MTBE in Gasoline: Clean Air and Drinking Water Issues

Congressional research reportApr 14, 2006

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MTBE in Gasoline:

Clean Air and Drinking Water Issues

Updated April 14, 2006

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Specialists in Environmental Policy

Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

MTBE in Gasoline: Clean Air and Drinking Water Issues

Summary

As gasoline prices have risen in March and April 2006, renewed attention has

been given to methyl tertiary butyl ether (MTBE), a gasoline additive being phased

out of the nation’s fuel supply. Many argue that the phaseout of MTBE and its

replacement by ethanol have been a major factor in driving up prices.

MTBE has been used by refiners since the late 1970s. It came into widespread

use when leaded gasoline was phased out — providing an octane boost similar to that

of lead, but without fouling the catalytic converters used to reduce auto emissions

since the mid-1970s. MTBE has also been used to produce cleaner-burning

Reformulated Gasoline (RFG), which the Clean Air Act has required in the nation’s

most polluted areas since 1995. The act didn’t mandate the use of MTBE (ethanol

or other substances could have been used to meet the act’s oxygenate requirement),

but price and handling characteristics of the additive led to its widespread use.

Under the Energy Policy Act of 2005 (P.L. 109-58), the RFG program’s oxygen

mandate terminates on May 6, 2006, and refiners are scrambling to remove MTBE

from the nation’s gasoline supply by that date. The phaseout of MTBE (like its use)

is not required by federal law, but gasoline refiners have focused on the May 6 date

because of concerns over their potential liability for its continued presence. MTBE

has contaminated drinking water in a number of states, and about half have passed

legislation to ban or restrict its use. Hundreds of suits have been filed to require

petroleum refiners and marketers to pay for cleanup of contaminated water supplies,

the cost of which has been estimated to be in the billions of dollars. The petroleum

industry has maintained that it used MTBE to meet the RFG program’s oxygen

mandate and therefore should not be held liable. That position could become more

difficult to maintain once the oxygen mandate is removed.

To replace MTBE, refiners are switching to ethanol as swiftly as they can,

leading temporarily to supply shortages and higher prices. The ethanol industry

maintains that there will be sufficient ethanol to meet demand but concedes that

temporary shortages exist in some parts of the country that could affect prices until

the end of June. These shortages and higher prices have led to renewed discussion

by some of exempting gasoline refiners from liability for MTBE cleanup (a so-called

“safe harbor” provision). Others have renewed their call for federal legislation to

stimulate the construction of new refining capacity.

Besides removing the RFG program’s oxygen requirement, Congress provided

a major incentive to the production of ethanol in the Energy Policy Act of 2005.

Under a Renewable Fuels Standard, an increasing amount of the nation’s motor fuels

must consist of renewable fuel, such as ethanol. The law requires 4.0 billion gallons

in 2006 (a level already being achieved) and an increase of 700 million gallons each

year through 2011, before reaching 7.5 billion gallons in 2012.

This report provides background regarding MTBE and summarizes the actions

taken by states and Congress to address problems raised by MTBE contamination of

the nation’s water supplies. It will be updated if future developments warrant.

Contents

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

Air Quality Benefits Resulting from MTBE Use . . . . . . . . . . . . . . . . . . . . . . 4

Health-Related Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Water Quality and Drinking Water Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Occurrence of MTBE in Drinking Water . . . . . . . . . . . . . . . . . . . . . . . 8

Occurrence of MTBE in Ambient Ground Water . . . . . . . . . . . . . . . . 10

EPA’s Responses to MTBE Occurrence in Water . . . . . . . . . . . . . . . . . . . . 11

Safe Drinking Water Act Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Underground Storage Tank Regulation . . . . . . . . . . . . . . . . . . . . . . . . 12

Blue Ribbon Panel on Oxygenates in Gasoline . . . . . . . . . . . . . . . . . . . . . . 13

State Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Alternatives to MTBE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Safe Harbor Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Renewable Fuels Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Changes to the RFG Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Phase-out of MTBE and Transition Assistance . . . . . . . . . . . . . . . . . . 23

Leaking Underground Storage Tank Issues . . . . . . . . . . . . . . . . . . . . . 23

NAFTA Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

List of Figures

Figure 1. Federal RFG & Winter OXY/RFG Programs

..................3

List of Tables

Table 1. Areas Using Reformulated Gasoline, as of February 2005 . . . . . . . . . . . 2

Table 2. State Actions Banning MTBE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

MTBE in Gasoline:

Clean Air and Drinking Water Issues

Introduction

This report provides background information concerning the gasoline additive

methyl tertiary butyl ether (MTBE), discusses air and water quality issues associated

with it, and reviews options available to congressional and other policy-makers

concerned about its continued use. It includes a discussion of legislation in the 109th

Congress.

Under the Clean Air Act Amendments of 1990, numerous areas with poor air

quality were required to add chemicals called “oxygenates” to gasoline as a means

of improving combustion and reducing emissions. The act had two programs that

required the use of oxygenates, but the more significant of the two was the

reformulated gasoline (RFG) program, which took effect January 1, 1995.1 Under

the reformulated gasoline program, areas with “severe” or “extreme” ozone pollution

(124 counties with a combined population of 73.6 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 (see Table 1 and Figure 1); about 30% of the gasoline sold in

the United States is RFG.

The law required that RFG contain at least 2% oxygen by weight. Refiners

could meet this requirement by adding a number of ethers or alcohols, any of which

contain oxygen and other elements. Because these substances are not pure oxygen,

the amount used to obtain a 2% oxygen level is greater than 2% of the gasoline blend.

For example, MTBE is only 19% oxygen and, thus, RFG made with MTBE needed

to contain 11% MTBE by volume to meet the 2% requirement.

By far the most commonly used oxygenate has been MTBE. In 1999, 87% of

RFG contained MTBE. As restrictions on MTBE use took effect in California, New

York, and Connecticut at the end of 2003, this number was reduced, but even with

these state bans, 46% of RFG nationally contained MTBE in 2004.

The requirements for reformulated gasoline (RFG), to reduce air toxics and the emissions

that contribute to smog formation, are found in Section 211(k) of the Clean Air Act.

Separate requirements for oxygenated fuel, to reduce carbon monoxide formation, are

contained in Section 211(m). Of the two programs, that for RFG has a much larger impact

on the composition of the nation’s gasoline, because RFG requirements are in effect yearround and apply to a larger percentage of the country. The Section 211(m) requirements,

by contrast, are in effect during winter months only and affect a small percentage of the

nation’s gasoline. Ethanol has been the primary oxygenate used in winter oxygenated fuels

and MTBE the primary oxygenate used in RFG, although either can be used in both fuels.

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Table 1. Areas Using Reformulated Gasoline,

as of February 2005

Mandatory RFG Areasa

Baltimore, MD

Chicago, IL (and portions of Indiana and Wisconsin)b

District of Columbia (and suburbs in MD and VA)

Hartford, CT

Houston, TX

Los Angeles, CA

Milwaukee, WIb

New York, NY (and portions of CT and NJ)

Philadelphia, PA (and portions of DE, MD, and NJ)

Sacramento, CA

San Diego, CA

San Joaquin Valley, CA

Southeast Desert, CA

Ventura County, CA

Opt-In RFG Areasc

Connecticut (entire state)

Dallas / Fort Worth, TX

Delaware (entire state)

Kentucky portion of Cincinnati metropolitan area

Louisville, KY

Massachusetts (entire state)

New Hampshire portion of Greater Boston

New Jersey (entire state)

New York (counties near New York City)

Rhode Island (entire state)

St. Louis, MO

Virginia (Richmond, Norfolk - Virginia Beach - Newport News)

Source: U.S. EPA.

Notes:

a. RFG use required by the Clean Air Act. In addition to these areas, Atlanta, GA, and Baton Rouge,

LA, are now also required to use RFG because they have been reclassified as severe ozone

nonattainment areas; but implementation of the RFG requirement has been stayed in both areas

pending the resolution of court challenges.

b. In the Chicago and Milwaukee areas, RFG has been made with ethanol rather than MTBE since

1995.

c. RFG use required by State Implementation Plan as a means of attaining the ozone air quality

standard. These “opt-in” areas may opt out of the program by substituting other control

measures achieving the necessary reductions in emissions.

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Figure 1. Federal RFG & Winter OXY/RFG Programs

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Also, MTBE has been used since the late 1970s in gasoline as an octane

enhancer. MTBE use grew rapidly in the 1980s, as it replaced lead in gasoline and

was used in premium fuels. As a result, gasoline with MTBE has been used virtually

everywhere in the United States, whether or not an area has been subject to RFG

requirements.

