Order Code 98-290 ENR
CRS Report for Congress
Received through the CRS Web
MTBE in Gasoline:
Clean Air and Drinking Water Issues
Updated January 2, 2004
James E. McCarthy and Mary Tiemann
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
Concern over water contamination caused by the gasoline additive methyl
tertiary butyl ether (MTBE) has raised questions concerning the desirability of using
the additive as a means of producing cleaner burning fuel. MTBE has been used by
most refiners to produce the reformulated gasoline (RFG) required under the Clean
Air Act in portions of 17 states and the District of Columbia. It is credited with
producing marked reductions in carbon monoxide emissions; RFG has also reduced
emissions of toxic substances and the volatile organic compounds that react with
other pollutants to form smog. Over the last few years, however, incidents of
drinking water contamination by MTBE, particularly in California, have raised
concerns and led to calls for restrictions on its use. In March 1999, Governor Davis
of California ordered a phase-out of MTBE use in the state by December 31, 2002
(later amended to December 31, 2003). Sixteen other states, including New York,
have subsequently enacted limits or phase-outs of the substance.
EPA responded to initial reports of water contamination by intensifying research
and focusing on the need to minimize leaks from underground fuel tanks. As reports
of contamination spread in 1998 and 1999, however, EPA’s position evolved. On
March 20, 2000, the Agency announced it was beginning the process of requiring a
reduction or phase-out of MTBE use under Section 6 of the Toxic Substances
Control Act. Because regulatory action could take years to complete, EPA urged
Congress to amend the Clean Air Act to provide specific authority to reduce or
eliminate use of the substance. Since then, the Senate Environment and Public
Works Committee has reported bills to provide such authority three times (S. 791 in
the 108th Congress). Language similar to S. 791 passed the Senate in its version of
H.R. 6, the comprehensive energy bill, July 31. The House approved somewhat
different MTBE provisions in its version of H.R. 6, April 11. The conference report
on the bill includes more extensive assistance for MTBE producers – some of it
controversial. The House adopted the conference report November 18. It awaits
Senate action.
If MTBE were removed from gasoline without amending the Clean Air Act,
there would be a need for refiners to use alternative sources of oxygen in RFG. The
potential alternatives are other forms of ether, or alcohols such as ethanol. Ethanol
is the most likely substitute, but it costs more to produce than MTBE, poses
challenges to the gasoline distribution system, and, some studies suggest that it
increases the risk of water contamination compared to non-oxygenated gasoline.
Also, in the short term, ethanol is unlikely to be available in sufficient quantity to
replace MTBE nationwide. Gasoline that meets the performance requirements for
RFG without using oxygenates at all can be made, but current law requires the use
of oxygenates in RFG.
The principal issues for Congress are whether MTBE use should be limited or
phased out and whether there should be a “safe harbor” from product liability
lawsuits for gasoline refiners and marketers who used MTBE.

---

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Air Quality Benefits Resulting from MTBE Use . . . . . . . . . . . . . . . . . . . . . . 4
Health-related Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Water Quality and Drinking Water Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Occurrence of MTBE in Drinking Water . . . . . . . . . . . . . . . . . . . . . . . 7
Occurrence of MTBE in Ambient Ground Water . . . . . . . . . . . . . . . . . 8
EPA’s Responses to MTBE Occurrence in Water . . . . . . . . . . . . . . . . . . . . . 9
Safe Drinking Water Act Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Underground Storage Tank Regulation . . . . . . . . . . . . . . . . . . . . . . . . 10
Blue Ribbon Panel on Oxygenates in Gasoline . . . . . . . . . . . . . . . . . . . . . . 11
Findings and Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Alternatives to MTBE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Current Statutory Authority to Control the Use of MTBE . . . . . . . . . . . . . 15
Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
California and Other State Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
NAFTA Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

---

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 108th
Congress.
Under the Clean Air Act Amendments of 1990, numerous areas with poor air
quality are required to add chemicals called “oxygenates” to gasoline as a means of
improving combustion and reducing emissions. 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, 1995.1 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
(see Table 1 and Figure 1); a little more than 30% of the gasoline sold in the United
States is RFG.
The law requires that RFG contain at least 2% oxygen by weight. Refiners can
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 must
contain 11% MTBE by volume to meet the 2% requirement.
By far the most commonly used oxygenate is MTBE. In 1999, 87% of RFG
contained MTBE, a number since reduced to about 70%. MTBE has also been used
1 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 year-
round 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 is the primary oxygenate used in winter oxygenated fuels and
MTBE the primary oxygenate used in RFG, although either can be used in both fuels.

