triggered a fire that burned for more than two days and severely burned a worker, who lost an arm in the explosion.

Citgo and local authorities alerted only about 15 to 20 households of the release, even though a 1986 industry-funded test found that hydrogen fluoride—also known as hydrofluoric acid, or HF—can travel up to five miles in lethal concentrations. The company claimed in the local newspaper that the release had never posed any harm to the community and insisted the chemical didn’t cross the plant’s fence line.

“They have this make-believe fence that [they say] nothing goes over, under or through,” says Connie Gonzalez, who lives about three miles from the refinery. “When they have a release you can smell it and you can see it sometimes and then they put out in the news, ‘The neighborhood was never in harm’s way.’”

Gonzalez’s husband worked at Citgo for 20 years; for a time she took him lunch every day and sometimes dropped him off or picked him up from work. Gonzalez developed breast cancer—she’s now in remission—and has nerve damage in her feet that makes her feel as though she’s constantly walking on rocks. Her husband has prostate cancer and heart problems; the couple traces their conditions to the refinery’s emissions. Before Gonzalez found out she had breast cancer, she says, a blood test revealed she had benzene in her blood.

At the time of the HF release, Citgo claimed only 30 pounds of the chemical had escaped the refinery. The U.S. Chemical Safety Board, which investigated the accident, later estimated that about 4,000 of the 46,091 pounds released inside the facility had gone off site. The TCEQ imposed a fine of $303,294. The federal government never prosecuted Citgo for the incident.

The HF release isn’t the only problem Citgo has had in Corpus Christi. Since the company’s federal conviction, the TCEQ has fined it seven times, sometimes for multiple violations, for a total of $87,201. Those violations included “emissions events” that released thousands of pounds of volatile organic compounds, particulate matter and other pollutants. It’s unclear how much of this pollution stayed inside the plant, but in at least a few cases the TCEQ made it clear that some of the emissions drifted into nearby neighborhoods.

“Never does anything escape from the plant,” Gonzalez says. “And yet everybody has allergies and people are dying of cancer.”

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