TESTIMONY OF PETER M. ROONEY
SECRETARY FOR ENVIRONMENTAL PROTECTION
CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY

Good morning, Senator Boxer. I am Peter Rooney, Secretary for the California Environmental Protection Agency. I would like to start by thanking you for the opportunity to address you today on the issue of MTBE, its use as a gasoline additive, and the potential impacts of MTBE on human health and the environment. As you know, these are issues Cal/EPA, the California Legislature, and other interested parties have been discussing at length during this last year, discussions I am sure will continue throughout this legislative session.

I understand you wish to limit today's conversation to the impacts of MTBE on water, but it is impossible to talk about this issue without first discussing why it is being used as a gasoline additive.

The introduction of Cleaner Burning Gasoline

As I'm sure you know, Senator, California has one of the greatest air quality challenges in the nation. At some time during the year, 90 percent of California residents breathe air that does not meet the current federal health-based air quality standards. Five of the seven air basins with ilk greatest air quality difficulties in the nation can be found here.

California has, however, through innovative and technology-based strategies, realized great improvements in its air quality. 1996 proved to be the cleanest "ozone season" on record for the South Coast Air Basin, the Los Angeles region, and for San Diego. (1997 is even better, but 1996 may be a more appropriate benchmark to use because of the influence meteorology had on this year's air quality.) Undoubtedly, one of the chief reasons for that improved air quality in 1996 was the introduction of California's Cleaner Burning Gasoline onto the market, in most cases, ahead of schedule. The improvement in air quality is all the more remarkable because it came at a time when the California economy was truly in a state of full recovery--when vehicle trips were increasing and, coincidentally, speed limits were being raised.

The success of the California Cleaner Burning Gasoline program is unprecedented. Up to 300 tons per day in ozone-forming precursors are no longer being emitted by the California light-duty vehicle fleet. Public exposure to known, potent human carcinogens has been reduced by 30-40 percent; ambient levels of benzene have been reduced by 50 percent. That benefit is equivalent to 3.5 million vehicles no longer being driven on California roadways.

Why is MTBE a part of the Cleaner Burning Gasoline?

The most persistent concerns about Cleaner Burning Gasoline relate to die use of MTBE (methyl tertiary butyl ether)--a gasoline additive. Those concerns center around MTBE's potential impact to human health and the environment. MTBE is an oxygenate--a compound that increases the oxygen content of gasoline. Its primary purpose is to allow gasoline to burn more completely and to reduce Carbon Monoxide emissions. It is the oxygenate of choice in California--and I strongly emphasize the word choice.

Despite the best efforts of the California Environmental Protection Agency to clearly articulate the facts surrounding State policy, State regulation, and the state of the science on MTBE, the issue has been confused and confusing. So, in the interest of informing the Committee, a brief overview is in order.

What are oxygenates?

First and foremost, oxygenates are a required additive in California's Cleaner Burning Gasoline year-round because it is required by federal law--(the Federal Clean Air Act). Oxygenates are a class of compounds that are blended with gasoline to increase its oxygen content.

Oxygenates are grouped into two different classes; ethers and alcohols. Recently, there have been three different ethers in use throughout the United States. Currently, the lost widely used is methyl tertiary butyl ether (MTBE), followed by tertiary amyl methyl ether (TAME) and occasionally some small amounts of ethyl tertiary butyl ether (ETBE). Ethanol is the only alcohol currently in use as an oxygenate, although to my knowledge, it is not being used in California at this time.

Oxygenates are blended with reformulated gasoline to help dilute the volumes of benzene, sulfur, aromatics, olefins, and other undesirable compounds. During the winter months, areas throughout the U.S. that are in violation of carbon monoxide standards use oxygenates to help reduce tailpipe CO emissions.

MTBE mandate

No federal law or regulation, and no state law or regulation mandates the use of MTBE. In fact, California's Cleaner Burning Gasoline regulations provide the refining industry with the ultimate flexibility. As long as the performance standard is met, as long as the emission reductions are realized, California regulation allows Cleaner Burning Gasoline to be made without any oxygenate at all, except in the wintertime months, as explained above.

