- An oil refining company is on the hook for a shipping accident that spilled 6,000 barrels of crude in the Delaware River, the U.S. Supreme Court ruled.
- CITGO must cover cleanup costs that shipowner Frescati Shipping Co. paid after the tanker struck an abandoned anchor near the refinery, Justice said.
- The ruling clarifies liability for future oil spills and other maritime accidents, resolving a dispute over contract language.
According to Bloomberg Environment, a case that has bounced around the lower courts for 13 years was finally settled on March 30 when the U.S. Supreme Court upheld a lower court decision, finding oil giant Citgo liable for a clean up of a 2004 oil spill in the Delaware River.
Athos I tanker collision
The spill stemmed from a collision that the Athos I tanker had with an abandoned and submerged anchor as the ship was approaching a Philadelphia-area refinery in New Jersey.
The collision pierced the hull, leading to the release of 264,000 gallons of heavy crude oil, according to court documents.
When the spill happened, the owner of the boat Frescati Shipping Company, along with the U.S. government paid $133 million for the cleanup, but the Oil Pollution Act of 1990 allows the government to recoup funds from liable parties after the fact.
That spurred a lawsuit over the language in the contract when Frescati and the government sued Citgo to recover what they spent.
Court rules Safe berth clause
The court ruled 7-2 that Citgo and others are responsible for cleanup costs.
The majority opinion, authored by Justice Sonia Sotomayor, said a “safe-berth” clause in the charter contract should be interpreted as a safety warranty, meaning Citgo and the others who commissioned the ship had to make sure the tanker docked safely.
The port in Paulsboro, New Jersey was controlled by three Citgo companies — Citgo Asphalt Refining Company, Citgo Petroleum Corporation, and Citgo East Coast Oil Corporation. The three companies chartered the oil tanker.
Citgo argued before the Supreme Court that it had done its due diligence by selecting a known safe harbor for the ship to dock. That became a sticking point during oral arguments as Justice Elena Kagan said the case should not be decided what CITGO thinks would be “sensible.”
Citgo ordered up to pay
Justice Ruth Bader Ginsburg pointed out that many contracts between shipping companies and companies that charter their boats have very loose and vague language.
However, this contract had much stricter language written into it, requiring CITGO to “designate and procure” a safe berth. “You either did or you didn’t,” Chief Justice John Roberts said in oral arguments, as Bloomberg Environment reported.
The majority rejected Citgo’s assertion that ship captains had a duty to analyze the chartered route accept it based on safety.
“[I]t strains common sense to insist (as the dissent does) that the vessel master implicitly has a separate, dueling obligation regarding the safety of berth, when the clause explicitly assigns that responsibility to the charterer,” Sotomayor wrote in the majority opinion.
Justices Clarence Thomas and Samuel Alito were the two dissenters.
The ruling clarifies liability for future oil spills and other maritime accidents, resolving a dispute over contract language.
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Source: Bloomberg Environment