After oil companies lose bid to quash suits in Congress, liability adds up
Albany Times Union, Matt Pacenza
Published April 9, 2006
In the early 1980s, Shell Oil engineers were making jokes about what MTBE really stood for. "Most Things Biodegrade Easier," was an early favorite, followed by "Menace Threatening Our Bountiful Environment" and Money To Be Extracted."
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The jokes proved to be damning in several multimillion-dollar lawsuits
brought by communities that lost drinking water wells to MTBE ontamination.
They helped lawyers convince a jury that several oil companies knew MTBE posed a threat to drinking water years before the industry began blending vast quantities of the additive with gasoline.
The battle over who will pay for pollution damage caused by the gasoline additive MTBE has been playing out in courtrooms around the nation, in cases similar to the big tobacco and asbestos lawsuits. Legislators who have seen the damages caused by the gasoline additive turned back an effort by an oil-friendly Republican Congress to kill those lawsuits.
The biggest MTBE case in history is nearing the trial phase at Manhattan's federal courthouse, where the nation's biggest oil companies are being sued for unspecified millions by 80 plaintiffs from Sacramento to Suffolk County.
The case pits two heavyweight law firms with powerful political ties against one another.
The documents showing that some oil companies knew about MTBE's problems were unearthed during a suit brought by South Lake Tahoe, Calif., which had to shut down 12 of its 34 wells. In 2002, a jury found that MTBE-containing gasoline was a "defective product" which Shell Oil Co., Texaco Inc., Lyondell Chemical Co. and Tosco Corp. California knew would threaten drinking-water supplies. The companies then settled with South Lake Tahoe for $69 million before the trial's penalty phase.
"There were literally reams of documents showing that the oil industry knew the potential for groundwater contamination as early as the early 1980s," said Dennis Cocking, a spokesman for the South Lake Tahoe Public Utility District.
An industry spokesman denied that claim, arguing that federal officials also knew MTBE might pose a problem. "Whether the industry knew about MTBE or not is irrelevant," said Frank Maisano, a spokesman for MTBE manufacturers. "It's the government that allowed MTBE to be used."
MTBE's physical characteristics are what made its problems so predictable.
It readily dissolves in water and doesn't cling to soil near a spill site, as most chemicals do. It degrades slowly and travels quickly. And it travels far in water. Other dangerous gasoline compounds, like benzene, are rarely found more than 300 feet from a spill site, while MTBE has been found 4,000 feet away.
Documents and statements from a number of oil companies show they knew all this almost as soon as they began producing MTBE in the late 1970s.
"When 20 percent of the tanks nationwide were known to leak, they put this stuff in tanks knowing it would race its way to groundwater and to drinking water supplies," said Richard Wild, senior vice president at the Environmental Working Group.
"Their hydrogeologists were very clear with them from the start," said
Stan Alpert, a private attorney who has represented homeowners and
communities damaged by MTBE. "They said, `Hey, don't do it. You'll cause a nationwide groundwater problem.' What did they do? They did it anyway."
Utilities and governments suing over MTBE aren't seeking damages because customers got sick from drinking the additive. Such claims are nearly impossible to prove. Instead, they want money for what they have spent -- or will have to spend -- to deal with the MTBE.
That includes the cost of putting filters in, digging up dirty soil and
installing systems to pump the MTBE out of the water. Such measures don't always work, or the water provider doesn't have time to wait for the levels of MTBE to go down, so they also are suing for money to pay for new water systems -- new wells, plus pipelines to bring the water to homes once served by private wells.
Why not just sue the local gasoline station? One reason is practical: Big oil has deeper pockets than the families or small companies who typically own convenience stores. Also, it's not always possible to determine exactly which gas station is at fault. Stations often are clustered together and since so many had leaking tanks, investigators can't pinpoint who bears responsibility for contaminated wells.
The decision to target MTBE manufacturers has been justified by documents showing that oil companies not only didn't tell the public about the groundwater problem; they didn't tell the businesses who actually sell gas.
"They even kept it away from their own retailers," Cocking said. "The
people who ran their stores, independent business people. They never told them how important it was to do inventory control."
Since 2003, at least 141 water systems in 16 states have filed suits arguing that MTBE is a defective product, according to an analysis from the Environmental Working Group. Currently, 110 of those suits are open, according to the Association of Trial Lawyers of America.
In federal court in Manhattan, 80 separate civil cases filed in state courts have been brought together. Plaintiffs including New York City, several Long Island water authorities, the state of New Hampshire and Orange County, Calif., all sued big gasoline refiners seeking damages for MTBE-polluted wells.
Those cases have been consolidated into a type of suit called a
multi-district litigation case. Judge Shira A. Scheindlin is reviewing all pretrial motions filed by each side. She already has rejected several bids from the oil companies to have the case thrown out.
Assuming Scheindlin allows the case to move forward, each of the 80 cases will then be sent back to state courts for trial in 2007 or later.
The Plainview water system in Suffolk County has joined the suit. Officials estimate it will cost Plainview millions to protect one of their main supply wells, just 500 feet from a major gasoline spill. "Water supplies are finally speaking out," said Paul Granger, superintendent of Plainview's system. "We're no longer going to be the punching bag. We need to protect our ratepayers."
Some of the biggest law firms in the nation are squaring off on the MTBE suit. Representing many of the water authorities is Weitz & Luxenberg, the Manhattan law firm specializing in personal injury cases that numbers among its attorneys Assembly Speaker Sheldon Silver.
And in the other corner? Representing Valero Energy Corporation and Total Petrochemicals USA, Inc. is the law firm of Bracewell & Giuliani. The Houston law firm, which represents oil, gas and banking clients, added former New York City Mayor Rudolph W. Giuliani as a partner in March 2005, a few months before it opened a new Manhattan office.
Big oil companies didn't want to have to face such litigation, after a few cases in California went against them. So they pushed Congress to add a waiver to the energy bill that would shield MTBE manufacturers from lawsuits.
The companies had powerful allies on their side: former House Majority
Leader Tom DeLay and House Energy and Commerce Committee Chairman Joe
Barton, both of whom are from Texas, where nearly all MTBE is made.
The House was adamant about including MTBE protection in their energy bills.
The Senate balked. Neither side would give in and the liability waiver
single-handedly stalled the massive energy bill for over a year.
Strong pressure was put on Republicans in the Senate who wouldn't back an MTBE shield, like Judd Gregg, who called one proposed compromise -- which would have created a fund to compensate water authorities -- "more smoke and gas brought to you by Big Oil," according to the Los Angeles Times.
Gregg is from New Hampshire, where 40 percent of public water supplies have tested positive for MTBE.
Senators like Gregg stuck to their guns, and in August the energy bill
finally passed, with no MTBE shield attached.
The oil companies and their congressional allies tried to argue that MTBE was forced upon the industry by the federal government. That stance was later contradicted by an ARCO executive, who admitted during a sworn statement, given during the South Lake Tahoe lawsuit, that the oil industry itself suggested MTBE as an alternative to other additives being considered by the EPA.
In 1999, a blue-ribbon panel commissioned by the EPA recommended that the additive be phased out. The blue-ribbon panel reached one startling conclusion: MTBE wasn't necessary. Nor was ethanol or any other oxygenate, if the goal is to reduce air pollutants from gasoline.
The panel backed using gasoline blended with alkylates and aromatics,
compounds that are already in gasoline which the panel said could provide the same clean air benefits -- without the harm to water.
