SITE INFORMATION AND CORRESPONDENCE

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i STARSKY & KIRK, LLP David J. Irey, Esq. Deputy District Attorney Environmental Prosecutions Unit Office of the District Attorney April 29, 1999 Page 2 site. You dismissed any discussion of the reasons why closure of the site is appropriate and instead berated the State Board and its decision-making process. During the conversation, you further suggested that if Union Oil will agree to withdraw the State Board petition, the District Attorney's Office will consider "ratcheting down" the $182,500 penalty that the parties .have agreed to. This appears-to 'be an attempt to substantially increase the cost of the settlement for Union Oil more than two months after we reached an agreement in principle that included a penalty figure. Our recent discussions did not include any specific component of additional corrective action at the Pacific Avenue site. I requested that you put your position in writing so that my client could know exactly what you were proposing,but you refused to do so. As I told you in my letters of March 2, 1999 and March 30, 1999, Union Oil continues to believe that it has a right to seek a State Board ruling on its petition. It also believes that your insistence, now under threat of a lawsuit, that it relinquish that right is unreasonable and inappropriate. As we have told you, settlement of these matters should not be contingent upon whether or not Union Oil exercises its constitutional right to avail itself of a procedure that has been established by the Legislature for resolving disputes over underground,storage tank cleanup actions. Your belief that the State Board will grant Union Oil's petition for closure of the site makes your demand that the petition be withdrawn even more inappropriate, insofar as it is indicative of,a conscious attempt to deprive Union Oil of the benefits -of this legislatively- established procedure for redress of grievances. We seriously question whether the manner in which you have chosen to proceed is a proper exercise of enforcement discretion. Despite the fact that Union Oil believes that your demand is inappropriate, Union Oil remains interested -in reaching a resolution of this matter without resort to litigation. Accordingly, I have been authorized to make the following offer. In exchange for the release of all pending service station enforcement matters against Union Oil currently under investigation in San Joaquin County, Union Oil will agree to pay monetary penalties riot to exceed$1,000,will undertake an additional $181,500 in corrective action -at 1665 Pacific Avenue-pursuant to a workplan agreed upon with San Joaquin County Public Health Services Environmental Health Division CTHS/EHD'% and will dismiss its currently-pending petition before the State Board-for closure of the site, provided PHS/EIdD agrees that it will close the site immediately upon Union Oil's completion of the agreed workplan. I wish to 'Make it clear that Union Oil will only take these steps, including dismissal of the petition, after the execution of a written settlement agreernent with San Joaquin County. Despite the fact that we reached an agreement in principle