Air Quality Benefits Resulting from MTBE Use

State and local environmental agencies and EPA attribute marked improvements

in air quality to the use of fuels containing MTBE and other oxygenates, but the exact

role of oxygenates in achieving these improvements is subject to debate. In Los

Angeles, which has had the worst air quality in the country, the use of reformulated

gasoline was credited with reducing ground-level ozone by 18% during the 1996

smog season, compared to weather-adjusted data for the same period in 1994 and

1995. Use of RFG also reduced the cancer risk associated with exposure to vehicle

emissions by 30% to 40%, according to the California EPA, largely because it uses

less benzene, a known human carcinogen.2

Whether the oxygenates themselves should be given credit for these

improvements has been the subject of debate, with the answer depending to some

extent on what one assumes would replace the oxygenates if they were removed.

Asked to look at the ozone-forming potential of different oxygenates used in

reformulated gasoline, a National Academy of Sciences panel concluded that “the

addition of commonly available oxygenates to RFG is likely to have little air-quality

impact in terms of ozone reduction.”3 An EPA advisory panel, by contrast,

concluded that the use of oxygenates “appears to contribute to reduction of the use

of aromatics with related toxics and other air quality benefits.”4

Less controversy exists regarding oxygenates’ role in reducing carbon monoxide

emissions. Both EPA and an interagency group chaired by the White House Office

of Science and Technology Policy (OSTP) have reported improvements in carbon

monoxide (CO) levels due to the use of oxygenates. According to the June 1997

OSTP report, “analyses of ambient CO measurements in some cities with winter

See “Reformulated Fuels Help Curb Peak Ozone Levels in California,” Daily Environment

Report, November 6, 1996, pp. A-1 and A-2.

Committee on Ozone-Forming Potential of Reformulated Gasoline, National Research

Council, Ozone-Forming Potential of Reformulated Gasoline, May 1999, p. 5. The NAS

study concluded that other characteristics of RFG, notably “lowering the Reid Vapor

Pressure (RVP) of the fuel, which helps depress evaporative emissions of VOC [volatile

organic compounds], and lowering the concentration of sulfur in the fuel, which prevents

poisoning of a vehicle’s catalytic converter,” result in a reduction of about 20% in VOC

emissions.

U.S. Environmental Protection Agency, Blue Ribbon Panel on Oxygenates in Gasoline,

Executive Summary and Recommendations, July 27, 1999, Appendix A. Available at

[http://www.epa.gov/otaq/consumer/fuels/oxypanel/blueribb.htm].

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oxygenated gasoline programs find a reduction in ambient CO concentrations of

about 10%.”5

EPA also “believes that the reductions estimated in air quality studies are

significant and that these reductions help to protect the public from the adverse health

effects associated with high levels of CO in the air.”6 The agency based its

conclusions both on its own analysis and on a report prepared for two industry

groups. The latter, using hourly data for more than 300 monitoring sites gathered

over a nine-year period, concluded that use of oxygenated fuels was associated with

a 14% reduction in ambient CO concentrations.7

Health-Related Questions

The improvements in measured air quality have not come without questions.

After oxygenated fuels containing MTBE were introduced, residents in several cities

complained of a variety of health effects from exposure to MTBE/RFG exhaust:

headaches, dizziness, nausea, sore eyes, and respiratory irritation. Some complaints

centered around the use of MTBE in cold weather; two of the principal areas noting

complaints were Alaska and Milwaukee, Wisconsin. The Interagency Task Force

examined these complaints and concluded:

With regard to exposures ... experienced by the general population and motorists,

the limited epidemiological studies and controlled exposure studies conducted

to date do not support the contention that MTBE as used in the winter

oxygenated fuels program is causing significant increases over background in

acute symptoms or illnesses.8

Additional health effects research is being conducted by EPA, universities, and

others. Under the authority of Section 211 of the Clean Air Act, EPA has requested

refiners to conduct health effects studies on conventional, reformulated, and

oxygenated (particularly MTBE-oxygenated) gasoline. These studies examine health

effects associated with the inhalation of evaporative emissions, and several are near

completion. Very little research has been done to assess the potential health risks

associated with exposure to MTBE in drinking water (ingestion).

Executive Office of the President, National Science and Technology Council, Interagency

Assessment of Oxygenated Fuels, Washington, D.C., June 1997, p. iv. Referred to hereafter

as the OSTP Report. (The executive summary, recommendations, and full report are

available at [http://www.ostp.gov/NSTC/html/MTBE/mtbe-top.html]). The report expressed

some hesitation about its conclusions, particularly regarding the impacts of MTBE in colder

weather. It also noted methodological difficulties in identifying statistically significant

reductions smaller than 10%, and recommended additional research.

U.S. EPA Response to Interagency Assessment of Oxygenated Fuels, undated, p. 2.

Systems Applications International, Inc., for the Renewable Fuels Association and the

Oxygenated Fuels Association, Regression Modeling of Oxyfuel Effects on Ambient CO

Concentrations, Final Report, January 8, 1997, p. 1.

OSTP Report, p. vi. The report did suggest that “greater attention should be given to the

potential for increased symptoms reporting among workers exposed to high concentrations

of oxygenated fuels containing MTBE,” however.

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Much discussion has centered on whether MTBE has the potential to cause

cancer. Although there are no studies on the carcinogenicity of MTBE in humans,

EPA’s Office of Research and Development (ORD) reported in 1994 that

inhalation carcinogenicity studies in mice and rats show evidence of three types

of animal tumors [testicular, liver, and kidney]. These particular studies are

difficult to interpret because of some high-dose general toxicity. Nevertheless,

ORD believes the inhalation carcinogenicity evidence would support placing

MTBE in Group C as a “possible human carcinogen.”9

Also, one metabolite of MTBE (formaldehyde) is considered a probable human

carcinogen, and another metabolite (tertiary butyl alcohol (TBA)) induces male rat

kidney tumors.10

Based on animal studies, EPA has concluded that MTBE poses a potential for

carcinogenicity to humans at high doses; however, because of uncertainties and

limitations in the data, EPA has been unable to make a confident estimation of risk

at low exposure levels.11 The Interagency Task Force assessing oxygenated fuels

concluded that the weight of the evidence supports regarding MTBE as having a

carcinogenic hazard potential for humans.12

In 1998, the International Agency for Research on Cancer (IARC) and the U.S.

National Toxicology Program determined not to list MTBE as a known human

carcinogen. The IARC noted that MTBE was “not classifiable as to its

carcinogenicity in humans,” based on inadequate evidence in humans and limited

evidence in experimental animals.13 In 1999, California’s Environmental Protection

Agency determined that the MTBE carcinogenicity studies were of similar quality to

studies on many other carcinogens, and established a public health goal for MTBE

in drinking water based on cancer risk.14

U.S. Environmental Protection Agency, Health Risk Perspectives on Fuel Oxygenates.

Office of Research and Development, EPA 600/R-94/217, December 1994, p. 8. Detailed

information is available in ORD’s 1993 MTBE risk assessment, Assessment of Potential

Health Risks of Gasoline Oxygenated with Methyl Tertiary Butyl Ether (MTBE),

EPA/600/R-93/206, at [http://www.epa.gov/ncea/pdfs/mtbe/gasmtbe.pdf].

U.S. Environmental Protection Agency, Assessment of Potential Health Risks of Gasoline

Oxygenated with Methyl Tertiary Butyl Ether (MTBE), EPA/600/R-93/206, p. 30.

U.S. Environmental Protection Agency, Drinking Water Advisory: Consumer

Acceptability Advice and Health Effects Analysis on Methyl Tertiary-Butyl Ether (MTBE),

EPA-822-F-97-009, December 1997, pp. 1-2, 9-10. This and other health effects information

is available at [http://epa.gov/waterscience/criteria/drinking/mtbe.html].

OSTP Report, pp. 4-26.

International Agency for Research on Cancer, IARC Monographs on the Evaluation of

Carcinogenic Risks to Humans and Their Supplements: Methyl tert-Butyl Ether (Group 3),

World Health Organization, v. 73, 1999, pp. 339-340.

California Environmental Protection Agency, Public Health Goal for Methyl Tertiary

Butyl Ether (MTBE) in Drinking Water, Office of Environmental Health Hazard

Assessment, March 1999, pp. 1-2.

