Settlement is city’s first break in MTBE lawsuit
Two of the largest oil companies accused of contaminating Santa Monica’s wells with a gasoline additive that is a suspected carcinogen have reached a tentative settlement with the city.
Both Chevron Texaco and Exxon Mobil have agreed to pay the full cost to design, construct, operate and maintain a water treatment facility that is estimated to cost hundreds of millions of dollars. The oil companies also will provide an undisclosed amount of cash to cover costs associated with the contamination.
In return, the city has agreed to release the two companies from its MTBE lawsuit. The suit was filed in June 2000 against 18 manufacturers, suppliers, refiners, owners and operators of pipelines and other gasoline facilities for allowing the additive to leak into its ground water. Methyl tertiary-Butyl Ether is a colorless chemical that at very low concentrations smells like turpentine and poses a serious public health risk.
City council members voted 5-0 at about 9:30 p.m. Wednesday behind closed doors in a special meeting to specifically approve the agreement. The meeting was called quickly after city attorneys learned the boards of directors of the two oil companies had agreed to the settlement’s conditions. Mayor Pro Tem Kevin McKeown and Councilman Robert Holbrook were not present at the meeting.
“These companies have stepped forward and acted with integrity and they have a chance to recoup some of their money,” said Joe Lawrence, the city’s lead attorney on the MTBE case. “The city is very upbeat about the settlement. This is a significant breakthrough for us.”
The terms of the settlement must be approved by Orange County Superior Court Judge Stephen J. Sundvold, who has been assigned to the case. Attorneys for both sides believe a decision is likely to be made in the next four to six weeks.
Though the oil companies were successful in moving the trial to an Orange County court in an effort seek a neutral setting, the city has won every challenge to its lawsuit. The settlement marks the first time oil companies have come to terms with the city’s demands for complete restitution.
The city will continue its litigation against the others named in the lawsuit, including Shell Oil Co., which city officials hold most responsible for contaminating the city’s drinking water supply.
However, if Shell is not found liable for the pollution, the settlement provides the city with a safety net, ensuring the wells will be cleaned up. The two oil companies named in the settlement could sue Shell to recoup their costs from the remediation.
“This agreement basically provides us with a guarantee that the cost of cleaning up the water is going to be taken care of,” said Councilman Ken Genser. “We think Shell should have to pay for that, but if for some reason it doesn’t, these other two have guaranteed the cost of clean-up to a very strict standard.”
“This agreement basically provides us with a guarantee that the cost of cleaning up the water is going to be taken care of” — — KEN GENSER Santa Monica City Councilman
Even though Chevron acknowledges it has reached a settlement, the company continues to deny any responsibility for the pollution.
“It is our strong belief that our facilities have in no way contributed to the contamination, which exists in the well field today,” said Chevron spokesman Rod Spackman. “However, by solving this problem now and assigning responsibility later, financial and manpower resources can be best used in developing an effective solution to the city’s water needs instead of expensive and counterproduc-tive litigation.”
“It is our strong belief that our facilities have in no way contributed to the contamination, which exists in the well field today.” — — ROD SPACKMAN Chevron spokesman
Shell couldn’t be reached for comment by press time.
The oil companies have been pointing fingers at each other, denying responsibility and blaming other companies named in the lawsuit, city officials said. Until now, the infighting had all but prevented any company from settling with the city.
City officials would not speculate if the settlement would place pressure on the remaining parties in the MTBE lawsuit to find an agreement with the city outside of court.
“You would think it would,” Lawrence said. “And you would think the other companies would recognize it is not in their best interest to continue with the litigation, but who knows what they are going to do.”
The pollution closed seven of Santa Monica’s 11 wells six years ago, forcing the city to import nearly 80 percent of the 12 million gallons of water it uses each day.
When the wells were first closed, early tests found water from the Charnock well fields contained more than 600 parts per billion of MTBE. The state determined that water must contain less than 5 parts per billion before it is safe to drink.
City officials detected the additive almost immediately in its water supply. It is unknown whether there are long-term effects from being exposed to the chemical.
Because of the high levels of contamination and amount of water located there, the Charnock wells, which hold five of the city’s seven drinking water sources, will require a massive treatment facility before it is reopened. Cleaning up the city’s wells and building a water treatment facility has been estimated to cost several hundred million dollars.
Six months ago, Santa Monica opened a water treatment facility for the Arcadia wells, which hold the other two MTBE contaminated wells.
Currently, the city treats water drawn from the Arcadia wells with granularly activated carbon. The water is run through a huge filter made of carbon, which absorbs the MTBE.
However, the carbon filter won’t completely clean the Charnock water. The city plans to use the carbon process in addition to an advanced oxidation process to clean the water.
The oxidation process involves adding hydrogen peroxide to the water and then using high intensity ultraviolet light to cause a chemical reaction that burns off the MTBE.
Until the drinking water is cleaned, the oil companies pay $3.5 million per year to import drinking water to the city from the Metropolitan Water District in Los Angeles. Since 1997, Santa Monica has budgeted $2.2 million annually for the study, investigation and now treatment of the MTBE-contaminated wells at the Charnock and Arcadia wells, which are located in West Los Angeles.
Recently, oil companies lost similar MTBE cases across the country, including in South Tahoe, Calif. Those companies found liable have been ordered to pay millions of dollars in damages.
The state was scheduled to ban the gasoline additive, but California Gov. Gray Davis has delayed the action.
Originally published in the Santa Monica Daily Press print edition on July 19, 2002. Read the original PDF.