Coffeyville Refinery Owner Goldman Sachs Feeling Heat as Kansas Oil Spill Rescuers Begin Showing Signs of IllnessJul 9, 2007 | Parker Waichman LLP
First responders to the Coffeyville, Kansas Oil Spill have begun to show signs of illness, prompting state officials to once again order residents of the oil-soaked town to leave the area. This is ominous news for investment giant Goldman Sachs, which plans to sell stock in Coffeyville Resources, the refinery responsible for last week’s massive spill. Goldman Sachs owns CVR Energy, Inc, the unit that manages the Coffeyville refinery. Already, a lawsuit has been filed against Coffeyville Resources, and many more are expected to follow.
This past weekend, Kansas officials halted the return of hundreds of Coffeyville residents who had been allowed to come back to assess the damage done to their homes in the wake of the flood and oil spill. Health officials had begun to see cases of skin rashes and diarrhea among rescue workers who have had prolonged exposure to the contaminated flood waters. Possible negative health consequences are always a concern during oil spills. Exposure to contaminated soil or water can affect the nervous system, blood and kidneys. There is evidence that workers in the petroleum industry have a higher chance of developing skin cancers and leukemia. For this reason, Kansas officials cordoned off Coffeyville until a more thorough assessment of the health dangers could be made.
Ramifications from the contaminated floodwaters could be felt as far away as Wall Street, where Goldman Sachs had planned to offer an initial public offering (IPO) of Coffeyville Resources stock in the coming months. According to a June 5 filing with the Securities and Exchange Commission, the investment banker planned to offer 21-percent of the company to the public in the hopes of raising $375 million. But because the success of an IPO hinges on the future prospects of a company, it is questionable whether that figure is realistic considering the staggering costs associated with the oil spill cleanup. There is also concern that lawsuits stemming from the spill will put further strain on Coffeyville Resources’ bottom line. Already, one oil spill lawsuit has been filed against the company, and it is not known how many more will follow. Although the company does have insurance to cover damages and liability up to $1.25 billion, the refinery would have to remain closed for more than 45 days for the policy to take effect. Coffeyville Resources has not yet calculated the costs of cleanup or potential liabilities, nor does it have a timeline for reopening the refinery.
The Kansas oil spill occurred on June 30 when Coffeyville Resources was attempting to shut down the refinery before it was inundated with flood waters. A pump apparently malfunctioned and allowed oil to continue flowing to the refinery’s main storage tank until it overflowed. The problem went unnoticed for some time, and allowed as much as 42,000 gallons of oil to escape. The town of Coffeyville, with a population of 11,000, has so far been hardest hit, although water supplies in several Kansas and Oklahoma communities might have been compromised.