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Regarding noncancer effects, a California advisory committee determined that

there was not clear scientific evidence to support listing MTBE as a toxic substance

affecting human development or reproduction. In reviewing the research on cancer

and noncancer effects, these groups generally noted that research gaps exist, and that

the data were particularly limited on health effects associated with MTBE ingestion.

In response to the need for research to evaluate the potential health risks from

exposure to MTBE and other oxygenates in drinking water, EPA in 1998 published

a document that identified the most critical and immediate research needs. The

document was intended to serve as a guide to planning future research; however,

EPA has not pursued research to address the needs identified in this document.15

For practical purposes, the interpretation of any health risks associated with the

addition of MTBE to gasoline could benefit from a comparison to the health risks

associated with conventional gasoline. The Interagency Task Force, EPA, and some

environmental groups have all argued that current knowledge suggests that MTBE

is a less serious pollutant than the gasoline components it replaced. According to the

OSTP report, the cancer risk from exposure to MTBE is “substantially less than that

for benzene, a minor constituent of gasoline that is classified as a known human

carcinogen; and more than 100 times less than that for 1,3-butadiene, a carcinogenic

emission product of incomplete fuel combustion.”16 Such a comparison might be of

limited usefulness, however, given the data gaps regarding MTBE’s health effects

and MTBE’s ability to reach water supplies more readily than conventional gasoline.

Water Quality and Drinking Water Issues

A major issue regarding the use of MTBE concerns its detection in ground water

at thousands of locations nationwide, and, usually at low levels, in various municipal

drinking water supplies, private wells, and reservoirs. Although MTBE has provided

air quality benefits, the inclusion of MTBE in gasoline has been a growing concern

as an environmental risk since the 1980s, for several reasons. Specifically, compared

to other gasoline components, MTBE (1) is much more soluble in water, (2) has a

lower taste and odor threshold, (3) has a higher transport rate, and (4) often requires

more time to be remediated and must be treated by more complicated and expensive

treatment technologies.17 MTBE is extremely soluble and, once released, it moves

through soil and into water more rapidly than other chemical compounds present in

gasoline. Once in ground water, it is slow to biodegrade and is more persistent than

other gasoline-related compounds. In surface water, it dissipates more rapidly.

U.S. Environmental Protection Agency, Oxygenates in Water: Critical Information and

Research Needs, Office of Research and Development, EPA/600/R-98/048, 1998.

OSTP Report, p. vii.

See, e.g., U.S. Environmental Protection Agency Memorandum from Beth Anderson, Test

Rule Development Branch, re. Division Director Briefing for Methyl tert-Butyl Ether

(MTBE), April 1987, which notes that “[t]he tendency for MTBE to separate from the

gasoline mixture into ground water could lead to widespread drinking water contamination.”

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Studies show that most of it evaporates from the upper levels of surface water in a

few weeks, while it persists longer at greater depths.18

The primary source of MTBE in ground water has been petroleum releases from

leaking underground storage tank (UST) systems. Other significant sources include

leaking above-ground storage tanks, fuel pipelines, refueling facilities, and accidental

spills. The most significant source of MTBE in lakes and reservoirs appears to be

exhaust from motorized watercraft, while smaller sources include gasoline spills,

runoff, and ground water flow.19

Occurrence of MTBE in Drinking Water. Available information on the

occurrence of MTBE in public drinking water supplies has increased substantially in

recent years, but has been somewhat limited geographically. Although a number of

serious contamination incidents have been reported, particularly in California, the

available data generally do not indicate a broad presence of MTBE in drinking water

supplies at levels of public health concern. However, as monitoring has increased

among the states, so has the number of public water systems and private wells

showing low-level detections of MTBE.

The most extensive MTBE monitoring data for drinking water are available for

California, where testing for MTBE was made mandatory for most water systems in

1997. Through April 2002, some 2,957 systems had tested 9,905 sources of drinking

water. MTBE was detected in 85 (0.9%) of these sources, including 54 (0.6%) of

9,234 ground water sources and 31 (4.6%) of 671 surface water sources. Overall, 53

(1.8%) of the 2,957 public water systems reported detections of MTBE in at least one

of their drinking water sources, and 13 (0.4%) of the systems reported that a total of

21 (0.2%) sources of water had MTBE concentrations exceeding California’s MTBE

drinking water standard of 13 micrograms per liter (:g/L). As of October 2005,

monitoring results had been reported for 13,620 sources. Nearly all of these results

were nondetections, while 113 sources had two or more MTBE detections.20

In 1998, the state of Maine tested nearly 800 public water supplies and 950

randomly selected private wells and found detectable levels of MTBE in 16% of the

public water supplies and 15.8% of the private wells. None of the public water supply

samples exceeded the state drinking water standard of 35 :g/L, while 1% of private

well samples contained MTBE concentrations above the standard. Roughly 94% of

public water supply samples showed MTBE levels that were either not detectable or

below 1 :g/L; the remaining 6% of samples were between 1 :g/L and 35 :g/L.21

Arturo Keller et al., Health and Environmental Assessment of MTBE, Report to the

Governor and Legislature of the State of California as Sponsored by SB 521, Volume I,

Summary and Recommendations, University of California, November 1998, p. 35.

Keller, pp. 33-34.

California EPA, MTBE in California Drinking Water, Oct. 18, 2005. For more

information, see [http://www.dhs.ca.gov/ps/ddwem/chemicals/MTBE/mtbeindex.htm].

(Micrograms per liter(:g/L) are equivalent to parts per billion (ppb) for fresh water.)

Maine Department of Human Services, Department of Environmental Protection, and

(continued...)

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Nationwide, the data on the presence of MTBE in drinking water have been

more limited. In July 1999, the EPA-appointed Blue Ribbon Panel on Oxygenates

in Gasoline reported that between 5% and 10% of drinking water supplies tested in

high oxygenate-use areas show at least detectable amounts of MTBE, and that the

vast majority of these detections have been well below levels of public health

concern, with roughly 1% of detections exceeding 20 :g/L.22

In a study completed in 2001, the United States Geological Survey (USGS), in

cooperation with EPA, assessed the occurrence of MTBE and other volatile organic

compounds (VOCs) in public water supplies in 10 mid-Atlantic and northeastern

states where MTBE use is common.23 The study analyzed water from 1,194

randomly selected community water systems. The USGS reported that MTBE was

detected in 8.9% of the tested water systems and was strongly associated with areas

where reformulated and/or oxygenated (RFG/OXY) fuels are used. Fifteen percent

of systems in RFG/OXY areas reported detecting MTBE at concentrations of 1 :g/L

or more, while 3% of systems outside of RFG/OXY areas reported such detections.

Most MTBE concentrations ranged from 0.5 to 5 :g/L, and less than 1% of the

systems reported MTBE at levels equal to or exceeding 20 :g/L, the lower limit of

EPA’s drinking water advisory.24

A 2003 nationwide survey conducted by the American Water Works

Association Research Foundation (AWWARF) reported similar results. This survey

monitored sources of drinking water for 954 randomly selected community water

systems (including 579 samples from groundwater-supplied systems and 375 samples

from surface-water-supplied systems). MTBE was found in 8.7% of the community

water system source waters, at concentrations ranging from 0.2 to 20 :g/L.25

AWWARF also conducted a focused survey, including 451 samples collected from

134 community water systems source waters (including ground water, reservoirs,

(...continued)

Department of Conservation, The Presence of MTBE and Other Gasoline Compounds in

Maine’s Drinking Water, preliminary report, October 1998, 24 pp. (Maine was not required

to use RFG, but had done so voluntarily; the state opted out of the RFG program in October

1998 because of concerns over MTBE contamination of ground water and drinking water

wells.)

The Blue Ribbon Panel on Oxygenates in Gasoline, Executive Summary and

Recommendations, July 27, 1999. Summary and full report are available at [http://www.

epa.gov/otaq/consumer/fuels/oxypanel/blueribb.htm].

For information on this 2001 study and other MTBE research at the USGS, see

[http://sd.water.usgs.gov/nawqa/vocns/mtbe.html].

Stephen J. Grady and George D. Casey, MTBE and Other VOCs in Drinking Water in the

Northeast and Mid-Atlantic Region. Available at [http://sd.water.usgs.gov/nawqa/vocns/

dw_12state.html]. MTBE was the second most frequently detected VOC in drinking water,

after trihalomethanes (disinfection byproducts), which were detected in 45% of systems

tested. Chloroform, the most frequently detected trihalomethane, was found in 39% of

systems.

