Hess 2014 Annual Report Download - page 32

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Item 3. Legal Proceedings
The Corporation, along with many companies engaged in refining and marketing of gasoline, has been a party to lawsuits
and claims related to the use of methyl tertiary butyl ether (MTBE) in gasoline. A series of similar lawsuits, many involving
water utilities or governmental entities, were filed in jurisdictions across the U.S. against producers of MTBE and petroleum
refiners who produced gasoline containing MTBE, including the Corporation. The principal allegation in all cases was that
gasoline containing MTBE is a defective product and that these parties are strictly liable in proportion to their share of the
gasoline market for damage to groundwater resources and are required to take remedial action to ameliorate the alleged
effects on the environment of releases of MTBE. The majority of the cases asserted against the Corporation have been settled.
In 2014, the Corporation settled and paid claims against it arising out of an action brought by the State of New Jersey for
approximately $35 million. The settlement was approved by the trial judge and the Corporation paid the settlement amount
in December 2014. In June 2014, the Commonwealth of Pennsylvania and the State of Vermont each filed independent
lawsuits alleging that the Corporation and all major oil companies with operations in each respective state, have damaged the
groundwater in those states by introducing thereto gasoline with MTBE. The Pennsylvania suit has been removed to Federal
court and has been forwarded to the existing MTBE multidistrict litigation pending in the Southern District of New York.
The suit filed in Vermont is proceeding there in a state court. An action brought by the Commonwealth of Puerto Rico also
remained unresolved at December 31, 2014. The Corporation has recorded reserves for its estimated liabilities for its
unresolved MTBE lawsuits.
The Corporation received a directive from the New Jersey Department of Environmental Protection (NJDEP) to remediate
contamination in the sediments of the lower Passaic River and the NJDEP is also seeking natural resource damages. The
directive, insofar as it affects the Corporation, relates to alleged releases from a petroleum bulk storage terminal in Newark,
New Jersey previously owned by the Corporation. The Corporation and over 70 companies entered into an Administrative
Order on Consent with the Environmental Protection Agency (EPA) to study the same contamination. The Corporation and
other parties recently settled a cost recovery claim by the State of New Jersey and also agreed to fund remediation of a
portion of the site. The EPA is continuing to study contamination and remedial designs for other portions of the River. In
addition, the federal trustees for natural resources have begun a separate assessment of damages to natural resources in the
Passaic River. Given the ongoing studies, remedial costs cannot be reliably estimated at this time. Based on currently known
facts and circumstances, the Corporation does not believe that this matter will result in a material liability because its terminal
could not have contributed contamination along most of the river’s length and did not store or use contaminants which are of
the greatest concern in the river sediments, and because there are numerous other parties who will likely share in the cost of
remediation and damages.
On July 25, 2011, the Virgin Islands Department of Planning and Natural Resources commenced an enforcement action
against HOVENSA by issuance of documents titled “Notice Of Violation, Order For Corrective Action, Notice Of
Assessment of Civil Penalty, Notice Of Opportunity For Hearing” (the “NOVs”). The NOVs assert violations of Virgin
Islands Air Pollution Control laws and regulations arising out of odor incidents on St. Croix in May 2011 and proposed total
penalties of $210,000. HOVENSA believes that it has good defenses against the asserted violations.
In July 2004, HOVIC and HOVENSA, each received a letter from the Commissioner of the Virgin Islands Department of
Planning and Natural Resources and Natural Resources Trustees, advising of the Trustee’s intention to bring suit against
HOVIC and HOVENSA under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).
The letter alleges that HOVIC and HOVENSA are potentially responsible for damages to natural resources arising from
releases of hazardous substances from the HOVENSA refinery, which had been operated by HOVIC until October 1998. An
action was filed on May 5, 2005 in the District Court of the Virgin Islands against HOVENSA, HOVIC and other companies
that operated industrial facilities on the south shore of St. Croix asserting that the defendants are liable under CERCLA and
territorial statutory and common law for damages to natural resources. In 2014 HOVIC, HOVENSA and the government of
the U.S. Virgin Islands entered into a settlement agreement pursuant to which HOVENSA paid $3.5 million and agreed to
pay the government of the U.S. Virgin Islands an additional $40 million no later than December 31, 2014. HOVENSA was
unable to make this additional payment because the U.S.Virgin Islands legislature did not approve a proposed operating
agreement required to complete a proposed sale of HOVENSA, which would have provided funds to make the settlement
payment. Under the terms of the settlement agreement, the U.S. Virgin Islands government was granted a first lien on
HOVENSA’s assets to secure the settlement payment, and in January 2015 the government commenced a foreclosure action
to enforce this lien. HOVENSA intends to defend this action and may take other steps in response to the action, including the
sale of assets and/or the commencement of bankruptcy proceedings. The Registrant does not believe that the resolution of
this matter will have a material adverse effect on its financial condition.
In February 2015, the Pension Benefit Guaranty Corporation (PBGC) issued a notice of determination to terminate the
HOVENSA pension plan. HOVENSA had been in negotiations with the PBGC to make additional contributions to the plan