Jury finds two oil giants deceived public on MTBE's hazards

In a landmark case, a San Francisco jury has found that gasoline with the additive MTBE is a defective product and that two major oil companies were aware of the chemical's dangers but withheld the information when they put it on the market. The Superior Court jury made its finding in a product liability case brought by the South Tahoe Public Utility District over contamination of the district's groundwater. The district sued in 1998 after MTBE pollution forced it to close a third of its drinking water wells.
In its verdict, the jury said Shell Oil, Lyondell Chemical (formerly Atlantic Richfield Chemical) and Tosco (now part of Phillips Petroleum) had placed a defective product on the market when they began selling gasoline with MTBE, or methyl tertiary butyl ether.
The jury also found that Shell and Lyondell acted with malice when they withheld information about the chemical. Lawyers for the South Lake Tahoe district had presented evidence that the companies promoted MTBE even though they knew it could contaminate water supplies.

The verdict, the first of its kind, came after seven weeks of deliberation in a five-month trial. Dozens of such cases are pending against the nation's largest oil companies that could expose the industry to billions of dollars in cleanup costs and punitive damages.
Lawyers involved in the case were prohibited from speaking to the media by Judge Carlos Bea because another phase of the trial must still address damages and the question of whether MTBE was the cause of groundwater pollution in South Lake Tahoe. But Scott Summy, an attorney in the Dallas firm of Baron and Budd, which has MTBE cases in California, New York, Florida and Illinois, called the verdict "very significant."
"The jury was presented with ample evidence that these companies had early knowledge that predicted these problems," Summy said. "They failed to disclose the information they had and also promoted the additive in gasoline despite the fact that it had inherent problems."

An oil industry trade group, Western States Petroleum Association, declined to comment. Generally, the industry has maintained that it followed state and federal laws and that MTBE was deemed appropriate by the US Environmental Protection Agency. The federal Clean Air Act requires that regions that don't meet air quality standards must use an additive -- either MTBE or ethanol -- to reduce vehicle pollution. In California, the refiners chose MTBE, which they can make from petroleum instead of buying ethanol from the Midwest. But MTBE has proved to be a major environmental headache nationwide.
Spilling from leaky underground storage tanks, it travels faster in the groundwater than gas and takes longer to break down. The state has set a maximum limit for drinking water because MTBE is a suspected carcinogen.

According to state records, there are 1,189 underground tank sites leaking MTBE within 1,000 feet of public supply wells or on vulnerable drinking water aquifers. An additional 1,729 leaking tank sites farther away from drinking water wells also pose a concern. Gov. Gray Davis recently delayed the state-wide phase out of MTBE in gasoline until January 2004.
South Lake Tahoe, with a population of 28,000 that swells to 50,000 in the summer, is one of the communities hardest hit by MTBE pollution. The city closed 12 of its 34 drinking water wells because of the MTBE contamination. "As a resort community, Lake Tahoe has built a reputation on a pristine lake, clean air and pure water," said utility district spokesman Dennis Cocking in a recent interview. "Who wants to save up their money and go on a vacation and drink water that tastes like paint thinner?"

The South Lake Tahoe utility estimates that it has spent more than $ 9 mm, which doesn't include the cost of treating the tainted water. The cost to remove MTBE from the water supply is estimated at $ 45 mm. In 1998, South Tahoe sued 31 companies, alleging that their defective product spoiled drinking water. Shell and Tosco were named because they ownedthe gas stations along Highway 50 where underground tanks leaked MTBE. Arco Chemical manufacturers MTBE.
Twenty-six companies already settled for $ 33 mm last year. Nationwide, the punitive damages for MTBE contamination could reach billions of dollars from suits filed by cities, water districts, private well owners and perhaps consumers of tainted water, said Richard Drury, a lawyer with Communities for a Better Environment.
Drury said the oil companies exhibited "the same type of knowing indifference to the public health" that tobacco companies did in promoting cigarettes. "In this case, it's also indifference to the environment," Drury said. "It was proven that the companies' own scientists for almost a decade were saying, 'Don't put MTBE on the market, or you're going to create a big environmental disaster.' The companies put it out anyway. It wasn't an innocent mistake," Drury said.

Drury has a lawsuit in the same court charging that Exxon, Mobil and Tosco engaged in unfair business practices in marketing MTBE. A state justice denied the companies' request to throw out the case, allowing a stalled trial to proceed. ChevronTexaco, Unocal, Shell and Atlantic Richfield settled last year, agreeing to clean up almost 1,300 sites around the state.