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Utility will get millions from oil companies

Susan Wood, Tahoe Daily Tribune

Wrapping up a landmark 5-year struggle, a San Francisco court approved Monday a settlement that oil companies will pay the South Lake Tahoe Public Utility District $28 million for polluting Tahoe groundwater supplies with MTBE.

Shell Oil, Shell Products, Texaco Inc. and Equilon Enterprises LLC comprised the remaining defendants in a high-profile legal fight that debated, in national headlines, the fuel additive’s validity.

“Several times we wondered if we should go forward. But I still believe in right makes might,” STPUD board member Mary Lou Mosbacher said.



The trial, the subject of months of closed-board sessions to review legal strategy, started almost a year ago.

In April, a jury ruled in favor of the district’s holding the oil refiners and gas stations liable for making and selling gas with MTBE. Monday’s settlement nullified a contempt of court claim by Shell that the district violated a gag order Judge Carlos Bea placed on the penalty phase.



The district, which filed suit in November 1998, was forced to shut down 13 of its 34 wells. It has used emergency backup supplies to meet the demand.

Methyl tertiary butyl ether was intended to help some regions meet federal clean-air standards. But the U.S. Environmental Protection Agency-deemed carcinogenic is anticipated to cost the district an estimated $45 million to clean up the groundwater supply.

“From the onset, our position has been ‘we didn’t put the stuff in the ground and our ratepayers shouldn’t have to shoulder the problem,'” district spokesman Dennis Cocking said.

Chief Financial Officer Rhonda McFarlane said the district — which serves 14,000 homes and businesses — has spent roughly $9.3 million in early cleanup efforts, staff time and litigation fees. The attorneys will receive 30 percent of the settlement amounts earmarked to go into a separate account.

Since July 1999, 16 settlements — including Monday’s — have totaled $69 million. Exxon and Chevron represent a few of the largest, adding up to $22 million. The most recent amounting to $300,000 involves Tahoe Tom’s, a South Shore filling station.

Lyondell Chemical Co., once a leading producer of MTBE, agreed to pay $4 million to settle the case two weeks ago.

Lyondell spokesman David Harpole said the company believed that settling served the “best interests of the shareholders.”

Harpole still believes in the product, which he added was “unfairly maligned by outside interests.”

“When the product is used properly, it’s a safe product,” he said.

Frank Maisano, who spoke on behalf of MTBE manufacturers for the Oxygenated Fuels Association, said the case was “quite overblown.”

“The state benefited from tremendous air emissions reductions,” he said.

MTBE advocates such as lobbyists for the petroleum industry contend the problem lies in whether leaking underground storage tanks are monitored, not in the effectiveness of the product.

Shell Oil has joined Unocal in beating California Gov. Gray Davis’ mandate to phase out MTBE statewide by 2003. The additive was banned at Lake Tahoe in 2000.

The settlement means no admission of guilt by the oil companies, Shell Oil spokesman Cameron Smyth said from the western regional offices in Burbank.

“It was now the appropriate time to settle,” Smyth said.

Now, the district board expects to take at least a few months in monthly meetings to outline a plan that will encapsulate cleanup efforts and evaluation of the system.

The drawn-out nature of the case prompted district board Chairman Duane Wallace to declare STPUD representatives as “now qualified to go to law school.”

“We’re thrilled it came out the way it has. We achieved the goals we set out to do,” Wallace said.

Board and staff — including General Manager Bob Baer — gathered Monday afternoon at district offices to thank its attorneys, the jury, representatives with the city of South Lake Tahoe and El Dorado County as well as the community for their show of support.


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