Unocal Settles Out of Court

The drinking-water provision of California's (1986-legislated) Proposition 65 has been successfully invoked to pressure a company into an out-of-court water-pollution settlement. The suit reportedly represents the first instance of the proposition's use to force a defendant to remediate groundwater contamination.

Nine years ago, residents of Avila Beach (population 300) discovered gasoline, crude oil, diesel fuel, MTBE, and petrochemicals in their drinking-water supply. Testing determined the source of contamination to be leaks in underground pipelines at an oil-transfer terminal owned by Unocal.

In 1997 the town's residents sued Unocal, bringing charges under the federal Clean Water Act, the Resource Conservation and Recovery Act, and Prop 65. According to Prop 65, businesses are prohibited from knowingly discharging listed chemicals into sources of drinking water. According to one source, Prop 65 imposed the greatest financial liability, ergo the greatest leverage.

"The Avila Beach settlement represents a new trend... in the use of the [proposition's] discharge prohibition," said Preston Brooks, an attorney with Cox, Castle & Nicholson LLP, a California law firm specializing in environmental litigation. Brooks explained that companies liable for chemical spills traditionally were required to clean the site to an acceptable state level. Once a site was pronounced clean, polluters received a "No Further Action Letter" from the state, certifying that the site meets specifications. This enabled companies to sell or finance properties without the threat of further government litigation. Prop 65 places companies at potential indefinite risk.

The Unocal settlement requires the company to pay U.S.$18 million in penalties. Of that sum, $1.5 million will be shared by three environmental action organizations: CBE, the Avila Alliance and the Environmental Law Foundation.

MTBE is not currently listed as a Prop 65 chemical. However, MTBE is being studied for possible addition to the list. California's Local Drinking Water Protection Act of 1997 requires the state's qualified experts to make a finding on or before Jan. 1, 1999, regarding MTBE's being scientifically validated as a carcinogen or a reproductive toxicant.

The previous story is adapted from a report appearing in Octane Week for the week of July 13.