- 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.
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- 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.
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- In its verdict Monday, the jury said Shell Oil Co., Lyondell
Chemical Co. (formerly Atlantic Richfield Chemical Co.) and Tosco Corp.
(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.
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- 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.
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- 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.
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- Lawyers involved in the case were prohibited from speaking
to the media yesterday 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.
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- 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."
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- "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."
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- 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 U.S. Environmental Protection Agency.
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- 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.
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- 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.
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- 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.
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- Gov. Gray Davis recently delayed the statewide phaseout
of MTBE in gasoline until January 2004.
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- 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.
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- "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?"
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- The South Lake Tahoe utility estimates that it has spent
more than $9 million, which doesn't include the cost of treating the tainted
water. The cost to remove MTBE from the water supply is estimated at $45
million.
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- In 1998, South Tahoe sued 31 companies, alleging that
their defective product spoiled drinking water. Shell and Tosco were named
because they owned the gas stations along Highway 50 where underground
tanks leaked MTBE. Arco Chemical manufacturers MTBE. Twenty-six companies
already settled for $33 million last year.
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- 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.
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- 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.
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- "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.
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- Drury has a lawsuit in the same court charging that Exxon,
Mobil and Tosco engaged in unfair business practices in marketing MTBE.
Yesterday, a state justice denied the companies' request to throw out the
case, allowing a stalled trial to proceed.
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- ChevronTexaco, Unocal, Shell and Atlantic Richfield Co.
settled last year, agreeing to clean up almost 1,300 sites around the state.
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- Chronicle staff writer Harriet Chiang contributed to
this article. Email Jane Kay at jkay@sfchronicle.com. http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2002/04/17/MN162760.DTL
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