Renewable Fuels and MTBE: Side-by-Side Comparison of H.R. 6 and S. 2095

Order Code RL31912

CRS Report for Congress

Received through the CRS Web

Renewable Fuels and MTBE: Side-by-Side

Comparison of H.R. 6 and S. 2095

Updated March 17, 2004

James E. McCarthy

Specialist in Environmental Policy

Resources, Science, and Industry Division

Mary E. Tiemann

Specialist in Environmental Policy

Resources, Science, and Industry Division

Brent D. Yacobucci

Analyst in Energy Policy

Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

Renewable Fuels and MTBE: Side-by-Side Comparison

of H.R. 6 and S. 2095

Summary

This report compares the energy bill (H.R. 6) conference report provisions

dealing with ethanol and with the gasoline additive methyl tertiary butyl ether

(MTBE) to the House and Senate versions of the same legislation, as well as a

substitute bill offered in the Senate (S. 2095). The House passed its version of H.R.

6 April 11, 2003; the Senate, July 31. The conference committee approved its version

November 17; the House agreed to the conference report November 18. On February

12, 2004, S. 2095 was introduced in the Senate. Except for one provision, S. 2095

and the H.R. 6 conference report titles on renewable fuels and MTBE are identical.

All three versions of H.R. 6, as well as S. 2095, would repeal the existing Clean

Air Act requirement that reformulated gasoline (RFG) contain at least 2% oxygen,

a requirement that led refiners and importers to use MTBE, and to a lesser extent

ethanol, in their RFG. In place of this requirement, all versions would provide a

major new stimulus for the use of ethanol – a provision that the annual production

of motor fuels contain at least 5 billion gallons of renewable fuel (more than double

the current production of ethanol) in roughly 10 years. In addition, the bills contain

similar provisions that: require that the reductions in emissions of toxic substances

achieved by RFG be maintained; authorize grants to assist merchant MTBE

production facilities in converting to the production of other fuel additives (although

the conference report and S. 2095 provide nearly triple the amount provided by either

the House or Senate versions of H.R. 6); authorize loan guarantees for the

construction of facilities to produce ethanol from municipal solid waste; and allow

ethanol credit trading among refiners and importers of fuels.

Major issues the bills handle differently include: whether to ban MTBE (the

Senate bill would have done so within 4 years, with some exceptions, while the

conference report and S. 2095 allow 11 years and give the President authority to

determine that it should not be banned); whether to provide a “safe harbor” from

product liability lawsuits for producers of ethanol and other renewable fuels (all

versions of H.R. 6 do, S. 2095 does not); whether to grant MTBE producers -- in

addition to ethanol producers -- a similar safe harbor from product liability lawsuits

(the conference report does, the Senate version of H.R. 6 and S. 2095 do not);

whether to require manufacturers of fuels and fuel additives to test their impacts on

public health and the environment (the Senate bill did so, the conference report and

S. 2095 do not); and whether to allow EPA to control or prohibit fuels and fuel

additives in order to protect water quality (again present in the Senate bill, but not in

the conference report or S. 2095).

This report will not be updated.

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

List of Tables

Table 1. Side-by-Side Comparison of House and Senate Energy Bills and the

Conference Report on H.R. 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Renewable Fuels and MTBE: Side-by-Side

Comparison of H.R. 6 and S. 20951

Introduction

This report compares the provisions dealing with renewable fuel (e.g., ethanol)

and with the gasoline additive methyl tertiary butyl ether (MTBE) in the House and

Senate versions of comprehensive energy legislation (H.R. 6), the conference report

reconciling the two, and a substitute bill offered in the Senate (S. 2095). The House

version of H.R. 6 passed the House April 11, 2003. The Senate version passed the

Senate July 31, 2003. The final draft of the conference report (H.Rept. 108-375) was

approved by the conferees November 17;2 the House approved the report November

18. S. 2095 was introduced February 12, 2004. Except for one provision, the

renewable fuels and MTBE titles of S. 2095 and the H.R. 6 conference report are

identical. This report does not address other provisions of the energy bill, including

ethanol tax issues; for an overview of these provisions, see CRS Issue Brief IB10116,

Energy Policy: The Continuing Debate.

