press release

Unocal, California agencies reach settlement on Guadalupe civil suit; funds earmarked for local environmental projects

Santa Maria, Calif., July 21, 1998 - Unocal Corporation today said it has reached a settlement of a civil suit with the State of California stemming from diluent releases at the Guadalupe oil field. State agencies have pledged part of the settlement payments for local environmental projects in San Luis Obispo and Santa Barbara counties.

Unocal reached agreement with the California Attorney General, Central Coast Regional Water Quality Control Board (RWQCB), California Department of Fish and Game, California Department of Toxic Substances Control, and the California Coastal Conservancy. The settlement was approved today by the Superior Court of San Luis Obispo County.

The settlement comes after four years of joint studies and negotiations to complete a Natural Resource Damage Assessment under the direction of the state agencies. The $43.8 million settlement covers damages, penalties and past agency costs related to the dune sand aquifer petroleum contamination. The damages portion of the settlement includes funding for restoration, replacement and rehabilitation efforts involving natural resources at the Guadalupe oil field. The payment does not include the anticipated costs for cleanup.

The company said it had already adequately provided for the settlement payment in the company's reserves for litigation. Unocal said it has received certain insurance settlement payments from unrelated claims that will provide cash to help offset these costs. The company expects additional cash insurance settlements this year.

"We have reached agreement with the state to settle this suit so that we can now move forward on remediation of the Guadalupe field," said Paul West, general manager for Unocal's California Operating Services unit.

The settlement requires Unocal to comply with the cleanup and abatement order for the Guadalupe field issued by the Central Coast RWQCB earlier this year. That order calls for excavation of certain contaminated sites, plus pilot testing over two five-year periods to evaluate potential cleanup technologies. The pilot testing could include bioremediation, pump and treat techniques and other possible technologies.

The company said it is premature to speculate on the ultimate cost to clean up the field. Unocal has provided for certain cleanup costs at Guadalupe in its environmental remediation reserves and has estimated certain possible additional costs that may be incurred. These amounts may change as additional information regarding the cleanup becomes available.

The 2,300-acre Guadalupe oil field, located along the Pacific Ocean north of the Santa Maria River, was operated by Unocal from the early 1950s until 1994. In the field, a product called diluent was injected through wells to aid in extracting the heavy crude oil. The contamination resulted from leaks in parts of the diluent storage and distribution system throughout the field.

Unocal has filed applications with federal, state and local agencies for permits to proceed with the cleanup project. Once agreement on permit conditions is reached and the permits are issued, the project should begin as anticipated this fall.

Updated: July 1998