Santa Monica : Shell to Pay $2.1 Million
Shell Oil Co. has agreed to pay the city $2.1 million to settle an eight-year legal dispute over franchise fees for an underground crude oil pipeline that runs through the city.
The settlement clears the way for a new franchise agreement. City Atty. Robert M. Myers is recommending an annual fee of $12,000 for a new 20-year franchise for the 3.9-mile-long pipeline. The City Council is scheduled to hold a public hearing on the proposed franchise Aug. 22.
The legal squabble began in 1981 when Shell’s 40-year franchise expired. City officials recommended a new annual fee of $237,000, based on the market value of the land that the pipeline traveled through.
Shell sued, contending that the fee was excessive and interfered with federal commerce. But the courts upheld the fee, and the U.S. Supreme Court refused to review the case.
Last year, Shell paid the city $1.7 million in back fees based on the new rate, but then filed a new suit to acquire an easement on the land the pipeline ran through and sought a trial to establish the value of the land. The city countersued for breach of contract.
The settlement agreement calls for both sides to drop all legal action.
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