The Texas Commission on Environmental Quality has issued fines against Marathon Oil for three environmental regulation violations.
TCEQ's fines are usually rather paltry, but this time it's remarkable how little the state environmental regulatory agency is actually making Marathon pay for infractions.
When the Houston-based oil company reported itself to TCEQ for three violations, initially it seemed as if state environmental regulators intended to do something about the incidents. That was a nice moment, but of course it didn't last long.
One of Marathon's plants, the Live Oak Central Facility, located about an hour outside San Antonio, racked up three clean air violations, starting in 2013, according to the San Antonio Business Journal. The company failed to conduct a mandated performance test on one of its engines in June 2013, according to TCEQ records, and the same thing happened again in September 2013. Then, between January and June 2015, the company exceeded its daily natural gas production rate of 6.5 million cubic feet per day by 5.43 million cubic feet per day, which also is a violation. This was an easy catch, in that TCEQ investigators didn't have to actually investigate. Marathon officials admitted to all three screw-ups.
Initially, state regulators fined Marathon about $11,000 for these violations, which is in keeping with how much TCEQ fines companies to begin with — TCEQ fines generally range from about $7,000 to about $200,000 — already a small sum for an multibillion-dollar oil company. However, Marathon didn't even come close to writing TCEQ a check for that amount. Once the fines had been assessed, a bunch of TCEQ discounts started kicking in, according to TCEQ documents. The company got $1,100 off of the fine for its compliance history. That was followed up with a $750 "good faith" discount, and the company got another $1,830 knocked off for an expedited settlement of the fines.
So this is where it gets interesting. Even though Marathon started out with an $11,000 fine, the company only owed $7,320, because, well, that's how TCEQ does business. But only about $3,000 of that fine will make it directly to the state. Marathon is donating half of the money owed in fines to the Texas Association of Resource Conservation and Development Areas, based in Victoria. The organization plans on using the money for a tire cleanup program in the Nueces River Basin.
TCEQ spokeswoman Andrea Morrow explained that the company gets these discounts only as long as it follows through. "The deferred penalties are deferred for an expedited settlement, but if they don't do what they say they've said they're going to do, they have to pay," she says. She also explained that TCEQ allows companies to use the "supplemental environmental program" that was signed off on by the state legislature to make sure some of the funds go back to communities actually affected by the violations. As to the size of the fine, Morrow says that TCEQ officials use a worksheet to assess penalties the same way for everyone. So while this set of fines amounts to the lightest of taps on the wrist, that's truly just how TCEQ does things.
It's worth noting that while Marathon has had some tough times in the past couple of years — almost every oil company has thanks to oil prices' dropping to lows not seen on the market in decades — the company is still working the Eagle Ford, having filed about 90 permits for exploration of the play in 2016 alone. Of course, that doesn't mean business is going swimmingly for Marathon. The company recorded more than $5 billion in revenue in 2015 but also finished off the year by losing more than $850 million.
Either way, Marathon officials must feel good about themselves on this clean air violation business. After all, the company gets to write a check for about $3,000 to the state environmental regulatory agency while also donating money to help pretty up an area as well.
We've asked Marathon for comment about why it chose to accept the fines and go this route to take care of its violations. We'll update with that as soon as we hear back.