The key question in this trial for punitive damages is: What was Aera Energy's corporate state of mind when it discovered its oilfield production waste water had polluted the groundwater beneath Starrh and Starrh Farms and decided to keep polluting?
Answering questions from Starrh's attorney Ralph Wegis, former Aera CEO Gene Voiland said oil and water simply don't mix in the oilpatch.
Starrh's attorney: You produce water with oil, right?
Starrh's attorney: About ten times as much water as oil?
Voiland: That's correct.
Starrh's attorney: And that's unfortunate because you have to deal with it, correct?
Voiland: Well, I can't sell it.
An oil company can't produce oil unless it has a place to store its production waste water. Voiland testified Tuesday that when he took the reins at Aera in 1997, he knew there was a storage capacity problem with oilfield waste water. He told the jury that after learning that Aera's waste water had seeped underground, entering Fred Starrh's groundwater in 1999, Aera still moved forward to ramp up its oil production in the Belridge field.
Starrh's attorney: What you did from the day you started operating Aera, you compounded the problem by drilling about 1000 new wells a year, didn't you?
Voiland: We drilled more wells and we produced more water.
Voiland testified that Aera had a critical business issue with its waste water as early as 1999 with the overriding goal of not allowing waste water storage constraints to impact Aera's profits and the production of oil. He also testified that more costly methods of disposal, such as injection wells, were shelved up until 2005.
"If you don't have to make an expenditure and the prices stay the same, inflation is less, it generally pays you not to make that expenditure," said Voiland.
Voiland told the jury he never considered the legal liabilities of polluting Fred Starrh's groundwater because the underground water basin on Kern's west side had always been considered unsuitable for crop irrigation.
"Water people had long-standing studies of the fact that the west side was a salt sink and it was not usable," said Voiland.
In a limited experiment in 2003, Fred Starrh had some success in blending the brackish groundwater with state aqueduct water, proving he could use his groundwater for certain crops.
The results of that experiment are being contested in court.
By that time, the pollution from Aera's waste water was expanding. Starrh sued Aera for trespass in 2004 and won - compensatory damages only, no punitive damages. That's what this case is all about.
When asked why he didn't just walk away with the seven million dollar verdict, Fred Starrh replied, "because the seven million dollars doesn't punish them."
Starrh attorney Ralph Wegis noted that while Aera decided to seek alternative storage methods in 2005, the company continued to those storage ponds that year.
Starrh's attorney: You were trying to achieve profit targets by continuing to use the ponds in 2005, weren't you?
Voiland: I didn't believe we were doing any harm and we continued to produce. So if you mean that I continued to produce and we made money from it, yes we did.
Ralph Wegis told the jury from 1999 through 2005, the time that Aera's waste water was impacting Fred Starrh's groundwater, Aera generated more than 1.1 billion dollars in profits but the waste water remains there and will never be remediated.
In a surprise move Wednesday morning, and with no discussion, Aera's attorneys elected not to call Gene Voiland to the witness stand.
The trial should last at least another week.