On August 3, 2018, a grand jury in Houston, Texas, indicted chemical manufacturer Arkema North America, Inc. (Arkema), its CEO and a manager at the manufacturer’s Crosby, Texas, plant on criminal charges for the “reckless emission” of air contaminants during Hurricane Harvey. The Harris County District Attorney’s Environmental Crimes Section (HCDA-ECS) brought the charges, which carry penalties of up to five years in prison for the CEO and plant manager, and fines of up to $1 million for the corporation, under the Texas Water Code.
The criminal charges demonstrate the importance of implementing proper safety measures prior to, during and after an event that go beyond strict regulatory compliance for those that are involved in the production, movement and storage of hazardous chemicals and petroleum products. Implementing a comprehensive spill and incident prevention and response program well in advance of any emergency situation is a critical step in mitigating liability exposure.
The charges stem from explosions at the plant on August 31 and September 3, 2017, brought about when rising floodwaters from Hurricane Harvey overwhelmed Arkema’s primary and emergency power backup systems, which kept certain organic peroxides under refrigeration. When power to the refrigeration units was interrupted and temperatures in backup storage containers began to rise, these organic peroxides degraded and ignited a fire that plant officials and emergency responders were forced to let burn due to safety concerns. In addition to organic peroxides, more than a dozen other hazardous chemicals were released in the blaze including ethylbenzene, mineral spirit, naphtha, naphthalene, 1,2,4-trimethylbenzene, tert-butyl alcohol and other volatile organic compounds. Bond has been set at $20,000 per defendant and an arraignment hearing is scheduled for October 22, 2018.
Arkema Civil Suits. Arkema’s liability resulting from the explosions is not limited to HCDA-ECS’s criminal suit. Indeed, diverse groups of stakeholders—ranging from neighborhood residents and homeowners to municipalities and first responders—are pursuing a variety of claims against the company. For example, in one pending case, which named Arkema, its CEO, President and a safety engineer as co-defendants, area residents advance several causes of action based on the company’s alleged negligent acts. Specifically, the suit claims that Arkema and its agents failed to (i) properly store chemicals, (ii) have in place adequate safety redundancies, (iii) provide first responders and the community with accurate information regarding the health risks posed by the chemicals stored at the facility, and (iv) follow regulators’ and the company’s own safety protocols, thus breaching the duties the company owed to the plaintiffs, particularly considering the foreseeability of the storm’s damage and the company’s checkered regulatory compliance history. Consequently, the plaintiffs allege that the company’s actions amounted to gross negligence and negligence per se. On account of personal injuries suffered, the plaintiffs request compensatory, exemplary and prospective damages totaling more than $1 million. In another suit, Harris County and the Texas Commission on Environmental Quality (TCEQ) seek, among other things, injunctive relief, and civil penalties and reimbursements exceeding $1 million resulting from several alleged violations arising under the Texas Clean Air Act and the Texas Water Code.
Texas Clean Air Act. The Texas Clean Air Act seeks to control or abate air pollution and emissions of air contaminants to protect public health, welfare and property as well as maintain adequate aerial visibility. To accomplish this goal, the Act prohibits the excessive emission of any air contaminant or the performance of any activity that contributes to air pollution in violation of the Act or any rule or order issued by the TCEQ. The TCEQ has promulgated rules to carry out and enforce the Act, which it does in part through its permitting authority. A person who violates TCEQ permits, rules or orders can be subjected to civil penalties of up to $25,000 for each day of each violation, with each day of a continuing violation constituting a separate violation. Recent TCEQ enforcement activity of emissions events has focused on emissions of sulfur dioxide, carbon monoxide, natural gas and volatile organic compounds in connection with oil and gas activities, particularly crude petroleum and natural gas, natural gas liquid (NGL) extraction, petroleum refineries and basic organic chemical manufacturing in and around Midland, Houston, Corpus Christi and Beaumont, Texas.
Texas Water Code. The Texas Water Code, among other things, prohibits violations of the Texas Clean Air Act and provides for criminal penalties. The Code authorizes criminal penalties for intentional or knowing violations of the Texas Clean Air Act, including fines of up to $50,000 per day per offense and confinement of up to 180 days for individuals, and fines of up to $100,000 per day per offense for businesses. Under the Code, the reckless emission of air contaminants placing another person in imminent danger of death or serious bodily injury could subject individuals to fines of up to $250,000 per day per offense and confinement of up to five years. For the same offense, companies could face fines of up to $500,000 per day per offense.
The criminal and civil litigation in which Arkema is currently embroiled highlights the potentially significant legal exposure faced by petrochemical manufacturers for spills and emissions of hazardous materials during “black swan” events. As the peak of the Atlantic Hurricane Season approaches, companies should consider how to protect their businesses and employees from potential criminal and civil liability, by implementing a comprehensive compliance program as well as a spill and release prevention and response program.
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