Texas Citizen Suit Developments

TEXAS CITIZEN SUIT DEVELOPMENTS

Environmental Essentials for In-House Counsel Webinar Series

Presented by: Whit Swift June 6, 2017

TEXAS CITIZEN SUIT DEVELOPMENTS • Background and context • Case history ‒ District Court judgment 1 ‒ Court of Appeals ‒ District Court judgment 2 • Observations and takeaways • Questions?

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BACKGROUND AND CONTEXT • Federal Clean Air Act section 304 [42 U.S.C. 7604] • Plaintiffs’ prior lawsuits and settlements ‒ 2008-2009: Shell (Deer Park) ‒ 2009-2010: Chevron Phillips Chemical Co. (Cedar Bayou) • Significant settlement values and injunctive relief

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ENVIRONMENT TEXAS AND SIERRA CLUB V. EXXONMOBIL • 2010: Suit filed • December 2014: District Court judgment 1 ‒ Only 94 actionable violations o No violations based on self-reported Title V deviations (“indications of noncompliance”) o Narrow interpretation of repeat/continuing violations ‒ No penalty ‒ No injunctive relief • Environment Texas and Sierra Club appeal

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ENVIRONMENT TEXAS AND SIERRA CLUB V. EXXONMOBIL • May 2016: U.S. Court of Appeals for the 5 th Circuit • 5 th Circuit vacates the District Court judgment ‒ Error in counting actionable violations ‒ Error in assessing penalty (economic benefit of noncompliance) ‒ Remand for assessment of penalty based on correct violation count • Additional key 5 th Circuit findings ‒ Title V deviation report, without more, does not establish a violation

‒ No useful purpose for the requested injunctive relief ‒ District court discretion in assessing penalty amount

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ENVIRONMENT TEXAS AND SIERRA CLUB V. EXXONMOBIL • April 2017: District Court judgment 2 ‒ STEERS report of upset event = violation(s)

‒ High violation count (speciation) ‒ To claim an affirmative defense: o It must be in the SIP o Must prove all 11 elements o TCEQ granting the affirmative defense is not determinative ‒ Deny all injunctive relief ‒ Penalty: $19.9 million o Economic Benefit of Noncompliance with 50% enhancement

o TCEQ Administrative Penalty deduction ‒ Awarded fees and costs to Plaintiffs

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OBSERVATIONS / TAKEAWAYS • Operations and Reporting ‒ Avoid over-reporting ‒ Affirmative Defense demonstration in STEERS reports/records ‒ Incentive to drive down emissions events • Permitting ‒ Outcome not based on unique permit language ‒ Opportunity to reduce STEERS reporting via permitting?

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OBSERVATIONS / TAKEAWAYS • Enforcement Exposure ‒ Title V Deviations vs. Emissions Events ‒ Exposure exists, despite active TCEQ enforcement ‒ Burden to demonstrate all 11 affirmative defense criteria ‒ Significant discretion afforded District Court judge in assessing penalty QUESTIONS?

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THANK YOU!

WHIT SWIFT +1.512. 494.3658 whit.swift@bracewell.com bracewell.com/swift

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This presentation is provided for informational purposes only and should not be considered specific legal advice on any subject matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. The content of this presentation contains general information and may not reflect current legal developments, verdicts or settlements. Use of and access to this presentation does not create an attorney-client relationship between you and Bracewell.

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