Under the Clean Air Act Amendments of 1990, gasoline sold in numerous areas

of the country with poor air quality must contain MTBE, ethanol, or other substances

containing oxygen as a means of improving combustion and reducing emissions of

ozone-forming compounds and carbon monoxide. The Act has two programs that

require the use of oxygenates, but the more significant of the two is the reformulated

gasoline (RFG) program, which took effect January 1, 1995. Under the reformulated

gasoline program, areas with “severe” or “extreme” ozone pollution (90 counties

with a combined population of 64.8 million) must use reformulated gasoline; areas

with less severe ozone pollution may opt into the program as well, and many have.

In all, portions of 17 states and the District of Columbia use reformulated gasoline;

a little more than 30% of the gasoline sold in the United States is RFG.

In the mid-1990s, the addition of MTBE to RFG and its use in conventional

gasoline became controversial. The additive has been implicated in numerous

incidents of ground water contamination, and 17 states have taken steps to ban or

regulate its use. The most significant of these bans (in California and New York)

take effect at the end of 2003, leading many to suggest that Congress revisit the issue

before then to modify the oxygenate requirement and set more uniform national

1

The bills address Clean Air Act, renewable fuel, and ground water cleanup issues. Of the

three authors of this report, Jim McCarthy handles the Clean Air Act; Brent Yacobucci,

renewable fuels; and Mary Tiemann, ground water and underground storage tank issues.

2

The final version of the conference report was released November 18, 2003.

CRS-2

requirements regarding MTBE and its potential replacements (principally ethanol).

All three versions of H.R. 6, as well as S. 2095, would repeal the Clean Air Act

requirement that reformulated gasoline contain at least 2% oxygen – the requirement

that forces refiners and importers to use MTBE, ethanol, or other oxygenates in their

RFG. In place of this requirement, all four versions would provide a major new

stimulus to promote the use of ethanol – a provision that the annual production of

gasoline contain at least 5 billion gallons of renewable fuel (more than double the

current production of ethanol). The conference version and S. 2095, like the Senate

bill, require this level in 2012.

The bills use the term “renewable fuel” rather than ethanol, so the 5 billion

gallon requirement could be met by other fuels. In fact, all versions of the bill

specifically include natural gas produced from landfills, sewage treatment plants,

feedlots, and other decaying organic matter in the definition. The renewable fuel

definition also clearly encompasses biodiesel, which can be made from soy beans or

cooking oils. However, ethanol is the only renewable motor fuel currently being

produced in significant quantities. In 2002, roughly 2.1 billion gallons of ethanol

were blended with gasoline. Biodiesel, the next most significant renewable motor

fuel, is consumed at a rate of about 50 million gallons annually, only 2 or 3% of the

amount of ethanol consumed.3

Besides the oxygenate and renewable fuel provisions, the bills are similar in

requiring that reductions in emissions of toxic substances achieved by RFG be

maintained; they all authorize grants to assist merchant MTBE production facilities

in converting to the production of other fuel additives (although the conference report

and S. 2095 authorize $2 billion in such assistance, as compared to $750 million in

both the House and Senate versions); and they each would allow ethanol credit

trading among refiners and importers of fuels.

Major issues the bills handled differently included:

! whether to ban MTBE (the Senate version of H.R. 6 would have done so

within 4 years, with some exceptions, while the House version would not have

banned the substance; the conference report and S. 2095 allow 11 years and

give the President authority to determine that it should not be banned);

! whether to provide a “safe harbor” from product liability lawsuits for

producers of ethanol and other renewable fuels (all three versions of H.R. 6

do, but S. 2095 does not);

! whether to grant MTBE producers – in addition to ethanol producers – a safe

harbor (the Senate bill and S. 2095 do not, but the House bill and the

conference report do so);

3

For additional information on ethanol and biodiesel, see CRS Reports RL30758, Alternative

Transportation Fuels and Vehicles: Energy, Environment, and Development Issues, and

RL30369, Fuel Ethanol: Background and Public Policy Issues.