American Water Works Association Research Foundation, Occurrence of MTBE and

VOCs in Drinking Water Sources of the United States, 2003, p. xxiii, p. 101.

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lakes, rivers, and streams) that were suspected or known to contain MTBE. The

researchers found MTBE in 55.5% of the water systems.26

Occurrence of MTBE in Ambient Ground Water. Looking at ground

water generally (not only drinking water wells), the data indicate that low levels of

MTBE are found often. Nationally, the most comprehensive ground water research

has been conducted by the USGS through the National Water Quality Assessment

Program (NAWQA). USGS data for some 2,743 monitoring, observation, and water

supply wells in 42 states (from 1993 to 1998) showed MTBE present in about 5%

(145) of the wells, with MTBE levels exceeding 20 :g/L in 0.5% (12) of the wells.

In all, MTBE was detected in ground water in 22 of the 42 states. The USGS further

evaluated the occurrence data based on whether or not detections occurred in RFG

or winter oxyfuel program areas. The researchers reported that low concentrations

of MTBE were detected in 21% of ambient ground water samples in high MTBE-use

areas and in 2.3% of samples in low or no-MTBE use areas.27

MTBE has been detected most frequently in ground water associated with

leaking underground storage tank (UST) sites. The California Environmental

Protection Agency has estimated that, based on monitoring information available for

these sites, MTBE can be expected to be found in shallow, unused ground water at

thousands of UST sites in the state, and often at high concentrations (in the parts per

million range).28 Moreover, a report by the Lawrence Livermore National Laboratory

found that MTBE was not significantly degrading in the monitoring networks for

these leaking UST sites.29 The situation in other states may be similar. In a

September 2000 survey of state leaking underground storage tank (LUST) programs,

31 states reported that MTBE was found in ground water at 40% or more of gasolinecontaminated sites in their states; 24 states reported MTBE at 60% to 100% of sites.30

A 2003 update to that survey found that, averaged among the states, MTBE was

found in groundwater at 60% of gasoline-contaminated sites.31

Ibid., p. 120.

U.S. Geological Survey, data summary submitted to the EPA Blue Ribbon Panel on the

Use of MTBE and Other Oxygenates in Gasoline, January 22, 1999. Available at

[http://www.epa.gov/otaq/consumer/fuels/oxypanel/blueribb.htm#Presentations].

California Environmental Protection Agency, MTBE Briefing Paper, p. 17.

Anne Happel, E. H. Beckenbach, and R. U. Halden, An Evaluation of MTBE Impacts to

California Groundwater Resources, Lawrence Livermore National Laboratory and the

University of California, Berkeley, June 11, 1998, p. iv.

New England Interstate Water Pollution Control Commission (NEIWPCC), Survey of

State Experiences with MTBE Contamination at LUST Sites (August 2000). Available at

[http://www.neiwpcc.org]. The survey notes that some states began requiring testing at

LUST sites in the 1980s (Maine in 1986 and Minnesota in 1987).

New England Interstate Water Pollution Control Commission (NEIWPCC), Survey of

State Experiences with MTBE and Other Oxygenate Contamination at LUST Sites (August

2003). Available at [http://www.neiwpcc.org/Index.htm?MTBE.htm~mainFrame].

CRS-11

EPA’s Responses to MTBE Occurrence in Water

Safe Drinking Water Act Initiatives. MTBE has not been regulated under

the Safe Drinking Water Act (SDWA), but to address concerns raised by the

detection of MTBE in ground water and drinking water supplies, EPA has pursued

several initiatives. In December 1997, the agency issued a drinking water advisory

for MTBE based on consumer acceptability (for taste and smell). EPA issues

drinking water advisories to provide information on contaminants in drinking water

that have not been regulated under SDWA.32 Advisories are not enforceable, but

provide guidance to water suppliers and other interested parties regarding potential

health effects or consumer acceptability. While the MTBE advisory is not based on

health effects, EPA notes that keeping MTBE levels in the range of 20-40 :g/L or

lower for consumer acceptability reasons would also provide a large margin of safety

from adverse health effects. Specifically, the advisory states that

[c]oncentrations in the range of 20 to 40 :g/L are about 20,000 to 100,000 (or

more) times lower than the range of exposure levels in which cancer or

noncancer effects were observed in rodent tests. This margin of exposure is in

the range of margins of exposure typically provided to protect against cancer

effects by the National Primary Drinking Water Standards under the Federal Safe

Drinking Water Act. This margin is greater than such standards typically

provided to protect against noncancer effects. Thus, protection of the water

source from unpleasant taste and odor as recommended will also protect

consumers from potential health effects.33

In addition, EPA has taken steps that could lead to the development of an

enforceable drinking water standard for MTBE. In February 1998, EPA included

MTBE on a list of contaminants that are potential candidates for regulation under the

Safe Drinking Water Act. Compounds on the contaminant candidate list are

categorized as regulatory determination priorities, research priorities, or occurrence

priorities. Because of data gaps on MTBE health effects and occurrence, EPA placed

MTBE in the category of contaminants for which further occurrence data collection

and health effects research are priorities. Thus, while EPA has not selected MTBE

for regulation to date, the agency is pursuing research to fill the existing data gaps so

that a regulatory determination may be made.

The Safe Drinking Water Act also directed EPA to publish a rule by August

1999 requiring public water systems to conduct monitoring for a list of unregulated

At least seven states have set health-based drinking water standards for MTBE ranging

from 13 parts per billion (ppb) to 240 ppb. (Parts per billion are equivalent to :g/L.) At least

five states have adopted a secondary standard (based on aesthetic qualities, i.e., taste and

odor), ranging from 5 ppb to 70 ppb. At least 10 states have adopted drinking water advisory

levels. At least 32 states have adopted a very wide range of ground water cleanup levels;

some are guidelines, some are enforceable, and some vary depending on the use of ground

water; some states apply these levels to ground-water cleanup at leaking underground

storage tank sites where ground water is used for drinking water.

EPA Drinking Water Advisory, p. 2.

CRS-12

contaminants that may require regulation. EPA included MTBE in this rule and

directed large public water systems to begin monitoring for MTBE in January 2001.34

The occurrence data generated under the Unregulated Contaminant Monitoring

Rule, combined with the results of ongoing health effects studies, are intended to

provide information needed by EPA to make a regulatory determination for MTBE.

Under SDWA, the next round of regulatory determinations will be made in 2006.

EPA typically requires roughly three and one-half years to promulgate a drinking

water regulation; thus, the earliest EPA would be expected to issue a drinking water

regulation for MTBE is 2010.

Underground Storage Tank Regulation. A key EPA and state

contamination prevention effort involves implementing the underground storage tank

program established by the 1984 amendments to the Resource Conservation and

Recovery Act (RCRA). Under this program, EPA has set operating requirements and

technical standards for tank design and installation, leak detection, spill and overfill

control, corrective action, and tank closure. As of 1993, all tanks were required to

comply with leak detection regulations. Additionally, all tanks installed before

December 1988 (when standards for new tanks took effect) were required to be

upgraded, replaced, or closed by December 22, 1998.

Federal and state regulators anticipate that as tank owners and operators comply

with these requirements, the number of petroleum and related MTBE leaks from UST

systems should decline significantly. However, MTBE has been detected at

thousands of leaking tank sites, and this additive is proving more difficult and costly

to remediate than conventional gasoline. A key concern for states is that, as testing

increases, it is likely that the number and scope of needed cleanups may increase as

well. A 2003 state survey found that many sites have not been tested for MTBE, and

most states do not plan to reopen previously closed Leaking Underground Storage

Tank (LUST) sites to look for MTBE, although 32 states reported that MTBE plumes

are often or sometimes longer than plumes from conventional gasoline leaks.35 A key

concern for community water suppliers and well owners is that fewer than half of the

states are taking steps to ensure that MTBE and other oxygenates are not migrating

beyond standard monitoring boundaries for LUST cleanup,36 thus leaving an

unknown number of MTBE plumes unremediated and ground water supplies at risk

for future contamination.

In 1986, Congress created a federal response program for cleaning up releases

from leaking petroleum USTs through the Superfund Amendments and

Reauthorization Act, which amended RCRA Subtitle I. These provisions created the

LUST Trust Fund and authorized EPA and states to use the fund to clean up

64 Federal Register 50555, September 17, 1999. The law requires monitoring by all

large public water systems (serving more than 10,000 people) and requires a representative

sampling of smaller systems.

