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The Almighty Buck Earth

Oil Companies Secretly Got Paid Twice For Cleaning Up Toxic Fuel Leaks 113

Hugh Pickens DOT Com writes "Mica Rosenberg reports at Reuters that major oil companies including Chevron, Exxon, ConocoPhillips, Phillips 66, and Sunoco were paid twice for dealing with leaks from underground fuel storage tanks — once from government funds and again, secretly, from insurance companies. Court documents show many of the cases and settlement agreements follow a similar pattern, accusing the oil companies of 'double-dipping' by collecting both special state funds and insurance money for the same tank cleanups. Some states say any insurance payouts should have gone to them since they covered the cost of the work. 'It appears this was a really common practice and it's very disconcerting,' says Colorado Attorney General John Suthers. 'Basically the companies were defrauding the state.' Approximately 40 states and the District of Columbia have special funds to cover the costs of removing and replacing the old tanks, excavating tainted dirt and pumping out dirty groundwater. Since 1988, there have been more than half a million leaky tanks reported across the country. Nearly 80,000 spills still are waiting to be cleaned up. The lawsuits against the oil companies allege fraud or other civil, not criminal, claims, which have a lower burden of proof and do not lead to jail time. Companies are largely cooperating to forge settlement deals and were interested in partnering with the states to clean up the legacy of petroleum leaks. For example Phillips 66 paid Utah $2 million to resolve allegations that the oil company defrauded a state fund to the tune of $25 million for cleanups associated with leaking underground tanks. Phillips sued myriad insurers over coverage for contamination arising from leaking tanks around the country and Phillips 66 wound up collecting $286 million from its insurers to resolve these disputes, but it never divulged any of this to Utah officials, the suit alleged. 'When I first saw these cases, I thought this is kind of incredible,' says New Mexico assistant attorney general Seth Cohen, who handled the lawsuit for the state. 'The oil companies have, in effect, profited off polluting.'"
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Oil Companies Secretly Got Paid Twice For Cleaning Up Toxic Fuel Leaks

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  • Oh my GOD! (Score:5, Insightful)

    by oscrivellodds ( 1124383 ) on Tuesday February 11, 2014 @06:33AM (#46216357)

    'The oil companies have, in effect, profited off polluting.'

    Doh!

    • This sounds like a job for Captain Planet!

    • It is analogous to the way software companies (extremely few) get paid for fixing bugs in their software.
    • Re:Oh my GOD! (Score:4, Informative)

      by operagost ( 62405 ) on Tuesday February 11, 2014 @09:56AM (#46217525) Homepage Journal

      Lawyers have profited off lies and hyperbole.

      These aren't tanks at some Chevron or Sunoco refinery. These are tanks buried at the POS, i.e. a gas station. Most are over 40 years old, and far past their expected lifetime. They should have been removed before they became a problem, but I presume the parties in question abandoned the property or otherwise did not take responsibility. Therefore, the oil companies-- as experts in the area-- were contracted.

      So the oil companies are profiting off POLLUTION, but not profiting off "polluting", which implies they are somehow responsible. Regardless, if they're double-dipping I find it unlikely they are doing so inadvertently and thus they're still engaging in unethical activity.

      • by bberens ( 965711 )
        Those gas stations probably have a big Chevron or Sunoco sign out front. I understand the concept of franchising but I don't think it's entirely out of line to assume the parent company assumes some responsibility for the pollution at their franchise stores.
      • So the oil companies are profiting off POLLUTION, but not profiting off "polluting", which implies they are somehow responsible.

        Please tell me how, if the oil companies are not responsible, they are able to collect from their insurance companies?

        This is crony capitalism at its finest. This is taxpayers money being given to companies that should instead be compensating the taxpayer for the damage that they have done.

    • 'The oil companies have, in effect, profited off polluting.'

      Will nobody think of the accountants and corporate lawyers? Did they get their bonuses for doing their jobs (i.e. making as much money as possible for their employers)? Were they promoted.

      This is business! It's business is to make money anywhere they can. Boiling babies down into soup? Not a problem! Ripping off taxpayers, state and national government? That'll do nicely.

