U.S. recommends $2 million fine, 5-year probation for Citgo violations

Reuters News
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Posted: Sep 07, 2012 4:26 PM
U.S. recommends $2 million fine, 5-year probation for Citgo violations

By Erwin Seba

HOUSTON (Reuters) - The U.S. Justice Department has recommended that Citgo Petroleum Corp pay a fine of at least $2 million and serve five years on probation under a court-appointed supervisor for criminal violations of the federal Clean Air Act, according to court documents filed this week.

A federal judge is scheduled to begin weighing Citgo's punishment next week for violations of the Clean Air Act and the Migratory Bird Treaty Act at its 163,000 barrel per day (bpd) Corpus Christi refinery. A federal jury found Citgo guilty of the violations in 2007.

As part of the sentencing recommendations, the Justice Department said the fine was a small portion of $1.157 billion Citgo had earned at the Corpus Christi refinery during the 10 years it was charged with environmental violations.

"The evidence (presented during the sentencing hearing) will also establish that Citgo has continued to commit multiple environmental and worker safety violations, both before and after its conviction, and up until the past summer," according to a Justice Department memo explaining the recommended sentence filed with the court.

Citgo, in a statement, declined to comment on the sentencing recommendation, but said the company "will continue to strive to exceed industry standards and maintain one of the best safety records in the industry."

In 2009, BP Plc paid a $50 million fine and was sentenced to three years probation for an environmental violation found in the deadly 2005 explosion at its refinery in Texas City, Texas. The explosion killed 15 workers and injured 180 people.

U.S. Judge John Rainey, who presided over the 2007 trial, will decide Citgo's punishment after the sentencing hearing next week in Corpus Christi.

Among the matters the Justice Department will ask Rainey to consider are a July 2009 alkylation unit explosion and fire that the U.S. Chemical Safety Board found was "a significant near-miss" for a widespread release of toxic hydroflouric acid vapor into Corpus Christi, a city of 300,000 residents.

Also this week, the U.S. Occupational Safety and Health Administration issued a citation to Citgo for alleged serious violations on the same alkylation unit, including failing to correct deficiencies on the unit equipment.

In March, a flange failed on the alkylation unit releasing as much as 500 pounds of hydrofluoric acid and forcing nearby residents to remain indoors to prevent exposure to the toxic vapor.

Hydrofluoric acid can cause severe burns and damage the eyes, lungs and heart in humans.

In a statement, Citgo said the company appreciated OSHA's evaluation and was reviewing the findings.

"CITGO embraces a culture of safety that is reflected in everything we and our employees do," according to the statement. "We are proud of our record and of the important role our refineries play in providing good jobs and much needed tax revenue for the communities they serve, including Corpus Christi."

The OSHA violations could cost Citgo $66,500 in fines.

The Chemical Safety Board has started an investigation of the March release from the alkylation unit.

Citgo is the U.S. refining subsidiary of Venezuela's national oil company, Petroleos de Venezuela SA.

A hydrogen fluoride alkylation unit uses hydrofluoric acid to convert refining by-products into octane-boosting additives for gasoline.

(Reporting by Erwin Seba; Editing by Gary Hill)