Accused of bilking cleanup fund, Phillips 66 pays Utah $2 million
Environment • The state says oil firms have been “double-dipping” into fund.
Published: January 9, 2014 08:31PM
Updated: January 10, 2014 12:48PM

Phillips 66 has paid Utah $2 million to resolve allegations that the oil company or predecessor ConocoPhillips defrauded a state fund to the tune of $25 million for cleanups associated with leaking underground tanks.

Phillips 66 is among three major oil companies the state has accused of “double-dipping” the fund by winning reimbursements for cleanups covered by private insurance. Regulators have already extracted $1.8 million from Chevron in an out-of-court settlement, while a lawsuit remains pending against BP Amoco, which allegedly misappropriated $1.5 million.

The money was paid out of the state Petroleum Storage Tank Fund, which lawmakers created in 1989 to help gas stations and other tank operators meet federal financial requirements.

More than 4,500 tanks have been cleaned up, many with the fund’s help, but the fund remains plagued with financial trouble. Many low-risk operators have opted out of the program, leaving the fund responsible for mostly higher risk tanks.

According to a recent report to the Department of Environmental Quality, the fund faces a $15 million “negative equity balance.” This means its current $12 million balance is insufficient to cover the $27 million in payouts that an actuarial analysis says the fund could face.

Even so, legislative requirements prevent the settlement from Phillips 66 and other double dippers from being returned to the trust fund. Instead, it will go to a related cleanup fund.

“The money recovered will be used for cleaning up sites and that’s a benefit to the environment,” said Brent Everett, director of the state Division of Environmental Response and Remediation.

In its lawsuit filed in 2012, the division alleged ConocoPhillips collected $25 million in payouts to cover cleanups at 82 service stations by falsely reporting that these sites were not covered by independent insurance.

The suit sought to recover this money, plus punitive damages and fines totalling $10,000 for every day ConocoPhillips violated the law. But as lawyers gathered evidence it became apparent some of the claims were not that strong, Everett said.

Officials said they are satisfied with the $2 million settlement, which amounts to less than 10 percent of what they originally claimed was misappropriated.

A phone message left with a Phillips 66 spokeswoman was not immediately returned.

Before and during the disputed payouts, Phillips 66 sued myriad insurers over coverage for contamination arising from leaking tanks around the country. The oil company wound up collecting $286 million from its insurers to resolve these disputes, but it never divulged any of this to Utah officials, the suit alleged. State lawyers contended Utah was entitled to reimbursement from these settlements.

bmaffly@sltrib.com