Gimme all your gas money

State alleges that ConocoPhillips has misused environmental cleanup funds

Elizabeth Miller | Boulder Weekly

The state of Colorado has filed a complaint against the ConocoPhillips Company alleging that ConocoPhillips has profited from the state’s fund for pollution cleanup at service stations by taking $70 million in state funds for clean-ups its insurance company later reimbursed it for.

“Essentially, the state has alleged that ConocoPhillips was at the same time collecting private insurance funds for the cleanup of underground storage tank incidents as it was accepting funds from the state to clean up underground storage tank facilities,” says Mike Saccone of the Colorado state attorney general’s office.

“According to the lawsuit, when ConocoPhillips was asking for use of the state funds to clean up its underground storage tank sites it repeatedly told the state that it was not going to receive any funds from other sources for the clean-up, including specifically insurance, where in fact we have alleged that it had a global insurance policy that provided it funds.”

ConocoPhillips declines to comment on legal matters.

According to the case, ConocoPhillips has been reimbursed for about $70 million to clean up underground storage facilities from contamination caused by petroleum leakage. That money was distributed in the form of $21 million for leaks at 113 ConocoPhillips sites in Colorado, as well as $48 million for 241 sites ConocoPhillips previously owned (the state alleges Conoco sold these sites to avoid having to pay the millions in cost of updating these sites to new environmental standards by Dec. 22, 1998), with the agreement to cover liabilities for environ mental hazards at those sites, an agreement that increased the sale price of those sites, the lawsuit alleges.

ConocoPhillips claimed in more than 2,000 filings with the state that they had no insurance to cover the cost of these cleanups, according to the lawsuit. The company had agreed, in contracts with the state, to “immediately pay to the State any monies it received from their parties for the same costs paid by the State, ‘including insurance proceeds,’” the lawsuit says. These claims were filed up to 2010.

But ConocoPhillips never told the state it had settled with its insurers, and didn’t repay the state for the funds it was awarded.

According to the lawsuit, the company has been a shareholder with the affiliated mutual insurance companies Oil Insurance Limited since 1971 and Oil Casualty Insurance Ltd. since 1986. The lawsuit references court cases from the early ’90s in which ConocoPhillips in fact sues its insurer for environmental liability coverage, and states that ConocoPhillips has made insurance claims for environmental liabilities totaling approximately $2.4 billion. ConocoPhillips has sued its insurers for the costs of corrective actions at service stations across the United States, including 95 sites in Colorado, first settling with its insurance company in 1994 and settling for approximately $286 million.

ConocoPhillips is listed as a shareholder at Oil Casualty Insurance, Ltd., which states that shareholders are required to purchase an excess general liability policy that provides a minimum of $25 million in limits.

The state’s Petroleum Storage Tank Fund had a balance of $11.2 million as of Dec. 31, according to the Colorado Department of Labor and Employment. The fund was established in 1989 as a public-benefit fund to cover the costs of environmental clean-ups from leaked petroleum fuels, which can contaminate soil and groundwater, according to the CDLE. The money for the fund is supplied by the state environmental surcharge on petroleum products.

Reimbursements for a single applicant are limited to $3 million per fiscal year.

“If you add up all the claims that ConocoPhillips made out of the state fund, it totals about $70 million, however when you include interest to that, we’re seeking $152 million from ConocoPhillips to essentially reimburse the fund for what we believe were improper withdrawals,” Saccone says.

Precedents include a previous settlement with Exxon Mobile Corporation for a similar complaint.