CRS-3

! whether to require manufacturers of fuels and fuel additives to test their

impacts on public health and the environment (the Senate bill would have

done so, the House bill, the conference report, and S. 2095 do not);

! whether to allow EPA to control or prohibit fuels and fuel additives in order

to protect water quality (again present in the Senate bill, but not in the House

bill, conference report, or S. 2095); and

! how much to authorize for MTBE cleanup (the conference report and S. 2095

authorize $1 billion for cleanup of fuels containing MTBE or other oxygenates

and another $1 billion for releases from underground storage tanks generally

– substantially more than either the House or Senate bill).

In addition, the conference report and S. 2095 include extensive amendments to the

underground storage tank (UST) regulatory program and the leaking underground

storage tank (LUST) program. The Senate bill contained some UST and LUST

provisions, but the conference report and S. 2095 go substantially farther, essentially

including the language of H.R. 3335, the Underground Storage Tank Compliance Act

of 2003. It adds new tank inspection and operator training requirements; prohibits

fuel delivery to ineligible tanks; expands UST requirements for federal facilities; and

requires EPA, with Indian tribes, to develop and implement a strategy to address

releases on Tribal lands. The bill authorizes states to use funds from the LUST Trust

Fund to help owners or operators pay the costs of remediating tank leaks in cases of

financial hardship It also authorizes EPA and states to use LUST funds to conduct

inspections and enforce UST release prevention and detection requirements. It

authorizes, for this purpose and for implementing delivery prohibition provisions,

$50 million in LUST funds for each of FY2004-FY2008.

The remainder of this report compares in more detail the MTBE and renewable

motor fuel provisions of the four versions of the bill. (For additional information on

MTBE, see CRS Report 98-290, MTBE in Gasoline: Clean Air and Drinking Water

Issues. For information on ethanol, see CRS Report RL30369, Fuel Ethanol:

Background and Public Policy Issues.)

CRS-4

Table 1. Side-by-Side Comparison of House and Senate Energy Bills and the Conference Report on H.R. 6

Provision

H.R. 6, as passed by House

H.R. 6, as passed by the Senate

H.R. 6 Conference Report / S. 2095a

Renewable Content

of Motor Vehicle

Fuel

A new §211(o) is added to the Clean Air

Act. Beginning in 2005, motor gasoline

must contain a certain amount of

renewable fuel. In 2005, 2.7 billion

gallons of renewable fuel must be sold

annually, increasing to 5.0 billion gallons

in 2015. After 2015, the percentage of

renewable fuel required in the motor fuel

pool must be the same as the percentage

required in 2015. This standard will

largely be met by ethanol, but other

renewable fuels, such as biodiesel, are

eligible. Ethanol from cellulosic

biomass (including from wood and

agricultural residue, animal waste, and

municipal solid waste) is granted extra

credits toward fulfilling the program's

requirements. Further, the bill would

establish a credit trading program to

provide flexibility to refiners and

blenders. [§ 17101]

Similar to the House provision, except that the

mandate would be 2.3 billion gallons in 2004,

and would increase to 5.0 billion gallons in

2012.

[§ 820]

Similar to the House and Senate

versions, except that the mandate

would be 3.1 billion gallons in 2005,

increasing to 5.0 billion gallons in

2012.

[§1501]

a

S. 2095 and the H.R. 6 conference report are identical except that S. 2095 does not contain the "safe harbor" provision for renewable fuels or MTBE (§1502)

in the H.R. 6 conference report. In S. 2095, this section was removed and all subsequent sections were renumbered accordingly. For example, §1508 in

the H.R. 6 conference report is §1507 in S. 2095.

CRS-5

Provision

H.R. 6, as passed by House

H.R. 6, as passed by the Senate

H.R. 6 Conference Report / S. 2095a

Ban on Use of

MTBE

No comparable provision.

Not later than 4 years after enactment, the use

of MTBE in motor vehicle fuel is prohibited

except in states that specifically authorize it.

EPA may allow MTBE in motor vehicle fuel in

quantities up to 0.5% in cases the

Administrator determines to be appropriate.

[§833(c)]

Similar to Senate provision, except that

the ban would take effect December 31,

2014. [§1504] Allows the President to

make a determination, not later than

June 30, 2014, that the restrictions on

the use of MTBE shall not take place.