  • by JcMorin ( 930466 ) on Tuesday February 11, 2014 @06:36AM (#46216367)
    If an oil company do a mess, they are responsible to clean it. If they have insurance fine for them, why we gouv need to pay them for their messed up?
    • by hoboroadie ( 1726896 ) on Tuesday February 11, 2014 @06:38AM (#46216381)

      Their investments in the legislative sector are paying off.

    • by Richard_at_work ( 517087 ) on Tuesday February 11, 2014 @07:52AM (#46216659)

      Its not their mess, its tanks owned by third parties:

      Often built for gas stations during the 1950s and '60s highway construction boom, the tanks corroded over time, spilling gas and diesel with potentially cancer-causing chemicals under properties and into aquifers.

      The oil companies are paid to clean up the pollution caused by these tanks constructed for, operated and owned by third parties. The oil companies are chosen because they already have extensive inhouse expertise on the subject, so they are ideal for doing it wholesale.

      Chances are, most of these tanks have been abandoned and their original owners do not exist, which is why local government step in.

      • Its not their mess, its tanks owned by third parties:

        So why would they receive insurance settlements?

        • by Richard_at_work ( 517087 ) on Tuesday February 11, 2014 @08:21AM (#46216789)

          Putting aside the issue of double dipping for a second, the liability for the cost of the clean-up still resides with the original insurer or chain of insurers who covered the facility (including the tank) in the first place.

          The oil companies were given the authority to carry out the clean up, which also grants them the authority to submit the costs to the insurance company - this isn't a simple case of the oil company doing something and then demanding money from a third party for it, there is a chain of liability, a chain of authority and both meet at the insurance companies door.

          Its very very similar to your car dumping oil all over the road, and the local authority towing your vehicle and paying for the environmental cleanup - you will definitely get a bill at the end of the day, and where I live that bill comes from the company the responsibility to do said actions is delegated to, not the local authority.

          In reality, it should have been the government chasing the insurance companies to force them to do the cleanup in the first place, but they didn't.

          And, as I said, the issue of double dipping is entirely not represented in this explanation - that's another issue entirely.

          • It sort of blends in with the privacy problem. I once drilled into an abandoned gas well with an auger truck by accident. The tank had a lot or rotten gasoline left inside. The gas station had been knocked down a couple of decades past. Without a database of the last owner of the station and the insurance company that covered the property as well as the company paid to demolish the station and its insurance companies the burden fell upon the taxpayers to clean up the old well site. In other words a
      • That does not explain the double dipping of being paid by the government then also collecting on insurance.

        • Never said it did, as that was not what was asked.

        • When a person in Louisiana has their house destroyed by a hurricane, are they double dipping when they receive an insurance settlement and also accept government assistance? No?
          • Actually yes, in most cases FEMA will expect money back if they give assistance and insurance also pays out.

      • by stox ( 131684 )

        The majority of those stations were built and owned by the oil companies. They later moved to a different model and sold the stations to third parties. Once the issue of laking tanks was discovered, it turns out that many/most of those stations had negative value ( ie. the cost to clean-up was greater than the value of the gas station ). How convenient the oil companies had just completed divesting themselves of these stations when the problems were discovered.

        The oil companies screw the American Public yet

        • Everybody takes advantage of everyone else whenever and wherever they can, oil companies are no different in that respect.

          I don't know why oil companies get kicked around like they do. If they all disappeared tomorrow we'd all be sitting in the dark wondering if we're going to starve to death before we freeze to death. People can talk about how we should not be burning oil but the fact is that we do. We will still be burning oil a century from now. We do that, and will continue to do so, because oil is

      • Its not their mess, its tanks owned by third parties:

        Often built for gas stations during the 1950s and '60s highway construction boom, the tanks corroded over time, spilling gas and diesel with potentially cancer-causing chemicals under properties and into aquifers.

        The oil companies are paid to clean up the pollution caused by these tanks constructed for, operated and owned by third parties. The oil companies are chosen because they already have extensive inhouse expertise on the subject, so they are ideal for doing it wholesale.

        Chances are, most of these tanks have been abandoned and their original owners do not exist, which is why local government step in.

