Valero Energy Corp. announced that it plans to quit producing methyl tertiary butyl ether next spring in an effort to reduce its exposure to product liability litigation.
The San Antonio-based independent refiner and marketer said that its decision also was influenced by expiration of the Clean Air Act’s oxygenate mandate 270 days after the 2005 energy bill takes effect.
US President George W. Bush is scheduled to sign the bill Aug. 8 in New Mexico.
MTBE product liability protection was in the US House of Representatives’ version of the energy bill, but did not survive when the measure went to conference with the Senate.
House Energy and Commerce Committee Chairman Joe Barton (R-Tex.) and Rep. Charles Bass (R-NH) proposed a trust fund as a compromise during the conference.
It would have provided up to $11.43 billion over 12 years for cleanups and other remediation efforts.
Refiners and marketers would have been required to pay $4 billion into the fund in exchange for immunity from MTBE defective product lawsuits. The proposal was withdrawn after it was criticized by oil industry groups, who considered it too expensive, and by state and local governments, who regarded it as insufficient.
Valero’s action will pull about 60,000 b/d off the 9 million b/d US gasoline market, the company said in an e-mail message to reporters.
“If other companies follow Valero’s lead, the market could lose a full 259,000 b/d, comparable to five world-scale refineries,” it said.
In 1-2 years, Valero could regain 30,000 b/d of gasoline production if it decides to convert its MTBE production units to Iso-octene, it said.
The company also could continue to export MTBE to Europe and other markets where it’s still used.
Valero said that if other US refiners also decide to quit making MTBE, the country could lose as much as 258,000 b/d of gasoline production.
It could regain 129,000 b/d of that production in 1-2 years “if everyone in the industry chooses to invest to convert their units to Iso-octene,” the company said. ✦