[§1505(b)] Separately, requires the

National Academy of Sciences to

conduct a review of MTBE’s beneficial

and detrimental effects on

environmental quality or public health

or welfare, including costs and benefits.

The review shall be completed by May

31, 2014. [§1505(a)]

Protection of Water

Quality

No comparable provision.

Amends §211(c)(1) of the Clean Air Act to

allow EPA to control or prohibit fuels and fuel

additives in order to protect water quality, in

addition to current authority based on

protection of air quality. [§833(c)]

No comparable provision.

CRS-6

Provision

H.R. 6, as passed by House

H.R. 6, as passed by the Senate

H.R. 6 Conference Report / S. 2095a

Safe Harbor

Provides a “safe harbor” for renewable

fuels and fuels containing MTBE (i.e.,

such fuels cannot be deemed defective in

design or manufacture by virtue of the

fact that they contain renewables or

MTBE). The effect of this provision

would be to protect anyone in the product

chain, from manufacturers down to

retailers, from liability for cleanup of

MTBE and renewable fuels or for

personal injury or property damage based

on the nature of the product (a legal

approach that has been used in California

to require refiners to shoulder liability

for MTBE cleanup). With liability for

manufacturing and design defects ruled

out, plaintiffs would be forced to

demonstrate negligence in the handling

of such fuels, a more difficult legal

standard to meet. Applies to claims filed

after the date of enactment. [§ 17102]

Similar to the House bill provision, except that

it applies only to renewable fuels, not MTBE

or other ethers. [§820(e)]

Safe harbor covers renewable fuels,

MTBE, and fuels containing them, as

in the House bill. Effective as of

September 5, 2003, rather than after the

date of enactment. The effective date

means that the safe harbor will protect

oil and chemical industry defendants

from defective product claims in

lawsuits that were filed in New

Hampshire and California after that

date. [§1502]

S. 2095 does not contain this

provision. Otherwise, Title XV in

both the H.R. 6 conference report

and S. 2095 are identical.

CRS-7

Provision

H.R. 6, as passed by House

H.R. 6, as passed by the Senate

H.R. 6 Conference Report / S. 2095a

MTBE Transition

Assistance

Amends §211(c) of the Clean Air Act to

authorize $250 million in each of FY

2004-2006 for grants to assist merchant

U.S. producers of MTBE in converting to

the production of iso-octane and

alkylates. Amounts to remain available

until expended. The Secretary of Energy

may make grants available for

conversion to other fuel additives, unless

EPA determines that such additives may

reasonably be anticipated to endanger

public health or the environment.

[§17103(c)]

Similar provision, but authorizes $250 million

for each of FY 2003-2005. [§833(c)]

Similar provision, but authorizes $250

million for each of FY 2005-2012.

Adds renewable fuels to the products

eligible for conversion assistance.

[§1503] The conference report also

authorizes $850 million total for

FY2004 through FY2006 for

conversion and construction of

cellulosic ethanol plants. [§1513]

Oxygen Content

Amends §211(k) of the Clean Air Act to

eliminate the requirement that

reformulated gasoline contain at least 2%

oxygen. Provision takes effect 270 days

after enactment, except in California,

where it takes effect immediately upon

enactment. [§17104(a)]

Identical provision. [§834(a)]

Identical provision. [1506(a)]

CRS-8

Provision

H.R. 6, as passed by House

H.R. 6, as passed by the Senate

H.R. 6 Conference Report / S. 2095a

Toxic Air Pollutants

Amends §211(k)(1) to require that each

refinery or importer of gasoline maintain

the average annual reductions in

emissions of toxic air pollutants achieved

by the reformulated gasoline it produced

or distributed in 1999 and 2000. This

provision is intended to prevent

backsliding, since the reductions actually

achieved in those years exceeded the

regulatory requirements. Establishes a

credit trading program for emissions of

toxic air pollutants [§17104(b)]

Identical provisions, but the requirements

provide an exception for California gasoline,

which is subject to more stringent state

requirements. [§834(b)]

Same as the House bill. [§1506(b)]

Mobile Source Air

Toxics

Requires EPA to promulgate final

regulations to control hazardous air

pollutants from motor vehicles and their

fuels by July 1, 2004. [§17104(b)]

Identical provision. [§834(b)]

Identical provision. [§1506(b)]

Blending of

Compliant

Reformulated

Gasolines

No comparable provision.

