Dissenting ViewsEnergy Policy Act of 2005MTBE Liability Waiver and Related IssuesSections 1502-1505 of the bill contain numerous provisions addressing methyl tertiary butyl ether or MTBE. These provisions include: (1) liability protection for defective product lawsuits; (2) a waivable prohibition on the use of MTBE by 2014; and (3) “transition assistance” for MTBE manufacturers. The ultimate effect of these provisions is to aid MTBE manufacturers and encourage further MTBE use at the expense of national, state, and local drinking water suppliers and taxpayers. These provisions are opposed by a wide range of state and local interest groups, including the National League of Cities, the U.S. Conference of Mayors, the National Association of Counties, the American Public Works Association, the American Water Works Association, the Association of Metropolitan Water Agencies, and the Association of California Water Agencies, among others. Background on MTBE MTBE is a gasoline additive developed by the oil industry in the 1970s to replace octane lost as a result of the removal of lead from gasoline. MTBE can be produced from natural gas and petroleum by-products. From an air quality standpoint, MTBE is a relatively clean, toxics-free source of oxygen (and octane). In 1990, Congress created the Reformulated Gasoline (RFG) program under section 211(k) of the Clean Air Act. Under this provision, Congress required the use of Reformulated Gasoline (RFG) in 10 specific ozone nonattainment areas and allowed other areas to “opt in” to the RFG program. The Act specified that RFG must contain two percent oxygen by weight, which was thought to be helpful in reducing ozone precursors. The primary fuel additives used to meet the two percent oxygenate requirement have been MTBE and ethanol, which were also the principal oxygenates in use in 1990. As a result of the 1990 Clean Air Act Amendments, MTBE use increased dramatically. While it is fair to say that Congress was aware that MTBE use would increase substantially as a result of the two percent oxygenate mandate, nothing in the language of section 211(k) specifically mentions MTBE or prescribes a particular oxygenate. Courts have specifically ruled on the issue of whether Congress mandated MTBE and have determined that MTBE was not mandated (Oxygenated Fuels Ass'n Inc. v. Davis, 331 F.3d 665 (9th Cir. 2003) (upholding California's ban on MTBE and emphasizing CAA's "neutrality" among oxygenates; Oxygenated Fuels Assoc. v. Davis, 163 F.Supp.2d 1182, 1188 (E.D.Cal.2001) (CAA "neither requires nor forbids the use of any particular oxygenate. Its 'goal' is to assure a particular oxygen content"). In addition, Committee documents reach similar conclusions. A 1995 memo from the Committee on Energy and Commerce staff written by Republican counsel involved in the 1990 Clean Air Act amendments states that: “the May 17th 1990 Report of the Committee on Energy and Commerce could not have been more clear...it is intended that this be a fuel neutral program...the committee intends no such preference...all should compete.” (Memorandum Re: June 7, 1995 Hearing on Implementation of the Reformulated Gasoline Program Under Title II of the Clean Air Act Amendments (June 5, 1995) at p. 9.) Other statements to similar effect include a letter to the Environmental Protection Agency (EPA) dated March 25, 1994, and signed by 115 Members of the U.S. House of Representatives, which favorably quotes a Senate letter for the proposition that “the Act is entirely fuel neutral and only requires achievement of the specified emissions reductions. The point can be no more clear.” (Letter to EPA Administrator Carol Browner, dated March 25, 1994, reprinted in Hearing before the Subcommittee on Oversight and Investigations, (103rd Cong.) June 22, 1994, Serial No. 103-155 at p. 239.) MTBE hazards and liability issues Although from the standpoint of air quality MTBE is a relatively clean, toxics-free source of oxygen and octane, MTBE’s properties pose special hazards to groundwater. MTBE contamination is not like ordinary gasoline contamination. MTBE moves very quickly through water and does not adhere to soil. A very small amount can contaminate large amounts of groundwater. According to the product safety bulletin of Lyondell Chemical, the largest producer of MTBE, every release into the environment has the potential for damaging groundwater supplies. Once in the groundwater, MTBE tends to migrate faster and farther than most other hydrocarbons...MTBE may not biodegrade as promptly as other gasoline components and may require additional and more costly remediation