Federal law preempts that flexibility. That's why the California Air Resources Board, Cal/EPA and Governor Pete Wilson's Administration has been on record for the past two years in support of efforts by a fonder member of the California Air Resources Board, Representative Brian Bilbray (HR 630 of 1997 and HR 3518 of 1996), that would remove the year-round oxygen ate mandate from the Federal Clean Air Act, at least with respect to California. I aid also pleased to note that Senator Feinstein has recently announced that she will introduce a companion bill in the Senate this January.

California's state-of-the-art predictive model, indicates that gasoline can be made without any oxygenate and that Cleaner Burning Gasoline made without an oxygenate will still yield equivalent emission reductions, and several companies have recently indicated they would do so if federal law was changed to mimic California's for a flexible, performance based approach.

MTBE in the water

You have specifically expressed an interest in the impact of MTBE in the waters of California. The Department of Health Services' Public Drinking Water Branch is addressing issues associated with the presence of detectable levels of MTBE in drinking water supplies in California--and has increased monitoring which was initiated in February of this year. Dr. David Spath from the Department of Health Services is here with me, and will address that issue more fully.

In 1983, the California Legislature designated the State Water Resources Control Board (State Water Board) as the lead agency for administration of state and federal underground storage tank (UST) laws. The State Water Board administers the UST Program as well as the UST Cleanup Fund. The UST Program includes both leak prevention and cleanup when leaks occur. I will discuss each of these programs as well as current State Water Board activities related to MTBE.

UST Leak Prevention

California State law, paralleling USEPA regulations, provided a ten-year compliance period for all related USTs to be removed, upgraded or replaced in accordance with state and federal standards by December 22, 1998 (note: smaller USTs, defined as those holding less than 1,100 gallons, are not regulated by either state or federal law).

In 1983, there were approximately 155,000 operating USTs at 60,000 facilities. There are now approximately 65,000 operating USTs located at 25,000 facilities. Aid estimated )3 000 of dose USTs, or 43 percent, still need to be removed, upgraded or replaced. This compares favorably with USEPA estimates which range from 45 to 60 percent of USTs nationwide which are still out of compliance.

While the State Water Board has adopted regulations pertaining to UST leak prevention, over 100 local California agencies actually implement flee program. These local agencies are responsible for issuing operating pen-its for all USTs in California.

Both the State Water Board and local agencies have pursued aggressive efforts to ensure that the 1998 state and federal upgrade deadline is met. Outreach efforts have included public workshops held throughout the state for UST owners, articles in industry newsletters, direct mailings to UST owners, newspaper advertisement, and site visits by local agency field inspectors.

In addition, the State Water Board has met with each State Agency that operates USTs and has obtained a commitment from each of those agencies that the 1998 deadline will be met. We are hopeful tat all federal agencies will match our commitment, but to date we have not received these assurances.

To further ensure compliance with the 1998 UST upgrade deadline, the Administration proposed and Governor Wilson signed SB 1491, authored by Assemblyman Cunneen. This law will prohibit the delivery of fuel to USTs which do not comply with upgrade standards after January 1, 1999. The State Water Board is in the process of preparing certificates of compliance which will be posted in a visible location at each UST facility. This bill, sponsored by the Wilson Administration and supported by industry, underscores our commitment to prevent future leaks from USTs.

The cost to tank owners to comply with the 1998 deadline varies considerably depending on whether the UST is upgraded by installing what is defined as a bladder or an epoxy lining or replaced with a double wall tank and double wall piping. Thus, for a three tank facility, the costs may range from $50,000 to $200,000.

In order to assist UST owners in financing the costs of upgrades, the California Trade and Commerce Agency offers low interest loans. To date, the UST Cleanup Fund has provided over 42 million dollars for this loan program. We have also supported legislation to increase funding for the loan program. However, we recognize that the loan program will not cover the needs of the many UST owners who will need financing in the near tend. Many UST owners will have to obtain private sector financing for facility upgrades.

