Friday, July 15, 2005

Sticking Point Over MTBE
Once again, final reconciliation of House and Senate versions of comprehensive energy legislation may hinge on whether agreement can be reached concerning protection from litigation arising from the use of the gasoline additive methyl tertiary butyl ether, or MTBE. At first glance, this provision seems to be yet another handout for big business. However, careful consideration of the history of MTBE use and the likely future path of fuels development suggests that some level of industry protection is justified and appropriate.

Widespread use of MTBE, which is soluble in water and can produce strong odors at very low concentrations, began in response to regional air quality regulations and the Federal Clean Air Act of 1990. These rules introduced “reformulated gasoline”, designed to produce the fewest pollutants from cars lacking the latest smog-reduction equipment. In urban areas with high levels of air pollution, this fuel was required to include chemical compounds containing oxygen, in order to reduce carbon monoxide emissions.

To meet this oxygen specification, oil companies had two choices, both of which were approved by the federal government and by most of the state governments involved: ethyl alcohol (ethanol) and MTBE. MTBE was less expensive, even after factoring in the tax subsidies for ethanol. More importantly, gasoline with MTBE could be shipped through efficient networks of regional petroleum product pipelines, while gasoline containing ethanol could not. The choice of MTBE helped consumers by reducing costs and shoring up the reliability and flexibility of the gasoline distribution system.

Thus the companies that used MTBE in their reformulated gasoline did so at the behest of, and with the full approval of the relevant regulatory bodies. It hardly seems fair now to saddle these companies with the entire burden of universal shortsightedness about the consequences.

Beyond this issue of fairness, turning MTBE into the next asbestos or tobacco litigation bonanza could have adverse longer-term consequences for the environment. The effort to improve the environmental qualities of automotive fuels is an ongoing process, with regulations already on the books to reduce the sulfur content of gasoline and diesel fuel. Looking farther ahead, we will not know the full consequences of using alternative fuels such as methanol or hydrogen on the same scale as gasoline, until we are actually doing so many years down the road. Exposing the motor fuels industry to a wave of product liability lawsuits at the same time we need it to invest in the next phase of gasoline reformulation or the creation and marketing of even more exotic fuels is counterproductive and shortsighted.

The main objection to MTBE tort relief comes from state and local authorities whose jurisdictions face costly cleanups of water supplies that are contaminated with MTBE, at a time when public funds are tight. They need someone to foot the bill and don't want to see the deepest pockets in sight let off the hook. In the final analysis, though, the public benefits derived from the reduction in air pollution attributable to reformulated gasoline outweigh the costs of MTBE cleanup. The air quality regulations of the 1980s and 1990s achieved many of their goals, although with a classic unintended consequence, in the form of MTBE pollution. Shouldn't the ultimate responsibility for the fallout from MTBE rest with--or at least be shared by--the governments and agencies that established the clean fuels mandates and approved MTBE for widespread use, and that can also claim the credit for the improvements it brought? On this basis, giving the energy industry relief from MTBE litigation is a reasonable proposition.

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