By Carolyn Sackariason
Daily Press Staff Writer

CITY HALL — It will likely be 15 years after the city’s drinking water was contaminated that Santa Monicans will be able to tap into their own wells again.

That’s because a bitter legal battle and complicated water treatment design process appear to be at an impasse between City Hall and the lawyers representing three major oil companies, which have admitted to allowing methyl tertiary-butyl ether (MTBE), a gasoline additive, to seep into the groundwater, thus contaminating the city’s drinking water wells in 1996.

In a landmark settlement in 2003, Shell, ChevronTexaco and ExxonMobil agreed to pay City Hall more than $120 million for their role in the water contamination. The oil companies also agreed to pay for the design, construction and maintenance of a water-treatment plant at Arcadia Wells, a source of city water located in West Los Angeles.

The wells were originally set to be cleaned up by 2008. But now it appears it will be at least 2011 before Santa Monicans will have clean drinking water from the city’s own supply, said Craig Perkins, City Hall’s environmental and public works director.

“We’re at least five years away,” he said. “Everything is moving much more slowly than we would like.”

City officials and attorneys representing the oil companies are finding little middle ground in agreeing on what method should be used to clean up the water wells and where the treatment plant should be located. All decisions must be made with a consensus from both sides, Perkins said.

That’s proving difficult since the oil companies’ attorneys are engaged in a bitter legal battle with City Hall over how much the contingency lawyers are entitled to in fees from the settlement. At issue is just how much City Hall owes its team of contingency lawyers for securing a $121 million cash settlement, plus the value of a water treatment facility that eventually will clean up the water wells.

It most likely will come down to how a judge and jury interpret a 15-page complicated legal services agreement signed between City Hall and the contingency lawyers that is as ambiguous as the sliding scale of fee percentages outlined in it.

But after years of litigation and millions of dollars spent, the case has stalled. After losing numerous motions at the Superior Court level, City Hall has filed an appeal for a motion to compel arbitration with the California Court of Appeals, which has effectively stayed the case.

The motion was originally denied by Los Angeles Superior Court Judge David Minning and was based on the argument that because City Hall had terminated one of the law firms included in the original legal services agreement, the fee structure outlined in it isn’t applicable.

Santa Monica-based attorney Roland Tellis, who is representing the law firms of Texas-based Baron & Budd, Sacramento-based Miller & Sawyer and San Francisco-based Sher & Leff — the three law firms that worked on the MTBE case for City Hall — believes the appeal is just a stalling tactic so city attorneys can regroup.

“We believe that because they came off the heels of six or seven losses, they filed a motion to compel arbitration and then appealed the judge’s decision so it’s an automatic stay,” Tellis said.

The trial was supposed to begin this past February, but it looks like it won’t be heard until the beginning of next year — if City Hall’s appeal is denied. A hearing before the Court of Appeals could be scheduled this fall with a ruling expected by the end of the year.

“We believe that we can get this case back on track by early next spring,” Tellis said.

Meanwhile, the design of the water treatment facility is moving equally slowly.

Perkins said an engineering committee comprised of city officials, consultants and engineers — hired by both City Hall and the oil companies — is considering different methods to clean up Santa Monica’s drinking water. But City Hall and the oil companies are disagreeing on several issues, including where the plant will be built and what type of facility it should be, Perkins said.

That matters a great deal to both sides because the contingency lawyers are entitled to a percentage of the value of whatever type of plant is built.

City Hall argues it should pay the attorneys on the value of the plant. The attorneys argue they should be paid on the cost and operation of the plant, which could be significantly higher than its value.

The treatment plant will become obsolete after Santa Monica’s water is cleaned up and therefore worth nothing monetarily, city officials argue.

“We think we want a better handle on how we treat (the water),” Perkins said. “I think if we had to do it all over again, the city would control it itself.”

But Tellis said city officials have created a conflict of interest for the public because they want the best technology to clean the water, which could increase the value of the plant and therefore increase the amount of money City Hall would have to pay the contingency lawyers.

“In dealing with the oil companies, they want a Volkswagen when it’s about the value of the plant, but they want a Bentley when it comes to the method (of cleaning the water),” Tellis said.

He added that the value of the plant and a treatment method already has been established. A panel that includes a host of experts, including Rhodes Trussell, a Pasadena-based hydrology engineer, has appraised the value of the plant at $135 million.

Tellis said Judge Minning ruled that the appraisal cannot be confirmed while the case is stayed.

“I find it hard to believe that they haven’t agreed or haven’t come up with a method,” he said. “As long as the case is stayed, they need to take the position that these costs are unknown and what the method to cleaning the water is because they realize that they have to walk the line and take the same position in both proceedings.”

But Perkins counters that the contingency fee dispute has little effect on the water treatment design process.

“It’s not a major impact ... it diverts some attention, but it’s sort of a sideshow at this point,” he said.

Perkins expects that once the method is selected, a small scale pilot treatment plant will built by the end of this year and will run for six to 12 months. The design and building of the large treatment facility will be bid out and will take three years to build.

Because the legal services agreement between City Hall and the law firms is vague and ambiguous regarding a non-cash recovery, it’s open for interpretation on whether or not the lawyers should be paid on the value of the plant or the cost of building and operating it.