In 1995 high levels of MTBE were unexpectedly discovered in the water wells of Santa Monica, California, and the U.S. Geological Survey reported detections. Subsequent U.S. findings indicate tens of thousands of contaminated sites in water wells distributed across the country. As per toxicity alone, MTBE is not classified as a hazard for the environment, but it imparts an unpleasant taste to water even at very low concentrations. The maximum contaminant level of MTBE in drinking water has not yet been established by the United States Environmental Protection Agency (EPA). The leakage problem is partially attributed to the lack of effective regulations for underground storage tanks, but spillage from overfilling is also a contributor. As an ingredient in unleaded gasoline, MTBE is the most water-soluble component. When dissolved in groundwater, MTBE will lead the contaminant plume with the remaining components such as benzene and toluene following. Thus the discovery of MTBE in public groundwater wells indicates that the contaminant source was a gasoline release. Its criticism and subsequent decreased usage, some claim, is more a product of its easy detectability (taste) in extremely low concentrations (ppb) than its toxicity. The MTBE concentrations used in the EU (usually 1.0–1.6%) and allowed (maximum 5%) in Europe are lower than in California.
Chevron, BP, and other oil companies agreed to settle with Santa Monica for $423 million on May 7, 2008.