Record Fine Answers 10 Years of Oil Spills by Koch Industries

By Cat Lazaroff

HOUSTON, Texas, January 13, 2000 (ENS) - After more than 300 oil spills that polluted waters in six states, oil pipeline giant Koch Industries Inc. will pay the largest civil fine ever imposed on an company under any federal environmental law, the U.S. Environmental Protection Agency and Department of Justice announced today. The $30 million fine levied against Koch comes on top of the $8 million the company agreed to pay last year in fines and remediation for water pollution in Minnesota.


Koch Petroleum operates thousands of miles of pipeline connecting oil refineries like this one in Corpus Christi (Three photos courtesy Koch Industries Inc.)
The settlement filed today in U.S. District Court in Houston resolves two lawsuits in Houston and Tulsa, Oklahoma, charging that Koch illegally discharged crude oil and petroleum products in Texas, Oklahoma, Kansas, Missouri, Louisiana and Alabama over the past 10 years. The State of Texas joined the federal government in suing Koch, and the $30 million penalty will be divided equally between Texas and the U.S. government.

The federal portion will be paid into the Oil Spill Liability Trust Fund, created in 1990 after the Exxon Valdez spill in Alaska. The fund helps pay for damages, cleanup costs and some operation expenses related to oil spills.

"This record civil penalty sends a clear message to those who transport hazardous materials: You cannot endanger public health or the environment," said Attorney General Janet Reno. "We will not let you foul our water and spoil our land by breaking the law."

Koch Industries, headquartered in Wichita, Kansas, owns and operates extensive underground and above ground pipelines that transport crude oil and related products in the Midwest. Most of the spills at issue in the settlement occurred in Oklahoma, Texas and Kansas. In one case, almost 100,000 gallons of oil was spilled in Texas and caused a 12 mile oil slick on Nueces Bay and Corpus Christi Bay.


Koch uses special sensors to help detect pipeline corrosion
Complaints filed in 1995 and 1997 alleged that Koch illegally allowed some three million gallons of crude oil and related products to leak from its pipelines into ponds, lakes, rivers and streams, or onto their shorelines, from 1990 to 1997. Most of the spills were caused by corrosion of pipelines in rural areas. Texas and the U.S. government charged that Koch could have prevented the corrosion by proper operation and maintenance.

According to the U.S. Environmental Protection Agency (EPA), one pint of oil released into the water can spread and cover one acre of the water’s surface, harming water birds and fish and seriously damaging the aquatic habitat. It can take years for an ecosystem to recover from an oil spill.

"Today’s landmark fine against Koch Industries for egregious violations of the Clean Water Act sends a strong message that those who try to profit from polluting our environment will pay the price," said EPA Administrator Carol Browner.

Under the settlement, Koch must assess the condition of 2,500 miles of pipeline that it currently operates, and repair any defects. The settlement also requires the company to implement an improved leak prevention and detection program, a maintenance and inspection program, and a training program aimed at preventing leaks.


Koch technicians can monitor many pipeline functions via computer
The government had sought $1,000 to $3,000 in per-barrel fines, the maximum amount under the law. The first of the two lawsuits, at the time of its filing, was unprecedented in that the government, for the first time, combined years of spills under one lawsuit. The fine included in the settlement averages about $325 per barrel, including settling 11 spills not initially filed in the government cases. The law lists certain factors to be used to determine an appropriate penalty for pipeline leaks, such as the effectiveness of a company's clean-up efforts, the seriousness of the incident, and the culpability of the company, if any.

"We believe that the settlement is fair and reasonable and will avoid even more years of litigation," said Pat McCann, senior vice president of Koch Pipeline Company.

The settlement could help Koch avoid further lawsuits, like the one the company settled with the state of Minnesota last year. The company pled guilty to violations to the Clean Water Act and Oil Pollution Act at the company’s Rosemount, Minnesota refinery, and agreed to pay a $6 million criminal fine - the largest in Minnesota history - and a $2 million donation to the Dakota County Park System.

Under federal law, companies are liable for penalties on pipeline spills regardless of their cause. This settlement includes leaks that occurred as the result of third party actions, like digging.

Koch has reduced its crude oil pipeline leaks by more than 90 percent during the 1990s, according to the company’s press office, and has earned praise from numerous government agencies for its record of preventing and mitigating damages when spills occur.

oiled bird

Oil spills can be deadly to wildlife (Two photos courtesy EPA)
"We're proud of the tremendous progress we made in the 1990s to prevent pipeline leaks from occurring in the first place." said McCann. "But when they do, we are committed to cleaning them up quickly and completely. We have always sought to operate our pipelines with the highest safety and environmental standards. Our commitment is to constant improvement and unsurpassed performance. We are also pleased that communities in three states will benefit from funding for local environmental projects."

In addition to paying fines and changing its operations, Koch will spend a total of $5 million on environmental projects in the states most affected by its illegal discharges.

In Texas, Koch's contribution will be used for a variety of projects including:

"Funds provided by Koch will help implement a variety of environmental projects identified in the Coastal Bend Bay Plan to protect and restore the health and productivity of the bays and estuaries within the 12 county area of the Coastal Bend," said Ray Allen, executive director of the CBBEP. "Koch has a history of being actively involved in conservation efforts in Corpus Christi and the Coastal Bend and we welcome this continued financial support," Allen added.

As part of its $5 million in remediation spending, Koch will pay $1 million to conduct a pipeline safety study in Texas, Kansas and Oklahoma aimed at educating the oil and gas industry about oil spill prevention.

oiled water

The EPA says a single pint of oil can cover an acre of the water's surface
Koch's $1.5 million contribution to Kansas and Oklahoma will be used for wetland acquisition and restoration. A Kansas conservation leader said the Koch funding would help conserve vital habitat, benefiting the state's wildlife populations.

"The contribution by Koch for the preservation and enhancement of wetlands will clearly help reverse the decline in this vital wildlife habitat," said Alan Pollum, vice president and Kansas director of the Nature Conservancy. "Kansas has experienced the loss of nearly half of its historic wetlands, and Koch's interest and investment will improve the future prospects for Kansas wildlife."

The president of the Oklahoma Nature Conservancy said the contributions would also benefit his state. "This support from Koch for local environmental projects will help conserve land with important biological value," said Larry Nichols. "Koch's contribution has the potential to greatly advance efforts to ensure a lasting legacy of conservation in Oklahoma."

Koch is the second largest privately held company in the U.S.