<DOC>
[106th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:56609.wais]
REFORMULATED GASOLINE
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
HEALTH AND ENVIRONMENT
of the
COMMITTEE ON COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
on
H.R. 11
__________
MAY 6, 1999
__________
Serial No. 106-18
__________
Printed for the use of the Committee on Commerce
U.S. GOVERNMENT PRINTING OFFICE
56-609 CC WASHINGTON : 1999
------------------------------
COMMITTEE ON COMMERCE
TOM BLILEY, Virginia, Chairman
W.J. ``BILLY'' TAUZIN, Louisiana JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas RALPH M. HALL, Texas
FRED UPTON, Michigan RICK BOUCHER, Virginia
CLIFF STEARNS, Florida EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio FRANK PALLONE, Jr., New Jersey
Vice Chairman SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania BART GORDON, Tennessee
CHRISTOPHER COX, California PETER DEUTSCH, Florida
NATHAN DEAL, Georgia BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma ANNA G. ESHOO, California
RICHARD BURR, North Carolina RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California BART STUPAK, Michigan
ED WHITFIELD, Kentucky ELIOT L. ENGEL, New York
GREG GANSKE, Iowa THOMAS C. SAWYER, Ohio
CHARLIE NORWOOD, Georgia ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma GENE GREEN, Texas
RICK LAZIO, New York KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming TED STRICKLAND, Ohio
JAMES E. ROGAN, California DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING,
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland
James E. Derderian, Chief of Staff
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Health and Environment
MICHAEL BILIRAKIS, Florida, Chairman
FRED UPTON, Michigan SHERROD BROWN, Ohio
CLIFF STEARNS, Florida HENRY A. WAXMAN, California
JAMES C. GREENWOOD, Pennsylvania FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia PETER DEUTSCH, Florida
RICHARD BURR, North Carolina BART STUPAK, Michigan
BRIAN P. BILBRAY, California GENE GREEN, Texas
ED WHITFIELD, Kentucky TED STRICKLAND, Ohio
GREG GANSKE, Iowa DIANA DeGETTE, Colorado
CHARLIE NORWOOD, Georgia THOMAS M. BARRETT, Wisconsin
TOM A. COBURN, Oklahoma LOIS CAPPS, California
Vice Chairman RALPH M. HALL, Texas
RICK LAZIO, New York EDOLPHUS TOWNS, New York
BARBARA CUBIN, Wyoming ANNA G. ESHOO, California
JOHN B. SHADEGG, Arizona JOHN D. DINGELL, Michigan,
CHARLES W. ``CHIP'' PICKERING, (Ex Officio)
Mississippi
ED BRYANT, Tennessee
TOM BLILEY, Virginia,
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Bordvick, Duane B., Vice President, Environment and External
Affairs, Tosco Corporation................................. 68
Beuhler, Mark, Director of Water Quality, Metropolitan Water
District of Southern California, on behalf of Association
of California Water Agencies............................... 84
Feinstein, Hon. Dianne, a U.S. Senator from the State of
California................................................. 19
Franks, Hon. Bob, a Representative in Congress from the State
of New Jersey.............................................. 25
Hickox, Winston H., Secretary for Environmental Protection,
California Environmental Protection Agency................. 60
King, Gregory C., Vice President and General Counsel, Valero
Energy Corporation......................................... 70
O'Connor, Hon. Pam, Mayor, City of Santa Monica.............. 29
Perciasepe, Robert, Assistant Administrator for Air and
Radiation, Environmental Protection Agency................. 40
Robinson, Thomas L., President, Robinson Oil Company, Inc.,
on behalf of Society of Independent Gasoline Marketers of
America, National Association of Convenience Stores, and
California Independent Oil Marketers Association........... 75
Tauscher, Hon. Ellen O., a Representative in Congress from
the State of California.................................... 27
Vaughn, Eric, President and CEO, Renewable Fuels Association. 78
Material submitted for the record by:
American Methanol Institute, Oxygenated Fuels Association,
Renewable Fuels Association, letter dated September 10,
1996, to Hon. Thomas Bliley................................ 112
ARCO:
Letter dated February 18, 1999, to Hon. Brian Bilbray.... 124
Letter dated February 17, 1999, to Hon. Tom Daschle...... 125
Letter dated May 5, 1999, to Hon. Brian Bilbray.......... 129
Bluewater Network, legislative recommendation................ 98
California Air Pollution Control Officers Association, letter
dated March 4, 1999, to Hon. Brian Bilbray................. 113
California Business Alliance, letter dated February 22, 1999,
to Hon. Brian Bilbray...................................... 122
California Chamber of Commerce, letter dated February 18,
1999, to Hon. Brian Bilbray................................ 123
California Environmental Protection Agency, letter dated July
31, 1996, to Hon. Thomas Bliley............................ 110
California Manufacturers Association, letter dated February
19, 1999, to Hon. Dianne Feinstein......................... 123
Chevron Products Company:
Letter dated May 4, 1999, to Eric Vaughn, President,
Renewable Fuels Association............................ 114
Letter dated April 29, 1999, to Hon. Dianne Feinstein.... 117
Letter dated February 10, 1999, to Hon. Tom Daschle...... 126
Contra Costa Water District, letter dated February 23, 1999,
to Hon. Brian Bilbray...................................... 122
Daschle, Hon. Tom, letter dated February 2, 1999, to Mike
Bowlin, Chairman, ARCO Corporation......................... 128
(iii)
Davis, Hon. Gray, Governor, State of California, letter dated
April 14, 1999, to Hon. Brian Bilbray...................... 120
Eastbay Municipal Utility District, letter dated February 16,
1999, to Hon. Brian Bilbray................................ 125
Henderson, Douglas F., Executive Director, Western States
Petroleum Association, et al., letter dated February 22,
1999, to Hon. Brian Bilbray................................ 121
Johanns, Hon. Mike, Governor, State of Nebraska, statement on
behalf of the Governors' Ethanol Coalition................. 96
Natural Resources Defense Council, prepared statement of..... 102
Renewable Fuels Association, letter dated April 9, 1999, to
Patricia Woertz, President, Chevron Products Company....... 116
Sacramento Metropolitan Air Quality Management District,
letter dated February 24, 1999, to Hon. Brian Bilbray...... 121
South Coast Air Quality Management District, letter dated May
4, 1999, to Hon. Brian Bilbray............................. 110
(iv)
REFORMULATED GASOLINE
----------
THURSDAY, MAY 6, 1999
House of Representatives,
Committee on Commerce,
Subcommittee on Health and Environment,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:35 a.m., in
room 2322, Rayburn House Office Building, Hon. Michael
Bilirakis (chairman) presiding.
Members present: Representatives Bilirakis, Bilbray,
Ganske, Shadegg, Bryant, Bliley (ex officio), Brown, Waxman,
Pallone, Green, DeGette, Capps, Hall, and Eshoo.
Staff present: Bob Meyers, majority counsel; Anthony Habib,
legislative clerk; and Alison Berkes, minority counsel.
Mr. Bilirakis. The hearing will come to order. Before the
Chair goes into its opening statement, I recognize the full
chairman, Mr. Bliley, for his opening statement.
Chairman Bliley. Thank you, Mr. Chairman. Today's hearing
concerns H.R. 11, legislation introduced by our colleague Brian
Bilbray to allow the application of California State
regulations in areas within that State which are subject to the
Federal reformulated gasoline program. Congressman Bilbray has
worked long and hard to advance this legislation. He has gained
the bipartisan support of nearly the entire California
delegation, and Senator Feinstein has introduced his
legislation in the other body. Therefore, I am glad that we
were able to schedule today's hearing, and I look forward to
receiving the testimony of our witnesses.
While it is never possible to construct a perfect hearing,
we have made every attempt to accommodate a variety of informed
opinions regarding H.R. 11. Although we are unable to
accommodate all requests to testify in person, we have included
witnesses who are both in favor of and oppose the legislation.
Therefore, our purpose today is simple. We need to examine
this bill in detail and receive the benefit of testimony from
the administration, the State of California, Members of
Congress, and experts and interested parties in the private
sector. In other words, this is an old-fashioned legislative
hearing on the bill. Our purpose is to both educate the
Commerce Committee concerning this legislation and establish a
legislative record.
Again, I want to thank our witnesses and congratulate Mr.
Bilbray on his ceaseless energy and dedication with respect to
this matter. I also want to thank Chairman Bilirakis for his
effort in holding this hearing and in furthering the
committee's review of H.R. 11. Thank you, Mr. Chairman.
Mr. Bilirakis. Thank you, Mr. Chairman. The purpose of
today's hearing is to receive testimony regarding H.R. 11,
legislation introduced by my colleague, Representative Brian
Bilbray, concerning the operation of the Federal reformulated
gasoline program in California.
This is the second hearing that this subcommittee has had
held on this issue. On April 22 of last year, the subcommittee
held a hearing on H.R. 630, legislation introduced by Mr.
Bilbray which is identical to today's measure. During our
hearing, the subcommittee received testimony from the EPA, from
the Department of Energy, the California Air Resources Board
and a panel of stakeholders.
Today's hearing will receive further testimony from Members
of Congress, the U.S. EPA, the California Environmental
Protection Agency, and private stakeholders. And I am hopeful
that this hearing can further illuminate the subcommittee's
examination of this legislation as well as assist the
subcommittee in reviewing events of the past year affecting the
Federal RFG program and the separate California clean-burning
gasoline program.
Let me say at the outset that it wasn't possible to extend
invitations to all interested witnesses. In some cases the
subcommittee was unable to invite all parties that may be
impacted by this legislation or the current operation of the
Federal RFG or California CBG programs. As you may know, we
already have four panels, but we still had to turn down a few
people who wanted to testify in person.
It is my intent, however, to have additional views and
materials published in a final hearing record and we will work
with members of the subcommittee on motions and requests to
allow such material into the record. It is not my intent to
limit any significant views in this legislation, but rather to
conduct a hearing which can be completed in a timely and
efficient manner. That being said, I believe today's witnesses
will help the subcommittee gain an updated understanding of
H.R. 11 and its impact on the operation of current RFG and CBG
programs. Since Federal RFG currently represents about one-
third of the domestic gasoline market, legislation which would
alter the operation of the current program must be thoroughly
assessed.
I must say, however, I am extremely disappointed that the
Environmental Protection Agency has chosen to ignore or at
least not have responded to a specific written request for
legal opinion on its ability to waive or otherwise
administratively alter the Federal 2 percent oxygenate
requirement.
While I appreciate that there are complexities involved,
this issue is central to the issue of Federal legislation to
amend the Clean Air Act. I believe that the EPA had sufficient
verbal and written notice on this matter and yet its written
testimony--and I might add that the verbal notice preceded the
written notice--yet its written testimony indicates only that
it is ``looking closely'' at the California waiver request.
I would remind EPA that a request for a waiver from section
211(k) requirements and an ongoing blue ribbon panel review of
the use of oxygenates in RFG are separate and distinct issues.
The letter of invitation did not ask for a policy analysis. It
requested a legal analysis of the California waiver request as
well as EPA's ability to waive or otherwise not enforce the
requirements contained in section 211(k) of the Clean Air Act
in California or any other State. This is a necessary request--
and I repeat a necessary request--of the subcommittee directly
related to its legislative function. And we must insist that
the EPA provide such an analysis in a timely fashion.
Hopefully, quite frankly, legislation will not be necessary
depending on what their response might be, but we need that
response. Otherwise, I think the subcommittee can benefit from
information concerning recent studies which have been completed
in California as well as information regarding the
environmental impact of the Federal RFG program. Testimony
received by the committee provides some indication of the real-
world benefits of reformulated gasoline, and I am informed that
more information may be available shortly in the form of a new
National Academy of Sciences study.
Altogether, I would like to thank the gentleman from
California, Mr. Bilbray, for his efforts regarding H.R. 11.
As I stated at last year's hearing, he has been a tireless
advocate for this legislation. That statement is even more true
today, and Mr. Bilbray has brought both the energy of youth as
well as the wisdom of age together in his effort to address a
most serious concern in his home State of California.
I am therefore glad that we are able to move forward with
today's hearing and I look forward to receiving the testimony
of our witnesses. I ask for brevity from members of the
subcommittee in their opening statement so that we can extend
proper courtesy to all these members who have other things to
do as we do, too. Mr. Brown.
Mr. Brown. The wisdom of age, I understand. The energy of
youth----
Mr. Bilirakis. I sometimes wonder about the wisdom of age.
Mr. Brown. First of all, Mr. Chairman, I would like to ask
unanimous consent to enter into the record Mr. Dingell's
opening statement, two other documents and other opening
statements of members which I have.
Mr. Bilirakis. Without objection.
[Additional statement submitted for the record follows:]
Prepared Statement of Hon. John D. Dingell, a Representative in
Congress from the State of Michigan
Mr. Chairman, I thank you for the opportunity to hear the divergent
views of a variety of stakeholders, as well as our Congressional
colleagues, the Environmental Protection Agency, the state of
California, and Mayor O'Connor on H.R. 11. I know that our colleague,
Mr. Bilbray, has had a keen interest in this subject, and this
legislation, for some time. While my interest may not be as pronounced
as his, particularly because the current version of H.R. 11 is a
California-oriented bill, I am interested in proposals that pertain to
the reformulated gasoline program, a largely successful national
program which I support. Moreover, I believe that this Subcommittee
must scrutinize any amendments to the Clean Air Act. We must exercise
caution in reopening the Act for any reason--the threshold must be high
and the proposal must be sound. With the possibility of Mr. Bilbray's
proposal becoming more national in its scope, as I expect we will learn
from our witnesses today, I fear that an objective of passing a
narrowly-crafted amendment may fail. I trust that my colleagues share
this concern, and I hope that we may commit to one another, should this
bill gain momentum, that only by our mutual agreement will we expand
its language or scope.
Even as we consider this legislative proposal today, the EPA is
fervently writing rules to implement the Clean Air Act. We have seen
thousands of pages of regulatory activity in the past nine months,
including such major actions as the NO<INF>X</INF> SIP call, the
regional haze rule and now the Tier II proposal. These proposals, and
other actions by the Agency, have not gone unnoticed by our
Congressional colleagues, nor their constituents. They will be costly
to the American public. I do not mean to diminish Mr. Bilbray's bill by
comparison, but I do mean to warn that there are a number of agendas
pertaining to the Clean Air Act, some of which I support. I am well
aware that those agendas are in search of any vehicle at this time, and
will be even more so as time passes in this Congress.
I have heard opposition to this bill from my constituents who
support the ethanol industry. For years, the Monroe County Corn
Growers, Farm Bureau and Michigan Corn Growers Association have
actively supported ethanol. There is concern in my district that the
California Governor may support legislation that would prevent the use
of ethanol as a replacement for MTBE--a decision viewed as having
serious repercussions for our corn farmers. I do not know whether H.R.
11 would prevent the use of ethanol in California or any other state,
but I intend to answer this question.
I have heard from others who worry about the continued use of MTBE
in California, and who advocate banning MTBE. In addition to ethanol as
an alternative to MTBE, there are other possibilities. But have we
carefully examined the availability, the costs and the quality of these
alternatives? We certainly must obtain the answers to these questions,
and we must answer these questions for every state, not just
California.
I thank the Chairman for inviting witnesses who support H.R. 11, as
well as witnesses who may oppose the bill. I look forward to hearing
their views.
Mr. Brown. Thank you, Mr. Chairman. I would like to thank
Mr. Bilirakis for holding this hearing on H.R. 11. I also would
like to welcome Senator Feinstein, Congressman Franks,
Congresswoman Tauscher, and Mayor O'Connor. Thank you for
joining us.
Under the 1990 Clean Air Act Amendments, regions of the
country with the worst ozone pollution are required to use
reformulated gasoline which must include 2 percent of an
oxygenate by weight. While the Clean Air Act does not specify
the type of oxygen, gasoline refiners primarily use either
ethanol or MTBE. Substantial improvements in air quality have
been attributed to the use of oxygenates. Use of MTBE comes at
a price.
MTBE is highly soluble, biodegrades slowly, and is
persistent in groundwater. Leaking underground storage tanks
and other sources have released MTBE into groundwater, causing
the concern that has led many of my colleagues from California
to support H.R. 11. The Governor of California has signed an
executive order phasing out MTBE over 3 years and asked the EPA
for a waiver from the Clean Air Act oxygenate requirement. The
State would prefer, instead, relying on the reformulated
gasoline required under California's clean air law.
Governor Gray's interest in protecting California citizens
from contamination of drinking water by MTBE is laudable and
understandable. I find this situation rather ironic, however,
in light of another problem involving a gasoline additive with
health and environmental drawbacks. The Ethyl Corporation, an
American company, produces a fuel additive called MMT, a
manganese-based compound that enhances octane and reduces
engine knocking. Health experts believe the neurotoxins in the
manganese in MMT pose a significant public health risk, and
automobile manufacturers contend that MMT damages pollution
control equipment in vehicles.
When the Canadian Government banned the MMT, the Ethyl
Corporation sued it under Chapter 11 of the North American Free
Trade Agreement for exappropriation of property, loss of sales
and profits, and harm to its reputation. Fearing it would lose
the lawsuit, the Canadian Government settled with the Ethyl
Corporation. Canadian taxpayers paid $13 million to this
privately held U.S. company and the Canadians repealed their
environmental law, lifting the ban on MMT. Interestingly,
California, the only State in the country that could, has
banned MMT for public health reasons.
It is troubling that because of NAFTA, the Canadian
Government, unlike the State of California, cannot protect its
citizens from a problematic gasoline additive.
Mr. Chairman, I believe everyone at today's hearing shares
the goal of achieving cleaner air while avoiding further
environmental or health complications from gasoline additives.
We all know that development of the Federal reformulated
gasoline program in the 1990 Clean Air Act Amendments required
extensive negotiations. While I support State flexibility in
meeting clean air requirements, any amendment to the Clean Air
Act should be approached with caution.
I am aware, Senator Feinstein, you have introduced a bill
to waive the oxygen content requirement nationally and,
Congressman Franks, you have introduced a bill to prohibit the
use of MTBE in gasoline. I suggest to the subcommittee that it
be extremely important to hear this thorough testimony on a
national approach before any broad action is taken on the
Federal reformulated gas program. I look forward, Mr. Chairman,
to hearing the views of today's witnesses.
Mr. Bilirakis. I thank the gentleman.
Mr. Bilbray for an opening statement.
Mr. Bilbray. Thank you, Mr. Chairman. Let me echo my
colleague's, the ranking member's comments about making sure
that we address the issues specific before us, which is why my
legislation, H.R. 11, has been designed in such a way to
reflect the rifle-shot approach that this committee has proven
so successfully in the past.
I would just like to say, Mr. Chairman, I appreciate your
support allowing this hearing to move forward and, Mr. Chairman
Bliley, I am really grateful for the bipartisan willingness to
work together on this issue. In California we are really sort
of celebrating the fact that here is an issue that everyone has
finally gotten together and gotten behind. Very seldom do you
ever see a delegation the size of California where you have 52
of the 54 elected representatives in the Federal Government not
just supporting but strongly support the legislation, and I
appreciate the fact that my colleagues from California have
been willing to get behind this.
You may ask why. Frankly, this is the third Congress in
which I have introduced this bill. It was first introduced long
before there was any discussion about additive concerns and
everything else, and was based mostly on my experience working
with the Air Resources Board in California who have some of the
best toxicologists and air pollution strategists in the world.
My bill is content neutral, outcome-based and California-
specific, and I think that the secret here is that we have
focused it on being California-specific and outcome-based.
I want to thank Senator Feinstein because her leadership in
the Senate has been essential at getting the message across,
not just across to the Senate but across this country, and I
appreciate the Senator's leadership on this issue. She has
supported this legislation for two Congresses now and has been
way ahead on this issue, and I appreciate her understanding of
air pollution issues--those of us who come from local
government who have worked these environmental issues in
California understand why we need this bill. We are basically
talking about a public health issue and placing the public
health above and supreme to other strategies and other economic
and social concerns.
I would also like to thank Congresswoman Tauscher for her
leadership. She has a district that is well aware of this
situation, and has taken a lead here. Subcommittee members
Capps and Eshoo have both been strongly in support here and I
want to thank them.
Mr. Chairman, when I introduced this bill in 1976, some
claimed that it was going to be used as a blanket approach----
Mr. Bilirakis. Not in 1976.
Mr. Bilbray. 1996, I am sorry. 1976 was the first year I
was elected, about the time the Senator was involved. But I
just want to point out that the issue at that time was the fact
that the 2 percent oxygen approach was based on a concept that
it was the best public health strategy that the Federal
Government could initiate in the most polluted areas at that
point in time. The Clean Air Act at that time--in fact going
back to the original Clean Air Act--reflected the fact that
California was way ahead of the Federal Government in many
ways. That is why the original act back in the 1970's
specifically isolated California's clean air strategies and
gasoline fuel strategies in this regard from other States--in
fact, California has a specific section in the act. That is why
my bill is written specifically for California, because I am
not talking about opening up the entire act. With H.R. 11, we
are only talking about opening up that section that
specifically has been earmarked for California's clean
gasoline.
The EPA has recognized again and again that California has
developed and designed a ``better mousetrap'' when it comes to
cleaner burning gasoline. The Federal EPA understands that, and
has said it clearly, working with my--with my ex-colleague from
California who has now gone back to California, Mary Nichols.
Her frustration with the fact that the law did not foresee that
Federal regulations may stand in the way of a clean air
strategy led to my first introduction to this bill in 1996.
Let me just say, though, that things have changed. Things
have changed dramatically since I first introduced the bill.
New scientific information reinforces the merits of H.R. 11.
Some past opposition has actually evolved into thoughtful
support for H.R. 11. Here I would ask that the statements of
the American Methadol Institute and the Methanex Company be
introduced into the record at the appropriate time.
Mr. Bilirakis. Without objection.
[The information referred to follows:]
Methanex Methanol Company
Dallas, TX 75251
May 4, 1999
Honorable Brian Bilbray
U.S. House of Representatives
Washington, D.C. 20515-0549
Dear Representative Bilbray: I am writing to express Methanex
Methanol Company's conditional support for your legislation, H.R. 11,
to provide flexibility to the state of California under the Clean Air
Act's (CAA) reformulated gasoline (RFG) program. Would you please
ensure that this letter is placed in the record for the May 6, 1999,
Subcommittee on Health and Environment hearing on H.R. 11.
As we have discussed previously, Methanex believes that the anti-
federalism aspects of the CAA's requirement for a minimum oxygen
content in RFG make it very difficult to devise a rational and workable
solution to the problem of methyl tertiary butyl ether (MTBE) in
groundwater. A major provision of a rational and workable solution
should provide refiners of RFG with maximum flexibility to meet
stringent fuel performance standards that ensure continued progress in
the reduction of air emissions from mobile sources. Within that
flexibility, refiners should be allowed to use the type and amount of
oxygenates, including MTBE, that make the most sense for their
refineries.
While Methanex disagrees with Governor Davis' decision to phase out
the use of MTBE in California, we understand his desire to address the
MTBE water contamination problem using the most effective means
available. The lack of flexibility under the minimum oxygen requirement
of the CAA limited the options available to the Governor and
contributed significantly to his decision to phase out MTBE. At this
point, a continuing requirement to add a minimum level of oxygen in RFG
while simultaneously phasing out the use of MTBE will only force
refiners to use other oxygenates that are more expensive, in short
supply, and not as effective in reducing air emissions.
Given this, Methanex supports the enactment of H.R. 11 provided
that the bill is amended to ensure that the repeal of the oxygen
standard and removal of oxygenates for gasoline will not result in
backsliding on air quality benefits currently being achieved in
California. In this regard, Methanex endorses the statement submitted
by the American Methanol Institute in support of H.R. 11.
I look forward to working with you as the debate on RFG and MTBE
continues in the Congress.
Sincerely,
Fred T. Williams
Methanex Methanol Company, Vice President Marketing
______
Prepared Statement of John Lynn, President & CEO, American Methanol
Institute
Mr. Chairman and members of the Subcommittee, I appreciate the
opportunity to provide you with testimony regarding H.R. 11. I am John
Lynn, President and CEO of the American Methanol Institute, our
industry's trade association here in Washington, D.C. The methanol
industry is a principal partner in our nation's clean air programs.
This year, over 1 billion gallons of methanol will be used to
manufacture the oxygenate methyl tertiary butyl ether or ``MTBE'.''
Nearly one-third of all gasolines sold in the United States is cleaner-
burning reformulated gasoline, and MTBE is the oxygenate of choice.
Further, about 70 percent of all gasoline sold in the country contains
some MTBE.
In the United States, there are 18 methanol plants located in eight
states with total annual production capacity of over 2.6 billion
gallons, about one-fourth of the worldwide capacity. Our industry
creates over 18,000 jobs in the U.S., while generating nearly $3
billion in economic activity each year. The methanol industry also is a
major consumer of domestic natural gas--our basic feedstock--using 200
trillion BTUs of natural gas each year.
In the last decade, the methanol industry has undergone an enormous
transformation. While methanol continues to be an important building
block for hundreds of widely used products, the production of the
gasoline additive MTBE now serves as the largest market for methanol in
the U.S. The methanol and oxygenates industries, along with the
gasoline refining industry, have spent billions of dollars developing
the production capacity to meet the reformulated gasoline market
directed by Congress in the Clean Air Act Amendments of 1990.
The reformulated gasoline program has been one of the shining
success stories of the Clean Air Act, dramatically improving air
quality for 75 million Americans. RFG reduces smog precursor emissions
by 36,000 tons per year, which is equal to removing over eight million
cars from our streets and highways. According to the U.S. EPA, the
actual emission reduction benefits of reformulated gasoline have
greatly exceeded the mandated targets of the Clean Air Act for volatile
organic compounds (VOCs), oxides of nitrogen (NO<INF>x</INF>), and air
toxics. In just eight months, the second phase of the reformulated
gasoline program will begin, with twice the smog-fighting benefits
being achieved today. MTBE has been the refinery industry's oxygenate
of choice in reformulated gasoline.
This past weekend, President Clinton announced the Administration's
Tier II proposal to set tougher standards for tailpipe emissions, and
cut sulfur levels in gasoline by about 90 percent over the next five
years. The EPA estimates that this cleaner gasoline will only cost
between one and two cents per gallon more at the pump. One way refiners
may choose to meet these fuel requirements would be to add MTBE to
replace the octane lost by removing sulfur, and for its favorable
dilution benefits.
Just over a year ago, AMI Chairman Roger Seward testified to this
Committee expressing concern about the legislation offered by
Congressman Bilbray regarding California's participation on the federal
RFG program. A lot has happened in the past year, most notably the
Executive Order instituted by Governor Gray Davis of California.
Today, the American Methanol Institute is prepared to offer its
support for H.R. 11, if the bill is amended to ensure that the air
quality benefits Californians now enjoy are not compromised. We
recognize that the bill as drafted attempts to prevent backsliding on
air emissions by requiring equivalency. However, we are concerned that
``equivalency'' refers to the emission reduction requirements of the
Clean Air Act, which fails to take into account the fact that actual
air quality benefits being achieved through the use of reformulated
gasoline have greatly exceeded the mandated targets. Based on
discussions with the Oxygenated Fuel Association, we would like to
offer the following language to provide greater definition on this
critical point:
Equivalent air quality shall be demonstrated for actual in-use
vehicle fleet mass emissions of Volatile Organic Compounds
(VOCs), Oxides of Nitrogen (NO<INF>x</INF>), and Air Toxics
(i.e., the reactivity adjusted sum of benzene, butadiene,
formaldehyde, acetaldehyde and ploynuclear organic matter),
using the California Air Resources Board's predictive model in
effect on December 31, 1998. The new gasoline formulation shall
also be shown to result in equivalent or lower mass emissions
of Carbon Monoxide (CO), and Particulate Matter smaller than
2.5 microns (PM 2.5), as well as equivalent reactivity-adjusted
ozone emissions.
We believe that the addition of this or similar language will
prevent air quality backsliding, and ensure that the actual air quality
benefits that are provided citizens of California today are not lost or
sacrificed by this change to the Clean Air Act. We also believe that
this legislation, if amended, will provide the refining industry with
the flexibility needed to meet California's gasoline demands. Without
the language necessary to safeguard today's air quality benefits, the
American Methanol Institute will be forced to oppose passage of H.R.
11.
AMI's insistence on protecting the air quality gains that have been
achieved is consistent with the actions taken by Governor Davis. Keep
in mind, that the actions taken in California were not instigated by
any immediate concerns for human health. Rather, the Governor was
reacting to incidences of groundwater contamination from MTBE. Our
industry continues to be concerned about the lax response to state and
federal requirements for the upgrading of underground storage tanks
(USTs), and the uneven enforcement of existing law. Of the 892,000
federally regulated USTs, the U.S. EPA estimated that only 56% were in
compliance with federal upgrade standards when the December 22, 1998
deadline was reached. As a nation, we must do more to ensure the proper
handling and containment of gasoline products. Further, any new fuel
formulations must be carefully evaluated for their potential to impact
groundwater resources and to affect air quality.
Finally, I'd like to close my remarks by looking ahead. In a few
weeks, the U.S. EPA Blue Ribbon Panel on Oxygenates will be issuing its
final report and recommendations. Likewise, the Northeast States for
Coordinated Air Use Management (NESCAUM) will be issuing a set of
policy recommendations to guide officials in the Northeast states. I
would strongly urge the Congress not to take any precipitous action on
the federal reformulated gasoline program until these reports have been
made available, and given an ample opportunity for review and comment.
The RFG program has been a huge air quality success, and there is no
pressing health concern that would warrant premature action by Congress
that may ultimately weaken this program.
Thank you for providing the American Methanol Institute with this
opportunity to express our thoughts.
Mr. Bilbray. I believe that this evolution of thinking is
reflecting the philosophy that the underlying bill, H.R. 11,
needs to be passed.
Mr. Bilirakis. Please finish up.
Mr. Bilbray. I will, Mr. Chairman. I just want to close by
saying the issue here is that H.R. 11 is content-neutral. We
don't chase our tail trying to figure out what to allow or what
to outlaw. We basically say that outcome is what is really
important. MTBE contamination and other issues can be addressed
locally with the California option if you provide that
flexibility. And I want to remind you that the Senate has
discussed the flexibility issue, along with the possibility of
making it national.
Mr. Franks has introduced a bill specifically to outlaw
MTBE and now it is my understanding that my colleague, Mr.
Pallone, is also contemplating a national approach to my
California-specific bill. I think all of these approaches point
out that there is strong support not just in California but
across the country to allow California to go specific with this
bill and to see exactly how much public benefit we can have by
allowing the flexibility to allow the State of California to do
the right thing for the people at the right time with this
legislation, and I hope we gain your support.
Mr. Bilirakis. The gentleman's time has expired.
[The prepared statement of Hon. Brian P. Bilbray follows:]
Prepared Statement of Hon. Brian P. Bilbray, a Representative in
Congress from the State of California
Mr. Chairman, thank you for holding this hearing today, and for
your willingness to work with me on behalf of the State of California
on this important issue. As you are well aware, this is an issue that
I've been working on since the 104th Congress, and on which the State
of California is united in support. I appreciate your ongoing support
and that of our colleagues, as the circumstances surrounding H.R. 11
have evolved into the higher profile landscape which we face today.
We will hear witness testimony shortly, but I want to take this
opportunity to specifically thank Senator Dianne Feinstein, who has
been a champion on this issue in the Senate and has introduced
companion legislation to H.R. 11 in the last two Congresses, for taking
the time to be here today. I would also like to thank our House
colleague Ellen Tauscher, who represents California's 10th District in
the Pleasanton area, and has been a tireless advocate in support of
this legislation among our delegation and the entire House.
Mr. Winston Hickox, the new Secretary of the California EPA, is
here on behalf of Governor Davis and H.R. 11, and I should say here
that I am very grateful for the long and continuing history of support
from CalEPA and the ARB on this legislation, which has been essential.
We will also hear strong support for H.R. 11 from Mayor Pam O'Connor
from the City of Santa Monica, part of California's 29th District which
is represented by our Committee colleague Henry Waxman.
Mr. Chairman, it has certainly been very interesting watching the
landscape around H.R. 11 evolve. When I first introduced this content-
neutral, outcome-based and California-specific legislation back in
1996, it came under fire by some stakeholders which characterized it as
a ``camel's nose under the tent'', the ``real'' intention of which was
to erode the national 2% oxygenate requirement, by allowing states
other than California to take advantage of its flexibility. Well, Mr.
Chairman, then as now, three years later, this bill is specific only to
California, recognizing the facts that 1) Congress has already provided
California with a unique and exclusive provision in the Clean Air Act
that allows it to operate its own fuels program, and 2) since 1990,
California has built the proverbial ``better mousetrap'' in that it has
developed a cleaner-burning gasoline that meets or exceeds existing
federal emissions standards.
But despite the resounding stability of this message of regulatory
flexibility for California throughout three Congresses, Mr. Chairman,
there have been a number of developments, albeit separate from H.R. 11
itself, which nonetheless have served to color the ongoing discussion
of this issue. There is compelling new information which serves to
further underscore the benefits of and need for the bill, and there is
also new support of the bill from several stakeholders which have in
the past expressed skepticism or been opposed to this legislation
outright. Expanding on this, I have statements here from the American
Methanol Institute, and a former member of the Oxygenated Fuels
Association, the Methanex Company, which I would ask to be included in
the record at their request. I strongly believe that this evolution is
a result of a much-improved understanding of the intent and scope of
this bill, and an acknowledgement of the strength and merits of the
outcome-based philosophy which underlies H.R. 11. Also for the record,
Mr. Chairman, I would also like to include with this the July 31, 1996
letter to Chairman Bliley from then-Chairman of the Air Resources Board
John Dunlap in support of this legislation, and the September 10, 1996
letter to Chairman Bliley from AMI, OFA, and RFA. I think these letters
help to show, respectively, the continuity of the argument on behalf of
H.R. 11 since its introduction, and how the perception of it has
evolved among specific stakeholders.
At this point, Mr. Chairman, I think it would be helpful to
reiterate two basic points--first, H.R. 11 is content-neutral, and
because it is focused on outcome and not process, it neither requires
nor bans the use of any particular ingredient which might be used to
manufacture California's reformulated gasoline. Its purpose is to
provide California-specific relief from the federal mandate which
California's own fuel has outpaced, and it is written to give
California that added flexibility by which to meet its already
stringent emissions standards. Second, I want to emphasize that this
legislation predates, and is not a direct reaction to, the separate
issue of MTBE contamination, which since this bill was first introduced
in 1996 has itself has developed into a public health concern of such
magnitude in California that Governor Davis was recently compelled to
issue an executive order to phase out its use.
Clearly, in California, which, led by Governor Davis, continues to
strongly support H.R. 11, the MTBE issue has reached new levels of
concern. As a result, Governor Davis has taken decisive action, based
on the findings of several comprehensive scientific studies, including
by the University of California, to phase out the use of MTBE in
California over the next three years.
Several other states have begun to experience similar concerns and
explore similar actions, and in the Senate legislation has been drafted
which would seek to provide governors with the kind of flexibility
which would be provided to California by H.R. 11. Our New Jersey
colleague Mr. Franks, who has introduced legislation which deals solely
with MTBE, will provide his state's perspective on H.R. 11, and it is
my understanding that our Committee colleague Mr. Pallone may be
contemplating taking up a broader bill on state flexibility similar to
that now pending in the Senate. Some might find it rather ironic that
there is now a growing discussion of whether the kind of flexibility
that H.R. 11 would provide only to California should be available to
other states. However, while these other initiatives may take differing
perspectives from H.R. 11, they are part of an important ongoing
dialogue on this broader issue, all of which I believe keeps circling
back to H.R. 11 as the practical solution.
Separately, Mr. Chairman, let me say that I appreciate your
specific interest in requesting EPA to discuss whether it has the legal
authority to waive the 2% minimum oxygen requirement in section 211(k)
of the Clean Air Act, for California or any other state. As you are
aware, this was a primary consideration which led to my initial
introduction of this legislation in the 104th Congress. Prior to
introduction of what was then H.R. 3518, I worked in close consultation
with EPA, particularly Mary Nichols, who like myself is an alum of the
California Air Resources Board, and who then served as EPA's
Administrator for Air and Radiation. Based on these consultations, it
was clear at that time that legislative action was in fact necessary to
provide California with the legal ability to operate its own fuels
program in lieu of the federal program established by the 1990 Clean
Air Act Amendments, and I introduced legislation, now H.R. 11, as a
result. Given this history, I am very interested in the views of Mr.
Perciasepe on the State of California's question to this effect.
Having touched on these more recent developments, Mr. Chairman, I
would like to revisit the basic principles which underlay the bill and
its high level of support. H.R. 11 would simply build on the existing
California-specific provision in the Clean Air Act to allow California
to meet its already tough standards without being mandated to follow a
specific ``recipe''. In essence, the state's more stringent RFG program
would operate in lieu of the overlapping and less stringent federal
program, so long as the state program continues to demonstrate that it
is achieving equal or better reductions in overall emissions of VOCs
and air toxics. The U.S. EPA has recognized that the California program
is more stringent, and has stated as much in several past federal
register notices. This can be accomplished without sacrificing or
``backsliding'' on any public health or environmental benefits that
California now enjoys; indeed, the broad support of air quality and
water districts around the state are testament to this fact, and I
believe that our witnesses from the California EPA and the Association
of California Water Agencies can address this in greater detail.
More specifically, H.R. 11 has been carefully drafted to build
exclusively on California's unique and preexisting ability under the
existing Clean Air Act to operate its own fuels program. This is so for
good reason, as California has historically had unique air pollution
challenges which require innovation and creativity to address.
Recognizing this, Congress singled it out for special status in Section
211(c)(4)(b) of the Clean Air Act, which reads ``Any state for which
application of section 209(a) has at any time been waived under section
209(b) may at any time prescribe and enforce, for the purpose of motor
vehicle emission control, a control or prohibition respecting any--fuel
or fuel additive.'' Under Section 209(b)(1) a waiver may only be
provided to ``any State which has adopted standards . . . for the
control of emissions from new motor vehicles or new motor vehicles
engines prior to March 30, 1966, if the State determines that the State
standards will be, in the aggregate, at least as protective of public
health and welfare as applicable Federal standards.'' California is the
only state which has met this criteria; as a result H.R. 11 as it is
written applies exclusively to California under the Clean Air Act, and
is not applicable to any other states.
I also want to reiterate to my colleagues that I continue to be
sensitive to concerns which have been expressed about the potential for
this legislation to ``open up the Clean Air Act'' or somehow serve as a
``vehicle'' for other amendments which might be harmful to the Act. Let
me again clarify that this is neither the intent nor effect of H.R.
11--it is tailored to be applicable to California only, and to meet its
specific needs by building on its unique status under the existing Act.
This Committee has on several occasions in recent years demonstrated
its ability to shepherd through the legislative process other
bipartisan ``rifle-shot'' amendments to the Clean Air Act, without
``opening it up'' in a harmful manner, and I have great confidence in
the ability of Chairman Bilirakis and Chairman Bliley to manage the
process accordingly to do so again. I appreciate their concern for the
integrity of the public health and high standards of air quality, and
look forward to working with them and our stakeholders to create a
favorable environment for the passage of this bill.
In conclusion, Mr. Chairman, ever since I first introduced this
legislation, I have tried to be as plain as I can about my intent with
H.R. 11, and my door has been open continuously to all interested
parties. I believe that the broad support which it now enjoys,
including new expressions of support from previously skeptical or
opposed stakeholders, serves to reinforce the level of awareness and
education that has gone into this process since I first introduced this
legislation in 1996. I greatly appreciate the amount of time and energy
which the Subcommittee and my colleagues have devoted to this important
clean air issue, and their willingness to learn about and support a
common-sense response to it.
We are reaching, if we have not already, a ``critical mass'' for
H.R. 11--the need for this bill has never been greater, or more evident
to Members of both the House and Senate. What is boils down to is
simple fact--California has different (and more difficult) air quality
needs than the rest of the nation. The Clean Air Act already reflects
this. California has used this unique authority under the Act to
develop an advanced, cleaner-burning fuel which outpaces the federal
standard--the proverbial ``better mousetrap''. H.R. 11 will maximize
the State's ability under the Act to achieve and improve upon its more
stringent air quality standards and respond appropriately to other
public health concerns which may arise. This is the essence of the
justification for and rationale behind this bill, and is what all our
participants should be focused on today; I look forward to the
testimony of our witnesses.
Mr. Chairman, I have several letters of support for H.R. 11 which I
would like to be added to the record, including letters from the
California Air Pollution Control Officers Association, the California
Chamber of Commerce, the California Manufacturers Association, the Los
Angeles County Board of Supervisors, the Metropolitan Water District,
and the California Business Alliance, to name just a few. I also have
other supporting material which I would ask to be included in the
record.
Thank you, Mr. Chairman.
Mr. Bilirakis. Mr. Pallone.
Mr. Pallone. Thank you, Mr. Chairman. Mr. Chairman, I do
not believe Congress should legislate a California-only bill.
California's Governor has already signed an executive order
waiving the State's oxygenate requirement and banning MTBE, and
therefore I introduced a bill just last evening that would
address reformulated gasoline nationally.
My bill, which is H.R. 1705, would waive the 2 percent
oxygenate requirement for the entire country essentially in the
same manner as Senator Feinstein's bill and I want to commend
the senator for moving toward a national initiative.
The bill I have introduced phases out MTBE in 3 years, as
is the case in California, as long as an adequate supply of
gasoline remains available and Clean Air Act requirements
continue to be met.
My bill would not preclude or prohibit the use of ethanol.
It would also require the National Academy of Sciences to
conduct the study of all other oxygenates and their combustion
byproducts to determine their health and environmental effects.
The bill I have introduced is supported by groups such as
Oxybusters, which originated in New Jersey and now exists
nationwide. I would ask unanimous consent, Mr. Chairman, that
testimony from this group be submitted as part of the formal
record.
Mr. Bilirakis. Without objection.
[The information referred to follows:]
Prepared Statement of Oxy-Busters of New Jersey
Oxy-Busters of New Jersey supports Congressman Frank Pallone's bill
to ban oxygenated fuel throughout the nation. The accomplishment of
this feat would be the culmination of six years of tireless efforts to
rid our country of these dangerous and useless fuel additives.
When oxygenated fuel was introduced in New Jersey in November 1992,
hundreds of unsuspecting victims experienced severe health problems
that included pounding headaches, sinus problems and breathing
difficulties. I, too, suffered from severe headaches, which prompted my
formation of Oxy-Busters, a grassroots organization dedicated to the
elimination of oxygenated gasoline.
Our efforts to rid New Jersey of oxygenated fuel were stymied by
the insensitivity of the state Department of Environmental Protection,
which continued to assert that oxygenated fuel was cleaning the air. It
was only recently that a University of California study proved what
Oxy-Busters had asserted all along--that oxygenated fuel has little, if
any, effect on cleaning the air. Even when Oxy-Busters presented 15,000
signed petitions to Gov. Whitman calling for a ban on oxygenated fuel,
our state government continued to do nothing to protect its citizens'
health. Gov. Whitman claims she has been supportive of our movement,
yet her token efforts pale in comparison to those of more progressive
governors who have managed to ban some forms of oxygenated fuel from
their states.
Maine, North Caroline, Montana, Alaska and California have
successfully fought against oxygenated fuel and have helped ensure the
well-being of their states' citizens. With the assistance of Frank
Pallone, the entire nation can be free from all oxygenates and all
citizens will be able to breathe the air outside their homes again. We
applaud Congressman Pallone's national leadership on this issue.
Just as our air has been polluted by oxygenated fuel, so, too, has
our water supply. Oxygenated fuel has been discovered in ground water
in numerous places throughout the country, and because some oxygenates
are suspected carcinogens, this water contamination should be a cause
for great alarm.
In New Jersey alone, Oxy-Busters has documented more than 800 cases
of people suffering ill health effects from oxygenated fuel. Keep in
mind that most of these people had never experienced any type of
chemical sensitivity prior to the introduction of oxygenated fuel. We
shudder to think of how many people throughout the United States are
also suffering but are unaware of what is making them ill, or think
they have nobody to turn to.
Now, thanks to Congressman Pallone, they do.
Barry Grossman
Founder, Oxy-Busters of New Jersey
______
Prepared Statement of Oxy-Busters of New Jersey, Southern Division
Oxybusters of New Jersey is a grass roots organization that opposes
the use of oxygenates in gasoline. We are part of a national movement
that began in 1993 after thousands of people became ill from exposure
to oxygenated fuel. Our group opposes the use of oxygenates for the
following three reasons:
1) Health Effects--oxygenates create harmful combustion byproducts
when used in gasoline. These include formaldehyde, acetaldehyde,
tertiary butyl alcohol, formic acid, isobutylene and nitrogen oxides.
These toxic chemicals can cause severe respiratory irritation. We
believe the dramatic increase in asthma in recent years is linked to
these byproducts. The federal EPA has only recently begun to study
these chemicals.
2) Air Quality Effects--the purpose of oxygenates was supposed to
be to reduce emissions of carbon monoxide (CO) and volatile organic
compounds (VOCs). Oxygenates are unnecessary for either purpose, and in
some respects, counterproductive. All cars built since the mid-1980's
have oxygen sensors, which control the oxygen mixture. In these cars,
oxygenates have no impact on CO--but they do result in increased
nitrogen oxides emissions, which create smog. Generally speaking, CO is
not the major problem of vehicle emissions that it was in the 1980's,
because of the oxygen sensors.
While oxygenates have replaced some VOCs in gasoline, refiners have
acknowledged they can maintain these reductions without using
oxygenates. Extensive studies done by the Auto and Oil industries, and
also by the University of California, all concluded that oxygenates do
not make gasoline burn cleaner.
3) Water Contamination--MTBE has contaminated water supplies
throughout the country. Because it is ether-based, it is highly soluble
in water, unlike other components of gasoline. It also biodegrades very
slowly, and is extremely costly to cleanup.
For these reasons, our group believes that the oxygen requirement
for reformulated gasoline should be eliminated. In addition, all ether-
based additives should be banned on a national level. We very much
appreciate the interest Congressman Frank Pallone has taken in these
issues. We would support any federal legislation that would accomplish
these goals.
Barry Dorfman
Director of Special Projects
Mr. Pallone. There are other groups such as the California
chapter of the Sierra Club which support the policy concepts of
this bill. The American Lung Association also has expressed
support at least for lifting the oxygen caps nationally.
I introduced this legislation because other parts of the
country deserve to breathe clean air and experience the same
health benefits as California. In my State of New Jersey and
elsewhere as--I was going to say Senator Franks; better be
careful, Bob--as Representative Franks and others will
reiterate, groundwater problems and health problems from MTBE,
which is used as an additive for reformulated gasoline, are
cropping up.
For example, the New Jersey State Department of
Environmental Protection issued a 1998 report which indicated
that approximately 400 private wells were contaminated with
MTBE beyond the New Jersey safe drinking level of 70 parts per
billion. And yet my home State is not considering banning MTBE
and that is why we need national legislation.
Let me just mention also the oxygenate requirement
currently in law. Research efforts conducted separately by the
University of California, Dr. Peter Joseph of the University of
Pennsylvania, the American Petroleum Institute and others,
indicate that the oxygenate requirement not only does not
improve air quality, it actually increases nitrogen oxides
which is a precurser to smog and can increase exhaust emissions
of formaldehyde and other toxic compounds.
The Sierra Club is on record opposing an oxygenate
requirement and in arguing that such a mandate would increase
the potential for smog and air toxins, and the research has now
proven that added oxygenates reduces carbon monoxide. I have
also been told some companies, which are represented here
today, have market-ready alternative fuels that can meet clean
air standards without using oxygenates. So it appears the
oxygenate requirement doesn't necessarily reduce emissions and
may cause harmful consequences as well.
Last, Mr. Chairman, I just wanted to mention with regard to
MTBE and the compounds used to meet the RFG oxygenate
requirement, MTBE is highly soluble in water, biodegrades
slowly and is costly to clean up. Like some of the witnesses
here today, I do not believe we should wait for more
groundwater contamination and more people to get sick before we
take nationwide action. And the costs of removing MTBE upfront
are far less than cleaning up contaminated groundwater supplies
and paying for health expenses related to MTBE exposure.
DOE estimates that removing MTBE in conjunction with
lifting the oxygenate requirement would cost only a few pennies
per gallon of gasoline. Since the EPA is already issuing
regulations to remove sulfur from gasoline, which would already
serve to reduce environmental impacts, the cost would probably
be even lower than these estimates.
Mr. Chairman, I am basically writing a letter to each of
our witnesses, asking that comments on my bill be included in
the record, and, ask unanimous consent that the record be kept
open for this purpose, with your permission.
Mr. Bilirakis. I thank the gentleman.
Mr. Bryant, for an opening statement.
Mr. Bryant. Thank you, Mr. Chairman. I do want to express
my gratitude to you and to Mr. Brown for holding this hearing
today on legislation introduced by my colleague from
California, Mr. Bilbray. Although this legislation specifically
relates to the situation in California, several issues we will
examine here this morning should concern us all. We are all
affected or potentially affected by the Clean Air Act and the
amendments of 1990. There isn't a congressional district in
this country that isn't affected by the cost and supply of
gasoline, and we are certainly all impacted by air and water
quality.
Not being an expert in environmental policy, I am looking
forward to hearing and learning from the testimony of our
witnesses today. I also want to thank all of you for taking the
time to be with us and thank you, Mr. Chairman. I yield back.
Mr. Bilirakis. Mrs. Capps, for an opening statement.
Mrs. Capps. Thank you, Mr. Chairman, for holding this
important hearing on H.R. 11. I welcome our witnesses today. I
especially want to welcome my own Senator and good friend,
Dianne Feinstein, and my California colleague, Ellen Tauscher,
who have both been leaders on this issue along with Mr. Bilbray
to help sponsor this legislation.
I am very proud to be an original co-sponsor of this bill
and pleased that an almost unanimous agreement exists among the
California colleagues in the House to support this important
legislation.
H.R. 11 will provide my home State the flexibility it needs
to keep our air clean without adversely affecting our drinking
water supply. California leads the Nation in air pollution
control programs. We already have the Nation's strongest
cleaner burning gasoline standards, which are stronger than the
Federal clean air standards. California has adopted a
performance-based program that allows gasoline refiners to use
innovative fuel formulas to meet clean air requirements without
mandating potentially harmful additives such as MTBE.
We all share the same goal here, to develop the cleanest
burning fuel to reduce air pollution. However, clean air must
not come at the expense of clean drinking water. With recent
studies showing the harmful effects of MTBE to California's
groundwater, it was no surprise that our new Governor ordered
the elimination of that additive to California's gasoline
within the next 3 years. A recent Federal survey indicates that
69 percent of California's population relies on groundwater for
their source of drinking water. Furthermore, the U.S. EPA has
indicated that MTBE is an animal carcinogen and has a human
carcinogenic hazard potential. The bottom line is that MTBE is
not needed, and dangerous.
California can meet Federal clean air standards by using
their own State clean gas regulations. It simply does not make
sense to continue using a chemical additive that is
unnecessary, pollutes California's drinking water supply and
threatens the public health.
H.R. 11 will allow California the flexibility it needs to
ensure clean air and clean water. I hope we can bring this bill
to a vote soon. Thank you.
Mr. Bilirakis. Thank you. Dr. Ganske.
Mr. Ganske. Thank you, Mr. Chairman. I will be brief. There
is ample evidence that oxygenates help fuel burn cleaner. We
want clean air so we have oxygenates. We don't want
contaminated water, so get rid of MTBE. But I am not in favor
of exempting California from all oxygenates simply because
there is an alternative called ethanol. I look forward to
testimony by Eric Vaughn from the Renewable Fuels Association.
Thank you, Mr. Chairman.
Mr. Bilirakis. I thank the gentleman. Mr. Waxman.