Finally, to ensure that the 1998 state and federal standards for USTs are effective in preventing future leaks, Governor Wilson has directed die State Water Board to convene an advisory panel of knowledgeable people, including representatives from industry, local governments and water supply agencies. The advisory panel will review existing databases of UST contamination sites to determine if there is a leak history associated with UST systems that already meet die 1998 federal and state standards. If there is such a history, the panel will identify appropriate measures that would assure the prevention and detection of releases from retail marketing facilities.

UST Cleanup Efforts

The cleanup of leaking USTs involves a coordinated effort between the State Water Board, nine Regional Water Quality Control Boards, 20 counties under contract with the State Water Board, and a number of other local agencies, all of whom conduct regulatory cleanup oversight. The total annual budget for regulatory cleanup oversight is approximately $20 million.

As of October 1997 and since the UST program's inception in 1983, a total of 31,704 sites have been identified as having leaking USTs. Tanks have been removed and appropriate cleanup measures have been completed at 15,328 of those sites. The 48 percent closure rate compares with a USEPA reported national average of 49 percent.

The State Water Board has adopted regulations related to required cleanup of leaking UST sites and has provided training and technical assistance to local regulatory staff. Regional Water Quality Control Boards and local agencies oversee approximately 5,000 and 11,000 site cleanups, respectively.

UST Cleanup Fund

The UST Cleanup Fund (Fund) was established in February 1991 to achieve two goals. First, to provide affordable environmental impairment insurance to eligible UST owners and operators enabling deem to meet federal and state financing responsibility requirements, and second, to provide financial assistance for eligible cleanup costs and damages awarded to third parties injured by petroleum releases. On June 9, 1993, the USEPA approved California's Fund as a mechanism for meeting the federal financial responsibility requirements for USTs containing petroleum.

Existing law requires every owner of a regulated petroleum underground storage tank to pay a per-gallon storage fee to the Fund. The fee began on January 1, 1991 at six mills ($0.006) per gallon and has been gradually increased to twelve mills ($0.012). The fee collection is scheduled to end on January 1,2005. The Fund's program will then begin to wind down as funds are depleted. (As of October 1997, the Fund had received over $700 million.)

To be eligible to file a claim with the Fund, the claimant must be a current or past owner or operator of the UST from which an unauthorized release of petroleum has occurred, and must be required by the appropriate regulatory agency to undertake cleanup action. Other eligibility conditions include compliance with applicable state UST permitting requirements and regulatory agency cleanup orders.

The maximum reimbursement per site is one million dollars, less the deductible. The deductible varies from $0 to $20,000 depending upon the claimant's priority classification.

Statute governing the Fund sets forth a claim priority system which is based on claimant characteristics. The highest priority, Class A, is given to residential tank owners; the second priority, Class B, is given to small California businesses, governmental agencies and nonprofit organizations with gross receipts below a specified maximum; the third priority, Class C, is given to California businesses, governmental agencies and nonprofit organizations having fewer than 500 employees; and the fourth priority, Class D, is given to all other claimants.

Under the statute, the Priority List must be updated at least once a year to include new claims. Since Fall 1993, the list has been updated monthly. Claims from previous updates retain their relative ranking within their priority class with new claims ranked in their appropriate class below those carried over from the previous list. New claims in a higher priority class must be processed before older claims in a lower priority class.

As of November 30, 1997, the Fund had received 352 Priority "A" applications; 4,362 Priority "B" applications; 2,096 Priority "C" applications; and 5,977 Priority "D" applications, for a total of 12,751 applications.

When a claim is activated from the Priority List, the eligibility requirements are verified with the appropriate regulatory agency, and a Letter of Commitment (LOC) is issued. The LOC is the mechanism the program uses to award or encumber funds for reimbursements of cleanup costs. As of November 30, 1997, the Fund had issued 5,252 LOCs in the amount of $546 million. These include 221 "A" claimants; 2,851 "B" claimants; 1,819 "C" claimants; and 361 "D" claimants. The average costs of cleanup paid by the Fund has been $150,000.

