Exxon to pay Montana $2.4 million in spill accord

Exxon Mobil Engineer Eric Julian inspects oil residue on the property of Jim Swanson in Laurel, Montana, July 5, 2011.

(Reuters) - Exxon Mobil Corp. would pay more than $2 million in penalties and cleanup costs to Montana for a pipeline rupture in July that spilled an estimated 1,500 barrels of oil into the Yellowstone River, according to a proposed legal settlement unveiled on Thursday.

Under the negotiated agreement between Exxon and the Montana Department of Environmental Quality, the Texas-based oil company would pay a fine of $1.6 million, the largest penalty ever levied in Montana for violations of its water quality regulations.

Exxon also would reimburse Montana $760,000 for state cleanup expenses and cover any future costs should the state incur them, according to the deal.

The proposal is open for public comment through February 21.

Exxon's Silvertip pipeline burst on July 1 at a crossing beneath the flood-swollen Yellowstone River near Billings, Montana, about 150 miles downstream from Yellowstone National Park.

The company originally put the size of the spill at 1,000 barrels of crude but has since revised the volume of oil released into the river at 1,500 barrels, Montana environmental officials said.

The deal represents only part of Exxon's liability stemming from the pipeline rupture, Montana Department of Environmental Quality Director Richard Opper said.

Exxon in November estimated its overall response to the spill, including cleanup, would cost $135 million and said it had reached compensation agreements with more than 95 percent of riverside property owners affected by the accident.

In addition, Exxon must still settle with the state for any damages assessed by the Montana attorney general under the state's natural resource laws, Opper said.

The cause of the accident, which occurred amid historically high water levels on the pristine river, remains under investigation by the federal Pipeline and Hazardous Materials Safety Administration.

Exxon said in a statement on Thursday that it regretted the incident and took full responsibility for the cleanup.

(Editing by Steve Gorman and Dan Burns)