Mr. Waxman. Thank you very much, Mr. Chairman. I want to
thank you for convening today's hearing on an issue of great
importance to California and to our Nation and I am looking
forward to getting the testimony. I know you are all looking
forward to giving us the testimony from our witnesses that are
sitting at the table and are going to follow them.
I particularly want to welcome Mayor O'Connor from Santa
Monica in my own district for being here, and my own State U.S.
Senator, Dianne Feinstein.
This bill would allow California's reformulated gasoline to
substitute for Federal reformulated gasoline. The most
significant impact of this change would be to exempt California
from the congressionally mandated Federal oxygenate
requirement.
When this legislation was first introduced, its goal was to
eliminate overlapping requirements between Federal and State
law, now the center of a raging MTBE controversy in California
and in other parts of the country.
I would like to mention briefly the major problem
associated with MTBE use and leaking underground fuel tanks of
California. Nowhere has this created more of a crisis than in
my own district of Santa Monica. MTBE has been detected at high
levels in two of Santa Monica's drinking well water fields, the
Arcadia and the Charnock well fields. The water from these
wells smells and tastes like turpentine. Even if we were sure
it was safe to drink, and we are not sure of that, the taste
and odor problems render it undrinkable. Both of these drinking
water wells have been closed down, forcing Santa Monica to
secure alternative water supplies at a considerable loss of
self-sufficiency.
The U.S. EPA has initiated a Federal enforcement action to
clean up the most significant of these well fields, but cleanup
is proving more complicated, costly, and time-consuming than
expected.
I am concerned that Santa Monica's experience may become a
reality in other areas. Preliminary studies, for example,
indicate that MTBE is already showing up in groundwater
supplies in the northeastern States. We would do well to gather
what lessons we can from Santa Monica's experience to help
address other areas where MTBE may be an emerging problem.
As one of the few members of the California delegation who
has yet to co-sponsor H.R. 11, I am interested in assuring that
as we move forward, we do everything we can to fix California's
problem and realize that this is a growing national problem. We
have to ensure that other States can prevent harm.
It is important to note that neither the Clean Air Act nor
the California fuels program requires that any specific fuel
additive be used to satisfy oxygenate requirements. Instead it
was the oil companies' choice to use MTBE to satisfy Clean Air
Act requirements.
MTBE currently accounts for 76 percent of oxygenate used in
the United States. Although the oil companies are the ones
financially responsible. And they recognize that
responsibility, we need to prevent contamination rather than
try to clean it up after it has occurred. So I want to ensure
that we prevent the widespread adoption of other fuel additives
which may pose unsuspected risks to the public health or
environment and put us in a similar situation 5 or 10 years
from now.
It is also essential, of course, that this subcommittee and
our committee consider steps that directly deal with problems
of leaking fuel tanks. It appears that previous legislation has
not adequately addressed this serious issue. In addition as we
mark up legislation, we need to make sure that any changes
don't result in more emissions of toxic air pollutants and we
need to also take into account potential impacts on global
warming.
Mr. Chairman and my colleagues, it would be easy to say
let's deal with California alone, but this is a growing
national problem and we have to look at the full consequences
of this issue and any changes we make and how it is going to
affect the whole country.
I want to thank you again for holding today's hearing. I
look forward to working with you and my colleagues on a
bipartisan bill that protects our environment and adequately
addresses the serious problems posed by MTBE.
Mr. Bilirakis. I thank the gentleman.
Mr. Green?
Mr. Green. Thank you, Mr. Chairman, for holding this
hearing on H.R. 11. The Clean Air Act regulations on
reformulated gasoline are clearly becoming not only in
California but also in other States a point of contention.
Because I was not here when the Clean Air Act Amendments were
passed in 1990, I was not involved in the decision prescribed
how to formulate reformulated gasoline. To be honest, I
understand the need and reasoning behind mandating RFG
performance levels, but I can't imagine why we would find the
need to mandate the formula with which refineries meet these
standards. Maybe someone who was around back then can explain
that point during the hearing.
Nevertheless, the Federal Government established the
oxygenate standard as a major component of the Clean Air Act
RFG standards. Whether you agree or disagree with that
decision, the fact remains it was made, and companies in Texas
have stepped up to meet the Nation's needs.
While H.R. 11 does not go as far as Governor Davis'
executive order to remove MTBE from RFG in California, nor does
it go as far as some Federal bills that have been introduced
into the House and Senate that would prohibit the use of MTBE
in gasoline for the entire country, I do believe it starts us
down a road that could simply not be ready for the traffic.
Before we abandon the use of MTBE in reformulated gas, we
need to make sure we have a viable alternative as safe as MTBE
is, as effective in reducing volatile organic compounds, does
not have other negative effects on the environment, is
affordable and is accessible throughout the country. And I find
that I agree with partial parts of all my colleagues'
statements before me.
Let me first address the public health issue. While it is
well known and documented MTBE causes odor and taste problems
in drinking water, it is not known at what levels the
contamination becomes hazardous. Unfortunately the public
health effects of the alternative of MTBE ethanol is also not
known. We should not rush to use another oxygenating compound
before we know more about it. Let's not make the same mistake
again.
Likewise, there is still very little known about non-
oxygenated gasoline. What we do know is that the product has
more aromatics which will significantly increase the level of
toxic emissions into the air.
Finally, on the issue of affordability and accessibility,
the simple fact is that ethanol, because it is so difficult to
transport and more expensive to produce, cannot currently be
counted on to meet the Nation's needs if MTBE was banned.
Mr. Chairman, let me conclude by saying we all want to
protect the quality of our drinking water, and Texas water is a
scarce resource and we do all we can to protect it. However,
the most direct approach in protecting water is to make sure
our underground storage tanks are sound and to be careful when
handling gasoline. The fact is many storage tanks do not meet
Federal safety guidelines, so replacing MTBE with another type
of gasoline will only mean different substances will leak into
that ground. Some flexibility may be needed in the fuel
oxygenate standard; however, no resulting policy should
undermine air quality or reduce the accessibility of fuel for
any Americans. We need to be cautious and thorough before we
proceed. Thank you, Mr. Chairman.
Mr. Bilirakis. Thank you.
Ms. Eshoo.
Ms. Eshoo. Yes, good morning, Mr. Chairman, and thank you
for holding this important hearing. First I would like to
welcome our very, very distinguished senior Senator of the
State of California. She has distinguished herself in
everything that she has done in public service, so we are very
proud to have you here; and a special welcome to my Bay Area
colleague, Ellen Tauscher.
Mr. Chairman, there is a saying that as California goes, so
goes the Nation. And I think an awful lot of that is built into
this bill which I am very proud to be a co-sponsor of. We know
that we have a problem with MTBE. We know that there are health
risks. We know that there is contamination of over 10,000
groundwater sites in California. California is not asking to be
let out the back door on the Federal Clean Air Act. We are
asking for flexibility; that we meet the Federal requirements,
but that we do it in a different way.
I think that we have established a clear case of the
problems with MTBE, and I think that the solution we put
forward would not only be good for California but also would be
a model for other States in addressing similar problems. It
wouldn't mandate that other States do that, but it would simply
set up California as a major case in the country, and
California is always a major case since we are the largest
State in the Nation.
So I am proud to co-sponsor the bill. I think it is
sensible. I think that it asks for the right kind of
flexibility, but it does not let California out from under the
stringent standards which I have always supported relative to
the Federal Clean Air Act.
Last, Mr. Chairman, I would like to request unanimous
consent that a statement from the Santa Clara Valley Water
district be entered into the record.
Mr. Bilirakis. Without objection.
Ms. Eshoo. Thank you and I yield back.
Mr. Bilirakis. Thank you. I think that completes our
opening statements. Ms. DeGette was here but I am not sure she
will be returning right off. Apparently not.
I, too, want to add my welcome to the first panel and
particularly to our colleagues and to Ms. O'Connor for having
come so very far to testify here today.
As per usual, your written statement, those of you who have
provided one, is a part of the record. I will set the clock at
5 minutes for each of you and hope that you could stay within
that time. If not, as long as you are on a particular point, in
the middle of a sentence, you can continue. We will kick off
with the Honorable Senator Feinstein.
STATEMENT OF HON. DIANNE FEINSTEIN, A U.S. SENATOR FROM THE
STATE OF CALIFORNIA
Senator Feinstein. Thank you very much, Mr. Chairman, I am
really delighted to be here. I will put my written statement in
the record.
What is clear is the committee knows a lot about this. I am
really heartened to see this. I would, just like to talk with
you informally this morning. I want to begin by thanking
Congressman Bilbray for his longstanding work in this effort. I
have introduced his bill in the Senate, as well as three others
which I will talk about in a moment.
I also know that Representative Henry Waxman with his real
expertise on health and environmental issues is playing a vital
role in this, and I want to particularly thank Representatives
Lois Capps and Anna Eshoo for their expertise. A good deal of
what Mr. Pallone has said I strongly agree with. I am really
very concerned about this because there are a number of Catch-
22s on the way to working out a solution.
Congressman Bilbray is right. We really do need to work on
a bipartisan basis and it is unacceptable to clean our air by
polluting our groundwater. And let there be no doubt, MTBE is a
serious pollutant.
But it is not only in California. I think clearly you will
see the extent in California. This map shows the sites of
leaking underground fuel tanks and leaking public wells in
California. You see the Los Angeles area. You see the San
Francisco Bay area. You see the Central Valley area. It's a big
problem.
It is also a problem developing in other States as well, in
at least 19 other States. The U.S. EPA survey in 1998 found
MTBE in 251 of 422 public wells in 19 States. The U.S.
Geological Survey and a 12-State survey of New England mid-
Atlantic States said that using MTBE in gasoline results in a
four- to sixfold increase in its presence in water.
MTBE to date has been detected in water in States such as
Maine, Pennsylvania, Virginia, Texas, Kansas, New York, New
Jersey, Georgia, Alabama, Colorado, New Hampshire,
Massachusetts, Delaware, and Arizona. There is no question it
is carcinogenic in animals. Now that has not been proved for
humans, but there is strong scientific belief that when it
happens in animals, everybody should be alerted.
The Catch-22 is that there are those, including the EPA and
environmentalists, who don't want to see the Clean Air Act
opened up. There are those that don't want a California-only
solution. We hear some of that on this committee. It exists in
the Senate. I have worked with the Chairman of the Environment
Committee, Senator Chafee, who has made clear that he doesn't
want only a California solution.
The other Catch-22, frankly, is the ethanol lobby, the
Renewable Fuels Association. I have the pleasure of meeting
with them this afternoon and I hope we can clean the air which
is clouded, I think, by several misimpressions. They view any
action as the camel's nose under the tent with respect to
ethanol and they want to ratchet up the ethanol requirement in
gasoline to 5 percent. Consequently, we have all of these
conflicting things going on. At the same time, we have MTBE
which spreads dramatically in groundwater.
I first was brought into this when I was visited by the
mayor of Santa Monica who spelled out with charts and graphs,
and had her attorneys there, about the pollution of 50 percent
of the groundwater of Santa Monica. Since that time and
beginning this week, south Lake Tahoe's drinking water is being
rationed. Tosco has moved very rapidly to pull MTBE out of the
water that goes to Lake Tahoe, but there isn't enough clean
water. Consequently, they are rationing water. In Santa Clara
County it has infiltrated their groundwater; 52 out of 58 water
districts, counties, have said, please help. I would like to
put their resolutions and their statement in the record.
Mr. Bilirakis. Without objection.
Senator Feinstein. Chevron has indicated very clearly to
me--and their representative is here today to answer any
questions, Mr. Hopkins--that they can clearly, if they have
flexibility, make gasoline that conforms with the California
performance model, which is the strongest model anywhere in
America for the cleanest gasoline anywhere in America without
MTBE. They would have to use ethanol certain times of the year
in the southern California market.
I think what I am pleading for is to provide flexibility in
whatever you do and allow us to work on a bipartisan basis. I
will be very pleased to sit down with the Renewable Fuels
Association. For some reason, they feel I am attacking them. I
am not trying to attack them. I am just trying to find a way to
be able to provide flexibility in the law.
If it is a California waiver, that is just part of the
problem. There has to be, I sincerely believe, a national
solution to this because it is going to percolate through
groundwater of other States and other States are going to be
resentful if it is a California-only solution.
So I think one of the keys is flexibility. I think allowing
a situation whereby the EPA can grant a waiver to States who
can show that they can meet the clean air guidelines without
MTBE or without an oxygenate, that that should be allowable. I
think it is a mistake for Federal policy to have a rigid
percentage of anything if that anything isn't necessary to meet
the Federal guidelines.
So I am happy to really work in the Senate with the House,
work with Republicans and Democrats, and see if we can't break
through some of these Catch-22s and come up with a piece of
legislation that really serves the purpose.
[The prepared statement of Hon. Dianne Feinstein follows:]
Prepared Statement of Hon. Dianne Feinstein, a U.S. Senator from the
State of California
Thank you for the opportunity to share with you my concerns about
the contamination of drinking water by the gasoline additive, MTBE.
My goal is narrow and simple: get MTBE out of California's water.
MTBE smells like turpentine and tastes like paint thinner. Relatively
low levels can simply make drinking water undrinkable.
MTBE is a contaminant that is ``frequent'' and ``widespread,''
impacting at least 10,000 sites in California, according to a June 1998
Lawrence Livermore study.
I have with me here today a map of my state showing the extent of
contamination all across California. The San Francisco Examiner on
December 14, 1998 called it ``a ticking timebomb.''
the mtbe problem
Why is MTBE so objectionable?
Unlike other components of gasoline, MTBE does not biodegrade.
MTBE is difficult and expensive to get out of the water. It costs
around $1 million to clean up one well in California and $5 million to
clean up a reservoir.
MTBE has a bad taste and odor.
MTBE travels quickly through soil and gravel. Lake Tahoe officials
have told me that ``out-of-control'' MTBE plumes move one to nine feet
per day, where it is now 1,000 feet from the lake.
Where does it come from? MTBE comes from gasoline--from leaking
underground storage tanks, from pipelines, from motorboat engine
discharges and exhausts, from spills and leaks at gasoline stations,
from automobile accidents, from stormwater runoff and sometimes from
sources unknown.
A June 13, 1997 Oakland Tribune article reported that MTBE levels
in the air around the San Francisco Bay area ``have risen
dramatically,'' quoting Bay Area Air Quality Management officials who
said that MTBE detections in the air grew after MTBE was introduced in
gasoline in the area. More recently (March 9, 1999), the Reno (NV)
Gazette-Journal reported, ``Traces of methyl tertiary butyl ether were
discovered last week in air samples taken by the South Tahoe Public
Utility District.''
A South Lake Tahoe official on February 5 told the Sacramento Bee
that MTBE traveled through the sewer system, through the treatment
system, through the export pipeline, across a stream and now into a
reservoir 30 miles away.
It is time to end it.
governor davis has acted
California Governor Gray Davis on March 26 issued executive order
D-5-99 taking 11 steps to stop MTBE contamination, which Secretary
Winston Hickox will describe for you later this morning. Governor
Davis's actions included the following:
(1) a phaseout of MTBE use in gasoline by December 31, 2002;
(2) a request to U.S. EPA for a waiver for California's cleaner-burning
gasoline from the federal requirement of oxygen in reformulated
gasoline;
(3) support for legislation to allow U.S. EPA to waive the federal
oxygenate requirement;
(4) labeling of gasoline pumps, indicating that gasoline contains MTBE;
(5) new guidelines for cleaning up MTBE contaminated areas;
(6) an evaluation, by December 31, 1999, of ethanol transport in air
and water; and
(7) a report on the potential for development of a California waste-
based or other biomass ethanol industry.
studies raise serious questions
Several authoritative studies have raised questions about MTBE in
drinking water.
University of California
A distinguished group of University of California scientists in
November 1998 in a five-volume study recommended that MTBE be phased
out over several years and that refiners be given flexibility in
gasoline formulations to achieve air quality.
Importantly, UC found that ``there is no significant additional air
quality benefit to the use of oxygenates such as MTBE in reformulated
gasoline, relative to'' California's reformulated gasoline formula. UC
also found that ``there are significant risks and costs associated with
water contamination due to the use of MTBE.''
Lawrence Livermore National Laboratory
A June 1, 1998, Lawrence Livermore National Laboratory study
reached five important conclusions:
1. ``MTBE is a frequent and widespread contaminant in shallow
groundwater throughout California. There are presently 32,409 leaking
underground fuel tank sites recognized in the state, 13,278 at which
hydrocarbons are known to have impacted groundwater. A minimum estimate
of the number of NME-impacted sites in California is greater than
10,000.''
2. ``MTBE plumes are more mobile than BTEX (benzene, toluene,
ethylbenzene, and xylenes) plumes.'' Thus, it moves quickly to
infiltrate groundwater.
3. ``The primary attenuation mechanism for MTBE is dispersion.''
4. ``MTBE has the potential to impact regional groundwater resources
and may present a cumulative contamination hazard.''
Association of California Water Agencies
The Association of California Water Agencies has detected MTBE in
shallow groundwater at over 10,000 sites in California. Some deeper
drinking water wells have also been affected.
ACWA's December 1998 study also documented MTBE contamination in
many of the state's surface water reservoirs, concluding that motorized
recreation is the biggest contributor of MTBE contamination and
confirming other studies findings that MTBE tends to stay in the
uppermost portion of the reservoir.
A sampling dated April 22, 1999 detected MTBE in 44 groundwater
sources and 28 surface water sources in California.
mtbe is not necessary
California can meet federal clean air standards by using our state
gasoline regulations, which Mr. Hickox can thoroughly discuss with you.
California's reformulated gasoline rules provide about twice the air
quality benefits of federal reformulated gasoline. California has the
cleanest gasoline in the world.
Clean gasoline without MTBE can be and is being manufactured by
several refiners, including Chevron Products Company, who wrote me on
September 11, 1998, ``We believe it is possible to replace gasoline,
which currently contains MTBE with a combination of ethanol-blended
gasoline and non-oxygenated gasolines, while maintaining the clean air
benefits that the California Cleaner Burning Gasoline program has
provided.''
a possible health hazard
U.S. EPA has indicated that ``MTBE is an animal carcinogen and has
a human carcinogenic hazard potential.'' The University of California
study clearly concluded that we need more research to fully understand
the human health impacts of MTBE, when the UC study called for a
phaseout.
Dr. John Froines, a University of California scientist, testified
at a state hearing on February 23, 1999, as follows on their work:
We in our report have concluded that cancer evidence in animals is
relevant to humans. There are acute effects in occupationally-exposed
workers, including headaches, dizziness, nausea, eye and respiratory
irritation, vomiting, sensation of spaciness or disorientation and
burning of the nose and throat.
MTBE exposure was associated with excess cancers in rats and mice,
therefore, multi-species. He cited ``multiple, endpoints, lymphoma,
leukemia, testicular cancer, liver and kidney.''
All four of the tumor sites observed in animals may be predictive
of human cancer risk . . .
The related question is whether there is evidence which
demonstrates the animal cancers are not relevant to humans. The answer
developed in detail in our report is no. There is no convincing
evidence that the data is specific to animals. That is our conclusion.
Nobody has come forward to tell us a basis to change that point of
view.
Many authorities believe that the human health effects of MTBE were
not adequately known or considered when Congress last amended the Clear
Air Act in 1990.
mtbe is spreading to other states
While there is no comprehensive survey available, we do have some
data to show that MTBE is contaminating the water in other states. A
1998 U.S. EPA-funded survey by the University of Massachusetts found
MTBE in 251 of 422 public wells in 19 states. A recent study of by the
U.S. Geological Survey, reported April 29 to the EPA ``blue ribbon''
MTBE panel, found in a 12-state survey of New England-Mid-Atlantic
states, that using MTBE in gasoline results in a four- to six-fold
increase in detection frequency. Another USGS study found MTBE detected
in 21 percent of 480 wells in community water systems in a sampling of
wells nationwide.
MTBE has been detected in water in states such as Maine,
Pennsylvania, Virginia, Texas, Kansas, New York, New Jersey, Georgia,
Alabama, Colorado, New Hampshire, Massachusetts, Delaware and Arizona.
legislative action needed promptly
We need an all-out attack on MTBE. That is why I have introduced 4
bills:
My first bill, S. 266 (the companion to H.R. 11, introduced by Rep.
Brian Bilbray), would provide that if a state's reformulated gasoline
rules achieve equal or greater emissions reductions than federal
regulations, a state's rules will take precedence. The bill would apply
only to states which have received waivers under Section 209(b)(1) of
the Clean Air Act, the provision of law that allows a state to
establish its own reformulated gasoline rules. California is the only
state that currently has established its own reformulated gasoline
rules.
My second bill (S. 267) requires U.S. EPA to make petroleum
releases into drinking water the highest priority in the federal
underground storage tank cleanup and enforcement program. Leaking
underground petroleum storage tanks and their pipelines are a major
source of MTBE in drinking water.
My third bill, S. 268, addresses motorcraft engines and accelerates
the federal emissions standards to make them effective by 2001,
consistent with California's standards. This bill, which covers spark-
ignition outboard marine and personal watercraft engines, beginning in
model year 2001, would speed up a complete fleet turnover by 2024.
My fourth bill, S. 645, would authorize the U.S. Environmental
Protection Agency to waive the two percent federal oxygenate
requirement in any state if gasoline with less than two percent or with
no oxygenates meets clean air standards.
Here are four approaches. There may be others. In short, we need a
legislative remedy that allows states to use gasoline rules that are
performance based, achieve clean air goals and do not contaminate the
drinking water. Current federal law prevents that kind of flexibility.
conclusion
I have appended to my statement a list of the local governments,
water agencies and others who support my MTBE legislation. You will see
that there is broad support for ending the use of MTBE.
Let me give you a clear message. We must get MTBE out of
California's drinking water. Millions of Californians should not have
to drink water contaminated with MTBE. Millions of Californians should
not have to breathe MTBE in the air. I believe we can put in place a
clean air policy using clean gasoline that does not contaminate our
drinking water.
I am not trying to wage a war for or against a particular
oxygenate. If ethanol or another oxygenate achieves clean air goals in
California and is safe for human health, for our air, water and natural
resources, so be it.
California's rules have shown we can make the cleanest gasoline in
the world. I believe we can leave the formula for gasoline formulations
to the experts and use an approach like California's predictive model
which is performance based and does not rely on a prescriptive federal
recipe for gasoline. We can have both clean air and clean water.
I am not trying to ``open up the Clean Air Act'' or dismantle the
Clean Air Act's protections. I am not trying to undo the reformulated
gasoline program. The reformulated gasoline program has no doubt
reduced unhealthy vehicle emissions.
I am trying to get MTBE out of the drinking water. It is not needed
for making clean-burning gasoline or for cleaning up the air.
We should not contaminate our water to clean up our air. As CARB
and other authorities have documented, we are poisoning our water by an
indefensible policy that was intended to clean up our air. California
has a better way. We should not continue to use MTBE when we have a
sound alternative that keeps both our air and our water clean.
Support for Eliminating MTBE--As of May 6, 1999
Local Governments and Air and Water Districts
Alameda County Flood Control and Water Conservation District,
Resolution No. 97-1850 (March 19, 1997); Alameda County Water District,
Paul Piraino (October 2, 1998); Bella Vista Water District, Robert W.
Dietz (September 30, 1998); Branham Homeowners' Association, Diane
Delbridge (September 23, 1998); Casitas Municipal Water District, John
J. Johnson/James W. Coultas (October 2, 1998; December 1, 1998); City
of Azusa, Robert W. Bowcock (October 5, 1998); City of Campbell City
Council, Resolution No. 9422 (September 1, 1998); City of Colfax City
Council, Arturo de la Cerda, Resolution 35-98 (November 25, 1998); City
of Costa Mesa City Council, Resolution No. 98-82 (September 21, 1998);
City of Gilroy City Council, Resolution No. 98-41 (August 3, 1998);
City of Los Altos City Council, Resolution No. 98-24 (August 18, 1998);
City of Milpitas, Henry Manayan (September 3, 1998); City of Monte
Sereno City Council, Resolution No. 1868 (July 21, 1998); City of
Morgan Hill City Council, Resolution No. 5213 (August 5, 1998); City of
Santa Clara, Judy Nadler (June 30, 1998); City of Santa Monica, Pam
O'Connor (February 11, 1997; March 20, 1997); City of Sebastopol, Kathy
Austin (October 8, 1998; November 17, 1998); City of South Lake Tahoe,
Hal Cole (September 14, 1998; October 13, 1998); Clear Creek Community
Services District, Richard K. McDonald (October 2, 1998); Coachella
Valley Water District, Tom Levy (October 5, 1998); Contra Costa Water
District, Joseph L. Campbell (October 6, 1998); County of Amador,
Resolution No. 98-089 (March 10, 1998); County of Contra Costa,
Resolution No. 98/484 (September 22, 1998); County of El Dorado, John
Upton (September 29, 1998); County of Lake, Louise Talley (January 9,
1998); County of Los Angeles, Joanne Sturges (August 19, 1998; December
16, 1998); County of Placer Board of Supervisors, Resolution No. 98-283
(December 1, 1998); County of San Diego, Roger F. Honberger/Thomas P.
Walters (May 4, 1998,; January 26, 1999); County of Santa Clara Board
of Supervisors, Donald F. Gage (July 20, 1998); County of Sonoma
Mayors' and Councilmembers' Association, Resolution (November 12,
1998); East Bay Municipal Utility District, Dennis M. Diemer,
Resolution No. 33135-99; (April 15, 1998, February 10, 1999); El Dorado
County Water Agency, Merv de Haas (October 9, 1998); Los Altos Hills
City Council, Patricia Dowd (August 24, 1998); Los Gatos Town Council,
Resolution No. 1998-139 (September 8, 1998); Los Gatos Village
Association, Victor Acevedo (August 30, 1998); Marin Municipal Water
District, Pamela J. Nicolai (October 1, 1998); Mesa Consolidated Water
District Board of Directors, Resolution No. 1207 (August 27, 1998);
Metropolitan Water District of Southern California, John R. Wodraska
(October 5, 1998); Orange County Transportation Authority, Sarah L.
Catz (July 27, 1998); Orange County Water District, William R. Mills,
Jr./Ron Wildermuth (September 1, 1998; September 24, 1998); Placer
County Agricultural Commission, Richard A. Johnson (November 12, 1998);
Placer County Water Agency, David A. Breninger (September 30, 1998;
November 12, 1998); San Diego Air Pollution Control District, R.J.
Sommerville (April 17, 1998); San Diego County Board of Supervisors,
Greg Cox (September 14, 1998; October 13, 1998); San Gabriel Valley
Water Association, David D. De Jesus (September 30, 1998); San Joaquin
Valley Unified Air Pollution Control District, David L. Crow (April; 1,
1998); San Miguel Neighbors Association, Tim Giltz (October 6, 1998);
Santa Clara Valley Water District, Robert W. Gross (February 17, 1998;
July 10, 1998; September 1, 1998; September 15, 1998); Solano County
Water Agency, David B. Okita (October 2, 1998); South Lake Tahoe
Chamber of Commerce, Duane Wallace (August 25, 1998); South Tahoe
Public Utility District, James R. Jones/Robert G. Baer (March 19, 1998;
July 16, 1998; August 24, 1998; September 4, 1998; September 14, 1998;
October 2, 1998; February 1, 1999); Town of Windsor, Lynn Morehouse
(December 3, 1998); Tuolumne Utilities District, Judy Delbon (October
5, 1998); United Water Conservation District, Sheldon Berger (October
5, 1998); Ventura County Air Pollution Control Board, Susan K. Lacey
(May 12, 1998); Walnut Valley Water District, Richard C. Engdahl
(October 8, 1998); Water Advisory Committee of Orange County, Robert
Hanson (October 2, 1998)
State Officials
Governor Pete Wilson, California (August 7, 1998); California
Environmental Protection Agency, John D. Dunlap (February 28, 1997);
California Energy Commission, David A. Rohy (September 15, 1997); The
Honorable K. Maurice Johannssen, California State Senate (October 2,
1998); The Honorable Lynne C. Leach, California State Assembly
(September 22, 1998); The Honorable Richard L. Mountjoy, California
State Senate (September 14, 1998); The Honorable Richard K. Rainey,
California State Senate (October 1, 1998).
Statewide Organizations and Other
Arco and Arco Corporation, Mike Bowlin/Robert Healy (February 22,
1999; February 24, 1999); Association of California Water Agencies,
Stephen K. Hall (September 14, 1998); Association of Ground Water
Agencies, William R. Mills, Jr. (October 2, 1998); Bluewater Network
Coalition, Russell Long (February 18, 1999); California Audubon
Society, John McCaull (February 8, 1999); California Chamber of
Commerce (May 4, 1999); California Farm Bureau, George Gomes (February
8, 1999); California Independent Oil Marketers Association, Evelyn
Parker Gibson (October 23, 1997; March 6, 1998; February 22, 1999);
California Independent Petroleum Association, David Gilbert (January
23, 1998; February 11, 1998); California Manufacturers Association
(February 19, 1999); Californians Against Waste, Mark Murray (February
8, 1999); Chevron Corporation, Philip T. Cavanaugh (March 6, 1998);
Chevron Products Company, David J. O'Reilly (September 11, 1998,
February 9, 1999; February 22, 1999; April 16, 1999); Clean Water
Action, Marguerite Young (February 8, 1999); Ecoworks, Francesca Vietor
(February 3, 1999); Exxon Corporation, James J. Rouse (March 6, 1998);
Gasoline Marketers of America, R. Timothy Columbus (March 6, 1998);
Mobil Corporation, Sandra G. Swirski (March 6, 1998); National Marine
Manufacturers Association, Testimony (September 16, 1998); Parsons
Engineering Science, Inc., Richard W. Bentwood (October 2, 1998); Shell
Oil Company, Steve Ward (March 6, 1998); Texaco, Inc., James C. Pruitt
(March 6, 1998); Tosco Corporation, Duane B. Bordvick/Ann Farner Miller
(October 11, 1997; March 6, 1998); Western States Petroleum
Association, Doug Henderson (March 6, 1998).
Mr. Bilirakis. Thank you, Senator.
Senator Feinstein. I thank you.
Mr. Bilirakis. Will you be able to stay?
Senator Feinstein. I would like to stay for a little bit.
Yes, thank you.
Mr. Bilirakis. Mr. Franks. Bob Franks is from our side of
the Capitol and represents a portion of the State of New Jersey
and as far as this subject is concerned, I suspect the entire
State of New Jersey. Bob.
STATEMENT OF HON. BOB FRANKS, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF NEW JERSEY
Mr. Franks. Mr. Chairman, thank you very much for the
opportunity to testify today. I am here to lend my support to
H.R. 11, a bill that would allow the State of California to opt
out of the 2 percent requirement of the Clean Air Act and to
urge the committee to go one step further. There is compelling
evidence that this requirement, which was designed to reduce
carbon monoxide emissions in 10 areas of the country has led to
another serious risk to the public health. A University of
California study into MTBE, which was released last November
12, concluded and I quote, ``Within a relatively short period
of time, MTBE has become one of the most highly publicized and
widely released contaminants of surface and groundwaters.
Introduced as a gasoline additive without adequate
investigation of its fate, transport, and toxicity, it is now
potentially a major threat to human health.''
As Mr. Pallone noted, in our State of New Jersey, the State
Department of Environmental Protection reports that 400 private
wells and 65 public wells have now been contaminated with MTBE.
This contamination has been found in wells providing drinking
water to homes and businesses throughout our State. One
particularly serious threat is to the Kirkwood-Cohansey
Aquifer, a massive storehouse of drinking water for southern
New Jersey where wells have been found to have unacceptably
high levels of MTBE.
Mr. Chairman, I think it is important for the committee to
note that many States are not waiting for the EPA to take more
definitive action. Growing evidence and concern about the
health and environmental impact has prompted Alaska, North
Carolina, Missouri, Montana, and Maine to stop the use of MTBE.
And as Senator Feinstein has said so articulately, back in
March Governor Gray Davis of California ordered MTBE be
eliminated from the gasoline supply of that State by 2003 and
called the chemical, ``a serious significant risk to
California's environment.''
I urge this committee, Mr. Chairman, to follow the lead of
these States and to put an end to the use of MTBE in gasoline
across the United States. Legislation that I am sponsoring,
H.R. 1367, would ban the use of MTBE as a fuel additive over
the next 3 years. By banning MTBE, we can prevent the spread of
this chemical to other sources of drinking water.
But phasing out the use of MTBE does not mean that we have
to sacrifice our commitment to clean air. Several refineries
have announced that they are already developing new additives
that will produce the same clean-burning effect without the use
of MTBE.
It is time for the Federal Government to admit that MTBE
was a mistake and to look for better, safer ways to clean our
air that do not endanger our safe drinking water. I applaud Mr.
Bilbray for his efforts and I encourage this committee to go
beyond Mr. Bilbray's legislation and ban MTBE nationwide.
[The prepared statement of Hon. Bob Franks follows:]
Prepared Statement of Hon. Bob Franks, a Representative in Congress
from the State of New Jersey
Thank you, Mr. Chairman, for the opportunity to testify today.I'm
here to lend my support to H.R. 11, a bill that would allow the State
of California to opt out of the 2% oxygenate requirement of the Clean
Air Act . . . and to urge you to go one step further.
There is compelling evidence that this requirement--which was
designed to reduce carbon monoxide emissions in 10 areas of the
country--has led to another risk to the public health.
It comes from Methyl Tertiary-Butyl Ether, or MTBE, the fuel
additive of choice in many areas of the country because it was the
least expensive way of meeting the two percent oxygenate requirement.
MTBE has been found to have contaminated the water supply in
California and in other areas across the country--including in my home
state of New Jersey.
A University of California study into MTBE, released on November
12, 1998, concluded: ``Within a relatively short period of time, MTBE
has become one of the most highly publicized and widely released
contaminants of surface and ground waters. Introduced as a gasoline
additive without adequate investigation of its fate, transport and
toxicity, it is now potentially a major threat to human health.''
As we mark Safe Drinking Water Week--in recognition of 25 years of
the Safe Drinking Water Act--it is only appropriate that Congress act
to curb this risk to our national water supply.
In New Jersey, the state Department of Environmental Protection
reports that 400 private wells and 65 public wells have been
contaminated with MTBE. The contamination has been found in wells
providing drinking water to homes and businesses throughout the state.
One particularly serious treat is to the Kirkwood-Cohansey aquifer--a
massive storehouse of drinking water in South Jersey--where wells have
been found to have unacceptably high levels of MTBE.
The EPA is currently in the process of conducting additional
research into the health effects of MTBE on humans. In the meantime, it
has proposed that the chemical be included in the list of drinking
water contaminates that are regulated under the Safe Drinking Water
Act.
Many states are not waiting for the EPA to take more definitive
action. Growing concern about the potential health and environmental
impact has prompted Alaska, North Carolina, Missouri, Montana and Maine
to stop the use of MTBE.
And in March, Governor Gray Davis of California ordered that MTBE
be eliminated from the gasoline supply in California by 2003, calling
the chemical ``a significant risk to California's environment.''
I urge this committee to follow the lead of these states and put an
end to the use of MTBE in gasoline--across the United States.
Legislation I am sponsoring--H.R. 1367--would ban the use of MTBE
as a fuel additive over the next three years. By banning MTBE, we can
prevent the spread of this chemical to other sources of drinking water.
Phasing out the use of MTBE does not mean that we have to sacrifice
our commitment to clean air. Several refineries have announced that
they are already developing new products that will produce the same
clean-burning effect without the use of MTBE.
It's time for the federal government to admit that MTBE was a
mistake and to look for better, safer ways to clean our air that do not
endanger our safe drinking water.
I applaud Mr. Bilbray for his efforts. And I encourage this
committee to go beyond Bilbray's legislation and ban MTBE nationwide.
Mr. Bilirakis. Thank you, Bob.
Next, also from our side of the Capitol, The Honorable
Ellen Tauscher from the State of California. Ellen, please
proceed.
STATEMENT OF HON. ELLEN O. TAUSCHER, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mrs. Tauscher. Thank you, Mr. Chairman, for calling this
hearing. Mr. Brown, thank you very much for your leadership. I
want to applaud my colleague, Mr. Bilbray, and certainly
Senator Feinstein for her leadership in the Senate, and I want
to thank my colleagues both from California and throughout the
country for their support for H.R. 11 and efforts to remove
MTBE from California's gasoline.
As you know, I testified last year before this panel on the
need to move quickly to provide California the flexibility
necessary to maintain its clean air while protecting the
State's water resources. By requiring California to blend an
oxygenate such as MTBE into two-thirds of the State's gasoline,
the Congress is unnecessarily putting our environment at risk.
It makes little sense to continue using a chemical additive
that is polluting the general drinking water supply in
California and is both difficult and expensive to remediate.
Furthermore, many experts believe, as Senator Feinstein has
said, that MTBE may be a human carcinogen. H.R. 11 is a
bipartisan, performance-based, and environmentally sound bill
which enjoys the support of 50 members of the California
delegation. And as others have said, perhaps most importantly,
California Governor Gray Davis issued an executive order on
March 25 in which he prudently and appropriately established a
timeline for the elimination of MTBE from California's
gasoline. We in Congress must act now to ensure a seamless
transition for the State's refiners and the families who depend
on gasoline on a daily basis, and I urge the committee to
swiftly consider this vital legislation.
Mr. Chairman, our State already suffers from very tight
gasoline supplies. California's air pollution problems require
that we use a cleaner blend of gasoline than is even required
by the Federal law, making our gasoline market an island that
is difficult and expensive to serve. If this bill fails to
pass, studies conclude that California families could see their
gasoline prices jump even higher than they are.
H.R. 11 will significantly mitigate any price increases
associated with removing MTBE from gasoline by ensuring that a
competitive market remains in place in California. Quite
frankly, I fear a full-scale backlash against our State's clean
air strategies if that comes to pass.
In sum, H.R. 11 will restore to California the flexibility
it traditionally has had in this area. It will enable
California to set fuel standards based on performance standards
that set a required level of emissions reductions from the tail
pipe and then leave it to the refiners to figure out how best
to achieve those reductions. These are exactly the type of
environmental strategies I support: Set a level and let the
States achieve it in their own way. Put simply, we should be
about results, not about process.
I want to thank you again, Mr. Chairman, and ranking member
Brown and the members of the subcommittee for hearing this
testimony, and I urge you to support this important measure.
And I yield back the balance of my time.
[The prepared statement of Hon. Ellen O. Tauscher follows:]
Prepared Statement of Hon. Ellen O. Tauscher, a Representative in
Congress from the State of California
I thank the Subcommittee for allowing me to testify today to
express my support for H.R. 11 and efforts to remove MTBE from
California's gasoline.
As you know, I testified last year before this panel on the need to
move quickly to provide California the flexibility necessary to
maintain its clean air while protecting the State's water resources. By
requiring California and other states to blend an oxygenate such as
MTBE into two-thirds of the state's gasoline, the Congress is
unnecessarily putting our environment at risk.
It makes little sense to continue using a chemical additive that is
polluting the general drinking water supply in California and is both
difficult and expensive to remediate. Furthermore, many experts believe
MTBE may be a human carcinogen.
H.R. 11 is a bipartisan, performance-based and environmentally
sound bill which enjoys the support of 50 members of the California
delegation. Perhaps most importantly, California Governor Gray Davis
issued an Executive Order on March 25 in which he prudently and
appropriately established a timeline for elimination of MTBE from
California's gasoline. We in Congress must act now to ensure a seamless
transition for the State's refiners and the families who depend on
gasoline on a daily basis, and I urge the Committee to swiftly consider
this vital legislation.
We must not lose sight of the fact that the important issue at hand
is ensuring that our air is clean and that pollution is reduced--not
how we get there. By federally mandating particular chemical additives
to gasoline, it takes away the local flexibility that could achieve the
same or better results.
By clearing away this federal mandate, this bill will greatly
benefit existing clean air strategies throughout California. Residents,
industries, and air quality watchdogs in California--from the
California Air Resources Board and the oil and auto industries, to
environmental groups and ordinary citizens--support the California
Cleaner Burning Gasoline (CBG) program. The CBG initiative already has
shown dramatic improvements in air quality and is certain to succeed if
given a full opportunity. It has proven to exceed the emissions
reductions achieved by Federal RFG because of the performance-based
nature of California's fuel program.
What's more, this bill was narrowly drafted to apply only to the
State of California, so as to avoid a controversial re-opening of the
Clean Air Act; and as I said, almost every California Member has
cosponsored it. It presents an excellent opportunity to demonstrate to
America's working families that Congress has the ability to work
together and lead in a bipartisan fashion on an important environmental
and public health issue. Most importantly, H.R. 11 is an example of
exactly the type of second generation laws and rules governing
environmental protection that we should promote. Our national approach
to environmental stewardship should be modernized to improve the
environment through performance standards rather than ``command and
control'' approaches, thus increasing public and private sector
efficiency, and instilling more fairness and accountability.
Unfortunately, without the passage of H.R. 11, California residents
stand to suffer dramatically higher prices at the gas pump because the
oxygenate mandate will cripple the ability of refiners to supply clean-
burning gasoline in a cost-effective manner. We will be left in
California with no option but to use ethanol in every gallon of federal
RFG. In effect, in the nation's largest gasoline market, federal law
would give the ethanol industry a legally-mandated monopoly for a
taxpayer-subsidized product, controlled by an oligopoly in which three
companies own almost 60 percent of the market and one company owns
about 45 percent. That is a very unhealthy economic prospect.
Mr. Chairman, our state already suffers from very tight gasoline
supplies. California's extreme air pollution problems require that we
use a cleaner blend of gasoline than is required even by federal law,
making our gasoline market an island that is difficult and expensive to
serve. If this bill fails to pass, studies by the California Energy
Commission conclude that California families could see their gasoline
prices jump even higher than they are today. H.R. 11 will significantly
mitigate any price increases associated with removing MTBE from
gasoline by ensuring that a competitive market remains in place in
California. Quite frankly, I fear a full-scale backlash against our
state's clean air strategies if that comes to pass.
In sum, H.R. 11 will restore to California the flexibility it
traditionally had in this area and that it lost in the 1990 Clean Air
Act Amendments due, as best as we can tell, to an oversight or
technical glitch. It will enable California to set fuel standards
based, not on a federal mandate or on the filing of a mound of
paperwork with the Federal EPA, but rather based on performance
standards that set a required level of emissions reductions from the
tailpipe and then leave it to the refiners to figure out how best to
achieve those reductions. Cal EPA and CARB can then follow with
necessary state law changes. These are exactly the type of
environmental strategies I support--set a level, and let states achieve
it in their own way.
Put simply, we should be about results, not about process.
I thank you, Chairman Bilirakis and Ranking Member Brown, and the
members of the Subcommittee for hearing my testimony and I urge you to
support this important measure.
Thank you.
Mr. Bilirakis. Thank you. And from the city of Santa
Monica, its Mayor, The Honorable Pam O'Connor. Please proceed,
Ma'am.
STATEMENT OF HON. PAM O'CONNOR, MAYOR, CITY OF SANTA MONICA
Ms. O'Connor. Good morning, I am Pam O'Connor, Mayor of
Santa Monica, California. I want to thank you, Mr. Chairman,
and members of the subcommittee, for the opportunity you give
me to testify before you today. I would also like to thank
Congressman Waxman and Senator Feinstein for all their efforts
on behalf of the people of Santa Monica.
My entire statement has been submitted to you so I will go
into the highlights here.
Yes, H.R. 1 takes a step back from oxygenates. But what
H.R. 11 does is to allow us a time to get it right, to plan the
safest and most responsible course to eliminate contaminants
like MTBE from the water we drink while finding long-term
solutions to air pollution.
While removing oxygenates is a requirement for cleaner
gasoline, it is not enough. We need your help. We need the
Federal Government to embark on a plan to aggressively clean up
MTBE that has leaked. Each day that MTBE is allowed to travel
in soil, it gets closer to destroying more of our Nation's
limited water resources.
It happened in Santa Monica, and I am here to share with
you the key lessons we learned from our experience with MTBE.
Santa Monica depends heavily on groundwater for its drinking
supply. Before MTBE contamination, the city produced 70 percent
of its water from our own wells. However, now after the MTBE
contamination, the city imports more than 80 percent of its
drinking water.
MTBE has handed Santa Monica our greatest environmental
disaster. MTBE caused rapid and near complete loss of drinking
water supplies. It has an uncanny ability to find its way to
water systems. It attacks suddenly.
MTBE strikes at the heart of public confidence in the
safety of drinking water. People are not going to drink water
that smells and tastes like turpentine. For 3 years now, Santa
Monica has been searching for a solution to this pollution
problem. No end is in sight. The projected costs of cleanup are
between 100 and $150 million. Think of these costs replicated
nationwide. We need the Federal Government to see to it that
other drinking water supplies are not gambled away, that more
good money is not thrown after MTBE and that groundwater that
has been polluted is restored.
Any future attempt to introduce a new chemical to the
Nation's fuel supply must first be accompanied by a complete
and interdisciplinary assessment of its impacts, its health,
safety, and environmental impacts. MTBE fell through the
cracks, the regulatory cracks, and they were far too wide. That
is why H.R. 11 is important.
I am not a scientist and I certainly don't have all the
answers to the problems caused by MTBE. I can't predict how
long it will take to clean up the MTBE pollution problem or how
much it will cost overall, but let me tell you what I do know.
Gasoline tanks, especially underground storage tanks, leak. And
once tanks leak, their contents can cause unexpected problems.
Whether there is H.R. 11 or some other legislation, we need
to move away from MTBE and from any untested oxygenates or
chemicals that take its place. For the past 3 years, many oil
companies and their trade groups called MTBE the most studied
chemical ever. I suspect some similar votes will be made about
other oxygenates touted as better than MTBE or miraculously
able to clean the air with no downsides. But let's not repeat
the mistakes of the past. Let's create better options. That is
what H.R. 11 is about.
Coming from southern California, I know all too well that
we need to rapidly clean up our air, but the last 3 years has
reminded me that we need clean air and clean water. We should
never again sacrifice one for the other.
From California to Connecticut, people know you don't clean
air by polluting drinking water. By looking to clean air goals
instead of chemical formulas for gasoline additives, H.R. 11
allows us to refocus the simple wisdom of the Clean Air Act to
clean up our air and in doing so not make things worse.
Thank you for your time and attention today and thank you
all for all the hard work you do for us.
[The prepared statement of Hon. Pam O'Connor follows:]
Prepared Statement of Hon. Pam O,Connor, Mayor, City of Santa Monica
Thank you members of The Subcommittee on Health and the Environment
for the opportunity to testify before you today on H.R. 11 and MtBE. By
taking a step back from oxygenates, H.R. 11 allows us all the necessary
time to plan the safest and most responsible course to eliminate
contaminants like MtBE from drinking water while finding long-term
solutions to air pollution. Yet removing oxygenates as a requirement
for cleaner gasoline is not enough. The Federal Government must also
embark on a plan to aggressively cleanup the MtBE that has leaked. Each
day that MtBE is allowed to travel in soil, it gets closer to
destroying more of the nation's limited water resources. I would like
to share with you today the key lessons we have learned from our
experience with MtBE in Santa Monica.
Santa Monica is a city of 92,000 permanent residents. Over one
hundred thousand additional persons visit and work in the City daily.
The City depends heavily on groundwater for its drinking water supply.
In this regard, MtBE's impact on Santa Monica could not be more cruelly
ironic. Prior to the MtBE catastrophe, Santa Monica strove to maximize
the use of local groundwater supplies, in an effort to build self-
sustainability and to reduce its reliance on water imported from
Northern California and the Colorado River. Before MtBE contamination
the City produced locally 70 percent of its water supply. Now after
MtBE contamination the City imports more than 80 percent of its
drinking water. This is a dramatic turn of events. MtBE contamination
has forced the City to further tax the State's water system. In doing
so, MtBE contamination has all but destroyed any notion that the City
could sustain itself in an emergency.
MtBE has handed Santa Monica the City's gravest environmental
disaster and Santa Monica has learned that the ``real world'' impacts
of MtBE the hard way:
<bullet> MtBE causes rapid and near complete loss of drinking water
supplies. MtBE travels quickly and combines readily with water
like no other gasoline additive;
<bullet> MtBE manifests aberrant characteristics. The City found MtBE
in its water supply shortly after MtBE was introduced into fuel
supplies. In contrast, other fuel constituents have been in
gasoline supplies much longer without the same catastrophic
contamination events. MtBE has an uncanny ability to find its
way into water systems through natural or human pathways not
taken by other contaminants;
<bullet> MtBE attacks suddenly. Once discovered, MtBE levels in the
City's wells rose quickly. If not for extreme City vigilance,
water heavily laden with MtBE may have been delivered to the
public;
<bullet> MtBE strikes at the heart of public confidence in the safety
of drinking water supplies. Although the full extent of the
health impacts of MtBE may not yet be completely known, people
will not drink water laced with MtBE because of its turpentine-
like odor and taste. In effect, water containing even low
levels of MtBE becomes unusable as a drinking water supply.
For three years now the City has been searching for a solution to
its pollution problem. No end is yet in sight. The City cannot use a
majority of its drinking water supplies. The cleanup costs of MtBE are
staggering. The projected cost to clean up the City's Charnock well
field is currently estimated at between $100 to $150 million. The cost
to clean up the City's Arcadia well field will exceed $5 million.
Cleanup at these sites may take ten years or more. Replicated
nationwide, these costs are unacceptable. Yet, without any concerted
state and nationwide MtBE cleanup underway, the future costs may be
even greater. It is far wiser to enact policies that seek to end this
kind of expenditure now. The Federal Government must see to it that
other drinking water supplies are not gambled away, that more good
money is not thrown after MtBE and that ground water that has been
polluted is restored.
Like water agencies throughout the nation, Santa Monica has over
the years spent tens, if not hundreds, of millions of dollars to secure
and to protect its water supplies. Yet, as our experience has proven
too clearly, this investment is fragile at best and can be lost by the
near silent action of one gasoline additive. What happened to Santa
Monica should be more than a cautionary tale. What happened to Santa
Monica should never be repeated. Any future attempt to introduce a new
chemical to the nation's fuel supply must be first accompanied by a
complete and interdisciplinary assessment of its health, safety and
environmental impacts. MtBE fell through regulatory cracks that were
embarrassingly far too wide, which is why H.R. 11 is important.
I don't pretend to be a scientist. I certainly don't pretend to
have all the answers to the problems caused by MtBE pollution. I can't
predict how long it will take to clean up MtBE pollution or how much it
will cost. But I do know some things. First, gasoline tanks, especially
underground storage tanks,leak. It makes almost no difference who owns
them and when they were put in. Whether they belong to oil companies,
to churches or to the federal government, whether they were installed
10 years ago or last year, storage tanks leak. Second, I also know that
once tanks leak, their contents can cause unexpected problems. Once out
of the tanks, unpredictability reigns with alarming regularity.
Pollution results with sometimes dire consequences.
Whether it is H.R. 11 or some other piece of legislation, we need
to devise an exit strategy away from MtBE and away from any like
oxygenates or other chemicals that may take its place. MtBE has caused
us to relearn a simple truth that all too often all of us forget--we
are not as smart as we think we are. Our best intentions can go awry.
And what we think we know, but don't, can hurt us more than we care to
imagine.
For the last three years many oil companies and their trade groups
have called MtBE ``the most studied chemical'' ever. They've made this
boast to down-play the threat that MtBE poses to drinking water and to
public health. Yet no one warned Santa Monica or anyone else that MtBE
could quickly wreak havoc on the public's drinking water supply if it
leaked out of storage tanks. Almost no one spent any time seriously
studying what would happen if unsuspecting people accidentally drank a
gasoline additive because it polluted a drinking water supply. This
threat was all but ignored. In fact, if it was not for Santa Monica
bringing the MtBE problem to the nation's attention, it might still not
be studied.
I suspect that similar boasts will be made about other oxygenates
or chemicals that might be touted as ``better'' than MtBE. They too
maybe labeled ``silver bullet'', able to miraculously clean the air
with no downside. But before we run the risk of repeating the mistake
of the past, we need to create better options, which is what H.R. 11 is
about.
