Sunoco 2011 Annual Report Download - page 38

In 2009, the EPA proposed penalties based on alleged violations of the Clean Water Act associated with an
October 2008 release from the Mid-Valley Pipeline. The EPA and the Partnership have agreed upon a settlement
of approximately $300 thousand. The Partnership has executed the settlement papers and awaits finalization from
the EPA.
The Partnership’s Sunoco Pipeline L.P. subsidiary operates the West Texas Gulf Pipeline on behalf of West
Texas Gulf Pipe Line Company and its shareholders pursuant to an Operating Agreement. Sunoco Pipeline L.P.
also has a 60.3% ownership interest in the Company. In March 2010, Sunoco Pipeline L.P. received a Notice of
Probable Violation, Proposed Civil Penalty and proposed Compliance Order from PHMSA with proposed civil
penalties totaling approximately $400 thousand in connection with a crude oil release that occurred at the
Colorado City, TX station on the West Texas Gulf Pipeline in June 2009. The Partnership has appealed the
finding of violation and the proposed penalty. The time or outcome of this appeal cannot be reasonably
determined at this time. (See also the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2010.)
In January 2012, the Partnership experienced a release on its refined products pipeline in Wellington, OH. In
connection with this release, PHMSA issued a Corrective Action Order under which the Partnership is obligated
to follow specific requirements in the investigation of the release and the repair and reactivation of the pipeline.
The Partnership also entered into an Order on Consent with the EPA regarding the environmental remediation of
the release site. The Partnership has not received any proposed penalties associated with this release and
continues to cooperate with both PHMSA and the EPA to complete the investigation of the incident and repair of
the pipeline.
MTBE Litigation
Sunoco, along with other refiners, manufacturers and sellers of gasoline, is a defendant in lawsuits alleging
MTBE contamination of groundwater. The plaintiffs typically include water purveyors and municipalities
responsible for supplying drinking water and governmental authorities. The plaintiffs are asserting primarily
product liability claims and additional claims including nuisance, trespass, negligence, violation of
environmental laws and deceptive business practices. The plaintiffs in all of the cases are seeking to recover
compensatory damages, and in some cases, injunctive relief, punitive damages and attorneys’ fees.
As of December 31, 2011, Sunoco was a defendant in approximately three lawsuits involving two states and
Puerto Rico. Two of the cases are venued in a multidistrict proceeding in a New York federal court. The
remaining lawsuit is pending in a New Hampshire state court. All three cases assert natural resource damage
claims. In addition, Sunoco recently received notice from another state that it intends to file an MTBE lawsuit in
the near future asserting natural resource damage claims.
Discovery is proceeding in all of these cases and accruals have been established where the losses are
probable and reasonably estimable. In two of the cases, there has been insufficient information developed about
the plaintiffs’ legal theories or the facts in the natural resource damage claims that would be relevant to an
analysis of the ultimate liability of Sunoco in these matters; however, it is reasonably possible that a loss may be
realized. Management believes that the MTBE cases could have a significant impact on results of operations for
any future period, but does not believe that the cases will have a material adverse effect on its consolidated
financial position.
During 2011, Sunoco settled seven MTBE contamination cases and several unfiled claims. The settlements
were not material to Sunoco’s results of operations or cash flows for 2011.
Other Litigation
Many other legal and administrative proceedings are pending or may be brought against Sunoco arising out
of its current and past operations, including matters related to commercial and tax disputes, product liability,
antitrust, employment claims, leaks from pipelines and underground storage tanks, natural resource damage
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