Trade groups blame MTBE supply slide on energy bill

March 29, 2006
A steep decline in the use of methyl tertiary butyl ether as a gasoline additive results from refusal by Congress to adopt MTBE liability limits as part of the Energy Policy Act of 2005, a former chairman of the National Association of Convenience Stores told a US Senate committee Mar. 29.

Nick Snow
Washington Correspondent

WASHINGTON, DC, Mar. 29 -- A steep decline in the use of methyl tertiary butyl ether as a gasoline additive results from refusal by Congress to adopt MTBE liability limits as part of the Energy Policy Act of 2005, a former chairman of the National Association of Convenience Stores told a US Senate committee Mar. 29.

Domestic ethanol producers are working hard to supply fuel-grade ethanol for the summer driving season, Bill Douglass, chief executive of Douglass Distributing Co. in Sherman, Tex., told the Senate Environment and Public Works Committee.

"But it is uncertain whether these best efforts will be sufficient to meet the demand for ethanol as the nation transitions away from MTBE," he said.

The National Petrochemical & Refiners Association made a similar point in a statement that its president, Bob Slaughter, submitted to committee chairman James M. Imhofe (R-Okla.) before the hearing.

"There is no doubt that refiners' efforts to maintain a secure gasoline supply during this transition period have been complicated by Congress's failure to include limited liability relief for MTBE as part of last year's comprehensive energy legislation," Slaughter said.

But Sen. James M. Jeffords (I-Vt.), the committee's chief minority member, expressed a different opinion in his opening statement at the hearing.

"The oil industry has had plenty of time to phase out MTBE and has resisted doing so. Suddenly, after years of foot-dragging, it has decided to stop using MTBE in early May in an abrupt and potentially disruptive manner," he said.

"The industry is faced with a crisis of its own making, and I fear it will use this as an excuse to hike prices at the pump," said Jeffords, who added that refiners should have been among the hearing's witnesses.

Few options
Douglass, who testified on behalf of the Society of Independent Gasoline Marketers of America as well as NACS, said he sees few public policy options to mitigate potential gasoline or ethanol shortages in the short term.

One possible action in the next 6 months would be to temporarily suspend the tariff on imported ethanol, he suggested.

"Such a move would help supplement the efforts of the domestic ethanol industry to satisfy the rapidly escalating demand without penalizing consumers with a 53¢/gal tariff. This would be meaningful, sound public policy enacted for the good of the consumer," Douglass said.

He said he is one of many retailers who will be selling gasoline with ethanol this year for the first time. They will be doing this as they switch from winter to summer gasoline blends, which will pose a challenge.

In his submitted statement, Slaughter noted that individual refiners will make their own decisions about continuing to use MTBE as the oxygenate requirement is lifted.

"NPRA traditionally opposes fuel mandates, a policy position that has only been validated by the industry's experience with the RFG mandate. We also remain concerned about Congress's recent decision to mandate ethanol inclusion in the nation's gasoline supply, as we do about attempts to extend that mandate and require other 'renewable fuel' use," Slaughter wrote Imhofe.

He urged Congress to monitor several evolving regulatory programs that could affect gasoline and diesel fuel supplies, including:

-- The design and implementation of the credit trading program for the ethanol mandate in the 2005 energy bill.

-- MTBE bans in states that effectively reduce fuel supplies.

-- Implementation of the ultralow-sulfur highway diesel fuel regulation.

-- Phase II of the Mobile Source Air Toxics rule for gasoline.

-- Implementation of the new 8-hr ozone rule under the National Ambient Air Quality Standards.

-- Continued clarification of the New Source Review program.

Contact Nick Snow at [email protected].