New England Interstate Water Pollution Control Commission (NEIWPCC), Survey of

State Experiences with MTBE and Other Oxygenate Contamination at LUST Sites (August

2003), Executive Summary, pp. 1-2.

Ibid.

CRS-13

underground storage tank spills and leaks in cases where tank owners or operators do

not clean up sites. EPA and states use the annual trust fund appropriation primarily

to oversee and enforce corrective actions performed by responsible parties. EPA and

states also use fund monies to conduct corrective actions where no responsible party

has been identified, where a responsible party fails to comply with a cleanup order,

or in the event of an emergency, and to take cost recovery actions against parties. For

FY2006, Congress provided $73 million from the LUST Trust Fund for states and

EPA to administer the LUST remediation program. EPA allocates approximately

80% of the appropriated amount to the states.37

Since the federal underground storage tank program began, nearly 1.6 million

of the roughly 2.2 million petroleum tanks subject to regulation have been closed,

and, overall, the frequency of leaks from UST systems has been reduced. Through

FY2005, 653,621 tanks subject to UST regulations remained in service, 452,041

releases had been confirmed, 421,924 cleanups had been initiated, and 332,799

cleanups had been completed. During FY2005, 7,421 releases were newly confirmed,

compared with 8,850 in FY2004 and 12,000 in FY2003.38

Blue Ribbon Panel on Oxygenates in Gasoline

As part of its effort to gather information and focus research, in November 1998,

EPA established an independent Blue Ribbon Panel on Oxygenates in Gasoline to

review the broad range of issues posed by the use of MTBE and other oxygenates.

The panel was established under the auspices of the Clean Air Act Advisory

Committee, and its membership reflected a broad range of experts and stakeholders.39

The panel:

recommended that Congress act to remove the Clean Air Act

requirement that 2% of RFG, by weight, consist of oxygen, in order

to ensure that adequate fuel supplies can be blended in a costeffective manner while reducing usage of MTBE;

recommended that the winter oxygenated fuels program be

continued;

agreed broadly that use of MTBE should be reduced substantially

(with some members supporting its complete phaseout), and that

Congress should act to provide clear federal and state authority to

regulate and/or eliminate the use of MTBE and other gasoline

additives that threaten drinking water supplies;

For more information on the LUST program and related legislation, see CRS Report

RS21201, Leaking Underground Storage Tanks: Program Status and Issues, by (nam

e redacted).

For state-by-state information, see [http://www.epa.gov/oust/cat/camarchv.htm].

A list of Blue Ribbon Panel members is provided, along with the panel report and related

materials, at [http://www.epa.gov/oar/caaac/mtbe.html].

CRS-14

recommended that EPA seek mechanisms to ensure that there is no

loss of current air quality benefits (i.e., no backsliding); and

recommended a comprehensive set of improvements to the nation’s

water protection programs, including over 20 specific actions to

enhance Underground Storage Tank, Safe Drinking Water, and

private well protection programs.

The panel’s numerous water protection recommendations addressed prevention,

treatment, and remediation. For example, the panel recommended that EPA work

with Congress to determine whether above-ground petroleum storage tanks (which

generally are not regulated) should be regulated; work to enhance state and local

efforts to protect lakes and reservoirs that serve as drinking water supplies by

restricting use of recreational watercraft; and accelerate research for developing costeffective drinking water treatment and remediation technologies.

The panel also suggested that EPA and others should accelerate ongoing health

effects and environmental behavior research of other oxygenates and gasoline

components that would likely increase in use in the absence of MTBE.

Then-EPA Administrator Carol Browner concurred with the recommendation

of the Blue Ribbon Panel calling for a significant reduction in the use of MTBE. She

also stated her commitment to work with Congress for “a targeted legislative solution

that maintains our air quality gains and allows for the reduction of MTBE, while

preserving the important role of renewable fuels like ethanol.”40

On March 20, 2000, the former administrator announced that EPA would begin

the process of issuing regulations to reduce or phase out use of MTBE. Recognizing

that this process could take several years to complete, she renewed her call for

congressional action to “amend the Clean Air Act to provide the authority to

significantly reduce or eliminate the use of MTBE,” to “ensure that air quality gains

are not diminished,” and to “replace the existing oxygen requirement contained in the

Clean Air Act with a renewable fuel standard for all gasoline.”41

In its few public statements on MTBE, the Bush Administration has not

indicated any change in the Clinton Administration’s policy, although EPA’s effort

to regulate MTBE using its existing authority slowed noticeably and now appear to

have been terminated. Five years after EPA began the development of regulations

to reduce or phase out MTBE, the agency quietly published a note in the Federal

Administration, like the previous one, appears to have preferred a legislative solution.

Statement by former EPA Administrator Carol Browner on findings by the EPA’s Blue

Ribbon MTBE Panel, July 26, 1999, available on the Blue Ribbon Panel home page,

previously cited.

U.S. Environmental Protection Agency, “Clinton-Gore Administration Acts to Eliminate

MTBE, Boost Ethanol,” EPA Headquarters Press Release, March 20, 2000, pp. 7-8.

U.S. EPA, Semiannual Regulatory Agenda, 70 Federal Register 27604, Sequence

Number 3106.

CRS-15

State Initiatives

Among the states, California has arguably been the most active in addressing

MTBE issues. Actions taken by the state legislature and the governor helped propel

the issue to national prominence. Legislation signed October 8, 1997, required the

state to set standards for MTBE in drinking water, and required the University of

California to conduct a study of the health effects of MTBE and other oxygenates and

risks associated with their use. The UC report, which was issued in November 1998,

recommended a gradual phaseout of MTBE from gasoline in California.43 Based on

the report and on public hearings, Governor Davis issued a finding that “on balance,

there is a significant risk to the environment from using MTBE in gasoline in

California,” and required the state’s Energy Commission to develop a timetable for

the removal of MTBE from gasoline at the earliest possible date, but not later than

December 31, 2002. (This date was amended, in March 2002, to December 31,

2003.) The governor also required the California Air Resources Board (CARB) to

make a formal request to U.S. EPA for a waiver from the requirement to use

oxygenates in reformulated gasoline and required three state agencies to conduct

additional research on the health and environmental impacts of ethanol, the most

likely substitute for MTBE.

The waiver request resulted in months of negotiation between EPA and CARB,

with EPA expressing skepticism that it had authority to grant a waiver under the

circumstances.44 More than two years later, on June 12, 2001, the agency finally

denied California’s request. Without a waiver, gasoline sold in ozone nonattainment

areas in the state was required to contain another oxygenate once the MTBE ban took

effect. During 2003, California’s motor fuels gradually phased out MTBE in favor

of ethanol.45

Following California’s decision to phase out MTBE, at least 24 other states have

acted to limit or phase out its use. The largest of these, New York, set a date of

January 1, 2004, to ban MTBE. (Table 2 summarizes state actions to ban MTBE.)

See Arturo Keller et al., Health & Environmental Assessment of MTBE, Report to the

Governor and Legislature of the State of California As Sponsored by SB 521, November

1998. Available at [http://www.tsrtp.ucdavis.edu/mtberpt/homepage.html].

The Clean Air Act, in Section 211(k)(2)(B), authorizes waiver of the RFG oxygenate

requirement only if the Administrator determines that oxygenates would prevent or interfere

with the attainment of a National Ambient Air Quality Standard. The law does not address

other impacts, such as drinking water contamination.

In January 2004, Governor Schwarzenegger again requested EPA to grant California a

waiver from the oxygenate requirement. The governor noted that EPA’s Blue Ribbon Panel

concluded that a minimum oxygen content is not needed in California, and that CARB had

demonstrated that the oxygen requirement is detrimental to the state’s efforts to improve air

quality. Governor Schwarzenegger further stated that the oxygenate requirement greatly

increases fuel costs and “is no longer required to ensure substantial and sustained ethanol

use in California.” EPA denied Governor Schwarzenegger’s request on June 2, 2005.

CRS-16

Table 2. State Actions Banning MTBE

State

Phaseout

Date

Complete or Partial Ban?

