Santa Clarita Ends Power Plant Dispute : Environment: Arco agrees to protect air and water quality in a pact made days before the city’s suit was expected to be decided.

The Santa Clarita City Council approved a settlement Wednesday that will end a 2-year-old legal dispute and allow Arco Oil and Gas Co. to operate a power plant in Newhall.

In exchange, the company agreed to extensive environmental controls designed to protect the air and water.

The agreement came days before the state Court of Appeal was expected to decide on a lawsuit aimed at blocking the $35-million project. City Manager George Caravalho said both sides were unsure how the court might rule and agreed to the pact early Wednesday after several hours of negotiations.

The negotiations continued even as the council held its regular meeting Tuesday night. “We received faxed drafts of the agreement during the meeting,” Caravalho said. While the council plodded through a lengthy agenda, attorneys for the city and company huddled in the back of the council chambers, revising the agreement.

The power plant, at Sierra Highway and Placerita Canyon Road, has been under attack ever since Santa Clarita was incorporated in December, 1987. At its first meeting, the City Council passed a moratorium to try to block its construction.

While the new city was still organizing itself, Los Angeles County released building permits for the plant to Tenneco Oil Co., which guided the project until Tenneco was purchased by Arco more than a year ago. The city said the permits violated the moratorium and ordered Arco to stop construction.

A Los Angeles Superior Court judge said Arco could not be punished for the county’s error and ordered Santa Clarita to let the project proceed. The city appealed in court. Wednesday’s agreement ends the litigation.

Under the agreement, Arco and Tenneco will spend about $1.8 million to install extra monitoring equipment, redesign the project and pay the city’s legal fees.

Caravalho said the pact addresses the city’s main concerns about the plant, which will produce oil and electricity. The company will pump steam into the ground to loosen and force oil to the surface. The steam also will drive electrical generators.

“We think it’s an agreement we certainly can live with and one the citizens of the Santa Clarita Valley can live with,” said Al Greenstein, an Arco spokesman. “We will be a good neighbor with this power plant.”

The agreement addresses noise, water, air quality, odors, lighting and the appearance of the plant. It formally recognizes the company’s right to complete the plant and the city’s right to pass the moratorium.

Arco is to provide quarterly reports on the quality of the ground water near the plant. If, after two years, the analysis reveals no contamination from the power plant, Arco will test the water annually.

Caravalho said the monitoring is vital because the city receives 50% of its water from local sources.

Arco agreed to install equipment to monitor noise and odors. Tenneco will pay Santa Clarita up to $125,000 to cover the city’s legal expenses in the battle. Arco is prohibited from building another plant within five miles of the existing facility. In return, the city agrees to issue any permits needed to complete the project.

The Placerita Canyon Property Owners Assn. had charged in an unsuccessful legal attack on the plant that the county should have required an environmental impact report for it. The state Supreme Court in October let stand an appellate court ruling against the association.