Lawsuit Claims Oil Companies Were Negligent With Ethanol

(MoneyWatch)  Should major energy companies have to pay the penalties for hastily-made government policy? Class action lawyers around the country are likely hoping the answer is 'yes', while watching a lawsuit in Fort Lauderdale, Florida to see if its strategy might pay off.

The lawsuit alleges that six oil companies, BP, Chevron, ConocoPhillips, Exxon, Shell Oil and Tower Energy, are responsible for damaging the engines of boats by selling their owners blended fuel containing ethanol. Boat fuel tanks are often made from fiberglass to prevent corrosion, but ironically, that's exactly what ethanol additives do to the material. More at Convenience Store News, via R-squared Energy Blog.

The original complaint also alleged that the oil companies intentionally failed to disclose ethanol's harmfulness to fiberglass, but the judge nixed that charge. So if the lawyer involved can't prove in court that the oil companies knew what they were doing -- and it doesn't sound like the judge believes in conspiracy theories -- he'll have to argue that the companies should have known, and are therefore liable.

Since I don't have any financial interest in suing oil companies, I think it's worth spending a moment speculating on who's really at fault. Is it the fuel sellers? The state passed a law requiring ethanol to be mixed in; the oil companies fought the law; they lost and began mixing ethanol and selling it. Nobody's foresight is 20/20, and I believe it's fair to assume that if it were, they would have posted warnings about the fuel in marinas.

The real problem is that the ethanol changes happened relatively quickly, so the kinks weren't all worked out of the system first. The Florida boat owners just helped discover one of those kinks. To paraphrase a somewhat rude saying, stuff happens.

Nevertheless, the case might win the plaintiffs a whopping amount of money, and you can be sure that if it does, lawyers around the country will sit up any take notice. Ethanol in Florida won't be the last problem, either. In fact, less than two weeks ago, freezing biodiesel in school buses caused school to stop for a day in a Minnesota town. That occurence will fuel a public policy debate, not a lawsuit, but it's not hard to imagine how it could have been different -- if, say, the biodiesel had frozen in someone's VW, leaving them stranded in deathly cold on a rural road.

Politicians have spent a lot of time lately talking up the renewable energy revolution's ability to create jobs. They just didn't know they were talking about lawyers, too.