---

CRS-2
Table 1
Areas Using Reformulated Gasoline (as of January 2003)
Mandatory RFG Areas*
Baltimore, MD
Chicago, IL (and portions of Indiana and Wisconsin)**
Hartford, CT
Houston, TX
Los Angeles, CA
Milwaukee, WI**
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 Areas***
Connecticut (entire state)
Dallas / Fort Worth, TX
Delaware (entire state)
District of Columbia
Kentucky portion of Cincinnati metropolitan area
Louisville, KY
Maryland (DC suburbs)
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 (DC suburbs, Richmond, Norfolk - Virginia Beach - Newport News)
_______________
* RFG use required by the Clean Air Act.
** In the Chicago and Milwaukee areas, RFG is made with ethanol rather than
MTBE.
*** 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, but not before January 1, 2004.
Source: U.S. EPA

---

CRS-3

---

CRS-4
since the late 1970s in non-reformulated gasoline, as an octane enhancer, at lower
concentrations. 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 discussion. 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
oxygenated gasoline programs find a reduction in ambient CO concentrations of
about 10%.”5
2 See “Reformulated Fuels Help Curb Peak Ozone Levels in California,” Daily Environment
Report, November 6, 1996, pp. A-1 and A-2.
3 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.
4 U.S. Environmental Protection Agency, Blue Ribbon Panel on Oxygenates in Gasoline,
Executive Summary and Recommendations, July 27, 1999, Appendix A. Available at
Internet website: [http://www.epa.gov/otaq/consumer/fuels/oxypanel/blueribb.htm].
5 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
(continued...)

---

CRS-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 on both 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 9-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.
In several cities, residents have complained of a variety of health effects from
exposure to MTBE/gasoline exhaust: headaches, dizziness, nausea, sore eyes, and
respiratory irritation. Some complaints have centered around the use of MTBE in
cold weather, two of the principal areas noting complaints being 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 research is being conducted by EPA, universities, and others. Under the
authority of Section 211 of the Clean Air Act, EPA has requested that refiners
conduct a number of health effects studies on oxygenated, reformulated, and
conventional gasoline, which should provide additional information.
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,
several rodent studies have been done. Based on these animal studies (which looked
primarily at inhalation effects), EPA has concluded that MTBE poses a potential for
carcinogenicity to humans at high doses; however, because of uncertainties and
5 (...continued)
as the OSTP Report.(Executive summary and recommendations are available at Internet
website [http://wwwsd.cr.usgs.gov/nawqa/pubs/abstracts/zogorski/ostp.exec.sum.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.
6 U.S. EPA Response to Interagency Assessment of Oxygenated Fuels, undated, p. 2.
7 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.
8 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.

---

CRS-6
limitations in the data EPA has been unable to make a confident estimation of risk
at low exposure levels.9 In 1998, the International Agency for Research on Cancer
(IARC), the U.S. National Toxicology Program, and California’s Carcinogen
Identification Committee all determined not to list MTBE as a human carcinogen.
Regarding noncancer effects, another 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 available
research on both 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.
For practical purposes, the interpretation of any health risks associated with the
addition of MTBE to gasoline requires 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.”10
Water Quality and Drinking Water Issues
A major issue regarding the use of MTBE concerns its detection at low levels
in ground water in numerous locations nationwide and at elevated levels in some
municipal drinking water wells and reservoirs. MTBE is very 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: 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.11
The available data indicate that 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
9 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. p. 1-2. This and other health effects information is available at
Internet website: [http://www.epa.gov/OST/drinking/mtbe.html]. (Also, see additional
drinking water risk discussion on p. 9 and 10 of this report.)
10 Ibid., p. vii.
11 Keller, Arturo, 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.