1/1/05

Partial: no more than 0.3% (vol.) MTBE in gasoline

12/31/03

Complete ban

4/30/02

Complete ban

1/1/04

Complete ban by 1/1/04, coordinated with NESCAUM

(North East States for Coordinated Air Use Management)

regional fuels task force

7/24/04

Partial: may not use, sell, or manufacture MTBE as a fuel

additive; may sell motor fuel containing no more than 0.5%

(vol.) MTBE

7/24/04

Partial: no more than 0.5% (vol.) MTBE in gasoline

7/1/00

Partial: no more than trace amounts (0.5% by vol.) MTBE in

motor vehicle fuel

7/1/04

Partial: may not sell or deliver any motor vehicle fuel

containing more than 0.5% (vol.) MTBE

1/1/06

Partial: no more than trace amounts of MTBE in fuel

1/1/07

Partial: no more than 0.5% (vol.) MTBE in gasoline sold

6/1/03

Complete ban by 6/1/03; can be extended if determined by

6/1/02 that phaseout date is not achievable

7/2/00

(partial)

7/2/05 (full)

Partial/then complete: no more than 1/3 of 1% oxygenate as

of 7/2/00; complete ban as of 7/2/05. Ban also applies to

ethyl tertiary butyl ether (ETBE) and tertiary amyl methyl

ether (TAME)

7/31/05

Partial: no more than 0.5% (vol.) MTBE in gasoline sold or

stored

1/1/06

Partial: no more than trace amounts in gasoline sold, stored,

or dispensed

7/13/00

Partial: no more than 1% (vol.) MTBE in any petroleum

product

1/1/07

Partial: no more than 0.5% (vol.) MTBE in gasoline sold or

stored. Ban applies to other gasoline ethers and tertiary

butyl alcohol (TBA)

1/1/09

Partial: no more than 0.5% (vol.) MTBE in gasoline

distributed in commerce for sale in the state

1/1/04

Complete ban as of 1/1/04

1/1/08

Partial: no more than 0.5% (vol.) MTBE in motor fuel

CRS-17

State

Phaseout

Date

Complete or Partial Ban?

7/1/05

Partial: no more than 0.5% (vol.) MTBE in motor vehicle

fuels

6/1/07

Partial: no more than 0.5% (vol.) MTBE in gasoline sold,

delivered, or imported. Ban also applies to other gasoline

ethers, and TBA.

7/1/01

Partial: no more than trace amounts (less than 0.5% vol.)

resulting from commingling during storage or transfer

1/1/07

Partial: no more than 0.5% (vol.) MTBE or other gasoline

ethers in fuel products sold or stored

1/1/04

Partial: may not be intentionally added to fuel or knowingly

mixed in gasoline above 0.6% (vol.)

8/1/04

Partial: no more than 0.5% (vol.) MTBE in gasoline

Source: Environmental Protection Agency, EPA 420-B-04-009, June 2004, updated July 2005 by

CRS.

Alternatives to MTBE

The major potential alternatives to MTBE are other oxygenates. Oxygenates

possess several advantages, including high octane and the ability to replace toxic

components of conventional gasoline.

Oxygenates that could replace MTBE include ethers, such as ethyl tertiary butyl

ether (ETBE), and alcohols, such as ethanol. These other oxygenates may pose

health and environmental impacts, but inadequate data make it difficult to reach

definite conclusions. EPA’s Blue Ribbon Panel concluded:

The other ethers (e.g., ETBE, TAME, and DIPE) have been less widely used and

less widely studied than MTBE. To the extent that they have been studied, they

appear to have similar, but not identical, chemical and hydrogeologic

characteristics. The Panel recommends accelerated study of the health effects

and groundwater characteristics of these compounds before they are allowed to

be placed in widespread use.46

Ethanol and other alcohols are considered relatively innocuous on their own;

they generally do not persist in ground water and are readily biodegraded. However,

research suggests that the presence of ethanol in a gasoline plume can extend the

spread of benzene and other toxic constituents of gasoline through ground water.47

This is largely because ethanol is likely to be degraded preferentially by

Blue Ribbon Panel Report, p. 8.

See, for example, “Ethanol-Blended RFG May Cause Small Hike in Gasoline Plume

Size,” Mobile Source Report, December 2, 1999, p. 11, or “Experts Charge Cal/EPA

Rushing Approval of Ethanol in RFG,” Inside Cal/EPA, January 14, 2000, p. 1.

CRS-18

microorganisms that would otherwise feed on other chemical components of

gasoline, including benzene, toluene, ethylbenzene, and xylene (BTEX).

In announcing the phaseout of MTBE in his state on March 25, 1999,

California’s Governor Davis required three state agencies to conduct additional

research on the health and environmental impacts of ethanol, the most likely

substitute. In reports approved in January 2000, the agencies concluded that if

ethanol were substituted for MTBE, there would be “some benefits in terms of water

contamination” and “no substantial effects on public-health impacts of air

pollution.”48

A more recent article, based on the California ethanol review, focused

specifically on the relative risks of ground water contamination by spills of ethanolblended gasoline, MTBE-blended gasoline, and non-RFG gasoline. The authors

concluded that

relative to risks associated with standard formulation gasoline, there is an

increase in the risk that wells will be contaminated by RFG using either MTBE

or ethanol as an oxygenate [emphasis added]. With ethanol, the risk of

contaminating wells decreases after approximately five years. However, the risk

continues to grow for MTBE because of the assumption that this chemical is not

degraded in the subsurface. The conservative approach used in this analysis,

including the low biodegradation rates and assumption that the gasoline source

areas are not remediated, results in an overstatement of the risks associated with

these additives to gasoline. Nevertheless, the relative trends do favor ethanol

when considering risk associated with RFG spills.49

The switch from MTBE to ethanol is not without technical problems, as well.

Ethanol costs substantially more to produce than MTBE; and it poses challenges to

the gasoline distribution system (it separates from gasoline if transported long

distances by pipeline, so it must be mixed with non-oxygenated gasoline blendstock

close to the market in which it is to be sold).50 Because most ethanol is produced in

the Midwest, whereas most RFG is consumed on the East and West Coasts,

transportation of ethanol to markets poses logistical problems and adds cost to any

gasoline-ethanol blend.

California Air Resources Board, Water Resources Control Board, and Office of

Environmental Health Hazard Assessment, Health and Environmental Assessment of the

Use of Ethanol as a Fuel Oxygenate, Report to the California Environmental Policy Council

in Response to Executive Order D-5-99, Dec. 1999, vol. 1, Executive summary, pp. 1-22.

Report is available at [http://www-erd.llnl.gov/ethanol/]).

Susan Powers et al., “Will Ethanol-Blended Gasoline Affect Groundwater Quality?”

Environmental Science & Technology, American Chemical Society, January 1, 2001, p.

28A.

For additional information on ethanol, see CRS Report RL33290, Fuel Ethanol:

Background and Public Policy Issues, (name redacted).

CRS-19

Since 1997, some refiners have discussed the possibility of making gasoline that

meets the performance requirements for RFG without using oxygenates.51 However,

in the absence of congressional action, this was not permitted. Now, with the

enactment of the Energy Policy Act of 2005, which ends the oxygenate requirement

in May 2006 and imposes a renewable fuels requirement for gasoline, refiners

generally are choosing to use ethanol to replace MTBE. Temporarily, this has led to

shortages of ethanol and has contributed to higher gasoline prices in March and April

2006. Ethanol producers, represented by the Renewable Fuels Association (RFA),

assert that these shortages are temporary: 500 million gallons of additional annual

capacity are expected online before July, 2006, according to RFA, and another 900

million gallons by the end of the year. With additional imports from Brazilian and

Caribbean suppliers, reallocation of ethanol within the marketplace, and the use of

ethanol stored at terminals in anticipation of the transition, RFA says, “...virtually

every refiner and gasoline analyst now acknowledges there will be sufficient ethanol

supplies to meet the demand created by MTBE replacement.”52

The increased demand for ethanol has stimulated the market for corn. Nearly

13% of the nation’s corn crop was used to produce ethanol in 2004, and ethanol

production has grown at least 20% since then. As much as 30% of the corn crop may

be dedicated to ethanol production by 2012. Federal tax credits for ethanol blending

and other state and federal legislation have played key roles in promoting this growth.

(For background on ethanol and a discussion of ethanol issues, including the effect

of the Energy Policy Act, see CRS Report RL33290, Fuel Ethanol: Background and

Public Policy Issues, by (name redacted).)

Legislation

Building on the work of earlier Congresses, the 109th Congress addressed

MTBE, ethanol, and many other energy issues in H.R. 6, the comprehensive energy

bill enacted in the summer of 2005. The bill passed the House April 21, 2005; a

different version passed the Senate June 28, 2005.53 Both houses — in their separate

legislation — would have banned future use of MTBE in motor fuels, with some

exceptions, and authorized transition assistance for MTBE producers, although the

In earlier versions of this report, we quoted Chevron and Tosco, two firms with large

stakes in the California gasoline market, who asked permission to produce RFG without

oxygenates in October and December 1997.