Coming from Southern California I know all too well the need to
rapidly clean up our air. No one has to convince me that our reliance
on cars has come at a high price. Yet, the last three years has
reminded me too well we need clean air and clean water. We should never
again sacrifice one for the other.
From California to Connecticut, reasonable people know that you
don't clean the air by polluting the drinking water. We made a mistake.
We need to move on with solutions to air quality that do not destroy
drinking water. H.R. 11 is a step in the right direction. By looking to
clean air goals, instead of the chemical formulas of gasoline
additives, H.R. 11 allows us to refocus on the simple wisdom of what
the Clean Air Act is about--which is to clean up our air and in doing
so not make things worse.
Thank you for your time and attention.
Mr. Bilirakis. Thank you, Mayor. I will kick off the
questioning. I suppose I have a little bit of a dilemma in my
mind. For instance, Senator Feinstein, you have introduced, I
know you introduced at least a couple of pieces of legislation.
Apparently it is been more than just a couple. Mr. Waxman has
already admitted he hasn't co-sponsored it but sounds like he's
relatively supportive of what H.R. 11 is attempting to do. So
it seems like the entire California delegation is basically
there. Considering the credibility and the influence of that
delegation, particularly on environmental issues, I would
imagine we should be able to move H.R. 11 relatively quickly.
Now, the national approach, which many would rather see,
probably, will take more time and who knows, the way the
process works. So I guess my dilemma is because we feel
relatively confident that we can move H.R. 11, should we just
go forward with H.R. 11 and keep working toward maybe the
national solution, if you will?
Senator Feinstein. In my view, yes, Mr. Chairman. I think.
Very important that a start be made and that the House, if the
House will take action, I think we can move the Senate to take
some action. It may be different but I think in conference it
can be worked out. I think it would be very desirable to sit
down with Senator Chafee who is now willing, I think, to move a
bill. Again, I believe it will be a national solution, but I
think if the House takes action, we can move something in the
Senate.
Mr. Bilirakis. And I don't see--I don't hear opposition to
a national solution. I guess my point here is H.R. 11 could
probably move a heck of a lot quicker than the other would. And
I am sure that that is of concern to you.
Ellen, did you want to offer anything?
Mrs. Tauscher. Mr. Chairman, I just want to reinforce the
fact that the problems in California are acute. I would hope
that with your leadership and Senator Feinstein's leadership in
the Senate, that we could mitigate any questions that people
have about a California-only solution versus a national
solution, in that we could have California move forward on H.R.
11 and then quickly, as soon as the committee is ready to, to
continue our hearings on the national situation and move that
forward.
But we desperately need H.R. 11 in California and we will
work with you in any way we can to make sure that the results
that are happening in California on the passage of H.R. 11 can
be used to help create a national solution.
Mr. Bilirakis. As I indicated in my opening statement, a
couple of weeks ago in writing, I inquired of the EPA to let us
know if they have legal authority to waive section 211(k) in
California. And we haven't heard from them; and it was prior to
that, sometime prior to that that we orally, not in writing,
indicated to them that we would like to get some sort of an
opinion. If we can get a quick opinion from them, assuming that
they would say yes, that they have the legal authority to
waive, then of course California would then receive what it
wants and we could maybe focus all of our efforts toward
possibly the national solution.
I would ask you, Senator, can you--and I am not putting
words in EPA's mouth and they will be testifying in a moment,
but I know that they have--sometime last winter--established a
blue ribbon panel to study this issue. I don't know whether EPA
is just going to come back to us and say well, we want to wait
until we get the results of that panel, but do you see any
reason----
Senator Feinstein. That is what I have been told, that they
want to wait till they get the results. I would welcome a
change. I think it is clear. I don't know why we need a blue
ribbon panel. I mean, I think the Livermore study is very
compelling, as is the University of California study.
I think Representative Tauscher is right: Let's just take
the action and begin it. You see, this just gets complicated
when it comes to the Senate and if it is phased out in
California, ethanol is going to come in as a substitute where
it is necessary, which is largely certain times of the year in
the southern California market, and that amount of ethanol is
substantial, equal to the national use today. So I don't
understand why the ethanol people have been so resistant to
taking this action in the Senate--a profound resistance, I must
tell you. I am very disappointed by it.
Mr. Bilirakis. Thank you. Mr. Brown. I am sorry, Bob. Go
ahead.
Mr. Franks Mr. Chairman, I just want to say Mayor O'Connor
graphically underscored the problems with MTBE. It was a
marvelous statement. Candidly, I could produce a half dozen
mayors from New Jersey who could illustrate the same kinds of
problems. I appreciate that California has an enormous problem,
but the fact of the matter is it is concentration on MTBE, the
properties of which are identical in its use in New Jersey as
they are in California. If we need to get it out of the water
supply in California, which we ought to do in an urgent way,
that same urgency ought to appear to getting this contaminant
out of the water supply in New Jersey. It is not just a
carcinogen, Mr. Chairman. It is nausea, it is headaches, it is
dizziness. This has a severe public health impact and this
committee should take action immediately.
Mr. Bilirakis. I would just hate to see California become--
what is the word that I am looking for--a subject to what
happens on a national scope, if in fact it can be done and
California can go into effect, it wouldn't hurt the national
picture. At least I hope it would not hurt the national
picture. That is my thinking on the subject. Mr. Brown.
Mr. Brown. Ms. Tauscher, you testified last year in the
same committee, the same issue. You stated a State ban of MTBE
would, ``create tremendous dislocation in an already tight
gasoline supply and could make it impossible to comply with
Federal laws in some parts of the State and some times of the
year.''
Since your testimony, obviously Governor Davis ordered the
phaseout of MTBE from gasoline sold within the State. What
happens if Congress doesn't pass this?
Mrs. Tauscher. Well, I think that we have a very desperate
situation in our State right now. We have very, very high
gasoline prices. We have a cyclical issue, obviously, coming up
in the summer. The best blue ribbon panel I have ever seen are
the citizens of California and American citizens. The citizens
of the State of California are very upset about the fact that
they have been forced into a tradeoff between clean air and
clean water. They want us to act.
The Governor has done, I think, a very good job by putting
forth this executive order. The short-term issue for us is how
do we get the relief as fast as possible, how do we make sure
that California's acute problems are taken care of, and that we
are mindful of the fact that this is a national problem.
Mr. Brown. How soon--is it totally impractical to think
that California could--that MTBE over some time could be
replaced with ethanol? Is that just totally impractical because
of the size of the market in California and the emergency
nature of the situation? Senator Feinstein?
Mrs. Tauscher. It is about flexibility.
Senator Feinstein. No, it could be replaced by ethanol. It
takes some time to change the refining equipment, but there is
no question--I mean, the gasoline companies have all said that
to me, their CEOs directly.
Mr. Brown. Over what period of time?
Senator Feinstein. Two to 4 years, I am told. But you see,
in California you don't need MTBE. You could just drop it right
now and then they make the change to bring in more ethanol over
a period of time. We could still meet the clean air performance
standards.
Mr. Brown. In New Jersey, Mr. Franks?
Mr. Franks. Mr. Brown, I don't claim to be an expert on
ethanol, but candidly, if California's entire gasoline supply
were to be treated with ethanol, questions have been raised as
to whether or not the availability of ethanol would be adequate
to supply gasoline in other areas that are currently under the
reformulated gasoline requirement.
Mr. Brown. Understanding what Senator Feinstein just said,
that California can meet the clean air standards simply by
dropping MTBE, not replacing it with ethanol, New Jersey is not
in the same situation but doesn't have the same size market
obviously.
Mr. Franks. Correct.
Senator Feinstein. May I say one other thing? The
Governor's phaseout is carefully calculated to allow some time
to generate the ethanol that would be required in what I
understand are 6 winter months in the southern California
market. And what I have been told is the key to this is
flexibility, so that there is some time and that there aren't
just frozen numerical mandates. The performance model of
California works well and I know Mr. Hickox is here to speak
about it and I think he can really give you the technicalities
very well on how this would work.
Mr. Brown. It is almost a circuitous argument. If the CEOs
are telling you it will take 2 to 4 years, if Governor Davis is
phasing out MTBE, can't the phaseout complement the phase-in of
ethanol without Federal action? I am not necessarily arguing
against Federal action. I am just pretty open-minded still
about this. Why do you need Federal action if Governor Davis
can do that and ethanol can begin to displace the MTBE?
Senator Feinstein. I suspect there is going to be a lapse.
Perhaps not. I think it is a complicated--it is not easy, but
you have had some where Tosco has stopped putting MTBE in its
gasoline. Bingo, just stopped it. I must tell you, I think that
is preferable to polluting the groundwater because the cost of
cleanup is a million dollars a well. Just enormous. Its spread
is so fast.
Mr. Brown. In other words, you support the Governor's
phaseout but you would, perhaps all of you, especially Mayor
O'Connor, would like to accelerate the Governor's phaseout
which this legislation would ultimately allow, right?
Senator Feinstein. Yes, that is correct.
Mr. Bilbray. Would the gentleman yield?
Mr. Bilirakis. The Chair yields to Mr. Bilbray.
Mr. Bilbray. I would just like to point out to the ranking
member the letter from Governor Davis indicating that H.R. 11
was essential in establishing his phaseout strategy, that the
flexibility--and this is where we get back to the outcome-based
issue--of this bill wasn't designed around one additive. It was
around a system that those of us who had been involved in
environmental policy-making saw was going--was creating
problems and going to create problems. And with the new
Governor looking at this issue, he has clearly indicated to us
that this flexibility is essential to making the transition out
of one additive and the appropriate use of another.
Senator Feinstein. Why don't you read those two paragraphs?
Mr. Bilbray. Go ahead, Senator. Why don't you read it?
Senator Feinstein. ``I have directed the appropriate State
regulatory agencies to devise and carry out a plan to begin an
immediate phaseout of MTBE from California gasoline, with 100
percent removal to be achieved no later than December 31, 2002.
However, in order for California to achieve this necessary goal
without a major disruption of our fuel supply, it is imperative
that Congress provide flexibility to California to meet Federal
clean air emissions standards without mandatory use of
oxygenates. Both the House bill H.R. 11, as well as the Senate
bills 266 and 645, provide exactly the flexibility California
needs, without weakening air quality regulations.''
Mr. Bilbray. Mr. Chairman, I think that clarifies the
ranking member's issues there. I would only like to clarify on
the ethanol issue that estimates which have been made are that
with H.R. 11 and the action that the Governor is planning, that
the use of ethanol in the State of California, as pointed out
by the Senator, will increase by huge amounts while still
maintaining the clean air, and actually reducing, in the long
run, overall cost to the consumer and making it safer for our
environment. Less expensive, cleaner, and safer. That is all
H.R. 11 is trying to do.
Senator, thank you very much. I yield back, Mr. Chairman.
Mr. Bilirakis. I thank the gentleman. Mr. Waxman?
Mr. Waxman. Thank you very much, Mr. Chairman. Mayor
O'Connor, we are all trying to figure out how to cut through
the legislative roadblocks, and the rest of the country is
starting to recognize that this may not be a problem unique to
California. We have had a terrible experience in Santa Monica.
Would you just briefly share with the people here--you did
it in your statement--but what lessons did we learn that they
are going to have to learn unless we take some action?
Ms. O'Connor. Well, the bottom line is if there is any
additive to gasoline, it needs to be studied. We need to
understand what are the impacts both in terms of air and water,
all the environmental impacts. You are finding more and more
instances where pollution has already occurred so it is
important for us to seek help both through EPA in terms of
enforcement and technical assistance to help with that cleanup.
But again, the bottom line is whatever is introduced, it
needs to be thoroughly studied beforehand. Folks thought MTBE
had been studied, but it looked at the air impacts. No one had
thought about or looked at its affinity toward water and what
would happen. No matter what regulations we all have in place
in terms of the underground tanks and making them as good as
possible, still spills occur sometimes, whether it is
underground tanks, pipelines, or other kinds of spills
occurring. So we need to understand all the consequences and
impacts of any additive.
Mr. Waxman. Would you share with the committee our
experience with cleaning up these two wells? One, there wasn't
a difficulty because the oil company took responsibility. But
in the other one, the Charnock field, we have had a real tough
time. Just so people here should be aware of it, tell us about
it.
Ms. O'Connor. How to best clean it up is still not known.
That is where the technical assistance----
Mr. Waxman. How to do it and who is to pay for it.
Ms. O'Connor. Right. First of all, there are the folks
who--potentially responsible parties identifying where the
leaks are, who polluted it, as well as figuring out how to
clean it up. And there were no answers. No one knew how to
clean it up. In fact, we are still struggling with that and for
us locally, that means it is now going on 3 years; going to be
4, 5 down the road till we can have our drinking water back
because there is no consensus. There is no proven way to clean
it up and we are still struggling with those technical aspects
of it.
Mr. Waxman. Mr. Brown asked why don't we turn to ethanol
for California. First of all, we don't need ethanol to achieve
the environmental objectives. Second, if we required ethanol
for California, there would be no ethanol for the rest of the
country. California is a huge market and we should never forget
that fact.
What we want to do is meet air quality performance
standards. We don't want to do anything to harm the drinking
water of this country. We also have to be mindful that there is
a problem with toxic air pollutants and global warming and we
have to take all that into consideration. And I am hopeful that
when legislation is finally passed, and hopefully soon, we will
keep all of these points in mind. Thank you very much, Mr.
Chairman.
Mr. Bilirakis. Any further inquiries of this panel? Mr.
Ganske.
Mr. Ganske. Thank you, Mr. Chairman. Two comments on timing
and supply. Ethanol has twice the oxygen content of MTBE. By
the way, I think that Congress ought to look at banning MTBE
for the rest of the country. We are looking at it in Iowa, even
though we primarily use ethanol. There is some MTBE in the
gasoline there and it is a big--I agree with you 100 percent--
it is a big, big problem and we don't know how to get it out of
the water once it gets in there.
But to move on to the supply, because ethanol has twice the
oxygen content of MTBE, half of the volume supplies the same
amount. And if you look at the estimate for California's
ethanol demand, you would be looking at somewhere around 40,000
barrels per day. With the current U.S. ethanol production
capacity, this would require only an additional 26,000 barrels
per day capacity, and I think that can be done in a relatively
short period of time, probably in 6 months or less by some
estimates.
But Senator Feinstein, I wanted to ask you a question. I
want to read a rather lengthy segment from the statement by the
renewable fuels people, and since you will be gone when they
come here, I would like to get your response to this and then
we will--then I will ask them.
This is from their testimony today. ``The California Energy
Commission recently completed an analysis supplying costs of
alternatives to MTBE in gasoline. The CEC report provides an
estimate of the potential costs or savings to the public in
increases or decreases in retail gasoline prices for each
alternative when compared to MTBE. In all cases studied, i.e.,
near term, medium term, long term, eliminating the use of
oxygenates resulted in the largest cost increase for California
consumers.
``For example,'' the report states, ``in the long term, a
complete ban on all oxygenates would result in the greatest
average cost increase for gasoline for this time period
compared to all other alternatives studied. Refiners would need
to make significant investments to modify their facilities,
totaling over $1.1 billion. This is the primary reason for the
average cost increase. In all cases, the ethanol option was
less expensive than a non-oxygenated case. Indeed, the ethanol
case was shown to potentially save consumers money over the
long term if adjustments to the predictive model are made
recognizing the carbon monoxide and exhaust emissions benefits
of ethanol which would obviate the need for refiners to secure
especially tailored blend stocks for ethanol.
``While the report also showed that passage of legislation
for making oxygenates optional in California would be the least
expensive option, this conclusion is based on the assumption
that other oxygenates, including MTBE, continue to be used.
Thus, this option, while potentially less expensive,
perpetrates the water contamination problems that have plagued
the program. Moreover, the economic analysis did not include
the potential costs of remediation if ether oxygenates continue
and additional drinking water supplies are contaminated from
that.''
It is a long statement but I would kind of like your
response, because basically the thrust was that eliminating the
use of oxygenates in California gasoline could increase
consumer costs. Would you like to respond to that?
Senator Feinstein. Of course ethanol has a subsidy.
Therefore, its use is automatically going to help with price;
hopefully reduce price. Let me just quote from Mr. Hickox's
oral presentation today.
``If the Federal oxygen requirement remains in effect,
California gasoline costs could increase as much as 6 to 7
cents per gallon due to the huge increase in ethanol demand,
according to the California Energy Commission. If H.R. 11 or
its companion bills are approved, cost increases could be only
2 to 3 cents per gallon.'' I know he is going to testify. I
think he is much more qualified to answer that question than I.
Mr. Ganske. Thank you.
Mr. Bilirakis. The gentleman's time has expired. Mr. Green.
Mr. Green. Thank you, Mr. Chairman. I think it is
appropriate I follow my colleague from Iowa. If I was from
Iowa, I also would be in favor of banning everything but
ethanol, but I don't think we grow enough corn to do that and
if we did, we surely wouldn't be able to eat corn, much less
drink it in corn whiskey.
Mr. Ganske. If the gentleman would yield, we need to solve
the drought problem so you guys can grow some corn down there.
Mr. Green. Well, if we had a tax benefit like ethanol, we
might be able----
Again, that is not coming from someone who hasn't been
involved in this issue. I remember in the legislature in the
seventies, I supported gasohol and the tax benefits for
gasohol. Obviously it fell flat on its face. And that was in
Texas.
Let me ask of this panel, and I know we are going to have
other panels and particularly from U.S. EPA in California, one
of the concerns I have in following Mr. Bilbray's bill now for
about 3 years is that the MTBE contamination into the
groundwater, is it predominantly from the underground storage
tanks or is it from just the burning of it and the pollution
from our cars? Is it the underground storage tank problem?
Senator Feinstein. By and large, yes. Water reservoirs are
being polluted from the air. The two stroke jet ski engines at
Lake Tahoe produce huge amounts. About a third of the gasoline
goes into the water and the ethanol, you know, leaches into the
shore groundwater. So it is a variety, I would say.
Mr. Green. I know Mr. Waxman's concern that no matter what
substance, whether it is MTBE or something else, if it is
getting into Lake Tahoe or if it is leaching in from a leaky
storage tank--and I guess that is one of the concerns.
And I know, Mr. Chairman, I may not be here for the
California EPA, but in December 1998, California's compliance
with underground storage tanks regulations were 60 percent, yet
5 months later became 90 percent, and I would just like to know
the secret in 5 months of how that happened, because I think if
we could duplicate it in other parts of the country, that no
matter what substance is developed--except ethanol, because it
evaporates but it will cause problems in Lake Tahoe or in our
subsurface formations and that is what the concern is.
We are attacking MTBE but we are not looking at the problem
of the leaking storage tanks and beginning with that kind of
success, I guess you wouldn't. But I would like to see how that
happened.
Let me--the study of the other additives, I don't think
there is a problem. The technology in our country is great, and
I think that if we have some flexibility, the petrochemical
industry will develop it. But again I think you have to realize
it takes time to do that and, like I said in my statement, I
wasn't here in 1990, although I supported the Clean Air Act. I
just don't know how we were so specific to have that
requirement to develop that. Again, hindsight is always 20/20,
but that is my statement.
Mr. Bilbray. Would the gentleman yield?
Mr. Green. I would be glad to.
Mr. Bilbray. Just to clarify how we got that, and the
gentleman from Santa Monica isn't here, in 1990 the best
science said 2 percent by weight was the cleanest technology
for burning gasoline at that time. What has happened is in
California, with our toxicologists and our different
formulations, in 1994 California came out with an outcome-based
rather than content-based strategy which has 50 percent less
toxins than the 1990 fuel. So what happened was the Federal
fuel got locked into a mandate while the State was able to,
with flexibility, produce a better mousetrap.
Mr. Green. And again, I have no problem. Of course, again,
maybe sometimes longevity has problems. I remember the Federal
Government in the 1970's banned the use of natural gas for
power plants, and we regretted that for many years after that.
But a decision was made in 1990 to have a specific formula, and
it was wrong. And here 9 years later, we are saying okay, what
can we do? I would not like to build that wrong mousetrap now
and have to do it 9 years later, after people invest, people
who buy gasoline invest.
There is no secret that billions of dollars went into
creating MTBE facilities.
Mr. Bilbray. That is why there is flexibility in this bill.
Mr. Bilirakis. The gentleman's time has expired. Mr.
Shadegg?
Mr. Shadegg. Thank you, Mr. Chairman. I will be brief and
simply say that I compliment the Chairman for holding this
hearing. I am very supportive of H.R. 11. Arizona is very
affected by what happens in the California refineries. More
than 50 percent of our gasoline comes from there. I think this
is a great illustration of how local control can improve both
the environment and other things.
In Arizona we just recently experienced a dramatic increase
in gas prices, going from less than $1 a gallon just a few
short months ago to over $1.40 a gallon now. And if the
California authorities have come up with a cleaner fuel which
is less expensive and does less environmental damage, it looks
to me like it is a no-brainer.
I do have an opening statement which I would like to put in
the record and again I compliment the proponents of this idea.
[The prepared statement of Hon. John Shadegg follows:]
Prepared Statement of Hon. John B. Shadegg, a Representative in
Congress from the State of Arizona
Chairman Bilirakis, thank you for holding this hearing on H.R. 11.
I appreciate the opportunity to discuss this bill and the positive
precedent that it could set for other states which have concerns with
implementation of the Clean Air Act.
The Clean Air Act currently requires the use of gasoline containing
an oxygenate in certain areas to reduce air pollution. There are two
types of oxygenates which are used in gasoline to reduce pollutant
emissions: Methyl Tertiary Butyl Ether (MTBE) and ethanol. California
is planning to prohibit the use of gasoline containing MTBE because of
concerns over its environmental effects and, under the Clean Air Act,
only gasoline oxygenated with ethanol will be allowed in many areas of
the state.
H.R. 11 modifies the Clean Air Act to allow California to use a
type of nonoxygenated, clean burning gasoline approved by the state.
This means that the state will not be forced to use only one type of
gasoline and allows it greater flexibility to address its air pollution
problems.
This issue is important to my state of Arizona for two reasons. The
first reason stems from the fact that approximately half of the
gasoline used in Arizona comes from California refineries. Factors
which affect production in these refineries have a direct impact on the
prices which Arizonans must pay for gas. This effect was illustrated
recently by the major price increases which Arizona experienced
following explosions in several California refineries. For example, the
price of gasoline in Phoenix shot up from less than one dollar per
gallon in January and February to approximately one dollar and forty
cents today! While this astronomical increase was not completely due to
refinery problems in California, these problems did make a significant
contribution to the inflated prices which citizens of my state are now
forced to pay.
If significant areas of California are forced by the Clean Air Act
to use only ethanol oxygenated gasoline, they will compete for the
supply of this gasoline with the cities of Phoenix and Tucson, both of
which require that motorists use oxygenated gasoline. This competition
will further increase the prices which Arizonans must pay.
This bill is also important to Arizona because of the possibility
that my state may also choose to prohibit the use of MTBE because of
the potential which it carries to contaminate supplies of groundwater.
Passage of H.R. 11 will directly benefit California, and it is
extremely important to ensure that other states share in this benefit.
On a more fundamental level, H.R. 11 reiterates the importance of
local control over matters of environmental protection. The air quality
situation in each state is unique, due to differences in geography,
climate, population, and industry. The Clean Air Act recognizes these
differences to some degree by giving states flexibility in deciding how
to structure their State Implementation Plans to achieve air quality
goals. It is logical to carry this flexibility one step further by
allowing states which certify alternative types of clean burning
gasoline to use those types in place of the federal standard.
I look forward to the insights on this issue which our witnesses
will offer us today.
Mr. Bilirakis. Thank you. Ms. Eshoo?
Ms. Eshoo. I don't have any questions. Thank you.
Mr. Bilirakis. Any questions of this panel?
Ms. DeGette. No, not of this panel.
Mr. Bilirakis. All right. You have been tremendously
helpful. It is unusual to have members sit here this very long
and basically suffer the inquiries that come from the panel and
we appreciate it very much. It has been very helpful.
Mrs. Tauscher. All because of you, Mr. Chairman.
Mr. Bilirakis. Panel two consists of The Honorable Robert
Perciasepe, the Assistant Administrator for Air and Radiation,
U.S. Environmental Protection Agency.
STATEMENT OF ROBERT PERCIASEPE, ASSISTANT ADMINISTRATOR FOR AIR
AND RADIATION, ENVIRONMENTAL PROTECTION AGENCY
Mr. Perciasepe. Thank you, Mr. Chairman and members of the
subcommittee. Thank you for the opportunity to talk with you
today about this very important and critical national issue. If
I might just do a tiny piece of business before I start the
testimony. I am going to try to summarize my testimony from a
couple of charts. I want to make sure----
Mr. Bilirakis. Is that business responding to our letter?
Mr. Perciasepe. I will get to that. If I don't, I am sure
you will ask me a question. I want to make sure the members
have copies of these charts I am going to use.
Mr. Bilirakis. Yes, sir.
Mr. Perciasepe. That was the business. First, I think it is
important to note that the United States has made tremendous
progress on air quality over the last decade, and this is in no
small part due to the work that Congress did in constructing
the 1990 Clean Air Act and those amendments that were in the
1990--the amendments to the Clean Air Act of 1990 and the
programs that were envisioned in them.
And I am going to review some of that, because the context
of the work that we are doing here and the discussions we are
having on this legislation and this issue really need to also
take place in the context of the larger whole of our clean air
goals as well as our clean water goals.
And I want to preface that by saying that I would agree, as
the EPA does, with the statements that have been made by the
members. We cannot achieve that kind of air quality coverage at
the expense of other environmental concerns. And I want to make
that clear, that it is a vitally important thing. I think it is
central to the issue we are talking about here.
There are a number of issues that come beyond the clean air
requirements. If you look at the chart, when Congress looked at
the fuels part of the Clean Air Act, we looked at not just at
the air quality improvement, they looked at energy security and
how these are things--and these requirements might affect the
provision of fuel and the supply of fuel. They looked at
renewable resources and what role that should play in the
national fuels program, and they looked very carefully at the
balance between what fuel programs were going to do for clean
air and what vehicle technology was going to do for clean air
and how those two would work together. This has resulted, as I
said, in a very successful outcome.
On a national level where reformulated gas is used, we see
toxic reductions of about 30 percent. I don't have on that
chart the progress that has been made on carbon monoxide also
around the country with most places, although not all yet, that
used to be non-attainment for carbon monoxide, now in
attainment. The fuels have played no small part in that, as has
the car technology and the oxidation catalysts that are used in
automobiles.
Ambient benzene reductions. Now, benzene is a known human
carcinogen and measurements in the air 1 year after the
implementation of the Federal reformulated gasoline program in
those areas where it was envisioned show a 38 percent reduction
in the ambient concentration. This is what people are
breathing.
Volatile organic compounds, another precursor to ozone,
about a 20 to 25 percent. It does vary a little bit, and the
bottom line is that this has improved significantly the air
quality for over 75 million people in the United States,
particularly in terms of air toxins and in ozone formulation.
The concentrations of ozone have gone down all over the
country. I won't go into the great detail on that that I could.
Now, as we look at the issues that the committee is looking
at and that Mr. Bilbray's bill brings to the forefront, and as
we are looking at this at the national level with our panel
that I think was mentioned in the last panel's discussion,
which I will talk about in a little more detail, we are looking
at how do we maintain these air quality benefits. They have
been significant. They have helped many local areas around the
country achieve their goals with a very cost-effective
approach. How do we maintain that? But how do we deal with the
fact that we have this water contamination problem? What is
different about this water contamination problem than gasoline
leaking into groundwater without MTBE in it? Many of these
places that we've talked about today also have benzene and
toluene and other components of gasoline in the water as well.
How do we do a better job of preventing fuel leaks? I know
it would be idealistic, but if there were no fuel leaks there
would be no problem. And what are the impacts of alternatives?
That all came up in the previous panel as well.
And whatever direction we take, what effect does it have on
the fuel supply of the United States and the cost of that fuel
supply?
I don't think it requires a lot of thought to understand
how important fuel supply is in the United States and,
obviously, for the economy of the country and what the cost is.
And how do we balance that appropriately to make progress on
the issues that we are talking about?
Let me tell you quickly what steps we are taking here at
the national level. Mr. Chairman, what I want to point out is
that these dovetail very closely with the issues that have been
talked about here already. We are working with California and
other States. We have been working both on terms of technical
assistance, financing, pilot projects to look at remediation,
enforcement actions where we can use our authority to help
facilitate cleanup.
This is something that has been going on in the Santa
Monica area. We have been looking at approaches to remediate
leaks. We have a research program: What can we do to find
cheaper ways to remediate leaks not just where MTBE is
involved, but in general, but specifically MTBE and to prevent
these leaks? What more can be done to prevent this problem,
because even if MTBE or any other component of gasoline wasn't
in gasoline, the thing we must remember is gasoline is a potent
toxic mixture of chemicals with or without certain oxygenates.
We as you have mentioned I think in one of your statements,
Mr. Chairman, and as the Senator mentioned--we have a blue
ribbon panel that we appointed last fall because we recognize,
as does the Congress, that the status quo was probably going to
have to change in regard to how we deal with these national
clean fuels programs. And our panel is about 2 months away from
recommendations to us, and we are working pretty hard with
them, and so I will talk a little bit more about that during
the question and answers.
We are reviewing the statutory and regulatory flexibilities
we have. I know that the committee asked very specifically, do
we have the authority to grant a waiver? I will talk about that
in just a moment. And, very importantly, at the bottom of that
list there, because it is sequential, after we do those other
things, it is going to be imperative that we coordinate with
Congress on how we move this whole thing forward.
So I am going to say that that is the summary of my opening
statement. I am sure there will be lots of questions. The key
point I want to make here is that we are in a process at EPA
and at the Federal Government. We have many people involved
with our process, including four people from California on our
panel. We have people from the drinking water industry in
California. We have a person from Berkeley. We have a person
from Lawrence Livermore. And we have a person from the
California Air Resources Board on our panel, and so we are very
coordinated in terms of where we are trying to push the panel's
assessment and where California--what information we can get
from California. I am going to end there with my opening
comments and take some questions.
[The prepared statement of Robert Perciasepe follows:]
Prepared Statement of Robert Perciasepe, Assistant Administrator,
Office of Air and Radiation, U.S. Environmental Protection Agency
Thank you, Mr. Chairman and Members of the Subcommittee, for the
invitation to appear here today. I am pleased to have this opportunity
to share with the Subcommittee the environmental benefits of the
reformulated gasoline or RFG program, and to address issues raised by
H.R. 11, introduced by Congressman Bilbray. H.R. 11, if enacted, would
potentially exempt gasoline used in several California cities from the
federal RFG requirements, including the 2.0% oxygen Clean Air Act (Act)
requirement.
An understanding of the history of the federal RFG program is
important in order to put H.R. 11 in perspective. As you know, the
Clean Air Act Amendments of 1990 put in place a number of programs to
achieve cleaner motor vehicles, and cleaner fuels. By and large, these
programs have been highly successful. Only after extensive
deliberations did Congress strike the balance between vehicle and fuel
emissions control programs. The RFG requirements also emerged from
combining several Congressional goals, including air quality
improvement, enhanced energy security by extending the gasoline supply
through the use of oxygenates, and encouraging the use of renewable
energy sources.
The federal reformulated gasoline program introduced cleaner
gasoline in January 1995 primarily to help reduce ozone levels.
Unhealthful ozone levels are still of significant concern in this
country, with over 30 areas still in nonattainment of the current 1-
hour ozone standard, and more expected to exceed the new, 8-hour ozone
standard.
Ozone has been linked to a number of health effects concerns.
Repeated exposures to ozone can make people more susceptible to
respiratory infection, result in lung inflammation, and aggravate pre-
existing respiratory diseases such as asthma. Other health effects
attributed to ozone exposures include significant decreases in lung
function and increased respiratory symptoms such as chest pain and
coughing.
RFG is a cost-effective way to reduce ozone precursors such as
volatile organic compounds (VOCs) and oxides of nitrogen
(NO<INF>X</INF>), when compared to other air quality measures. The
Clean Air Act Amendments of 1990 required that RFG contain 2.0 percent
minimum oxygen content by weight. The first phase of the RFG program,
from 1995 through 1999, requires average reductions of ozone-forming
volatile organic compounds and toxics of 17% each, and NO<INF>X</INF>
by 1.5%. In the year 2000, the second phase of the RFG program will
achieve even greater average benefits: a 27% reduction in VOCs, 22%
reduction in toxics, and 7% reduction in oxides of nitrogen emissions
that also contribute to the formation of urban smog. This is equivalent
to taking more than 16 million vehicles off the road. RFG provides
these reductions at a cost of less than five cents per gallon.
The federal RFG program is required in ten metropolitan areas which
have the most serious ozone pollution levels. Three of these
metropolitan areas are in California. This includes Sacramento, Los
Angeles, and San Diego. Although not required to participate, some
areas in the Northeast, in Kentucky, Texas and Missouri that have poor
air quality have elected to join, or ``opt-in'' to the RFG program as a
cost-effective measure to help combat their pollution problems. At this
time, approximately 30% of this country's gasoline consumption is
cleaner-burning reformulated gasoline.
We are often asked about the ``real-world'' benefits of RFG. Since
1995, RFG, on average, has exceeded expectations for VOC,
NO<INF>X</INF> and toxic reductions. Most notably, overall toxics
reductions are about twice that required, with about a 30% reduction
versus a 17% requirement. It is estimated that about two-thirds of the
additional air toxic reduction is a result of the use of oxygenates.
Ambient monitoring data from the first year of the RFG program also
showed strong signs that RFG is working. RFG areas showed significant
decreases in vehicle-related VOC concentrations. One of the air toxics
controlled by RFG is benzene, a known human carcinogen. The benzene
level at air monitors showed the most dramatic declines with a median
reduction of 38% from the previous year.
Because of the severe air pollution that occurs in parts of
California, and the leadership California has shown in addressing air
pollution, the Clean Air Act provides the state with unique authority
to establish its own clean fuels programs. Using that authority,
California introduced its current formula of reformulated gasoline in
1996. Although reformulated gasoline sold throughout California must
comply with the strict state requirements, all gasoline sold in three
metropolitan areas (LA, San Diego and Sacramento) must also comply with
the federal RFG requirements. In order to alleviate the burden on
California refiners to meet overlapping requirements, EPA has provided
them flexibility in a number of areas, including reporting and fuel
survey requirements, and sampling and testing techniques.
Neither the Clean Air Act nor EPA requires the use of MTBE in RFG.
The statute and EPA's regulations only specify the oxygen content as a
performance standard, they do not specify what oxygenate to use. Both
ethanol and MTBE are used successfully in the current RFG program, with
fuel providers choosing to use MTBE in about 76 percent of the RFG.
Like federal RFG, California's Cleaner Burning Gas substantially
reduces harmful emissions from motor vehicles. When oxygenate is added
to RFG in California, in both federal and California RFG areas, almost
all of it is MTBE. Oxygenates help to reduce emissions of ozone
precursors and air toxics by diluting or displacing gasoline components
such as benzene, olefins, aromatics, and sulfur and by altering the
distillation index. Oxygenates also help to reduce carbon monoxide by
improving the fuel combustion process. In addition, since oxygenates
increase octane, refiners have chosen to add them to gasoline since the
late-1970's. And because oxygenates comprise up to 11% of the volume of
reformulated gasoline, they can extend the gasoline supply through
displacement of some gasoline components. This reduces our reliance on
foreign petroleum imports--a fact as important today as it was in the
1970s.
Despite the air quality aspects of oxygenates in RFG, there is
growing concern about contamination of drinking water by MTBE in Santa
Monica, several other areas in California, as well as in Maine and
other states. As a result, Governor Davis has recently taken action to
phase out MTBE use in California by the end of the year 2002. EPA is
also concerned about the detection of MTBE in drinking water in
California and other states. For the most part, levels detected in
drinking water have been quite low. For instance, the California
Department of Health Services requires public drinking water systems to
monitor for MTBE. As of April, 1999, 3.8% of California's drinking
water systems sampled have detected MTBE. Most of those detections are
below the state's secondary standard (or taste and odor action level)
of 5 parts per billion.
The U.S. Geological Survey (USGS) has reported that about 3 percent
of groundwater wells in RFG program areas have detections of MTBE at or
above 5 parts per billion. MTBE detections at high concentrations in
groundwater, such as those experienced in Santa Monica, result
primarily from leaking underground fuel storage tanks, and possibly
from spills from distribution facilities. These leaks are unacceptable
regardless of whether or not MTBE is present in the gasoline. However,
the presence of MTBE at these leak sites suggests the need for improved
early warning systems for underground storage tank leaks. The Agency's
underground storage tank (UST) program is expected to substantially
reduce future leaks of all fuels and additives, including MTBE, from
underground fuel storage tanks. All USTs were required to be upgraded,
closed, or replaced to meet these requirements by December 1998. Over
80% of the regulated tanks have complied with this requirement and EPA
is continuing to work with the states to ensure further progress.
In response to health and water contamination concerns associated
with the use of oxygenates in gasoline, the Administrator established a
blue-ribbon panel of leading experts from public health and scientific
communities, water utilities, environmental groups, industry, and local
and state government, including California, to assess issues posed by
the use of oxygenates in gasoline in California and the rest of the
nation. The Administrator requested recommendations from the panel by
July 1999. This panel is currently grappling with a number of complex
issues. This includes an assessment of alternatives to the use of MTBE
to ensure that the air quality benefits that RFG currently provides are
continued, and the additional benefits of the second phase of the
program are not endangered.
There is concern about the availability and viability of potential
substitutes such as ethanol, or alkylates, that could help to provide
the dilution and octane benefits currently obtained with MTBE. Refiners
are using about 260 thousand barrels per day of MTBE in RFG, as
compared to about 25 thousand barrels per day of ethanol. If
substitutes can be made available, what time frame would be needed? Are
there potential environmental consequences of substitutes that need to
be considered? What are the potential impacts to water quality if these
substitutes are accidently released to the environment? What will the
public ultimately have to pay for such alternatives? These are just a
few of the many questions the panel is considering as it begins to
develop options.
Options being considered by the panel include the following:
maintain the status quo and continue current efforts to protect water
sources; enhance existing water protection programs; increase
flexibility on the use of oxygenates with no new constraints on the use
of MTBE; increase flexibility while also phasing out the use of MTBE;
or maintain the oxygen mandate but phase out MTBE. We are impressed
with the high caliber of individuals that are serving on the panel, and
are looking forward to hearing the panel's recommendations regarding
steps that should be taken to ensure continued improvement in both air
and water quality.
Mr. Chairman, I want to assure you that we are committed to working
with the state of California to continue to look at options, including
potential actions that could be taken within the state to align fuel
distribution with state and federal RFG requirements. At the same time
EPA is carefully assessing our statutory authority to determine what,
if any, options we have to address Governor Davis' recent request for
flexibility on the oxygen mandate. The waiver request submitted by the
Governor is the first one EPA has received. Since this is the first
case, there is no precedent for an administrative response to such a
request. We are therefore looking closely at the Governor's request,
and assessing both our authority and the evidence presented by the
state.
Again, I want to emphasize that the blue ribbon panel is in the
process of conducting a robust evaluation of issues posed by the use of
oxygenates, nationwide. The panel has painstakingly taken the time to
hear from a wide variety of stakeholders in this matter, including an
open meeting in Sacramento, California. From that input, the panel has
now begun to formulate a number of options for consideration. Once we
have the panel's recommendations, it is important that we work with
states, and coordinate with Congress over the next three to four
months. During that time frame, we will not only have the benefit of
the panel's advice, but we will have a better understanding of our
authority to respond to Governor Davis' request for flexibility on the
oxygen mandate. We will then be in a better position to coordinate with
Congress to ensure that air quality benefits are preserved, while
continuing to protect the nation's water quality.
This concludes my prepared statement. I would be happy to answer
any questions that you may have.
Mr. Bilirakis. Thank you, sir. I am sure we all have
questions. I am going to yield to Mr. Bilbray.
Mr. Bilbray. Thank you, Mr. Chairman. On April 22, 1998,
the EPA testified that they could not--EPA cannot support the
bill at this time. Now, I have looked at and reviewed your
prepared statement, and it gives a very comprehensive history
of the reformulated gasoline program, but it is completely
silent on H.R. 11. Is the subcommittee to assume that EPA no
longer opposes the Bilbray/Feinstein bill?
Mr. Perciasepe. I think the administration has no position
at this time on this bill or any of the other bills that are
currently beginning to be introduced, and we want to find a way
to coordinate between recommendations from our blue ribbon
panel, which we expect in the next several months, and what the
legislation might start to look like.
I would have to say that we would lean toward looking at
national approaches, but assuming that the panel puts forward
recommendations that look at national approaches and that
legislation is part of that, we are about 2 months behind you,
I would imagine.
Mr. Bilbray. Do you see any damage, looking at California
specifically, to us?
Mr. Perciasepe. I think the fact that you are having this
hearing is helpful to the entire debate on this subject. I
think it is very important that we keep in mind the broad base
of issues that I put up there, because it is not just the
groundwater contamination, although that is vital and something
we have to take into account. We have to look at how we don't
lose the air quality benefits, we have to look at the fuel
supply issues, the cost issues and everything else.
I think as several people have already said, as goes
California, so goes the Nation. Clearly it will be a
bellwether, and I think it is very important for me, at the
national level, to have some view about where that is going to
go before I make a decision one way or another to advise the
administration specifically on your bill.
Mr. Bilbray. Okay. Let us point out some specifics about
California that may make it kind of unique. Does the EPA agree
that California clean-burning gasoline is equal or superior to
the Federal reformulated gasoline formula?
Mr. Perciasepe. I think that is an accurate statement, yes.
Mr. Bilbray. Thank you. I think, just to clarify, in
February 1994 the EPA's position was that California's program
was at least as stringent as the Federal program. In 1994, in
the Federal Register in February, a statement of EPA was that
California has a greater emission reduction performance than
the Federal Phase 1.
In February 16, 1994, the EPA stated in the Federal
Register that the fuel meeting the standards of the California
Phase 2 program has a greater VOC and toxic performance
reduction than fuels meeting the Federal formulated gasoline
standards.
So I think to clarify here, H.R. 11 in no way is indicating
to outlaw oxygenates in the fuel, but at the same time,
California is one State that EPA has concluded has a fuel that
is equal or superior than the 1990 formula.
That is fair to say?
Mr. Perciasepe. Yes. The reformulated program in the Clean
Air Act on the national level has two phases to it, phase 1,
which was in 1995, and phase 2, which takes effect in 2000.
When phase 2 takes effect, those differences will narrow, but
the equivalence will be the same.
Mr. Bilbray. Do you have any other State equal to the
California reformulated gasoline?
Mr. Perciasepe. When States start using the second phase of
the reformulated program, they will be equivalent.
Mr. Bilbray. At this time----
Mr. Perciasepe. The refinery industry, they are somewhere
in between, I should say. They are somewhere in between phase 1
and phase 2 reformulated gas as they ramp up, and are probably
getting closer this summer.
Next summer they have to be there.
Mr. Bilbray. Thank you very much. I appreciate it. I yield
back, Mr. Chairman.
Mr. Bilirakis. The gentlelady from California, Ms. Eshoo.
Ms. Eshoo. Thank you, Mr. Chairman.
Good morning to you and welcome. As you know, the Clean Air
Act gives California a unique authority to administer its own
fuels program to reduce vehicle emissions. Despite this
authority, the reformulated gasoline requirements of the Clean
Air Act still apply to California.
So as I understand it, this means that California is the
only State in the country where Federal requirements apply in
conjunction with State regulations that have proven to be more
effective in terms of producing cleaner burning gasoline.
Can you provide any further insight as to whether or not
EPA is willing to grant a waiver from the Federal reformulated
gas requirement to California as requested by the Governor,
and, if not, what is the basis of your thinking?
I have another question as well, and that is that H.R. 11
requires that in order to obtain the flexibility it wants, a
California refiner would have to demonstrate to EPA that its
nonoxygenated gas burns at least as clean as the Federal RFG.
Do you have a problem with the principles of a performance
standard, even when your own agency gets to decide whether the
standard has been met?
Mr. Perciasepe. I will try to go in order there.
Ms. Eshoo. Don't run out of time.
Mr. Perciasepe. On the equivalency, next summer there will
be very little difference between the Federal program and the
California program in terms of the performance from an air
quality perspective. So the differences in terms of one being
superior to the other will really fade away next summer.
The waiver request that the Governor has----
Ms. Eshoo. This coming summer?
Mr. Perciasepe. The summer of 2000, the Federal
reformulated gasoline program will be roughly equivalent to the
California program. There will be some differences, but it will
be roughly equivalent.
Ms. Eshoo. California being more stringent.
Mr. Perciasepe. Right now. In 2000, they will be much
closer.
Ms. Eshoo. I hope everyone hears that on the committee.
Mr. Perciasepe. Of course, it is only used in the
Sacramento area, the Los Angeles area, and the San Diego area.
The request for a waiver that the Governor has sent to EPA was
for a waiver from the 2 percent by weight oxygenate
requirement. To my knowledge, all of the California clean gas
also has oxygenates in it. But the Sacramento, Los Angeles and
San Diego areas, since those are the Federal reformulated gas
areas, have to have at least 2 percent by weight of oxygenate.
There was a request from the Governor to provide some
flexibility on that or a waiver specifically for that. That
doesn't mean there will not be oxygenates in it but the 2
percent waiver.
Now, you sort of asked me the question already in your
opening statement, but the Clean Air Act does provide for a
waiver, so the simple legal interpretation is yes, EPA has the
authority to grant a waiver. But the problem is, let me tell
you what it is for. I will read it to you. Upon a determination
by the administrator that compliance with such requirement, the
2 percent oxygenate requirement, would prevent or interfere
with the attainment of the area, in this case the southern part
of California and Sacramento, with ambient air quality
standards.
So the authority we have in the Clean Air Act, given to us
by Congress, to grant a waiver, is based on whether or not the
2 percent oxygenate requirement interferes with the attainment
of National Ambient Air Quality Standards.
So when I say, yes, we have the authority to grant a
waiver, I have to preface it with--and the reason I didn't
answer as explicitly in my written testimony yet, we have never
been asked whether the oxygenate requirement is interfering
with the implementation or the attainment of National Ambient
Air Quality Standards. As the chart showed earlier, all the
evidence shows it is helping attain the National Ambient Air
Quality Standards.
So this is what we are reviewing with the State of
California and why we don't have a final answer yet on the
waiver part.
I am afraid I forgot the third one. I think it was--you had
a third question there.
Ms. Eshoo. Do you have a problem with the principles of the
performance standard, even where your own agency gets to decide
whether the standards are met or not?
Mr. Perciasepe. We are in favor of performance standards.
That is pretty much the way the Clean Air Act is set up.
Mr. Bilirakis. Did you have anything more?
Ms. Eshoo. No, I will honor the clock going off.
Thank you.
Mr. Bilirakis. Well, sir, of course, the waiver request was
made by the Governor, but the Commerce Committee request was
for a legal analysis.
You have a policy decision, you referred to your charts.
But we are interested in a legal decision. All we asked about
was the legal decision and your ability to grant a waiver of
the requirement, and we haven't heard anything.
You are saying you do have that legal ability, but that it
is----
Mr. Perciasepe. Yes. The plain language of the act says we
can grant a waiver to the oxygenate requirement if it is
interfering with the attainment of air quality standards.
Mr. Bilirakis. That is the only basis that you would have
to grant a waiver?
Mr. Perciasepe. That is a specific----
Mr. Bilirakis. The only basis? Is that the way you read the
act?
Mr. Perciasepe. We are looking at the rest of the act as
well, but that is a specific provision in the act that can
grant a waiver for the oxygenate requirement.
Mr. Bilirakis. So what you are telling me is that you are
looking at other sections of the Clean Air Act to determine
whether, in fact, you have the legal authority to grant a
waiver?
Mr. Perciasepe. We are trying to be as expansive in our
review of this request that you have given us as we can. We
haven't completed it. Obviously we are looking into it. We will
continue to do that.
Mr. Bilirakis. Sir, with all due respect, and really, I
mentioned, and it has been brought up here, that there are
always dangers with opening up the Clean Air Act. Granted, if
you go into the national approaches to this situation you are
doing it there anyhow. But if we don't have to open up the
Clean Air Act for California, I think it is an advantage, and
we have kind of opened up the door here.
It sounds to me, frankly, with all due respect, like you
are stonewalling. Do you just not want to make a decision? The
least you can do is tell us whether you can make the decision.
The way we read the Clean Air Act, you have the legal authority
to either grant or disapprove the waiver. But we haven't flat
come out and said that. We have asked you if, in fact, you
could do it.
Mr. Perciasepe. Okay. Our counsel is still working on this,
and we would be more than happy to talk to your counsel about
what ideas that they have on it. Obviously there are advantages
if we don't have to have Federal legislation if there is a way
to solve a problem.
I want to point out something else that has come up several
times here, and that is California doesn't need a waiver to ban
MTBE. If the Governor has made this decision, which he has
done, simply moving to an alternative oxygenate, you don't have
to have a waiver.
Mr. Bilbray. If the gentleman will yield, to simply move to
another oxygenate, to me, is the most insensitive statement I
have heard here.
You are talking about the largest consumer of
petrochemicals in the world, and with the cost impacts to our
consumers right now, this is not just a simple thing of saying
let us just start trucking in one product instead of the other.
I don't know if you have ever been involved in the
transformation of one fuel to another. I have over 10 years
ago. I did it 3 times. It is not a simple thing.
I am sorry, Mr. Chairman, but I have to clarify. The simple
issue here with H.R. 11 is giving the flexibility, and EPA has
not, going back 5 years ago with Mary Nichols, has not
determined they have had that flexibility in the past, and I
would think the Chairman is just trying to get a clarification.
But don't say it is a simple transition, because I'm sorry it
isn't.
Mr. Perciasepe. You are correct.
Any transition from the way the fuel is provided now will
not be simple. Any transition--and any transition is going to
take time, both in California and nationally, and will cost
money. The option is open to California to achieve its policy
objectives--are to have more flexibility with oxygenates, which
I understand is the question at hand, and/or try to do--I am
using up whose time--well, if we can go around to the Member
again.
Mr. Bilirakis. All right, look, I think it is just a simple
request that was submitted in writing on April 23 and prior to
that verbally. That is an awful lot of time. Common, I have
practiced law too.
But can you give me a date? Can you give me a time when we
are going to hear from EPA whether they feel that they have the
authority to grant a waiver? To grant the waiver regarding
the--of course, the application made by the Governor.
Mr. Perciasepe. I don't want--it is not my intention to be
argumentative here.
Mr. Bilirakis. I don't intend that either. Put yourself in
our shoes. We are trying to do a job here, and I don't know, it
looks like Mr. Shadegg is no longer here, but he made comments
about how it looks like a no-brainer, because it would clean up
the air, it would clean up the water, it would result in less
cost to the consumer, et cetera, et cetera.
Whether you accept all that or not, I don't know. But it
indicates if you do, it is a no-brainer. In this committee, we
are pledged to do a particular job and we are requesting the
cooperation of EPA, just a simple request. We didn't even ask
you if you would grant the waiver, but can you in fact?
Mr. Perciasepe. I can say at this particular juncture it is
clear under certain circumstances we could grant a waiver, and
at least in one provision of the Clean Air Act if lays out what
those circumstances are, that there is an interference with the
attainment of national air quality standards.
Mr. Bilirakis. I guess we are going to have to suspend. I
was hoping, sir, we could finish up and release you.
Ms. Eshoo. Could you yield for 30 seconds?
Mr. Bilirakis. We have something less than 5 minutes to
vote.
Ms. Eshoo. I just want to get this in before I leave and
not jeopardize my vote on the floor, and that is I want to
underscore what the Chairman is struggling to say here.
I don't think that the California Clean Air Act or the
Federal Clean Air Act was anything but a magnificent effort at
a health-based environmental law. I helped implement the
Federal Clean Air Act, meshed the California Clean Air Act,
before I came here, together in the Bay Area Air Quality
District. I come to the table with, I think, well-earned
environmental credentials.