No comparable provision.

Retailers may blend batches of gasoline

with and without ethanol as long as

both batches are compliant with the

Clean Air Act. In a given year,

retailers may only blend batches over

two ten-day periods in the summer

months. [§1514]

Consolidation of

RFG Requirements

Eliminates the less stringent

requirements for volatility applicable to

reformulated gasoline sold in VOC

Control Region 2 (northern states) by

applying the more stringent standards of

VOC Control Region 1(southern states).

[§17104(c)]

Identical provision. [§834(c)]

Identical provision. [§1506(c)]

CRS-9

Provision

H.R. 6, as passed by House

H.R. 6, as passed by the Senate

H.R. 6 Conference Report / S. 2095a

Public Health and

Environ-mental

Impacts of Fuels and

Additives

No comparable provision.

Amends §211(b) of the Clean Air Act to

require manufacturers of fuels and fuel

additives to conduct tests of their health and

environmental impacts (currently, these tests

are at EPA’s discretion and do not include

environmental effects). Also requires EPA,

within 2 years, to conduct a study of the health

and environmental effects of MTBE

substitutes, including ethanol-blended RFG. [§

835]

No comparable provision.

Analyses of Fuel

Changes

A new §211(p) is added to the Clean Air

Act. Within four years of enactment, the

Administrator of the Environmental

Protection Agency (EPA) must publish a

draft analysis of the effects of the fuels

provisions in the Act on air pollutant

emissions and air quality. Within five

years of enactment, the Administrator is

required to publish a final version of the

analysis. [§17105]

Identical provision. [§ 836]

Identical provision. [§1507]

RFG Opt-In

No comparable provision.

Allows Governors of 12 Northeastern states to

petition EPA to require RFG use in attainment

areas in their states. The Administrator shall

do so, unless he determines there is insufficient

capacity to produce RFG, in which case the

commencement date of the requirement shall

be delayed. [§ 837]

No comparable provision.

Federal

Enforcement

No comparable provision.

At the request of a state, allows federal

enforcement of state controls on fuels and fuel

additives. [§ 838]

No comparable provision.

CRS-10

Provision

H.R. 6, as passed by House

H.R. 6, as passed by the Senate

H.R. 6 Conference Report / S. 2095a

Renewable Fuels

Surveys

Requires DOE to collect and publish

monthly survey data on the production,

blending, importing, demand, and price

of renewable fuels, both on a national

and regional basis. [§17106]

Similar provision. [§813]

Identical to the House provision.

[§1508]

Similar provision beginning 12/1/2005.

[§820(d)]

Similar provision. [§1501(c)]

Similar to the House version, except that the

report must be submitted by June 1, 2006.

[§ 839]

Similar to the House version, except

that the report must be submitted by

December 31, 2007. [§1510]

Not later than 12/1/2006, and annually

thereafter, requires the EPA

Administrator to conduct a survey to

determine the market shares of

conventional gasoline and RFG

containing ethanol and other renewable

fuels in each conventional and RFG area

in each state. [§17101(c)]

Study of

Harmonizing Fuel

System

Requirements

The EPA Administrator and the

Secretary of Energy are required to

conduct a study of all federal, state, and

local motor fuels requirements. They are

required to analyze the effects of various

standards on consumer prices, fuel

availability, domestic suppliers, air

quality, and vehicle emissions. Further,

they are required to study the feasibility

of developing national or regional fuel

standards. A report must be submitted to

Congress by December 31, 2006.

[§17107]

CRS-11

Provision

H.R. 6, as passed by House

H.R. 6, as passed by the Senate

H.R. 6 Conference Report / S. 2095a

Reducing the

Proliferation of

Boutique Fuels

A new provision is added to §211(c)(4)

of the Clean Air Act. The EPA

Administrator is directed to give

preference to the approval of air quality

State Implementation Plans that require

the use of "Federal Clean Burning

Gasoline"(defined as Reformulated

Gasoline with a Reid Vapor Pressure of

6.8 psi) or "Low RVP" gasoline (with a

Reid Vapor Pressure of 7.8 psi).

