U.S., Arkansas sue Exxon over Pegasus pipeline spill

WASHINGTON Thu Jun 13, 2013 3:29pm EDT

The Belgian headquarters of oil giant ExxonMobil, where Britain's Nicholas Mockford worked, is pictured in Machelen, northern Brussels, October 27, 2012. REUTERS/Sebastien Pirlet

The Belgian headquarters of oil giant ExxonMobil, where Britain's Nicholas Mockford worked, is pictured in Machelen, northern Brussels, October 27, 2012.

Credit: Reuters/Sebastien Pirlet

WASHINGTON (Reuters) - The Justice Department filed a joint lawsuit with Arkansas on Thursday against oil producer Exxon Mobil Corp (XOM.N) over the pipeline spill in March of thousands of barrels of heavy Canadian crude oil in a suburban neighborhood.

The 95,000 barrels per day Pegasus line has been shut since spilling the oil in Mayflower, Arkansas, where cleanup operations continue. U.S. oil pipelines rarely spill in towns.

The Justice Department said it is seeking civil penalties against Exxon under federal law.

Arkansas is seeking civil penalties for alleged violations of state waste and pollution laws. The state also seeks a judgment on Exxon's liability for damages related to the spill of about 5,000 barrels that contaminated 22 homes, forcing residents to evacuate.

An Exxon spokesman said the company has yet to review the allegations and had yet to be formally served with the complaint.

The spill sparked debate about the wisdom of shipping heavy Canadian crude across the United States, as the State Department considers TransCanada Corp's (TRP.TO) application for the Keystone XL pipeline, which would link Alberta's oil sands to refineries in Texas.

The lawsuit said the Pegasus pipeline was buried about two feet below the ground in the Mayflower neighborhood, which is about 25 miles from Little Rock, the state capital.

Federal pipeline regulators this month gave Exxon time to conduct a second round of testing on Pegasus after the company said an initial investigation into why the nearly 70-year-old line failed was inconclusive. The pipeline runs from Illinois to Texas.

Exxon installed a new section of the pipeline in April after it removed a 52-foot-long (15.8 meter) damaged section, but it has yet to file a restart plan with federal regulators.

(Reporting by Timothy Gardner and David Sheppard in New York; Editing by Ros Krasny and Kenneth Barry)