Exxon Targets Standing in Largest-Ever Citizen Lawsuit Penalty

Exxon Mobil Corp. and environmental groups will square off once again in circuit court on Tuesday in a 13-year-old lawsuit over pollution from the energy giant’s Baytown, Texas, refinery.

In an unusual decision for en banc examination, the US Court of Appeals for the Fifth Circuit will hear oral arguments in Environment Texas Citizen Lobby v. ExxonMobil Corp., a civil rights case aiming to put Exxon on the hook for $14 million, the largest-ever Clean Air Act citizen lawsuit penalty.

In its request for a rehearing, Exxon asked the court to reexamine a “sweeping liability theory” that amounts to “a roadmap for runaway citizen suits.”

Exxon has been fighting this complaint against its Baytown petrochemical complex since 2010 over claims that carbon monoxide, sulfur dioxide, benzene, and other emissions from the group of plants far exceeded its permits.

Courts have flip-flopped over Exxon’s liability since then. The Fifth Circuit originally overturned a 2014 decision in Exxon’s favor, which led to an initial decision to impose $20 million in fees on the company issued by the US District Court for the Southern District of Texas.

Exxon appealed the penalties, which were lowered to $14 million and upheld by the Fifth Circuit in 2021. When Exxon asked for a rehearing with a larger suite of judges, the Fifth Circuit accepted the bid.

One of the issues of the rehearing is whether Exxon’s emissions actually caused all the harm in the claims, which could open the door for an industry-friendly Fifth Circuit to revisit standing for environmental plaintiffs.

“With the makeup of the Fifth Circuit and the makeup right now of the Supreme Court, that would be the thing environmentalist would fear the most,” according to University of Houston energy law expert Victor Flatt.

Standing at Risk

The en banc panel will hear questions on Exxon’s $14 million in penalties and whether plaintiffs have standing to sue, a central requirement under Clean Air Act citizen suits.

In order to establish standing, challengers must establish physical harm that is traceable to the defendant and would likely be redressed if they win their case.

The Environmental Protection Agency threw its weight behind environmentalists in a supporting brief, addressing Clean Air Act standing and Exxon’s claims that civil penalty violations are backward-looking.

“Exxon’s position makes sense only if civil penalties are conceived of as damages for past harm,” the EPA said in its amicus brief. “But that is not the function of civil penalties, as Exxon acknowledges.”

Exxon argues that the last Fifth Circuit panel incorrectly upheld liability for violations that could not be adequately traced to actual injuries.

“If every report or record of a deviation from permit requirements is traceable per se simply because it satisfies certain conditions, then citizen-suit plaintiffs will be free to do what they did here: gather those reports and records, list them in spreadsheets, admit the spreadsheets at trial without proof linking each event to an injury-in-fact, and recover penalties for each event,” Exxon attorneys wrote in their en banc petition.

According to Flatt, repeated efforts to keep the case in proceedings are typical of a company that “never admits defeat” and has a lot of future money on the line.

Should Exxon prevail, “it’s insulating them from a lot of future lawsuits,” Flatt said.

The case is Environment Texas Citizen Lobby v. Exxon Mobil Corp., 5th Cir. App., No. 17-20545, Oral Arguments 5/16/23