Thu Apr 23, 2009 6:32pm BST By Erwin Seba HOUSTON, April 23 (Reuters) – Shell Oil Co, the Sierra Club and a Texas environmental group have agreed on Thursday to settle a federal Clean Air Act lawsuit against Shell's Houston-area refinery and chemical plant. Under the proposed settlement, Shell promises to cut pollution from malfunctions at the 329,800-barrel per day (bpd) Deer Park, Texas, refinery, upgrade the refinery's coking unit and the Deer Park chemical plant flare system, increase pollution monitoring and pay a $5.8-million civil penalty, according to a statement issued by the groups. "We are pleased that we have reached an agreement with the citizen groups to resolve the matter, avoid continued litigation and provide benefits in the public interest," Shell said in a statement.