So to skirt around this issue or to not address it head on
and not work as a genuine partner--it is one thing to talk
about the Federal Clean Air Act. What about the rest of this
testimony as to what we are subjected to in the State of
California? We have responsibilities to work with one another
to make this thing work.
Mr. Bilirakis. I am going to suspend the proceedings until
we can return from the vote.
Mr. Hall. Are you going to keep this witness?
Mr. Bilirakis. Yes, sir.
Mr. Perciasepe. I will continue when you return.
Mr. Bilirakis. As soon as we get back. Thank you, sir.
[Brief recess.]
Mr. Bilirakis. Okay, let us get started. Are you ready,
sir?
Mr. Perciasepe. Yes, Mr. Chairman.
Mr. Bilirakis. Mr. Perciasepe, again, you know, I think
that your concern and the concern of EPA is the opening up of
the Clean Air Act and the problems that may come from it and
everything of that nature. So it stands to reason that if you
can grant the waiver, and we haven't asked you to grant the
waiver, we haven't asked for a policy decision, we merely asked
if you feel that you have the legal authority to grant the
waiver.
But if you can grant the waiver, obviously then we are not
reopening up the Clean Air Act insofar as at least as
California is concerned. You certainly ought to take that into
consideration.
Anyhow, getting again to the legal decision, Mr. Meyers is
right here to my right. I know he has worked with your people
over the years. When can we expect to find out whether, in
fact, you feel that you can, you have the authority at least,
to grant the waiver regarding the specific request?
Mr. Perciasepe. I am hesitant to give you an exact time,
but, you know, I don't want to waste a lot of time on this. I
don't want the committee wasting their time either. I am very
respectful to the position that you are putting forward here,
that obviously if there is an administrative way to deal with
some of these things, that reduces at least some of the
legislative work that may need to get done.
If it is within the bounds of what everybody is comfortable
with, that makes everything work better. I recognize that, and
obviously I want to do it in a timely fashion so we can work
with you. I want to keep coordinating with you. I would like to
coordinate with your counsel. I want to have some time to
consult with the State of California. I haven't been able to do
that yet as well. I mean, we have had general discussions. So I
am talking----
Mr. Bilirakis. Forgive me, because I am not ordinarily this
way in the Chair, but, again, you say coordinate with the State
of California, and all we are wondering is do you have the
authority, the legal authority to grant the waiver?
I am not even asking you whether you would grant the
waiver.
Mr. Perciasepe. Right. I understand that.
Mr. Bilirakis. But you are not sure? You can't respond?
Mr. Perciasepe. I think the answer, in simple terms, is
yes.
The question is what constitutes those conditions that are
in the statute. You know, I want to spend time understanding
the basis of California's interest in any interference with
meeting the air quality standards. I would rather not make that
up.
Mr. Bilirakis. I am going to ask counsel here then to
coordinate with the committee by this time next week to find
out what has transpired in that regard, because I would hate to
think that--well, I have said it, and Ms. Eshoo said it a lot
better than I. The word ``stonewall'' is basically what is
being used here. It is a shame. She mentioned the word
``partnership.'' We should be working together.
Mr. Perciasepe. We agree with that. I want to make it
really clear that I agree with that statement, and what the
Congresswoman said, and I want--as Mr. Bilbray said earlier, I
am not here in opposition to this bill, like has been the past
practice of the Environmental Protection Agency.
We are changing our views on what has to be done here, but
we have a process under way where--maybe perhaps a little bit
behind you, I put up there as one of the principles we want to
coordinate with Congress.
You used the word partnership. I agree with that term too.
I want to be clear to all the members of the committee that we
are not here trying to stonewall, we are not here trying to say
let us not do something if it needs to be done. We are here in
a different position than we have been in the past Congresses,
and I appreciate the frustration and I respect the need for you
to know what you are asking me.
Mr. Bilirakis. Okay.
Senator Feinstein quite clearly indicated that she did not
think that the blue ribbon panel and their deliberations had
anything at all to do with the immediate subject matter of this
hearing and the request for the waiver.
Then I do appreciate what you say about the overall
picture, because decisions have to be made regarding the
overall picture. But, again, that is the policy.
I think my time has expired. I will give you all
opportunities to finish up.
Mr. Bilbray. Can I make a statement for the record?
Mr. Bilirakis. Yes, you can.
I was going to give you that opportunity anyhow.
Mr. Bilbray. I just want to clarify that my original
introduction of this bill in 1996 was after extensive
discussion with Mary Nichols of the EPA, after a request and
consultation with the State of California between and among
Mary Nichols, myself, and the California EPA.
The reason for this legislation is that the representative
of the EPA at that time. as now, evidently felt that she did
not have the authority under the act to grant the waiver. That
is the purpose of the whole legislation. I yield back, Mr.
Chairman.
Mr. Bilirakis. To the ranking member of the subcommittee,
Ms. DeGette.
Ms. DeGette. Thank you, Mr. Chairman. To shift ground just
a little bit, one of the things you focused on in your
testimony was this concern about leaking underground storage
tanks, and this is a concern in my district as well in Colorado
and around the country as well as in California.
I was curious to learn that you thought it was a big
concern here today in your testimony, because last year when we
had testimony on this legislation, we heard that there was a
compliance deadline for the tanks at the end of 1998. Then we
subsequently learned that the EPA intended to give low
enforcement priority to certain categories of tanks.
So I guess I am wondering, given the concern that you have
about MTBE today--and maybe you can also explain, we now have
two statistics. One comes off of your web site which says only
500,000 of the 892,000 storage tanks are in compliance with
Federal standards, and then the other statistic in your
testimony today says 80 percent are in compliance.
So my questions are, No. 1, which is it, and, No. 2, what
is the agency doing to bump this up on the priority list?
Because it would solve a lot of the immediate health
hazards, although I don't think it would solve the whole
problem.
Mr. Perciasepe. Right.
Let me just say that 80 percent is our current estimate of
the compliance rate. We expect it to be around 90 percent next
year. We are pushing it as hard as we can.
It is a very important program. We are trying to work with
water supply programs to look at targeting compliance in areas
where there is source water protection for drinking water,
coordination between the water program and the underground
storage tank program.
So, yes, it is a high priority, particularly in those
sensitive watersheds. I think it is fair to say in addition to
what you said, that underground storage tanks are by no means
the only source of gasoline getting into the environment.
Obviously it could be transportation pipelines or overturned
tanker-trailer trucks, or even in a rural area where you have
private wells, very small leaks could cause problems.
So you are correct in that assessment.
Ms. DeGette. To follow up, what happened with that 1998
deadline? Did it get extended?
Mr. Perciasepe. The deadline is not extended. All the legal
requirements are still in place, and we are sweeping through to
get the compliance to 100 percent.
It is going to take time though.
Ms. DeGette. How much time? Are you seeing in a place like
California any improvement in the groundwater--or any
dissipation of the problem of groundwater contamination as you
move more toward this?
Mr. Perciasepe. We definitely anticipate, whether it be
California, Colorado or anywhere, when the tanks are upgraded
to the more modern tanks that have the coating and the
protection from electric arching and all these other things,
that it will reduce substantially the risk of leaking from the
tanks.
But there are historic leaks we find when we dig them up--
you probably know all this from looking at the problem before--
that have to be remediated.
Ms. DeGette. So you haven't actually seen any changes in
the last year in California in particular?
Mr. Perciasepe. I don't have enough information to answer
that question right here.
Ms. DeGette. Let me ask you another question.
Last year when we heard from the Department of Energy about
Mr. Bilbray's bill last year, which was almost identical to
this, he identified a key supply related issue called
regulatory stability and discussed major investments in
oxygenate production as well as refinery equipment that were
made by the regulated entities with the expectations that the
regulations would remain stable.
He opined particularly that as we moved into the
implementation of the phase 2 that you were talking about a few
minutes ago, its regulatory uncertainty would reduce stability
of the reformulated gas program.
Do you have those concerns as you move into phase 2?
Mr. Perciasepe. I think the issues you bring up are reasons
why I testified earlier this morning that there are national
issues at play here, and as we start to make decisions, whether
it be in California or Maine, Colorado, or New Jersey, that
they are going to have a cascading effect on how we try to deal
with this issue nationally.
I can't put blinders on and say that isn't the case.
Notwithstanding the very real problems that have to be dealt
with today.
It is true that time is probably one of the more important
ingredients to making an appropriate transition, whether it be
in California--and the Governor clearly recognized this in his
executive orders. And you will be able to ask the California
folks how they came up with their approach. But time to allow a
transition so there is no disruption in fuel supply, so there
are no spikes in price and run-outs in certain areas is vitally
important. I don't have a good answer for what that time line
would be on a national level to do this kind of transition.
But the issues that were testified to last year are issues
that we are trying to grapple with in our blue ribbon panel. We
have experts on that panel from the refining industry and from
the Department of Energy and from California who have already
gone through some of this analysis to look at how, whether it
is flexibility or whatever kind of transition that might come
to be, that it is done in a way that protects the American fuel
supply from any of those eventualities.
That would have to be taken into account as we look at this
issue nationally.
I don't want to say that California hasn't. The Governor
did take these things into account.
Ms. DeGette. Thank you. I am out of time.
Mr. Bilirakis. Dr. Ganske.
Mr. Ganske. Thank you, Mr. Chairman.
Mr. Perciasepe, if I am pronouncing your name right, you
know, from a lot of the comments that members of the first
panel made and comments from the committee sitting here, it
seems like a lot of members think that there is a significant
problem with MTBE in groundwater. Is that the EPA's view as
well?
Mr. Perciasepe. MTBE is less toxic than many other
constituents of gasoline, so the toxicity part, while a very
important part, if you took it out, the gasoline would have
constituents in it that are just as and more toxic than MTBE
itself.
What MTBE does have is a unique physical characteristic,
and that is its solubility in water. It has the ability to move
more quickly than the other constituents of gasoline. When we
get the leaks, we get the other stuff, the toluenes and
benzenes, that gets into the water also, but it doesn't move as
quickly and get as far away.
So the answer is yes, MTBE in gasoline does present a
difficult set of issues when gasoline gets spilled into the
environment. I guess we would want to have this world where
this doesn't happen, but it does. So not having MTBE in the
gasoline will not make it okay to spill gasoline into the
environment or drink it or anything like that. But having it in
there and its unique physical characteristic, does exacerbate
the remediation and it does increase the amount of groundwater
that can be affected in a shorter period of time.
So from that perspective, yes, it has a different impact.
Mr. Ganske. So you are saying that it is unique in that it
is very soluble, that it tends to move, and in that respect, it
is unlike other parts of gasoline.
Is that a fair summary of what you just said?
Mr. Perciasepe. That is probably a fair summary. I don't
know every chemical in gasoline. There may be other ones in
there that are equally soluble. In general.
Mr. Ganske. Since there is another oxygenate available that
doesn't present the same kind of problems, why doesn't the EPA
just ban MTBE?
Mr. Perciasepe. I know this committee doesn't seem to be
very amenable to my sort of legalistic or bureaucratic answers
here, but we don't have the authority--we don't really have the
authority to ban specific----
Mr. Ganske. If you had the authority, would you think about
doing that for this because of this unique property of this
chemical?
Mr. Perciasepe. I think that is why we have changed our
position on this and why the administrator has appointed a blue
ribbon panel, to look at all the consequences of this. I
certainly don't want to easily slip out of the frying pan into
the fire with whatever answer that we come up with there, so I
am well aware of the competing opportunities that are presented
and how this will come out.
But I am very hopeful that if we keep our eyes on the ball,
to use that sports analogy, in this deliberation that we are
in, that we can come up with a fair and environmentally
protective set of recommendations that we will obviously share
and coordinate with Congress.
Mr. Ganske. Let us see if we are in agreement with some
things. It is my understanding that oxygenates reduce exhaust
emissions of carbon monoxide and volatile organic compounds,
VOC's, particularly in higher emitting vehicles. Carbon
monoxide is a precursor to the formation of urban ozone. In
fact, as VOC emissions from vehicles have been reduced, the
importance of carbon monoxide to ozone formation has become
more critical.
Recent studies indicate that exhaust carbon monoxide
emissions from gasoline vehicles make about as much ozone as do
exhaust VOC emissions. Neither Federal RFG or California CBG
includes a carbon monoxide performance standard. In the absence
of an oxygen requirement then, an increasingly important
contributor to the formation of urban ozone will be increased.
Do you agree with that?
Mr. Perciasepe. Increase in carbon monoxide?
Mr. Ganske. In the absence of an oxygen requirement, an
increasingly important contributor to the formation of ozone
will be increased.
Mr. Perciasepe. Well, I don't know whether I can agree with
that point-blank, because I don't have enough information. But
let me say there are two things that work against that being an
absolutely true statement.
First, as I mentioned earlier in my testimony, Congress
envisioned an optimization between the automobile technology
and the fuels. And one of the reasons, among many, that there
is not a carbon monoxide component to the reformulated gas is
because the oxidizing catalysts that are put on the tailpipe of
the automobile oxidize carbon monoxide. So there is a control
technology on the car. Both California and the Federal
Government have a very strict tailpipe performance standard for
automobiles for carbon monoxide.
So regardless of what happens to the fuel, the automobiles
can't exceed that performance standard at the tailpipe. To the
extent that we have total balance the fuel and the technology
on the car, that is another one of these national issues that
is before us as we look at these formulations.
Mr. Ganske. Mr. Chairman, I have one question in follow up
to that on the exhaust. I--may I have 1 additional minute?
Mr. Bilbray. One additional minute.
Mr. Ganske. If reducing ozone then is the objective,
exhaust VOC emissions are more important than evaporative VOC.
Would you agree with that? Because exhaust emissions are more
reactive. Exhaust emissions will form ozone more quickly and
readily than evaporative emissions.
In the absence of the oxygen requirement, it is very likely
that exhaust emissions will increase relative to evaporative
emissions. Thus, ozone increases even if mass-based VOC--even
if the mass-based VOC standard, which does note distinguish
between exhaust and evaporative emissions is met.
Would you agree with that?
Mr. Perciasepe. I would agree----
Mr. Ganske. Thank you.
Mr. Perciasepe. No, no. I would agree that a simple mass-
based performance standard for either VOC's or toxics can be
met with varying degrees of actual performance in the ambient
air because different VOC's do have different reactivities, and
different toxics have different toxicity.
One of the concerns in looking at oxygenates and/or other
formulations of gasolines are--is if there are less or more of
them, what are they displacing and what is replacing them. If I
replace oxygenates, for instance, with more aromatics, and
benzene would be an example of an aromatic, or olefins this
could increase toxic emissions in terms of toxicity, but you
still could be meeting the performance standards of toxic mass
reductions.
On the VOC question that you have specifically asked, we
have asked the National Academy of Sciences to give us advice
on that, and we are--I know this sounds like a broken record,
almost like I was going through with the chairman earlier, but
we are hoping that the National Academy of Sciences is going to
give us some input on that within the next several weeks.
Clearly there can be variability underneath those mass
standards.
Mr. Ganske. My last question then, it is possible that
eliminating the oxygen requirement in California could result
in increased environmental problems?
Mr. Perciasepe. Yes, depending on the formulation that
replaces it.
Mr. Ganske. Thank you.
Mr. Bilbray [presiding]. I think the discussion with the
gentleman from Iowa clarifies why outcome-based, not process-
based environmental strategies are essential. Right now you
have a standard based on what you put into it, and you make
assumptions based on what comes out.
Sometimes the assumptions are a major problem. I would just
like to say as somebody who worked on the evaporative emission
problem, I don't know what has been done in the last 2 years,
but I remember our problems where we underestimated the
evaporative emissions problem by 75 percent, I remind my
colleague in this nonattainment area of California, they have
the Smog Check-2 tailpipe inspection program, which the
gentleman from the EPA pointed out, which is the most stringent
in the world. It is part of this.
So trying to look at these things in isolation is tough if
you don't see the whole strategy. I have to say one thing, EPA
is right, in that you do have to look at the big picture.
I would like to recognize my colleague from New Jersey, Mr.
Pallone.
Mr. Pallone. Thank you. I wanted to ask you two questions.
One about my bill, and then the other about the underground
storage tanks.
First, I know the bill was just introduced yesterday, but I
just wanted to get an idea whether the EPA would support the
concept behind it, which basically is a waiver of national
oxygenate requirements, the MTBE phaseout, and the national
study of health and environmental effects of oxygenates.
Mr. Perciasepe. Congressman, I am going to find myself in
generally the same position in not opposing it, again in a
little advance--we are trying--I think Congress deserves EPA
when it comes before it and says this bill, or this piece of
this bill, or this piece of this bill, works, because it works
in this context. You deserve to get that from us.
Unfortunately, as I mentioned earlier, you are ahead of us
having that context.
Now, I am going to say in a couple more months we should
have a better sense of the context in which we can look at the
different pieces of these legislative proposals and be able to
be more coordinated, as I mentioned, with Congress.
So I don't think we would be in here today in a position of
saying we would oppose any legislation related to this forever
and hold our peace, but to say that I want to be able to bring
to you the context in which all these changes would be made. It
is the fuel supply of the United States, there are a lot of
moving parts, as somebody might say, and I want to be able to
give you the best advice I can.
I am a little bit short on that right now in terms of the
advice I am trying to get from these national experts.
Mr. Pallone. Can we ask then that you will get back to us?
Mr. Perciasepe. Yes. Absolutely. Yes, of course we will get
back to you.
[The following was received for the record:]
Mr. Perciasepe committed to get back to Congressman Pallone
once the Agency has received recommendations from the panel of
experts currently assessing issues related to the use of
oxygenates in gasoline. The recommendations are expected in
July, 1999.
Mr. Pallone. You talked about the underground storage tanks
as a source, and we know they are a source, of a lot of the
MTBE's. I guess it has been 10 years for underground storage
tanks to comply with Federal requirements, but you said they
are at 80 percent compliance and heading toward 90 percent.
Since it has been 10 years, I am just wondering when we are
going to reach 100 percent compliance?
Mr. Perciasepe. I hate to answer for my colleague who is in
charge of that program, but I guess one way I can just do it in
my head and project it would probably be another couple years.
And if you want a more detailed answer for the record I would
ask that you let me consult with my colleagues who run that
program and get that to you. I am sure they have got a more
technical answer than looks like a couple more years.
Mr. Pallone. All right. If you would get back to us, with
the permission of the Chair. Thank you, Mr. Chairman.
[The following was received for the record:]
EPA expects that within 2-3-years nearly 100% of active
underground storage tanks (USTs) (that are federally-regulated)
will have the equipment necessary to meet the 1998 deadline
requirements, but there are ongoing operation and maintenance
requirements that need to be followed in order to ensure full
UST system compliance.
Mr. Bilbray. The gentleman from Texas, Mr. Hall.
Mr. Hall. Thank you, Mr. Chairman. Have you provided for us
to submit questions for the record to be answered?
Mr. Bilbray. Yes.
Mr. Hall. If we will be allowed to do that, I will shorten
my questions a little if we can.
Mr. Bilbray. Especially if you are from Texas.
Mr. Hall. It is my understanding that the EPA just
announced a fuel sulfur rule requiring its sulfur be reduced to
30 parts per million. In order to maintain octane, the preamble
of the rules suggest that oxygenates are going to be needed. In
light of this, wouldn't it be shortsighted to place some limits
on MTBE?
Mr. Perciasepe. Well, we have provided a pretty long phase-
in for reducing sulfur which, incidently, California has
already done with their fuel. We basically are catching up the
national fuel to the California fuel on the sulfur side. On
these other things we have been talking about we catch up
pretty much next year, and we have a phasedown going to 2006
and longer for smaller refineries. There are actively being
tested today, at the refinery level diesel sulfurization
processes that do not reduce, octane across the
desulphurization process--they are catalytic processes
associated with the fluid catalytic cracker system. If that
continues to be a problem over the next several years as these
new technologies evolve, and our hope is they will because it
will reduce even beyond what we have estimated the cost of
desulfurization to be, there are other options to working on
the octane than just simply adding MTBE. But we hope--it is our
hope, even though we explained in the preamble that there is
currently an issue with this and this is only a proposal, we
hope that this will not be an issue, Congressman, in the
desulfurization processes.
Mr. Hall. The benefits of MTBE, one of the great ones being
it is the least expensive?
Mr. Perciasepe. I think--it is hard to say MTBE has this
and this other option A has this.
Mr. Hall. That is meeting the 2 percent requirement.
Mr. Perciasepe. The reason MTBE is used more than other
oxygenates is not completely, but significantly associated with
its cost, but it is not the only reason. It is ease of
transport through the pipeline systems and other factors are
involved with that. So there are a number of product side
advantages from some of the other oxygenates. You can argue
with them but that is what the industry has done because we
don't say, in Congress's instructions to us under the Clean Air
Act or in anything we have done, which oxygenate should be used
to meet those standards that are in the Clean Air Act.
Mr. Hall. Aren't there some instructions in the Clean Air
Act that require technology that is not even in existence yet?
Mr. Perciasepe. You saying that as a general matter?
Mr. Hall. Yes. If you don't know, you can tell me you don't
know. I can't point out--I was here when it was written, days
and nights. I thought it was a bad act when it was written.
Mr. Perciasepe. There are probably some parts of it that
were written in anticipation of some technology.
Mr. Hall. I will withdraw that. I don't want to hammer
around on you. You have been condescending in answering the
best you can on all these, but go ahead and give an answer to
my question. Wouldn't it be shortsighted to place limits on
MTBE under those circumstances? Just yes or no.
Mr. Perciasepe. If life was only that easy. I can't----
Mr. Hall. Would you recommend to place limits on MTBE,
then, under those circumstances?
Mr. Perciasepe. Under which circumstances, sir?
Mr. Hall. That I have laid out. You want me to repeat them?
Mr. Perciasepe. The reasons why it is used as much as it
is?
Mr. Hall. Yes.
Mr. Perciasepe. Let me just answer in a phrase, and that
is, we need to take care in any limits we place on the way the
fuel is and to not take into account the impact on price
distribution and fuel supply while we are looking at the
environmental issues.
Mr. Hall. Mr. Chairman, I have some other good questions to
ask him but I will submit them, one of them being whether or
not EPA believes MTBE to be a health threat. I would like to
know about their blue ribbon panel on MTBE, the investigation
of the issues that we are addressing here today and other
things so I will submit those. And I thank you.
[The following was received for the record:]
Congressman Hall noted that he plans to submit questions
for the record. EPA will will be happy to respond to these
questions as soon as they are received.
Mr. Bilbray. The Chair would like to point out to the
gentleman from Texas that H.R. 11 doesn't specifically outlaw
the use of any product. Again, it is the flexibility that is
the intention of legislation.
Referring to the question about the Clean Air Act requiring
the use of technology that does not exist or did not exist at
the time of the act, technically you can say no, it did not;
but as somebody who has implemented the act, to implement the
standards that are set by the act, State and local agencies
have been required to implement a strategy called technology-
forcing regulations. This is an interesting game of chicken
with reality, in which we say as of this time, you fulfill this
standard and if you don't, basically the world's going to come
to an end. And I have got to say one thing as somebody who has
been involved: Most of the time, industry fulfills those
standards. There are some times you have to back off, but the
clean fuel--the reformulated gasoline in California is one of
those where you had almost every major oil refinery in the
State say it was absolutely impossible to do it, until one vice
president or one oil company said we will not only do it, we
will do it in 6 months. At that time, I will tell you, I
wouldn't want to have the life insurance policy for that guy.
I think we have gotten some great testimony. I appreciate
the fact you are here. I would only like to ask one question,
because Mr. Ganske had pointed out the possibility that there
could basically be backsliding in California if the mandated
oxygenated content was withdrawn to any degree. In the areas of
California where there is no Federal mandate to use
reformulated gasoline, in those areas, is the gas used in those
areas without the Federal mandate equal or better than the
Federal mandate fuel?
Mr. Perciasepe. As I testified earlier this morning, it is
at least equal or better.
Mr. Bilbray. Thank you very much. We will excuse you at
this time and call up the next panel.
Mr. Perciasepe. Thank you, Mr. Chairman.
Mr. Bilbray. Thank you.
Mr. Bilbray. Mr. Hickox, welcome to the new job, first of
all. It is a new face from those of us who have worked with the
State in California's environmental strategies departments. As
the new director of Cal EPA, you inherit a very, very lofty
position with huge responsibilities and a great tradition of
leading this country in its environmental strategies
challenges. We will see if you can continue that heritage into
the future. You now have 5 minutes to testify, so fire away.
STATEMENT OF WINSTON H. HICKOX, SECRETARY FOR ENVIRONMENTAL
PROTECTION, CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY
Mr. Hickox. Thank you very much. Good afternoon, Mr.
Chairman and members of the subcommittee. I want to thank you
for holding today's hearing on H.R. 11. I am glad to be here on
behalf of Governor Gray Davis to discuss the reasons why we
strongly support this important bill.
On March 25, 1999, Governor Davis ordered the elimination
of the gasoline additive MTBE from California's gasoline
supplies by no later than December 31, 2002, because it poses
unacceptable risks to California's environment. His executive
order outlines a number of steps the State will take to reduce
those risks immediately.
Two California communities, Santa Monica and South Lake
Tahoe, have had their municipal drinking water supplies
decimated by MTBE contamination and MTBE has been found in
groundwater at 4,200 leaking underground tank sites across the
State.
California has the cleanest gasoline in the world and we
intend to keep it that way. California's cleaner burning
gasoline standards provide greater air quality benefits than
Federal requirements and they also are more flexible.
California allows refiners to reduce or eliminate the use of
oxygenates as long as they can demonstrate the fuel provides
required emissions benefits. However, the Clean Air Act
requires the year-round use of oxygenated gasoline in southern
California and Sacramento, which comprises about 70 percent of
California's gasoline market.
When MTBE's use is discontinued in California, the only
acceptable oxygenate will be ethanol. The Federal oxygen
requirement will in effect be an ethanol mandate for most
California gasoline. With MTBE, we have learned a painful
lesson about mandates.
H.R. 11 and its sister bills in the U.S. Senate, Senate
bill 266 and Senate bill 645, would exempt California from the
Federal oxygen requirement. Refiners would have the flexibility
to market non-oxygenated and ethanol-based gasoline statewide.
California refiners have shown that they can make MTBE-free
cleaner burning gasoline, but they need the exemption to
provide MTBE-free gasoline with or without oxygenates as cost
effectively as possible while retaining the public health
benefits of cleaner air.
If the Federal oxygen requirement remains in effect,
California gasoline costs could increase as much as 6 to 7
cents per gallon due to the huge increase in ethanol demand,
according to the California Energy Commission and as cited this
morning by Senator Feinstein.
If H.R. 11 and/or its companion bills are approved, cost
increases could be only 2 to 3 cents per gallon. The Federal
oxygen requirement could double the cost of removing MTBE from
California gasoline without taking a single extra pound of air
pollution out of the sky. That is unfair to millions of
California motorists. An ethanol market is expected to develop
in California even if there is no Federal oxygen requirement.
And that is important for us all to know. The amount of ethanol
used in California should be determined by the marketplace, not
by Federal law.
Governor Davis's executive order outlines the comprehensive
plan to address the risks to California's environment from
MTBE, but we need your help. With the MTBE phaseout and passage
of H.R. 11, we can and will have clean air and clean water. I
urge the committee to take action on this legislation as soon
as possible. Thank you.
[The prepared statement of Winston H. Hickox follows:]
Prepared Statement of Winston H. Hickox, Secretary for Environmental
Protection, California Environmental Protection Agency
Thank you, Chairman Bilirakis and members of the subcommittee for
holding today's hearing on H.R. 11. I am pleased to be here on behalf
of Governor Gray Davis to discuss the reasons why we strongly support
this important bill.
Six weeks ago, on March 25, 1999, Governor Davis declared that the
gasoline additive MTBE poses a significant risk to California's
groundwater and drinking water. The Governor established a national
precedent by ordering the elimination of MTBE from California's
gasoline supplies by no later than December 31, 2002.
The Governor's decision was consistent with a comprehensive
assessment of MTBE by the University of California, which recommended
that its use be discontinued in order to protect our state's water
resources. Two California communities--Santa Monica and South Lake
Tahoe--have had their municipal drinking water supplies decimated by
MTBE contamination, and MTBE has been found in groundwater at almost
4,200 leaking underground tank sites.
The Governor's executive order also outlined a number of other
steps the state is taking to reduce the risk posed to California's
environment by MTBE. The executive order calls for moving aggressively
in areas such as Lake Tahoe and Santa Monica where MTBE has
contaminated drinking water. The order directs state agencies to
develop cleanup guidelines and to identify vulnerable water resources.
Governor Davis' order anticipates that there will be a significant
increase in ethanol use in California as an alternative to MTBE. To
prepare for this transition, the Governor has directed the California
Environmental Protection Agency to conduct a comprehensive health and
environmental assessment of ethanol. The Governor also has directed the
California Energy Commission to study the potential for the development
of a California-based ethanol industry.
In addition, Governor Davis has formally asked the U.S.
Environmental Protection Agency to waive the federal Clean Air Act
requirement for the use of oxygenated gasoline in California. A waiver
of the oxygen mandate allow us to reduce risks of future water
contamination, meet California's growing demand for fuel and allow
flexibility to make more economical blends of gasoline while meeting
the required emission reductions.
The Governor's request has the same objective as H.R. 11 and
several similar bills, such as S. 266 and S. 645 by Senator Feinstein.
They will give California the flexibility it needs to phase out MTBE
use in the most cost-effective manner, while retaining all the air-
quality benefits that California receives from its cleaner-burning
gasoline program.
While U.S. EPA can give California that flexibility at the earliest
possible date by granting the Governor's waiver request, Congress must
still pass H.R. 11 or its companion proposal to provide certainty that
California can keep that flexibility in the long term, I would like to
explain why this flexibility is so important.
California gasoline is the cleanest in the world. When our cleaner-
burning gasoline was introduced in 1996, it reduced smog-forming motor
vehicle emissions by 15 percent, a benefit comparable to removing 3.5
million motor vehicles from the state's roads.
California's gasoline provides about twice the air-quality benefits
of Phase 1 Federal Reformulated Gasoline, and equal or greater benefits
than the Phase 2 Federal Reformulated Gasoline to be introduced next
year.
While California's gasoline standards are cleaner than the federal
requirements, they also are more flexible. California regulations call
for the use of an oxygenate such as MTBE or ethanol, but we allow
refiners to reduce or eliminate the use of oxygenates as long they can
demonstrate, using procedures approved by the California Air Resources
Board, that their fuel produces comparable emission reductions.
The Federal Clean Air Act arbitrarily requires the year-round use
of oxygenated gasoline in regions classified as being in severe or
extreme non-attainment for the federal ozone standard. This requirement
applies to virtually all gasoline in Southern California and the
greater Sacramento area, which comprise about 70 percent of
California's gasoline market.
In the San Francisco Bay Area, where the federal oxygen requirement
does not apply, three refiners have produced and sold non-oxygenated
gasoline that meets all California requirements.
But federal law prevents the sale of those non-oxygenated
formulations in Southern California and Sacramento, even though they
provide greater air-quality benefits than required by the federal
government.
If the federal law remains in effect, it will make California's
transition away from the use of MTBE considerably more difficult, as
well as costly for California motorists.
Once MTBE is no longer used, the only acceptable oxygenate will be
ethanol. The federal oxygen requirement will, in effect, be an ethanol
mandate for most California gasoline.
We view the emergence of a California ethanol market as a positive
development. However, we learned the hard way that it was wrong for
California to become dependent on a single oxygenate, MTBE. We should
not repeat the same mistake with ethanol.
H.R. 11 and its companion proposals will enable California to avoid
repeating the mistakes of the past by exempting the state from the
federal oxygen requirement.
Refiners would have the flexibility to produce and sell non-
oxygenated gasoline, as well as ethanol-gasoline, anywhere in the
state. California's gasoline regulations would ensure that both types
of gasoline provide the required air-quality benefits.
Because ethanol has desirable qualities, we expect many refiners to
use it whether or not there is a federal oxygen requirement. However,
if the federal oxygen requirement remains in effect, California
refiners will be forced to use greater amounts of ethanol than
necessary to meet our state's needs. This will have an effect on
gasoline costs in California.
The California Energy Commission estimates that California in 2003
will require about 75,000 barrels per day of ethanol if the federal
oxygen requirement is in effect. This is comparable to the amount of
ethanol currently produced in the Midwest, which is the heart of the
U.S. ethanol industry.
While the Energy Commission believes that sufficient ethanol can be
produced by 2003 to meet California's needs, that huge increase in
production could add as much as six to seven cents per gallon to
gasoline costs in California.
If the federal oxygen requirement is lifted and refiners are
allowed to choose their own level of ethanol use, the cost increase
could be only two to three cents per gallon, the Energy Commission
estimates. A separate study conducted for Chevron and Tosco
corporations makes similar findings.
In short, the federal oxygen requirement could double the cost of
removing MTBE from gasoline in California, without taking a single
extra pound of air pollution out of our skies. That is unfair to
millions of California motorists.
I would also like to note that if the federal oxygen requirement
stays in effect, other states could feel the impact as well.
The California Energy Commission estimates that ethanol prices
nationally could increase about four cents per gallon as supplies are
stretched to meet California's 75,000 barrel-per-day market. This may
also have an effect on gas prices in states where ethanol is widely
used.
By exempting California from the federal oxygen requirement, H.R.
11 and its sister proposals acknowledge what California has already
proven: Cleaner-burning gasoline can be produced with or without
oxygenates.
Oxygenates such as ethanol can provide benefits, but it is
counterproductive to mandate them. The amount of ethanol used in
California should be determined by the marketplace, not the federal
government.
H.R. 11 and its sister proposals are vitally important to
California in this time of transition. I urge the committee to take
action on this legislation as soon as possible. Thank you.
Mr. Bilbray. Thank you.
At this time I recognize myself for questions. Let me see
on page 5 of the RFA's prepared testimony, they state that they
feel that eliminating the oxygen requirement in California will
result in an environmental ``backsliding.'' Given the state of
California's development as to the most stringent clean air
standards in the world, these are very serious allegations. Do
you feel that they are accurate?
Mr. Hickox. No, I do not. The Governor, when he announced
his decision with regard to his action with regard to MTBE
flatly stated there would not be any loss in air quality
benefits that have accrued to the State of California through
the creation of reformulated gasoline that has dramatically
reduced emissions in California. We will not give up one inch
is the simple answer to that.
There are technical considerations with regard to how that
would be accomplished, and I am sure additional questions will
allow me to address that, at least in part. But the California
Air Resources Board this year will embark upon the creation of
Phase 3 gasoline in California which will go into effect in the
not too distant future.
I have had meetings, extensive meetings with the oil
refiners with regard to this issue. They are aware of where we
are and where we are headed and what our objectives are.
Mr. Bilbray. Since you bring that up, I guess the other
issue we will be talking about, is the testimony that--you
testified that you expect the ethanol market in California to
expand. In other words, with H.R. 11, do you believe the use of
ethanol in the State of California with H.R. 11 will increase,
remain the same, or decrease?
Mr. Hickox. Increase.
Mr. Bilbray. Do you want to explain why?
Mr. Hickox. In the discussions--as you may or may not know,
we took office in January of this year. In February, to finish
out the requirements of the Senate bill that required
California State government to look at MTBE and whether or not
it should be allowed to continue to be used as an oxygenate in
California, we held three public hearings. I chaired those
hearings, two in Sacramento and one in southern California. We
took testimony from across the spectrum of interested parties,
including the oil refiners.
In our discussions with the oil refiners, two of whom are
here to speak with you today, who commissioned a study, it
became clear to us as well as them that flexibility is the key
answer to our problem here, and that the way to deal with the
need for an oxygenate in the gasoline supply in California is
to have the flexibility to have an amount of ethanol or another
substitute--I can't imagine what that would be--but not require
2 percent by weight.
In discussions with the Governor as he began to finalize
his decision on this matter, it became clear to him that he
needed to allow the time that he called for in his executive
order, in order for you to act on H.R. 11, such that the
refiners in California would have a clear picture of the path
that they were going to have to take in order to meet our
requirement that MTBE be taken out of gasoline: either a full
1-to-1 substitution which would require certain modifications
to refineries and to the distribution system or no oxygenate at
all, which some people think might be possible but at a cost
that would probably be prohibitive or something in between. And
the something in between is what is most likely in the minds of
folks at the Air Resources Board, the Energy Commission in
California and among the refiners as well.
Mr. Bilbray. Previous administrations investigated this.
Governor Davis walked through the front door of the Governor's
office just about the time the report got dropped in his lap.
And the Governor has now announced a pretty substantial move
over the next few years on the MTBE issue. Is there any other
State that has committed to that kind of action to this date?
Mr. Hickox. Well, I am told that three or four other States
have already taken some action. North Carolina and Alaska are
two of them. And our sense is that other States are following
closely what we are doing.
As you know, and to finish the picture, the legislation I
referred to in California required an extensive study completed
by the University of California that looked at this issue from
a very carefully detailed scientific perspective and came to
the conclusion that led to the Governor's decision. And I am
sure others are looking at what we have done and will likely
follow.
Mr. Bilbray. Thank you. My time has expired. I would
recognize Ms. Eshoo, the gentlelady from California.
Ms. Eshoo. Thank you. I want to thank our sitting-in
ranking member for allowing California to keep going first, and
also to salute and welcome our new director of the EPA in
California. You have a very proud tradition to carry out and I
think that you come to the table magnificently ready to do the
job. So I wish you well. I mean, to the extent that you
succeed, we all succeed, right?
Mr. Hickox. Thank you. Yes.
Ms. Eshoo. A couple of questions. As I understand it,
representatives of the ethanol industry have said that the
problem in California and other States doesn't center around
the presence of MTBE in gasoline but rather MTBE in water. Do
you think this is an accurate assessment and, if so, why; and
if not, why?
Mr. Hickox. Well, certainly the reason that we are taking
this action is because California's drinking water supply has
been impaired as a result of MTBE being in gasoline. And let me
try as briefly as possible to add something to this discussion
based upon the time that I sat through earlier responses to
questions this morning. One of the things that added value when
we went through our deliberative process as to the action we
should take is to understand the relationship between drinking
water supplies, particularly groundwater, and underground
storage tanks. In some instances, they are in close proximity
to one another, both horizontally and vertically, if you will.
In others, drinking water supplies come from very deep wells.
There are differing topographies between the surface and that
drinking water supply.
So while the 4,200 sites of contamination that we detected
represent potential future risks to groundwater, the current
groundwater risk is at about a half a percent of the drinking
water supply. Obviously we want to characterize this in
balanced terms so we don't create undue concern on the part of
the people of California. But those underground tanks that are
leaking pose a threat.
And as has been described earlier, the characteristics of
MTBE, its solubility in water and the way in which it moves in
water exacerbates the problem greatly. Other elements of
gasoline break down more easily. They tend to float and don't
mix with water so they present a lesser problem.
What it did in Lake Tahoe Basin in terms of its impact to a
local constrained area really brought the picture into great
clarity. So, yes, it's a problem in terms of drinking water,
but it is there because it is an element of gasoline and you
cannot protect groundwater ultimately.
Ms. Eshoo. Governor Davis's March order calls for the State
to develop a timetable for the removal at the earliest possible
date and not later than December 31, 2002. Would California
achieve this mandate if we don't have a waiver? Could we? I
mean, it is a devil's advocate question, but for those that
question why we are pursuing what we are pursuing, I think that
it deserves an answer.
Mr. Hickox. Right. And again, as I mentioned a moment ago,
when we sat down with the Governor to help him develop his
determination, the important consideration was what time was
necessary for the production and distribution system for
gasoline in California in order to respond to this mandate if
we chose to cause the removal of MTBE. There is lead time
necessary to retrofit the refinery and distribution system,
whichever model you take, and what we want is flexibility.
Without H.R. 11, we won't have flexibility. It will be
difficult to meet the requirement within the timeframe that has
been set forth if there is an absolute 1-to-1 requirement of
the substitution of ethanol for MTBE. There will be ethanol in
California gasoline as our best projection. It is just that 2
percent by weight requirement 1-for-1 substitution is forcing a
solution when we all have talked--I have heard a number of
people talk today about the wisdom in allowing flexibility and
letting industry figure out the best way to get there.
Ms. Eshoo. Thank you very much. Thank you, Mr. Chairman.
Mr. Bilbray. The gentleman from Iowa.
Mr. Ganske. Thank you, Mr. Chairman. It would be great if
we had Mr. Vaughn on the same panel with Mr. Hickox. But you
have asked most of the questions that I would have asked and so
I thank Mr. Hickox for coming.
Mr. Bilbray. The gentlelady from Colorado.
Ms. DeGette. Thank you. Thank you, Mr. Chairman. Mr.
Hickox, I was impressed by your commitment and your new
Governor's commitment to maintaining the high clean air
standards in California. But I guess I would like you to talk a
little more specifically about how you intend to do that if you
remove an oxygenate like MTBE. It sounded sort of like a great
oratory statement, but how is that going to happen?
Mr. Hickox. As you may or may not be aware, the California
reformulated gasoline standards, which the Federal standards
will soon approach but not quite reach, use a predictive model
methodology for the refiners to offer a blending formulation
for gasoline that will meet the equivalent air emission
outcomes that are required by the law. As long as they prove
that the formulation that they are proposing will do that, it
is allowed to be produced and sold in California.
So the people at the Air Resources Board believe that it is
possible to produce gasoline without an oxygenate that will
meet the requirements of the Clean Air Act in California, and
it is a matter of working with the refineries in California in
terms of the way in which they would go about retrofitting the
refinery to produce that gasoline. Some is produced now in
small quantities.
Ms. DeGette. How is that equivalency going to be
demonstrated, given the fact that the EPA doesn't use the same
predictive model that California does?
Mr. Hickox. We have the delegated authority to carry out
the program in the manner in which we have and would continue
to in California. In other words, we have the ability to use
this predictive model and it is considered acceptable by U.S.
EPA as a methodology for determining compliance with the Clean
Air Act requirements.
Ms. DeGette. To follow up on that, one of the California
studies predicted that removing MTBE from the State gasoline
supply would result in a blending of 60 to 80 percent of
California's gasoline with ethanol. That is what we were
talking about before. Now Governor Davis's order, as you well
know, calls for a study of the health risks of ethanol. What is
your agency's view of the risks of ethanol leaking into the
water supply versus MTBE?
Mr. Hickox. Well, first of all, the Office of Environmental
Health Hazardous Assessment, which I am responsible for, has
been given the responsibility to do a portion of those studies
by the end of this year and to respond to that would be
premature. The way in which questions similar to that posed by
the Governor were responded to was the following. The Governor
was told that there is an enormous amount of information
available about ethanol, what it is, how it reacts in the
environment. There are some issues having to do with the
byproducts of combustion with ethanol that we particularly want
to look at a little more carefully. That is an air quality
issue as related to a water quality issue. The focus of your
question was with regard to water.
Ms. DeGette. Because we don't want to replace one problem
with another with respect to the Santa Monica water supply, or
anyplace else.
Mr. Hickox. Right. Absolutely right.
Ms. DeGette. So we will know that by the end of this year?
Mr. Hickox. End of this year.
Ms. DeGette. Thank you very much. I will yield back, Mr.
Chairman.
Mr. Bilbray. California is experiencing one of the--
actually, the largest and fastest price increase in the history
of the country, $2 a gallon-plus. I guess that was one of the
concerns that the Governor had articulated. But I would like
you to specifically make reference to the fact that we have
seen the recent experience with California refiners when it
pertains to ethanol pricing in the Pacific Northwest, where
there was a 12 to 14 percent increase just because the
Governor--they thought the Governor had taken action that
justified the increase.
Are you worried about California and how vulnerable it
would be as a captive market without the flexibility of H.R.
11?
Mr. Hickox. The question is absolutely. I am aware of the
experience that you have referenced. One of the reasons for the
phase-in of this decision and the complete elimination of MTBE
by the end of the year 2002 was a recognition of the Governor's
responsibility to the people of California that the appropriate
amount of time be taken such that we would not affect supply
and demand and the base price of gasoline to the consumer and
with regard to the elements that would go into whatever
solution was developed.
You are absolutely correct that too hasty a move and not
having the flexibility that would be granted by H.R. 11 would
create a risk in California similar to the one that you cited
in Washington.
Mr. Bilbray. Thank you. I just remember the outcry when we
went to low sulfur fuel in California and the supply problems
that occurred there and the nightmare. That is why I kind of
came unglued with EPA when they said you ``just do this, or
this.'' If you had a room full of truck drivers with crowbars
standing in the room with you, believe me they sensitize you to
market demand real fast.
Any other questions from the members?
I will excuse you. Thank you very much.
Mr. Hickox. Thank you.
Mr. Bilbray. The next panel, please. Mr. Bordvick, you have
5 minutes.
STATEMENTS OF DUANE B. BORDVICK, VICE PRESIDENT, ENVIRONMENT
AND EXTERNAL AFFAIRS, TOSCO CORPORATION; GREGORY C. KING, VICE
PRESIDENT AND GENERAL COUNSEL, VALERO ENERGY CORPORATION;
THOMAS L. ROBINSON, PRESIDENT, ROBINSON OIL COMPANY, INC., ON
BEHALF OF SOCIETY OF INDEPENDENT GASOLINE MARKETERS OF AMERICA,
NATIONAL ASSOCIATION OF CONVENIENCE STORES, AND CALIFORNIA
INDEPENDENT OIL MARKETERS ASSOCIATION; ERIC VAUGHN, PRESIDENT
AND CEO, RENEWABLE FUELS ASSOCIATION; AND MARK BEUHLER,
DIRECTOR OF WATER QUALITY, METROPOLITAN WATER DISTRICT OF
SOUTHERN CALIFORNIA, ON BEHALF OF ASSOCIATION OF CALIFORNIA
WATER AGENCIES
Mr. Bordvick. Thank you very much. Thank you for this
opportunity. Thank you for this subcommittee hearing on this
very important subject. My name is Duane Bordvick. I am Vice
President for Tosco Corporation and for Environmental and
External Affairs.
Tosco strongly supports the prompt enactment of H.R. 11
which has been endorsed by Governor Davis, as you have heard,
authored by Congressman Bilbray, and is co-sponsored by a
bipartisan group of 52 House Members from California. H.R. 11
is also supported by the Western States Petroleum Association
OF which Tosco is a member.
Tosco's four petroleum refineries in California with the
combined crude capacity of 400,000 barrels per day supply
California and the neighboring States of Arizona, Nevada, and
Oregon. Almost all of the gasoline we produce in California
meets the requirement for California cleaner burning gasoline,
Federal reformulated gasoline, or both. Tosco markets our
gasoline on the West Coast through more than 3,000 retail
outlets under the brand Union 76 and Circle K.
Driven by a growing concern in California over groundwater
contamination, our company took the lead for our industry in
advocating the removal of MTBE from gasoline. In October 1997
we wrote the California Air Resources Board proposing that,
``responsible action should be taken sooner rather than later
to allow the reduced use or elimination of MTBE in gasoline.''
We pointed out then, as we do now, how important passage of
Congressman Bilbray's bill would be to provide refiners with
the flexibility needed to rationally shift away from MTBE use.
To underscore our commitment and to demonstrate the
technical and commercial viability of non-MTBE fuel, Tosco
launched a project in April 1998 for northern California to
produce and market California cleaner burning gasoline, using
ethanol instead of MTBE in both the summer and winter. We have
been marketing ethanol-blended California gasoline at about 60
of our Union 76 outlets in the Bay area ever since, and we have
received a very positive response from our dealers and our
customers.
In addition, Tosco has demonstrated that California cleaner
burning gasoline can be produced without using any oxygenate.
During this past winter, we produced non-oxygenated California
gasoline from our refinery in Rodeo, California, which we
marketed in the San Francisco Bay area.
It is not surprising, then, that Tosco welcomed the
decision of Governor Davis in March of this year to require a
complete phaseout of MTBE from California by the end of the
year 2002. In response to a request from Governor Davis, we
have already begun supplying non-MTBE gasoline to our stations
in South Lake Tahoe where concerns over water contamination, as
we have heard today, are especially acute.
While we are proud of these special programs, our current
ability to supply this non-MTBE gasoline is very limited
because of refinery hardware limitation. It is limited because
of unavoidable characteristics of California's system for
transporting gasoline throughout the State, and it is limited
because of the Federal oxygenate mandate affecting 70 percent
of California gasoline.
The Governor's phaseout order was based in part on a study
performed by the California Energy Commission by MathPro,
Incorporated, which examined the supply and cost implications
of removing MTBE from gasoline. Together with Chevron Products
Company, Tosco sponsored an extension of the MathPro study to
examine the relationship of H.R. 11 to the supply and cost
implications of eliminating MTBE. A summary of the MathPro
results is attached in my prepared statement and I request that
the full study be included in the record of the hearing.
The MathPro study included the following three key
findings:
First, enactment of H.R. 11 would reduce the cost of
removing MTBE from gasoline by one half or more.
Second, enactment of H.R. 11 will create the opportunity
for California refiners to optimize cleaner burning gasoline
production by providing two types of gasoline, one blended with
ethanol and one blended without oxygenate.
Third, this optimal production of non-MTBE gas will result
in a substantial increase in the use of ethanol in California.
The study predicted that 60 to 80 percent of the California
gasoline production would be blended with ethanol remaining
non-oxygenated. So based on the MathPro study and our own
experience, we are convinced that H.R. 11 would significantly
moderate the negative economic impacts of eliminating MTBE from
California gasoline without adverse effects on emission
quality, and we hope that Congress will enact the bill promptly
in order to facilitate this orderly and rational phaseout of
MTBE.
[The prepared statement of Duane B. Bordvick follows:]
Prepared Statement of Duane B. Bordvick, Vice President, Environmental
and External Affairs, Tosco Corporation
Mr. Chairman and Members of the Subcommittee: My name is Duane B.
Bordvick, and I am Vice President of Tosco Corporation for
Environmental and External Affairs. Tosco strongly supports the prompt
enactment of H.R. 11, which has been endorsed by Governor Davis, is
authored by Congressman Bilbray, and is co-sponsored by a bi-partisan
group of 50 House members from California. H.R. 11 is also supported by
the Western States Petroleum Association, of which Tosco is a member.
Tosco's four petroleum refineries in California, with a combined
gasoline production capacity of about 400,000 barrels per day, supply
California and the neighboring states of Arizona, Nevada, and Oregon.
Approximately 75 percent of the gasoline we produce in California meets
the requirements for California Cleaner Burning Gasoline (``CBG''),
Federal Reformulated Gasoline (``RFG''), or both. Tosco markets
gasoline on the West Coast through more than 3,000 retail outlets,
primarily under our Union 76 and Circle K brands.
Driven by a growing concern in California over groundwater
contamination, our company took the lead for our industry in advocating
the removal of MTBE from gasoline. In October 1997, we wrote the
California Air Resources Board proposing that ``responsible action
should be taken sooner rather than later to allow the reduced use or
elimination of MTBE in gasoline.'' We pointed out then, as we do now,
how important passage of Congressman Bilbray's bill would be to provide
refiners with the flexibility needed to shift away from MTBE.
To underscore our commitment and to demonstrate the technical and
commercial viability of a non-MTBE fuel, Tosco launched a project in
April 1998 for Northern California to produce and market California CBG
using ethanol instead of MTBE in both the summer and winter seasons. We
have been marketing ethanol-blended CBG at about 60 of our Union 76
outlets in the San Francisco Bay Area ever since, and we have received
a very positive response from our dealers and our customers.
In addition, Tosco has demonstrated that California CBG can be
produced without using any oxygenate. During this past winter, we
produced non-oxygenated CBG at our refinery at Rodeo, California, which
we market in the Bay Area.
Tosco welcomed the decision of Governor Davis in March of this year
to require a complete phase-out of MTBE from California by the end of
the year 2002. In response to a request from Governor Davis, we have
already begun supplying non-MTBE gasoline to our stations at South Lake
Tahoe, where concerns over water contamination are especially acute.