---

CRS-7
lakes and reservoirs appears to be exhaust from motorized watercraft, while smaller
sources include gasoline spills, runoff, and ground water flow.12
Occurrence of MTBE in Drinking Water. Available information on the
occurrence of MTBE in public drinking water supplies has increased substantially
over the past few 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 public water
systems in February 1997. As of April 3, 2002, 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 1 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).13
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.14
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
12 Keller. p. 33-34.
13 California Environmental Protection Agency. MTBE in California Drinking Water, April
3, 2002. Regular updates are available at Internet website:
[http://www.dhs.cahwnet.gov/ps/ddwem/chemicals/MTBE/mtbeindex.htm].
(Micrograms per liter(:g/L) are equivalent to parts per billion (ppb) for fresh water.)
14 Maine Department of Human Services, Department of Environmental Protection, and
Department of Conservation. The Presence of MTBE and Other Gasoline Compounds in
Maine’s Drinking Water, A Preliminary Report. October 13, 1998. 24 p. (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.)

---

CRS-8
majority of these detections have been well below levels of public health concern,
with roughly 1% of detections exceeding 20 :g/L.15
More recent federal and state monitoring efforts have been advancing the
knowledge about the presence of MTBE in drinking water. Perhaps most notably,
the United States Geological Survey (USGS), in cooperation with EPA, recently
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.16 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.17
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 1993-1998) 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.18
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
15 The Blue Ribbon Panel on Oxygenates in Gasoline. Executive Summary and
Recommendations. July 27, 1999. Summary and full report are available at Internet website:
[http://www.epa.gov/otaq/consumer/fuels/oxypanel/blueribb.htm].
16 For further information on MTBE research at the USGS, see Internet website:
[http://wwwsd.cr.usgs.gov/nawqa/vocns/].
17 Grady, Stephen J. and George D. Casey. MTBE and other VOCs in Drinking Water in the
N o r t h e a s t a n d M i d - A t l a n t i c R e g i o n . A v a i l a b l e a t I n t e r n e t
website:[http://sd.water.usgs.gov/nawqa/pubs/abstracts/grady/Grady_iccssw_abs.pdf ].
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.
18 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 Internet
website: [http://www.epa.gov/otaq/consumer/fuels/oxypanel/blueribb.htm#Presentations].

---

CRS-9
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).19 Moreover, a 1998 report by the Lawrence Livermore National
Laboratory found that MTBE was not significantly degrading in the monitoring
networks for these leaking UST sites.20
The picture nationwide may be similar. As of late 2000, 42 states had begun to
require testing for MTBE in ground water at leaking UST sites. 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 gasoline-
contaminated sites in their states; 24 states reported MTBE at 60% to 100% of sites.21
EPA’s Responses to MTBE Occurrence in Water
Safe Drinking Water Act Initiatives. To address concerns raised by the
detection of MTBE in ground water and drinking water supplies, EPA has undertaken
a variety of activities. 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 the Safe Drinking Water Act (SDWA).22
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
19 California Environmental Protection Agency, MTBE Briefing Paper, p. 17.
20 Happel, Anne, 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.
21 New England Interstate Water Pollution Control Commission (NEIWPCC). Survey of
State Experiences with MTBE Contamination at LUST Sites (August 2000). Available at
Internet website: [http://www.neiwpcc.org/mtbe1.html]. The survey shows that some states
began requiring testing at LUST sites in the 1980s (Maine in 1986 and Minnesota in 1987)
while others recently began to do so (Kentucky in 2000 and Washington in 2001).
22 At least 7 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 5
states have adopted a secondary standard (based on aesthetic qualities, i.e., taste and odor),
ranging from 5 ppb to 70 ppb. 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.

---

CRS-10
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.23
Additionally, EPA is taking 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
contaminants that may require regulation. EPA included MTBE in this rule and
directed large public water systems to begin monitoring for MTBE in January 2001.24
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. Based on reporting by states, EPA estimates that, by the end of fiscal
year 2003, 79% of facilities were in “significant operational compliance” with the
1998 release prevention requirements and 72% of facilities were in significant
operational compliance with the release detection requirements. However, MTBE
23 EPA Drinking Water Advisory, p. 2.
24 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.