        Nonsense! They each outright own a large portion of such stations, either directly, or through secondary companies they set up. Not all of them are franchises.

    • This can be complicated. Off the top of my head, the EPA has vast powers to force cleanup, and funding in the form of the superfund. Of course, the superfund was mostly intended as a 'last ditch' cleanup program for when the business was or going to be out of business before finishing cleanup, sometimes for chemicals that were previously considered safe.

      Somewhat paranoid, but I wonder if some of the tanks weren't actually that of the company that ended up doing the cleanup, or whether they were truly doub

  • He steals from the poor

    And gives to the rich

    Stupid bitch.

  • 'The oil companies have, in effect, profited off polluting.'

    I thought we had reached an agreement as a species that this is what they were doing in the first place? Did anyone else read the last book Kurt Vonnegut wrote [wikipedia.org]?

  • by canadiannomad ( 1745008 ) on Tuesday February 11, 2014 @06:43AM (#46216401) Homepage

    For example Phillips 66 paid Utah $2 million to resolve allegations that the oil company defrauded a state fund to the tune of $25 million for cleanups associated with leaking underground tanks.

    This is why corporate crime pays in the current world :S

    • by amiga3D ( 567632 )

      I noticed that too. Steal $25 million dollars and only pay $2 million of it back. WTF! You know, fuck the money. Put the bastards in jail. Not a country club prison but an honest to god Federal Pen with a 300lb faggot named Bubba for a room buddy. How in hell can you ever expect this to stop if there are zero consequences?

    • by bluefoxlucid ( 723572 ) on Tuesday February 11, 2014 @07:44AM (#46216631) Homepage Journal
      Yeah I'm thinking this is backwards. You defrauded the state $25M? Well you owe the state $25M, plus interest, plus overhead, plus punitive damages for being a dickhead. A settlement would be $25M--break even--at the very least; you want it to be a little bit more so that a high incidence of getting caught can lead to a poor ROI (i.e. if you have a 1 in 50 chance of netting $25M and otherwise it costs you $2M, you're $73M short in the long run per 50 suits). This settlement is bullshit.
      • Did you read the details of the settlement? I didn't. But if they had good evidence to win, they probably would not have settled. A bought politician would not have brought the case at all.

        So, without further details, I can only assume they settled for what they could get, instead of losing completely. Your math does not account for the probability of not having the evidence needed to win. No win, no repayment, no damages.

  • Depends... (Score:2, Informative)

    by Anonymous Coward

    Some states require all insurance policies stack to cover an event, rather than there being "primary" and "secondary" insurance. Many times governments will take out insurance policies of their own to cover things like this, naming the oil company as the beneficiary. The oil company may also have its own insurance. Depending on the laws having jurisdiction over the event, one or both insurance companies must pay the full amount of the claim.

    If I buy two life insurance policies for myself, and I die, they bo

    • If I buy two life insurance policies for myself, and I die, they both have to pay.

      But if you take out two insurance policies on your car, each covering the full value, and you try to collect both after your car gets "stolen", it's called fraud. That's been a principle of insurance for centuries.

      • I am not sure that you are correct, but if you are it is because of the way in which insurance companies write the auto insurance policies. It is likely that auto insurance policies are written that way because of the laws governing insurance policies. In the case being covered in the article (oil companies insurance against pollution) it is also a case of the laws being written that way. In addition, this is not a case of the oil companies taking out two insurance policies. It appears that the government t
  • This [gstatic.com] and this guy [telegraph.co.uk]. Mod up if you remember being pissed at how smug they were about it, the British bastards...
    • Mod up if you remember being pissed at how smug they were about it, the British bastards...

      As opposed to the American oil companies, which are always contrite and quick to admit fault?

  • Why do gigantic oil companies like that get government money to clean up the mess these companies themselves carelessly created in the first place? It is their fault these spills happened, they should be held fully responsible for what they did.

    • by ErroneousBee ( 611028 ) <neil:neilhancock DOT co DOT uk> on Tuesday February 11, 2014 @07:43AM (#46216627) Homepage

      Because there is no reward for good behaviour.