Testimony of Bob Dinneen, President and CEO, Renewable Fuels Association, “The

Impact of the Elimination of MTBE in Gasoline,” Hearing, U.S. Senate, Committee on

Environment and Public Works, March 29, 2006. Mr. Dinneen’s testimony quotes the CEOs

of Valero Energy, the nation’s largest refiner, and ExxonMobil in support of his statement.

Legislation that could affect MTBE use has been introduced in every Congress since the

104th. In the 108th Congress, both the House and Senate passed comprehensive energy bills

(H.R. 6) that addressed MTBE. A conference report on the legislation (H.Rept. 108-375)

was adopted by the House, November 18, 2003, on a vote of 246-180. In the Senate,

however, a cloture vote on the conference report, November 21, 2003, failed to achieve the

60 votes necessary to limit debate, in large part because of the MTBE safe harbor provision

contained in the conference report.

CRS-20

specifics of these provisions differed. The House bill would also have provided a

“safe harbor” from product liability suits for MTBE producers.

Conferees on the legislation could not reach agreement on most of these

provisions, so the version of H.R. 6 that emerged from conference and was signed by

the President August 8, 2005 (P.L. 109-58), was stripped of many MTBE-related

elements. As a result, controls on the use of MTBE and liability for cleanup of

MTBE in ground water and drinking water will be left to the states and the courts

respectively.

The reasons why these provisions were left out of the final version are

complicated. The conferees faced time pressure as the result of a White House

demand that energy legislation be delivered to the President by August 1. For that

deadline to be met, the conferees needed to reach agreement on a range of issues

quickly. The safe harbor and the provisions on the phaseout of MTBE, described in

more detail below, were not amenable to a quick compromise. Thus, the path of least

resistance was to remove them.

In the enacted version, Congress did address two issues that will affect future

MTBE use. The act removes the Clean Air Act’s mandate to use oxygenates (such

as MTBE or ethanol) in reformulated gasoline, eliminating a major incentive for

continued use of MTBE. However, the enacted bill will also require a substantial

increase in the use of renewable fuels, such as the competing oxygenate, ethanol, in

both conventional and reformulated gas. With ethanol use required, there will be less

need for gasoline refiners to use MTBE.

Refiners began reacting to these provisions almost immediately: Valero Energy,

the nation’s largest petroleum refiner, announced August 2, 2005, that it will

discontinue production of MTBE in May 2006, when the RFG oxygenate

requirement is eliminated.54

The remainder of this section discusses the principal features of the House and

Senate bills and how they were addressed in the enacted legislation.

Safe Harbor Provision. Perhaps the most controversial element in H.R. 6

was the House version’s inclusion of a safe harbor provision protecting

manufacturers and distributors of renewable fuels and fuels containing MTBE from

product liability claims. The Senate bill contained a safe harbor for renewable fuels,

but not for MTBE.

The effect of the House provision would have been to protect anyone in the

product chain, from manufacturers to retailers, from liability for damages for

contamination related to MTBE and renewable fuels, or for personal injury or

property damage based on the nature of the product. The safe harbor provision would

have applied retroactively to September 5, 2003, potentially barring lawsuits filed on

or after that date, including those filed by the State of New Hampshire and numerous

“Valero to Quit Making Additive,” MySA.com, posted August 2, 2005,

[http://www.mysanantonio.com/business/stories/MYSA080305.01E.Valero.12325438.html].

CRS-21

cities, towns, counties, municipal water suppliers, and schools. Prior to that date, five

lawsuits had been filed. After that date, more than 150 suits have been filed on

behalf of some 210 communities in 15 different states.55

The safe harbor provision stated that the defective products liability shield

would not affect the liability of a person for environmental cleanup costs, drinking

water contamination, negligence for spills, or other liabilities other than liability

based upon a claim of defective product. However, MTBE manufacturers and those

who blend fuels would likely have been more difficult to reach under these other

bases of liability.56

State attorneys general, local governments, and drinking water suppliers noted

that providing a products liability shield would effectively leave only gas station

owners liable for cleanup, and because these businesses often have very limited

resources, the effect of the safe harbor provision would have been that the burden for

cleanup would fall to local communities, drinking water utilities, and the states. In

light of this, the Congressional Budget Office identified the safe harbor provision as

an intergovernmental and private-sector mandate in its review of the House version

of H.R. 6.57 The Attorneys General for at least 14 states, including states where RFG

has been heavily used, strongly opposed the MTBE safe harbor provision. Others

questioned the fairness of placing the liability burden primarily on gas station

owners, who were not made aware of MTBE’s exceptional contamination potential.

Oil companies and other proponents of the provision argued that a safe harbor

provision was reasonable, given that the fuels were used to meet the 1990 federal

oxygenated fuels and reformulated gasoline mandates, and that the key problem lay

Environmental Working Group. Like Oil and Water: As Congress Considers Legal

Immunity for Oil Companies More Communities Go to Court Over MTBE Pollution. April

2005, at [http://www.ewg.org/reports/oilandwater/execsumm.php].

For a more detailed discussion, see CRS Report RS21676, The Safe-Harbor Provision for

Methyl Tertiary Butyl Ether (MTBE), (name redacted).

Congressional Budget Office, “Cost Estimate for H.R. 6, the Energy Policy Act of 2005,

as Introduced in the House of Representatives.” Addressed to Honorable David Dreier,

Chairman of the Committee on Rules, U.S. House of Representatives, April 19, 2005, 4 pp.

This document is available at [http://www.cbo.gov/CESearch.htm]. The CBO determined

that the MTBE and renewable fuels liability safe harbor “would impose both an

intergovernmental and private-sector mandate as it would limit existing rights to seek

compensation under current law.... Under current law, plaintiffs in existing and future cases

may stand to receive significant amounts in damage awards, based, at least in part, on claims

of defective product. Because section 1502 would apply to all such claims filed on or after

September 5, 2003, it would affect more than 100 existing claims filed by local

communities, states, and some private companies against oil companies. Individual

judgments and settlements for similar lawsuits over the past several years have ranged from

several million dollars to well over $100 million. Based on the size of damages already

awarded and on information from industry experts, CBO anticipates that precluding existing

and future claims based on defective product would reduce the size of judgments in favor

of state and local governments over the next five years. CBO estimates that those reductions

would exceed the threshold established in UMRA (Unfunded Mandates Relief Act) [$62

million] in at least one of those years.”

CRS-22

not with MTBE, but with leaking underground storage tanks, which are the primary

source of MTBE contamination. Even so, MTBE producers appeared to remain

concerned about potential liability exposure. MTBE production and use grew rapidly

during the 1980s, and several oil companies experienced some incidents of MTBE

contamination of groundwater and drinking water wells before the RFG and oxy-fuel

mandates. In 1984, oil company engineers estimated that, if MTBE use in gasoline

became widespread, the number of well contamination incidents would triple, and

treatment costs would increase by a factor of five compared to conventional gasoline

incidents.58 In 1985, Exxon engineers “recommend[ed] that from an environmental

risk point of view MTBE not be considered as an additive to Exxon gasolines on a

blanket basis throughout the United States.”59

The total costs of treating MTBE contaminated drinking water are unknown, but

are expected to be in the billions. Two studies by water utilities place their best

estimates of the costs, given the limited data, at $25 billion60 and $33.2 billion.61 A

study sponsored by the American Petroleum Institute estimated that the costs of

MTBE cleanup for UST sites, public wells, and residential wells that are not covered

by a private party, the LUST Trust Fund, state cleanup funds, or insurance, could

range from $500 million to $1.5 billion.62

The conference did not reach agreement on the safe harbor issue. Unable to

persuade Senate conferees to accept the provision without some concessions to the

local governments and water utilities that might bear the cost of cleanup (in place of

MTBE producers), Representatives Barton and Bass, on behalf of the House

conferees, offered to establish an $11.43 billion MTBE cleanup fund, financed by the

petroleum industry, states, and federal contributions over a 12-year period.63

Lawsuits filed by a state attorney general (i.e., New Hampshire) after September 5,

Memorandum from B. J. Mickelson to V. M. Dugan, MTBE Contamination of Ground

Water, Exxon Oil Company, August 23, 1985, presented in South Tahoe Public Utility

District v. Atlantic Richfield Co., Case No. 999128 (San Fran. Super. Ct. Aug. 5, 2002).

