Supreme Court overturns Mobil's $10M cleanup order

Wednesday 20 July 2016 11:49 AM

Supreme Court overturns Mobil's $10M Wynyard Quarter cleanup order

By Jonathan Underhill

July 20 (BusinessDesk) - Mobil Oil New Zealand has succeeded in a Supreme Court challenge to a $10 million bill imposed for the clean-up of a contaminated former oil storage site in Auckland's Wynyard Quarter.

Chief Justice Sian Elias and Justices Terence Arnold, William Young, Susan Glazebrook and Mark O'Regan in the Supreme Court reversed a Court of Appeal judgment in favour of Development Auckland that imposed the $10 million charge on Mobil, which was the agreed cost of remediation work.

The justices reinstated the original High Court ruling in favour of Mobil, which found that a requirement to maintain the sites in a "clean and tidy condition" in tenancy agreements dating back to 1985 didn't extend to severe subsurface contamination. Mobile was also entitled to costs of at least $25,000 in relation to the appeals.

The Pakenham and Beaumont Street sites are in the Wynyard Quarter of Auckland's CBD, which is now being developed for commercial and residential uses. Mobil stopped using the land for bulk oil storage in 2005 and handed it back to Development Auckland in 2011 but decades of use for oil and petroleum had led to substantial contamination.

It was made worse because the 67-acre area known as the Western Reclamation in Freemans Bay had originally been reclaimed from Waitemata Harbour by the Auckland Harbour Board between 1905 and 1917 using already-contaminated fill. The sites were first used for oil storage in 1925 by companies that were later amalgamated into what became Mobil NZ. The Harbour Board was disestablished and its interest in the sites eventually transferred to Development Auckland.

In the High Court in 2014, Justice Sarah Katz found that contamination of the sites had reached a "tipping point" prior to the end of the tenancy agreement in 1985. Mobil had argued that point was reached in the 1970s and if that were the case, the Supreme Court said, "it would follow that the subsequent actions of Mobil caused no loss".

"The Harbour Board understood from the outset - that is from 1925 - that spillage was a risk associated with bulk oil storage," the Supreme Court judgment says. "Over the following decades, the records show that the Harbour Board was made aware of incidents which had resulted in petroleum products going into the ground" and at least from 1963 the board had known the reclaimed land was porous and in 1979 that the area had become "saturated with petroleum products".

An assessment of the clean-up requirements set out in the Supreme Court judgment said the exercise would involve the removal of soil to a depth of 3.5 metres over an area of about 2.5 hectares and replacement with clean fill. The costs to Mobil would have run to about $50 million but the actual $10 million claim represented "the incremental cost to Development Auckland of remediating the land as part of its own development work."

Demand for the waterfront storage facilities fell away in the 1980s after the major oil companies commissioned a pipeline between a shared terminal at Wiri in south Auckland and Marsden Point, with a second pipeline built between Wiri and Auckland Airport for aviation fuel.

(BusinessDesk)

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