Chevron, 11 Oil Companies to Pay $423 Million in MTBE Lawsuits

Bloomberg: Chevron, 11 Oil Companies to Pay $423 Million in MTBE Lawsuits 

By David Glovin

May 8 (Bloomberg) — Water suppliers in 17 states will collect $423 million fromChevron Corp., BP Plc and 10 other oil companies as part of a settlement of contamination claims involving the gasoline additive MTBE.

The suits claim the oil companies contaminated wells and underground aquifers across the country by adding methyl tertiary butyl ether, or MTBE, to gasoline as a way to reduce air pollution. They claim the oil companies hid information showing MTBE would cause “massive” contamination.

The settlement was filed yesterday with U.S. District Judge Shira Scheindlinin New York, who is presiding over the 59 settled lawsuits brought by 153 municipalities. The six oil companies and refineries that didn’t settle includeExxon Mobil Corp., the world’s biggest publicly traded oil company, according to Robert Gordon, a lawyer for the plaintiffs.

The municipalities “will use the money to continue to treat water so that it is safe and pure,” Gordon said in a phone interview.

MTBE reduces air pollution by making gasoline burn more completely in a car’s engine. MTBE discharged into the air contaminates groundwater through rainfall. The additive has been banned in many states.

Estimates of the cost to treat contaminated water in the U.S. have reached $30 billion. Gordon said municipalities have covered a portion of the cost. As part of the settlement, the oil companies will fund a 30-year water treatment program for sites with excessive contamination, he said.

`Peace of Mind’

“We think it’s an excellent settlement,” Gordon said. “It provides not only cash, but peace of mind going into the future.”

The settlement “was the result of arm’s length negotiations that took into account a variety of objective factors,” according to the 26-page agreement.

The settled cases were brought by water providers in 17 states, including New York, Connecticut, Pennsylvania, Virginia, New Jersey, Massachusetts, Florida, California and New Mexico. The settlement also includes 200 lawsuits brought by individuals in Wisconsin.

The settling companies include units of Royal Dutch Shell Plc, Europe’s biggest oil company, ConocoPhillips, the second- largest U.S. refiner, Marathon Oil Corp., the fourth-largest U.S. oil company, Valero Energy Corp. and Sunoco Inc. Chevron is the second-largest U.S. oil company. BP is Europe’ssecond- largest oil company.

`Hard-Fought Litigation’

“The settlement is the product of long, hard-fought litigation and lengthy negotiations,” Rick Wallace, a lawyer for Chevron, Shell and their units, said in a phone interview.

The portion of the total settlement that each company will pay was negotiated among the defendants and isn’t included in the settlement agreement, Wallace said.

“Valero has entered into a settlement agreement which resolves many of the lawsuits filed against Valero relating to the company’s prior use of MTBE in gasoline,” company spokesman Bill Day said yesterday in an e-mailed statement. “The settlement agreement is being reviewed by the court and is not yet final.”

ConocoPhillips spokesman Bill Tanner said, “A settlement is in the works. However, there are still other issues that are outstanding, that are still subject to litigation.” He declined to comment further.

“We worked hard to reach a responsible resolution to the cases being settled and are pleased to be moving forward,” Chevron spokeswoman Stephanie Price said in a phone interview.

BP spokeswoman Valerie Corr and Sunoco spokesman Thomas Golembeskididn’t immediately return requests for comment.

James Pardo and Peter Sacripanti, lawyers for the oil companies, didn’t immediately return calls.

`Not Material’

Forty of the lawsuits named Marathon as a defendant, said company spokeswoman Linda Casey. “We consider our portion of the settlement to be minor,” she said. “It’s not material to the company.”

A few cases remain pending against the settling companies, though most are now resolved, Gordon said. In addition, cases are pending against non-settling defendants, including Lyondell Chemical Co. New York City is also pursuing a case that hasn’t settled against the oil companies.

Tony Cudmore, media relations manager for Exxon, said in a mobile message that the company had no immediate comment.

Scheindlin denied a request by the oil companies to dismiss the suits in 2005.

“Innocent water providers — and ultimately innocent water users — should not be denied relief from the contamination of their water supply if defendants breached a duty to avoid an unreasonable risk of harm from their products,” Scheindlin said at the time.

The case is In Re: MTBE, 00-cv-1898, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: David Glovin in U.S. District Court in New York at [email protected].

Last Updated: May 8, 2008 00:01 EDT