Welcome
Environment & Energy Report

Justices Rule Against Refiner in $143 Million Oil Spill Case

March 30, 2020, 2:27 PM

An oil refining company is on the hook for a shipping accident that spilled 6,000 barrels of crude in the Delaware River, the U.S. Supreme Court ruled Monday.

CITGO Asphalt Refining Co. should have ensured the safe arrival of the Athos I, a tanker it chartered to deliver crude from Venezuela to the company’s refinery near Philadelphia, the justices ruled.

Because it failed to do that, the 7-2 opinion says, CITGO must cover cleanup costs that shipowner Frescati Shipping Co. paid after the tanker struck an abandoned anchor near the refinery and gushed crude into the river in 2004.

The ruling clarifies liability for future oil spills and other maritime accidents, resolving a dispute over contract language.

Safety Guarantee

At issue is a ship charter provision that said CITGO would “designate and procure” a safe berth and harbor for the ship. The shipping firm and refiner disagreed over whether that clause functioned as a guarantee of safety, or simply a promise of due diligence.

The U.S. Court of Appeals for the Third Circuit sided with Frescati, agreeing with British courts that the charter clause is best interpreted as a guarantee of safety. The Supreme Court agreed.

“Given the unqualified language of the safe-berth clause, it is similarly plain that this acknowledged duty is absolute,” Justice Sonia Sotomayor wrote for the majority. Justices Clarence Thomas and Samuel Alito dissented.

After the 2004 spill, Frescati spent $143 million on cleanup efforts. It was later reimbursed more than half of those costs, thanks to the Oil Pollution Act’s cap on liability. Frescati and the federal government have been in court for years trying to recoup their costs.

Lawyers for CITGO argued during November oral arguments that “any rule that would expose a defendant to limitless liability” would disrupt maritime commerce.

The case is CITGO Asphalt Ref. Co. v. Frescati Shipping Co., U.S., No. 18-565, 3/30/20.

To contact the reporter on this story: Ellen M. Gilmer in Washington at egilmer@bloombergenvironment.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergenvironment.com; Anna Yukhananov at ayukhananov@bloombergenvironment.com

To read more articles log in. To learn more about a subscription click here.