Hearings - Statement
 
Statement of Joseph I. Lieberman
Hearing: Full Committee Hearing
An Oversight Hearing on the Impact of the Elimination of MTBE
Wednesday, March 29, 2006

Thank you Mr. Chairman for calling this hearing to review Department of Energy warnings that the oil industry’s abrupt decision to switch from MTBE to ethanol as an oxygenate or octane enhancer could lead another summer of gasoline shortages and high prices.

I support the goal of phasing out MTBE – or methyl tertiary butyl ether – in favor of ethanol. In fact, the bipartisan Vehicle and Fuel Choices for American Security Act I have sponsored, along with Sen. Brownback and 10 other Senators, encourages the development ethanol and other renewable fuels as a way of lowering our dependence on foreign oil.

My home state of Connecticut is one of seven states that have already banned the use of MTBE as a gasoline additive because of the dangers it poses to public health and environment as a possible carcinogen leaking into the ground water.

But I fear that the oil industry – already drowning in record profits – will use the sudden switch from MTBE to ethanol as a backdoor means of raising prices if the ethanol industry cannot deliver the quantities needed, as the Energy Information Administration thinks likely, according to its recent report.

The oil industry says it was forced to switch from MTBE to ethanol because Congress did not provide a waiver of liability from damage caused by MTBE when it dropped the oxygenate requirement in the 2005 Energy Policy Act. Unfortunately, we do not have a representative of the oil industry at this hearing today, so we can not explore more fully how they would defend their decisions.

As we consider the actions of the oil industry, we should remember several points. First, the industry chose to use MTBE as an oxygenate to make gasoline burn cleaner in heavily polluted areas. MTBE was the industry’s choice, not a Congressional mandate, and there is no reason to release the industry from liability for a choice it made.

As stated succinctly by the representative of the Renewable Fuels Association today, “Refiners are not compelled to use MTBE in [Reformulated Gasoline], nor are they compelled to use ethanol once the oxygenate requirement is eliminated. The decision to stop using MTBE is the refiners’ alone.”

The industry knew the day would come that it would have to phase out MTBE and has had plenty of time to plan for the transition and make sure there were adequate supplies of the ethanol or another alternative.

There is no excuse for unnecessary shortages and discretionary price increases. That, if anything, should be the focus of Congressional investigation. Any resulting price spikes and higher profits should be taxed as an undeserved windfall.

Legislation I introduced in December year would impose an excise tax on oil companies for 50 percent of their windfall profits. This one-time tax would provide a one-time payment to partially offset increased home heating and energy costs, as well as a portion of gasoline cost increases.

Thank you Mr. Chairman.

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