While we are proud of these special programs, our current ability to
supply non-MTBE gasoline is very limited because of refinery hardware
limitations, unavoidable characteristics of California's system for
transporting gasoline throughout the state, and the federal oxygenate
mandate affecting 70 percent of California gasoline.
The Governor's phase-out order was based in part on a study
performed for the California Energy Commission by MathPro Inc., which
examined the supply and cost implications of removing MTBE from
gasoline. Together with Chevron Products Company, Tosco sponsored an
extension of the MathPro study to examine the relationship of H.R. 11
to the supply and cost implications of eliminating MTBE. A summary of
the MathPro study results are attached to my prepared statement, and I
request that the full study be included in the record of this hearing.
The MathPro study included the following three key findings:
First, enactment of H.R. 11 would reduce the cost of removing MTBE
from gasoline by up to one-half, from 6.1 cents per gallon to 2.7 cents
per gallon.
Second, enactment of H.R. 11 will create the opportunity for
California refiners to optimize CBG production by providing two types
of gasoline, one blended with ethanol and the other non-oxygenated.
Third, this optimal production of non-MTBE gasoline will result in
a substantial increase in the use of ethanol in California. The Study
predicted that 60 to 80 percent of California gasoline production would
be blended with ethanol and the remaining gasoline, about 20 percent to
40 percent of statewide supply, would be non-oxygenated.
Based on the MathPro study and on our own experience, we are
convinced that enactment of H.R. 11 would significantly moderate the
negative economic impact of eliminating MTBE from California gasoline
and would lead to a substantial new market for ethanol in California,
with no adverse effect on the emission quality of California CBG. We
hope the Congress will enact the bill promptly in order to facilitate
an orderly transition away from MTBE in California.
I would be pleased to answer any questions the Committee may have.
Mr. Bilbray. Thank you.
Mr. King.
STATEMENT OF GREGORY C. KING
Mr. King. Mr. Chairman, members of the subcommittee, thank
you for this opportunity to testify. My name is Greg King and I
am Vice President and General Counsel of Valero Energy
Corporation.
Valero Energy is the second largest independent refining
and marketing company in the United States with five refineries
in Texas, Louisiana, and New Jersey. Valero produces premium
environmentally clean products such as reformulated gasoline,
car gasoline and oxygenates like MTBE. Valero believes strongly
that the production and use of MTBE worldwide has been a boon
to air quality by reducing gasoline's most harmful components,
all in a cost-effective and uncomplicated manner.
Phase 1 of RFG has exceeded expectations, as we have heard
today. It was designed to reduce air toxins by 15 percent, but
actually achieved a greater than 30 percent reduction. It was
supposed to reduce VOCs by 15 percent, but in reality achieved
a reduction of more than 27 percent. And while having no
specific requirement for NO<INF>X</INF>, a 3 percent reduction
was realized.
Some have wondered whether the same performance could be
expected from fuels without oxygenates. The simple answer is
no. Fuel chemistry clearly demonstrates that MTBE in particular
is the most cost-effective component of pollution control when
the car is still relatively cold and therefore more polluting.
Without it there will be an increase in air toxins from
automobiles, including benzene.
The most severe nonattainment areas in California have
improved considerably over the course of the last decade. In
addition, earlier this week thousands of Californians expressed
their discomfort with fuel prices by staging the Internet-
driven Great American Gas Out when they delayed filling up
their tanks for a day. While gas prices have been volatile, we
can assure the committee that fuel oxygen was not the cause,
accounting for only a 2 to 4 cent increase in gas prices since
1995. As unexpected refinery fires on the West Coast diminished
supply, the flexibility to use additional increments of MTBE
actually extended the fuel supply in California enough to avoid
shortages.
While MTBE quietly labored as the workhorse of the Clean
Air Act, few in the public took notice until MTBE appeared in
certain isolated water samples. Valero strongly believes that
it is possible to protect water quality without sacrificing the
air quality benefits attributable to MTBE. Fixing or replacing
leaking tanks would solve the problem. For example, the Lake
Tahoe area, served by seven local gas stations, all of which
were leaking gasoline into the groundwater which eventually
found its way into Lake Tahoe.
As we have heard, in December 1998, the Federal law
required all underground storage tanks to be replaced with
state-of-the-art upgraded tanks. This law is not being
enforced. Currently 30 percent of the Nation's storage tanks
continue to leak gasoline. The EPA must undertake efforts to
enforce compliance or shut down these dangerous underground
tanks. We urge members of this committee not to opt for the
simple solution of restricting MTBE when complex water quality
problems deserve a more comprehensive approach.
Given what little we know about potential alternatives to
MTBE, we could be making matters worse by changing fuel
formulations without fixing our deteriorating tanks.
Formulations without any oxygenates will have more toxic
aromatic components. Further, the effects of ethanol have not
been fully studied, as even Governor Davis's executive order
admitted.
MTBE is not a carcinogen listed by the International Agency
for Research on Cancer. By contrast, benzene, the toxic
compound that would increase in the absence of fuel oxygenates,
is a known human carcinogen. The fact is, MTBE has become a
convenient scapegoat, a way to avoid the reality of leaking
storage tanks. Clearly banning MTBE at either the State or the
Federal level won't solve this problem.
Now, some have suggested that legislation should give
California and other States the right to opt out of the fuel
oxygen standard. While we believe that the case has not been
made for such legislation, Valero does not oppose an open
dialog in which the flexibility of the fuel oxygen standard is
a part of the discussion. However, any legislation must meet
the following objectives: First, such legislation must not
result in diminished effectiveness at reducing air emissions
from the current RFG levels of achievement. Second, such
legislation must not present greater logistical problems or
price fluctuations that occur in RFG. And last, such
legislation must not undermine the performance of gasoline.
Should an alternative approach for the fuel oxygen standard
meet this criteria, Valero believes we would have the principal
basis for a dialog on the subject. Since the passage of the
1990 Clean Air Act, Valero Energy has invested hundreds of
millions of dollars to produce cleaner burning fuels. We did so
in good faith, responding to the government's challenge and the
public's environmental needs. We urge Congress not to penalize
companies that are providing environmental solutions when the
more appropriate course is to fix the leaking tanks.
Thank you very much for your careful attention to this
matter. And I look forward to working with you all on this
subject.
[The prepared statement of Gregory C. King follows:]
Prepared Statement of Gregory C. King, Vice President and General
Counsel, Valero Energy Corporation
Mr. Chairman and members of the Subcommittee, thank you for this
opportunity to testify on a matter of great environmental and economic
significance to my home state and to the nation. My name is Greg King
and I am the Vice President and General Counsel of Valero Energy
Corporation. Valero Energy is the second largest independent refining
and marketing company in the United States and is a member of the
Oxygenated Fuels Association. The company owns and operates five
refineries in Texas, Louisiana and New Jersey, with a combined
throughput capacity of approximately 735,000 barrels per day. Valero is
recognized throughout the industry as a leader in the production of
premium, environmentally-clean products such as reformulated gasoline,
CARB Phase II gasoline, lowsulfur diesel and oxygenates like MTBE.
Valero is proud of its record of environmental achievement, which
goes beyond its commitment to produce cleaner-burning fuels and
additives. Investing millions of dollars in pollution prevention and
waste minimization, Valero was the first petroleum refiner ever to
receive the prestigious Texas Governor's Award for Environmental
Excellence and has been recognized by a national trade publication for
its ``outstanding environmental stewardship and leadership.'' Valero
believes strongly that the production and use of MTBE worldwide has
been a boon to air quality by reducing air toxics, volatile organic
compounds, oxides of nitrogen, and greenhouse gases all in a cost-
effective and uncomplicated manner.
Background of the Use of Oxygenates
The Clean Air Act divides air pollution into two broad categories:
stationary sources and mobile sources. By the time of the Act's
amendment in 1990, it had become clear that mobile sources presented
the most intractable problem for urban air quality. Interested
stakeholders together with the Congress and the Administration
developed the reformulated gasoline program using state-of-the-art
scientific and technical information.
Introduced to the American public on January 1, 1995, RFG is used
in areas of 18 states that have the greatest ozone air quality problems
and accounts for 32 percent of the gasoline market. As part of the
federal requirements, RFG must have an average of 2 percent fuel oxygen
by weight, and must have reduced levels of aromatics, olefins, benzene,
sulfur, and controlled Reid vapor pressure. Oxygenates, for their part,
have long been used in gasoline as an octane enhancer. As the phase out
of lead in gasoline got underway in 1973, it was the oxygenate MTBE
that was principally used to replace the octane that lead accounted for
in the fuel. And the EPA has termed the phase out of lead as one of the
single most effective policy initiatives for the protection of
children's health.
MTBE itself is a fuel ether largely derived from natural gas, a
clean and abundant fuel source with a superior carbon profile to liquid
petroleum. Regardless of other effects on fuel chemistry, therefore,
gasoline with MTBE can be expected to have less greenhouse emissions
and can be expected to stretch limited petroleum resources.
Effect on Air Quality
MTBE has a profound impact on automobile emissions. By using
oxygenates like MTBE in gasoline, refiners have exceeded the announced
expectations for the federal RFG program. For example, Phase I RFG was
supposed to reduce air toxics by 15 percent, but actually achieved a
greater than 22 percent reduction. It was supposed to reduce volatile
organic compounds by 15 percent, but achieved a reduction of more than
27 percent. And while having no specific requirement for Nox reduction,
a 3 percent reduction was realized.
Some have wondered whether the same performance could be expected
from fuels without oxygenates. The simple answer is no. Oxygenates like
MTBE go to work in an engine at the point where most pollution is
produced: the cold cycle. For the first 3 to 4 minutes after you start
your ignition, your car's engine produces the lionshare of its
emissions. Because oxygenates combust at low temperatures with MTBE
combusting at far lower temperatures than ethanol--fuel chemistry
clearly demonstrates that MTBE is the most effective component of
pollution control when the car is still relatively cold. In addition,
to meet the other federal specifications, RFG without oxygenates would
have to change its ratio of aromatics. The result of this change is
two-fold: first, there will be a certain increase in air toxics from
automobiles; and second, more byproducts from the use of aromatics may
be created. In fact, if ethanol is used to replace MTBE, it is more
volatile than MTBE and therefore would increase evaporative emissions.
And the potential loss of RFG's important benefits would be
significant. The most severe nonattainment areas in California have
improved considerably over the course of the last decade. In addition,
earlier this week, thousands of Californians expressed their discomfort
with fuel prices by staging the Internet-driven Great American Gas Out
when they delayed filling up their tanks for a day. While gas prices
have been volatile, we can assure the Committee that fuel oxygen was
not the cause, accounting for only a 2 to 4 cent increase in prices
since 1995. Indeed, as unexpected refinery fires on the West Coast
diminished supply, the flexibility to use additional increments of MTBE
actually extended the fuel supply in California enough to avoid
shortages.
Alternatives to MTBE, including ethanol, are more expensive and
more difficult to transport. Industry experts estimate that even under
ideal circumstances, replacing MTBE with ethanol will raise prices at
the pump a minimum of seven cents a gallon. But prices could rise much
higher than that if shortages of ethanol and, as a result, of gasoline
develop. Currently, refiners use about 250,000 barrels a day of MTBE;
total ethanol capacity is only about half of that.
Impact on Water Quality
While MTBE quietly labored as the workhorse of the Clean Air Act,
few in the public took notice until MTBE appeared in certain water
samples taken, principally in California. Valero shares the concerns of
most Americans for clean water; having made substantial investments in
waste minimization and pollution prevention that protects our water
resources. However, we strongly believe that it is possible to protect
water quality without sacrificing the air quality benefits attributable
to the use of MTBE. In most instances, MTBE found in water is traceable
to leaking underground storage tanks. Fixing or replacing leaking tanks
would solve the problem. For example, the Lake Tahoe area is served by
7 local gas stations. According to testimony given in the California
public hearings, 7 out of 7 of these stations were leaking gasoline
into the ground water which eventually found its way into Lake Tahoe.
The problem that needs to be fixed is the underground storage tank
itself and not the part of the fuel which does the most to prevent
pollution!
In December of 1998, federal law required all underground storage
tanks to be replaced with state of the art, upgraded tanks. It is not
being enforced. Even the EPA has admitted that enforcement of the
underground storage tank program has been lax at best. Currently,
approximately 270,000 or 30 percent of the nations storage tanks
continue to leak gasoline. The EPA must undertake efforts to enforce
compliance or shutdown dangerous underground tanks. Valero and other
members of the oxygenates industry are willing to work on legislation
or regulatory changes that would streamline storage tank repair and
remediation. We are aware that such approaches take time and money.
However, as H.L. Mencken once observed, ``Complex problems have simple
solutions . . . simple solutions that are usually wrong.'' We urge
members of this Committee not to opt for the simple solution of
restricting MTBE when complex water quality problems deserve a more
comprehensive approach.
Indeed, given what little we know about potential alternatives to
MTBE, we could be making matters worse by changing fuel formulations
without fixing our deteriorating tanks. Consider that formulations
without any oxygenates will undoubtedly have more toxic aromatic
components. Further, the effects of ethanol and the ether ETBE have not
been fully studied, as even Governor Davis' executive order admitted.
And we do know that ethanol compounds tend to degrade plastics. With
the most prevalent repair strategy for leaking tanks being plastic
fiberglass liners, a precipitous change to ethanol could make the
problems of leaks even worse! The problem could also be worse because
MTBE in water is below public health thresholds and MTBE itself is not
listed as a carcinogen by the International Agency for Research on
Cancer. By contrast, ethanol is listed as a carcinogen, as is benzene,
the toxic compound that would increase in the absence of fuel
oxygenates.
MTBE actually reduces the risk of cancer. According to the
California Environmental Protection Agency, the cancer risk from
gasoline-powered vehicles throughout the state has been reduced by
approximately 40 percent since the reformulated gasoline program began
because MTBE displaces known carcinogens in gasoline. The fact is, MTBE
has become a convenient scapegoat, a way to avoid the reality of
leaking storage tanks. Clearly, banning MTBE won't solve this problem.
The Fuel Oxygen Standard
As we observed, federal RFG has an average content of 2 percent
oxygen as required by the Clean Air Act. Some have asked that this
standard be waived administratively by EPA. From our reading of the
Clean Air Act, we believe that such a waiver would be illegal. Others
have suggested that legislation should give California and/or other
states the right to opt out of the fuel oxygen standard. While believe
that the case has not been made for such legislation because oxygenates
contribute significantly to air quality while other approaches should
be used to maintain water quality. Valero does not oppose an open
dialogue in which the flexibility of the fuel oxygen standard is a part
of the discussion. However, any legislation designed to meet such
objectives would not be good public policy unless it met several
important criteria: first, such legislation should not result in
diminished effectiveness at reducing air emissions from the current RFG
specifications. Remember that the most likely candidates for increased
emissions are air toxics, the most carcinogenic part of the air
emissions profile. Further, as the federal RFG program becomes less
effective as an air quality control initiative, states will be required
to undertake other programs that may be less effective or more
intrusive to the public. These alternative control strategies might
force further ratcheting down on factories already hard hit with a raft
of new Clean Air regulations; second, such legislation should not
present greater logistical problems or price fluctuations than current
RFG; and last, such legislation should not undermine the performance of
gasoline. Federal RFG has been carefully studied and engineered with
modern engines and pollution control devices in mind. Alternative fuel
formulations have not been the result of such careful analysis. Our
pollution control strategies are only as good as consumers will
tolerate. If alterations in fuel without careful study result in less
optimal fuels, we will all hear about it and loudly. Consumers must not
only understand our reasons for changing the law; they must also accept
the consequences of such changes.
Should an alternative approach to the fuel oxygen standard meet
these criteria, Valero believes we would have the principled basis for
a dialogue on the subject.
Since passage of the 1990 Clean Air Act amendments, Valero Energy
Corporation has invested hundreds of millions of dollars to produce
clean-burning fuels. We did so in good faith, responding to the
government's challenge and to the public's environmental needs. We urge
Congress not to penalize companies that are providing environmental
solutions, when the more appropriate course is to fix leaking tanks and
improve the management of our water resources. Thank you very much for
your careful attention to this subject. I look forward to working with
you, Mr. Chairman and the members of the Subcommittee on this issue in
the future.
Mr. Bilbray. Thank you.
Mr. Robinson.
STATEMENT OF THOMAS L. ROBINSON
Mr. Robinson. Good morning, Mr. Chairman. My name is Tom
Robinson. I am President of Robinson Oil, San Jose, California.
Our company, in partnership with another San Jose company,
Coast Oil, owns and operates 28 ``Rotten Robbie'' retail
gasoline outlets located in the San Francisco Bay area.
Thank you for inviting me to testify today. I appear before
you representing the California Independent Oil Merchants
Association, CIOMA, the National Association of Convenience
Stores, NACS, and the Society of Independent Gasoline Marketers
of America, SIGMA.
Our company is an independent unbranded marketer of
gasoline. Our company does not manufacture ethanol, MTBE, or
gasoline. Independent branded and unbranded marketers
traditionally have been recognized as the most cost-competitive
segment of the motor fuels marketing industry. But our role in
this industry is dependent upon adequate supplies of gasoline.
Without adequate supply, independent marketers cannot be
competitive.
This is the reason I am appearing before you today. If the
storm clouds I see gathering on the horizon today are not
dissipated in the near future, independent marketers, who I am
very concerned about, and gasoline consumers, who we both
should be very concerned about, will suffer.
This hearing represents my third opportunity to present
testimony before Congress. Last year I testified on H.R. 630,
the predecessor legislation under consideration today. In 1996
I testified before the Senate on the reasons for increases in
retail gasoline prices during the spring of 1996. My concern is
that without passage of this legislation, I may receive another
invitation when Congress again looks for the reasons for
significant California retail price increases.
CIOMA, NACS, and SIGMA believe that H.R. 10 must pass
Congress this year to avoid a pending gasoline supply crisis in
California. This crisis will not be caused by California
gasoline marketers but it surely will be marketers and, more
importantly, consumers that will feel the brunt of this crisis
if it is not averted.
Consequently, we collectively urge the members of the
subcommittee to pass this legislation as soon as possible. I
will not take up your time by repeating the technical arguments
for H.R. 10 put forth by other witnesses. We agree that H.R. 10
must pass to give California refiners greater flexibility in
producing gasoline.
California currently has the cleanest and the most
expensive-to-make gasoline in the world. Governor Davis's
recent decision to ban MTBE in California gasoline will
increase the cost of the gasoline production and decrease the
supply gasoline even if this legislation is passed. However,
without the passage of this legislation, we have big problems.
The central point CIOMA, NACS, and SIGMA want to make to
the subcommittee is that it ultimately will be California
consumers who will suffer if H.R. 10 is not enacted.
Many of the other witnesses appearing here today have an
economic stake in the components of California gasoline.
Refiners make the base product and some manufacture MTBE as an
additive. MTBE manufacturers want to make sure that MTBE bans
do not spread to other States. The ethanol industry is trying
to secure the California market for the product. Certainly a
mandate without a viable competitor situation, any business
dreams about.
Companies I represent today are different. For all program
purposes we are surrogates for the California consumer. In
general we do not win or lose if one component or another is
included in the gasoline sold in California. However, we do
lose and consumers will lose if the gasoline supplies in
California are not adequate to meet the demand in the future.
And given the facts as I currently view them, such a disconnect
will occur if some action is not taken soon.
Refiners and marketers in California are faced with an
untenable situation. Seven out of every ten gallons of gasoline
used in California must meet Federal RFG standards, including
the mandatory oxygenate standard. MTBE currently is the
oxygenate of choice in the State. Ethanol, while used in
limited quantities in isolated markets, generally is not a
viable alternative to MTBE because of limited supplies and
tight Federal and State gasoline RVP constraints. Oxygenates
are mandated. The primary oxygenate used, MTBE, will soon be
banned, and ethanol may or may not be a viable substitute for
MTBE.
The solution of this untenable solution is clear. The
enactment of H.R. 10 will remove the oxygenate mandate for
California alone. As a result, California refiners will be
permitted to meet the very stringent performance standards of
California Phase 2 RFG and Federal Phase 2 RFG without
oxygenates if they choose to do. California Phase 2 RFG is the
cleanest gasoline in the Nation, without the need for oxygenate
mandate.
We submit that opposition to this legislation has nothing
to do with clean air. Instead it has to do with economics and
politics. If the oxygenate mandate is removed in California,
then the MTBE industry is afraid it will spread to other States
and the ethanol industry is afraid it will lose a golden
opportunity to expand its market. Clean air is not the issue.
Economics and politics are. We urge you to side with
independent marketers and consumers. Consumers and marketers
will win with the enactment of H.R. 10.
Again, thanks for allowing me to appear. I hope the next
time I am invited to appear before Congress, it won't be
because of higher gasoline prices in California caused by the
failure to pass this legislation.
[The prepared statement of Thomas L. Robinson follows:]
Prepared Statement of Thomas L. Robinson, President, Robinson Oil
Company, Inc., on Behalf of California Independent Oil Marketers
Association, National Association of Convenience Stores, and Society of
Independent Gasoline Marketers of America
Good morning, Mr. Chairman. My name is Tom Robinson. I am President
of Robinson Oil Company of San Jose, California. Our company, in
partnership with another San Jose company, Coast Oil Company, owns and
operates 28 ``Rotten Robbie'' retail gasoline outlets located in the
San Francisco Bay Area of California.
Thank you for inviting me to testify today. I appear before you
representing the California Independent Oil Marketers Association
(CIOMA), the National Association of Convenience Stores (NACS), and the
Society of Independent Gasoline Marketers of America (SIGMA). Together,
sales to consumers by CIOMA, NACS, and SIGMA members account for a
substantial majority of the gasoline sold each year in California.
Our company is an independent, unbranded marketer of gasoline. Our
company does not manufacture ethanol, MTBE, or gasoline. We do not fly
the flag of a major oil company. Independent branded and unbranded
marketers traditionally have been recognized as the most cost-
competitive segment of the motor fuels marketing industry. But our role
in this industry is dependent upon adequate supplies of gasoline.
Without adequate supply, independent marketers cannot be competitive.
This is the reason I am appearing before you today. If the storm
clouds I see gathering on the horizon today are not dissipated in the
near future, independent marketers (who I am very concerned about), and
gasoline consumers (who you should be very concerned about), will
suffer in the near future.
This hearing represents my third opportunity to present testimony
before Congress. Last year, this Subcommittee invited me to testify on
H.R. 630, the predecessor to the legislation authored by Congressman
Bilbray that is under consideration today. In 1996, I testified before
the Senate Energy and Natural Resource Committee on the reasons for
increases in retail gasoline prices during the Spring of 1996. While I
may be becoming a veteran at this in some people's eyes, I still get
very nervous before presenting testimony and take my opportunity to be
a witness before this Subcommittee very seriously. I suspect that,
without passage of this legislation, I may get the opportunity to visit
you again in the future when Congress again looks for the reasons for
significant California retail gasoline price increases.
CIOMA and SIGMA supported H.R. 630 last year before this
Subcommittee. This year, NACS joins with CIOMA and SIGMA to urge your
support for H.R. 10. In our collective opinion, this bill must pass
Congress this year to avoid a pending gasoline supply crisis in
California. This crisis will not be caused by California gasoline
marketers, but it surely will be marketers, and more importantly,
consumers, that will feel the brunt of this crisis if it is not
averted. Consequently, we collectively urge the members of this
Subcommittee to pass this legislation as soon as possible.
I will not take up this Subcommittee's time today by repeating the
important and persuasive technical arguments for H.R. 10 put forth by
other witnesses. I have attached to my formal statement a copy of my
testimony before this Subcommittee last year. We agree that H.R. 10
must pass to give California refiners greater flexibility in producing
gasoline. California currently has the cleanest, and the most expensive
to make, gasoline in the world. Governor Davis' decision to ban MTBE
will increase the cost of gasoline production and decrease the supply
of gasoline even if this legislation is passed. However, without the
passage of this legislation, we've got big problems.
The central point CIOMA, NACS, and SIGMA want to make to this
Subcommittee is that it ultimately will be California consumers who
will suffer if H.R. 10 is not enacted. Virtually all of the other
witnesses appearing here today have an economic stake in the components
of California gasoline. Refiners make the base product and some
manufacture MTBE as an additive. MTBE manufacturers want to make sure
that Governor Davis' decision to ban MTBE does not spread to other
states. The ethanol industry is trying to secure the California market
for their product. Certainly, an oxygenate mandate without another
viable competitor is a situation any business dreams about.
The companies I represent today are different. For all practical
purposes, we are a surrogate for the California consumer. Our primary
mission is to secure adequate supplies of gasoline to sell to consumers
at a competitive price. In general, we do not win or lose if one
component or another is included in gasoline sold in California.
However, we do lose, and consumers will lose, if gasoline supplies
in California are not adequate to meet demand in the future. And, given
the facts as I currently view them, such a disconnect will occur if
some action is not taken in the near future.
Seven out of every ten gallons of gasoline used in California must
meet federal reformulated gasoline (RFG) requirements, including a
mandatory oxygenate standard of 2.0 percent by weight. Currently,
because of issues involving air quality, MTBE is the oxygenate of
choice in California. Ethanol, while used in limited quantities in
isolated markets, generally is not a viable alternative because of
limited supplies and its impact on gasoline volatility (RVP)--which is
tightly controlled under federal and California RFG specifications.
As of 2003, MTBE cannot be used in California gasoline under
Governor Davis' decision. It will be extremely difficult for ethanol to
replace MTBE both because of limited existing ethanol supplies,
constraints in the California fuel distribution system, and current
environmental regulations. Further, studies must be performed to
determine if ethanol is, in fact, a viable substitute for MTBE. As a
result, refiners and marketers in California are faced with an
untenable situation. The federal government has mandated that we must
have oxygenates in the majority of the gasoline we sell, but the most
widely used oxygenate is banned and the other generally-used oxygenate
will be very difficult for refiners to use because of the significant
added expense of producing gasoline that meets the RVP constraints when
blended with ethanol.
The solution to this untenable situation is clear, at least to
CIOMA, NACS, and SIGMA. The enactment of H.R. 10 will remove the
federal RFG oxygenate mandate for California alone. As a result,
California refiners will be permitted to meet the very stringent
performance standards of California Phase II RFG and federal Phase II
RFG without oxygenates if they choose to do so. California Phase II RFG
already is the cleanest gasoline in the nation. If oxygenates are not
necessary to make this clean gasoline, then the federal RFG mandate
also is unnecessary, at least in California.
CIOMA, NACS, and SIGMA submit that opposition to this legislation
has nothing to do with clean air. Instead, it has to do with economics
and politics. If the oxygenate mandate is removed in California, then
the MTBE industry is afraid it will spread to other states. If the
mandate is removed in California, then the ethanol industry is afraid
it will lose a golden opportunity to expand its markets.
Clean air is not the issue. Economics and politics are. If this
Subcommittee must make a decision based upon economics, CIOMA, NACS,
and SIGMA urge you to side with the independent marketers and
consumers. Marketers and consumers will win with the enactment of H.R.
10 through increased refiner flexibility, increased supplies of
gasoline, and lower retail gasoline prices.
Again, thank you for inviting me to appear today. I hope that the
next time I am invited to appear before you, it will not be because of
higher gasoline prices in California caused by the failure to enact
H.R. 10.
I would be pleased to answer any questions you may have regarding
my testimony.
Mr. Bilbray. Thank you.
I would like to commend the staff in making sure that you
were in the middle of this panel, because I think as a
middleman in this issue, obviously your perception of what is
going on with this legislation is very enlightened; except for
one point, that it is H.R. 11. Unless we have a room full of
bankers here, we better watch it.
Mr. Robinson. Could I hit one point which was the tank
issue, because there were many comments regarding that? The
comment I would like to hit is that EPA is seen as pretty
flexible when they don't want to enforce environmental rules.
The associations I represent have been very disappointed with
EPA's lack of enforcement of the 1998 tank upgrade
requirements. The statements they have made have been, I think,
very irresponsible and do significant damage to compliance
nationwide.
Fortunately, many States, certainly California is one, have
continued to aggressively enforce these regulations, and I
think that enforcement of the tank laws would go a long ways
toward solving many of the leak problems.
Mr. Bilbray. I appreciate your comments on the price issue.
I think in California right now, especially southern
California, we have seen what driving the little guy out of
business has done to the consumer's ability to get a fair price
or at least what the consumer perceives as a fair price. And I
know a lot of the big guys may disagree with me on that.
Mr. Bilbray. Mr. Vaughn, you have 5 minutes.
STATEMENT OF ERIC VAUGHN
Mr. Vaughn. Thank you, Mr. Chairman. Once again it is a
pleasure to be here with you and I appreciate the opportunity
to offer testimony here on what I consider to be extremely
important environmental economic policy and energy security
policy legislation. I have actually brought a surprise guest,
because many people in the country, certainly the Congress,
believe that the ethanol industry exists in the State of Iowa.
I am sorry, Congressman Ganske, it is beginning to move around
the country and we have with us today the largest single
ethanol producer west of the Rocky Mountains, Neil Koehler with
Peril Products. I have Neil here with me today. Unfortunately,
while Neil is producing ethanol in California from agriculture
waste and other biomass products, much of his ethanol has to
leave the State because there is no market for it today in the
great State of California. We hope to change that. With your
support, with your enthusiastic interest in the renewable
alternative option in California, we will see that change.
I represent the Renewable Fuels Association. We are the
national trade association for the ethanol industry. We have 54
companies, manufacturing approximately 1.8 billion gallons of
ethanol today and approximately 400 million new gallons of
ethanol production capacity coming on line the next 18 months
to 2 years. Much of that is not designed for, or destined for,
focused on the developments in California. Much if not all of
this ethanol production is being used throughout the Midwest in
attainment areas and non-attainment areas.
When our industry looks at the reformulated gasoline
program, we do not see calamity, water contamination, consumer
outrage, political frustration. We see a success story. The
success story is in Chicago, in Milwaukee, and in Gary,
Indiana, where fully a third of the ethanol produced in the
United States is used in the Federal reformulated gasoline
program. It is the reformulated gasoline model for our country.
It is exactly what Ed Madigan--excuse me, Congressman Ed
Madigan the ranking minority member at the time, and at some of
the subcommittee hearings, Chairman Henry Waxman, were trying
to design when they put together the reformulated gasoline
program as part of the Clean Air Act Amendments in 1990.
History is a wonderful tool to be able to make sure we
don't repeat it--in terms of bad lessons and bad impacts--but
history is a perfect indicator of what this Congress intended
to do with this important fuel legislation. There are a range
of public policy goals and objectives. Clean air is certainly
at the top of the list. But the range of public policy
objectives, energy security initiatives, marketplace
opportunities for grain and other renewable biomass materials
and moving our country away from all hydrocarbon slated fuels
were among those initiatives.
The historic passage of the Clean Air Amendments in 1990
would not have been possible had it not been for the support of
Republicans and Democrats alike throughout the upper Midwest.
They were the deciding factor and the deciding force in the
successful completion of those legislative initiatives.
The Renewable Fuels Association stands firmly in support of
the reformulated gasoline program and the oxygen content
requirement. However, we are not unmindful and certainly we are
not insensitive to the water quality contamination concerns
that have been expressed not only in California but in 11
States across the United States where legislation has been
introduced to ban and/or to significantly limit the use of
MTBE.
Just last Friday, the legislature of the great State of
Iowa introduced and passed a ban bill on MTBE use. There is no
MTBE used in Iowa, but they are afraid of the potential
implications of MTBE coming out of California and working its
way up the Mississippi River. So the concern is literally coast
to coast. The fact of the matter is we have a successful
program and it includes the role of oxygenated fuels, and
ethanol is meeting that objective today.
In Chicago we have the very best air quality in the country
among the reformulated gasoline areas. We have absolutely no
water contamination. And Congresswoman DeGette, I would only
point out since 1985, ethanol has been used effectively and
fully, and today in virtually all of the front range of
Colorado's gasoline. And according to the Colorado Department
of Health, never has MTBE been found more often, as it was all
across that State when it was used, but ethanol is not found in
any of the test sites or in any of the test analyses being done
in those programs.
We applaud the work and the support and the leadership of
Governor Gray Davis. We think his 11-point plan, not just a
waiver of the oxygenate standard, deserves this committee's
serious and thoughtful attention.
I would encourage you, Congressman Bilbray, to look at all
of the initiatives that are incorporated in the Governor's
plan. Just so you are fully aware, we are anxious, angry, upset
at all suggestions that we are not ready to compete in the
California market--we are--with available supplies today and
growing supplies in the future.
And I would close with this. We look forward to the debate
in California, Mr. Hickox's leadership on these issues, and I
intend to fully and aggressively and hopefully effectively
compete in the California and other reformulated gasoline
program markets in the future.
I thank you, Congressman, for your kind invitation. I look
forward to your questions.
[The prepared statement of Eric Vaughn follows:]
Prepared Statement of Eric Vaughn, President, Renewable Fuels
Association
Good morning Mr. Chairman and Members of the Committee. I am very
pleased to be here to discuss H.R. 11, a bill introduced by
Representative Brian Bilbray (R-CA) which amends the Clean Air Act to
permit the exclusive application of California State regulations to
federal reformulated gasoline within the State. This is an important
issue with far-reaching consequences for both consumers and air
quality, and I appreciate the opportunity to provide comments on behalf
of the domestic ethanol industry.
The Renewable Fuels Association (RFA) is the national trade
association for the domestic ethanol industry. Our membership includes
a broad cross-section of ethanol producers, marketers, agricultural
organizations and state agencies interested in the increased
development and use of fuel ethanol. There are more than 50 ethanol
producing facilities in 21 states in operation today, including a
growing number of farmer-owned cooperatives that have begun production
in just the past five years. The industry currently produces
approximately 100,000 barrels of ethanol per day, and utilizes more
than 600 million bushels of grain per year. The RFA membership
represents more than 95% of all ethanol produced and sold in the United
States today.
In short, the RFA opposes H.R. 11, as drafted. We understand the
desire of some to reduce or eliminate the use of MTBE. But H.R. 11 does
not accomplish that objective. Simply put, the problem is MTBE in
water, not oxygen in gasoline. Governor Davis' recent decision to phase
out the use of MTBE in California gasoline by 2003 addresses the
problem of MTBE water contamination. Providing refiners with additional
flexibility to use no oxygenate at all is unnecessary and will result
in environmental backsliding. Moreover, providing this additional
flexibility could increase consumer fuel costs, threatens the
investments made by farmers and ethanol producers in anticipation of
oxygenate markets, and undermines the energy security and rural
economic development policy objectives of the Clean Air Act Amendments
of 1990.
Background
The Clean Air Act Amendments of 1990 (the Act) created several
programs to help reduce emissions from automobiles. First, the Act
created the oxyfuel program, which required gasoline marketers in
carbon monoxide (CO) non-attainment areas to add 2.7% wt. oxygen to
reduce CO emissions beginning in 1992. Because of its higher oxygen
content, ethanol has been the oxygenate of choice in this market.
Approximately 85% of the oxyfuel market is ethanol blended gasoline,
the remainder is MTBE. The oxyfuel program has been a tremendous
success, reducing ambient CO pollution approximately 14 percent. As a
result, many areas have achieved attainment of the CO standard. In
1990, there were 42 CO non-attainment areas. Today, in large part
because of the success of the oxyfuel program, there are only 17, and
additional areas are demonstrating attainment every year.
The second fuel program created by the Act was the reformulated
gasoline (RFG) program. The Act requires refiners distributing gasoline
in severe ozone non-attainment areas to reduce VOC and toxic emissions
by 15% (27% and 20%, respectively, in phase 2 RFG which begins January
1, 2000). A key component of this program also is the addition of
oxygenates. The Act requires that RFG contain 2.0% wt. oxygen, which
can be met by either 11% volume MTBE or 5.7% volume ethanol. Oxygenates
were seen as a means of providing clean octane to replace components,
such as aromatics, which would have to be reduced in order to meet the
VOC and toxic performance standards of the Act.
From an air quality perspective, the RFG program has also been a
success. EPA estimates RFG is the equivalent of taking 8 million
vehicles off the road each year. Unlike the oxyfuel program, however,
MTBE has become the oxygenate of choice in this market. Including areas
which opted-in to the program, RFG represents about 30% of the nation's
total gasoline supply, or about 35 billion gallons annually.
Approximately 88% of the RFG oxygen market is met with MTBE. The
remaining 12% is met by ethanol, primarily in Chicago and Milwaukee
where ethanol blends are used almost exclusively.
In California, while one refiner is now using some ethanol blended
fuels on a limited basis, almost all of the state's cleaner burning
gasoline (CBG) has been blended with MTBE. California is the largest
single market for MTBE, using approximately 100,000 barrels per day (b/
d) or 1.5 billion gallons annually.
Governor Davis' Executive Order eliminating the use of MTBE addresses
the problems of MTBE water contamination.
In early 1996, California state officials reported that several
municipal water supplies had to be closed because of MTBE
contamination, and that MTBE water contamination was becoming a larger
threat. The California legislature responded by enacting legislation
(S.B. 521) requiring a number of studies of the health and
environmental impacts of MTBE. If the Governor, on the basis of these
technical reports, concluded MTBE posed a significant threat to the
health or environment of California, the legislation authorized the
Governor to take whatever action necessary to protect the citizens of
California.
In December, 1998, several reports were completed and forwarded to
Governor Davis. Among the reports was a comprehensive analysis by the
University of California-Davis, ``Health and Environmental Assessment
of MTBE'' (UC Davis study) which concluded that there are ``significant
risks and costs associated with water contamination due to the use of
MTBE.'' According to the UC Davis study, ``if MTBE continues to be used
at current levels and more sources become contaminated, the potential
for regional degradation of water resources, especially groundwater
basins, will increase.'' The report concludes, ``the use of either non-
oxygenated reformulated gasoline or ethanol as an oxygenate in CaRFG2
would result in a much lower risk to water supplies, lower water
treatment costs in the event of a spill, and lower monitoring costs.''
Based on the UC Davis assessment, the peer review comments and
public hearings, and acting on the basis of S.B. 521, Governor Gray
Davis on March 26, 1999 issued Executive Order D-5-99, phasing out the
use of MTBE in California gasoline by 2003. Thus, we question the need
for federal legislation largely designed to achieve the same end.
While there are some overlapping reporting requirements for
refiners selling CBG in federal RFG areas, from a practical standpoint,
the only effect of H.R. 11 is to vitiate the oxygen requirement of
federal RFG, making oxygen optional in California gasolines. But as
described in the state's own reports, the problem is MTBE in water, not
oxygen in gasoline. Governor Davis' Executive Order of March 26 deals
with the problem--it phases out the use of MTBE.
Governor Davis' order also expresses support for federal
legislation providing flexibility to refiners not to use oxygenates at
all. But the only reason to provide such ``flexibility'' would be an
assumption there is insufficient ethanol to meet the oxygenate demand.
That is not the case.
There is sufficient ethanol supply to meet California oxygenate demand.
The only reason to provide refiners with the flexibility to utilize
non-oxygenated gasoline in California, or elsewhere, is a presumption
that ethanol supply is insufficient to meet anticipated demand. But
U.S. ethanol production is adequate to meet California's oxygenate
demand, particularly given the extensive phase-out of MTBE included in
Governor Davis' Executive Order. Approximately 100,000 b/d of MTBE are
used in California today. That includes MTBE that is currently being
used in CBG not covered by federal RFG requirements. But it would not
take that much ethanol to meet the same oxygenate demand. Ethanol has
twice the oxygen content as MTBE. Thus, it will satisfy the same oxygen
demand with only half the volume. Assuming oxygenates are not used in
areas where it is not required, it is estimated that California's
ethanol demand is only 40,000 b/d. With current U.S. ethanol production
capacity of about 117,000 b/d, and an additional 26,000 b/d of capacity
in construction or in planning, there will clearly be adequate supplies
of ethanol to meet California oxygenate demand.
Another issue is whether there would be adequate transportation and
storage capacity to handle increased ethanol usage in California.
Again, the answer is yes. Attached is a report completed by Downstream
Alternatives, Inc., ``The Use of Ethanol in California Clean Burning
Gasoline: Ethanol Supply/Demand and Logistics,'' which concludes;
``Based on our assessment, adequate supplies of competitively
priced ethanol could be supplied to the California market
almost immediately. Terminal preparation is the real variable.
But even here it is clear that well over half the terminals
offering gasoline could make ethanol available in six months or
less. In turn, these terminals could be utilized to supply
ethanol for gasoline sourced from other terminals thereby
increasing the amount of ethanol blending that could be
achieved in a short time frame. It is not necessary to have
ethanol in all gasoline terminals to achieve 100% market
penetration.''
The U.S. ethanol industry invested $2.8 billion in expanded production
capacity to meet anticipated Clean Air Act oxygenate demand.
Indeed, the U.S. ethanol industry has already demonstrated its
ability to respond to market forces quickly and effectively. In
anticipation of significant market opportunities, the domestic ethanol
industry began an unprecedented expansion in 1990, almost doubling in
size from 850 million gallons of annual capacity to 1.5 billion gallons
in 1995. Most of that new production capacity was by farmer-owned
cooperative plants. Farmers have recognized the need for value-added
processing, and understand that ethanol production offers a tremendous
opportunity for rural economic growth and investment. According to the
U.S. Department of Agriculture, small farmer-owned cooperative ethanol
plants now represent approximately 30% of the industry's production.
The industry continues to grow. Domestic ethanol production capacity
today is approximately 1.8 billion gallons.
More than 40 plants were either built or expanded as a result of
the 1990 clean air bill, representing about 450 million bushels of
increased corn demand annually and $2.8 billion in investment in this
important value-added industry. Repealing the oxygen standard places
much of that investment and rural economic growth at risk, and
certainly threatens the continued development of the domestic ethanol
industry.
Eliminating the use of oxygenates in California gasoline will increase
consumer costs.
The California Energy Commission (CEC) recently completed an
analysis, ``Supply and Cost of Alternatives to MTBE in Gasoline.'' The
CEC report provides an estimate of the potential costs or savings to
the public in increases or decreases in retail gasoline prices for each
alternative when compared to MTBE. In all cases studied (i.e., near
term, medium term, long term), eliminating the use of oxygenates
resulted in the largest cost increase for California consumers. For
example, the report states:
``In the long term, a complete ban on all oxygenates would
result in the greatest average cost increase for gasoline for
this time period compared to all of the other alternatives
studied . . . refiners would need to make significant
investments to modify their facilities, totaling over $1.1
billion. This is the primary reason for the average cost
increase.''
In all cases, the ethanol option was less expensive than the non-
oxygenated case. Indeed, the ethanol case was shown to potentially save
consumers money over the long term if adjustments to the predictive
model are made recognizing the carbon monoxide and exhaust emissions
benefits of ethanol which would obviate the need for refiners to secure
specially tailored blendstocks for ethanol. While the report also
showed that passage of legislation making oxygenates optional in
California (i.e., H.R. 11, S. 645) would be the least expensive option,
this conclusion is based on the assumption that ether oxygenates,
including MTBE, continue to be used. Thus this option, while
potentially less expensive, perpetuates the water contamination
problems that have plagued the program. Moreover, the economic analysis
did not include the potential costs of remediation if ether oxygenates
continue and additional drinking water supplies are contaminated.
Recently, MathPro Inc. completed an analysis of the economic impact
of non-oxygenated fuels in California for Chevron Products Company and
the Tosco Corporation, ``Potential Economic Benefits of the Feinstein-
Bilbray Bill.'' The MathPro analysis concluded that even with the
flexibility to use non-oxygenated fuels, refiners in California would
continue to utilize oxygenates to help meet the toxic performance
standards and maintain octane. It is interesting to note that MathPro
concluded, ``the `optimal' (cost minimizing) share of non-oxygenated
CARB gasoline ranges from about 20 to 40 percent, depending on the time
period and Predictive Model mode.'' But approximately 35% of
California's gasoline is already exempt from the federal RFG oxygen
requirement. Thus, according to the refining industry's own analysis,
the most economic level of non-oxygenated fuel can already be supplied
to California without federal legislation.
Eliminating the oxygen requirement in California will result in
environmental backsliding.
The California Air Resources Board (CARB) and the oil companies
maintain the oxygen standard is not necessary to meet Clean Air Act
emissions standards. From a strict VOC compliance perspective, they
might be right. But this perspective ignores the ``real world''
benefits of oxygenates that would be forfeited by passage of H.R. 11.
Both state and federal emissions standards for cleaner burning
gasolines use mass VOC emissions as a measure of compliance. There are
many ways to reduce VOC emissions, and for some large integrated
refiners it would not be necessary to use oxygenates in order to meet
those standards. Modeling by the Department of Energy and others
suggests refiners would likely respond to the ``flexibility'' for non-
oxygenated fuels by increasing olefin and aromatic content, and using
alkylate or other petroleum-derived products. The result would be
dirtier air.
Oxygenates reduce exhaust emissions of CO and VOC's, particularly
in higher-emitting vehicles. CO is a precursor to the formation of
urban ozone. In fact, as VOC emissions from vehicles have been reduced,
the importance of CO to ozone formation has become more critical.
Recent studies indicate that exhaust CO emissions from gasoline
vehicles make about as much ozone as do the exhaust VOC emissions.
Neither federal RFG nor California CBG includes a CO performance
standard. In the absence of the oxygen requirement then, an
increasingly important contributor to the formation of urban ozone will
be increased.
In addition, if reducing ozone is the objective, exhaust VOC
emissions are more important than evaporative VOC emissions because
exhaust emissions are more reactive, i.e., exhaust emissions will form
ozone more quickly and readily than will evaporative emissions. In the
absence of the oxygen requirement, it is very likely that exhaust
emissions will increase relative to evaporative emissions. Thus, ozone
will increase even if the mass-based VOC standard, which does not
distinguish between exhaust and evaporative emissions, is met.
A detailed analysis of the air quality impacts associated with
repealing the oxygen standard is attached. The clear conclusion,
however, is that unless the emissions standards are tightened to
reflect the Areal world@ benefits of oxygenates, there will be
environmental backsliding caused by H.R. 11.
In addition to environmental backsliding, enacting H.R. 11 would
forfeit the energy security and rural economic development
benefits of the oxygen requirement.
As stated by Richard Wilson, then-EPA Acting Assistant
Administrator for Air and Radiation, in testimony expressing the
Agency's opposition to this legislation at last year's hearing on H.R.
630 (the predecessor to H.R. 11);
``The RFG requirements also emerged from the melding of several
Congressional goals, including air quality improvements,
enhanced energy security by extending gasoline supply through
the use of oxygenates, and encouraging the use of renewable
energy sources.''
Indeed, these ancillary benefits were an integral part of the
historic agreement leading to passage of the Clean Air Act Amendments
of 1990. With hundreds of thousands of American troops stationed in the
Persian Gulf at the time and a flagging rural economy, the Congress
wanted to promote the increased use of domestically produced, renewable
resources, such as ethanol, through the oxygen requirement. These
policy objectives remain valid today.
The farm economy would certainly benefit from continuation of the
oxygen requirement. Recently, Federal Reserve Board Chairman Alan
Greenspan conceded, ``farmers, rather than sharing in the general
prosperity, have been experiencing disappointing exports and sharply
falling prices.'' The potential for increased domestic value-added use
of grain, such as ethanol production, could dramatically enhance rural
economies. This rationale for the oxygen content requirement is perhaps
more valid today than it was even in 1990.
The importance of ethanol and maintaining the oxygen standard was
recently underscored by several farmer and commodity organizations in a
letter to Congressional leadership. The letter states:
``The elimination of the oxygen requirement would deal a severe
blow to the domestic ethanol industry which has offered one of
the few growing market opportunities for American farmers in a
year of economic collapse in farm country . . . Removing the
oxygen standard now simply because there is a problem with MTBE
would reverse a policy that has not only brought clean air to
many American cities, but renewed economic activity in rural
America.''
April 22, 1999 letter to congressional leaders signed by the
National Corn Growers Association, American Farm Bureau Federation,
National Farmers Union, National Grain Sorghum Producers
Association, American Soybean Association, American Sugar Alliance,
American Sugarbeet Growers Association, Florida Sugar Cane League,
Gay and Robinson, Inc. (Hawaii), Rio Grande Valley Sugar Growers,
U.S. Beet Sugar Association, American Corn Growers Association,
American Society of Farm Managers and Rural Appraisers, National
Association of Wheat Growers, National Pork Producers Council,
Women Involved in Farm Economics, National Council of Farmer
Cooperatives.
In addition to the agricultural impacts, enhancing energy security
at a time when the U.S. is more dependent upon imported energy than at
any time in its history also remains an important policy objective. It
is indeed ironic that almost 40% of the MTBE used in RFG today (1.4
billion gallons annually) is imported. If MTBE use is reduced as a
result of actions taken to curtail water contamination, the energy
security objective of the clean air bill may finally be realized.
Conclusion:
The domestic ethanol industry understands the strong interest in
protecting water supplies. But the problem is MTBE in water, not oxygen
in gasoline. By simply giving refiners the flexibility to use
oxygenates, or not, H.R. 11 simply does not address the problem. Just
as in Illinois and Wisconsin, where the ethanol RFG program has been an
unqualified success, California can have clean air and clean water. The
oxygen requirement is a critical protection against environmental
backsliding. It also advances important public policy objectives of
energy security and rural economic development, and promotes the
increased production and use of renewable fuels, such as ethanol, which
is the only transportation fuel strategy we have for reducing
greenhouse gases and addressing global climate change. If MTBE must be
removed from gasoline to protect public health and water quality, there
is sufficient ethanol supplies to satisfy demand. If MTBE is a problem,
ethanol can, and will, preserve the air quality benefits of RFG without
sacrificing public support for this important program.
Thank you.
Mr. Bilbray. Thank you. I appreciate the fact that you have
at least indicated support for the State strategy at addressing
these issues.
Mr. Beuhler, you have the floor for 5 minutes.
STATEMENT OF MARK BEUHLER
Mr. Beuhler. Mr. Chairman, distinguished members, my name
is Mark Beuhler. I am the Director of Water Quality for the
Metropolitan Water District of Southern California. I am here
on behalf of the Association of California Water Agencies,
ACWA. ACWA represents over 450 water suppliers throughout the
State of California and serves, in combination, about 90
percent of the water in the State. And ACWA would like to
express its strong support for H.R. 11.
About 50 years ago, the pesticide DDT was introduced
worldwide to control mosquitoes, and as a result, millions of
lives were saved by the prevention of malaria. Then we found
DDT had some unintended environmental consequences, and it had
to be phased out. Similarly, MTBE clearly has helped clean up
the air, but recently we have seen some of these similar
unintended environmental consequences, and it is time to look
at the lead California has already taken in terms of phasing it
out.
MTBE is a known animal carcinogen and a potential human
carcinogen. When we tell our consumers of the presence of this
compound in their water--and we have to tell them now as a
result of the 1996 Safe Drinking Water Act Amendments, some of
which you were involved in passing that--our consumers in
general don't drink the water. Instead, they turn to bottled
water at the cost of maybe 500 to 1,000 times more per gallon
consumed.
Also, they can taste MTBE at very low levels, about 5 parts
per billion. That is about a tablespoon of MTBE in an Olympic-
size pool of water. Very low concentrations. MTBE is unique. It
is much more persistent than most compounds we deal with. It
simply doesn't degrade well in the environment and it moves
very rapidly; in our view, more rapidly than the regulators can
track it.
Utilities have been impacted. You already heard of the case
of Santa Monica. South Lake Tahoe is another example. In fact,
South Lake Tahoe provides an interesting example of two things.
One is they have both a groundwater problem and a surface water
problem in the lake, as well as in south Lake Tahoe. With the
contamination they have had, there has not been a single
demonstrated case of a leaking underground tank. It is all due
to other sources.
The University of California estimates as many as 10,000
wells throughout the State of California could be impacted.
