Phillips 66 Company v. Yamuna Spirit, LLC, Teekay Chartering and Teekay Marine (The “YAMUNA SPIRIT”) – SMA No. 4454, 12 January 2023
Summary of Facts
At 0524 on September 19, 2016, the YAMUNA SPIRIT began discharging her Arabian Extra Light crude cargo at the Phillips 66 Marine Terminal, Rodeo Refinery, California. The T-head pier extended past the Vessel’s bow and stern, with the Vessel fairly centered on the offshore side.
A 16” movable compound joint of the 16” Chicksan loading arm was connected to the Vessel’s manifold, with oil then flowing into two 12” cargo lines into the shore tank. Discharging of the AXL crude began at 0924 and ceased at 2342. Operations resumed the next day, September 20, at 0024, stopped at 0154, and resumed at 0218 to permit a change in shore tanks. Discharge was halted again at 0930 and resumed at 1900 that evening.
Fuel Odors and Oil Reported in San Pablo Bay
During this time, the Vessel conducted stripping procedures to reduce the ROB. However, at 1700 and 1830, two reports of asphalt/fuel oil odors were reported, and at 1945 shortly after discharging resumed, the Vessel crew reported a hydrocarbon smell.
From 1900-2000, Phillips 66 Marine Terminal operators searched the water along the Pier and Vessel with flashlights but did not see any evidence of oil in the water or dock. Within 20 minutes, the odor had dissipated and was gone. By 2000 crude oil washing was conducted and completed by 2054.
However, by 2007 the US Coast Guard received information from a ferry that a strong odor was present in San Pablo Bay. Shortly after, another ferry and a tug reported a half-mile sheen coming from Rodeo Refinery Pier. In addition, sheen and odors were also noted at Pinole Shole, 2 miles west of the Marine Terminal. There was also a report of a “shelter in place” due to unknown odors issued for sections of the city of Vallejo, which lay across the bay from the Terminal.
USCG reported these incidents to the Vessel Captain and directed him to activate the Vessel Response Plan (VRP). Discharging was stopped by 2107. The Captain and Chief Engineer then investigated the Pier and Vessel with flashlights but did not find evidence of oil in the water or on the Vessel’s hull. Checks of cargo, ballast tanks, and engine room spaces on the Vessel were conducted by Vessel personnel and a P66 Marine Safety Advisor, however, no oil was found.
Oil Sheen Discovered Alongside Vessel
Discharging recommenced at 0042 the next day, Wednesday, September 21, but was halted at 0130 when an oil sheen was seen 150 yards off the Vessel’s starboard bow. At 0730, operations began again, but at 0744, an oil sheen was discovered at the port quarter of the Vessel near the Pier, so operations were stopped by 0748.
Phillips 66 then commenced its Oil Spill Response Plan, which included the placement of a boom encircling the Vessel. The USCG began its investigation by 0900, and the OSPR-CDFW was on site by 1000 and reported seeing a brownish emulsion, or oil mousse, on the water’s surface. The Chicksan was disconnected and hydro tested, however, no leaks were found.
Over the next four days, multiple inspections were conducted, samples taken, and equipment tested on the Vessel. Underwater inspections of the Vessel’s hull were completed. The cargo seachest was confirmed to be safely sealed with no signs of disturbance, as were the pump and engine rooms. The bilges were inspected and reported to be clean. Interviews of the crew were conducted by the USCG, and a MARPOLI examination was completed. No signs of leakage or oil contamination were found.
The Terminal was also scrutinized for potential leaks. The cargo lines were hydro tested again, and no evidence of leaks, drips, or stains were found on the Chicksan or loading arm. The area around the Terminal was examined, and no oil was found on the surrounding dikes, roads, or tracks. No cargo loss was identified from the Rodeo Refinery.
Blooms of Oil Bubbles
September 24, 1718, discharging began again, and soon an oil sheen was sighted off the Vessel’s port quarter. As bubbles rose to the water’s surface and popped, witnesses observed blooms of oil sheen spread across the water. By 1734 discharge was halted, and the IGS scrubber discharge examined. No evidence was found of leakage, however, by 1900, the Captain noted that the sheen appeared to increase within the boom area even after all operations had ceased. Bubbles of oil continued to be present until 2030.
On September 26, with USCG, two California oil spill agencies, and Phillips 66 officials present, thorough inspections and tests of the cargo and engine room equipment to be used during discharge were conducted. The waters surrounding the vessel remained clear. The USCG determined that “all possibilities of oil coming from the vessel were ruled out” and approved cargo operations to recommence during daylight hours.
The discharge restarted that evening and ran for 80 minutes with no issues. Water was observed bubbling up at the stern portside, however, it was attributed to the IGS. The next day, Tuesday, September 27, discharge began again and finished by early afternoon. The Vessel sailed by early evening.
Contentions of Each Party
Each party contended that the other was the source of the oil leak. Arbitration was sought to establish responsibility for the leak and recover the expenses associated with the oil spill responses, investigations, and legal fees.
The parties, in cooperation with the USCG and state agencies, conducted extensive investigations and testing to determine whether the source of the leak was the Terminal or Vessel.
The investigations and witnesses for Phillips 66 all concluded that the Rodeo Refinery could not have been the source of the oil leak.
The investigations and witnesses for Yamuna Spirit LLC, Teekay Chartering Ltd and Teekay Marine (Singapore) all concluded that the Vessel could not have been the source of the oil leak.
Both parties commissioned formal reports on the incident, which concluded the source of the oil leaks could not be determined; However each report speculated the cause lay with the opposing party. Multiple outside reports, including that from the USCG, stated the source of the oil could not be determined. Expert witnesses were brought in, however, their opinions formed speculation on the oil spill origins rather than definitive evidence of the originating source of the oil.
The Panel noted that both parties exhibited extraordinary efforts to demonstrate that they and their equipment were not the sources of the oil and oil sheens on the water.
In this undertaking, each party strove to exempt itself from responsibility and attempted to advance the claim that the leak was the fault and hence the responsibility of the other. Extensive exhibits, submissions, reports, and testimony supported their respective contentions.
The Panel also noted that the dollar amount of the claims typically did not warrant such vigorous efforts and submissions and concluded that this arbitration was sought more to protect the parties’ reputations and oil spill avoidance records.
Both parties earnestly sought to determine the source of the oil when discovered and mitigate further contamination. The extensive inspections and testing, detailed reports, and testimony proved that the parties conducted rigorous investigations to try to identify the source of the oil.
The inability to definitively identify the source was also reflected in outside investigations by the USGC and other agencies, as well as a review of the facts by expert witnesses.
After careful consideration the Panel concluded that neither party had proven by a preponderance of evidence that the other party’s equipment was the source of the oil. The Panel denied each party’s claims and ordered each to bear the costs of their own attorney fees and expenses.