Oil Giants to Settle Water Suit

Some of the nation’s largest oil companies have agreed to pay about $423 million in cash to settle a lawsuit brought by more than a hundred public water providers, claiming water contamination from a popular gasoline additive.

In the lawsuit, the plaintiffs, which include 153 public water systems in New York,California and 15 other states, claimed that the additive, a chemical called methyl tertiary butyl ether, or M.T.B.E., was a defective product that led to widespread contamination of groundwater. The suit contended that the chemical was used by oil companies, even though they knew of the environmental and health risks that it posed.

Low levels of M.T.B.E. can make drinking water supplies unpalatable because of its “offensive taste and odor,” according to the Environmental Protection Agency. The agency has also found that the compound caused cancer in laboratory rats that were exposed to high doses.

Since the mid-1990s, hundreds of lawsuits have been brought against oil companies for their use of the chemical. This deal, if approved, would be the largest settlement to date.

M.T.B.E. has been used since 1979 to increase octane levels in gasoline, but its use became more widespread after the 1990 Clean Air Act mandated the use of an oxygenate in certain cities to reduce smog and other pollutants.

When mixed with gasoline, the additive ensured that the fuel burned more thoroughly, thereby reducing air pollution.

But after being widely adopted, it was found to corrupt groundwater. Even in small amounts, the additive makes water smell and taste like turpentine.

The use of M.T.B.E. is now banned in 23 states, including New York and California.

In 2005, some 130,000 barrels of M.T.B.E. were produced a day, representing about 1 percent of the nation’s gasoline supplies. Oil companies stopped using it in 2006.

The oil industry has fought hard to avoid penalties related to its use of the additive, arguing that it should not be forced to pay for the cleanup of a product that it was mandated to use. Estimates of the cost of a total cleanup of M.T.B.E. have run to the tens of billions of dollars.

In 2003, the Republican-dominated Congress tried to pass a provision that would have shielded M.T.B.E. manufacturers from litigation, but failed because of strong opposition in the Senate. A second attempt to add a lawsuit shield also failed during discussion of the 2005 energy bill.

“No court has ruled that gasoline with M.T.B.E. is a defective product,” said Rick Wallace, a lawyer at Wallace King Domike & Reiskin in Washington, who represents Chevron and Shell. “This settlement does not concede the point. Quite the contrary, the settling companies are prepared to vigorously defend the product.”

The high risk of lawsuits related to M.T.B.E. has prompted the oil industry to stop using it and look for another gasoline additive. That eventually led to the development and use of ethanol as an oxygenate replacement.

Peter J. Sacripanti, a lawyer representing Exxon at McDermott Will & Emery, said that Exxon did not plan to settle and would “vigorously defend” itself.

“Exxon’s position is very simple,” he said. “When it engages in conduct that injures people, it pays recompense for that. In all these cases, our conduct did not cause injury, or cause damages. Our conduct was lawful.”

The suit, first filed in 2003 by public water providers in several states, was eventually consolidated into a single federal case.

The pending case will go to trial in September in New York.

Robert J. Gordon, of Weitz & Luxenberg in New York, also represented the plaintiffs.

Related

Gas Prices Expected to Peak in June (May 7, 2008)

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