---

CRS-11
has been detected at thousands of leaking tank sites, and this additive is proving more
difficult and costly to remediate than conventional gasoline. Moreover, many sites
have not been tested for MTBE. 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.
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
Leaking Underground Storage Tank (LUST) Trust Fund and authorized EPA and
states to use the Fund to clean up 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 FY2003, Congress provided $72.3
million for the program, and the President has requested $72.5 million for FY2004.25
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.26
The panel was directed to perform the following tasks:
! examine the role of oxygenates in meeting the nation’s goal of clean
air,
! evaluate the efficiency of each of the available oxygenates in
providing clean air benefits and the existence of alternatives,
! assess the behavior of oxygenates in the environment,
! review any known health effects, and
! compare the cost of production and use, and each product’s
availability.
The panel also was directed to study the causes of ground water and drinking water
contamination from motor vehicle fuels, to explore prevention and cleanup
technologies for water and soil, and to make recommendations to EPA “on how to
ensure public health protection and continued improvement in both air and water
quality.”
25 For more information on the LUST program and related legislation, see CRS Report
RS21201, Leaking Underground Storage Tanks: Program Status and Issues.
26 A list of Blue Ribbon Panel members is provided, along with the panel report and related
materials, at Internet website: [http://www.epa.gov/oar/caaac/mtbe.html].

---

CRS-12
Findings and Recommendations. In releasing its recommendations July
27, 1999, the Blue Ribbon Panel stressed that “RFG has provided substantial
reductions in the emissions of a number of air pollutants from motor vehicles, most
notably volatile organic compounds (precursors of ozone), carbon monoxide, and
mobile-source air toxics (benzene, 1,3-butadiene, and others), in most cases resulting
in emissions reductions that exceed those required by law.”27
However, the panel noted water quality problems associated with MTBE
releases and made a number of recommendations. Specifically, the panel:
! recommended that Congress act to remove the current 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 cost-
effective 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 phase out), 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;
! 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 aboveground 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 water craft; and accelerate research for developing cost-
effective drinking water treatment and remediation technologies.
With regard to the recommendation to reduce substantially the use of MTBE,
the panel noted that accomplishing such a major change in gasoline supply without
27 Blue Ribbon Panel on Oxygenates in Gasoline, “Panel Calls for Action to Protect Water
Quality While Retaining Benefits from National Clean Burning Gas,” press release, July 27,
1999, p. 2. Available at [http://www.epa.gov/oms/consumer/fuels/oxypanel/blueribb.htm].
Regarding dissenting views, one member endorsed the water protection reforms but
disagreed with the recommendation to limit the use of MTBE, noting that the panel had not
identified any increased public health risk associated with MTBE use in gasoline; another
member supported maintaining the existing oxygenate standard for the air quality benefits.

---

CRS-13
disruptions to fuel supply and price would require up to 4 years lead time if the use
of MTBE were eliminated (or less if use was substantially reduced).
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.”28
On March 20, 2000, she announced that EPA would begin the process of issuing
regulations to reduce or phase out use of MTBE (discussed at greater length below
in the section on “Current Statutory Authority”). 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.”29
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 has slowed noticeably. This
Administration, like the previous one, would defer to a legislative solution. As one
EPA official described it, “If the ethanol and oil industries can come to an agreement,
we’ll support it.”
Alternatives to MTBE
The major potential alternatives to MTBE are other oxygenates. This is so both
for practical and for regulatory reasons: at present, oxygenates are required by the
Clean Air Act, and, they 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
28 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.
29 U.S. Environmental Protection Agency. “Clinton-Gore Administration Acts to Eliminate
MTBE, Boost Ethanol,” EPA Headquarters Press Release, March 20, 2000, pp. 7-8.

---

CRS-14
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.30
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.31
This is largely because ethanol is likely to be degraded preferentially by
microorganisms that would otherwise feed on other chemical components of gasoline
including benzene, toluene, ethylbenzene, and xylene (BTEX).
In announcing the phase-out of MTBE in his state, 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.”32
A more recent article, based on the California ethanol review, focused
specifically on the relative risks of ground-water contamination by spills of ethanol-
blended 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.33
The switch from MTBE to ethanol is not without technical problems as well.
Ethanol costs substantially more to produce than MTBE; it poses challenges to the
30 Blue Ribbon Panel Report, p. 8.
31 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.
32 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. Volume 1, Executive summary. P. 1-22.
Report is available at Internet website: [http://www-erd.llnl.gov/ethanol/]).
33 Powers, Susan, et al. “Will Ethanol-Blended Gasoline Affect Groundwater Quality?”
Environmental Science & Technology. American Chemical Society. January 1, 2001. p 28A.

