A year of rocky energy politics left unresolved too many issues crucial to US energy supply. Large among them is the potentially limitless legal liability hanging over makers or sellers of methyl tertiary butyl ether or gasoline containing it.
Before passing the Energy Policy Act of 2005, Congress rejected a shield against one category of MTBE liability. Since then, two devastating Gulf Coast hurricanes have underscored the deficiency of US refining capacity relative to oil consumption. Legislation-some good, some not-surfaced late last year to encourage capacity additions. If lawmakers are serious about the ability of US refiners to meet national energy needs, they should look first for ways to remove official impediments to refining investments. In that simple context, rationalizing MTBE liability is an easy call.
Political interests
But rationalizing MTBE liability runs afoul of powerful political interests. It would force trial lawyers and their water utility and municipal government clients to prove real harm caused by genuine misbehavior on the parts of truly responsible parties before they win judgments and collect damages for MTBE leaks. By shifting liability away from large oil and chemical companies, it would shrink a prospective bonanza for the tort bar. So Congress last year didn’t rationalize MTBE liability, leaving refiners, chemical makers, and fuel marketers facing what some fear will become an endless round of very costly litigation. Comprehensive energy legislation that left an industry crucial to US energy supply subject to such unwarranted jeopardy can’t be called a triumph.
Yet the lapse is partly understandable. The omnibus energy bill resulted from an orgy of political deal-making rather than reasoned assessment of national energy needs and the means for fulfilling them. It was easy for easy-money lawyers and prospective defendants to portray MTBE liability rationalization as a scheme to prevent victims of water-supply contamination from extracting justice from big oil companies that had done them wrong.
In fact, oil companies and others that have made or sold gasoline containing MTBE have wronged no one. They have incorporated into gasoline a substance crucial to compliance with Clean Air Act requirements for oxygen in vehicle fuel. The substance has leaked from a number of faulty tanks around the nation and migrated, as MTBE will, into water supplies. In a large majority of instances, the amounts are too small to be detected by taste or smell, although it doesn’t take much MTBE to make water undrinkable. And in most cases, the large companies that made or sold fuel containing the MTBE had nothing to do with the leaks, many of which do require cleanup and some of which do warrant litigation.
Liability rationalization would not prevent victims of MTBE contamination from suing responsible parties. As proposed for the energy bill, it would have maintained bases of liability such as environmental remediation costs, drinking-water contamination, trespass, public or private nuisance, breach of warranty, breach of contract, and negligence for reasonably foreseeable events.
What the initiative would do, and what the tort bar doesn’t like, is protect makers and sellers of MTBE against defective-product lawsuits. In that type of case, unlike in most tort actions, plaintiffs don’t have to prove negligence. And defective-product liability often extends beyond manufacturers to all parties handling the product.
Uncovered costs
Limitation of the defective-product cause of action thus would make MTBE cases harder to win and probably narrow the field of defendants to owners and makers of faulty storage tanks. It thus would make MTBE litigation less potentially lucrative for plaintiffs and their counsel and let refiners and chemical makers use their time and money to satisfy energy demand. And it would not, as city governments have argued, leave owners of truly damaged water supplies holding the bill for cleanup. A study conducted for the American Petroleum Institute estimates MTBE remediation costs uncovered by existing environmental funds and insurance at $1.5 billion. That’s a small fraction of costs projected by lawyers’ groups and others hoping to profit from MTBE litigation.
The welter that produced the omnibus energy bill obscured these arguments. But that fog has lifted. Congress has no excuse. If it’s serious about expanding US refining capacity, it must relieve the industry of legal jeopardy to which it never should have fallen subject.✦
