Editorial: Serial mistakes

July 11, 2005
A past mistake with fuel ethanol hampers the effort by Congress to pass a comprehensive energy bill.

A past mistake with fuel ethanol hampers the effort by Congress to pass a comprehensive energy bill. A likely new mistake promises even more trouble.

Ethanol lies at the base of the House-Senate conflict over product-defect liability protection for companies that have sold gasoline containing methyl tertiary butyl ether. The substance has leaked with fuel containing it into the subsurface and migrated into sources of drinking water. In almost all cases, it has not threatened public health. In some cases, it has made drinking water taste or smell foul. In many more cases, it has provoked lawsuits.

Litigation bonanza

The House wants to prevent runaway litigation by requiring that MTBE complaints allege something other than product defects. Nothing about MTBE detected in water supplies is defective; the defects are in fuel containment systems. But plaintiffs’ lawyers favor product-defect cases because they’re easier than other, more germane types to win. And the plaintiffs’ bar knows a potential bonanza when it sees one. So far, senators in majority numbers haven’t wanted to provide limited liability protection, the right of predatory lawyers to feed off frivolous lawsuits being sacred to some politicians.

The impasse over MTBE thwarted past efforts to pass an energy bill. If Congress is to succeed with its current attempt, there will have to be a compromise. A deal is in the works under which companies would receive limited liability protection in exchange for payments into a fund dedicated to water supply cleanup.

Although the compromise would mitigate the risk of limitless liability, it represents expensive solace to refiners that have processed MTBE into gasoline in good faith to satisfy oxygen-content requirements of the Clean Air Act Amendments of 1990 (CAAA). All but forgotten now is that Congress broadened those requirements as a favor to grain farmers and distillers.

The CAAA set gasoline oxygen specifications under two fuel programs. One program addressed carbon monoxide pollution, a wintertime problem in a relatively few areas. As a remedy to CO pollution, adding oxygen to gasoline makes sense.

The other, much larger program, involved the reformulation of gasoline to combat ozone smog. Adding oxygen to reformulated gasoline can make sense in some instances. But refiners can meet reformulation aims without oxygen, sometimes better than with it. Congress required oxygen in all reformulated gasoline anyway, assuming the requirement would boost demand for grain ethanol and win favor in farm states. But MTBE became the preferred oxygenate. Congress thus confronts a large issue over MTBE now because it imposed an unnecessarily widespread oxygen mandate in 1990 for reasons altogether political.

If Congress passes energy legislation in its current form it will compound the error. The House and Senate bills sensibly eliminate the oxygen requirement for reformulated gasoline but ludicrously mandate that gasoline contain 5-8 billion gal/year of grain or cellulosic ethanol by 2012. The Energy Information Administration has warned that either of the mandates would add to the price of gasoline by raising the costs of making and delivering product and by lowering fuel energy content. Because of ethanol’s generous tax credit, which should be unnecessary at current gasoline prices but which Congress is sure to renew, a mandate also would cut government revenue.

Environmentally backward

What’s more, an ethanol mandate would force Congress to revisit gasoline specifications at some point in the future. The claim that ethanol makes gasoline “burn cleaner” is unsupportable. Ethanol raises gasoline volatility, aggravating evaporative emissions of volatile organic compounds, a family of ozone precursors. Along with the tax credit, in fact, gasoline-ethanol blends enjoy relaxed volatility standards. Ethanol also raises tailpipe emissions of nitrogen oxides, another ozone precursor. Expanded use of gasoline containing ethanol thus would be not only costly but also environmentally backward. With progress stalled on ozone pollution, Congress would feel compelled to tinker yet again with fuel chemistry-never a money-saving undertaking from the consumer perspective.

Acknowledging political reality, oil companies wanting Congress to pass an energy bill for other reasons aren’t aggressively resisting an ethanol mandate. With fuel markets strong, they’ll make money selling gasohol. But someone should be speaking for the consumers and taxpayers who would fund the government-sponsored profits for grain growers and distillers and who apparently don’t understand what Congress, inexcusably, is prepared to do to them again.