---

CRS-15
gasoline distribution system (it would separate 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); and, in the short term, it is unlikely to
be available in sufficient quantity to replace MTBE nationwide.34
Since late 1997, some refiners have discussed the possibility of making gasoline
that meets the performance requirements for RFG without using oxygenates. Tosco
and Chevron, two firms with large stakes in the California gasoline market, asked for
changes in the rules to allow the sale of RFG not meeting the oxygenate requirement
in late 1997. In October 1997, Tosco expressed concern about the growing evidence
of the potential for extensive MTBE contamination in asking the California Air
Resources Board to “take decisive action” to “begin to move away from MTBE.”35
Chevron, California’s largest refiner, followed suit, announcing that it “may be
possible to make a cleaner burning gasoline without oxygenates, and still reduce
emissions to the same extent achieved with current standards.”36 The company stated
its support for legislation allowing it to stop or reduce its use of oxygenates. These
statements were supported by the Western States Petroleum Association. The
American Petroleum Institute now also supports legislation to remove the RFG
oxygenate requirement, which was a key recommendation of the Blue Ribbon Panel.
Affected industries have not been united in seeking authority to replace MTBE,
however. The major producers of MTBE have not joined the efforts to promote
alternatives, and ethanol producers and agricultural interests (most ethanol is made
from corn) are concerned that removing the oxygenate requirement would negatively
affect the sales of their products. Nearly 10% of the nation’s corn crop is used to
produce ethanol. If MTBE use were reduced or phased out, but the oxygenate
requirement remained in effect, ethanol use would likely soar, increasing demand for
corn. Conversely, if the oxygenate requirement is removed by legislation, not only
would MTBE use decline, but so, likely, would demand for ethanol.
As a result, Members, Senators, and Governors from corn-growing states have
taken a keen interest in MTBE legislation. Unless their interests were addressed,
they would have posed a potent obstacle to its passage. Reflecting these concerns,
both the House and Senate versions of MTBE legislation in the 108th Congress
eliminated the oxygen requirement, but mandated a more than doubling of the use of
renewable fuels such as ethanol by 2012 or 2015. This provision appears to have
generated broad support for most provisions of the legislation.
Current Statutory Authority to Control the Use of MTBE
34 For additional information on ethanol, see CRS Report RL30369, Fuel Ethanol:
Background and Public Policy Issues.
35 Letter of Duane B. Bordvick, Vice President, Environmental and External Affairs, Tosco,
to John D. Dunlap III, Chairman, California Air Resources Board, October 17, 1997.
36 “Chevron Seeks Changes to Reformulated Gasolines,” Press Release, Chevron
Corporation Public Affairs Department, December 1, 1997.

