Attorney General Lockyer Announces ARCO to Pay Largest Penalty in Nation to Settle Alleged Underground Tank Violations in California

(SAN FRANCISCO) – Attorney General Bill Lockyer today filed with the court a $45.8 million settlement with BP-ARCO that includes the largest penalty in the nation for alleged widespread underground tank violations at ARCO gasoline stations in California.

"Gasoline stations were given 10 years to make required safety upgrades to underground fuel storage tanks to better safeguard our water supplies and protect the environment from unseen leaks," Lockyer said. "The landmark settlement ends our two-year investigation which found that ARCO failed to make required safety improvements at 59 service stations spread across the state from San Diego in the south to Sacramento and Marysville in the north and failed to disclose the truth to government officials."

Filed in San Francisco Superior Court, the settlement of the state complaint was reached by ARCO, the Attorney General and San Francisco City Attorney Dennis Herrera, who also found alleged violations of local certification requirements and deliveries of gasoline to retail stations with non-upgraded underground tank systems. The case was based on investigations of underground tanks by the California Environmental Protection Agency, State Water Resources Control Board and the San Francisco Department of Health.

"This is an example of state and local officials working together to protect our environment," Herrera said. "By combining our resources, we have been able to avert a long court battle and get a settlement that is good for the health and safety of the entire state."

The settlement provides for $25 million in direct penalties and costs to be paid by ARCO and $20.8 million in improvements that the oil company must demonstrate have been made to underground tanks at its gasoline stations. The payment includes civil penalties, reimbursement of investigation and enforcement costs and funding for the prosecution of other environmental protection cases. The company also agreed to specified court-enforceable monitoring, inspection and enforcement conditions that apply to the more than 900 ARCO stations in California. ARCO merged with BP Amoco in April 2000.

"We believe that ARCO, which cooperated in this enforcement case, is now in full compliance with the upgrade standards at all its gasoline stations," Lockyer said. "As further assurance, the oil company under the settlement must provide state inspectors with access to ARCO stations and close immediately any gasoline stations discovered with upgrade violations until required improvements are made."

In 1987, California gave gasoline stations a 10-year deadline by which to meet strengthened underground fuel tank standards for corrosion protection, leak detection, spill prevention and environmental protection. Upgrades such as the use of double-walled or non-corrosive fiberglass linings were required to be installed by a highly publicized December 22, 1998 deadline. Responding to industry concerns that delays in government inspections could result in service stations closures, oil companies were allowed to self-certify completion of upgrade work. Violations could result in civil penalties of up to $5,000 per day.

The state investigation focused on ARCO's compliance with the underground tank safety requirements statewide. Operational problems such as leaking gasoline at individual retail stations are subject to separate enforcement action by local regulatory agencies. The state settlement does not affect local enforcement actions pending in Orange County or other jurisdictions.

Settlement documents filed with the court noted that ARCO's actions provided the company with an unfair business advantage in alleged violation of California's Unfair Competition Act, also known as Government Code section 17200, which provides civil penalties of up to $2,500 per violation. While other companies were temporarily shutting down service stations to meet the deadline for underground tank improvements, ARCO by allegedly ignoring or misrepresenting work done was able to continue selling gasoline at the 59 stations, postpone upgrade costs and hire contractors to do the work after the big rush by other companies seeking to meet the state deadline.

The 59 ARCO stations cited in the complaint are in the cities of Bellflower, Berkeley, Buena Park, Carson, Castro Valley, Cotati, Culver City, Cupertino, Downey, Dublin, El Cajon, El Monte, Elk Grove, Fair Oaks, Fresno, Garden Grove, Glendora, Harbor City, Hawthorne, Hayward, Hemet, Los Angeles, Malibu, Marysville, National City, North Highlands, Oakland, Palmdale, Paramount, Pinole, Sacramento, San Diego, San Francisco, San Jose, Simi Valley, South Gate, Sunnyvale, Ventura, West Covina and Whittier.