Memorandum from B. J. Mickelson to Mr. J. M. E. Mixtar, Introduction of Methyl

Tertiary Butyl Ether (MTBE) in the Texas Eastern Transmission, Jacksonville, Florida;

Charleston, South Carolina; and Wilmington, North Carolina Areas, Exxon Oil Company,

April 19, 1985, presented in South Tahoe Public Utility District v. Atlantic Richfield Co.,

Case No. 999128 (San Fran. Super. Ct. Aug. 5, 2002).

American Water Works Association. A Review of Cost Estimates of MTBE

Contamination of Public Wells. June 21, 2005.

Association of Metropolitan Water Agencies. Cost Estimate to Remove MTBE

Contamination from Public Drinking Water Systems in the United States. June 20, 2005.

American Petroleum Institute. Analysis of MTBE Groundwater Cleanup Costs. June 2005.

See “Bass Presents MTBE Cleanup Plan,” News, House Committee on Energy and

Commerce [http://energycommerce.house.gov/108/News/07222005_1608.htm#Related],

July 22, 2005. Additional detail can be found in numerous places, including “Barton, Bass

Unveil MTBE Cleanup Plan; Petroleum Industry Refuses to Give Support,” Daily

Environment Report, July 25, 2005, p. A-9. The text of the proposal is available from CRS

upon request.

CRS-23

2003, would also have been exempt from the safe harbor provision. But the offer did

not pick up additional support, and the safe harbor died.

Renewable Fuels Standard. Both the House and Senate versions of H.R.

6 and the enacted version of the bill amend the Clean Air Act to establish a new

requirement that an increasing amount of gasoline contain renewable fuels such as

ethanol. The House bill would have required that 3.1 billion gallons of renewable

fuel be used in 2005, increasing to 5.0 billion gallons by 2012. (This compares to 3.4

billion gallons actually used in 2004.) The Senate bill would have required 4.0

billion gallons in 2006, increasing to 8.0 billion in 2012. The enacted bill is closer

to the Senate version, requiring 4.0 billion gallons in 2006, and an increase of 700

million gallons each year through 2011, before reaching 7.5 billion gallons in 2012.

Changes to the RFG Requirements. As noted above, the enacted bill, like

the earlier House and Senate versions, repeals the RFG program’s 2% oxygen

requirement. This step removes a major incentive for refiners to use MTBE in their

fuel. The enacted bill also contains anti-backsliding provisions: gasoline refiners and

importers, with some exceptions, must maintain the reduction in emissions of air

toxics that they achieved in gasoline produced or distributed during 2001 and 2002.

Phase-out of MTBE and Transition Assistance. Many of the other

MTBE provisions in the House- and Senate-passed bills did not make it into the

enacted version. Both House and Senate would have banned the use of MTBE in

motor vehicle fuel, with exceptions — the House version by December 31, 2014; the

Senate, four years after the date of enactment. The conferees dropped the ban

entirely.

The House and Senate bills would also have authorized funds to assist the

conversion of merchant MTBE production facilities to the production of other fuel

additives ($2.0 billion in the House bill, $1.0 billion in the Senate). These provisions

were also dropped by the conferees.

Leaking Underground Storage Tank Issues. Both chambers addressed

the issue of MTBE leaks from underground storage tanks (USTs). Adopting

provisions from the House bill, Title XV, Subtitle B, of the Energy Policy Act of

2005 comprises “The Underground Storage Tank Compliance Act” (USTCA). The

USTCA amends SWDA Subtitle I to add new leak prevention and enforcement

provisions to the UST regulatory program and impose new requirements on states,

EPA, and tank owners. The USTCA requires EPA or states that receive funding

under Subtitle I to conduct UST compliance inspections every three years. It also

requires states to comply with EPA guidance prohibiting fuel delivery to ineligible

tanks, develop training requirements for UST operators and individuals responsible

for tank maintenance and spill response, prepare compliance reports on governmentowned tanks in the state, and implement groundwater protection measures for UST

manufacturers and installers. The act also requires EPA to implement a strategy to

address UST releases on tribal lands.

As amended in January 2006, the USTCA authorizes the appropriation of $155

million annually for FY2006 through FY2011 from the Leaking Underground

Storage Tank (LUST) Trust Fund for states to use to implement the new UST leak

CRS-24

prevention requirements and to administer state programs.64 However, the Energy

Policy Act’s fuels tax extension language (§1362) prohibits the use of LUST Trust

Fund appropriations for any new purposes. Thus, the Energy Policy Act significantly

expands states’ leak prevention responsibilities, while at the same time, it prohibits

the use of the trust fund money by states to implement the new requirements, some

of which have tight deadlines. States that receive funds under Subtitle I are required

to implement these provisions.

The USTCA authorizes annually, from the Trust Fund, for FY2006 through

FY2011, the appropriation of $200 million for the LUST clean-up program for

petroleum tanks and another $200 million specifically for responding to tank leaks

involving MTBE or other oxygenated fuel additives (e.g., ethanol). The Senate bill

would have authorized a one-time appropriation of $200 million for the cleanup of

MTBE and other ether fuels (but not ethanol) from USTs and other sources. (For a

detailed comparison of the MTBE and ethanol provisions of the House and Senate

bills with the enacted version, see CRS Report RL32865, Renewable Fuels and

MTBE: A Comparison of Selected Provisions in the Energy Policy Act of 2005, by

(name redacted), (name redacted), (nam e redacted), and (name redacted).)

NAFTA Arbitration

Another MTBE issue that emerged in the wake of California’s decision to phase

out the use of MTBE in gasoline concerns the applicability of certain provisions in

the North American Free Trade Agreement (NAFTA). Chapter 11, Article 1110, of

the NAFTA requires the United States, Canada, and Mexico to treat each other’s

investors and investments in accordance with the principles set out in the chapter.

It also allows these investors to submit to arbitration a claim that a NAFTA party has

breached Chapter 11 obligations and to recover damages from any such breach.

In June 1999, the Methanex Corporation, a Canadian company that produces

methanol in the United States and Canada, notified the U.S. Department of State of

its intent to institute an arbitration against the United States under the investor-state

dispute provisions of the NAFTA, claiming that the phaseout of MTBE ordered by

the governor of California on March 25, 1999, breaches U.S. NAFTA obligations

regarding fair and equitable treatment and expropriation of investments, entitling the

company to recover damages which it estimated at $970 million. (Methanol is a

major component of MTBE and is Methanex’s only product. The California market

for MTBE reportedly accounted for roughly 6% of global demand for methanol.)

The 1999 Methanex claim asserted that California’s phaseout was motivated by a

desire to favor an MTBE competitor, ethanol, which is produced in the United States.

In August 2002, an arbitration panel ordered Methanex to file a new claim more

specifically relating the actions of California to the company’s manufacture of

Technical corrections to the Energy Policy Act were enacted in P.L. 109-168 on January

10, 2006. The single substantial correction to the USTCA was the revision of the dates

authorizing appropriations for Subtitle I from FY2005-FY2009 to FY2006-FY2011.

CRS-25

methanol. Methanex did so, and a hearing was held in June 2004. In August 2005,

a NAFTA arbitration panel dismissed the claim.65

Conclusion

Numerous detections in ground and surface water, and particularly in municipal

and private drinking water wells, have raised significant concerns about the

continued use of MTBE in gasoline. Half the states have now taken action to phase

out its use, and Congress, in enacting H.R. 6, has removed the federal requirement

that oxygenates (such as MTBE) be used in reformulated gasoline.

These actions may lead refiners to phase out the substance entirely. Within days

of final passage of the 2005 energy bill, the nation’s largest refiner, Valero,

announced that it will discontinue production of MTBE. Other producers appear to

be following suit.

Whether this marks the end of congressional action on MTBE remains to be

seen. More than 150 suits have been filed over liability for cleanup of MTBEcontaminated water. With substantial sums of money in play, the results of this

litigation will be closely watched, and may generate further pressure for

congressional action.

The effects of MTBE removal on gasoline supply and price are also of concern.

In mid-April 2006, gasoline prices were near record highs, and many analysts blamed

the phaseout of MTBE and shortages of ethanol for a significant part of the run-up

in price. Whether these factors prove transitory will bear watching

U.S. Department of State. NAFTA Tribunal Dismisses Methanex Claim. August 10, 2005,

available at [http://www.state.gov/r/pa/prs/ps/2005/50964.htm]. See also CRS Report

RL31638, Foreign Investor Protection Under NAFTA Chapter 11, by (name redacted).

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