procedures.” In recent years, numerous suits have been filed against MTBE makers alleging defective product theories. These defective product theories center on the argument that MTBE makers knew about the contamination characteristics of MTBE and knowingly introduced a defective product. Records from these court proceedings indicate that MTBE manufacturers were aware of the characteristics of MTBE. When presented with these documents, a jury in California found that MTBE manufacturers acted “with malice in selling MTBE that was defective in design.” Ultimately this suit was settled for $68 million, of which 75 percent was used directly for groundwater remediation. A similar suit was brought and settled in Santa Monica for a minimum of $300 million, with $212 million or more going to remediation. Since that time, numerous suits have been brought throughout the United States, most notably in New England and California. These suits demonstrate the very large amount of liability exposure that MTBE manufacturers face. MTBE cleanup costs are currently estimated by the water utilities to be between $12 billion and $63 billion, with the most widely cited estimate being $29 billion. The liability waiver in section 1502 is retroactively effective to September 5, 2003. This feature of the bill will eliminate many existing lawsuits filed after that date and prior to enactment. That feature alone is cause for serious concern. Given that the full extent of MTBE contamination is not yet known, however, and MTBE continues to be released into the environment, the retroactive portion of the liability wavier may not be its most significant feature, since it only applies to the subset of cases filed between September 5, 2003, and enactment. The principal objection to the liability waiver relates to the prospective immunity that the waiver affords to all future MTBE contamination cases. Upon enactment of this legislation, the oxygenate mandate would be repealed and at that time there can no longer be any argument about an MTBE mandate. Nor does serious dispute remain today regarding the contamination characteristics of MTBE. Because the energy bill allows MTBE use until 2014, the liability waiver will allow MTBE manufacturers to use MTBE with immunity for nearly another decade. Extending the use of MTBE Also of significant concern is the very long phase-out time for MTBE. Section 1504 prohibits the use of MTBE “not later than December 31, 2014.” Under section 1505, however, the President may render such prohibition “null and void” at any time prior to December 31, 2014. No standards are set for such a determination. In a hearing before this Committee in 2001, a representative of the American Petroleum Institute (API) testified that phasing out MTBE in gasoline in four years would be a “virtual walk in the park.” (Hearing before the Subcommittee on Oversight and Investigations, Nov. 1, 2001, “Issues Concerning the Use of MTBE In Reformulated Gasoline,” Serial No. 107-73 at p. 63.) Given what we now know about MTBE in groundwater and its failure to biodegrade, even after a decade or more, allowing the use of MTBE until 2014 is inviting unnecessary damage to our drinking water supplies. Providing $2 billion to MTBE makers Finally, the $2 billion transition assistance program in section 1503 represents an unjustifiable subsidy. Serious questions remain regarding the failure of the MTBE makers to inform Congress in 1990 that MTBE would contaminate groundwater. Recent requests to the American Petroleum Institute to document any evidence that MTBE makers warned Congress during enactment of the Clean Air Act Amendments of 1990 were met with the following response:
The slow phase-in of the MTBE prohibition in section 1504, and substantial questions regarding the MTBE makers role in creating this problem suggest that there is little justification for this Committee to authorize giving $2 billion of taxpayer funds to MTBE makers. MTBE makers will not be forced to suddenly abandon their businesses, and it is notable that the substances that they will be given funds to “transition” into manufacturing (iso-octanes, iso-octenes and alkylates) were oxygenates available in 1990. Conclusion The overall effect of these MTBE provisions is to transfer an enormous amount of potential liability from MTBE makers to consumers and providers of drinking water, to continue creating liability by failing to prohibit further use of MTBE as soon as possible, and to provide $2 billion dollars in corporate handouts to MTBE producers. JOHN D. DINGELL | |
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