What we are really worried about is not the cases that we know,
but rather the iceberg out there, the cases of MTBE
contamination that we are going to find out about.
Governor Davis acted in March to ban MTBE or actually phase
it out over about 3\1/2\ years, and ACWA's position is we have
to have complementary Federal legislation like H.R. 11 to make
the Governor's action work.
Finally, I might add the really significant impact of
consumers. We have estimated--``we,'' actually being an
interesting partnership between the oil industry and ACWA, have
estimated a cost of $40 to $90 per family per year to clean up
MTBE. And that is probably the bottom end of the cost.
In summary, we need H.R. 11. We need to phaseout MTBE, and
we need to move quickly because the longer we wait, the more of
our surface waters and our wells will be contaminated. Thank
you.
[The prepared statement of Mark Beuhler follows:]
Prepared Statement of Mark Beuhler on Behalf of the Association of
California Water Agencies
Mr. Chairman, members of the subcommittee, my name is Mark Beuhler
and I am the Director of Water Quality for the Metropolitan Water
District of Southern California as well as a member of the Water
Quality Committee of the Association of California Water Agencies
(ACWA). I am testifying today on behalf of ACWA in strong support of
H.R. 11. H.R. 11, introduced by Brian Bilbray, is cosponsored by 49
members of the California congressional delegation. It is also
supported by major air and water quality districts throughout
California. ACWA also supports S. 266, a companion bill in the Senate
sponsored by Senator Feinstein. ACWA represents over 450 public urban
and agricultural water utilities throughout the State of California,
which deliver more than 90 percent of the water supplied in California.
The gasoline additive MTBE is a known animal carcinogen and
potential human carcinogen. Existing health studies are inadequate to
determine the risk posed by MTBE in drinking water. Yet, it has become
the third most common chemical manufactured in the United States. It
constitutes about 11 percent of the gasoline in areas such as Los
Angeles, San Diego, and Sacramento. It is unfortunate that a chemical
with so little known about its health risk(s) has become so widely
used.
Our consumers can taste MTBE in their water at extremely low
concentrations, in the range of 5 parts per billion (this is equivalent
to less than a tablespoon of MTBE in an Olympic-sized pool). If our
consumers taste a chemical that is a known animal carcinogen and
potential human carcinogen, they very often choose to buy bottled water
at a cost of 500 to 1,000 times more than the cost of tapwater. Also,
MTBE is a man-made chemical. There is no good reason why it should be
present in our drinking water.
MTBE is a unique contaminant in water. It spreads into our drinking
water aquifers faster than nearly all other constituents in water. It
moves faster than regulatory agencies can track it and faster than
water utilities can drill new wells to replace the contaminated
supplies. Unlike most organic chemicals, MTBE does not biodegrade
rapidly in water. Once it has leaked into our groundwater or spilled
into our drinking water reservoirs, it persists.
Why do we need H.R. 11? The gasoline oxygenate requirement in
federal law is not necessary to meet clean air standards. The
flexibility provided by H.R. 11 will enable California to eliminate the
use of MTBE. California is taking decisive action on this issue.
A recent study conducted by the University of California has
recommended that use of MTBE be eliminated in California. Governor Gray
Davis acting on this recommendation issued Executive Order D-5-99 to
phase out the gasoline additive by December 31, 2002. However, this
executive order is not on track with existing federal requirements for
mandatory use of oxygenates within the Clean Air Act. H.R. 11 is needed
to implement Governor Davis' executive order to accomplish the phase
out.
Water suppliers in California have already been severely impacted
by MTBE. The City of Santa Monica lost 50 percent of its well
production capacity and has had to switch to more expensive imported
water from Northern California. South Tahoe Public Utilities District
has lost one third of its well capacity. Unfortunately, South Tahoe has
no imported water to replace its lost supplies and is at risk of water
shortages. Many other utilities throughout the state have shut down
wells or bypassed water supply reservoirs rather than risk having the
fast-moving, persistent MTBE making its way into consumers' taps.
MTBE has also impacted individuals with private wells. Residents of
the City of Glenville were drinking water with MTBE levels as high as
20,000 parts per billion, which is 1,000 times greater than the
California Public Health Goal of 13 parts per billion.
These documented contamination incidents are likely to be just a
preview of future cases. The University of California estimated that as
many as 10,000 wells may be contaminated with MTBE in California. This
could have a huge impact on the state's water resources and on the cost
to consumers of providing alternate drinking water supplies.
The cost of removing MTBE through treatment is very expensive. The
University of California has estimated these treatment costs to range
from $340 million to $1.5 billion in California alone. Existing
treatment technologies, such as air stripping, would cost at least $40
to $90 per family per year. Other existing treatment processes would be
even more expensive (see Figure 1).
To develop new, less expensive treatment technology, an MTBE
Research Partnership was created by the Association of California Water
Agencies, the Western States Petroleum Association, and the Oxygenated
Fuels Association. The Partnership focuses on developing new, cost-
effective treatment technology to handle existing contaminated drinking
water supplies and developing source protection technology, to protect
uncontaminated sources. This is a cooperative step in the right
direction.
ACWA has also supported all major state legislation on MTBE,
including bills by Kuehl/Hayden, Sher, Mountjoy, and Cunneen. However,
California MTBE legislation cannot override the federal mandate for the
use of oxygenates like MTBE.
California has demonstrated that it can meet all of the health and
air requirements of the Clean Air Act without the use of MTBE. H.R. 11
will provide the flexibility to implement an MTBE phase-out ordered by
the Governor of California and simultaneously meet all state and
federal clean air standards. With the elimination of MTBE, it will be
possible to have both clean air and clean water.
About 50 years ago, the pesticide DDT came into widespread use
throughout the world to control mosquitoes. It saved millions of lives
by preventing Malaria. Then we found that DDT had unintended
consequences on the environment and it had to be phased out. MTBE is
similar. Its use has produced unintended consequences in drinking
water. Trading clean air for clean water is not an acceptable tradeoff.
It is time to phase out MTBE. H.R. 11 will enable California the
flexibility to do that.
Mr. Bilbray. Thank you, Mr. Beuhler. Appreciate it.
The Chair will start off the round of questioning. Mr.
King, can you elaborate on why you were testifying today as a
single company rather than as the Oxygenated Fuel Association
which has opposed the legislation in the past two Congresses?
Mr. King. We were invited to participate as an individual
company. I never inquired as to why the OFA is not testifying.
We were encouraged at the opportunity and we looked forward to
coming and visiting with you.
Mr. Bilbray. Your testimony is rather confusing. I will
just be very frank. I read your testimony and it is appropriate
that I am frank here because it sounded like you were
testifying in opposition to Mr. Franks' bill. Your specific
testimony was aimed at a proposal that MTBE might be--would be
outlawed. But seeing that if you read H.R. 11, you see that it
is totally content neutral, and it doesn't outlaw MTBE. Also,
for the record, we have had a pretty extensive history of
dialoguing over the last 4 years, 5 years, so your challenge at
saying let's work together and let's talk about this issue, is
it aimed at H.R. 11 or is it aimed at the movement in some
parts of Congress in this country at specifically outlawing one
product?
Mr. King. Well, H.R. 11 does not seek to ban MTBE, we agree
with that. But you have heard--we have heard for the last 3\1/
2\ hours quite a bit of discussion about banning the product
and the negative implications of MTBE, and Governor Davis's
order is asking that the product be eliminated from California.
Your bill facilitates the Governor's ability to phase the
product out, so it really does dovetail into a phaseout of
MTBE, which we obviously do not support.
Mr. Bilbray. The question is that my bill eliminates an
inflexible mandate and your concern is that that mandate is
right now a defensive mechanism to avoid the elimination of a
commodity that you sell.
Mr. King. That is correct. Without your bill, the product
cannot be banned in California.
Mr. Bilbray. I have just got to say, Mr. Robinson, that I
think as the testimony went on, you have proven that you are
basically sitting between two agendas: one wanting a mandate to
be able to defend a product, and basically one that wanted a
mandate to be able to guarantee a market base.
I would ask Mr. Vaughn, I have just got to go back and say
the testimony from Governor Davis and the refineries have all
indicated that the market share of ethanol in the State of
California will be expanded over the next few years
substantially with the passage of H.R. 11.
Why would an industry oppose a bill that has been
identified as basically being part of the answer? Is it
transitioning from one product to another with expansion of
your own market share or is it that you are looking at the fact
that without H.R. 11, your market share can be huge and
guaranteed, and that H.R. 11 only allows the transition to a
larger market share, not a guaranteed monopoly basically in the
State of California?
Mr. Vaughn. Congressman, you asked a lot. Let me see if I
can try and answer the first and then I will work my way
through the questions, unless we run out of time.
Mr. Bilbray. First, your product is going to be sold more
and is going to be phased in faster and that H.R. 11 would help
that. Why would you oppose H.R. 11?
Mr. Vaughn. What I said in my prepared remarks, and I heard
you in the background commenting, and you did say after my
testimony you are glad I have endorsed, we have pledged to
support what we consider to be bold and effective action by the
Governor of California to specifically address a problem. He
has an 11-point agenda that we think, if enacted in its current
plan, will result in significant market development
opportunities for ethanol.
Quite frankly, I think it is going to drive very specific
rice straw development for ethanol in California and we are
very encouraged by that. I am not certain, sir, because every
single chance you get, you say your objective is to be fuel
neutral or at least you are content neutral. That is not what
Governor Davis is doing. Your bill works in concert with
Governor Davis's plan. If your bill is a stand-alone
initiative, as it is before this committee, it does not work.
Mr. Bilbray. Reclaiming my time. Let me just clarify that
this body, not just as a subcommittee but as a Congress, is not
in the position to implement the Davis plan in the State of
California. But we can do our part of it. But I am sitting here
with two people from different industries that are having
totally different reasons to oppose H.R. 11, and to be frank
with you, the ban standing between you really indicates why I
and a lot of people in the State of California and in this
Congress feel that it needs to be passed; specifically because
you two are standing here to oppose it. So I am just saying it
is a clear statement. I allow my colleague--I have got to go to
the ranking member, but I will allow my colleague, and we will
do a second round.
Mr. King. I was just going to add something.
Mr. Bilbray. Go ahead.
Mr. King. We keep referring to Mr. Robinson and the
consumer. We got a letter yesterday, sent to Chairman Bilirakis
from the National Consumer League, which supports the continued
use of MTBE for both environmental and for economic reasons.
This is a 100-year-old organization that I----
Mr. Bilbray. Do they support mandating that it has to be
used in an area that has a cleaner--basically a cleaner
formula, and does a Federal mandate accomplish what we want to
do with this? That is the big question.
Ms. DeGette. Thank you, Mr. Chairman. First let me clarify
something, Mr. Vaughn, because I was disturbed by a
misinterpretation you may have, as evidenced by your remarks
directed toward me and the front range of Colorado.
I am certainly well aware of the benefits of ethanol in
Colorado and other places. But I do think that because of what
Mr. Beuhler was saying and some of the unintended results we
have seen from MTBE, that before we make a wholesale shift into
ethanol or anything else, we should look at all of the
environmental and health impacts before we go there. So I just
wanted to clarify that with you.
Mr. Beuhler, let me ask you, because I think what you are
talking about in Lake Tahoe with the MTBE, they are finding in
areas with no leaking underground storage tanks, is important.
Do you think that that contamination is coming from two-stroke
boat engines or other sources, or do you know?
Mr. Beuhler. It is both. In fact--and I also serve on the
blue ribbon panel that was referred to earlier so we have heard
of cases, similar things in Maine and other parts of the
country. In the case of Lake Tahoe, the lake itself has
contamination from two-cycle engines. About a quarter of the
fuel gets spewed out unburnt into the lake, so that is a
problem with the lake itself.
The city of South Lake Tahoe, though, has its own set of
municipal wells. They don't use water from the lake. They use
it from their wells. And in those wells, although they have
good monitoring, they have yet to see a single demonstrated
case of leaking underground tanks. When they have investigated
what the cause is, it is things like poor maintenance, people
spilling gas on the ground.
There is one example I am aware of where a car drove away
with a nozzle stuck in the tank, and it ripped off the hose and
it spilled that way. So there are lots of ways that gasoline
can get into the groundwater other than just leaking tanks.
Mr. Shadegg. Do you have any sense of what the extent of
contamination is from these other sources versus the leaking
underground tanks?
Mr. Beuhler. Yeah. The largest single source is clearly the
leaking underground tanks--to be clear about that--and that has
been demonstrated in a variety of cases. But the reason for
emphasizing the non-underground tank situation is MTBE is so
obnoxious at low concentrations that just a little bit goes a
long ways. And so even with perfectly functioning tank systems,
communities are at risk of MTBE contamination.
Ms. DeGette. Do you know what the percentage is?
Mr. Beuhler. No, I don't.
Ms. DeGette. Is anyone working on that?
Mr. Beuhler. No, I don't think so, probably because in
general it is concluded that we have got to fix the tanks but
we have also got to address a whole series of other issues,
too.
Ms. DeGette. Mr. Bordvick, I want to ask you, there are a
lot of refiners who are a lot less sophisticated than you folks
are, and I am wondering if you have any information about small
refiners that are ready and able to produce gasoline without
any oxygenate that will meet the California standards.
Mr. Bordvick. I don't have specific information on other
refiners. We have heard certainly from other sophisticated
refiners, if we can use that term, like Chevron who has made
certain commitments. What I can tell you is this. We do produce
today gasoline that has all the same air quality benefits,
cleaner burning gasoline using ethanol, which isn't easy to do
year round since summertime is a challenge, but we can do it
and without any oxygenates at all. It is not magic. It is not
using some science that isn't available to anyone else. It does
require some hardware changes in the refinery, which we haven't
made yet, in order to make the volumes that we need to
provide--supply the entire State--but it is not a technological
issue.
It does take some investment, which smaller companies may a
have harder time than bigger companies, but it is not--it is
not a huge issue. One biggest issue right now is time. It just
takes some time to do that.
Ms. DeGette. In your testimony, you said there are really
three barriers to getting this non-oxygenated fuel out.
Obviously, the current law. And then you also said technology
and transportation. Let's say we pass H.R. 11. Aren't you still
going--may I have permission for a couple extra minutes?
Mr. Bilbray. Yes.
Ms. DeGette. Thanks. We are still going to have the
technology and transportation problems, I would assume. Do you
think those will lessen if we pass the law and, if so, why?
Mr. Bordvick. By passing H.R. 11, one of the benefits of
passing H.R. 11 is that you will provide the opportunity for
some immediate phaseout of MTBE. With the flexibility of no
longer having a mandate, we can look at the distribution and
transportation system in California, for example, and see where
there are opportunities to perhaps dedicate specific pieces of
that transportation system to a non-MTBE gasoline, similar to
what we have done to Lake Tahoe. It won't provide--everywhere
in the State won't have that same opportunity, but we are going
to look at every opportunity we can, so one of the very
significant benefits of passing this bill is the speed at which
MTBE can be phased out. We still may not get a 100 percent
removal under the Governor's mandate, but there is going to be
a lot less MTBE in gasoline with the passage of this bill.
And if I may comment on the underground storage tank issue,
which is a big issue. As I mentioned, we have 3,000 retail
outlets on the West Coast. It is a significant issue for us.
The person that has to pay the bill in cleaning it up is us. If
I could guarantee to you that we could make an underground
storage system that would absolutely not leak, I would love to
do that. I cannot sit here and tell you that won't happen,
either from spills, from customers, whatever; but I can
guarantee you that if MTBE is not in the gasoline, it won't get
in the water.
Ms. DeGette. Mr. King, can you comment on some of these
same issues?
Mr. King. I don't know whether Mr. Bordvick is saying that
all of his tanks had not been replaced but----
Mr. Bordvick. All of our tanks are complying with the
Federal standards, and we also would wish that the EPA would
uniformly enforce that because we certainly are in compliance.
We don't have leaking tanks. But we have found that it is
showing up in other places, and we conclude that is from fairly
small customer spills. It might be from even someone in the
backyard with their lawn mower, and certainly motor boats'
deposition from the air. There are a lot of other sources. I
can't give you a percentage, unfortunately, but there is a
significant other source, other than storage tanks.
Mr. King. Clearly the problem is storage tanks. We have
talked about at least 30 percent of the country does not have
their storage tanks replaced to the new double-hold standards.
We believe very strongly that that is the problem. We talk
about MTBE is the problem with the leak, but there are other
constituents of gasoline that are leaking as well, that are
known carcinogens. And so EPA has to come out and decide on a
deadline for the tanks to be remediated and get it done.
Ms. DeGette. Mr. Chairman, I think from our side of the
aisle, if I can just ask unanimous consent that any members
that had to leave could submit any questions for this panel.
Mr. Bilbray. No objection.
Mr. Ganske.
Mr. Ganske. Mr. Beuhler, you started out your comments with
a pretty strong comparison. I mean, you basically were
comparing MTBE to DDT.
Mr. Beuhler. If I could clarify, DDT is not an MTBE or not
comparable in terms of health risks. That is not the issue. I
think the reason for the comparison is unintended consequences
on the environment. Nobody understood when DDT was first used,
there would be unintended consequences on the environment, and
the same is true with MTBE. Nobody understood there would be
unintended consequences on the environment, in this case water.
Mr. Ganske. You are basically in agreement with the
gentleman from the EPA that there were some unique properties
about MTBE that facilitated dispersion; is that correct?
Mr. Beuhler. Absolutely. It is one of the most difficult
compounds to deal with, because it moves so fast and doesn't
really break down effectively.
Mr. Ganske. It isn't really like just regular gasoline.
Mr. Beuhler. No.
Mr. Ganske. It doesn't have MTBE that we have had around
the country for a long time.
Mr. Beuhler. You are correct. We don't have anywhere near
the same problems like with benzene or toluene, because they
biodegrade in the environment. By the time they hit our wells,
they are largely gone.
Mr. Ganske. Mr. Vaughn, earlier in the day, we had some
questions or comments about the availability of ethanol and the
impact on cost. Would you care to address those?
Mr. Vaughn. Yes, sir, Mr. Ganske. The ethanol industry
today has the capacity to produce approximately 1.8 billion
gallons, and as I mentioned in my remarks, approximately 400
million gallons of new capacity is coming onstream. If you took
a look at the entirely reformulated gasoline program in
existence today, and you put those gallons of MTBE that is used
today in ethanol equivalent, which means you need less ethanol
to achieve the same oxygenate requirement, it is approximately
a 2.1 billion gallon demand. And anyone who says that ethanol
can meet all that requirement tomorrow afternoon at 5 o'clock
is wrong. We couldn't.
But Governor Gray Davis has asked in an analysis completed
by the end of this year, could ethanol meet approximately 650
million gallon demand, annual demand in the State of
California? How much of that would be coming from California
base feed stocks? Congressman, we consider all of those to be
very positive economic environmental goals and objectives that
have not been talked about here today.
We would like to see those on objectives fully evaluated,
fully developed, and to see the role of renewables alternatives
like ethanol be fully explored and developed in the California
market.
Mr. Ganske. What would be the impact on the cost of
gasoline in California if you are using ethanol instead of
MTBE?
Mr. Vaughn. Mr. Hickox, the new director of the California
EPA, in his comments said that the impact on adding ethanol to
gasoline in California under the current regime would increase
gasoline prices approximately 7 cents. What he is referring to
was if it was an immediate ban on MTBE and an immediate
replacement of ethanol. Quite frankly, I think he is correct in
those numbers.
The California Energy Commission analysis, the UC-Davis
report, as was also pointed out here, pointed out that an
ethanol-blended option in the current reformulated gasoline
program marshaled in over the timeframe that the Governor has
indicated, is the cheapest option in terms of the impact on
consumers. But that is also, sir, taking ethanol out of the
Midwest.
We are anticipating, then--the representatives of
California rice growers are here for meetings this afternoon
with Senators from California in the other body to promote
renewable alternative development right there in Sacramento, in
the valley. We are burning the equivalent of 350 million
gallons a year in rice straw in California. That is a crime. We
ought to stop that and we ought to produce the ethanol in
California, which would drive down those consumer impact
implications immediately. It would be the most consumer-
friendly and the most environmentally friendly option available
on the docket today.
Mr. Ganske. Senator Feinstein, I thought, mentioned
something about 4 years before you could get significant
ethanol into California. Is that in line with what you are
thinking, or would it be a shorter period of time?
Mr. Vaughn. The ethanol has--and I do apologize,
Congresswoman DeGette, if we have gotten off on the wrong foot
with ethanol on the front range--ethanol surrounds California.
We are in every major metropolitan area in the Rocky Mountain
region from the Pacific Northwest to Phoenix. Denver is the
most exciting program we have had for 10 years with ethanol,
Reno, Las Vegas, Salt Lake City. So we are within minutes of
the western part of California right now today.
We would estimate that we could respond to the entire
northern California marketplace demand for oxygenates in 60 to
180 days and the transportation is available, the
infrastructure for refining internally is available and the
ethanol is available.
Southern California is a different story, and that is why
Governor Gray Davis's 3-year plan, while some might consider it
to be excessive in terms of phasing out one product, it could
be a very positive way of developing in-state and national
ethanol production to meet demand for cleaner burning renewable
oxygenates if California.
Mr. Ganske. Finally, one question, Mr. Beuhler. As a
physician, I have looked at--worked with ethanol for a long,
long time. I mean, there are probably very few people in this
room that haven't consumed it. Even though there isn't a study
that is out there, it is hard for me to believe that a
substance that we have in beer, other drinks, you know--is it
your expectation that we would see the same type of problems
with ethanol at some time in the future that you are seeing
with MTBE?
Mr. Beuhler. Well, I will defer to your medical knowledge
on that. But just from the standpoint of drinking water
suppliers, two things work in our favor. The first is hopefully
it won't get to our water sources in the first place. It
degrades very rapidly, in fact, much faster than most of the
other compounds that are in gasoline. So that works in our
favor.
The other question is a real good one. We don't have the
answer to that yet. What do low levels of ethanol mean in
drinking water? I don't think anybody knows.
Mr. Ganske. Thank you. Thank you, Mr. Chairman.
Mr. Bilbray. Mr. King, I wanted to come back to you because
I think I was a little harsh on one side. After re-reading more
of your testimony, it doesn't seem like your company is very
far from H.R. 11 at all. You refer to that any legislation
should have the objective that would be good for public policy
and would fulfill certain criteria to protect the public
health. Are you aware that the EPA has already made a
determination about California reformulated gasoline pertaining
to the public health protection?
Mr. King. In what form?
Mr. Bilbray. That it is superior to the Federal
reformulated gasoline. In fact, it is superior to the Phase 2
Federal reformulated gasoline.
Mr. King. Superior to Phase 2 with oxygenates?
Mr. Bilbray. With or without.
Mr. King. I am not aware of that. I guess I have been under
the impression that the fuel in California with oxygen is a
better product than without.
Mr. Bilbray. But with the standard, the California standard
which, granted, the great percentage of it has oxygenates in
it, but the California standard, which is what my bill would
refer to, are you aware that that standard that my bill would
refer to has already been found by EPA to be superior to the
Federal clean fuel?
Mr. King. I know that that fuel is superior, but I don't
know exactly whether it is superior to the Federal clean fuel
because it has oxygenates. But, you know, we are aware that the
California clean fuel is a good product, but we just believe it
is better with MTBE in it, and it does help reduce the key
toxic emissions that we have been talking about.
Mr. Bilbray. My point was you were talking about the
criteria to make sure there was no net degradation of the
public health. That was a determination that is included right
in the bill that the EPA needs to make a--would have to make
that determination which they already have. The question I--
that is where I am wondering where we are going with this. I
understand your concern about an abolition and a substance
specific. Again, this is why this bill isn't substance-specific
because I have seen, through practical application and air
pollution strategies, that flexibility has been the success of
the Clean Air Act traditionally. It is most successful--can we
all agree it is the most successful environmental strategy in
the history of the world? It also gives the most local
flexibility of any environmental strategy there has been.
California's air right now is twice as clean right as it
was in the sixties. The question is, why not build on the
flexibility successes of the Clean Air Act? In other words, be
outcome-based like the rest of the act is.
Mr. King. The Federal RFG program provides benefits greater
than the California cleaner burning gasoline. What we are
saying is you necessarily would have a slight backslide, I
think--you are still meeting the standards with California
cleaner burning gasoline without oxygenates, but with the
oxygenates I have talked about in my comments that we have
exceeded far beyond what the expectations were. So if you go to
that standard nationally, you are going to have backsliding
from where we are currently today.
Mr. Bilbray. I just wish to point out the previous
testimony of the director of the California EPA that in the
parts of California that are not under the Federal mandate at
this time, the fuel burned there is superior to the Federal
fuel and there has not been a backsliding in those areas.
Mr. King. That is right. And here is why, I think. Because
in those areas, there is 1.6 percent, on average, by weight of
MTBE used as opposed to the 2 percent, by weight, in the
oxygenate mandate areas. So MTBE is still being used in that
gasoline.
Mr. Bilbray. But the point is, it isn't dependent on a
Federal mandate. It is based on the outcome of how important
the clean fuel is. I appreciate that. I just appreciate how far
you guys come in addressing this issue. And I appreciate it.
I would like to thank the panel. I think that we have had a
rather open discussion. Let me just say this to the gentlemen
that are testifying today. Each of you are representing your
portion of the American community one way or the other. You
have got people that want the water to be able to be consumed
so it can be sold. You have got those who want the renewables
to be able to have expanding markets as much as humanly
possible. You have those who want to be able to provide a cost-
effective product that is safe to the consumer. You have those
who have a product that has shown air pollution benefits in the
past. And you have got those who basically want to be able to
have the flexibility to produce the cheapest, safest, and the
most effective fuel available.
I know we can all disagree on certain issues. We come from
different approaches. The challenge for Congress is to make
sure that we represent no one group sitting before us but we
represent the general good of the American people. And with
your testimony, we hopefully will see that happen.
Mr. Robinson?
Mr. Robinson. Can I just clarify our support for your
legislation, whatever the number is?
Mr. Bilbray. Thank you very much. This meeting stands
adjourned.
[Whereupon, at 1:35 p.m., the subcommittee was adjourned.]
[Letters in support of H.R. 11 were received from: Board of
Supervisors, County of Los Angeles, dated December 16, 1998;
City of Sebastopol, dated December 17, 1998; Town of Windsor,
dated December 3, 1998; Water Advisory Committee of Orange
County, letter dated October 2, 1998; Orange County
Transportation Authority, letter dated July 27, 1998;
Metropolitan Water District of Southern California, letter
dated October 5, 1998; and the Lake County Board of
Supervisors, letter dated January 9, 1998.]
[Additional material submitted for the record follows:]
Prepared Statement of Hon. Mike Johanns, Governor of Nebraska, on
Behalf of the Governors' Ethanol Coalition
I am very pleased to submit this statement on behalf of the State
of Nebraska and on behalf of the 22 members of the Governors' Ethanol
Coalition regarding H.R. 11. This legislation, introduced by
Representative Brian Bilbray to redress the MTBE water contamination
crisis in California, amends the Clean Air Act to eliminate the overlap
between California's cleaner burning gasoline program and the federal
reformulated gasoline program by allowing California state regulations
to prevail.
First of all, as a governor, let me say that I empathize with
Representative Bilbray, Senator Feinstein, Governor Davis, and others
who, as elected officials like myself, have a responsibility to protect
the quality of life of their constituents and as such must provide
viable solutions to the current water quality situation in California.
However, in light of recent actions by Governor Davis, I do not believe
H.R. 11 is any longer necessary, nor do I believe it would it address
the problems posed by MTBE.
Last month, acting on the Health and Environmental Assessment of
MTBE prepared by the University of California-Davis, Governor Davis
issued an Executive Order that phases out the use of MTBE in the state
by the end of 2002. As a result, MTBE's days are numbered in
California. Governor Davis's action preempts the need for federal
legislation, as Representative Bilbray's goal to reduce MTBE use in the
state is already being implemented.
The problem in California is MTBE in the water, not oxygen in
gasoline. Allowing the California Cleaner Burning Gasoline program,
which does not have an oxygen content requirement, to supercede the
federal reformulated gasoline program in California will forfeit the
public policy benefits of the oxygen standard.
When the federal reformulated gasoline program was established in
1990 as part of the Clean Air Act Amendments, an important component
was the inclusion of a year-round oxygen content requirement. There are
two commonly used oxygenates today: ethanol, derived from agricultural
feedstocks and biomass, and MTBE, a petroleum or natural gas-derived
chemical. The oxygen standard was designed to enhance air quality and
provide dramatic economic benefits to agricultural America while
reducing our dependence on foreign energy supplies.
In parts of the country where ethanol has been the oxygenate of
choice, there is tremendous support for the oxygen standard and it is
hailed as an unqualified success. The Chicago metropolitan area,
Minnesota, Wisconsin, Oregon, and numerous other states have relied on
ethanol as an additive to satisfy the requirements of the Clean Air
Act. And, wherever acute health effects concerns regarding MTBE have
been raised, from Alaska to Maine, the use of ethanol has preserved
important pollution reduction programs. Everywhere ethanol is used, it
allows compliance with the Clean Air Act without the problems of water
pollution or negative health effects. In fact, the American Lung
Association of Chicago recently released a report praising the ethanol
reformulated gasoline program, stating:
``[O]xygenates like ethanol help fuels burn more completely,
thereby reducing emissions of carbon monoxide, volatile organic
compounds, and toxic air emissions. Furthermore, oxygenates
displace benzene found in conventional gasoline, which reduces
emissions of this known carcinogen as well.''
In Iowa--where ethanol has been the oxygenate of choice for over 20
years--the legislature last week banned the sale of MTBE-blended
gasoline in the state. Although MTBE use in Iowa is relatively
insignificant, the U.S. Geological Survey did find MTBE in eight of 30
monitored Iowa water wells, two of which had MTBE concentrations high
enough to warrant a potential U.S. Environmental Protection Agency
health advisory. With the number of states experiencing MTBE-related
water quality problems growing at an alarming rate, Iowa lawmakers took
this precautionary measure to protect its citizens and the quality of
their water supplies. When blended with gasoline, oxygenates such as
ethanol can reduce emissions of carbon monoxide, fine particulates,
toxics, nitrogen oxides and exhaust hydrocarbons that contribute to
urban ozone. And because ethanol is a renewable fuel, it is the only
commercially available transportation fuel that helps reduce carbon
dioxide emissions, a greenhouse gas. These benefits will be forfeited
if the oxygen content requirement is eliminated.
Ethanol Supply
Some have suggested that the reformulated gasoline oxygen content
requirement must be eliminated because the ethanol industry cannot meet
demand currently satisfied by using MTBE. That is simply not true.
Current U.S. ethanol capacity is more than twice the amount needed to
fulfill California's demand. That capacity will quickly expand,
including new production from California biomass feedstocks, with
growing supply to replace MTBE. The California Energy Commission has
concluded that as an alternative to MTBE-blended fuels, ethanol blends
can be available at prices lower than non-oxygenated gasoline.
Economic Development
Speaking as the Governor of one of the nation's largest ethanol
producing states, I can personally attest to the value that a homegrown
ethanol industry brings to agricultural economies. Ethanol production
is one of the most effective economic engines we have to stimulate
increased domestic demand for grain, boost farm income, and create
jobs. During the economic downturn of the early 1980s that devastated
economies in agricultural states, Nebraska and similarly situated
states were advised to add value to their agricultural bounty by
developing new manufacturing and industrial uses for the surplus grain.
In Nebraska, we heeded that advice. Hundreds of millions of dollars
have been spent to develop the value-added ethanol industry in the
state. Nebraska's ethanol industry has grown so that today over 30
percent of the state's corn crop is processed in the state's ethanol
plants. Also, over 75 percent of the state's grain sorghum crop is used
in ethanol production. Studies have shown that corn and sorghum used
for ethanol production results in higher prices paid to farmers.
Without the ethanol industry, the grain surpluses and low commodity
prices we are experiencing today would be worse. Lastly, we have been
able to create new jobs--more than 4,000 in Nebraska--in small towns
where job creation is particularly difficult.
The agricultural community is suffering from low commodity prices,
falling export markets, decreasing land values and plunging domestic
feed use of grain. In fact, recent testimony before the House
Agriculture Committee by a Cargill executive confirmed recent US
Department of Agriculture findings: U.S. grain exports are dropping,
but the domestic market--new uses for grains by American manufacturers
and others--has grown by more than 50 percent since 1980.
In a recent speech to the Independent Bankers Association of
America, Federal Reserve Board Chairman Alan Greenspan noted that while
the U.S. economy as a whole continues to experience robust economic
growth, the agricultural sector has been adversely affected by severe
problems of many foreign economies, which have led both to reduced
demand from abroad and to increased competition from imports:
``Farmers, rather than sharing in the general prosperity, have
been experiencing disappointing exports and sharply falling
prices. Overall, the prices received by farmers in February
were about 5 percent below the level of a year earlier. In
recent weeks, corn prices have been running around $2 a bushel
in the Midwest, the lowest late-winter price for that crop in a
number of years.''
One significant bright spot in agriculture's otherwise dismal
outlook is the opportunity for increased domestic grain consumption
created by new demand for ethanol. Already, ethanol is the third
largest consumer of grain, behind only feed and export markets. The
industry uses a portion of the grain from more than 600 million bushels
to produce over 1.4 billion gallons of clean-burning, renewable
ethanol, adding $4.5 billion in farm revenue annually. The production
of ethanol has sparked new capital investment and economic development
in rural communities across America. Direct farmer ownership of ethanol
production facilities accounts for the majority of the recent expansion
within the industry. American farmers are realizing the positive impact
from this important value-added market for their crops. Today, a
substantial portion of U.S. ethanol production is accounted for by
farmer-owned cooperatives.
The current status of farm markets makes the availability of value-
added processing that much more important to our nation's farmers and
the agricultural economy. Clearly, California farmers could benefit
from expanded in-state ethanol production. Today there is modest
ethanol production in California, primarily from Parallel Products, a
company which produces the product from waste beverage products. As the
market for ethanol grows in California, new ethanol plants in the state
will be built to provide local supply. These plants can convert waste
products such as rice straw, forest residue and urban waste into
ethanol. This will help solve vexing waste issues and create jobs as
well. The rice industry has three plants currently planned in the
Sacramento valley to convert rice straw into ethanol. Ethanol is the
only real alternative foreseen by the rice industry to prevent field
burning which has been banned because of air pollution concerns.
Conclusion
While the oxygenate of choice for refiners in California has been
MTBE, demand for ethanol to replace MTBE in the state can result in
developing an in-state ethanol industry. Ethanol demand will be met by
a combination of an expanded California ethanol industry and supplies
from existing ethanol production facilities across the U.S.
The members of the Governors' Ethanol Coalition and I are committed
to working with Congressman Bilbray and this Committee to ensure the
best possible solution for California without abandoning the
significant air quality, energy security, and rural economic
development benefits of the oxygen content requirement in reformulated
gasoline. No citizen should have to choose between clean air and clean
water. With ethanol, that choice does not have to be made.
______
Bluewater Network's Legislative Recommendation for methyl tertiary-
butyl ether
executive summary
The gasoline additive methyl tertiary-butyl ether (MTBE), listed as
``a possible human carcinogen'' by EPA, is being found in ground and
surface water resources throughout the United States. Drinking water
shortages, boating restrictions, litigation and remediation costs, and
increased human exposure to toxins are unavoidable consequences of
using MTBE. Bluewater Network contends that in order to avoid massive
water contamination throughout the U.S., MTBE must be expeditiously
phased out nationwide. Other ether-based additives should be banned
until they are adequately studied. A realistic phaseout can be
accomplished in 2-4 years.
The use of non-oxygenated ethanol-blended gasoline as a replacement
for MTBE does not result in increased air emissions (assuming
volatility and other existing regulations are left intact). Urban areas
within Reformulated Gasoline Program areas which are required to use
oxygenates, will shift to ethanol until acceptable alternatives are
available. In some areas, a volatility waiver may be appropriate to
better accommodate the use of ethanol provided that overall air quality
is maintained as a result of the waiver. Ethanol's positive effect on
carbon monoxide emissions, as well as high emitters, should be
accurately weighted in the analysis.
A temporary 2-4 year moratorium from the oxygen standard of the
Clean Air Act will have two primary benefits: (1) accelerating the
phase-out of MTBE by allowing non-oxygenated fuels to displace MTBE-
blends in previously, oxygenated areas; (2) providing a grace period to
review the effectiveness of ethanol, the oxygen standard and progress
towards the use of non-petroleum fuel. Until those question's are
answered, Bluewater Network strongly recommends that the general
requirements of the CAA are permanently protected.
Section 1: Bluewater Network supports state and federal bills calling
for a ban or phase out of ether-based oxygenates, including
MTBE.
MTBE and other ether-based oxygenates (e.g. ETBE) are suspected
carcinogens. Although all gasoline compounds are a threat to ground and
surface water resources, ether additives have the following unique
characteristics:
<bullet> High water solubility (e.g. sub-surface contamination);
<bullet> High mobility in soil and water (e.g. larger and deeper
plumes);
<bullet> High persistence in the environment (e.g. accumulates in
boating season)
<bullet> Resistance to biodegradation (i.e. slower than other gas
compounds);
<bullet> Resistance to traditional water treatment (e.g. intake/tap
levels similar);
<bullet> Noxious odor and taste at extremely low concentrations (e.g. 2
ppb);
<bullet> High remediation costs (e.g. air stripping not effective).
Extensive investigation into the hazards of MTBE demonstrates that
continued use of MTBE or other ethers will further jeopardize U.S.
water supplies, undercut the public's right to clean drinking water,
shoulder water and regulatory agencies with unprecedented liabilities
and cost burdens, and seriously threaten public health. Although MTBE
proponents argue that aggressive replacement of leaking underground
storage tanks (USTs) and two-stroke marine engines will mitigate the
MTBE problem, the most advanced USTs available have proven ineffective
at preventing leaks large enough to contaminate groundwater with
dangerous levels of MTBE, and two-stroke marine engines will remain in
use for at least twenty years. Two-stroke engines currently emit an
estimated 8 million pounds of MTBE into U.S. waterways every year.
Containment of MTBE or other ethers is not a viable option.\1\
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\1\ The current California Department of Health Services
``aesthetic'' standard is 5 parts per billion (ppb) for MTBE in
drinking water. In April, 1999, a pinhole sized leak in the ``vapor
recovery line'' of a new, fully compliant underground storage tank in
South Lake Tahoe, CA caused MTBE groundwater contamination at levels of
100,000 ppb. In terms of two-stroke engines, a 5 ppb standard.is the
equivalent of a 12-ounce soda can of MTBE in 13 million gallons of
drinking water (the water consumed daily by about 90,000 people). The
California public health standard is roughly three times that amount. A
single jet ski releases enough MTBE to exceed the ``aesthetic''
standard in less than I hour, and enough MTBE to exceed the public
health standard in less than 2 hours.
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Section 2: Bluewater Network supports state and federal bills designed
to provide increased protections from MTBE-related
contamination, and/or which accelerate the phase-out of MTBE
and other ethers with either of the following conditions:
1) any amendments to the Clean Air Act provide only a 2-4 year
temporary moratorium from the oxygen requirement, and other
components of the Act are not considered for amendment; or
2) the Clean Air Act is not amended.
Bluewater Network's top priority is protect water resources from
ether-based oxygenates. Bluewater supports aggressive legislation which
seeks to improve the underground storage tank system, protect drinking
water reservoirs from two-stroke engine pollution, safeguard vulnerable
and at-risk areas, and provide more extensive liability and clean-up
programs and funds. We agree with California Governor Gray Davis'
assessment that MTBE poses a significant risk to public health and the
environment, especially his emphasis on the need for continued action
at the legislative level.
Consistent with extensive research indicating that MTBE is not a
unique and indispensable component of the Reformulated Gasoline
Program, or the only viable oxygenate for ``non-attainment'' urban
zones or RFG-designated areas, Bluewater Network does not believe that
banning one category of oxygenates necessitates permanently lifting the
oxygen standard in the Clean Air Act.
Although temporarily lifting the oxygen mandate may accelerate a
shift away from ether-based additives in areas where a phase-out is
required, permanent changes to the Act may have the following
consequences:
<bullet> opening the Act may lead to damaging amendments;
<bullet> loss of current and potential fuel diversity through an
immediate return to 100% hydrocarbon-based fuel;
<bullet> continued use of MTBE and other ethers which provide octane
and regulatory benefits to refiners; and as a result, continued
ground and surface water MTBE contamination;
<bullet> an increase in carbon monoxide (CO) emissions;
<bullet> an increase in ground level ozone;
<bullet> an increase in primary particulate matter (PM<INF>2.5</INF>)
emissions;
<bullet> loss of a dilution effect of other toxic gasoline compounds
such as benzene, toluene, xylene and aromatics inherent with
the use of oxygenates;
<bullet> a potential increase in the use of other toxic gasoline
compounds to replace octane, such as toluene;\2\
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\2\ Because regulations are more stringent in California than in
other states, refiners would utilize different means to produce
compliant gasoline and octane needs depending upon the regulations in
effect. In California, refiners may alter aromatics and paraffins to
boost octane, while in New England refiners may use toluene.
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<bullet> loss of progress towards renewable or alternative fuels,\3\
including ethanol, which offer the current or potential for
less dependence on imported oil, a non-petroleum fuel source
with the potential to be produced from agricultural and
commercial waste, and a reduction in climate change greenhouse
gases. Promoting alternative fuels was one of the primary goals
of the Clean Air Act.
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\3\ In the short term, experts believe that refiners would continue
to utilize ethanol to comply with gasoline regulations and octane
needs; however, refiners would quickly begin moving away from ethanol--
or other alternative or renewable products produced by outside
vendors--towards their own oil-based sources.
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Relevance to current bills
S 645, as currently drafted, would allow the U.S. EPA to waive the
2% reformulated gasoline oxygenate requirement of the Clean Air Act in
any state where use of gasoline with less than 2% oxygen, including
non-oxygenated fuel, does not result in greater emissions. As
discussed, although the bill may help California to accelerate the
shift away from ether-based additives such as MTBE, it will not help to
reduce MTBE use throughout the United States. In fact, it may actually
perpetuate the status quo use of MTBE and other ethers, since such
additives have similar costs to ethanol while continuing to provide
competitive, regulatory and octane benefits to refiners. For that
reason, Bluewater Network has requested that Senator Feinstein sponsor
a companion bill to phase-out the use of added ethers such as MTBE over
a two to four year period.
S 266, as currently drafted, would allow California to apply its
own clean or reformulated gasoline rules [over those stipulated by the
Clean Air Act] as long as emissions reductions are equivalent or
greater. As discussed, although this may be a viable and immediate
short-term solution to curb MTBE use, in the long term California may
be inhibiting its growth towards fuel diversity, the use of a
renewables, and a reduction in climate change greenhouse gases.
Therefore, if Senator Feinstein proceeds with S 645 and S 266, we
urge her to take either of the following two steps to preserve those
benefits:
1. Amend the bills to incorporate a renewable content
requirement for all fuels. This could start at modest levels
and increase each year until achieving maximum practical,
sustainable (or politically acceptable) levels. It would also
provide an excellent mechanism in the future should the
Congress choose to try to further reduce US carbon emissions
through a fuels program.
2. Amend the bill to create a 2-4 year temporary moratorium
from the oxygenate requirement, in order to accelerate the
shift away from MTBE and other ether-based additives. The Clean
Air Act would remain intact and the oxygenate requirement would
be reinstated after the moratorium.
Governor Davis' support of Feinstein's oxygenate bills is
consistent with his hope to provide an impetus for refiners to shift,
as quickly as possible, to less dangerous fuel blends in California.
Bluewater Network supports the Governor and Senator Feinstein in their
pursuit of an accelerated phase-out so long as the exemption from the
Clean Air Act is exclusive and temporary, and tied to a ban on the use
of ether-based additives.
HR 1367, as currently drafted, would ban the use of MTBE nationwide
within the next three years. Congressman Bob Franks (R-NJ) has proposed
the only bill that will effectively end the threat of MTBE
contamination. However, to prevent refiners from switching to other
equally dangerous additives to replace MTBE, we have requested that the
bill include language banning other ether based additives until they
are adequately studied.
Ouestions concerning an expected increase in the use of ethanol
Production--There has been concern in California that a shift to
ethanol as the primary oxygenate could not be accommodated by the
ethanol industry. However, according to a recent study,\4\ the current
capacity for ethanol production is more than double the amount needed
to meet California's demand if MTBE use is eliminated. According to the
report, this ethanol supply could be made available to the state almost
immediately.
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\4\ ``The Use of Ethanol in California Clean Burning Gasoline:
Ethanol Supply/Demand and Logistics,'' study requested by the Renewable
Fuels Association in anticipation of CA Governor Davis' decision to ban
MTBE, conducted by Downstream Alternatives, Inc., January/February,
1999.
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Nationally, actual production of ethanol in 1998 was approximately
1.5 billion gallons. Production capacity is expected to exceed 1.8
billion gallons in 1999. By comparison, current production of MTBE is
approximately 3.5 billion gallons. According to ethanol producers,
expanding ethanol use to meet demand is feasible based on 1) the
diversity of potential sources of ethanol (e.g. corn, feedstock,
agricultural waste, rice, etc.); 2) the potential for growth in the
agricultural community; 3) the relatively short time period required
for new facility construction (6 months). Furthermore, ethanol contains
more oxygen than MTBE. Attainment of the 2% oxygen mandate requires
only 7% ethanol by volume versus 11% MTBE. Therefore, compliance with
the Act demands less supply of ethanol. Demand for ethanol may also
stimulate the production of new ethanol facilities, including waste and
cellulosic material conversion plants, especially in states where it is
used. Some believe that California alone has the potential to produce 2
billion gallons of ethanol within a few years.\5\
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\5\ Personal contact with ethanol industry business representative,
April, 1999.
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In addition, the California Energy Commission found that
``potential suppliers appear to have the production capacity and raw
materials necessary to produce sufficient volumes of ethanol . . .
under any of the various cases [of an MTBE phase-out].''
Cost to refiners and consumers--According to the California Energy
Commission, ``if the scope of replacing MTBE were to be broadened to
include the elimination of all oxygenates from gasoline, the cost
impact for consumers would be the greatest, regardless of the length of
time allowed for the transition.'' The study confirms that ethanol-
blended fuels are actually cheaper than non-oxygenated fuels both in
the short and long term.
UC-Davis concluded that MTBE RFG was the least cost-effective
gasoline using a multi-media analysis. The study confirms that both
ethanol and non-oxy blends are more cost effective than MTBE, but of
these two alternatives to MTBE, non-oxygenated would have the highest
net cost to consumers. This is based on the anticipated cost of
replacing oxygenates, which constitute 11-15% of gasoline supplies by
volume, with imported oilbased alternatives.
There is also a strong argument to be made that fuel source-
diversity will benefit consumers by reducing price fluctuations in the
petroleum sector. This is another reason why the oil industry opposes
the oxygenate mandate (i.e. it lessens their control over the market).
In sum, the cost to consumers is expected to be higher by
converting to non-oxygenated RFG than ethanol RFG, with actual cost to
refiners roughly equivalent between ethanol, MTBE and non-oxygenated
fuel blends. However, the economic and environmental costs of MTBE are
significantly higher if other factors are included such as water
cleanup costs, greenhouse emissions, waste reduction and economic
development.
Air Emissions--The use of ethanol in reformulated gasoline does not
result in an increase in air pollution if no other gasoline regulations
are adjusted. As confirmed by the California Energy Commission study,
under the current Air Resources Board Predictive Model \6\ ethanol has
comparable emissions benefits to other oxygenates including MTBE, as
long as the current 7.0 pound maximum volatility requirement is
maintained. Tosco's current ethanol blend, distributed in California,
confirms the conclusions of the Energy Commission study.
---------------------------------------------------------------------------
\6\ This excludes ethanol's additional benefits in reducing carbon
monoxide emissions. Ethanol proponents criticize the current model
because it fails to include the impact of carbon monoxide in general,
especially on ozone production. Recent photochemical air-quality
monitoring reveals that carbon monoxide is a significant and perhaps
growing contributor to urban ozone formation relative to VOCs. Ethanol
reduce's carbon monoxide emissions by roughly 10% more than MTBE or
other ethers.
---------------------------------------------------------------------------
Some experts believe that the feasibility of ethanol hinges on an
increased one pound volatility (RVP) allowance, from 7.0 to 8.0 pounds.
Under this waiver, refiners would not have to produce a base gasoline
of lower volatility (roughly 6.0), at presumably higher cost, to
accommodate the more volatile ethanol and remain under the current
volatility requirement (7.0).\7\ Current regulations could allow
refiners to produce gasoline containing 10 percent ethanol with a one
pound volatility allowance, to 8.0 pounds, but CARB has not determined
what the air quality costs will be under this waiver.
---------------------------------------------------------------------------
\7\ Tosco and other refiners currently produce gasoline with
ethanol that complies with the 7.0 volatility requirement.
---------------------------------------------------------------------------
Some experts also believe that the air quality costs of a one pound
volatility waiver will be significant--an estimated 100 tons per day HC
increase in the State of California. This prediction is simple: it
presumes a reversal of the estimated emissions benefits of reducing the
volatility requirement from 8.0 to 7.0 a few years ago. According to
the Energy Commission, the preliminary results of a vehicle test study
performed by CARB show that gasoline blends of 10 percent ethanol and a
maximum volatility of 8.0 appear to confirm a suspected increase in HC
emissions.
However, the overall air quality costs of ethanol remain unclear.
Although a volatility waiver (if necessary) may increase HC emissions
by 100 tons per day, ethanol use reduces carbon monoxide emissions by
an additional 10% (in comparison. to MTBE). CO is critical because (a)
it is treated separately by CARB's emissions analysis; (b) its role as
an ozone precursor may be underestimated by CARB, and its emissions
models. Ethanol proponents claim that emissions increases from
volatility can be justified if CO emissions benefits were accurately
weighted by CARB. Conversely, MTBE's emissions benefits are actually
accommodated by CARB. The Agency acknowledges that they lowered the
volatility requirement to 7.0 largely because MTBE RFG is highly
accommodative of a 7.0 volatility requirement. In other words, some
fuel-blend specifications set by the cleaner burning gasoline (CBG)
program are designed around a model expectant of MTBE use.
In terms of CO emissions, one of the known benefits of requiring
oxygenates during the discussions leading up to the Clean Air Act's
oxygen mandate was that oxygen-content provided CO reductions and
enhanced ozone reductions for the RFG program without the complications
of trying to impose hydrocarbon-based control strategies to combat the
ozone-forming potential of CO. Ethanol use will further reduce the
formation of ground-level ozone from CO, as well CO concentrations in
general. Concerns regarding a possible 100 ton/day increase in HC
emissions may overlook the possibly crucial 800 ton/day decrease in CO
emissions.\8\
---------------------------------------------------------------------------
\8\ Based on CARB's inventory of 8327 tons/day CO emissions in CA
from mobile sources in 1997, and the new CARB study which concludes
that ethanol reduces CO by 10% more than MTBE.
---------------------------------------------------------------------------
Inclusion of CO emissions in an ethanol-related air quality
analysis may be even more important if a recent Urban Airshed Model
(UAM) accurately reveals that exhaust hydrocarbon emissions from
gasoline vehicles produce about as much ozone as exhaust carbon
monoxide emissions.\9\ Under these conditions, a 10% reduction in
carbon monoxide emissions may be as important to ozone reduction as a
10% hydrocarbon emissions reduction. In terms of ethanol, and
irrespective of the benefits of reducing CO exclusively, a 10% CO
reduction would reduce ground level ozone levels by enough to
counteract the ozone effects of a 100 tons per day increase in HC
emissions.\10\
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\9\ Gary Whitten, ``Potential Extra Air Quality Benefits From
Oxygenates That Are Not Required to Meet Reformulated Gasoline
Specifications,'' report prepared for the 9th CRC On-Road Vehicle
Emissions Workshop, San Diego, CA, April 19-21, 1999.
