The oil companies will pay roughly $78 million to a group of California city governments and water companies that claimed that the chemical had contaminated their wells, or could do so in the future. Among those receiving money are a water company based in San Jose, several water districts in the Sacramento area and the city of Riverside.

Formally known as methyl tertiary butyl ether, MTBE was added to gasoline in the 1990s to make the fuel burn more thoroughly and cut air pollution. But it soon started showing up in drinking water - a problem because it gives water a noxious taste and is considered a possible carcinogen. California stopped using it in 2003.

Its use triggered lawsuits nationwide, as local governments tried to recoup the money spent on cleaning up their wells.

The agreement, announced late Wednesday, settles 59 separate cases that had been filed in 17 different states but were ultimately wrapped into one. Most of the nation's largest oil companies agreed to it, including San Ramon's Chevron. Exxon Mobil did not.

The companies have not disclosed how much each of them will pay.

"The settlement was the result of hard-fought litigation and long, tough negotiations between the parties over the course of a year and half," said Chevron spokeswoman Stephanie Price. "We reached the point where we had the opportunity to resolve the litigation, and did."

Under the agreement, the oil companies will pay $422 million up front. They also agree to cover 70 percent of the cleanup costs for any of the plaintiffs' wells that become contaminated with MTBE within the next 30 years.

"We're pleased because the money recovered will really help them address a problem they've been having, and the 30-year element gives them some peace of mind," said Scott Summy, a partner with the Baron & Budd law firm representing California plaintiffs in the suit.

Within the state, the California Water Service Co. of San Jose will receive the biggest settlement award - $49.7 million. The company has found MTBE in 27 of its wells and has 786 wells that could be exposed to the chemical.

Several water companies in the Sacramento area received settlement awards of roughly $264,000 each, even though the chemical hasn't been found in any of their wells.

"They get a little bit up front to monitor the wells, and then they also get that 30-year guarantee in case any of their wells get hit," Summy said. "There's a lot of MTBE contamination in the groundwater nearby."

The chemical has a complicated, contentious history.

Federal clean air laws in the early 1990s mandated that gasoline sold in smoggy areas contain additives that would help cut back on air pollution. Ethanol and MTBE were the additives most widely used. California officials argued they could meet federal air quality standards without either one but were overruled.

Then MTBE seeped into drinking water wells. California and other states stopped using it, and lawsuits were filed against the oil companies.

The companies argued that they shouldn't have to pay cleanup costs because the government had compelled MTBE's use in the first place.

They also argued that the chemical's long-term health effects on humans hadn't been proved, and as a result, MTBE shouldn't be considered a contaminant.

The settlement agreement does not address those arguments, and an attorney representing Chevron in the case said the companies still hold those views.

"There remain differences between the parties in the litigation over whether MTBE poses any real risk and, at what levels MTBE must be treated," said Rick Wallace, with the law firm of Wallace, King, Domike & Reiskin.

E-mail David R. Baker at dbaker@sfchronicle.com.

This article appeared on page D - 1 of the San Francisco Chronicle