Grant Bosse: New Hampshire’s newest revenue scheme: sue the unpopular!

Last modified: Sunday, April 14, 2013
New Hampshire is getting really good at the shakedown.

Last week, a Merrimack County Superior Court jury found Exxon Mobil liable for contaminated well water with the gasoline additive MTBE and awarded the state $236 million, easily the largest jury verdict in New Hampshire history.

Methyl tertiary-butyl ether (MTBE) is an oxygenate. It’s added to gasoline to raise the oxygen level, which not only prevents knocking in older car engines but also burns the gas more completely, resulting in cleaner emissions. In 1990, Congress passed the Clean Air Act, which among many other provisions required that oil companies add oxygenates to their product in order to reduce tailpipe pollution.

The only other possible chemical that would have met the federal standard was ethanol, which not only decreases fuel efficiency but also breaks down in pipelines and large storage tanks. It also wasn’t produced widely enough in 1990 to be a viable additive, so most companies chose MTBE.

In 1991, New Hampshire signed up for the EPA’s program requiring oil companies to use reformulated gasoline rather than subject car owners to tailpipe emissions tests in four counties that exceeded federal air pollution standards.

MTBE came with problems of its own. Unlike ethanol, MTBE is easily absorbed in water and does not break down. One study has shown that in very high concentrations, it is a possible carcinogen. And it smells really bad.

In 2003, then-Attorney General Peter Heed filed suit against 22 oil companies for selling a “deficient product.” In 2004, New Hampshire banned more than trace amounts of MTBE in gasoline, and that went into effect in January 2007. The EPA has since lifted the Clean Air Act’s oxygenate requirements, as cleaner-burning cars made them obsolete.

Over the past decade, most of the oil companies settled with New Hampshire and the other states who saw a good shakedown racket when they saw one. Shell, Sunoco, and Citgo recently agreed to pay a combined $51 million to get out of the lawsuit.

Only Exxon-Mobil held out. The largest American oil company has a company policy to fight nuisance lawsuits, even when the nuisance is a state attorney general.

After hearing testimony for three months, jurors took 90 minutes to find Exxon Mobil liable. They took an additional 20 minutes to reach the $236 million award, based on the state’s estimate of how much it would cost to test, monitor and clean wells statewide.

While we should add the settlement income to state’s balance sheet, wiping out this year’s projected deficit and the need for Gov. Maggie Hassan to raid dedicated funds, we shouldn’t start spending the Exxon money just yet. The company will appeal, and it might win.

Maryland courts recently reversed a $1.65 million ruling in a similar claim, finding that Exxon Mobil didn’t make any fraudulent claims about MTBE, and no one could show they’d been harmed. The company is still appealing a verdict against them from New York.

We shouldn’t sue companies because in hindsight we wish they had complied with regulations differently. The federal government forced oil companies to put extra stuff in their gasoline in order to reduce emissions. State government bought into those regulations in order to get out of an alternative air pollution scheme. Exxon and its competitors chose to use what they saw as the better of two bad options. It turns out that we’re paying for cleaner air with dirtier water. That trade-off was likely a good deal from a public health standpoint, but now we’re trying to sue our way out of the consequences of these government decisions.

Putting MTBE in gasoline was a bad idea, but it’s not like the oil companies wanted to do it. They didn’t mislead anyone about what they were doing. And there is no evidence that MTBE in groundwater has made anyone sick.

We can’t punish most of the politicians whose bad decisions polluted our groundwater. So instead, we’ve picked big companies with deep pockets and little sympathy with a jury. That’s a lousy way to raise money.

(Grant Bosse is editor of New Hampshire Watchdog, an independent news site dedicated to New Hampshire public policy.)