\10\ Based on CARB's TOG emissions inventory of 1066 tons per day.
100 tons more is equivalent to roughly a 10% increase in HC, which
would be counteracted by a 10% reduction in CO based on the latest UAM
research.
---------------------------------------------------------------------------
Air quality effects should be considered for: (a) those compounds
which would replace oxygenates in non-oxy fuel; (b) older, high
emitting engines, which clearly benefit from oxygenates. Although
oxygenates have little effect on new model automobiles, they clearly
improve CO emissions among older vehicles, and slightly improve HC
emissions.
Experts also believe that non-oxy fuel will contain higher levels
of aromatics, paraffins and other toxins such as toluene. Increased use
of these gasoline constituents may produce higher levels of airborne
benzene, olefins, peroxyactyl nitrates (PAN), fine particulate matter
(PM), nitrogen oxides (NO<INF>X</INF>) and other harmful toxins.
______
Prepared Statement of Janet Hathaway, Senior Attorney, and Dave
Hawkins, Senior Attorney on Behalf of the Natural Resources Defense
Council (NRDC)
a. mtbe contamination: america's challenge to better protect air and
water
Detection of MTBE in water provides us with convincing evidence
that our methods of storing, transporting and using gasoline and other
petroleum fuels must be substantially improved. MTBE and other gasoline
constituents have been detected in California in surface and ground
water as well as in other states. These findings make obvious what we
should have known: gasoline endangers our water, and improper storage
of gasoline will result in soil contamination that can then endanger
ground water.
States also jeopardize water supplies when, as in California, they
allow highly-polluting, very inefficient recreational vehicles on
reservoirs--and where this happens, one finds not only MTBE but
benzene, a known human carcinogen, and other gasoline toxics including
toluene, xylene and ethylbenzene. Throughout the country, fuel storage
tanks have been located in porous soil over shallow groundwater, and
over the years many of these tanks leaked fuel. In such places, MTBE as
well as a long list of gasoline constituents will be found, both in
soil and in groundwater.
MTBE is not the only dangerous substance in gasoline, but it has
perhaps become the most notorious. Gasoline is a cocktail of known and
suspected carcinogens, neurotoxins, and reproductive toxicants. Studies
of workers exposed to gasoline suggest higher rates of leukemia, kidney
cancers and other cancers may be associated with exposures to gasoline
or its constituents.<SUP>1</SUP> While today's science does not suggest
that MTBE is among the most dangerous substances in gasoline, the fact
that sensitive people detect a foul taste at concentrations of MTBE as
low as a few parts per billion makes it impossible to ignore. Perhaps
there is a silver lining in our inability to ignore this problem. We
should ignore neither MTBE contamination nor any other of the pervasive
gasoline spills and leaks endangering our environment.
---------------------------------------------------------------------------
\1\ ``Potential Health Effects of Gasoline and Its Constituents: A
Review of Current Literature (1990-1997) on Toxicological Data''.
Environ. Health Perspect. 1998 Mar; 106(3):115-125; McKee RH, Plutnick
RT Exxon Biomedical Sciences, Inc., East Millstone, New Jersey 08875-
2350, ``Carcinogenic potential of gasoline and diesel engine oils,''
Fundam. Appl. Toxicol.1989 Oct;13(3):545-553; Raaschou-Nielsen O, Lohse
C, Thomsen BL, Skov H, Olsen JH Division for Cancer Epidemiology,
Danish Cancer Society, Copenhagen, Denmark. ole@cancer.dk, ``Ambient
air levels and the exposure of children to benzene, toluene, and
xylenes in Denmark,'' Environ Res, 1997 Nov; 75(2):149-159; Infante PF
Health Standards Program, Occupational Safety and Health
Administration, Washington, DC 20210, ``State of the science on the
carcinogenicity of gasoline with particular reference to cohort
mortality study results,'' Environ Health Perspect 1993 Dec;101 Suppl
6:105-109; Hadnagy W, Seemayer NH Medizinisches Institut fur
Umwelthygiene, Universitat Dusseldorf, FRG.; ``Genotoxicity of
particulate emissions from gasoline-powered engines evaluated by short-
term bioassays.'' Exp Pathol 1989;37(1-4):43-50; Environ Health
Perspect 1985 Oct;62:303-312 ``Epidemiologic evidence for an
association between gasoline and kidney cancer.'' Enterline PE, Viren
J; Lynge E, Andersen A, Nilsson R, Barlow L, Pukkala E, Nordlinder R,
Boffetta P, Grandjean P, Heikkila P, Horte LG, Jakobsson R, Lundberg I,
Moen B, Partanen T, Riise T Danish Cancer Society, Copenhagen,
Denmark., ``Risk of cancer and exposure to gasoline vapors,'' Am J
Epidemiol 1997 Mar 1;145(5):449-458; Hotz P, Lauwerys RR Unit of
Industrial Toxicology and Occupational Medicine, Catholic University of
Louvain, Brussels, Belgium, ``Hematopoietic and lymphatic malignancies
in vehicle mechanics,'' Crit Rev Toxicol 1997 Sep;27(5):443-494;
Enterline PE Graduate School of Public Health, University of
Pittsburgh, PA 15261, ``Review of new evidence regarding the
relationship of gasoline exposure to kidney cancer and leukemia.'';
Environ Health Perspect 1993 Dec;101 Suppl 6:101-103; Caprino L, Togna
GI, Institute of Medical Pharmacology, University of Rome ``La
Sapienza,'' Rome, Italy, Potential Health Effects of Gasoline and Its
Constituents: A Review of Current Literature (1990-1997) on
Toxicological Data; Guldberg PH Tech Environmental, Inc., Waltham, MA
02154. ``Gasoline and vapor exposures in service station and leaking
underground storage tank scenarios.'', J Expo Anal Environ Epidemiol
1992 Jan;2(1):97-107.
---------------------------------------------------------------------------
If the nation responds to the evidence of gasoline contamination
merely by banning MTBE, the larger environmental problem represented by
thousands of leaking tanks and recurrent gasoline spills will remain.
Will we simply repeat today's scenario a few years hence with a
different chemical ``culprit''--another ether or another gasoline
constituent? That would be most unfortunate. Instead, let us use what
we've learned about the dangers gasoline contamination poses to the
environment to better protect air, water and soil.
The challenge is to preserve the air quality benefits that have
resulted from reformulated gasoline (RFG)--which will increase with
Phase II of the federal RFG program beginning in December of this
year--while taking action to improve protection of our reservoirs,
ground water and surface water.
Various bills have been introduced in this and the previous
Congress to address concerns about contamination of groundwater. NRDC
supports giving states flexibility to limit or even eliminate their
oxygenate use so long as the states preserve the air quality benefits
of reformulated gasoline (RFG). Different legislative approaches could
achieve that end.
One approach would simply eliminate the minimum oxygen content
requirement currently in the Clean Air Act. NRDC would support such
legislation if it includes an express requirement to preserve all
existing and anticipated RFG air quality benefits. We understand that
Senator Chafee is proposing legislation which has that objective. The
Clean Air Act and regulatory performance standards mandating reductions
of air toxics and ozone precursors, however, would remain in place.
With some needed drafting changes to clarify the critical requirement
to preserve all current and anticipated RFG benefits, the Chafee bill
would be a positive step.
Another approach is embodied in legislation before this committee.
H.R. 11 (introduced by Mr. Bilbray of California, with a companion
Senate bill introduced by Senator Feinstein) allows any state which
adopts especially stringent vehicle standards because of serious air
pollution and which EPA determines to have a reformulated fuels program
at least as effective as the federal program (``achieving equivalent or
greater emissions reductions'') to apply state fuel standards instead
of the federal program specifications. This approach would effectively
eliminate the specification of oxygen content but would require
equivalent reductions of toxic emissions and ozone precursors. This
approach also is meritorious in providing flexibility to states to
ensure air quality protection without requiring a specified percentage
of oxygenates in fuels.
Both of these approaches are good first steps toward improving
fuels in ways that better protect our water supplies.
But it is important that such bills be accompanied by two
additional initiatives: concerted efforts to identify funds for
remedial action at sites contaminated by fuel leaks and spills; and a
revamping of programs to minimize future leaks from tanks and reservoir
contamination. If we have learned from the legacy of gasoline spills
and leaks, we will establish a coordinated program of better fuel
storage regulation, clear liability for those owning or operating
leaking tanks or pipelines, better enforcement against those
responsible for fuel spills and leaking tanks, and better financial
resources to address abandoned sites.
Elimination of the minimum oxygen requirement for reformulated
gasoline unquestionably moves fuel policy in the proper direction.
While this alone will not eliminate spills and leaks of fuels and
oxygenates, it is a necessary prerequisite to state, regional, and
national action to reduce oxygenates in gasoline and to reduce threats
to water.
b. congressional action should not reduce air quality benefits of
reformulated gasoline.
1. Air Quality Benefits of RFG and RFG Phase II Should be Preserved.
Absolutely fundamental to NRDC is the preservation of air quality
benefits achieved through reformulated fuels. These benefits cannot be
allowed to decline in any manner. If the mandate for 2% by weight
oxygen in gasoline is eliminated, fuels are still required to meet the
performance standards for RFG established by EPA in 1994.<SUP>2</SUP>
This does ensure that certain fuel parameters specified in the Clean
Air Act will not be violated, but these specifications do not provide
sufficient detail to ensure all air quality benefits will be retained.
Without further regulatory action, reductions in oxygenates could cause
some regions to experience increases of olefins in gasoline, which in
turn would increase atmospheric levels of 1,3-butadiene, a potent
carcinogen. EPA should commence rule-making to ensure that the nation's
fuels will reduce aromatics, toxics, and volatile organics, as required
by the Clean Air Act, without increases in nitrogen oxides, and without
increases of other toxics in the new fuel. EPA must also ensure that
areas with conventional (i.e., non-reformulated) gasoline will not
suffer a decline in fuel quality and increasing air pollution as
refiners shift cleaner fuel to the RFG areas.
---------------------------------------------------------------------------
\2\ Environmental Protection Agency, ``Regulation of Fuels and Fuel
Additives: Standards for Reformulated and Conventional Gasoline,''
Federal Register, February 16, 1994.
---------------------------------------------------------------------------
Some confusing news reports have suggested that oxygenates have no
air quality benefits. This is not true. While air quality has improved
from the use of oxygenates, these benefits need not be forfeited from
future formulations using lower concentrations of oxygenates or even no
oygenates at all. However, this does not mean that making a transition
to low- or no-oxygenate fuel can be immediate or without cost.
A fair part of the confusion on this issue has resulted from a
report from University of California researchers stating that fuels
could provide equivalent benefits without using oxygenates.
The California legislature requested the University of California
to quantify the benefits attributable to MTBE from California's
reformulated, oxygenated fuel.<SUP>3</SUP> Unfortunately, this request
was not one that could directly be met. On the one hand, the UC did
estimate the benefit of reformulated gasoline and found it to be
substantial. Ca RFG with about 11% MTBE reduced emissions of ozone
precursors (volatile organic compounds and nitrogen oxides) from
gasoline vehicles by about 15 percent (300 tons per day), reduced CO
emissions by about 11 percent (1300 tons per day), and reduced sulfur
dioxide (SO ) emissions by about 80 percent (30 tons per
day).<SUP>4</SUP> Ca RFG with MTBE at about 11% reduces the use of
aromatics (such as benzene) in gasoline by about 25%.<SUP>5</SUP> These
are enormous benefits, essential for attainment of health-protective
air quality standards for ozone, CO and particulate matter. ARB
analysis of air monitoring data suggest that the Ca RFG program may
have reduced ozone levels in Southern California and Sacramento by 10
percent and 12 percent, respectively.<SUP>6</SUP>
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\3\ Keller et al., UC MTBE Report, Executive Summary and
Recommendations, Health and Environmental Assessment of MTBE, Report to
the Legislature of the State of California, November 12, 1998, p. 11.
UC MTBE Report Internet web site http:.www.tsrtp.ucdavis.edu/mtberpt.
\4\ California Environmental Protection Agency, MTBE (Methyl
tertiary butyl ether) Briefing Paper, updated September 3, 1998, p. 7-
8.
\5\ Oxygenated Fuels Association, ``A Critical Review of the
University of California's Report on the Health and Environmental
Assessment of MTBE,'' December 1998, p. 14.
\6\ California Air Resources Board, ``Cleaner-Burning Gasoline: An
Assessment of Its Impact on Ozone Air Quality in California,'' October
1997.
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But UC Berkeley report representatives noted they could not simply
compare CA RFG with MTBE and CA RFG without MTBE, and attribute
differences to MTBE.<SUP>7</SUP> The reason is that there is no way to
remove only the oxygenates from the fuel but still meet the state's
mandatory gasoline performance standards. In other words, oxygenates
are an integral part of the current formulation, and one cannot simply
remove oxygenates and still have a gasoline meeting the RFG standards.
However, according to oil company representatives from Tosco and
Chevron <SUP>8</SUP>, if oxygenates are reduced or removed and other
fuel parameters are changed in very precise ways, the resulting fuel
may meet the stringent California RFG standards,
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\7\ U.C. Berkeley presentation before the U.S. EPA Blue Ribbon
Panel on Oxygenates, Sacramento, CA, March 25, 1999.
\8\ Tosco and Chevron presentations before the U.S. EPA Blue Ribbon
Panel on Oxygenates, Sacramento, CA, March 26, 1999.
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Oxygenates have useful qualities that induced oil companies to use
them in fuels. They function in gasoline to provide octane enhancement,
allow dilution and reduction of aromatics (resulting in lower toxics
both from evaporation and combustion), and provide available oxygen to
reduce CO formation from engines. The ethers like MTBE and ETBE, unlike
ethanol, can be stored and transported with existing infrastructure and
do not increase vapor pressure. Nevertheless, the oxygenates definitely
pose environmental problems when they spill or leak, because they move
relatively rapidly through soil and the ethers resist degradation.
The UC Report attempted to answer the confusing question, ``What
air quality benefits come from using MTBE?'' by saying that though
there are substantial air quality benefits from CA reformulated
gasoline, these benefits are not uniquely attributable to MTBE.
Although reformulated gasoline with oxygenates provided real and
substantial benefits, and though MTBE is an integral part of much of
the current RFG, those benefits can be obtained through other fuel
formulations.
There is a danger that some people may mistakenly infer from the
finding that oxygenates are not ``essential'' the conclusion that
eliminating all oxygenates immediately and completely is without risk.
That inference is not warranted. Especially for federal reformulated
gasoline, with its higher aromatics, higher vapor pressure and much
higher sulfur levels, taking MTBE out without establishing careful
standards for the new fuel formulation could result in increased air
toxics and more smog.
2. The Clean Air Act Establishes Air Quality Performance Standards for
Reformulated Gasoline: Fuels Using Minimal Oxygenates Can
Reduce Threats of Water Contamination.
An Auto/Oil study of 1995 and subsequent oil industry
pronouncements confirm that refiners can provide large supplies of non-
oxygenated fuels. In late 1997, as debate about MTBE intensified, a
variety of oil industry representatives stated that they have
manufactured fuels with the air quality benefits of RFG and greatly
reduced levels of oxygenates.
Fortunately for the federal RFG program, the EPA's model already
evaluates the air quality benefits of different formulations of RFG
with specific consideration of the properties of different oxygenates
which may be used. Because that model is already a number of years old
and does not reflect the newest health and environmental studies, and
because that model did not take into account the volatility effects
that occur when different oxygenates are mixed (this ``commingling''
effect is especially significant when ethanol blends are mixed with
non-ethanol blends), US EPA needs to further improve its model to
ensure that changes in fuels, including modifying oxygenate amounts and
types, do not lead to any diminution in air quality. Furthermore, it
will be important for US EPA to ensure that conventional gasoline is
not adversely affected by refiners'' efforts to supply cleaner fuel to
RFG areas.
US EPA should evaluate the need for stringent parameters (``cap
limits'') for individual toxics in gasoline. If this is not done before
fuels are modified, the known human cancer-causing substances in
gasoline fumes or tailpipe emissions, such as benzene and 1,3-
butadiene, may well increase. The Clean Air Act wisely establishes
performance standards to be achieved by the fuel, including limits on
total toxics and aromatics. But EPA must make further careful
evaluations to ensure that overall risk is not increases, even while
total mass emissions of toxics may remain stable. EPA must also
consider potential trade-offs posed by different fuel formulations,
such as increasing potential risks through other exposure routes, such
skin absorption, as well as ensuring that the fuel meets RFG
performance criteria. This evaluation must include full consideration
of potential risks to water supplies and aquatic life from new fuel
formulations.
EPA can, and should, prevent increases of the concentrations of
toxics and known carcinogens by further restrictions on aromatics and
olefin content or by specific cap limits. Acetalydehyde and
formaldehyde, both carcinogens which are already present at risky
levels in urban air from gasoline combustion, must be carefully
limited. Hazards from fuel evaporation, combustion emissions, and the
chemical transformation of these substances in the atmosphere must all
be carefully considered to ensure no backsliding in environmental
progress.<SUP>9</SUP>
---------------------------------------------------------------------------
\9\ While MTBE increases atmospheric levels of formaldehyde,
ethanol and ethyl tertiary butyl ether (ETBE), tertiary amyl methyl
ether (TAME), significantly increase acetalydehyde.
---------------------------------------------------------------------------
c. other oxygenates should be studied for health and environmental
effects.
Federal law currently requires the use of oxygenates. Many have
suggested repealing this requirement, in order to reduce oxygenate use
throughout the country. This committee has legislation before it with
substantially the same effect.
The United States Environmental Protection Agency warned, ``It
should not be inferred that the only oxygenate warranting attention is
MTBE or, for that matter, that the issues identified here are
necessarily unique to oxyfuels.'' <SUP>10</SUP> With new scientific
data and practical experience, the U.S. EPA must carefully modify fuel
regulations to protect the environment and human health.
---------------------------------------------------------------------------
\10\ Office of Research and Development, United States
Environmental Protection Agency, Oxygenates in Water: Critical
Information and Research Needs, EPA/600/R-98/048, December 1998, p. 5.
---------------------------------------------------------------------------
As a policy matter, NRDC recommends resisting pleas that fuel
constituents be mandated or that recipes of the fuel be defined by law.
The risks of MTBE contamination should not be reduced in ways that
simply increase other less-studied risks. To avoid a repetition of fuel
contamination problems of recent years, full environmental and health
impacts of alternatives to MTBE should be evaluated before they are
used in gasoline.<SUP>11</SUP>
---------------------------------------------------------------------------
\11\ ``Selection of an alternative to MTBE should not occur without
adequate health effects and exposure assessment, and that is an
important consideration in evaluating the potential efficacy of ethanol
as an MTBE substitute.'' Froines, et al, ``An Evaluation of the
Scientific Peer-Reviewed Research and Literature on the Human Health
Effects of MTBE, its Metabolites, Combustion Products and Substitute
Compounds,'' Report to the Legislature of the State of California,
Volume II, Human Health Effects, November 1998, p. 179.
---------------------------------------------------------------------------
Even if the federal minimum requirement for oxygenates were
repealed, it is likely that some use of oxygenates, whether ethanol,
other alcohols <SUP>12</SUP> or ethers <SUP>13</SUP>, would persist.
The simple reason is that these substances boost octane in gasoline.
The phase-out of lead, a dangerous neurotoxin, has required refiners to
find alternatives for enhancing octane levels in gasoline.<SUP>14</SUP>
Without further environmental and health studies on the other
oxygenates, it is impossible to know if substitution alternative
oxygenates for MTBE will affect public health adversely.
---------------------------------------------------------------------------
\12\ Other alcohols which may be used as oxygenates include
methanol and tertiary butanol (TBA).
\13\ Other ethers which may be used as oxygenates include ethyl
tertiary butyl ether (ETBE), tertiary amyl methyl ether (TAME),
tertiary amyl ethyl ether (TAEE), diisopropul ether (DIPE) and dimethyl
ether (DME). Only the first two have been used in significant
quantities to date.
\14\ The choices for octane enhancement have been properly limited
by restrictions on toxic aromatics and neurotoxic metals such as lead
and manganese compounds (e.g., MMT).
---------------------------------------------------------------------------
1. Alternative Ethers May Not Reduce Groundwater Contamination.
Dr. John Froines and other University of California physicians and
health scientists warn against assuming that MTBE is the only oxygenate
posing environmental and health risks. ``Introduction of these
compounds [alternative ethers, including ETBE, TAME, and DIPE] as a
substitute for MTBE is not advisable at this point in time given the
paucity of data on their health effects.'' <SUP>15</SUP>
---------------------------------------------------------------------------
\15\ Froines, et al. Report to the Legislature of the State of
California, Volume II, Human Health Effects, November 1998, pp. 179-
180.
---------------------------------------------------------------------------
MTBE has been extensively studied for both acute and chronic
effects in animals and, to some extent, in humans. Some aquatic
toxicity studies have been conducted for the alternative ethers, but
essentially nothing is known about chronic health and environmental
impacts of alternative ethers, including ETBE and TAME.<SUP>16</SUP>
``The information on the health effects and toxicology of the other
substitutes, ETBE, TAME and DIPE is extremely limited.'' <SUP>17</SUP>
What is know is that none of these oxygenates are without risk. All of
the oxygenates can move swiftly through soil if spilled or leaked.
There is no reason to believe other ethers would reduce toxicity
relative to MTBE, and they, like MTBE, may make water unpalatable at
extremely low concentrations.
---------------------------------------------------------------------------
\16\ US EPA has required manufacturers to study the effects of
chronic exposure to ETBE and TAME. The results will not be available
for at least another year. See ORD, United States Environmental
Protection Agency, Oxygenates in Water: Critical Information and
Research Needs, EPA/600/R-98/048, December 1998, p. 24.
\17\ Froines, et al, ``An Evaluation of the Scientific Peer-
Reviewed Research and Literature on the Human Health Effects of MTBE,
its Metabolites, Combustion Products and Substitute Compounds,'' Report
to the Legislature of the State of California, Volume II, Human Health
Effects, November 1998, p. 179.
---------------------------------------------------------------------------
2. Ethanol Use May Increase Air Toxics and Pose Additional Health
Risks.
Ethanol is a familiar product, but it also poses health concerns.
The UC Report on Health Effects states, ``Use of ethanol would result
in increased atmospheric concentrations of acetaldehyde and
peroxyacetylnitrate (PAN). Acetaldehyde has been listed as a Toxic Air
Contaminant in California based on evidence of carcinogenicity and
while PAN has not been tested for carcinogenicity, it is genotoxic
[causes genetic damage] and produces respiratory and eye irritation and
may produce lung damage.'' <SUP>18</SUP> In a separate section these
scientists reiterate, ``The formation of formaldehyde, acetaldehyde and
PAN in the atmosphere [from ethanol use] are matters of considerable
concern and represent one of our highest recommendations for future
research.'' <SUP>19</SUP>
---------------------------------------------------------------------------
\18\ Froines et al, ``An Evaluation of the Scientific Peer-Reviewed
Research and Literature on the Human Health Effects of MTBE, its
Metabolites, Combustion Products and Substitute Compounds,'' Report to
the Legislature of the State of California, Volume II, Human Health
Effects, November 1998, p. xix.
\19\ Froines et al, 1998, p. 179.
---------------------------------------------------------------------------
Studies of high level exposures to ethanol (virtually all studies
of ingestion rather than inhalation) demonstrate that ethanol increases
a variety of adverse human health effects, ranging from developmental
toxicity, central nervous system dysfunction, teratogenicity (birth
defects), reproductive disorders and cancer <SUP>20</SUP>. Pregnant
women are generally advised to avoid ethanol exposure by avoiding
alcoholic beverages, because chronic ingestion is known to cause fetal
alcohol syndrome, a profound birth defect including major neurological
dysfunction. Some data suggest developmental toxicity even at low
doses.<SUP>21</SUP> Today pregnant women can effectively avoid ethanol
exposure. But if gasoline blends contain ethanol, pregnant women may
find it impossible to avoid ethanol exposure through air when they
refuel their vehicle. Today, no one knows if such exposures could be
harmful to the developing fetus.
---------------------------------------------------------------------------
\20\ Froines et al, ``An Evaluation of the Scientific Peer-Reviewed
Research and Literature on the Human Health Effects of MTBE, its
Metabolites, Combustion Products and Substitute Compounds,'' Report to
the Legislature of the State of California, Volume II, Human Health
Effects, November 1998, pp. 144-153, 179., Health Effects Institute.
The Potential Health Effects of Oxygenates Added to Gasoline, A Review
of the Current Literature. A Special Report of the Institute's
Oxygenates Evaluation Committee. April 1996.
\21\ Froines, op cit. p. 150-151.
---------------------------------------------------------------------------
Before expanding the use of ethanol in gasoline, policy makers and
the public should better understand the health impacts. Combustion
products of ethanol include both formaldehyde and acetalydehyde, both
known carcinogens. Likely sub-populations with special sensitivity to
ethanol exposure include pregnant women and people with a specific
genetic trait affecting their metabolism of ethanol.<SUP>22</SUP> This
genetic trait, a trait which a majority of Asian populations share,
experience much higher blood levels of acetaldehyde and an increased
potential for allergic reactions after ethanol exposure.<SUP>23</SUP>
Without further research, we are merely gambling that low-level, long-
term ethanol exposure will not increase health hazards.
---------------------------------------------------------------------------
\22\ Froines, op cit., p. 145-146.
\23\ Froines, op cit, p. 145-148.
---------------------------------------------------------------------------
d. leaking fuel tanks are major sources of mtbe contamination.
The experience in California is that the overwhelming source of
MTBE in groundwater is leaking fuel tanks, and the predominant source
of MTBE in surface water is recreational boating. But it is impossible
to say that these factors are important or even significant in all
regions of the country. Because every area has its own unique geology,
and California's soils may be more permeable to petroleum spills and
oxygenates than soils with greater organic content, the California
experience may be instructive only for areas with similar, permeable
soils and/or shallow groundwater supplies used for drinking water.
California has long had a huge number of underground storage tanks,
most of which store petroleum products. An inventory in the 1984
revealed over 100,000 underground tanks. The State estimates it has now
has over 50,000 operating underground storage tanks--about 6% of the
nation's total.<SUP>24</SUP>
---------------------------------------------------------------------------
\24\ Fogg et al, ``Impacts of MTBE on Groundwater,'' Health and
Environmental Assessment of MTBE, Report to the Legislature of the
State of California, Volume IV: Ground & Surface Water, November 1998,
p. 14.
---------------------------------------------------------------------------
California began efforts to regulate underground tanks in the early
1980s to protect the state's groundwater from solvents and fuels. Since
then regulations have required tank owners to obtain permits, test
tanks for leaks, and upgrade tanks with new containment and monitoring
technology. In 1989 California also established a fund to help
underground storage tank owners address leaking tanks <SUP>25</SUP> by
imposing a mill fee on each gallon of petroleum tank owners put in to
underground storage.<SUP>26</SUP> The fee has been increased by
subsequent legislation, but in light of the new demands on the fund for
more costly clean-ups, further increases may be necessary.
---------------------------------------------------------------------------
\25\ Underground Storage Tank Cleanup Trust Fund Act, SB 299,
Keene, 1989.
\26\ Wiley, Kip, Senate Office of Research, California Legislature,
``Clean Air vs. Clean Water Does California Need MTBE?,'' February
1998.
---------------------------------------------------------------------------
As of June 1998, at least 32,779 sites in California were
identified as leaking chemical compounds.<SUP>27</SUP> Ninety percent
(90%)--more than twenty-nine thousand leaking California tanks--held
petroleum products. In December of 1998 more stringent federal
underground storage tanks requirements took effect, which required old
and deteriorated tanks to be replaced. The State believes most of the
worst leaking tanks were taken out of service. Nevertheless, of the
thousands of corroded tanks which contaminated soil nearby, only a
small percentage were actively treated to remove contaminants. In most
sites involving petroleum products, the chosen remedy was ``natural
attenuation''--essentially waiting for soil microorganisms to
biodegrade the harmful compounds.<SUP>28</SUP>
---------------------------------------------------------------------------
\27\ Fogg, et al, ``Impacts of MTBE on Groundwater,'' Health and
Environmental Assessment of MTBE, Report to the Legislature of the
State of California, Volume IV: Ground & Surface Water, November 1998,
p. 6.
\28\ Fogg, et al, ``Impacts of MTBE on Groundwater,'' Health and
Environmental Assessment of MTBE, Report to the Legislature of the
State of California, Volume IV: Ground & Surface Water, November 1998,
p. 57.
---------------------------------------------------------------------------
As of 1998, 3,486 groundwater sites have been identified with MTBE
contamination.<SUP>29</SUP> Not surprisingly, ``MTBE impacts to
drinking water wells were similar to benzene impacts given current
regulatory action levels.'' <SUP>30</SUP> Fortunately, a small
percentage of these sites involve high concentrations.
---------------------------------------------------------------------------
\29\ Fogg, et al, ``Impacts of MTBE on Groundwater,'' Health and
Environmental Assessment of MTBE, Report to the Legislature of the
State of California, Volume IV: Ground & Surface Water, November 1998,
p. 23.
\30\ Happel et al, Lawrence Livermore National Laboratory, An
Evaluation of MTBE Impacts to California Groundwater Resources, report
submitted to the California State Water Resources Control Board
Underground Storage Tank Program, June 11, 1998, p. 32. Also see Keller
et al, stating that the benzene, toluene, xylene and ethylbenzene
components of gasoline were found at approximately 50% of leaking fuel
sites and MTBE was found at about 49%, ``Cost and Performance
Evaluation for MTBE-contaminated Water,'' Health and Environmental
Assessment of MTBE, Report to the Legislature of the State of
California, Volume V, November 1998, p.49.
---------------------------------------------------------------------------
More leaks may threaten ground water, since many ``closed sites''--
leaking sites no longer under investigation--were not tested for MTBE
and were not actively remediated.<SUP>31</SUP> Leaking underground fuel
storage tanks are believed to be the primary source of acute
groundwater contamination of MTBE (levels above 20ug/l) in
California.<SUP>32</SUP> Experts say old tank removal may reduce the
rate of tank failures in the near future.
---------------------------------------------------------------------------
\31\ Fogg et al, in ``Impacts of MTBE on Groundwater,'' Health and
Environmental Assessment of MTBE, Report to the Legislature of the
State of California, Volume IV: Ground & Surface Water, November 1998,
p. 28, state that 169 of 186 closed gasoline contaminated sites in Los
Angeles had detectable concentrations of MTBE, as did 38 of 65 closed
gasoline sites in the Central Valley.
\32\ Fogg, op cit., p. 7.
---------------------------------------------------------------------------
But if gasoline contains oxygenates, future gasoline tank leaks
involving MTBE appear inevitable. Even new tanks will eventually fail
through material aging, operator error, and accident. There are also
some reports of MTBE + gasoline groundwater contamination from pipeline
leaks, above ground fuel tanks failures, and gasoline tanker truck
accidents, and these will continue as long as oxygenate use
continues.<SUP>33</SUP>
---------------------------------------------------------------------------
\33\ Fogg, op cit., pp. 31-34.
---------------------------------------------------------------------------
e. california, and the nation, must swiftly address gasoline
contamination sites.
Chemical properties of oxygenates tend to make gasoline leaks and
spills more problematic when they include oxygenates. Ethers and
alcohols are highly water soluble and only weakly adsorbed by soil, so
these oxygenates move through soil essentially as rapidly as
groundwater once they leak or spill. Ethers are resistant to
decontamination by soil microorganisms. Alcohols, however, are
preferentially consumed by soil microbes relative to conventional
gasoline compounds. The consequence, in either case, may be a more
persistent, rapidly migrating plume of contaminants, requiring more
complex intervention.
Probably at least as problematic as rapid soil migration is the
very low odor and taste threshold of ethers, which make water with even
minute (parts per billion) quantities of MTBE or other ethers
objectionable to most consumers.<SUP>34</SUP> The positive side of this
characteristic is that people will not be inadvertently exposed to
drinking water contaminated with even extremely small levels of MTBE
contamination--the foul taste will warn anyone away from drinking such
water. But this ability to detect trace contamination increases
pressure on water agencies concerned about providing acceptable water
and worried about treatment costs of reducing any contamination to
extremely low levels.
---------------------------------------------------------------------------
\34\ Office of Research and Development, United States
Environmental Protection Agency, Oxygenates in Water: Critical
Information and Research Needs, EPA/600/R-98/048, December 1998, p. 20.
EPA cites recent studies suggesting that taste and odor thresholds may
be even lower for ETBE and TAME than for MTBE.
---------------------------------------------------------------------------
Cleanup of gasoline spills including any oxygenate must be designed
to respond to the specific constituents and conditions at the site.
Oxygenates may increase the cost of cleanup, with estimates of MTBE
clean-up costs vary from 25% to 80% higher than comparable gasoline
spills without oxygenates.\35\<SUP>,</SUP>\36\ MTBE and other ethers
are persistent in the soil as compared to benzene and other typical
gasoline constituents, and recent evidence about the effectiveness of
biodegradation is equivocal.<SUP>37</SUP>
---------------------------------------------------------------------------
\35\ Kavanaugh, M., Malcolm Pirnie, Inc, ``Brief Review of MTBE
Fate, Transport, and Remediation,'' presentation of February 4, 1999,
p. 10-11, estimates a 25% increase in treatment costs.
\36\ Keller, et al, Cost and Performance Evaluation of Treatment
Technologies for MTBE--Contaminated Water, Health and Environmental
Assessment of MTBE, Report to the Legislature of the State of
California, Volume III, November 1998, p. 30 offer an estimated cost
increase for treatment of MTBE-contaminated water of from 40% to 80%
over treatment of water contaminated with conventional, non-oxygenated
gasoline.
\37\ Office of Research and Development, United States
Environmental Protection Agency, Oxygenates in Water: Critical
Information and Research Needs, EPA/600/R-98/048, December 1998, p. 10-
12
---------------------------------------------------------------------------
Early fears that MTBE-contaminated sites could not be remediated
now appear excessively pessimistic.<SUP>38</SUP> However, it appears
likely that many MTBE-contaminated sites will persist and migrate with
ground water unless active intervention occurs. Although prevention of
gasoline spills and leaks must be a national priority, once leaks are
identified, remedial action should be swift and complete.
---------------------------------------------------------------------------
\38\ Office of Research and Development, United States
Environmental Protection Agency, Oxygenates in Water: Critical
Information and Research Needs, EPA/600/R-98/048, December 1998, pp.
30-37. Also see Kavanaugh, Malcolm Pirnie, Inc. ``Review of the UC
SB521 Study: Water Treatment and Remediation Costs,'' December 1998.
---------------------------------------------------------------------------
f. congress can help reduce contamination by allowing reduced oxygenate
use.
In the last Congress and again in this Congress, Representative
Brian Bilbray of San Diego and California Senator Dianne Feinstein
introduced bills to allow states to reduce or eliminate oxygenates
under certain conditions providing the fuel achieves equivalent or
greater emission reductions. This legislation, or legislation which
simply eliminates the requirement for minimum percentage of oxygenate
in fuels, would be a sound first step at addressing contamination from
gasoline spills containing oxygenates, if it were revised to include
clear requirements assuring that the air quality benefits of the
oxygenate mandate are not lost. Of course, the legislation should also
promote more effective gasoline containment and better enforcement of
current storage or cleanup requirements. It is however, not realistic
to expect any legislative action to eliminate water contamination
problems from past or future spills or leaks.
While supporting the goal of minimization of oxygenate use, NRDC
has been reluctant to encourage any amendments to the Clean Air Act,
and will resist any broad opening of this landmark statute. . If the
Bilbray / Feinstein bills, or similar bills designed only to remove the
required oxygenate minimum while preserving RFG air quality benefits,
can be enacted, we believe this would begin to remedy a serious
environmental threat, especially for parts of the country with shallow
surface water or highly permeable soils. The problem posed by gasoline
spills should trigger further examination and strengthening of federal
authority to protect and clean water supplies contaminated with
petroleum products. But NRDC will continue to vigorously oppose opening
the Clean Air Act beyond this narrow issue.
h. nrdc's recommendations for addressing air and water quality concerns
arising from oxygenate use:
1. The Federal Reformulated Gasoline Program must preserve all air
quality benefits, including the air toxics, ozone precursor,
and aromatic reductions, which were required by the Clean Air
Act. EPA should ensure that any future changes in RFG (such as
changing or reducing oxygenates) do not increase levels of
toxics or ozone precursors either in areas using RFG or in the
rest of the country using conventional gasoline.
2. Congress can reduce the risk to water supplies from petroleum spills
by elimination of the minimum oxygen content requirement in
federal reformulated gasoline coupled with clear requirements
to fully preserve RFG air quality benefits, including those
benefits that flow from the existing oxygenate mandate.
3. Remediation should occur swiftly at sites where gasoline has spilled
or leaked Passively awaiting microbiological degradation of
gasoline contaminants should not be assumed appropriate for
fuel spills or leaks, particularly those threatening water
resources. Costs for the cleanup should be recovered from
parties responsible for the spills or leaks.
4. Protection of surface water depends on careful regulation of boating
(and restrictions on the use of jet skis or other inefficient
2-stroke gasoline engines). Restrictions on numbers of boats,
engine types and fueling methods can help to reduce water
contamination, and appear necessary regardless of future
oxygenate policy.
5. The country needs improved fuel storage tank regulations, including
improving siting and monitoring restrictions. Furthermore,
enforcement must be strict to ensure recovery of cleanup costs
from those responsible for spilling or improperly storing fuel.
______
South Coast Air Quality Management District
Diamond Bar, CA
May 4, 1999
The Honorable Brian Bilbray
U.S. House of Representatives
Longworth House Office Building Suite 1530
Independence and New Jersey Avenue SE
Washington, DC 20515
H.R. 11--California Reformulated Gas Rules
I am pleased to inform you that the South Coast Air Quality
Management District (AQMD) supports your H.R. 11, which would amend the
Clean Air Act to allow California's cleaner-burning gasoline
regulations to apply in California, in lieu of existing federal
regulations, when California regulations achieve equivalent or greater
reductions in emissions of ozone-forming compounds and toxic
contaminants.
California has some of the worst air pollution in the nation. Since
the introduction of reformulated gasoline in 1996, the South Coast Air
Basin has experienced some of its best air quality in years. However,
when the U.S. EPA was directed to adopt a federal reformulated gas
program, only specified properties were mandated for use. This limited
flexibility among refiners in producing cleaner-burning gasoline. H.R.
11, along with California actions, provides refiners much greater
flexibility in the formulation of cleaner-burning gasoline.
Reformulated gasoline is a critical measure in California's State
Implementation Plan. With this measure we can look forward to
increasing the health of our residents in California and the South
Coast Air Basin. We appreciate your efforts in this area and fully
support H.R. 11.
Sincerely,
Barry R. Wallerstein, D.Env.
Executive Officer
______
California Environmental Protection Agency
Air Resources Board
Sacramento, CA 95812-2815
July 31, 1996
The Honorable Thomas Bliley
Chairman, House Committee on Commerce
U.S. House of Representatives
Washington, DC 20515
Dear Mr. Chairman: I am pleased to express the support of the
California Air Resources Board (ARB) for H.R. 3518, which was
introduced by Congressman Brian Bilbray on May 23, 1996. Under this
bill, California cleaner burning gasoline regulations will apply in
California in lieu of existing federal reformulated gasoline
regulations as long as the California regulations achieve equivalent or
greater reductions in emissions of ozone-forming compounds and toxic
air contaminants than now result from the federal regulations.
California has historically faced the most challenging and
intractable air pollution problems in the nation. Because of our unique
needs, for more than 25 years California has been the only state
allowed by the federal Clean Air Act to develop and administer its own
motor vehicle emission standards. As long as they are at least as
protective as the federal standards and meet other criteria, our
California motor vehicle emission standards can be substituted for the
federal standards. California is also the only state given
unconditional authority under the Clean Air Act to adopt its own
emission control standards for gasoline and other motor vehicle fuels.
In the case of fuels standards, however, both the California and
federal standards are now applied in California.
The 1990 Clean Air Act Amendments directed the U.S. Environmental
Protection Agency (U.S. EPA) to adopt a federal reformulated gasoline
program for urban areas with the most serious smog problems. The
amendments mandated that federal reformulated gasoline contain various
specified properties, and imposed limitations on the level of
flexibility that the U.S. EPA could build into the program. The federal
reformulated gasoline regulations were promulgated in early 1994 and
became applicable in December 1994. In California, the federal
regulations now apply in the greater Los Angeles, San Diego, and
Sacramento areas.
In the meantime, the ARB was developing a comprehensive program for
cleaner cars and cleaner fuels. We adopted the California cleaner
burning gasoline regulations in 1991, and they became applicable in the
spring of this year. This program established the most stringent and
comprehensive gasoline standards in the world. It contains
specifications for eight different properties that affect emissions of
ozone-forming compounds and toxic pollutants. The regulations also
feature a ``predictive model'' that is based on the analysis of a large
number of vehicle emission test studies. Instead of meeting the
specifications set forth in the regulations, refiners have the option
of producing gasoline subject to an alternative set of specifications
that the predictive model shows will achieve equivalent emission
reductions. California refiners are using the predictive model approach
for much of the gasoline now being produced in the state.
Unfortunately, the overlapping applicability of the state and
federal reformulated gasoline regulations substantially reduces the
extent to which refiners can take advantage of the flexibility built
into the California program. Refiners are required to comply with the
federal Act even though the California predictive model shows that a
different formulation will achieve equivalent or greater air quality
benefits. Refiners are also required to meet complicated federal
reporting and recordkeeping requirements that are not necessary for
compliance with the state program. Although we are pleased that U.S.
EPA exempted California refiners from a number of the federal
enforcement requirements, a refiner can lose that exemption as a result
of even a single violation of the California regulations.
Now that the California and federal reformulated gasoline
regulations both are in place, we believe that it makes best sense for
the more effective state regulations to apply in lieu of the federal
regulations, as is the case with California's motor vehicle emission
standards. Enactment of H.R. 3518 is necessary so that refiners can
fully use the flexibility built into the California program, and can
avoid needless paperwork requirements. This will reduce the costs of
producing California gasoline, and should lead to lower prices at the
pump.
H.R. 3518 is carefully crafted to assure that, without establishing
new federal mandates, Californians enjoy all of the health benefits of
reformulated gasoline. The California regulations will apply in lieu of
the federal regulations only if they will achieve equivalent or greater
emission reductions. Further, the California gasoline regulations have
been approved by U.S. EPA as part of our State Implementation Plan, and
are thus federally enforceable.
For these reasons, the ARB fully supports and urges the committee
to act favorably upon H.R. 3518. Please let me know if there is
anything I can do to assist in its passage.
Sincerely,
John D. Dunlap, III
Chairman
cc: Honorable Barbara Boxer
Honorable Dianne Feinstein
Honorable Brian Bilbray
Honorable Christopher Cox
Honorable Anna Eshoo
Honorable Carlos Moorhead
Honorable Henry Waxman
______
American Methanol Institute
Oxygenated Fuels Association
Renewable Fuels Association
September 10, 1996
The Honorable Thomas Bliley
Chairman
Committee on Commerce
U.S. House of Representatives
Washington, D.C. 20515
Dear Mr. Chairman: On behalf of the entire U.S. oxygenate industry,
we would like to express our serious reservations regarding H.R. 3518,
a bill introduced by Representative Bilbray to exempt certain states
from federal reformulated gasoline (RFG) standards. We believe this
bill is unnecessary and we strongly suggest the need for a thorough
hearing and dialogue if the Committee should contemplate taking any
action on this legislation.
Proponents of H.R. 3518 have failed to make a compelling argument
that the legislation is needed. When introducing the bill in May,
Congressman Bilbray argued that H.R. 3518 would ease the rising costs
of gasoline. Time and the benefit of hindsight, of course, have
demonstrated that the causes for the increases in gasoline prices this
past spring had virtually nothing to do with Clean Air Act compliance
costs, and everything to do with temporary supply shortages caused by a
colder-than-normal winter and the decrease in inventories at
refineries. As the market adjusted and gasoline prices were reduced,
the need to provide legislative relief to lower refiner costs was
proven to be unnecessary.
Exempting states from federal RFG standards would have little
impact on the price of gasoline in any event. Market prices have shown
that federal RFG costs only slightly more than conventional gasoline
(2-3cts per gallon) and actually less than California RFG, the only
state with its own RFG program. The reason California RFG is more
expensive is the cost associated with reducing sulfur content capping
aromatic content, capping olefin content and reducing distillation
specifications that reduce the amount of gasoline that can be extracted
from a barrel of crude oil. These requirements are far more stringent
than federal RFG and far outweigh the nominal cost of oxygenates, which
is the only additional specification of the federal fuel.
Advocates of H.R. 3518 also argue that the bill will allow refiners
to take advantage of the flexibility built into the California program.
But similar flexibility is built into the federal RFG program. Refiners
utilizing EPA's complex model for RFG have great latitude to adjust
fuel parameters to maximize efficiency and lower cost. Therefore, the
argument that H.R. 3518 is needed to promote flexibility is specious.
Proponents of H.R. 3518 maintain it would only apply to California.
But the legislation clearly allows ``any such state'' which has been
granted an EPA waiver to develop its own RFG regulations which do not
meet the federal RFG standards. This could create a patchwork of fuel
requirements across the country that would severely burden the fuel
production and distribution system.
The legislation, as drafted, has significant enforcement problems.
The bill provides no mechanism to verify that gasolines indeed meet
equivalent or greater reductions in emissions than required by federal
RFG. While proponents have argued that the State Implementation Plan
process allows for such a determination to be made, the means by which
an appropriate evaluation and comparison would be made remains
unspecified.
Presumably, proponents of H.R. 3518 believe the predictive model
developed by the California Air Resources Board (CARB) could be used by
refiners to demonstrate that fuels subject to an alternative set of
specifications could achieve emissions reductions equivalent to fuels
meeting the federal standards. But the CARB predictive model has shown
significant differences from the complex model developed by EPA.\1\ A
comparison of the two models suggests that the predictive model
underestimates the benefits of oxygenates by, among other factors,
failing to properly account for the impact of high emitters. Certainly,
until the differences between the two models are more thoroughly
understood and corrected, it makes no sense to legislate a change to
the Clean Air Act establishing an alternative compliance mechanism.
---------------------------------------------------------------------------
\1\ It is important to note that the complex model was developed
with input from refiners, oxygenate producers, auto manufacturers,
consumer groups and state environmental officials (including CARB).
---------------------------------------------------------------------------
We understand that EPA has dealt effectively with virtually all of
the problems caused by the overlapping applicability of state and
federal gasoline regulations. Thus, the only practical consequence of
H.R. 3518 is to exempt refiners in California, and possibly other
states, from the oxygen requirement of Sec. 211(k) of the Clean Air
Act. Such relief is unnecessary, and could potentially undermine the
air quality benefits of the RFG program. If the bill only impacts
California, as proponents suggest, and the goal is to provide
consistency in the California market, legislation is not necessary.
Refiners could simply add the required oxygenate amounts to California
RFG. The air would be cleaner and the state would have one gasoline.
Oxygenates play a critical role in assuring that the air quality
and public health benefits of RFG are realized. Oxygenates provide
significant reductions in exhaust VOC emissions. Without the oxygen
standard, refiners would likely meet the VOC reduction requirements
through evaporative VOC emissions reductions alone, thereby forfeiting
significant ozone reduction benefits.\2\ In addition, oxygenates are
the most cost-effective means of reducing benzene and other toxic
emissions from gasoline. When refiners utilize the octane value of
oxygenates, the toxic reductions realized often exceed those required
by either California or federal RFG. Analysis of gasoline quality
surveys done by the American Automobile Manufacturers Association
indicate that 1995 reformulated gasolines had a reduction of
approximately 25% in toxic emissions while their minimum requirement
was only 15%. In the absence of the oxygen standard, those additional
toxic reductions would be forfeited.
---------------------------------------------------------------------------
\2\ Exhaust VOC emissions are known to be more reactive than
evaporative VOC emissions, meaning that they will form ozone more
quickly. Therefore, the exhaust VOC reduction benefits of oxygenates
are critical to the ozone reduction goal of the RFG program.
---------------------------------------------------------------------------
In summary, H.R. 3518 will have no beneficial impact on gasoline
prices, is not needed to provide refiners with the flexibility to
effectively meet clean air regulations, creates unnecessary
implementation and enforcement problems, and could undermine the air
quality benefits of the RFG program. Again, we strongly advise against
Committee action on H.R. 3518.
Thank you for your consideration of these views.
Sincerely,
Eric Vaughn
Renewable Fuels Association
Fred Craft
Oxygenated Fuels Association
Ray Lewis
American Methanol Institute
cc: Honorable Michael Bilirakis
Honorable John Dingell
Honorable Henry Waxman
Honorable Brian Bilbray
______
CAPCOA
Cameron park, CA 95682-9206
March 4, 1999
The Honorable Brian Bilbray
United States House of Representatives
1530 Longworth House Office Building
Washington, DC 20515
Dear Representative Bilbray: The California Air Pollution Control
Officers Association (CAPCOA) consists of thirty-five local air quality
agencies throughout California. Our Association supports both your
bill, H.R. 11, and Senator Feinstein's bill, S. 266. These bills would
provide California greater authority over its clean air program by
allowing California's cleaner-burning gasoline regulation to apply in
lieu of federal reformulated gasoline regulations as long as these
regulations achieve equivalent or greater emission reductions of ozone-
forming compounds and toxic air contaminants.
The Clean Air Act currently requires the use of at least 2% by
weight oxygenates in reformulated gas. Congress mandated, in the Clean
Air Act, the use of reformulated gasoline in 1990 in those areas of the
country with the worst smog problems, primarily here in California.
This requirement results in 11% of MTBE in each gallon of gas--MTBE
being the oxygenate/additive used in California to reduce fuel
emissions. Although gasoline manufacturers claim it is feasible to
produce clean-burning gas without MTBE, the 2% federal requirement
prohibits them from doing so in many areas of the State.
H.R. 11 and S. 266 give California the flexibility to implement
more stringent standards without having to meet the federal regulations
requiring oxygenates, like MTBE, in gasoline. This legislation permits
California to meet an ``outcome'' based reformulated gasoline standard
without requiring an additive that poses a serious ground-water
pollution problem such as MTBE. We strongly believe that achieving
cleaner air should not come at the expense of water quality.
For these reasons, CAPCOA fully supports H.R. 11 and S. 266. Should
you have any questions, please contact our Legislative Committee
Chairman Larry Greene at (530) 757-3656.
Sincerely,
Douglas W. Allard
CAPCOA President
c: CAPCOA Legislative Committee
______
Chevron Products Company
San Francisco, CA 94105
May 4, 1999
Mr. Eric Vaughan
President
Renewable Fuels Association
One Massachusetts Ave., N.W.
Suite 820
Washington, D.C. 20001
Dear Mr. Vaughan, It was with some disappointment that we read your
April 9 letter to Chevron Products Company President, Pat Woertz. As
you know, we have spent countless hours in meetings with you, your
staff, and key representatives of your industry over the past year
trying to come up with a way to work together to achieve the common
goal of eliminating MTBE from our California gasoline. Our objective in
these meetings was to explain the obstacles faced by Chevron in hopes
that we could convince your industry that providing California with the
flexibility to depart from the federal reformulated gasoline oxygen
mandate would allow us to remove MTBE with minimal inconvenience to our
gasoline-buying customers. We also hoped your industry would understand
that ethanol, though used scantily in California gasoline now, would be
used in large quantities if MTBE were eventually phased out.
Your April 9 letter suggests that we failed in this endeavor. With
your personal encouragement and with encouragement from at least one of
your member companies, we thought at one point that we were close to
agreement. But given the unqualified statement that you will
``steadfastly oppose legislative efforts to remove the oxygen content
requirement,'' we wonder whether the time we spent on the set of common
principals we jointly drafted was well spent.
We also apparently failed to communicate the importance of
flexibility in the manufacture and distribution of petroleum products.
