The City of Santa Monica has reached agreement with a consortium of oil companies that is designed to streamline construction of a new water treatment system necessitated by the contamination of the City’s drinking water by gasoline additives.
Shell, Chevron, and ExxonMobil, who were already obligated to pay for a water treatment facility under the terms of a 2003 settlement agreement, have agreed to pay the City the liquidated sum of $131 million rather than continue to foot the bill for design and construction costs. The City says this amount will allow it to construct a water treatment plant for water produced from the City’s Charnock Well Field, to pay for replacement water until the plant begins its operations and to maintain and monitor regional test wells and to perform other related tasks.
Since 1996, Santa Monica drinking water has been imported from the Metropolitan Water District at the expense of the oil companies after it was discovered that MtBE, an oxygenate designed to make gasoline burn cleaner, was present in the aquifer supplying the Charnock Well Field. In June 2000, the City sued the oil companies it believed to be responsible for the contamination and, in late 2003, settled that lawsuit for a cash payment of approximately $121 million and the oil companies’ agreement to fund a water treatment facility to restore the Charnock Well Field.
Under the settlement announced December 5, the City will now assume sole control of the design and construction of the system to remove MtBE and related petroleum compounds from Charnock water. Previously, the plant design and construction, although funded by the oil companies, had been jointly managed by the City and the companies. The new facility is tentatively scheduled to open in 2012.
“The City is pleased with the settlement. It means that the citizens of Santa Monica will regain control over one of our most precious resources,” said Richard Bloom, Mayor of Santa Monica. “The funding provided under this agreement is expected to be sufficient to ensure that the City can build a system that will restore the Charnock Well Field and provide clean water to Santa Monica residents at no cost to the City’s taxpayers, and adequate also to provide clean replacement water to City residents until the system is operational.”
Brad Boschetto, representative of Charnock Technical Advisory Group (CTAG), the oil company consortium that has been working with City staff on the facility, said, “We’re pleased to have worked with the City to reach an agreement that allows the City water independence far into the future, as well as full control over its own public works projects.” Both the City and the companies believe that their newly announced agreement will better serve their interests and allow for a more efficient resolution of the City’s clean-up needs.
Still unresolved is litigation between the City of Santa Monica and the lawyers it retained to bring the lawsuit against the oil companies in June 2000. Those lawyers – California and Texas attorneys – were never paid under their contingent fee agreement with the City, and they now claim 25 percent of both the $121 million cash settlement and the value of the water treatment facility. The City’s current settlement with the oil companies may have a bearing on determining that latter value. Santa Monica disputes both the applicable percentage fee and the settlement value to which a contingent percentage would be applied.
The attorneys’ fees lawsuit is presently on hold pending the outcome of the City’s appeal from the court’s denial of its motion to transfer the case from the superior court to arbitration. That appeal has been fully briefed and is awaiting oral argument.