[§17107A]

No comparable provision.

A new provision is added to §211(c)(4)

of the Clean Air Act. The EPA

Administrator shall not approve a

control or prohibition respecting the

use of a fuel or fuel additive unless he

finds that it will not cause fuel supply

or distribution interruptions or have a

significant adverse impact on fuel

producibility in the affected area or

contiguous areas. Within 18 months of

enactment, the Administrator shall

submit a report to Congress on the

effects of providing a preference for

RFG or either of two low RVP

gasolines. [§1509]

Ethanol from Solid

Waste Loan

Guarantees

The Secretary of Energy is required to

establish a loan guarantee program for

the construction of facilities to produce

fuel ethanol and other commercial

byproducts from municipal solid waste.

The section authorizes such sums as

may be necessary for the program.

[§17108]

Similar provision. [§820B]

Similar provision. [§1511]

CRS-12

Provision

H.R. 6, as passed by House

H.R. 6, as passed by the Senate

H.R. 6 Conference Report / S. 2095a

MTBE and Other

Oxygenated Fuel

Cleanup

Authorizes to be appropriated to EPA

from the Leaking Underground Storage

Tank (LUST) Trust Fund $850 million

for actions deemed necessary to protect

human health, welfare, and the

environment from underground storage

tank (UST) releases of fuel containing

fuel oxygenates. [§ 17201]

Amends Subtitle I of the Solid Waste Disposal

Act (SWDA) to authorize EPA and states to

use funds appropriated from the LUST Trust

Fund to remediate releases of MTBE or other

ether fuel additives that present a threat to

human health, welfare, or the environment;

authorizes the use of $200 million from the

LUST Trust fund for this purpose; and

specifies that releases need not be from USTs

to be eligible for funding. [§ 832]

Authorizes $200 million for each of

FY2004-FY2008 from the LUST Trust

Fund for responding to LUST releases

generally, and the same amount for

responding to releases of fuels

containing MTBE or other oxygenated

fuel additives (e.g., ethanol) that

present a threat to human health,

welfare, or the environment.

[§1525 and §1531]

Underground

Storage Tank

Compliance

No similar provisions.

Amends Subtitle I of the Solid Waste Disposal

Act (SWDA) to allow EPA and states to use

LUST funds to conduct inspections and

enforce federal and state UST release

prevention and detection requirements;

authorizes for these purposes, $50 million for

FY2003, and $30 million for each of FY2004FY2008. Directs EPA to establish a resource

center for research on bioremediation of

MTBE in groundwater and for providing

technical assistance to states; for these

purposes, authorizes LUST Trust Fund

appropriations of $500,000 for FY2003 and

$300,000 for each of FY2004-FY2008. EPA

may establish a research program for soil

remediation of MTBE; for this purpose,

authorizes Trust Fund appropriations of

$100,000 for FY2003 and $50,000 for each of

FY2004-FY2008. [§ 832]

Makes more extensive amendments to

Subtitle I UST and LUST programs

than does the Senate version. Adds new

tank inspection and operator training

requirements; prohibits fuel delivery to

ineligible tanks; expands UST

requirements for federal facilities; and

requires EPA, with Indian tribes, to

develop and implement a strategy to

address releases on Tribal lands.

Authorizes use of LUST funds to help

owners pay for cleanup in cases of

financial hardship. Funds may also be

used to conduct inspections and enforce

UST leak prevention and detection

requirements; authorizes for these

purposes and for implementing

delivery prohibition provisions, $50

million in LUST funds for each of

FY2004-FY2008. [§1522-§1533]

CRS-13

Provision

H.R. 6, as passed by House

H.R. 6, as passed by the Senate

H.R. 6 Conference Report / S. 2095a

Research and

Development

No comparable provision.

No comparable provision.

Authorizes $4 million for the

University of Mississippi and the

University of Oklahoma for each of

fiscal years 2004-2008 for a resource

center to further develop bioconversion

technology using low-cost biomass for

the production of ethanol. [§1512(b)]

Authorizes $25 million in each of FY

2004-2008 for research, development,

and implementation of renewable fuel

production technologies in RFG states

with low rates of ethanol production.

[§1512(c)]