In a major victory for environmentalists, Unocal has agreed to a settlement that will clean up 400,000 gallons of petroleum contamination in Avila Beach, an unincorporated area south of San Luis Obispo. The June settlement is being called the largest Proposition 65 settlement in state history and is believed to be the first time a company has been forced to remove contamination and rebuild a community. "This is the biggest cleanup since Love Canal," said Richard Drury, legal director of the environmental group Communities for a Better Environment in San Francisco. The action came after years of wrangling on the issue, with pressure applied from a lawsuit filed by CBE, the local Avila Alliance and the Environmental Law Foundation. The California Attorney General's office, the county, and the Regional Water Quality Control Board later joined in the suit, which charged violations of state and federal Clean Water laws, as well as of Proposition 65 for illegal discharges to a source of drinking water. Unocal has had a marine loading facility in Avila Beach for about 100 years, according to Ken Alex, a deputy attorney general for the state. Pipes connect the facility to 14 storage tanks on a hill above the town, and those pipes leaked into the groundwater. A small amount of the pollutants has leached from the soil and is flowing into the Pacific Ocean, he said. Unocal covered the beach with thousands of pounds of sand to keep the oil from surfacing during recent winter storms. Among the petroleum products found to have been spilled were gasoline, diesel, crude oil and MTBE, according to an analysis done by CBE. The analysis found significant levels of benzene and toluene, which are considered toxic. Many people familiar with Proposition 65 think of it as solely a toxic warning statute. But the law, passed by California voters in 1986, has a second provision which prohibits the discharge of toxic chemicals to potential sources of drinking water. Drury, CBE's legal director, said that the provision is also being used to challenge other groundwater contamination problems in the state, including lawsuits against Rocketdyne in Simi Valley in Ventura County and Aerojet in Sacramento County. Under the Avila Beach agreement, Unocal will pay an $18 million penalty to local and state groups, with much of the money being used for environmental restoration in Avila Beach. A half million dollars will go to the State Oil Prevention Spill Fund, and $1.5 million to attorneys for the environmental groups. Additionally, the agreement calls for the oil company to excavate contamination from huge chunks of the small town - about 40 parcels of land that include a small business district and residences. Many of the buildings will be torn down and rebuilt. That project is expected to take over a year and cost between $70 million and $200 million. Drury described Avila Beach as a low income community, with a large portion of residents living in mobile homes. About 350 people live in the community. Dennis Lamb, Unocal's manager on the project, said he is uncertain as to how the rebuilding will look, since the county has not yet prepared a specific plan for the area. Current plans are to complete the work by the year 2000. Alex Hinds, the county's planning director, described Avila Beach as a "very eclectic group of buildings" or "1950s California coastal funk," that hadn't changed much in 40 years. Some historic buildings, such as the yacht club, will be saved, he said. Hinds said the consensus at this point is that residents don't want the town to look like just another modern coastal community. As part of the settlement, Unocal will also donate land in Avila Beach valued at $1.5 million to the county. Originally, Unocal officials had opposed excavation, and instead promoted biosparging, which is a technique involving the injection of oil-eating bacteria into the contaminated area. Lamb called it a "high-tech, less intrusive method." But it was opposed because it would take an estimated 75 years to clean the spill, according to CBE officials. Other lawsuits by Avila Beach residents are still pending against Unocal. Cotchett & Pitre, a Burlingame law firm, recently filed about 20 lawsuits based on negligence and nuisance claims. The settlement agreement provides funds for a number of restoration projects for the town, including: o The $ 6 million Avila Beach Restoration Trust, with $2.5 million to be used for studies and restoration of injuries to animal and plant life due to the contamination, and another $3.5 million for restoration of public facilities affected by the oil release. The trust will be administered by the National Fish and Wildlife Foundation. o A $1 million endowment fund for water quality improvements The recent settlement does not cover the contamination at Unocal's tank farm, a hilly area in Avila Beach where storage tanks stood until recently. The tank farm served at times as a refinery and as one of the West Coast's major oil distribution facilities. A study by Unocal showed that nearly a foot of pure petroleum products had accumulated on top of the groundwater in some spots, according to the San Luis Obispo Telegram-Tribune. Unocal is working with the regional water quality control board on an assessment plan on the contamination, Lamb said. Unlike the other contamination in the town, the tank farm which is on 90 acres, is all on private property, he said. There's no information that contamination from the tank farm is migrating anywhere, he said. Drury of CBE and Saro Rizzo, attorney for the Avila Alliance, are expected to file another lawsuit on the tank farm contamination soon. The contamination problem in Avila Beach was discovered in 1989, when a local resident was digging a basement and hit oil, Drury said. About the same time, fumes from the pollution in another basement caused an explosion. Contacts: Ken Alex, Deputy Attorney General, (510) 286-1219. Dennis Lamb, Manager of Avila Beach affairs for Unocal, (805) 595-7657. Steve Williams, Cotchett and Pitre, (650) 697-6000. Richard Drury, legal director, Communities for a Better Environment, (415) 243-8373. Saro Rizzo, Avila Alliance, (805) 783-2050. Case Name: Avila Alliance, et al. v Unocal Corporation, et al., case no. CV 079728