Environmental
Jul. 30, 2002
Parties Make a Deal in Tahoe MTBE Case
SAN FRANCISCO - The handful of oil companies still defending their use of the controversial gas additive MTBE in a landmark jury trial are poised to settle the case, court records show.
After 10 months of trial and a jury verdict against them, the remaining defendants - Shell Oil Co., Shell Products Co., Equilon Enterprises LLC and Texaco Inc. - appear ready to settle claims they are responsible for MTBE that leaked into drinking wells near Lake Tahoe.
According to the San Francisco Superior Court's register of actions, the parties recorded a "judicially supervised confidential settlement" last Wednesday. No details about the settlement were announced. Attorneys from both sides of the case, and the companies they represent, declined to comment, citing a judge's gag order.
Jurors in the case had already declared gasoline with MTBE a defective product. In April they held the oil company defendants liable for making and selling gas with MTBE. The risk of using MTBE outweighs any benefit, the jury concluded, and the defendant companies didn't adequately warn their customers of the danger.
The jury had also found Tosco Corp. liable for selling a defective product. Tosco agreed in June to pay $3 million to settle the rest of the case.
Jurors were hearing evidence in the second phase of trial, to determine whether area gas stations are liable for trespass and nuisance claims. A third phase of the trial would address damages.
Jurors were sent home last week and told to return Aug. 5.
Also last week, defendant Lyondell Chemical Co., once a leading producer of MTBE, agreed to pay $4 million to settle the case. San Francisco Superior Court Judge Carlos Bea approved that settlement Thursday.
Technically, the settlement would not end the case, as one defendant, a small gas station, remains. But it would essentially end a marathon trial that experts considered a potential bellwether for industry liability.
Word of a settlement was welcomed by environmental plaintiffs lawyers, who said it might indicate an increased willingness by oil companies to fund the cleanup of sites contaminated by MTBE. Experts said the Tahoe jury's verdict was the first of its kind and may push companies to settle future claims.
"Settlement at this late stage of the game establishes that the manufacturers of MTBE and refiners of gas containing MTBE are finally beginning to acknowledge the dangers to the environment imposed by this chemical," said Celeste Evangelisti, a lawyer with Dallas' Baron & Budd who has handled several MTBE cases.
"Hopefully this is a sign that, in the future, these defendants will focus their attention on addressing contamination instead of fighting meritorious lawsuits."
Evangelisti was careful to say that she didn't know whether the companies had actually struck the deal. Several defense lawyers and representatives of oil industry groups declined to comment Friday.
The lawsuit originated in South Lake Tahoe, where MTBE leaked out of underground gas tanks and into public water wells. The utility district filed a lawsuit in San Francisco to recover cleanup costs from small gas stations, giant oil companies and one manufacturer of the chemical. South Tahoe Public Utility District v. Atlantic Richfield Co., 999128.
More than 30 defendants settled the suit for a total of about $44 million. That total doesn't include the unknown amount apparently agreed to by the oil companies last week. Settling companies have denied liability in court papers, saying the district never proved that their gasoline actually contaminated a Tahoe well.
The settlements come just days after Exxon Mobil and Chevron Texaco agreed to clean up MTBE contamination in drinking water wells in Santa Monica. The companies agreed to pay $30 million and fund the construction and operation of a water treatment facility there.
MTBE, or methyl tertiary-butyl ether, is a chemical added to gasoline to help it burn more cleanly. The chemical achieved widespread use after Congress passed the 1990 Clean Air Act, which requires companies to use specially formulated gas in certain areas. Two chemicals were proposed to help meet the standards: MTBE and ethanol. Most California refineries chose MTBE.
But the chemical caused problems. It was extremely soluble in water, and small amounts of it dispersed through groundwater and reached public drinking wells. The chemical changes the taste and smell of water, and plaintiffs claim the chemical makes water undrinkable. Some claim MTBE is a carcinogen, but at least two medical research groups have declined to list it as such.
Tyler Cunningham
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