In a case reminiscent of the Hollywood Erin Brockovich, about a dozen of the largest oil companies in the US have agreed to pay $423 million in cash to settle litigation with 153 public water providers in 17 states for groundwater contaminated by the gasoline additive MTBE, an abbreviation for the oil-refining byproduct methyl tertiary butyl ether.

The companies in the settlement include: BP America Inc, a unit  of BP PLC, Chevron  Corp, ConocoPhillips, Shell Oil Co, an arm of  Royal Dutch Shell PLC, arathon Oil Corp, Citgo Petroleum  Corp, Sunoco Inc and Valero Energy Corp. Of the six companies who refused to settle were: Exxon Mobil  Corp and Lyondell Petrochemical Corp LYO.N, the maker of MTBE.

The current settlement can be compared to the $333 million awarded in a lawsuit in 1996 when legal clerk Erin Brockovich-Ellis was instrumental in constructing a case against California's $28-billion Pacific Gas and Electric Company (PG&E) for contaminating drinking water with hexavalent chromium. This landmark case was immortalised in the Julia Roberts-starrer Erin Brockovich for which the actress won an Academy.

The offending companies also agreed to pay clean-up costs that arise in the next 30 years in the terms submitted for court approval in the US District Court in the Southern District of New York.

The Environmental Protection Agency calls MTBE a "known animal carcinogen" and a "possible human carcinogen." The agency has found that the compound caused cancer in laboratory rats that were exposed to high doses. It has been detected in at least 36 states and has been banned in 23, including California and New York, which accounted for 40 per cent of total MTBE consumption in the U.S. The settlement doesn't shield defendants from liability in the event MTBE is shown in the future to carry human health risks.

The companies in the settlement include BP America Inc, a unit of BP PLC, Chevron Corp, ConocoPhillips, Shell Oil Co, an arm of Royal Dutch Shell PLC, Marathon Oil Corp, Citgo Petroleum Corp, Sunoco Inc and Valero Energy Corp. Of the six companies who refused to settle were Exxon Mobil Corp and Lyondell Petrochemical Corp LYO.N, the maker of MTBE. The individual contributions to the pool of $423 million have not been disclosed.

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 local water providers will be compensated according to a formula based on MTBE levels and the size of wells. If MTBE is found to surpass the specified threshold at a given site during the next 30 years, defendants will pay 70 per cent of the water-treatment cost for 10 years from the point of detection. Payments will end if the affected area is deemed MTBE-free for one year. At the end of the 10-year period, payments can be extended five more years if the water source still shows a certain level of contamination.

The oil majors had been adding MTBE to gasoline in an effort to curb smog emissions for about 30 years before being opposed by the concerted action by water providers. The 2003 lawsuit by public water providers in 17 states was consolidated into a single federal case. In 2005, some 130,000 barrels of M.T.B.E. were produced a day, representing about one per cent of the nation's gasoline supplies. Oil companies stopped using it in 2006, and replaced it with ethanol as an oxygenate.

MTBE has been used 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. During the deliberation of the lawsuit, the oil companies had argued that since the government earlier had approved the use of MTBE, they should not be made to pay for its negative side effects.

In 2003, the Republican-dominated Congress tried to pass a provision that would have shielded MTBE 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.

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