Chevron and TOSCO sponsored the report done by MathPro to show that if
California refiners were allowed to optimize their production and
distribution of gasoline--while meeting all emissions performance
requirements--costs would be significantly reduced overall and ethanol,
due to its advantageous octane, dilution, and distillation properties
would still be used. It is disappointing that you should use those
results to justify maintaining the current oxygen mandate for
California when, in fact, MathPro's key conclusion supports just the
opposite:
By allowing refiners to produce non-oxygenated CARB gasoline,
the Feinstein-Bilbray bill likely would: (1) reduce the cost of
producing CARB gasoline; (2) reduce California's draw on
limited supplies of mid-western ethanol; and (3) moderate
possible increases in the price of ethanol or shortfalls in the
supply of ethanol.
The federal oxygenate mandate interferes with flexibility by
requiring in specific areas at specific times of the year in specific
quantities. We are not surprised that MathPro showed only modest
overall reductions in ethanol that would be used compared to the
federal mandate. However, we are also not surprised that cost estimates
were substantially reduced since lifting the mandate has an enormous
impact on flexibility.
The implication in your letter that using ethanol in the winter in
Los Angeles is a simple matter indicates we also were unable to
communicate the existence of considerable logistical barriers involved.
Seasonal switching between ethanol- and MTBE-blended gasoline is
unavoidable in the near term because, under the mandate, oxygen is
required in summertime gasoline and capital expenditures that could
take four or more years to make are required to accommodate ethanol at
mandated levels. Thus, for now, we will have to use MTBE in the summer.
Seasonal switching is very difficult since the federal government does
not allow mixing of ethanol-blended gasolines with non-ethanol blended
gasolines anywhere in the distribution system and because summertime
gasoline is subject to stringent vapor pressure (RVP) control. The RVP
increase that comes from mixing an ethanol-blended gasoline with any
other is underappreciated outside our industry including the authors of
the Downstream Alternatives, Inc., study you cited. Specific to
Chevron, of course, the Downstream Alternatives study indicated that we
have a long way to go before our terminals are capable of blending
ethanol at any time of the year.
The so-called ``real world environmental benefits'' of oxygenates,
as described in your letter, are at best an accidental byproduct of the
oxygen mandate. It is also possible that they are fictional. These
ancillary benefits have never undergone a real analysis using the
normal process of genuine scientific inquiry. Should these ancillary
benefits be compelling but achievable less expensively, then
appropriate performance standards should be adopted rather than
maintaining the prescriptive oxygen mandate. In our view, 700 million
gallons of non-oxygenated gasoline produced at our Richmond refinery
that met or exceeded the California Air Resources Board performance
standards is sufficient proof that the imposition of the oxygen mandate
is not necessary to maintain the air quality benefits of the Clean Air
Act Amendments.
Curiously, your letter fails to mention the big ``real world''
detriment that ethanol produces, that of RVP increase when added to
gasoline. It is this unalterable characteristic of ethanol, more than
any other factor, that has limited its use in California reformulated
gasoline. RVP increases drive volatile hydrocarbons into the atmosphere
where under the summer sun they react with oxides of nitrogen to form
ozone, precisely the opposite of what the Clean Air Act intended for
reformulated gasoline.
Finally, we find your discussion of certainty interesting because
while we have endeavored to keep the public policy debate focused on
concerns about MTBE in California gasoline, you suggest that our
support for the Feinstein/Bilbray bill has caused uncertainty. At the
same time, your letter openly injects new and unrelated issues into the
legislative arena. Perhaps we differ on which uncertainties are
relevant to this issue. When we talk of it, we mean the need for legal
and regulatory certainty that enables us to plan for the future, i.e.,
obtain necessary permits, configure our refineries and other
facilities, and serve our customers. For the ethanol industry, the
certainty you seek appears to be market certainty--mandates for the use
of your product, supported by subsidies to make your product
economical. If we have missed the mark in our understanding and legal
certainty is in fact a goal you share with us, we invite you to support
Feinstein/Bilbray or similar bills and to keep the discussion focused
on the matter at hand and demonstrate your concern for the California
consumer.
As you know, we have taken no exception to your contention that a
reasonable amount of ethanol can be supplied (at a cost) to California.
The uncertainty lies in whether the amount actually required is
reasonable given the combination of mandated levels, the need to meet
other California gasoline specifications, and octane demands. The
Downstream Alternatives report suggests that far larger quantities may
be needed than what you cite in your letter. By working against the
flexibility our industry needs, your industry risks the backlash of
California's drivers who, as we have learned from painful experience,
don't want obstacles to their access to low cost and abundant motor
fuel.
As committed as you are to maintaining the federal oxygen mandate
nationwide, we are committed to supplying our customers with products
that they want. Our California customers are telling us that they want
MTBE out. Our ability to satisfy them is hindered by the oxygen mandate
as it applies in California, we will continue to support efforts to
remove it here or in other places where our customers say the same. At
any time that you feel it would be productive, we are ready to renew
discussions.
Sincerely
Al Jessel
cc: Governor Gray Davis
Senator Dianne Feinstein
Congressman Brian Bilbray
______
Renewable Fuels Association
Washington, DC 20001
April 9, 1999
Patricia Woertz
President
Chevron Products Company
575 Market Street
San Francisco, California 94105
Dear Ms. Woertz: The domestic ethanol industry has followed with
great interest Chevron's efforts to promote federal passage of H.R. 11
and/or S. 645 as a means of accelerating the ban on MTBE from
California gasolines. Given the conclusion of the University of
California-Davis report regarding the environmental risks posed by the
continued use of MTBE, your effort to facilitate the expeditious
removal of MTBE is laudable. But the problem is MTBE in water, not
oxygen in gasoline. So your advocacy of a solution eliminating the
oxygen standard appears to us to be misplaced.
I understand from press reports that Chevron believes a combination
of ethanol blended gasolines and non-oxygenated fuels will likely
replace MTBE. And I have reviewed the MathPro Inc. report prepared for
Chevron and Tosco Corporation which concludes ``the `optimal' (cost-
minimizing) share of non-oxygenated CARB gasoline ranges from about 20
to 40 percent, depending on the time period and Predictive Model
mode.'' But as CARB gasoline, which as you know does not require the
addition of oxygen, currently accounts for about 35% of the state's
total gasoline supply, it seems refiners would be able to produce the
``optimal'' amount of non-oxygenated gasoline today. Moreover, if
accelerating the replacement of MTBE with ethanol is a goal, and as
there are no volatility constraints to ethanol use during the winter
months, refiners could certainly achieve 100% non-MTBE fuel use during
the winter months far sooner than envisioned by either Governor Davis'
Executive Order or your proposed accelerated schedule.
Your marketing staff should clearly be able to advise you that
ethanol supply is not a problem. There is more than enough ethanol to
meet California demand. In fact, as ethanol has twice the oxygen
content of MTBE, and can satisfy the oxygen standard for RFG with less
than half the volume of MTBE, we estimate the total amount of ethanol
needed to meet California RFG demand would be about 35,000 barrels per
day, or less than 30% of existing U.S. ethanol production capacity.
Enclosed is an analysis completed by Downstream Alternatives, Inc.
which, after surveying every gasoline terminal in the state, concluded:
``adequate supplies of competitively priced ethanol could be supplied
to the California market almost immediately . . . it is clear that well
over half the terminals offering gasoline could make ethanol available
in six months or less.''
One of your stated goals has been environmental equivalency. We
agree. There should be absolutely no backsliding of the air quality
benefits from RFG as MTBE is phased out. But while you have stated
refiners can meet the required VOC performance standards without
oxygen, you must also recognize that the ``real world'' environmental
benefits of oxygenates are not reflected in the VOC reduction models.
These ``real world'' benefits include reductions in combustion chamber
deposits, which assure greater emissions reductions over the life of
the vehicle; improved performance from higher emitting vehicles which
benefit from the reduced exhaust emissions attributable to oxygen
content; and, the reduced reactivity of exhaust emissions from
oxygenated fuels. At the very least, we should be able to agree that
eliminating the oxygen standard in carbon monoxide non-attainment areas
such as Lake Tahoe would represent environmental backsliding.
You should also know that to the extent ethanol fuels are used,
there are the additional ``real world'' benefits of reduced greenhouse
gas emissions, enhanced energy security and tremendous rural economic
development which were all important policy objectives considered by
the Congress when the RFG oxygen standard was enacted.
Another key goal of the refining industry is certainty. Again, we
agree. Companies need to know as soon as possible what the rules will
be and make plans accordingly. In this case, the oxygen content
standard was agreed to in the Clean Air Act Amendments of 1990. The
rules governing oxygenates and RFG were made certain in 1994. But
passage of Feinstein/Bilbray legislation is far from certain. And
whether Feinstein/Bilbray remains focused on just the oxygen content
provision or turns to other issues such as sulfur levels, olefin
content, driveability index or greenhouse gases is even more uncertain.
Thus, your advocacy of Feinstein/Bilbray only adds uncertainty to this
process and thwarts your stated goal of accelerating MTBE's removal
from gasoline.
The U.S. ethanol industry sees Chevron Products Company and other
refiners in California as partners in the effort to provide high-
quality, clean-burning, MTBE-free gasolines as quickly as possible. But
we will steadfastly oppose legislative efforts to remove the oxygen
content requirement in federal RFG. We believe the oxygen standard is
critical to maintaining the air quality goals of the Clean Air Act, and
that attempts to remove it are unnecessary and counter-productive to
expediting the removal of MTBE fuels in California.
Again, I applaud your objective of providing non-MTBE fuels to
California consumers and I look forward to working with you and others
to realize that objective as quickly as possible.
With best regards, I am
Sincerely,
Eric Vaughn
President
Attachment
cc: Governor Gray Davis
Senator Dianne Feinstein
Congressman Brian Bilbray
______
Chevron Products Company
San Francisco, CA 94105
April 29, 1999
The Honorable Dianne Feinstein
United States Senate
Hart Building, Room 331
2nd & C Streets, NE
Washington, DC 20510-0504
Dear Senator Feinstein: It has been reported in the trade press
that Senator Daschle is considering offering, among a number of
prescriptive fuel specifications, a renewable fuels proposal that would
greatly expand the mandate for ethanol use in motor fuels. The
proposal, as reported, raises a number of public policy and operational
concerns. I have had members of my staff put together the attached
paper that highlights these issues in more detail.
In summary, rather than providing refiners flexibility as long as
they meet emission performance standards (as your legislation does),
the proposal would continue the policy of providing government
``recipes'' for gasoline. The adverse consequences of MTBE use were not
foreseen in 1990, the last time Congress tried to write a mandated
``recipe'' for reformulated gasoline. Congress should not make the same
mistake again by mandating the use of ethanol, particularly in light of
the known and recognized air quality concerns it would create. The
proposal would likely have very significant adverse air quality
impacts, by raising evaporative emissions of gasoline around the
country, at a time when areas are struggling to find ways to meet air
quality requirements. Additionally, the proposal would greatly expand
the ethanol mandate, to all motor fuels--conventional and reformulated
gasoline, and likely to diesel fuel as well. The current oxygen mandate
applies just to federal reformulated gasoline. Our analysis shows the
proposed mandate would result in a six-fold increase in ethanol use,
increase the cost of refining, and decrease competition because
refiners would have no other option (they could no longer make non-
oxygenated gasoline). Finally the proposal would also result in
billions of dollars of lost revenues from federal taxes, since ethanol
enjoys a substantial federal subsidy.
Because of all the adverse public policy concerns, and the negative
operational effects this proposal would have, we would be strongly
opposed to this renewable fuels mandate. We hope that you will continue
to pursue your legislation, which we believe is based on sound public
policy, and protects air quality, while providing refiners greater
flexibility. We also will support the bill that we understand that
Senator Chafee plans to introduce (and which we understand you will
cosponsor) that would allow governors to opt-out of the oxygen
requirement. It is important for California to have a solution as soon
as possible. We're hopeful that working with Senator Chafee and other
Senators, you will be able to craft a workable solution in the U.S.
Senate. We would be happy to discuss with you or your staff in greater
detail the concerns that the renewable fuels proposal raises.
Sincerely,
Patricia A. Woertz
President
Attachment
cc: The Honorable Gray Davis
The Honorable Brian Bilbray
Mr. Winston Hickox, Secretary, California Environmental Protection
Agency
Mr. Ken Derr, Chairman, Chevron Corporation
concerns--renewable fuels proposal
It has been reported that Senator Daschle has proposed that
beginning in 2001, 1% of all vehicle motor fuel sold in the U.S. shall
be produced from renewable sources (i.e., other than petroleum, natural
gas, coal, or peat), increasing to 2.5% in 2005, and 5% in 2010.
Misleadingly labeled as a ``renewable performance standard'', it is in
fact an ethanol mandate, which raises numerous concerns. These include:
<bullet> Continuing a bad policy of providing `recipes' rather than
`performance standards'
<bullet> Degrading air quality and increasing gasoline manufacturing
costs
<bullet> Mandating an unprecedented six-fold increase in ethanol use
over next 10 years
<bullet> Decreasing competition--creating a monopoly for ethanol use in
gasoline
<bullet> Increasing the ethanol subsidy by $10 billion over next 10
years; a subsidy that will have to be offset by a tax increase
on some sector of the economy.
<bullet> Causing an unprecedented change in the ethanol distribution
and transportation system throughout the United States.
The proposal would continue the bad precedent established in the 1990
Clean Air Act Amendments of government establishing gasoline
recipes, rather than establishing performance standards.
The adverse consequences of MTBE use were not foreseen in 1990, the
last time Congress tried to write a mandated ``recipe'' for the
reformulated gasoline program for the worst ozone areas in the country.
Congress should not make the same mistake again by mandating the use of
yet another additive in gasoline, ethanol, particularly in light of the
known and recognized air quality problems it creates. The MTBE
experience teaches that Congress should rely on emission performance
standards, rather than mandating oxygen content--the way the California
program does. Refiners can make gasoline that meets the emission
reduction performance standard with or without adding oxygen.
Government requirements for gasoline recipes only add to the cost,
limit flexibility, and risk adverse unintended consequences. The
California state program, which is performance based--establishes
emission limits without dictating to refiners how they must make the
gasoline. The renewable fuels proposal just makes a bad situation
worse.
The proposal could result in significant air quality degradation
throughout the United States. Adding ethanol raises the vapor
pressure of gasoline--increasing air emissions.
The ethanol mandate could result in significant degradation of air
quality throughout the United States, unless other costly modifications
are made to producing gasoline. It is well known that introducing
ethanol as a gasoline blendstock increases the vapor pressure of
gasoline (about 1 psi or <difference> 15% and, hence, the evaporative
emissions of volatile organic compounds, or VOCs. VOCs lead to
increased ozone formation, and can lead to increases in fine
particulate. The new ozone and particulate standards will result in
hundreds of new areas around the country being designated as non-
attainment. Those areas will be looking to reduce VOC emissions, not
increase them. Rather than helping improve air quality, adding ethanol,
without making other changes to gasoline, only makes air quality worse.
[Note: Ethanol is allowed a 1 psi waiver under the Clean Air Act for
conventional gasoline even though these increased emissions adversely
impact air quality.] From a public policy standpoint, it is hard to
understand why Congress would greatly expand the mandate for ethanol
use nationwide, and risk serious air quality degradation.
Costly modifications are necessary to offset ethanol's vapor pressure
effect.
In order to meet the ethanol mandate proposal, without adversely
impacting air quality, vapor pressure would have to be held constant.
Refiners would have to remove about the same volume of current gasoline
component (pentanes) as ethanol is added to keep the vapor pressure of
gasoline down. Refiners would have to modify their refineries to (1)
take out those blendstocks by adding new processing equipment, (2)
build new pressurized tanks to hold those high volatility blendstocks,
and (3) find new markets which don't exist today to dispose of those
blendstocks. Where would these components go? What would be their use?
Massive dislocation in use and transport of very volatile gasoline
blendstocks, even when done safely, will have a significant impact on
producing gasoline. All of which adds significantly to the cost
nationwide of producing gasoline, with absolutely no commensurate air
quality benefit,
The bottom line: Air quality can be degraded and gasoline
manufacturing costs will be increased--a lose-lose situation.
The proposal would result in a significant expansion of required
ethanol use. Significant new ethanol production capacity would
need to be constructed.
There is roughly 8 million barrels of gasoline sold per day in the
United States, which equates to 120 billion gallons per year. Diesel
fuel sales amount to roughly 30 billion gallons per year (on road
diesel). If 1% needed to come from renewable sources (ethanol mandate)
that would require roughly 1.5 billion gallons of ethanol, increasing
to 9 billion gallons by the year 2010, when the ethanol mandate would
increase to 5%. The current ethanol use in the United States is roughly
1.4 billion gallons per year (per the RFA website. The ethanol mandate
would require a six-fold increase in domestic ethanol use or an
additional growth of about 20% per year for the next 10 years of
ethanol used in motor fuels.
The proposal would hold refiners and the consumer hostage to ethanol
prices.
Currently, in areas where the oxygen mandate applies, refiners can
choose which oxygenate (MTBE or ethanol) to add to gasoline--thus
promoting pricing competition for oxygenates. In areas not covered by
the oxygen mandate, non-oxygenated gasoline competes as well. By
expanding the mandate to all motor fuels nationwide, and limiting it to
renewable sources--an ethanol mandate--would in fact limit refiners'
flexibility and reduce competition. Ethanol production in the U.S. is
dominated by one company which has <difference> 50% of the domestic
ethanol capacity. This would hold refiners (and ultimately consumers)
hostage to whatever prices the ethanol industry wanted to charge.
The proposal would result in significant loss of tax revenues to the
United States government.
Nearly every gallon of ethanol sold in the United States gets a
$0.54/gallon subsidy today from the United States Treasury, through an
equivalent reduction in either motor fuel tax revenue collected under
the federal excise tax or through income taxes collected by blenders of
ethanol. Therefore, current ethanol use (roughly 1.4 billion gallons/
year) results in a loss of federal tax revenue's of <difference>
$750,000,000/year. Expanding the ethanol mandate by a factor of five in
the year 2010 (to 5%, or 9 billion gallons/year) would result in a loss
of almost $4,000,000,000/year in tax revenues. Over the next decade,
this would result in a loss of over $10 billion that the federal tax
revenues, most of which goes to states to spend on roads, highways, and
other uses.
The chart below shows the loss in revenue, assuming motor vehicle
fuel (gasoline and on-road diesel, or mogas) continue to grow at
<difference> 2%/year, and that ethanol baseline growth is also at the
same <difference> 2%/year.
----------------------------------------------------------------------------------------------------------------
ethanol, Daschle
mogas baseline Proposal Subsidy $MM Delta Taxes
Billion Gal/ Billion Gal/ Billion Gal/ Gal/Yr $MM Gal/Yr
Yr Yr Yr
----------------------------------------------------------------------------------------------------------------
2000........................................... 150 1.50 1.50 $810 $0
2001........................................... 153 1.53 1.53 $811 $0
2002........................................... 156 1.56 1.56 $827 $0
2003........................................... 159 1.59 1.59 $827 $0
2004........................................... 162 1.62 1.62 $842 $0
2005........................................... 166 1.66 4.15 $2,117 $1,270
2006........................................... 169 1.69 4.23 $2,157 $1,295
2007........................................... 172 1.72 4.30 $2,193 $1,316
2008........................................... 176 1.76 4.40 $2,244 $1,346
2009........................................... 179 1.79 4.48 $2,285 $1,372
2010........................................... 183 1.83 9.15 $4,667 $3,733
Sum Total.................................. $10,333
----------------------------------------------------------------------------------------------------------------
The proposal would stretch the transportation system to the limit.
Ethanol would have to be moved from the Midwest where it is
produced, to every corner of the US, to every gasoline terminal no
matter how remote. Since ethanol cannot be pipelined, ethanol cannot be
blended at the refinery--like other oxygenates are. This will result in
significant investment at marketing terminals around the country, in
urban and remote locations, in order to blend and store ethanol.
Ethanol would have to be brought in by railroad and truck causing
increased highway traffic and further stressing our rail infrastructure
that, recently, has demonstrated an inability to deliver on time. This
proposal would greatly exacerbate the nation's transportation system,
risking run outs and gas lines at retail stations if ethanol cannot be
delivered in a timely manner.
______
State Capitol
Sacramento, California
April 14, 1999
The Honorable Brian Bilbray
United States House of Representatives
Washington, D.C. 20515
Dear Representative Bilbray: I am writing to convey my strong
support for legislation introduced in the House (H.R. 11) and in the
Senate (S. 266 and S. 645) that would enable California to phase out
the use of the gasoline oxygenate methyl tertiary butyl ether (MTBE)
from California reformulated gasoline.
As you know, MTBE has led to the degradation and contamination of
drinking water sources in communities such as Santa Monica, Santa
Clara, Sacramento and Lake Tahoe. According to the Lawrence Livermore
National Laboratory, MTBE has been detected at over 4,600 leaking
underground fuel tank sites after inspecting only half the known sites.
Furthermore, MTBE is known to cause cancer in animals and has been
identified by several major scientific bodies as having the potential
to cause cancer in humans.
On March 25, 1999, I issued Executive Order D-5-99 where I found
that the use of MTBE in gasoline poses a significant risk to
California's environment. Required by State law, this determination was
based on a study by the University of California, peer review comments
of that study by the U.S. Geological Survey and the Agency for Toxic
Substance and Disease Registry, and testimony from three days of public
hearings conducted by the California Environmental Protection Agency.
As a result of that determination, I have directed the appropriate
state regulatory agencies to devise and carry out a plan to begin an
immediate phase-out of MTBE from California gasoline, with 100% removal
to be achieved no later than December 31, 2002.
However, in order for California to achieve this necessary goal
without a major disruption of our fuel supply, it is imperative that
Congress provide flexibility to California to meet federal Clean Air
Act emission standards without mandatory use of oxygenates. Both the
House bill (H.R. 11) as well as the Senate bills (S. 266 and S. 645)
provide exactly the flexibility California needs without weakening air
quality regulations.
The California Energy Commission and the University of California
study have warned that an immediate ban or precipitous phase-out of
MTBE would result in catastrophic price increases with a heavy impact
on the economy. Most California refineries and terminals are not
equipped to handle ethanol, the only viable alternative oxygenate, at
this time. The re-tooling necessary to shift to an alternate such as
ethanol would take a period of years and a multi-billion dollar capital
investment by the oil and gas industry. The amount of ethanol
California would need to import from other states and countries to
cover an immediate ban on MTBE would amount to half of all the ethanol
produced in the United States last year.
Finally, I take seriously the admonition by the UC study that
California learn from its mistake with MTBE and research the
environmental impacts of any alternative before mandating its
widespread use. Therefore, I have ordered the California Air Resources
Board and the State Water Resources Control Board to conduct an
analysis of ethanol and any other alternative oxygenate in air, surface
water, and ground water. I am also directing the Office of
Environmental Health Hazard Assessment to prepare an analysis of the
health risks of ethanol in gasoline, including the products of
incomplete combustion.
Ethanol may very well play a large role in California's future fuel
supply. But if California, or any state, can meet the emission
standards of the Clean Air Act--with or without the use of oxygenates--
we should be permitted to do so.
Having that flexibility now will allow us to stop any further
contamination of our drinking water while we transition away from MTBE.
But the legislation outlined above is critical to California's ability
to invest in a long-term solution. One that protects our water, keeps
us on the road to clean air, and ensures an uninterrupted, afforded
fuel supply.
I look forward to working with you to promote the passage of this
much-needed legislation.
Sincerely,
Gray Davis
Governor
______
Sacramento Metropolitan Air Quality Management District
February 24, 1999
The Honorable Brian Bilbray
United States House of Representatives
1530 Longworth House Office Building
Washington, DC 20515
Dear Representative Bilbray: The Sacramento Metropolitan Air
Quality Management District supports both your bill, H.R. 11, and
Senator Feinstein's bill, S. 266. These bills would provide California
greater authority over its clean air program by allowing California's
cleaner-burning gasoline regulation to apply in lieu of federal
reformulated gasoline regulations as long as these regulations achieve
equivalent or greater emission reductions of ozone-forming compounds
and toxic air contaminants.
The Clean Air Act currently requires the use of at least 2% by
weight oxygenates in reformulated gas. Congress mandated, in the Clean
Air Act the use of reformulated gasoline in 1990 in those areas of the
country with the worst smog problems, primarily Los Angeles, San Diego,
and here in Sacramento. This requirement results in 11% of MTBE in each
gallon of gas--MTBE being the oxygenate/additive used in California to
reduce fuel emissions. Although gasoline manufacturers claim it is
feasible to produce clean-burning gas without MTBE, the 2% federal
requirement prohibits them from doing so in many areas of the State.
H.R. 11 and S. 266 give California the flexibility to implement
more stringent standards without having to meet the federal regulations
requiring oxygenates, like MTBE, in gasoline. This legislation permits
California to meet an ``outcome'' based reformulated gasoline standard
without requiring an additive that poses a serious ground-water
pollution problem such as MTBE. We strongly believe that achieving
cleaner air should not come at the expense of water quality.
For these reasons, the Sacramento Metropolitan Air Quality
Management District fully supports H.R. 11 and S. 266. Please let us
know if there is anything I or the Air District can do to assist in its
passage. Should you have any questions, please contact our Legislative
Liaison, Larry Robinson, at (916) 386-6645.
Sincerely,
Norm Covell
Pollution Control Officer
c: Stewart Wilson, Secretariat, California Air Pollution Control
Officers' Association
______
February 22, 1999
The Honorable Brian Bilbray
U.S. House of Representatives
1503 Longworth House Office Building
Washington, DC 20515-0549
Dear Congressman Bilbray: We the undersigned would like to express
our strong support for H.R. 11. It would eliminate superfluous federal
requirements for gasoline marketed in California, as long as California
Reformulated Gasoline (RFG) has equivalent or better emission reduction
performance relative to federal RFG.
California has had a long history of regulating fuels in the state
to improve air quality, predating the adoption of the federal RFG
program under the 1990 amendments to the Clean Air Act. Today, refiners
and marketers of fuels in California find themselves having to comply
with conflicting and duplicative federal and state requirements. This
adds complexity and cost to producing California RFG, with absolutely
no commensurate benefit to the environment.
H.R. 11 would eliminate the overlap in California between the state
and federal programs. It would also provide greater flexibility in
formulating and producing California RFG, while still assuring that the
high standards for reducing emissions are retained. These state
requirements are mandated by California RFG regulations which are
federally enforceable as part of California's State Implementation
Plan. We applaud your leadership in introducing this important
legislation and urge Congress to enact this bill into law.
Douglas F. Henderson, Executive Director, Western States
Petroleum Association; Evelyn Gibson, Government Relations
Director, California Independent Oil Marketers Association;
Arleen Alexander, Director Legislative Affairs, National
Association of Convenience Stores; Philip T. Cavanaugh, Vice
President, Federal Relations, Chevron Corporation; Steve Ward,
Vice President, Government Affairs, Shell Oil Company; Ann
Farner Miller, Vice President, Government Relations, Tosco
Corporation; R. Timothy Columbus, Counsel for Society of
Independent Gasoline Marketers of America; James C. Pruitt,
Federal Government Affairs, Texaco, Inc.; Sandra G. Swirski,
Manager, Federal Government Relations, Mobil Corporation; James
J. Rouse, Vice President, Washington Office, Exxon Corporation;
and Robert L. Healy, Vice President, Federal Government
Relations, Arco Corporation.
______
Contra Costa Water District
Concord, CA
February 23, 1999
The Honorable Brian Bilbray
U.S. House of Representatives
Longworth House Office Building
New Jersey & Independence Ave. SE
Washington, DC 20515
RE: H.R. 11
Dear Congressman Bilbray: I am pleased to inform you that the
Contra Costa Water District (CCWD) Board of Directors has adopted the
position of Favor for H.R. 11.
CCWD provides treated and untreated water to a population of
400,000 in central and east Contra Costa County. The District recently
built the 100,000-acre-foot Los Vaqueros Reservoir near Brentwood. Gas-
powered vehicles will be not be allowed on Los Vaqueros, or any of the
District's reservoirs, which shows the District's commitment to
protecting water quality. Because of its interest in protecting water
quality, the District favors legislation that will phase out and/or
eliminate MTBE from gasoline.
Thank you for your efforts on behalf of this important public
health matter.
Sincerely,
Joseph L. Campbell
President
cc: CCWD Board of Directors
______
California Business Alliance
Sacramento, CA
February 22, 1999
The Honorable Dianne Feinstein,
United States Senator,
331 Hart Senate Office Building,
Washington D.C. 20515-0504
Sub: Support of S. 266
Dear Senator Feinstein, few regulatory issues are more frustrating
to the business community than conflicting rules at the local, state
and federal levels. One such situation is the federal mandate that
reformulated gasoline contain oxygenates, such as MTBE, which are not
required under California's cleaner-burning gasoline rules.
As you are aware, the California state legislature is considering a
total or partial ban on MTBE in response to concerns about its impact
on water quality. But the current conflicting federal makes any such
action difficult if not impossible.
That is why CBA strongly support your bill S. 266 and Congressman
Bilbray's bill H.R. 11. This legislation would allow California's
cleaner-burning gasoline regulations to apply in lieu of federal
reformulated gasoline rules, as long as California regulations achieve
greater or equivalent emissions reductions. Since our state's standards
call for greater emissions reductions than those required under federal
law, your bill would protect California's air quality while allowing us
the flexibility to address growing concerns about MTBE.
The California Business Alliance represents small businesses
throughout California. Our membership advocates regulatory flexibility
to achieve reasonable air and water quality standards using the most
cost effective and efficient means available. S. 266 and H.R. 11
provide such flexibility.
Once again, we support S. 266 and H.R. 11, and hope that they will
be the first of many bipartisan efforts to reduce regulatory
contradictions and increase flexibility for the business community.
Sincerely,
T. Jacob Mathew
cc. Congressman Brian Bilbray
Governor Gray Davis
______
California Manufacturers Association
February 19, 1999
The Honorable Dianne Feinstein
United States Senate
331 Hart Building
Washington, D.C. 20510
Dear Senator Feinstein: The California Manufacturers Association
extends its support for your S. 266, which will provide reasonable
flexibility to California in obtaining cleaner air standards.
Federal law requires a strict gasoline recipe which mandates adding
oxygenates such as MTBE and ethanol to gasoline sold in California.
Without passage of S. 266, 70% of California's gasoline must still
contain oxygenates. The state Legislature is currently considering a
ban on MTBE. S. 266 would provide refiners with the flexibility to make
gasoline without MTBE as long as they meet the state's cleaner-burning
gasoline standards, which are the strictest in the country.
Under existing rules, refiners must simultaneously implement
California's cleaner-burning gasoline regulations and different federal
regulations for reformulated gasoline. These inconsistent regulatory
requirements result in duplication, overlap and unnecessary higher
costs without any additional air quality benefits.
California is considered a model for implementing the most
stringent regulations to maintain quality environmental resources,
including the protection of air quality. The flexibility provided in S.
266 will allow California to establish procedures for maintaining
cleaner air quality that is best suited and effective for California.
Thank you for your efforts in establishing a common-sense approach
to this issue. Again, CMA would like to state its support for your S.
266.
Sincerely,
Jack M. Stewart
President
cc: Congressman Brian Bilbray
Governor Gray Davis
______
California Chamber of Commerce
February 18, 1999
The Honorable Brian Bilbray
U.S. House of Representatives
1530 Longworth House Office Building
Washington, D.C. 20515
Subject: H.R. 11 (Bilbray) Reformulated Fuel: Flexibility Support
Dear Congressman Bilbray: The California Chamber of Commerce
strongly supports your bill H.R. 11, which would allow California to
use its cleaner burning gasoline regulations in lieu of federal
reformulated gasoline rules, as long as California rules achieve
greater or equivalent emissions reductions.
Current law requires California refiners to comply with both state
and federal cleaner-burning gasoline rules. Unfortunately, state and
federal requirements differ as federal law requires California refiners
to comply with a federal mandated recipe by adding oxygenates such as
MTBE in their reformulated fuels, whereas state law only requires the
use of oxygenates during the winter months. These inconsistent
regulatory requirements result in unnecessary higher costs without any
additional air quality benefits.
Recently, there have been several reports about MTBE contamination
in certain parts of California's water supply. The state Legislature is
currently considering a ban on MTBE to address this problem. However,
recent government studies have concluded that an immediate ban would
have dire consequences on California's economy. California refiners
would have to import huge quantities of other oxygenates from other
states, which would require a significant new infrastructure.
The most logical solution to solving the MTBE dilemma without
disrupting California's economy is to provide greater flexibility at
the federal level by removing the federal mandate. H.R. 11 would permit
non-oxygenated gasoline throughout the state while still meeting
California's cleaner-burning gasoline standards, which are the
strictest in the nation. The performance-based emissions reduction
standards called for in H.R. 11 would eliminate existing regulatory
confusion, while giving refiners flexibility to produce the cleanest
gasoline safely and cost-effectively.
For these reasons, we SUPPORT H.R. 11 as a common sense approach to
air quality improvement.
Sincerely,
Allan Zaremberg
President
cc: Members of the California Congressional Delegation
Governor Gray Davis
Members of the California Legislature
______
ARCO
Los Angeles, California
February 18, 1999
The Honorable Brian Bilbray
1530 Longworth House Office Building
Washington, DC 20515
Dear Representative Bilbray: I am writing to let you know that ARCO
strongly supports your legislation (H.R. 11) that would provide
refiners with the flexibility to produce clean-burning gasoline in
California without the use of a minimum level of oxygenates.
Enactment of this legislation would allow ARCO and other refiners
to eliminate the use of MTBE in our gasolines. The use of MTBE has been
extremely effective in reducing pollution from automobiles and
producing cleaner air while maintaining adequate gasoline supplies at
reasonable prices. Unfortunately, MTBE also has disadvantages--it
dissolves easily in water, and has a disagreeable taste and odor that
can be detected in water at very low concentrations.
As you know, Governor Gray Davis is expected to make a decision
soon regarding the fate of MTBE in California fuel. In addition, state
legislation has been introduced that would ban or phase-out the use the
use of MTBE. The phase-out of MTBE appears likely. If MTBE is phased-
out and the federal oxygenate mandate remains, ethanol is the only
feasible alternative oxygenate. If ethanol were the only option,
refineries would have to be modified at substantial cost to deal with
increased vapor pressure resulting from ethanol in the entire gasoline
pool. Most of that investment would be wasted if at a later date the
mandate disappeared. Therefore, If MTBE is phased-out, flexibility to
produce gasoline without the federal oxygenate mandate becomes
critical.
ARCO has nothing against the use of ethanol in gasoline. In fact,
we currently use it in some gasoline we sell in other states. There
would be new opportunities for expanded use of ethanol in California if
MTBE were phased out and the oxygen requirement was eliminated. We
think this is the right solution, and the one that will best serve all
interests--including the environment, motorists, and oxygenate and fuel
producers.
Thank you for your leadership on this important issue to the State
of California. We are working hard in California and Washington, D.C.
to help you enact this bill into law.
Sincerely,
Mike R. Bowlin
Chairman and CEO
______
East Bay Municipal Utility District
February 16, 1999
Honorable Brian Bilbray
United States House of Representatives
1530 Longworth House Office Building
Washington, D.C. 20515
Dear Representative Bilbray: On behalf of the East Bay Municipal
Utility District (EBMUD), I am pleased to inform you that we support
your H.R. 11, which would provide that California's cleaner burning
gasoline regulations would apply in California in lieu of existing
federal regulations as long as equivalent or greater reductions in
emissions of ozone-forming compounds and toxic air contaminants are
achieved.
We believe your H.R. 11 would improve flexibility in the
formulation of gasoline while preserving the stringent minimum emission
standards in the Clean Air Act, so that gasoline refiners would have
alternatives to the use of methyl tertiary butyl ether (MTBE). Your
measure would strike an important balance in ensuring high standards of
air quality while moving forward on alternative fuel formulations which
may be less threatening to human health and drinking water quality.
As you know, existing law results in overlapping application of the
state and federal reformulated gasoline regulations. This creates a
substantially reduced opportunity for gasoline refiners to take
advantage of the flexibility in the California program's reformulation
rules without falling out of compliance with federal regulations. As a
result, compliance with the federal regulations is still required,
despite the fact that the California standards have demonstrated
achievement of equal or superior air quality benefits. Although the
federal law and regulations do not require the use of MTBE
specifically, the federal regulations do require the use of a fuel
oxygenate. MTBE has become the oxygenate of choice because of its high
octane rating, low production cost, and ability to readily mix with
other gasoline components.
We very much appreciate your leadership on this issue. Ensuring
that gasoline consumed in California is formulated in such a way that
there are minimized threats to drinking water quality and continued
protraction of air quality is an important public health and
environmental protection effort.
Randele Kanouse, Special Assistant to the General Manager, is
available to answer any questions you may have concerning EBMUD's
position on H.R. 11. Mr. Kanouse may be reached at (916) 443-6948.
Sincerely,
Dennis M. Diemer
General Manager
______
ARCO
Los Angeles, California
February 17, 1999
The Honorable Tom Daschle
509 Hart Senate Office Building
Washington, DC 20510
Dear Senator Daschle: Thank you for your recent letter on
oxygenated fuels issues in California. I am pleased that you have
underscored the importance of moving to resolution on the issues
associated with the use of MTBE and the federal oxygenates requirement
as applied to California. I am particularly encouraged that you are
determined to work with all interested parties to find a resolution
that will work in this state. Your leadership will surely make a
difference.
Based on your letter and the discussion that my staff had with your
Legislative Director, it appears that we are close to a possible
solution. ARCO was an originator of clean-burning gasoline and remains
a strong supporter of the California and federal clean-burning gasoline
programs. These programs have been remarkably effective in improving
the air quality in California's urban areas and other urban areas
across the nation.
Your suggestion that Congress establish an advisory committee to
conduct a thorough evaluation of the use of MTBE and alternative
oxygenates in gasoline is sound and we agree. The California Energy
Commission and the University of California have recently concluded an
evaluation of the economic and health issues related to MTBE use in
California. It would be very useful to conduct a more exhaustive study
on the economic, health and environmental impacts of the use of
oxygenates in the rest of the U.S. We suggest that the study be
referred to a panel established under the aegis of the National Academy
of Sciences.
We also support your proposal that the State of California be
allowed to waive the fuel oxygen requirement provided no deterioration
in air quality occurs. As you may know, there is no risk to air quality
in the event of a waiver since California's gasoline performance rules
are as stringent as or more stringent than the federal counterparts.
We would like to further discuss your proposal for a two-year
waiver of the oxygenate requirement since it would not produce any
significant changes in MTBE use. To substantially reduce the use of
MTBE, refiners like ARCO must make modifications to refineries. Based
on our experience, the time to get permits, design and construct the
modifications of this sort would consume more than two years. But the
real difficulty would be that we would not know which of the two
alternative futures we would face: permanent repeal or reinstitution of
the oxygenate mandate.
Each path requires substantial modifications to refineries and
capital outlays, but the two paths differ greatly.
Next month Governor Gray Davis is expected to make a decision
regarding the fate of MTBE in California fuel. Due to media and
political pressures, the phase-out of MTBE appears likely. If MTBE is
phased-out and the federal oxygenate mandate remains, ethanol is the
only feasible alternative oxygenate. At first blush, this would appear
to be a great boon to ethanol suppliers. However, we are concerned that
an effective mandate for the use of ethanol in California on the same
scale as the current use of MTBE would potentially cause a number of
difficulties.
There are several reasons for our concerns. First, ethanol shares
some of the same physical characteristics as MTBE. It is extremely
soluble in water--more so than MTBE--and is difficult to remove from
water. Although it has a much higher taste and odor threshold than
MTBE, water providers would likely have a similar response to its
presence in drinking water supplies if MTBE is to be phased out, we
clearly need a very thorough study to ensure that we are not exchanging
one set of oxygenate issues for another.
Second, large-scale, short-term demand for ethanol in California
could produce supply shortages and price spikes. Gasoline and ethanol
prices could rise substantially.
Third, as noted above, if ethanol were the only option, refineries
would have to be modified at substantial cost to deal with increased
vapor pressure resulting from ethanol in the entire gasoline pool. Most
of that investment would be wasted if at a later date the mandate
disappeared.
There would be new opportunities for expanded use of ethanol in
California if MTBE were phased out and the oxygen requirement was
eliminated. We think this is the right solution, and the one that will
best serve all interests--including the environment, motorists, and
oxygenate and fuel producers.
We are very pleased that you have made the California MTBE issues a
priority for the 106th Congress. We look forward to continuing this
dialogue with you to find a cooperative solution.
Sincerely,
Mike R. Bowlin
Chairman and Chief Executive Officer
cc: The Honorable Brian Bilbray
The Honorable Dianne Feinstein
______
Chevron
San Francisco, CA
February 10, 1999
The Honorable Tom Daschle
United States Senate
Hart Building, Room 509
Washington, DC 20510-0504
Dear Senator Daschle:
Thank you for your letter dated February 2, 1999 on the MTBE issue
in California and your willingness to consider changes in gasoline
specifications as possible solutions. As you are aware, this issue has
been growing in intensity in California over the last several years. In
December 1997, in response to our customers concerns, we publicly
stated that we would work toward significantly reducing our use of MTBE
in gasolines we make for California. Since that time, we have produced
some gasoline with reduced MTBE content and have eliminated it entirely
in some batches, for areas of the state where the overlapping federal
oxygenate mandate does not apply (outside of the Los Angeles, San
Diego, and Sacramento ozone non-attainment areas). We could do more
immediately should the legislation sponsored by Senator Feinstein (S.
266) and Congressman Bilbray (H.R. 11) become effective. As we
testified before Congress last year, we believe this legislation will
make it easier for both ethanol-blended gasolines and non-oxygenated
gasolines to compete in the marketplace.
I would like to respond to several issues you raised in your
letter:
First, you have suggested that California be allowed to waive the
federal oxygenate content mandate for a certain period of time, by
granting refiners the flexibility to sell either federal RFG or CARB II
gasoline throughout California. We certainly support the flexibility to
replace the federal RFG requirements with the CARB RFG requirements.\1\
This, in fact is exactly what the Feinstein/Bilbray bills do. As we
testified last year, CARB RFG outperforms federal RFG in reducing
vehicle emissions, and the CARB program is performance-based in one
important respect where federal RFG isn't, the oxygen content. We
continue to believe that this is the best approach for government to
take, rather than mandating specific formulas.
---------------------------------------------------------------------------
\1\ Although your letter indicates that either federal RFG or CARB
II gasoline could be sold in California during the waiver period, we
don't believe that was your specific intent. Gasoline that only meets
federal RFG requirements would not be as clean burning as CARB
gasoline--and thus would be unacceptable backsliding.
---------------------------------------------------------------------------
However, limiting the time period to two years for refiners to take
advantage of an oxygenate waiver provides little reason to change
gasoline manufacturing practices by the industry. The modifications
needed to refining, blending, and marketing operations to significantly
reduce or eliminate MTBE would involve substantial investments that a
short-term moratorium would not justify. In short a moratorium would
only serve to postpone the tough decisions that must be made and
further frustrate the people of California who are telling us and the
political leadership of the state that they want action now.
Second, you mentioned in return for this flexibility, no oxygenates
would be phased out or banned. While we cannot respond for the state,
we suspect the pressure will grow to phaseout MTBE in California. The
issue is more complex than leaking tanks and two-stroke engines. MTBE,
while a good gasoline blendstock, behaves differently from other
gasoline components in the environment. It is highly water soluble,
slow to degrade, and causes drinking water to smell and taste bad at
extremely low concentrations. This means that even small discharges,
such as spills by consumers, tank overfills, and vehicle accidents can
result in MTBE contamination, which is more difficult to clean up and
more likely to impact groundwater.
Third, you discussed the idea of establishing a National Oxygenates
Policy Advisory Commission (NOPAC) to conduct an intensive two-year
evaluation of the use of MTBE and other oxygenates in gasoline. We
would support additional steps which would further our collective
understanding of this issue, since we believe issues will continue to
arise regarding the national mandate.
Finally, you mentioned you were hopeful there would be new
opportunities for the expanded use of ethanol. As I mentioned earlier,
we believe that gasoline with MTBE will be replaced with a combination
of ethanol-blended and non-oxygenated gasolines in the marketplace. For
one thing, oxygenates will continue to be needed in Los Angeles even if
Senator Feinstein's bill were to become law, due to the need for carbon
monoxide reductions in the winter. Ethanol will also be used
voluntarily where its high octane and other favorable blending
attributes make economic sense.
I hope you will support the legislation sponsored by both Senator
Feinstein and Congressman Bilbray, which has broad bipartisan support
from the California delegation. The President of Chevron Products
Company, Ms. Patricia Woertz, will be visiting Washington in the next
few months, and would like to discuss this with you further, if your
schedule permits. Thank you again for your letter, and your
consideration of our thoughts on this issue.
Sincerely,
K.T. Derr
Chairman of the Board
cc: The Honorable Dianne Feinstein
The Honorable Gray Davis
The Honorable Brian Bilbray
______
United States Senate
Office of the Democratic Leader
Washington, DC 20510-7020
February 2, 1999
Mr. Mike Bowlin
Chairman
ARCO Corporation
Los Angeles, CA 90071
Dear Mr. Bowlin: One of my priorities for the 106th Congress is
responding quickly to the existence of MTBE in groundwater in
California. The potential ramifications of this problem for both the
environment and the future of the RFG program are immense, and I am
determined to work with all interested parties to fashion a response
that allows California to address its immediate contamination concerns
while preserving the long-term benefits associated with the use of
oxygenates in gasoline.
I view discussions with California's elected officials, the EPA and
industry as essential to the realization of this goal. Therefore, I
particularly appreciated the time that a representative of your company
took recently to discuss the California situation with my Legislative
Director, Eric Washburn. I am hopeful that that meeting marked the
beginning of a constructive dialogue on the issue of MTBE and
oxygenates use in gasoline.
While I appreciate ARCO's desire to eliminate the oxygenate
requirement for gasoline sold in California, I remain a strong believer
in the oxygenate standard's contribution to a cleaner environment, a
stronger economy and greater security. There should be no mistake about
my commitment to the maintenance of the minimum oxygen standard over
the long-term in cleaner burning gasoline.
Last year, I actively opposed bills to waive the oxygen standard
permanently, because I felt that they do not address the root cause of
what I agree is a very serious environmental problem in California, and
because they would have sacrificed the many benefits associated with
using oxygenates. It is my understanding that the primary sources of
contamination in California groundwater are leaking underground storage
tanks and two-cycle boat engines. Any long-term solution to this
problem should focus on these sources.
Senators Feinstein and Boxer have reintroduced legislation in the
106th Congress to allow California to utilize non-oxygenated gasoline
in RFG areas. I am sympathetic to their assessment of the urgency of
the environmental threat posed by contaminated groundwater in their
state and have suggested an alternative approach that will address this
problem immediately while preserving the benefits of oxygenated fuels.
Last fall, the EPA announced a series of steps designed to
eliminate the pollution of water supplies by all constituents of
gasoline, including MTBE. Since it will take time to fully implement
those initiatives, I propose that the State of California be allowed to
waive the oxygen requirement under certain prescribed conditions for a
finite period of time. This interim approach will address the immediate
environmental problem and allow us to reach the point where gasoline
can be used without fear of water contamination.
This compromise would, for a two year period (from date of
enactment), grant to refiners the flexibility to sell either federal
RFG or CARB II gasoline in California. No backsliding would be allowed,
and no deterioration in California air quality would be permitted. In
return for this grant of flexibility, no oxygenates would be phased
out, or banned. In fact, I am hopeful that, in this environment, new
opportunities would be found for the expanded use of ethanol.
Given your concerns and the concerns of others regarding the
continued use of MTBE, I also suggest that Congress establish a
National Oxygenates Policy Advisory Commission (NOPAC) to conduct an
intensive two-year evaluation of the use of MTBE and other oxygenates
in gasoline. This panel would evaluate the effectiveness of oxygenates
in cleaner burning gasoline, progress that has been made in leaking
underground storage tank prevention, improvements in the efficiency of
two-cycle engines, MTBE bio-remediation, the relative safety, cost and
availability of alternatives to oxygenates, and other relevant issues.
It would then make recommendations to the Congress prior to the
reinstatement of the oxygen requirement in California in two years.
The efficacy of RFG with oxygenates is undeniable. The EPA has
called the RFG program one of the most successful air pollution
reduction programs in history, and early claims that RFG would cost 25
cents per gallon more than conventional gasoline have proven totally
unfounded. RFG costs have averaged from 1 to 3 cents per gallon
nationwide, much of the credit for which must go to companies like ARCO
that have worked hard to provide cost-effective RFG to the American
people. Today, four years after implementation of RFG, program
supporters range from automakers to the American Lung Association. It
is my intent to ensure that our economy and environment continue to
enjoy the benefits of the minimum oxygen standard in cleaner burning
gasoline for years to come.
Again, thank you for your interest in this issue. I look forward to
continuing this dialogue and finding a cooperative solution to the
groundwater problem in California.
Sincerely,
Tom Daschle
______
ARCO Products Company
Los Angeles, California
May 5, 1999
The Honorable Brian Bilbray
Chairman, Subcommittee on Health and Environment
United States House of Representatives
Washington, DC 20515
Re: H.R. 11
Dear Representative Bilbray: As you know, on May 6, the Health &
Environment Subcommittee will hold a hearing on H.R. 11, your
legislation that would allow California's reformulated gasoline (RFG)
rules to preempt federal requirements if the state's rules achieve
equal or greater emissions reductions. I am writing letters to all
members of the subcommittee to encourage them to support H.R. 11 and to
urge Subcommittee Chairman Bilirakis and Committee Chairman Bliley to
move it through the Commerce Committee as quickly as possible and then
urge Speaker Hastert to move it through the House of Representatives
shortly thereafter.
On March 25, 1999, Governor Davis signed an Executive Order phasing
out the use of MTBE in California no later than December 31, 2002.
Therefore, California urgently needs relief from the 2%-by-weight
federal oxygenate requirement. Without relief, ARCO and other
California refiners would have no choice but to use ethanol to meet the
oxygenate requirement. While we do use ethanol in our gasolines in many
areas during the winter, we could not use it in most of our gasoline in
California without investing tens of millions of dollars to retool our
California refinery. We are very reluctant to invest that capital for
several reasons: (1) there are no air quality benefits associated with
this expenditure, (2) gasoline vapor pressure limits in California make
it exceedingly difficult to use ethanol in summertime gasoline even
with refinery modifications, and (3) the oxygenate requirement may be
eliminated soon after we make the investment. Instead, we would
purchase gasoline and gasoline components on the open market to meet
our customer's demands. Under this scenario, if we did not spend the
money to optimize our CARB gasoline production with 2 weight percent
ethanol, our gasoline output would decline by 15% to 30% during the
summer. Since ARCO supplies about 20% of the gasoline in the state,
California gasoline production would decline by 3% to 6%.
California's most recent gasoline supply shortfall once again
demonstrated that it is time-consuming and expensive to replace lost
gasoline production from California refiners due to California's unique
gasoline requirements and its geographic isolation from other major
refining centers. The requirement to use a certain percentage of
ethanol would further complicate California's gasoline supply
infrastructure, since the ethanol necessary to meet the federal mandate
would be transported to California primarily by rail cars from the
Midwest.
The ethanol industry will in fact make major gains in the
California gasoline market without an oxygenate mandate. It has been
estimated that about 44,000 barrels per day of ethanol would be used in
California after MTBE is phased out. This represents about one-half of
the total fuel ethanol currently produced in the entire U.S. and over a
100-fold increase in ethanol usage in California today. ARCO expects to
use about 9,000 to 10,000 barrels per day of ethanol, assuming
reasonable price and contract terms, even without a federal oxygenate
requirement.
Enclosed is a paper that provides further detail on why California
needs urgent relief from the oxygenate requirement.
Thank you very much for your continued hard work to get H.R. 11
enacted into law.
Sincerely,
Roger E. Truitt
President