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Lawsuit Filed By Chinese NGO Against ConocoPhillips And CNOOC

For the first time, a Chinese court has agreed to hear a lawsuit filed by a private public-interest group against two of the country’s energy giants, ConocoPhillips China and China National Offshore Oil Corp. (CNOOC), over oil spills in the country's waters four years ago.

On Jan. 1, China changed its Environmental Protection Law to allow such cases involving accusations of pollution by non-governmental organizations (NGOs) as long as they are registered and can demonstrate that they have been actively concerned with environmental issues for five years before their suits are filed.

The Maritime Court in Qingdao in northeastern China said the NGO, the China Biodiversity Conservation and Green Development Foundation, based in Beijing, filed the suit on July 7 regarding the spills in June and July 2011 in the Bohai Bay, a northwestern arm of the East China Sea.

Related: Pessimism Amongst Oil Traders Reaches 5 Year High

The oil emanated from an oil field owned by ConocoPhillips China, a subsidiary of ConocoPhillips of Houston, and Beijing-based CNOOC, the country’s leading producer of offshore gas and oil. The group is demanding that the two companies “immediately repair the damage in the Bohai Bay’s ecosystem” to its status before the oil spills.

The NGO isn’t seeking compensation for the spills from the two companies, but to publicly accept responsibility for the spills and begin a thorough cleanup.

ConocoPhillips and CNOOC already have paid about 1.7 billion yuan, or about $270 million, to the State Oceanic Administration (SOA), which governs maritime issues in China. The two companies also agreed with China’s Ministry of Agriculture to pay $160 million to settle claims related to the spill. ConocoPhillips also said it would help pay for social projects in Bohai Bay and reduce pollutants there.

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The 2011 spills in Bohai Bay began June 4 and persisted until July 12, polluting more than 6,200 square kilometers of water. The SOA said the disaster led to a drop in tourism and aquatic farming in the Hebai and Liaoning provinces, which border the bay. The oil was released by the Penglai 19-3 oil field, one of China’s largest, which produces about 160,000 barrels of oil per day.

The suit filed by the China Biodiversity Conservation and Green Development Foundation isn’t first to come before China’s courts from a private NGO. The Maritime Court in Dailan, in the province of Liaoning, is considering a similar case filed last month by the private, non-profit Dalian Environmental Protection Volunteer Association.

The Dailan group is demanding 645 million yuan, or about $105 million, for damage it says resulted from pollution caused by China National Petroleum Corp in July 2010.

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Private suits are nothing new in China, even if its courts are only now accepting cases filed by private NGOs. They're also not new for ConocoPhillips and CNOOC. In December 2014, for example, 21 Chinese companies sought damages from the two companies seeking more than 141 million yuan, or $22.7 million, to compensate for losses arising from a spill that affected their sea cucumber farms.

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By Andy Tully Of Oilprice.com

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