      In BP's case, they made a decision to fund the cleanup and compensate people and businesses. And every fraud and shyster crawled out of the woodwork and started demanding compensation. They get no credit for putting their hands up, while US companies Transocean and Haliburton were busy hiding behind lawyers and shredding the evidence and getting away with it.

      • They have been trying to have claims reviewed properly through the courts recently, and at every step they have been told to bugger off and stop complaining by US courts - they have been trying to stop claims like a certain hotel chains claim for loss of income from three hotels which had closed down 6 months prior to the spill 250 miles away from the coast.

        The claims being approved by the US claims fund administrators have next to no scrutiny, so some really ridiculous stuff is being approved for payouts.

      • The catch is that millions of people who live near the coastal waters were damaged and continue to be damaged by the BP spill. Do you really feel comfortable eating seafood from the Gulf of Mexico? Do you think that tourist dollars are not still being lost as some people fear the food and water on the gulf coast or simply can't enjoy the beaches knowing that toxic chemicals are still in play? Remember the Exon Valdez? The fishery near that spill is still highly damaged and has not retur
        • And this ladies and gentlemen, is why moderates tend to view environmentalists as nutjobs.

          Energy consumption will forever and always be on the uptick. Global Population will stabilize, but predicting WHEN this will occur is less than precise.

          The irony of your post is that you're advocating lowering birthrates, which is fine. From past experiences we know that the best way to do that is .. increase the standard of living. But your screed amounts to "stop using energy!" which will absolutely LOWER the st

    • by mysidia ( 191772 )

      Why do gigantic oil companies like that get government moneyto clean up the mess these companies themselves carelessly created in the first place?

      The oil companies are no more responsible for causing the mess, than the airplane manufacturer Boeing was responsible for 9/11, no more responsible than Smith and Wesson is responsible if someone goes on a shooting spree, or Jack Daniels is responsible if someone drives drunk on their product and runs down some innocent pedestrians.

      The oil companies are no

  • by Ice Tiger ( 10883 ) on Tuesday February 11, 2014 @07:00AM (#46216471)
    Meet another example of the new US Welfare Queens.
    • by Maxwell ( 13985 )

      They are Capitalist welfare queens, they made their donations, so that is OK. It is the *individual* welfare queens that will destroy America!

  • by Kazoo the Clown ( 644526 ) on Tuesday February 11, 2014 @07:11AM (#46216493)
    Why do you think gas is so cheap? In the good old US of A, industrial cleanup is simply not factored into the cost of doing business. Whether fossil fuel, nuclear, plastics or any chemistry based business, cleanup is "someone else's problem.". Even hard drive manufacture-- though that's no longer done in the US largely because of the dreaded "regulations" which at least for that, have caught up with them. I bought a bunch of file cabinets once from a liquidation sale of a hard drive company, that still had the files in it from the building maintenance guy-- it was an endless array of citations for dumping the nickel water from the plating operations-- you could see the entire history of what happened. They then started trucking it in tanker trucks offsite (all the bills for that were there), then they got cited for what they did with that, finally it got so expensive tomdeal with they went out of business. This was in the 1980s/1990s. Now they'd probably get some Republican asshole to whine about overregulation and get the regs removed while the neighbors start suffering the effects of nickel in their drinking water.
    • by amiga3D ( 567632 ) on Tuesday February 11, 2014 @07:28AM (#46216567)

      There you go getting all political. This is a bipartisan issue, the oil companies don't give a shit which party they bribe. Regulation isn't the answer. Enforcement is the answer. These assholes broke all kinds of laws but look, they aren't going to be punished for it! Making laws and regulations will do nothing if you can't even enforce the ones you have in place.

