More than five years after a pipeline burst in Mayflower near Lake Conway, state and federal officials have asked Exxon Mobil Corp. to pay more than $1.8 million to compensate the government for damage caused by the oil spill, and to pay for wildlife restoration efforts and other expenses.
The proposed settlement is in a letter that the Arkansas Game and Fish Commission mailed Tuesday to Exxon Mobil and released Wednesday to the Arkansas Democrat-Gazette.
Written by commission general counsel James Goodhart, the letter also asks the oil giant to finance the state's purchase of about 80 acres near the popular fishing lake to facilitate monitoring and management of the new property. The letter does not give a cost estimate on such a purchase.
Commission spokesman Keith Stephens said, "Any settlement reached would be presented for public comment before finalization." There also could be a public hearing on it, he said.
In an email late Wednesday, Exxon Mobil spokesman Jeremy Eikenberry said the company had received the offer Tuesday "to settle natural resource damage claims related to the Pegasus pipeline" accident in 2013.
"We are reviewing the letter and will not comment on the specifics of the offer or on pending discussions," Eikenberry said.
[DOCUMENT: Read Statement of Financial Interest + proposed Exxon settlement]
"We will work with the appropriate agencies to address their claims. We regret this spill happened and are committed to learning from it to prevent similar incidents from occurring in the future," he added.
The Pegasus pipeline, built in 1947-48, ruptured between two houses in Mayflower's Northwoods neighborhood on March 29, 2013. Tens of thousands of gallons of thick, black crude spilled into the neighborhood, ditches and the lake's Dawson Cove. Dozens of people were evacuated, and some never moved back home. Three houses had to be demolished.
Representatives, or trustees, of three agencies will be involved in any settlement negotiations: the commission, the Arkansas Department of Environmental Quality and the U.S. Fish and Wildlife Service.
The agencies have proposed a settlement totaling $1,802,977.71 for natural resource damage and restoration, according to the commission letter. Of that sum, $627,977.71 would go for commission expenses. There also would be an unspecified amount of additional funds to buy the 80 acres near Lake Conway.
The Democrat-Gazette obtained an earlier draft letter and other records from the commission under the state's Freedom of Information Act. The commission voluntarily released the updated letter, labeled "For Confidential Settlement Purposes Only," after it was completed.
Among other things, the proposed settlement asks that Exxon Mobil pay $700,000 "to compensate for recreational fishing loss at Lake Conway that occurred in the months immediately following the oil spill."
The money would be used to fund restoration projects in the Lake Conway vicinity to benefit recreational fishermen.
Other proposed settlement terms call for Exxon Mobil to:
• Pay $400,000 to compensate for migratory waterfowl mortality resulting from the spill. The money would go to restore about 4 acres to a type of soil that would provide overwintering habitat for migratory waterfowl.
• Provide funding for the land purchase, which the trustees believe will in turn "generate ecological benefits" in light of terrestrial habitat injuries and wildlife death caused by the spill and cleanup.
• Pay $50,000 for a contractor to develop a restoration plan.
• Pay $25,000 to cover costs of such activities as finalizing the settlement process, overseeing restoration and managing the acquired land.
In an emailed statement Wednesday, Glen Hooks, director of the Arkansas chapter of the Sierra Club, said, "If settlement is reached and funds become available for mitigation, we encourage the State to include non-governmental members of the Mayflower community as Trustees.
"The citizens of Mayflower suffered the most from this incredible oil spill and should be directly involved in deciding how damage funds are spent," he added.
Eikenberry said earlier that Exxon Mobil has worked closely with state and local agencies "on completing remediation and restoration of the area," as part of a federal consent decree reached in 2015. That agreement is separate from the current proposal.
Goodhart said any damage payments resulting from the newly proposed settlement would be payable to the trustees and would go into an agreed-upon fund. Trustees then would approve spending the money for implementing a final restoration plan.
If Exxon Mobil "disputes or fails to settle that claim within 90 days, the trustees can submit the claim to the National Pollution Funds Center in Washington, D.C.," Stephens said. A decision by that center can be appealed in federal court. The U.S. Coast Guard administers that fund.
Exxon Mobil shut down the Pegasus pipeline, which runs through Arkansas, Illinois, Missouri and Texas, shortly after the accident. The company blamed a manufacturing defect for the pipe's rupture. A 211-mile Texas section of the pipeline has reopened.
"In October 2016, the Pegasus pipeline became part of Permian Express Partners, LLC," Eikenberry said in another email. "Sunoco Pipeline, a subsidiary of Energy Transfer Partners, is the majority owner and operator."
Eikenberry said Permian would be the firm "responsible for any decision to restart the northern segment of the Pegasus pipeline."
The federal Pipeline and Hazardous Materials Safety Administration, part of the U.S. Department of Transportation, also would have to approve any restart plan.
In Washington on Wednesday, safety administration spokesman Darius Kirkwood said the northern section of pipeline remains shut down. The safety administration is aware of no plan at this time to restart it soon, he said.
The state environmental department's director, Becky Keogh, said Monday that she would recuse from any negotiations once a proposed settlement letter went to Exxon Mobil.
Keogh is a former Exxon Mobil employee and, with her husband, owns a small amount of stock in the oil giant as well as other energy companies.
Public records, obtained from the Game and Fish Commission, show that Keogh was copied in on a July draft of the proposed settlement and on Tuesday's letter.
"I take a very conservative pathway on recusal," she said, adding that she would not want the public to perceive bias.
Mike McAlister, the department's managing attorney, said Keogh had provided feedback to the Game and Fish Commission on the settlement drafts about what will ultimately be sent to Exxon. But he said he did not consider her involvement to be a conflict of interest because of the amount of her stock holdings and the time that has passed since she was employed by Exxon.
The environmental agency's personnel policy says that "employees should avoid acquiring any business interest, engaging in outside employment or participating in any activity outside ADEQ, for which they are compensated, that would conflict with his or her official duties."
Keogh said she has not acquired any stock since becoming director. She said she would appoint someone to oversee settlement discussions, perhaps her senior associate director Julie Linck.
Keogh's statement of financial interest filed with the state says she owns more than $12,500 in Exxon stock, but environmental department officials said she had overestimated her holdings in the stock, XOM. It closed at $80.73 per share Wednesday, making her shares worth $1,291.68. Keogh said she worked at Exxon Chemical Co. in Baton Rouge for seven years in the 1980s.
Keogh has advised Gov. Asa Hutchinson's office of her plans to recuse.
"The governor has the utmost confidence in Director Keogh and trusts her on this issue," said J.R. Davis, the governor's spokesman.
Hooks said recusal is "entirely appropriate in this situation, although it perhaps should have been done earlier."
Arkansas statutes on conflicts of interest don't specifically address the issue of stock holdings by state agency directors, said Graham Sloan, director of the Arkansas Ethics Commission. Members of boards and commissions are specifically prohibited from participating in actions involving something they have financial stakes in, he said.
As for state employees, Ark. Code Ann. 21-8-304(A) says public servants cannot use their positions to "secure special privileges or exemption" for themselves or first-degree family members or "for those with whom he or she has a substantial financial relationship.
For Keogh to meet those criteria, Sloan said, she must be shown to be securing a special privilege and that her stock holdings are "substantial."
A Section on 08/09/2018