In addition to reimbursing claimants for corrective action costs, the Fund provides money to the Regional Water Quality Control Boards (RWQCBs) and local regulatory agencies to abate emergency situations or cleanup sites which are posing a significant threat to human health, safety, and the environment. The Petroleum Underground Storage Tank Emergency, Abandoned, Recalcitrant (EAR) Account was established within the Fund to take corrective action at petroleum UST sites that have had an unauthorized release and that require either (l) immediate action to protect human health, safety and the environment (emergency or prompt action sites); or (2) where a responsible party cannot be identified or located (abandoned sites); or (3) the responsible party is either unable or unwilling to take the required corrective action (recalcitrant sites). All costs incurred are subject to cost recovery from the responsible party. The State Water Board manages the EAR Account which is funded by aid annual Budget Act appropriation of $5 million from the Fund.

The Commingled Plume Account was created within the Fund by the Legislature in 1996 to encourage responsible parties with commingled plumes to coordinate their cleanup efforts, avoid litigation, more rapidly address required cleanups, and significantly reduce the costs of cleanup. A Commingled Plume is defined as the condition that exists when groundwater contaminated with petroleum from two or more discrete unauthorized releases have mixed or encroached upon one another to the extent that the cleanup action performed on one plume will necessarily affect the other. Commingled plume sites represent a special problem to California's groundwater protection efforts because they often represent more serious water quality impacts, involve parties float disagree as to liability, and include cleanups which continue to be stalled or handled in a piecemeal, haphazard and expensive manner. Unless corrective action is performed in a coordinated manner, cleanup of commingled plumes could be ineffective.

MTBE related actions

In the spring of 1995, the U.S. Geological Survey reported findings of MTBE in shallow groundwater in the Denver area. As a result, our State Water Board asked the oil industry to sample monitoring wells at industry-owned leaking UST sites for MTBE. The results from that sampling efforts showed that most of these sites had detectable levels of MTBE in shallow groundwater. These results were found at about the same time the finding of high levels of MTBE in public drinking water wells in the City of Santa Monica. In the spring of 1996, the State Water Board requested all regulatory agencies involved in leaking UST cleanup oversight to add MTBE to routine monitoring well analyses. In addition, the State Water Board, with funding from the U.S. Department of Energy and the Western States Petroleum Association, contracted with the Lawrence Livermore National Laboratory to conduct a study of the environmental fate of MTBE in groundwater. The results of the Lawrence Livermore study are expected in March of 1998.

Thus far we know that MTBE, like the other three ether compounds used as oxygenate additives to gasoline, is reasonably soluble in water and resistant to biodegradation. As a result, once in groundwater, MTBE is difficult to remediate other than pumping and treating the affected groundwater. Clearly, additional research is needed in the area of treatability. Additional partnerships between the State and Federal government, as well scientific, petrochemical and water industries are needed to develop faster and more cost efficient methods for remediation contamination.

During the 1997 session, the California Legislature passed several bills related to MTBE, in addition to AB 1491 (discussed above), all of which were signed by Governor Wilson. The State Water Board has a number of responsibilities arising from these bills. SB 521 authored by Senator Mountjoy requires that all leaking UST sites be sampled for MTBE prior to the issuance of a regulatory closure letter following satisfactory cleanup. This requirement is consistent with the earlier State Water Board request of regulatory agencies to require analysis of MTBE. AB 592, authored by Assembly Member Kuehl, and SB 1189, authored by Senator Hayden, contain a number of MTBE related provisions including requiring Regional `Water Quality Control Boards to report new discoveries of MTBE to water supply agencies on a quarterly basis and setting aside five million dollars per year from the Fund for an alternative water supply or treatment for MTBE affected drinking water wells when requested by a water supply agency. Finally, AB 521 and SB 1189 require the State Water Board to conduct a pilot study in the Santa Clara Valley and Santa Monica areas to develop a geographical intonation system database of existing and potential sources of MTBE and existing public water supply wells. It is anticipated that once developed and accessible electronically, water supply and regulatory agencies will be able to better assess the potential risks to drinking water wells and surrounding groundwater aid take appropriate or preventative actions. The GIS mapping pilot study will be completed in June of 1999. To ensure that possible human and environmental health issues were addressed as comprehensively as possible, in addition to signing these measures, the Governor specifically:

 Directed the State Water Board to determine if there is a leak history associated with tanks that have been upgraded, and if so, to determine what steps should be taken to avoid additional releases;

 Directed the State Water Board to evaluate refueling facilities and practices at marinas, as discussed above;  Directed the California Energy Commission to conduct an evaluation of MTBE and alternative oxygenates (discussed further below).

