Santa Monica : Pipeline Agreement OKd

The Santa Monica City Council has approved a new $12,000-a-year, 20-year franchise agreement for Shell California Pipeline Co. for a 3.9-mile underground crude oil pipeline.

The agreement also calls for the oil company to increase its liability insurance on the pipeline from $5 million to $50 million.

The pipeline runs in a north-south direction essentially along 26th Street and Colverfield Boulevard.

The new franchise comes a month after Shell agreed to pay the city $2.1 million to settle an eight-year legal dispute over franchise fees. In 1981, after Shell's 40-year lease expired, the city raised the annual franchise fee to $237,000, based on the market value of the land above the pipeline.

The oil company sued, but a federal judge ruled that the fee was legitimate. The U.S. 9th Circuit Court of Appeals upheld the decision, and the U.S. Supreme Court refused to review the case.

Shell then filed suit to obtain an easement on the land and sought a trial to establish the value of the land. The city countersued for breach of contract.

Last month's $2.1-million settlement resulted in all lawsuits between Shell and the city being dropped.

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