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City Gets $131 Million from Oil Giants for New Water Plant

By Olin Ericksen
Staff Writer

December 6 -- A landmark multi-million dollar settlement approved by the City Council Tuesday could secure water for Santa Monica for decades to come and cap a ten-year costly dispute with giant oil companies.

Under the $131 million settlement -- reached a decade after Santa Monica’s water supply was discovered tainted by a gasoline additive -- the City will take over the building of a new water treatment system that will service local homes, businesses and visitors.

Approved in closed session, the settlement with Shell, Chevron, and ExxonMobil will also pay for replacement water until the plant is scheduled to go on line in 2010, City officials said.

Santa Monica's new mayor, Richard Bloom, called the agreement a win for the City, without taxing residents.

"The funding provided… can build a system… and provide clean water to Santa Monica residents at no cost to City taxpayers, and is adequate also to provide clean replacement water to City residents until the system is operational," Bloom said.

Craig Perkins, the City's Environmental and Public Works manager, said after the announcement that the project would be on time and under budget..

"The City is now fully responsible for the design and construction and operation, and the oil companies are giving us enough money to do the project the way we need to do it to quickly restore clean drinking water," Perkins said.

The trick, now, is to build the large and intricate facility – still only in sketches.

When completed, the plant will service as many as 90,000 permanent residents and nearly 300,000 daytime visitors, Perkins said, noting that the money will pay for temporary water, groundwater monitoring and insurance, as well as building and operating the facility.

"That $131 million has got to pay for a lot of stuff," Perkins said. "We're going to work very diligently to finish the project and restore the drinking water to the community."

If not completed on budget, Santa Monica will be stuck with any additional costs, Perkins said.

"They (the oil companies) are being released from any obligation to pay for the clean up of current contamination, so that's a big deal," said Perkins.

"We accept that risk, but we very carefully negotiated this settlement so that we are very confident we have enough money to get the job done right," he said.

As California water politics continue to heat up -- with more and more people moving to the Golden State each year taxing a limited water supply -- the facility will also free Santa Monica from its dependence on water from elsewhere, officials said.

"We're pleased to have worked with the City to reach an agreement that allows the City water independence far into the future, as well as full control over its own public works," said Brad Boschetto in a prepared statement, a representative of the energy consortium that worked with staff on the facility.

Citing those goals, City officials said they would push a tough timeline to restore water in the next four years, two years ahead of oil company projections.

"Our target is to have it operational by 2010," Perkins said. "That's a very aggressive target, but we're going to do our best."

The settlement now effectively clears Shell, Chevron and ExxonMobil of any continued legal obligation to build the system – a key component of an earlier 2003 landmark settlement agreement of $121.5 million reached between the City and the giant multinational corporations.

That 2003 accord may be the largest legal award in Santa Monica's history before the settlement announced Tuesday. The City, however, is still litigating outside legal fees for that agreement that could run into to tens of millions of dollars. (see story)

Since the 2003 agreement, Perkins said, there have been ongoing disputes on how and when to build the facility, expected to pump nearly 7,000 gallons of water per minute to area customers.

"Quite frankly the (recent) arbitration revolved around the interpretation of some of those terms in the agreement," he said. "Rather than argue a lot over a long period of time about all of those differences, both parties agreed it would better to figure out a different kind of path to resolution."

Since 1996, Santa Monica’s drinking water has been imported form the Metropolitan Water District at the oil companies’ expense, after the gasoline additive MtBE, an oxygenate designed to make gas burn cleaner, was detected in the City's Charnock Well Field in nearby Mar Vista.

The additive – originally added to help protect clean air – is thought to be cancerous.

In the aftermath, the City – in addition to taking a lead role in litigation – has been a major proponent of upgrading underground gasoline storage tanks and implementing a more effective monitoring system, currently conducted by service station managers

But there are still some unanswered questions as Santa Monica takes on the hefty task of securing its water and building the facility

Foremost among them may be where to locate the facility, which City officials said will be on land already owned by the City.

"Honestly the treatment facility they have to build is very substantial, it's not a small treatment facility," said Dr. Mark Gold, executive director for the Santa Monica-based non-profit, Heal the Bay, and head of the City's influential environmental task force.

But the biggest concern, Gold said, is that the City uses all of the money to get the facility up and running.

"If all the money doesn't get used, it could basically revert back to the council for their decision," Gold said. "You can imagine with an incentive like that, there's sort of an incentive to low-ball the drinking water clean-up."

Indeed, Perkins and some council member alluded to the prospect of coming in under cost, if possible.

"Hopefully if we are smart and efficient, we will have some money left over at the end of the day," Perkins told The Lookout.

Despite the lengthy battle and mounting legal bills, taking over the building of the facility is a giant step forward for the City, Gold said.

"I think it's a huge relief for Santa Monica and hopefully we can finally move past all the fighting between the oil companies and Santa Monica, which has occurred for a decade, and we can start to become self-reliant on our water supply," Gold said.

The goal of the City’s sustainable plan is to get back to 75 percent reliance on local ground water supply, a level that predates the water contamination saga, Gold said.

"That's something for us to do and finally start moving forward on this," Gold said.
The lookout








The settlement will "provide clean water to Santa Monica residents at no cost to City taxpayers." Richard Bloom


"We're going to work very diligently to finish the project and restore the drinking water to the community." Craig Perkins


"If all the money doesn't get used, it could basically revert back to the council for their decision." Dr. Mark Gold



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