United States Announces Bankruptcy Settlement with Oil Company in Wake of October 2009 Explosions and Fire
Includes $8.2 Million Payment for Environmental Cleanup Costs and Penalties
At Oil Facility and Service Stations in Puerto Rico
WASHINGTON – Under a settlement agreement lodged today in federal bankruptcy court in Delaware, Caribbean Petroleum Corp., Caribbean Petroleum Refining L.P., and Gulf Petroleum Refining Corp. – Puerto Rico (collectively, CAPECO) will pay more than $8.2 million to address environmental liabilities relating to CAPECO’s former petroleum distribution facility in Bayamón, Puerto Rico, and more than 170 service stations owned or leased by CAPECO throughout Puerto Rico.
The $8.2 million payment will reimburse the Environmental Protection Agency (EPA) and the U.S. Coast Guard for cleanup costs incurred at the Bayamón facility during the bankruptcy, and cover penalties for violations of the Clean Water Act (CWA) and Resource Conservation and Recovery Act (RCRA) during the bankruptcy. The settlement also provides the United States with allowed general unsecured claims in excess of $18 million. These claims are for cleanup costs and penalties for violations of the CWA and RCRA before the bankruptcy, and will be paid based on the availability of funds in the bankruptcy estate.
CAPECO filed Chapter 11 petitions in the bankruptcy court in August 2010 following a series of catastrophic explosions and fires at the Bayamón facility on Oct. 23, 2009. The explosions, measuring 2.8 on the earthquake Richter scale, destroyed 15 above-ground storage tanks and damaged another 17 above-ground storage tanks, releasing approximately 30 million gallons of petroleum. EPA, serving as lead federal agency, conducted emergency cleanup actions with funds from the Oil Spill Liability Trust Fund administered by the U.S. Coast Guard’s National Pollution Funds Center. In February 2011, the United States filed proofs of claim against CAPECO in the bankruptcy proceeding, seeking to recover cleanup costs as well as penalties for violations of the CWA and RCRA.
The bankruptcy settlement is part of a broader settlement that includes three non-bankruptcy agreements announced on May 2, 2011 between EPA and Puma Energy Caribe LLC, under which Puma will perform cleanup work at the Bayamón facility. A fourth non-bankruptcy agreement, among Puma, the EPA and the Commonwealth of Puerto Rico, requires that Puma undertake comprehensive compliance measures at 147 of the service stations and make environmentally beneficial improvements at the service stations that are not required by regulations. Puma acquired the Bayamón facility and 147 service stations on May 11, 2011, through a court-ordered bankruptcy sale. CAPECO has also agreed to pay $850,000 to address the costs of investigation and remediation that is determined to be needed at service stations not acquired by Puma
“This bankruptcy settlement and the earlier agreements with Puma Energy are the result of a commitment by the United States to clean up the contaminated CAPECO site after the catastrophic explosions and fires in October 2009,” said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division at the Department of Justice. “Today’s settlement will send a message to the regulated community that they cannot declare bankruptcy and avoid environmental liabilities.”
“Today’s bankruptcy settlement and the earlier agreements with the new owner, Puma, will advance the ongoing work to clean up the former CAPECO facility,” said EPA Regional Administrator Judith Enck. “EPA is encouraged that Puma has agreed to perform necessary environmental work. EPA will continue to ensure that the cleanup of this facility, and compliance efforts at the service stations, are done properly and that the health of people in the surrounding communities is protected.”
The bankruptcy settlement is subject to approval by the bankruptcy court. Before approval, the settlement agreement will be lodged with the court for a period of seven days to afford members of the public an opportunity to comment on the settlement.