      • It is partisan to its core. Half of the republican party is a clone of the Chamber of Commerce. These are the very people who we need to be kept away from government completely. Oh and just how do politics play a part? One way is to claim that you are out to save the taxpayer and force cuts upon programs such as law enforcement thus insuring that money to go after white collar criminals does not exist. So the lower my taxes crowd on the right wing also fully supports corporate crime.
        • by amiga3D ( 567632 )

          I see your point although I don't fully agree. Aside from that though, look at what we have here. These companies have been caught red handed. And nothing is going to happen to them. Token fines, no jail at all. How is more taxes going to solve this? If someone is above the law then no amount of money will matter. It's time to outlaw corporate bribery but that's not going to happen. Take a walk around this site http://www.opensecrets.org/ [opensecrets.org] and see how pervasive it is. Non-partisan also. We keep pla

      • one party is working very hard to save money by cutting back on enforcement of regulations. [nationaljournal.com] One guess as to which one.
      • by jfengel ( 409917 )

        Except that the same party that opposes creation of regulations also opposes enforcement. The like to cut the EPA's budget, and appoint judges who favor businesses. They're the party who demand apologies [cbsnews.com] when the government does attempt to enforce regulations even after the fact.

        The other party is certainly far from guiltless, but there's only one party that makes a point out of making enforcement harder and harder. Enforcement requires effort, generally taking many years to achieve, and is frequently fruit

  • Comment removed (Score:5, Insightful)

    by account_deleted ( 4530225 ) on Tuesday February 11, 2014 @07:11AM (#46216497)
    Comment removed based on user account deletion
    • by JaredOfEuropa ( 526365 ) on Tuesday February 11, 2014 @07:29AM (#46216571) Journal
      This. Being an executive means (or should mean) being personally responsible for your actions, and that includes criminal charges for pulling stunts like this. Without the option of course to buy your own arse out of a lawsuit using corporate (shareholders) funds
      • by Maxwell ( 13985 )

        All that would do is create incentives for even more cover ups. As long as it isn't discovered while you are there, you'll probably be fine.

        All the execs in this case have long since retired - fabulously wealthy of course.

        • The ability to press criminal charges doesn't go away after the offending exec has left the company.

          Also, I don't think the right way to prevent cover-ups is to give those responsible a free pass. That's like letting murderers walk free in exchange for a confession (there might be a reduced sentence in it for them, but no acquittal). Besides, it's not like the current soft approach has encouraged a lot of companies to come clean; those coverups will happen regardless of penal consequences (since there a
      • Comment removed based on user account deletion
      • A new slogan - putting the execute back into executive

    • Go after the executives.

      Right after they prosecute the bankers for control fraud in the global financial crisis. Case law and all has been established. See William K. Black for a detailed explanation.

    • by amiga3D ( 567632 ) on Tuesday February 11, 2014 @07:32AM (#46216587)

      Exactly! Everyone is screaming for more regulation when the regulations in place now are totally ignored. Breaking the rules has to have consequences. If you just ignore all these infractions then why have regulations at all? Seriously, they're talking about making them pay back 10 cents on the dollar for what amounts to theft. The same legislative cocksuckers that rant about "stealing" movies. Download movies and go to jail, defraud millions and laugh all the way to the bank.

    • by laird ( 2705 ) <lairdp@gm a i l.com> on Tuesday February 11, 2014 @07:40AM (#46216619) Journal

      Good point. Look at how when SOX made the officers of a company personally liable for incorrect financial statements that suddenly companies put financial controls in place. Personal liability is clearly a much better motivator than ethics or responsibility to shareholders.

      • by mysidia ( 191772 )

        Good point. Look at how when SOX made the officers of a company personally liable for incorrect financial statements that suddenly companies put financial controls in place.

        Maybe.... but SOX was really just an irrational reaction to Enron (whose executives were prosecuted anyways), and the additional financial "controls" are mostly just lip service, with no real improvement. The SOX are ultimately stifling free enterprise and opportunities for Americans, and are a great example of poor, overreaching reg

        • by laird ( 2705 )

          Off, I think that SOX is actually a rather elegant law. It's actually very simple, in that it doesn't tell companies how they do business, just that if they lie/provide incorrect information to investors, the officers of the company are personally liable. All of the complexity that I've seem related to SOX is because companies sometimes invent complex control mechanisms to try to prevent errors. But the SOX law is nice and simple establishment of responsibility.

