Chevron, 11 Oil Firms Pay $423 Million in MTBE Suits

Business Materials 9 May 2008 07:22 (UTC +04:00)

Chevron Corp, BP Plc and about 10 other oil companies tentatively agreed to pay $423 million to settle lawsuits in 17 states over contamination claims involving the gasoline additive MTBE, once used to reduce air pollution, Bloomberg reported.

Estimates of the cost to treat MTBE contaminated water in the U.S. have reached $30 billion. Wells and aquifers were poisoned when the burned additive, methyl tertiary butyl ether, returned to the ground in rainwater. The plaintiffs said the firms hid data showing MTBE causes ``massive'' contamination.

``The settlement is the product of long, hard-fought litigation,'' said Rick Wallace, a lawyer for Chevron, Shell and their units.

The settlement was filed yesterday with U.S. District Judge Shira Scheindlin in New York, who is presiding over the settled lawsuits filed by 153 municipalities. The six oil companies and refineries that didn't settle include Exxon Mobil Corp., the world's biggest publicly traded oil company, according to Robert Gordon, a lawyer for the plaintiffs. In 2005, Scheindlin rejected a bid by the companies to dismiss the suits.

``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.

MTBE, which reduces pollution by making gasoline burn more completely in a car's engine, has been banned in many states. Gordon said the municipalities ``will use the money to continue to treat water so that it is safe and pure.''

He added that the municipalities have already covered a portion of the cleanup cost. As part of the settlement, the oil companies will fund a 30-year water treatment program for sites with excessive contamination.

``We think it's an excellent settlement,'' Gordon said. ``It provides not only cash, but peace of mind.''

The settled cases were brought by water providers in 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's second-largest oil company.

The portion of the total settlement that each company will pay was negotiated among the defendants and isn't included in the 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,'' company spokesman Bill Day said in an e-mailed statement. ``The settlement agreement is being reviewed by the court and is not yet final.''

ConocoPhillips spokesman Bill Tanner said ``there are still other issues that are outstanding,'' declining further comment.

Chevron spokeswoman Stephanie Price said the settlement is a ``responsible resolution.''

The accord is ``not an admission that MTBE is a defective product,'' BP spokeswoman Valerie Corr said, adding that the breakdown of payments by the companies is confidential.

Sunoco spokesman Thomas Golembeski didn't return a call seeking comment.

Forty of the lawsuits named Marathon as a defendant, said company spokeswoman Linda Casey.

``We consider our portion of the settlement to be minor,'' Casey said, without specifying the amount Marathon is to pay under the accord. ``It's not material to the company.''

A few cases remain pending against the settling companies, Gordon said. Lawsuits are also pending against non-settling defendants, including Lyondell Chemical Co. New York City has sued some of the oil companies as well.

``Lyondell has consistently maintained that it should have no liability in these cases,'' spokesman David Harpole said in a statement. ``We expect to prevail should this suit continue.''

Tony Cudmore, an Exxon spokesman, declined to comment.

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