Potential impacts of banning MTBE

The California Energy Commission (Commission) is currently in the process of conducting a detailed evaluation of alternative gasoline additive supplies that could be used in lieu of MTBE. This study will include potential costs or savings to the public of the various alternatives, the present and future availability of these alternatives and the minimum time frames within which these alternatives could be undertaken without resulting in significant disruptions of California's gasoline supply.

Preliminary estimates indicate that the short-tend impact of banning MTBE on reformulated gasoline production capability for California refineries would be significant. While only 11 percent of reformulated gasoline by volume, MTBE helps achieve compliance by its mixing with less desirable compounds in finished gasoline. With an immediate ban on MTBE, additional gasoline components would have to be removed until the remaining finished gasoline is in compliance, resulting in a decrease of the production of gasoline in the range of 15 to 40 percent by volume. It is not unreasonable to believe that the resulting price spikes and probable spot shortages would have a dramatic impact on California consumers and the state's economy.

The Commission has developed a work plan that will quantify various scenarios of reduced uses of MTBE and replacement with other oxygenates; changes in federal mandates; and increased reliance on gasoline or blending components produced at refineries outside California.

The Commission's study will develop an alternative oxygenates implementation strategy for California based on each feasible oxygenate, its availability and cost in the intermediate and long trend. The Commission will examine complete substitution of MTBE by ETOH, TBA, ETBE; a case in which oxygenates may be combined (to increase available total supplies of oxygenates); cases which assume changes in federal legislation; and a case which examines the impact on California if there is a national movement to ban MTBE. All totaled, 78 different scenarios will be quantified.

The Commission plans to report the supply and price implications for each scenario in two distinct time periods: intermediate-term, and long-term. The near-term period will not be included in the refinery modeling runs but will be examined to determine what limiting factors could interfere with a smooth transition to an alternate oxygenate.

In addition, the time frame and cost to upgrade California's distribution terminals to make them compatible with the alternative oxygenate are being studied and the marine infrastructure will be examined to determine what constraints to moving additional refined products though the system may exist.

Conclusion

Under California regulations, die choice is left to refiners; there is no regulatory impediment to produce Cleaner Burning Gasoline using any oxygenate of choice, or no oxygenate at all. It is the Federal Clean Air Act that explicitly requires that reformulated gasoline in specified areas contain at least 2 percent oxygenate by weight in gasoline year-round.

The clear and consistent message we would like the Committee to hear is California's support aid desire for California fuel regulations to be the controlling rules in California. California views efforts like HR 630 as a prelude to further flexibility, not further restrictions.

Cal/EPA aid its sister agencies are moving aggressively to address public concerns about the impact of MTBE and its impact on human health and the environment. We have taken, and will continue to take, swift action to eliminate contamination from any source. Just this last year, we have taken steps to expedite the UST program; enacted a ban on placing fuel into tanks that fail to comply with the federal regulations initiated actions to update databases to include more accurate information about leaking tanks and pipelines, particularly with regard to their proximity to drinking water sources. We will respond where contamination exists, as we did in the City of Santa Monica.

Cal/EPA is working closely with the Department of Health Services to establish primary and secondary drinking water standards for MTBE, and will expedite review of all health-required actions.

Your staff has specifically asked me to suggest what the federal government could do to assist in our efforts. The problem we are discussing here today is yet another example of what can happen when the federal government tells states not just what to do, but how to do it. Do not mandate technology. Set standards, hold us to them, but allow us to determine how best to meet them--in this case, through California's far stricter reformulated gasoline requirements that build in flexibility for producers.