Suncor (SU) Sued by Environmentalists for Air Pollution

Zacks Equity Research

June 6, 2024 at 8:00 a.m.·5 min read

Suncor Energy Inc. SU is facing a significant legal challenge as environmental groups filed a notice to sue the company under the U.S. Clean Air Act. The lawsuit, initiated by Earthjustice, a non-profit environmental law organization, accused Suncor of more than 1,000 air pollution violations at its Commerce City, CO, refinery. This legal action aims to hold Suncor accountable for its repeated offenses and seek civil penalties to prevent future violations.

Background of Suncor’s Violations

Suncor, based in Calgary, Canada, had been under scrutiny for its operations at the Commerce City refinery. This facility, which produces 98,000 barrels of oil per day, is the only refinery in Colorado and faced multiple issues in recent years, including a fire in December 2022 and numerous resident complaints about air quality. Between January 2019 and December 2023, SU reported more than 1,000 emission violations to the state of Colorado, highlighting a persistent problem.

Legal Framework: The Clean Air Act

Under the Clean Air Act, members of the public must provide a 60-day notice before filing a lawsuit against an entity for air pollution violations. This legal framework empowers citizens and organizations to take action when they believe environmental regulations are not being adequately enforced.

The act's provisions are crucial in enabling groups like Earthjustice and the Colorado Sierra Club to seek legal redress and push for stricter compliance measures.

Details of the Lawsuit

Scope of Violations: The lawsuit filed by Earthjustice alleged that Suncor had violated air pollution standards around 9,000 days, with each day potentially subject to a maximum penalty of $121,000. This significant number of violations highlighted the severity and ongoing nature of the refinery's non-compliance with environmental laws.

Penalties and Objectives: The primary objective of the lawsuit was to impose civil penalties on Suncor and enforce meaningful deterrents to ensure future compliance. According to Ian Coghill, a senior lawyer representing Earthjustice, previous actions taken by the state of Colorado had not resulted in substantial improvements in Suncor's operations. Therefore, the legal action aims to hold Suncor accountable and ensure a lasting change in its environmental practices.

Suncor's Response and Ongoing Efforts: Management of Suncor stated that they are working on implementing improvements to address the refinery's emissions. These efforts are part of a 2020 settlement with Colorado Department of Public Health & Environment. However, the persistent violations reported in subsequent years raised questions about the effectiveness and sufficiency of these measures. The company’s ongoing struggle to meet air quality standards continues to impact the surrounding community and environment.

The Impact on Commerce City Residents: Commerce City, located near Denver, had been significantly affected by the refinery's operations. Residents reported numerous air-quality issues, leading to concerns about public health and environmental safety. The community is directly exposed to harmful emissions due to its proximity to the refinery, which makes the legal actions and subsequent improvements crucial for their well-being.

Environmental and Legal Significance

Environmental Implications: The repeated violations by Suncor highlighted the broader issue of industrial pollution and its impact on local communities and ecosystems. Ensuring strict compliance with environmental regulations is important to protect air quality and public health. The case against Suncor served as a critical reminder of the need for vigilant enforcement of environmental laws and the potential consequences of non-compliance.

Legal Precedents: This lawsuit could set a significant precedent for future legal actions against other companies with similar violations. It demonstrated the power of environmental groups and citizens to hold corporations accountable through the legal system. Successful litigation against Suncor could encourage stricter regulatory oversight and more robust enforcement of environmental standards across the industry.

Conclusion

The impending lawsuit against SU by environmental groups marked a key moment in the fight for cleaner air and stricter adherence to environmental laws. As Suncor faced the consequences of its repeated violations, the case highlighted the importance of corporate accountability and the role of legal frameworks like the Clean Air Act in protecting public health and the environment. The outcome of this legal action will be closely watched, as it has the potential to drive significant changes in industrial practices and regulatory enforcement.

Zacks Rank and Key Picks

Currently, SU carries a Zacks Rank #3 (Hold).

Investors interested in the energy sector might look at some better-ranked stocks like Archrock, Inc. AROC and SM Energy Company SM, each sporting a Zacks Rank #1 (Strong Buy) and Sunoco LP SUN, carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is valued at $2.93 billion. The company currently pays a dividend of 66 cents per share, or 3.52%, on an annual basis.

AROC, together with its subsidiaries, works as an energy infrastructure company in the United States. The company operates under two segments — Contract Operations and Aftermarket Services.

Denver, CO-based SM Energyis valued at $5.35 billion. The company currently pays a dividend of 72 cents per share, or 1.55%, on an annual basis.

SM, an independent energy company, engages in the acquisition, exploration, development and production of oil, gas and natural gas liquids in the state of Texas.

Sunoco is valued at $5.11 billion. It is a major wholesale motor fuel distributor in the United States, distributing over 10 fuel brands through long-term contracts with more than 10,000 convenience stores, ensuring consistent cash flow.

SUN’s extensive distribution network across 40 states provides a robust and reliable source of income and the Brownsville terminal expansion will add to its revenue diversification.

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