SAN FRANCISCO, June 19 (UPI) -- A record settlement of nearly $49 million between California and British Petroleum was filed Wednesday in San Francisco Superior Court, ending an investigation into the oil company's failure to upgrade the underground storage tanks that could be leaking dangerous chemicals at 59 of its ubiquitous ARCO gas stations.
The oil company was now declared to be in compliance with regulations aimed at preventing the tanks from leaking gasoline into the soil and groundwater underneath the state's service stations.
"We believe that ARCO, which cooperated in this case, is now in full compliance with the upgrade standards at all of its gasoline stations," Attorney General Bill Lockyer said in a statement.
BP merged with Atlantic Richfield Co., or ARCO, in 2000, taking over the ARCO chain of AM-PM stations and convenience stores that are a common sight across California highways and byways.
The $45.8 million settlement, the largest of its type in the nation, includes $25 million in penalties and other costs, and another $20.8 million to pay for upgrades to tanks, Lockyer said.
"As further assurance," he said, "the oil company must provide state inspectors with access to ARCO stations and immediately close any stations discovered with upgrade violations."
The settlement does not cover legal actions over leaking tanks taken by local municipalities, Lockyer said.
Leaky storage tanks were at the heart of California's move to phase out the use of the gasoline additive MTBE by the end of 2003. MTBE, a petrochemical oxygenate used to make gasoline burn more efficiently, has been found in groundwater sources and is considered a possible cancer-causing agent, according to recent medical literature.
One study found elevated blood levels of MTBE among gasoline station attendants and suggested that the materials could cause a reaction in the exposed individual's immune system. Other studies have linked MTBE to cancer in lab animals.
"My administration has moved forcefully to make sure that California's vital water supply is protected now and for years to come," said Gov. Gray Davis, D-Calif. "In cases like this, we enforce the law vigorously. Protecting our ground water from potentially leaking tanks, with or without MTBE, is a top priority."
Proponents of continuing the use of MTBE have argued that rather than doing away with the additive altogether and switching to ethanol as an oxygenate, the groundwater problem could be solved through plugging the leaks in the estimated 50,000 tanks that lie beneath the state's service stations.
But California had ordered a major upgrade of service station tanks as far back as 1987, giving oil companies 10 years to install fiberglass linings and leak detection instruments. Companies were allowed to self-certify that they had complied with the order, but an investigation launched by the state and San Joaquin County in 1999 revealed that 59 of the approximately 900 ARCO stations in the state had falsely stated that the upgrades had been completed.
"ARCO had claimed the stations had fiberglass tanks and piping, when portions of the piping were unprotected steel," Davis' office said in a statement.
BP said in a statement that it had moved aggressively to correct problems with the tanks after the merger, and noted that ARCO had spent more than $100 million on upgrades beginning in 1985.
"The agreed-upon settlement in this case reaffirms ARCO's commitment to the environment and intent to take whatever steps are necessary to ensure full cooperation with all government investigations and full compliance with all environmental regulations," the company declared.
(Reported by Hil Anderson, UPI Chief Energy Correspondent)