---

CRS-16
Whether EPA has authority to take steps to regulate or ban MTBE use in the
absence of specific congressional authorization is a question many have raised as the
Agency and Congress consider their responses to MTBE contamination. In theory,
if the Agency determines that MTBE poses what it considers a significant threat to
air quality, water quality, or human health, it can take action to restrict or ban the
substance using existing authority under the Toxic Substances Control Act (TSCA).37
Until early 2000, based on its public statements, the Agency seemed unlikely to make
such a determination. In April 1998 testimony before a House Commerce
subcommittee, for example, EPA’s then Acting Assistant Administrator for Air and
Radiation stated: “One needs to be very cautious about initiating changes to the RFG
program that could upset the balance of previous agreements that have led to the
significant emissions reductions we are seeing today.”38 Instead, the Agency focused
attention on the need to prevent leaks from underground fuel storage tanks, which,
it argued, would address the major cause of drinking water contamination by MTBE.
On March 20, 2000, however, former EPA Administrator Browner announced
that the Agency would start a regulatory process “aimed at phasing out MTBE,”39
using Section 6 of TSCA. According to the Agency’s press release, EPA expected
to issue a proposed rule to ban or phase down MTBE within 6 months. As the
Agency noted, however, a TSCA rulemaking is procedurally burdensome and may
take “several years” to complete. To use the authority, the Agency will have to
conclude that MTBE poses an unreasonable risk to health or the environment. In the
27 years since TSCA was enacted, the Agency has successfully invoked this authority
against fewer than half a dozen classes of chemicals.
The first step in the TSCA rule-making process was the issuance of an Advance
Notice of Proposed Rulemaking (ANPRM) on March 24, 2000.40 The ANPRM
solicited the input of interested parties regarding EPA’s course of action, including:
! whether some use of MTBE as a gasoline additive
should be allowed to continue,
! how much lead time would be necessary to allow
refiners to eliminate MTBE from RFG or from all fuels
without unacceptable impacts on the price or supply of
fuel,
37 Under the Clean Air Act, EPA has authority to waive the RFG oxygenate requirement if
the oxygenate interferes with the attainment of an air quality standard; however, EPA has
no authority to waive the requirement for water quality reasons.
38 Statement of Richard D. Wilson, former Acting Assistant Administrator, Office of Air and
Radiation, U.S. EPA, in “Implementation of the Reformulated Gasoline Program in
California,” Hearing before the Subcommittee on Health and Environment, Committee on
Commerce, U.S. House of Representatives, April 22, 1998, Serial No. 105-94, p. 30.
39 U.S. Environmental Protection Agency. “Clinton-Gore Administration Acts to Eliminate
MTBE, Boost Ethanol,” EPA Headquarters Press Release, March 20, 2000, p. 2.
40 65 FR 16093, March 24, 2000.

---

CRS-17
! whether EPA should eliminate or cap the use of any
other gasoline additives (e.g., other ethers) in addition
to MTBE, and
! whether MTBE presents significantly greater risk to
public health and/or water quality than alternative
gasoline additives.
The Agency also requested additional information regarding releases of gasoline
containing MTBE, the extent of contamination of water resources by the substance,
remediation technologies, alternatives to MTBE and their potential impacts on health
and the environment, and the cost of limiting or phasing out MTBE over various time
frames.41 As of August 2003, the Agency was still preparing a proposed rule, but
Agency staff familiar with the process have described it as “basically on hold,”42 with
the Administration deferring to what they think will be congressional action.
In addition to TSCA authority, Section 303 of the Clean Air Act could possibly
have been invoked. Section 303 allows the Administrator to seek a restraining order
(and temporarily to issue such orders on his own authority) in cases where “a
pollution source or combination of sources ... is presenting an imminent and
substantial endangerment to public health or welfare, or the environment....” In
EPA’s assessment, however, studies to date suggest that MTBE is less toxic than
certain other gasoline components, such as benzene, so it might be difficult to justify
a finding of imminent and substantial endangerment.
Legislation
Legislation that could affect MTBE use has been introduced in every Congress
since the 104th, but until 2002, did not reach the floor of either chamber.43 In the
107th Congress, however, the Senate included MTBE provisions in its version of H.R.
4, the comprehensive energy bill that it passed April 25, 2002. The House included
authorization of funds to clean up MTBE leaks in its version of the bill, but did not
address MTBE use, the oxygenate requirement, or other issues. Senate and House
conferees did not reach agreement on the bill.
Relying heavily on the work of the 107th Congress, however, the 108th Congress
moved quickly to address MTBE and related issues. On April 11, 2003, the House
passed H.R. 6, a comprehensive energy bill. The Senate passed its version July 31,
and the conferees reported the bill (H.Rept. 108-375) on November 18. The House
adopted the conference report the same day, 246-180. In the Senate, a cloture vote
41 The specific request for information is found on pp. 16106-16107 of the March 24, 2000
Federal Register notice.
42 Personal communication, U.S. EPA, Office of Transportation and Air Quality, January
6, 2003.
43 Prior to the 107th Congress, the only legislation that had reached the floor of either house
was a Senate amendment to the FY2000 agricultural appropriations bill (S. 1233), offered
by Senator Boxer, expressing the sense of the Senate that use of MTBE should be phased
out. The Senate adopted the amendment on August 4, 1999.

