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Administration Reportedly Settles $8.9B Exxon Lawsuit in a Hurry -- For Only $250M

Critics claim that by settling natural-resources damages suit in current fiscal year, money can be diverted to closing budget gap

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In a move stunning to lawmakers and environmentalists, the Christie administration is reportedly settling an 11-year-old pollution lawsuit against Exxon Mobil Corp. for $250 million, a fraction of the $8.9 billion it originally sought.

The settlement, first reported by The New York Times on Friday, aims to address the contamination of 1,500 acres of marshes, wetlands, and water from two refineries in Linden and Bayonne once operated by the energy conglomerate

The reported agreement, according to opponents, raises this question: Why settle for so little?

To critics, the settlement, yet to be approved by a judge, signals another intention. If the case is settled and Exxon pays the money, the state could divert $200 million to help plug a hole in state finances. It's doing much the same thing with a similar settlement of $190 million involving dioxin contamination of the Passaic River; $140 million is being diverted to the state budget rather than being used for environmental restoration.

Asked about that possibility, Joseph Perone, director of communications for the state Department of Treasury, said, “I was just looking through the Budget Summary for the next fiscal budget, but I don’t see any reference to it.’’

However, in this year’s budget, there is language allowing the state to divert anything above $50 million from natural resources damage suits (the basis of the Exxon lawsuit initiated in 2004) to the general fund. It is unclear whether that language is retained in Gov. Chris Christie’s budget for the next fiscal year. If not, it might explain why a case winding down after years of litigation was settled so abruptly.

Debbie Mans, the executive director of the New York/New Jersey Baykeeper, said the judge in the case, a former top official in the state Department of Environmental Protection, already had ruled Exxon liable in the case. The only other matter to be decided was how much damage it would pay.

Mans argued that the proposed settlement will not even cover the cost of restoration of acres of wetlands, streams, and other natural resources affected by decades of Exxon activities. The Bayway refinery, no longer owned by Exxon, is a familiar site to motorists driving north on the New Jersey Turnpike.

Using a complicated formula established under natural resources damage suits, the state calculated damages at $8.9 billion from pollution spills at the two refineries. The case was first brought by the administration of former Gov. Jim McGreevey and has been pursued by succeeding administrations, including Christie’s.

Jeff Tittel, director of the New Jersey Sierra Club, agreed. “This is the biggest corporate giveaway in state history. You don’t have to be an environmentalist to be upset about this,’’ he said. “Even worse, we’re plugging a hole in the state budget.’’

Some lawmakers agreed. Sen. Ray Lesniak (D-Union) vowed to fight the proposed settlement before the DEP, and, if necessary, in the Appellate Division. “This is a grossly inadequate amount of compensation that lets the mega-oil company off the hook,’’ he said in a press release issued yesterday.

Whether those efforts will amount to much with the rest of the Legislature remains in question. The Democrats, who control both houses, agreed to the budget language in the current budget that made it possible to shift money from the Passaic natural resources damage suit to the general fund, an option that averted the need to come up with other revenue sources or cuts in programs to balance the budget.

Tittel argued the latest settlement was wrong. “Not only are they selling out the environment, but they selling out the taxpayers,’’ he said. He vowed a challenge in the courts if the diversion is approved, saying it would have good chance of success.

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