Report to Evaluate Safety of Shell Oil Pipeline : Officials in Torrance Say Results of Santa Monica Study Bear Watching

A study of the environmental effects of a pipeline that carries oil under Santa Monica streets has been ordered by the City Council in its continuing struggle with Shell Oil Co. over whether to renew a 40-year-old franchise to operate the pipeline.

The environmental report will evaluate the safety of the pipeline, which transports oil under 3.9 miles of city streets. When the report is completed, the city will conduct a public hearing. The council also decided to conduct a new study of the pipeline’s value.

The 89-mile pipeline, which was built in 1942, carries about 20,000 barrels of oil a day from Ventura to Shell’s Wilmington refinery. There have been ruptures in the past, including one near Paul Revere Junior High School in 1970.

City Atty. Robert M. Myers said that many residents may be unaware that the pipeline runs adjacent to residential areas, near storm drains and a reservoir. He said that the environmental impact process will give them a chance to state their views.

Review Warranted

“This is generally an older pipeline,” Mayor Christine E. Reed said. “It hasn’t had too many breaks. . . . But common sense would tell us that it’s probably deteriorating and the safety aspects need to be carefully reviewed.”

Edward Renwick, a lawyer representing Shell, said that he welcomes the environmental impact report and that the pipeline is safe. He said that crude oil is not volatile and that gas pipelines in many parts of the city pose a greater risk.

“This pipe has never caused environmental problems,” he said. “It’s not likely to cause problems in the future. The mere fact that a line is 40 years old doesn’t mean anything. The main thing is to examine the steel. The quality of the steel in that line is excellent.”

The dispute began in 1981 when Shell’s 40-year franchise to operate the pipeline expired. Shell and the city have been unable to come to terms on a new franchise.

Between 1965 and 1981, Shell paid about $1,000 a year to operate the pipeline. In 1981, after both the city and Shell conducted safety studies and appraisals of the pipeline, the city asked Shell to make safety improvements and pay the city $235,000 a year. Shell countered with an offer to pay roughly $10,000 a year.

In May, 1982, Shell filed a lawsuit against the city in U.S. District Court claiming that the Commerce Clause of the United States Constitution prevents Santa Monica from restricting Shell’s use of the pipeline. The clause says that only Congress may regulate interstate commerce.

Does Not Apply

Santa Monica contends that the Commerce Clause does not apply. The city says Shell is seeking the use of city land and that the city has the right to set the terms of the franchise.

The case is pending in federal court. In the meantime, Shell has operated the pipeline on an interim agreement, paying the city $10,000 a year.

Neither side appears willing to compromise, according to Councilman David G. Epstein, because both regard the dispute as precedent-setting. “Money is a potential area of compromise,” Epstein said. “What we will not compromise on is public safety.”

“I think that Shell was really getting away with paying the city not very much money for a long time,” Councilman James P. Conn said. “Everybody is saying this is . . . a financial concern . . . and an environmental concern to the city. If you are going to run that risk, Shell ought to pay for it and ought to pay a lot.”

Renwick said that Shell is concerned that if Santa Monica is allowed to charge $235,000, the rest of the cities along the pipeline will demand increases, making the pipeline uneconomical.

The council decided to commission the new assessment of the pipeline’s value from an appraiser specializing in pipelines. The appraisals conducted in 1981 by consultants for Shell and the city came up with widely disparate results. Santa Monica’s consultant concluded that the pipeline easement is worth $474,000 a year, while Shell’s consultant valued it at $10,000 to $12,000 a year.

Santa Monica’s consultant evaluated the easement in terms of the value of the land, while Shell’s consultant looked at the fees other cities charge for pipeline franchises, according to Myers.

Myers said that the city believes many safety precautions still need to be taken, but Renwick said the city does not have the power to impose the safety requirements.

“One of the principal concerns is the potential for a spill,” Myers said. “If there were a major spill in Santa Monica, it’s likely the oil could end up in the Pacific Ocean.”

Spill Called Likely

In the safety reports, the city’s consultant concluded that a spill is likely to occur within the city in the next 30 years and made several safety recommendations, including increased visual inspection of the pipeline and regular samplings of water in a nearby reservoir.

Shell’s consultant, on the other hand, concluded that the pipeline is safe but made several technical recommendations.

Myers said the results of the new environmental impact and pipeline value reports will help the city decide whether to renew the franchise. He noted that the City Council never took a formal position on whether to renew the franchise before Shell filed the lawsuit in 1982.

Myers said the City Council could still decide “unilaterally” not to renew, or simply set the terms for a new franchise. Shell could either accept the terms or take the pipeline somewhere else, Myers said.

The city’s power is at issue in the federal lawsuit.

Other cities and companies are keeping an eye on the dispute. With thousands of miles of pipelines running under city streets throughout the country, the results of the lawsuit could have far-reaching implications.

“If the law were ever established that a city could charge whatever it wanted . . . since cities have a monopoly on the streets, the practice of pipelining could be strangled,” Renwick said.

Torrance City Atty. Stanley Remelmeyer said that he could not think of a single city that would want Shell to prevail on the issue of whether a city has the right to levy franchise fees and charge what it believes is a reasonable amount for the use of city land.

Torrance, which has many more miles of pipeline than Santa Monica, settled a similar franchise dispute with Union Oil Co. last year.