---

CRS-18
on the bill, November 21, failed to achieve the 60 votes necessary to limit debate.
Thus, the bill remains on the Senate calendar for possible action in the second
session.
The conference version of the bill (in Title XV) would amend the Clean Air Act
to eliminate the requirement that RFG contain 2% oxygen and establish a new
requirement that an increasing amount of gasoline contain renewable fuels such as
ethanol. The bill would require that 3.1 billion gallons of renewable fuel be used in
2005, increasing to 5.0 billion gallons by 2012 (as compared to 2.1 billion gallons
used in 2002). It would authorize $2.0 billion to assist the conversion of merchant
MTBE production facilities to the production of other fuel additives, preserve the
reductions in emissions of toxic substances achieved by the RFG program, and
provide a “safe harbor” from product liability lawsuits for producers of MTBE and
renewable fuels.
The bill would ban the use of MTBE in motor vehicle fuel, except in states that
specifically authorize its use, not later than December 31, 2014. The ban has two
possible exceptions. First, EPA may allow MTBE in motor fuel up to 0.5 percent by
volume, in cases that the Administrator determines to be appropriate; and second, the
President may make a determination, not later than June 30, 2014, that the
restrictions on the use of MTBE shall not take place.
The safe harbor provision is among the most controversial provisions in the
entire bill. It would 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 successfully used in California to require refiners to shoulder liability for
MTBE cleanup). The safe harbor would be retroactive to September 5, 2003. Prior
to that date, five lawsuits had been filed. After that date, at least 150 suits were filed,
on behalf of 210 communities in 15 different states.
With liability for manufacturing and design defects ruled out, plaintiffs would
be forced to demonstrate negligence in the handling of such fuels in these and any
future cases, a more difficult legal standard to meet. As a result, drinking water
suppliers widely oppose the safe harbor provision and have expressed concern that
it could leave communities paying much of the cost for cleaning up contamination
caused by fuels containing MTBE or ethanol. Manufacturers counter that the
problem lies with leaking tanks, not with the fuels the tanks contain. They argue that
a product liability safe harbor provision is reasonable, given that the fuels are used
to meet federal fuel mandates.44

The legislation also addresses the issue of MTBE and other fuel leaks from
underground storage tanks. Title XV, Subtitle B, of the conference report would
make extensive amendments to Subtitle I of the Solid Waste Disposal Act (SWDA)
to enhance the leak prevention and enforcement provisions of the federal
underground storage tank regulatory program, and to broaden the allowable uses of
44 For more information on this issue, see CRS Report RS21676, The Safe-Harbor Provision
for Methyl Tertiary Butyl Ether (MTBE).

---

CRS-19
the Leaking Underground Storage Tank (LUST) Trust Fund. The conference report
essentially incorporates the language of H.R. 3335, the Underground Storage Tank
Compliance Act of 2003, which shares many similarities with Senate-passed S. 195.
The provisions would add new tank inspection and operator training requirements,
prohibit fuel delivery to ineligible tanks, and expand underground storage tank
requirements for federal facilities. The provisions also would authorize states to use
funds from the LUST Trust Fund to help tank owners or operators pay the costs of
remediating tank leaks in cases of economic hardship, and would allow EPA and
states to use LUST funds to enforce UST release prevention and detection
requirements. The conference report would authorize LUST Trust Fund
appropriations of $200 million annually, FY2004 through FY2008, specifically for
cleaning up leaks containing MTBE or other oxygenated fuel additives (e.g.,
ethanol), and another $200 million annually for the same years for responding to tank
leaks, generally.
(For a more detailed discussion of the MTBE and ethanol provisions of the
conference report, and a comparison of the conference, House, and Senate bills, see
CRS Report RL31912, Renewable Fuels and MTBE: Side-by-Side Comparison of
House and Senate Energy Bills and the Conference Report on H.R. 6.)
California and Other 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 phase-out of MTBE from gasoline in California.45 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, 2002.46 (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
45 See Keller, Arturo, 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 on the web at [http://www.tsrtp.ucdavis.edu/mtberpt/homepage.html].
46 Governor Gray Davis, Executive Order D-5-99. The Executive Order and related
materials can be found at: [http://www.governor.ca.gov/state/govsite/gov_homepage.jsp].
(Search “MTBE”).

