Oil majors agree to pay $423 million compensation for groundwater contamination

09 May 2008

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."