Oil Firms Close to Accord on Cleanup

Oil companies will spend tens of millions of dollars to remove the gasoline additive MTBE from Santa Monica’s water wells under a legal settlement scheduled to be finalized by the city today.

The pact will bring about the end of a long legal drama between the city and gasoline-related companies that allegedly tainted its groundwater supply. The case has been closely watched nationally by other municipalities with MTBE contamination.

Two mammoth oil companies, Exxon Mobil Corp. and a subsidiary of ChevronTexaco Corp., agreed to a settlement last year. But Shell Oil Co., which Santa Monica alleged was most responsible for the MTBE pollution, held out until recently.

All three, along with gas producer Unocal and several smaller companies, have now agreed to settlements with Santa Monica. They will pay to build and operate a treatment facility to clean up the city’s groundwater -- a process that is expected to take years and cost the companies as much as $400 million, including payments to the city for reimbursement of its costs, according to some of the parties that negotiated the deal.

The settlement is scheduled to be formally approved by the Santa Monica City Council this morning. It has tentatively been approved by negotiators for the city, the oil companies, and the regulators overseeing the cleanup, the U.S. Environmental Protection Agency and the Los Angeles Regional Water Quality Control Board. A judge is scheduled to sign off on it next week.

“The significance of this is that the work is actually going to get done now,” said Wayne Nastri, the EPA’s regional administrator for California, Hawaii and most of the Southwest. The EPA helped mediate the settlement talks -- and warned the companies that it might take punitive action against them if they did not agree to terms, he said.

“There was a lot of concern last year when the city had settled with ChevronTexaco and Exxon Mobil” but not Shell, he said. “Each firm thought it should not contribute as much. There could have been additional lawsuits and constant delays. But we were able to bring Shell and Unocal in, and convince everyone that this was in the best interest of everyone.”

MTBE contamination forced the closing of most of Santa Monica’s water wells in 1996, requiring the city to buy additional water to meet its needs. Oil companies have since been footing the bill for the water purchases, which have cost them more than $3 million a year.

A Shell spokesman declined to discuss the settlement Thursday. Santa Monica officials also declined to discuss details of the settlement before the vote.

California regulators widely added MTBE to the state’s gasoline supplies during the early 1990s because it reduced air pollution. But the additive was found to pose health dangers of its own.

Energy legislation making its way through the Republican-controlled Congress would limit the legal liability of companies responsible for MTBE contamination. The measure, which is opposed by Democrats, may curtail existing cleanup claims.