Shell Oil’s 100 underground storage tank claims banned by State Water Board, $20 million fine issued

The State Water Resources Control Board has permanently banned 100 of Shell Oil Company’s underground storage tank (UST) claims from the UST Cleanup Fund for allegedly claiming reimbursement through false or misleading statements on claim forms. The ban is part of a settlement agreement; the agreement also requires Shell to pay $20 million to the settlement agreement parties.

The financial impact to Shell is significant. Shell has paid the State Water Board more than $11 million to settle the Water Board’s administrative claims and the alleged False Claims Act violation. The State Water Board’s portion of the settlement moneys will go to the UST Cleanup Fund and be used to reimburse other UST Cleanup Fund claims. Shell has also paid $8 million in settlement moneys to the state’s Office of the Attorney General and a whistleblower related to the False Claims Act alleged violations.

“The UST Cleanup Fund relies on accurate and truthful claimant self-reporting when issuing reimbursements,” said UST Cleanup Fund Manager Lisa Babcock. “We are pleased that Shell has now complied with the requirement and recognizes the critical need for full disclosure to the UST Cleanup Fund.”

The State Water Board and the Office of the Attorney General uncovered evidence that Shell failed to disclose reimbursements it received from insurance companies for the same sites where Shell was seeking UST Cleanup Fund reimbursement. The State Water Board staff had challenged Shell’s UST Cleanup Fund claims since 2007, and developed an administrative case to disqualify certain claims from seeking reimbursement.

Claimants are prohibited from receiving UST Cleanup Fund reimbursement for cleanup costs that have been, or will be, reimbursed from another source. Shell UST Cleanup Fund claims were placed on hold during the dispute between Shell and government agencies. As part of the settlement, the State Water Board will process reimbursement of up to $20 million in eligible claims subject to certain conditions set forth in the settlement.

A whistleblower filed a complaint in Sacramento Superior Court against Shell alleging fraud under the California False Claims Act. The complaint alleged that when Shell submitted applications to the UST Cleanup Fund seeking reimbursement of costs at UST sites, it failed to disclose it previously had received reimbursement from a series of insurance claims, litigation, and settlements for the same sites on its Non-Recovery Certifications. This misrepresentation to the State Water Board is not allowable under the UST Cleanup Fund; all types of monies received from other sources must be disclosed on its Non-Recovery Certifications.

“The UST Cleanup Fund is a critical tool the State Water Board uses to protect public health and safety and the environment,” said Cris Carrigan, director of the State Water Board’s Office of Enforcement. “It is imperative that claimants not engage in bad faith or fraud when accessing these vitally important public-benefit funds by submitting false or misleading statements. If they do, the State Water Board has powerful administrative authority to disqualify and take deductions against claims.”

The settlement with Shell Oil Company is third one reached by the UST Cleanup Fund for similar conduct by a major oil company, and the State Water Board has been in touch with other state administrators nationwide regarding such conduct by multiple major oil companies.