Maureen Lorenzetti
Washington Editor
WASHINGTON, DC, Sept. 18 -- As the US Congress resumes energy bill negotiations this week, environmental and public interest groups called on lawmakers to reject a pending Senate provision designed to exempt fuel ethanol from federal and state product liability lawsuits. The coalition also wants lawmakers to reject a possible House proposal to expand liability protections to the clean fuel additive methyl tertiary butyl ether.
"We urge you to strike the loophole from the energy bill in conference and to ensure that renewable fuels are not subject to a lesser liability standard than other motor vehicle fuels or fuel additives. In addition, we understand that representatives of the oil industry are trying to expand the liability loophole to include MTBE, which is an outrageous proposition given the widespread water contamination caused by MTBE to date," the Sept. 18 letter said.
The US Public Interest Research Group spearheaded the letter, also signed by the American Lung Association, American Rivers, Earthjustice, Environmental Defense, Friends of the Earth, League of Conservation Voters, National Environmental Trust, Natural Resources Defense Council, Sierra Club, and Physicians for Social Responsibility.
Pending business
Last year, integrated oil companies, US Northeast states, most environmental groups, and agricultural interests crafted a compromise regarding federal clean fuels programs. Oil companies agreed to support a Senate provision giving states a flexible MTBE phase-out plan to address concerns over groundwater contamination. Major oil companies, meanwhile, won the stipulation that the current 2 wt % oxygen requirement in federal reformulated gasoline be eliminated.
Agricultural interests also got a guarantee that the fuel ethanol market would be robust thanks to a renewable fuels mandate. That mandate, while controversial, still has the support of key policymakers on Capitol Hill and the White House. It seeks to nearly triple the ethanol market to 5 billion gal/year by 2012 and include a bank-and-trade program. Ethanol producers, with the blessing of some integrated oil companies, also successfully negotiated a "safe harbor" provision designed to shield them from the kind of lawsuits MTBE producers are facing.
House discussions
The House version does not include an ethanol mandate. It does authorize $200 million for MTBE-related cleanup, as does the Senate measure.
House negotiators, meanwhile, are said to be favoring accepting the ethanol mandate in deference to the powerful hold the issue has in the politically pivotal US Midwest. But in return, some House lawmakers from districts with petrochemical plants want MTBE manufacturers also to have liability relief.
"The Senate version of the bill provides for an increase in ethanol usage plus relief from potential liability associated with its use. However, MTBE, the most widely used fuel additive, will be banned and denied any liability protection. This denial of protection to MTBE manufacturers against lawsuits is inconsistent with law and policy,"said a Sept. 18 letter authored by Rep. Lamar Smith (R-Tex) and signed by nine other lawmakers from producing states.
"As we proceed in conference, we must address the liability concerns of the MTBE manufacturers who complied with the federal mandate Congress enacted in 1991. It is not unusual for the federal government to address liability concerns when businesses are required to produce a product or adopt a particular manufacturing process. Without liability protection, many MTBE manufacturers may exit the market before the bill's 4-year phase out is complete. This early exit from the market may precipitate supply shortages and price spikes. Certainly this was not the intention of the authors of the legislation. However, as the conference continues, we urge you to provide equivalent liability treatment for MTBE."
House negotiators also are said to endorse a Senate provision authorizing the Department of Energy to give grants to US merchant MTBE producers that want to convert facilities to other chemical feedstocks, such as iso-octane. But that provision does not shield ether producers from the kind of product liability-related lawsuits ExxonMobil Corp. and Halliburton Co. have faced on asbestos.
Fuel suppliers fear lingering legal problems even though some courts have recently ruled in industry's favor. A recent New York state court, for example, held refiners can't be held liable when groundwater is contaminated with MTBE-blended gasoline that came from a leaking fuel tank. But another lawsuit, in northern California, lingered for 4 years until refiners and gasoline distributors settled for $28 million. MTBE supporters note, however, that most of the settlement costs reflect problems associated with leaking storage fuel tanks, not just MTBE use.
"MTBE has not been the root chase of the problem; it's leaking storage tanks," said Frank Maisano, spokesman for the Oxygenated Fuels Association, which represents MTBE producers. "Whether it's MTBE, ethanol, or any type of gasoline, if tanks are leaking you will have a problem."
Maisano also noted that the extent of the MTBE contamination problem may not be as extensive as first thought. Initial estimates by some consultants put a $29 billion price tag on a nationwide cleanup of the ether near drinking water sources. But new MTBE contaminations later dramatically dropped when suppliers upgraded tank equipment.
Environmental worries
Environmental groups, many of which earlier agreed to endorse the Senate clean fuel provision because they expect it to mean the phase-out of MTBE, are now worried about what the House may consider. Along with eyeing product liability relief for MTBE, House negotiators are said to be considering similar liability protections for ethanol and related clean fuel additives such as ethyl tertiary butyl ether (ETBE). That in turn could lead to backsliding of clean water protections, say public interest and environmental groups.
In the letter, groups warn that extending liability coverage could deny affected communities appropriate redress, eliminate an important disincentive to pollute, and create a dangerous precedent for future environmental policy.
"Already concerns have been raised that renewable fuels, like ETBE . . . may contaminate groundwater. Ethanol may inhibit the breakdown of other, more toxic components in gasoline and increase the spread of benzene and other hydrocarbons around leaking storage tanks. Moreover, as much-needed research on existing fuels goes forward and new renewable fuel technologies develop, new and unanticipated public health and environmental hazards may well emerge," the letter said.
Liability issues
Supporters of the liability language say there are provisions in the bill requiring industry to test fuels. The Senate bill also expands the Environmental Protection Agency's discretion to regulate fuels to protect water. And supporters maintain that the ethanol "safe harbor" provision is designed to limit product defect claims and is not meant to discourage gasoline tank spill cleanups. Similarly, the Senate language does not give any ether, ethanol-based or otherwise, special protections.
On ethanol, the Senate bill also makes sure communities can make polluters pay, ethanol interests said.
"This is an extremely limited provision," said Monte Shaw of the Renewable Fuels Association. "It would not preclude the responsible parties to pay when there has been a spill or leak or contamination. They are still 110% liable for those actual cleanup costs."
Environmental groups, however, say that language still is not a substitute for liability protections.
"Product defect claims are the clearest way to hold accountable manufacturers whose products cause injuries to public health or the environment. In addition, the liability loophole could undercut state product defect protections by giving bad actors the ability to argue that the federal government has preempted such state laws," the group said.
API view
American Petroleum Institute took issue with the claims made in the groups' letter, which it said "grossly distorts the intention and effect of the safe harbor provision in the energy bill.
"This provision would only prevent a finding that the addition of an EPA-approved renewable to gasoline could cause the gasoline to be found to be a defective product under tort liability law. It is very limited and would have no impact on a community's (or other affected entity's) ability to seek redress from harm done from the spill of gasoline containing a renewable."
API contends that it is important to understand that such a defense is available only for renewables that have been approved by EPA as a gasoline additive. ETBE is an ether and thus is explicitly excluded from this provision of the bill, the association said.
In addition, API pointed out, liability for the MTBE cleanup costs cited in the letter ($29 billion nationwide, $400 million in Santa Monica) would not have been affected by this provision even if it applies to gasoline containing MTBE—which it does not.
Furthermore, "the petroleum industry is not advocating that this provision be expanded to include MTBE."
API said it remains committed to the fuels agreement in the Senate bill and opposed to changes that would "materially change" the agreement.
"Efforts to expand the liability provision to include MTBE are being pushed by those who recognize the substantial opposition to such an expansion and are interested in using that opposition to kill the whole bill," it said.
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