---

CRS-20
circumstances.47 The Clean Air Act 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.48 More
than 2 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 will be
required to contain another oxygenate (most likely, ethanol) when the MTBE ban
takes effect, unless Congress acts to change the oxygenate requirement. As of May
2003, about 80% of California’s motor fuels were reported to have phased out MTBE
in favor of ethanol.
Following California’s decision to phase-out MTBE, at least 16 other states
(Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Kansas, Kentucky,
Michigan, Minnesota, Missouri, Nebraska, New York, Ohio, South Dakota, and
Washington) 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. Maine (which is not required to use
RFG, but had chosen to do so) also opted out of the RFG program in October 1998
as a result of concerns over MTBE contamination of ground water, and subsequently
substituted a low-volatility gasoline to provide similar reductions in emissions of
ozone-forming compounds, without requiring the use of oxygenates.
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 phase-out of MTBE ordered by
the Governor of California 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 accounts for roughly 6% of global demand for methanol.) The
1999 Methanex claim asserted that California’s phase-out was motivated by a desire
to favor an MTBE competitor, ethanol, which is produced in the United States.
NAFTA, Chapter 11, requires the disputing investor to deliver a written notice
of its intent to the NAFTA country involved at least 90 days before the claim is
47 See statements of Robert Perciasepe, former Assistant Administrator for Air and
Radiation, U.S. EPA, at the May 6, 1999 House Commerce subcommittee hearing,
previously cited, pp. 47-52.
48 The waiver language is found in Section 211(k)(2)(B).

---

CRS-21
submitted to arbitration under the appropriate international arbitral rules. NAFTA
also requires 6 months to elapse “since the events giving rise to a claim” before the
investor may proceed with arbitration. Because no settlement was reached within
that timeframe, the matter proceeded to arbitration. In August 2002, an arbitration
panel ordered Methanex to file a fresh claim more specifically relating the actions of
California to the company’s manufacture of methanol. Methanex filed a new claim
in November 2002, and a hearing is scheduled for June, 2004.49
Conclusion
Controversy continues to surround the use of MTBE in gasoline. Research
conducted to date suggests that the air quality benefits of its use are substantial.
However, numerous detections of MTBE in ground and surface water, and
particularly in municipal and private drinking water wells, have raised significant
concerns about the use of this oxygenate. Research on MTBE and other oxygenates
is ongoing and should provide additional information to help advance the current
understanding of MTBE-related health and environmental issues and those of its
potential alternatives.
Legislation introduced in Congress initially focused on the limited issue of
MTBE use in California, where federal requirements have prevented refiners from
adopting a more flexible approach permitted by state regulations. Modifying the
federal requirements as they pertain to California has had substantial support among
the California congressional delegation. As MTBE has been detected in drinking
water wells in other parts of the country, and in surface waters in addition to
underground sources, broader legislation has been introduced. These bills emerged
in a context of ongoing activities aimed at reducing releases of petroleum, generally,
or MTBE, specifically. The effectiveness and sufficiency of these efforts (such as the
continued implementation of UST regulations and stricter emissions standards for
marine engines), combined with concerns and uncertainties about potential
replacements for MTBE, add complexity to the debate. Also, some lawmakers have
cautioned against acting precipitously to replace MTBE with other additives without
adequate research and consideration of potential adverse consequences. Others view
the debate over MTBE as an opportunity to encourage the greater use of ethanol, a
competing oxygenate generally made from corn.
Developments in the states, particularly California and the Northeast, have
driven reconsideration of the petroleum industry’s reliance on MTBE as the principal
means of meeting RFG requirements. These developments have generated continued
congressional interest in the issue. Differences remain over whether to ban MTBE,
whether to provide a product liability safe harbor for MTBE (or renewable fuels)
producers, and other issues that may delay or prevent enactment of legislation.
49 For more information, see CRS Report RL31638, International Investor Protection:
“Indirect Expropriation” Claims under NAFTA Chapter 11.

---