1816, false spelling of local in a sense "a place, a locality, a scene," especially with reference to circumstances connected with it, from this sense in French local, noun use of local (adj.), from Latin locus "a place" (see locus). The English spelling with -e probably is based on morale and intended to indicate stress.
The word's right to exist depends upon the question whether the two indispensable words locality & scene give all the shades of meaning required, or whether something intermediate is useful. [Fowler]