    • Then they'll just start putting scapegoats in charge of the company while the board becomes a secret group within the company. Anything goes wrong, just replace the scapegoat.
  • "fraud or other civil, not criminal, claims, which have a lower burden of proof and do not lead to jail time."
    "For example Phillips 66 paid Utah $2 million to resolve allegations that the oil company defrauded a state fund to the tune of $25 million"

    Pretty sure if I defrauded the state out of $25 million from it would be a criminal, not civil claim and would lead to jail time and a fine of more than 8% of the original fraud amount.

  • by laird ( 2705 ) <lairdp@gm a i l.com> on Tuesday February 11, 2014 @07:38AM (#46216615) Journal

    If they defrauded the government of $25m, how is $2m a punishment that discourages fraud, since it leaves them $23m ahead? Shouldn't the penalty be, say, 3x the amount of the fraud, so that the cost of defrauding the government is far more than the benefit of committing fraud, enough more that the risk of getting caught and paying the penalty is far more than the benefit, and companies don't commit fraud because it's a bad risk?

    • I also would love to defraud the government of 25 million and return 2 million as a punishment. Is there a list or forms that I can fill out to do that?
  • by andydread ( 758754 ) on Tuesday February 11, 2014 @07:41AM (#46216625)

    And now folks you see why Lamar Smith wants to hobble the EPA. [opensecrets.org]

    Meanwhile in North Carolina you have 30 year Duke Energy vetran Governor Pat McCrory who has been using the power of the govt in NC to sheild Duke Energy [washingtonpost.com] from lawsuits [go.com] as a result of massive pollution. Spilling things like arsenic, lead, mercury and other things into NC waterways. In every single lawsuit the McCrory administration intervened and shut the lawsuits down. Now you have the lastest massive spill [nbcnews.com]

  • by Anonymous Coward

    The fund in question was funded by collecting from individual gas stations. I am not sure if the various states actually spent other funds on the cleanup, just that the funds that were "stolen" came from funds paid by the gas station operators.

  • You have to wonder which costs more... underground storage tanks which *don't leak*, or underground storage tanks which *leak*.

    • by Pope ( 17780 )

      They don't leak right away, so obviously the ones that leak later are cheaper. At least on the balance sheet at the end of the quarter that the tank was installed, which is all that matters in corporate finance.

  • by erroneus ( 253617 ) on Tuesday February 11, 2014 @08:10AM (#46216733) Homepage

    Insurance fraud is a big giant problem and more often criminal. But since this is another of those "too big to fail" organizations, we'll just have to let this one slip. The executives enabling and making this happen, of course, keep their bonuses and all that but there may be layoffs or raises may not come again this year.

  • Insurance companies don't actually like paying out, so why are they paying when they know damn well the government has a fund that covers it?
  • There are folks, even in this jaded epoch, who would return the extra money paid by a homeowner's policy and a vehicle insurer, say, on an accident to the family car in the driveway.

    People this honest are rare. Notably, fudging one's tax return and bilking insurers isn't even the threshold where dishonesty begins for many.

    Reintroduce the very likely morally defunct petro-executive: "Huh, so we can clean up this mess without jeopardizing 3rd quarter bonuses? He probably double-dipped for a relatively

  • The insurance companies most likely put a subrogation clause [wikipedia.org] in their contracts. Now that they know the oil companies received additional payouts from a third party, they can come in and claim that money.

  • I'll shorten the discussion: blah blah blah, you're gonna pay for cleanup one way or another, either taxes or increased prices in the products.

    Now go home and surf for Tay Tay, or Miley, or that Russian skater you perves.

  • The individual who engaged in fraud should go to jail. A judge should make an example of them -- stealing tax dollars. Pigs might fly.
  • I hate to burst your anti-corporate bubble but wherever there is money to be made, there will be douchebags willing to subvert the original intentions of punitive damages for their own personal gain. There is a long list of plaintiffs filing claims against BP who have no presence in the Gulf region. There is an even longer list of obnoxious law firms e.g. the law offices of James suck-a-glove who will be the real beneficiaries of civil suit awards. If you think corporations charge too much for their prod

  • "The lawsuits against the oil companies allege fraud or other civil, not criminal, claims, which have a lower burden of proof and do not lead to jail time."

    Perhaps if there were more criminal claims there would be less corporate fraud (etc).

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