Mr. Chairman and members of the committee, I appreciate the opportunity to appear today on behalf of the American Lung Association to discuss the impact of eliminating MTBE from gasoline.
The American Lung Association Supports the Removal of MTBE from Gasoline
As you know MTBE has been found to contaminate ground or surface water in nearly every state. MTBE has rendered thousands of public and private drinking water sources unusable. Addressing the clean up or replacement of these sources has been estimated in a study by the American Water Works Association to cost upwards of $25 billion dollars. These statistics, which may not include all MTBE contamination costs, provide reason enough to eliminate MTBE from the nation’s fuel supply. I have attached a summary of the AWWA report to my testimony.
The American Lung Association is particularly interested in eliminating MTBE from reformulated gasoline (RFG) because the fear of MTBE contamination has reduced the public acceptance of RFG as a tool in fighting air pollution. Many areas with unhealthy levels of ozone have avoided adopting RFG for fear of contaminating local water supplies. Therefore, we see the recent trend of refiners choosing to eliminate MTBE from RFG as a welcome development which may facilitate the adoption of RFG in more areas that need it. If so, the public will benefit from reduced exposure to ozone and toxic air pollutants. The elimination of the oxygen requirement in RFG, in combination with the sulfur limit in all gasoline implemented as part of the Tier II rules, and the limitations on boutique fuels adopted in the Environmental Policy Act of 2005(EPACT) should eliminate the proliferation of boutique fuels while providing clean fuels choices to areas that need them. We believe that any additional limitations on states’ ability to select clean fuels would have adverse air quality impacts and are unnecessary given all the changes I just described.
Refiners Are Eliminating MTBE from RFG This Spring Entirely Voluntarily
The American Lung Association endorsed a ban of MTBE in fuel phased in over four years. This time frame was originally identified by the refining industry as the necessary phase out period in testimony before this committee. The Congress chose not to adopt such a measure during its consideration of EPACT. Congress did remove the oxygen requirement from RFG, enabling each refiner to use as much or as little MTBE as it chose.
Now this spring, refiners are attempting to remove MTBE from RFG all at once rather than pursuing a phased elimination. Although MTBE is already banned for use in fuel in over 20 states, the current action to remove MTBE from the remaining RFG supply is voluntary, is not required to meet any law. We see no credible basis for finding that the use of MTBE in RFG in 2006 gives rise to special liability given the nature of MTBE groundwater contamination and the difficulty of distinguishing when contamination occurred. Whatever liability refiners may be subject to will be based largely on past actions. The nature of that liability is well described in testimony by Erik D. Olson of the Natural Resources Defense Council before the House Energy and Commerce Committee (seehttp://energycommerce.house.gov/108/Hearings/03132003hearing818/Olson1367.htm ).
It has long been predicted that removal of MTBE from RFG would spike a demand for ethanol. I provided testimony before this committee in June 2000 that the removal of MTBE would create a demand of 3.8 billion gallons a year just to provide octane in RFG. My testimony was based on information obtained from the refining industry itself. In fact ethanol is apparently being used today in amounts greater than needed to provide octane in order to help refiners meet air toxics reduction requirements.
The fact that refiners are voluntarily and precipitously withdrawing MTBE from use knowing that such action would cause a spike in RFG prices provides testament to the indifference the industry has to the calls of consumers to restrain fuel prices.
Shortages Created Through Voluntary Oil Industry Decisions Are Not a Basis for Waiving Fuel Requirements
As you know, in the Energy Policy Act of 2005(EPACT) the Congress provided EPA with the authority to temporarily waive a fuel or additive requirement under the Clean Air Act in cases of an “extreme and unusual fuel or fuel additive supply circumstance” (Section 1541(a)). The statute explicitly states that shortages that reasonably could have been foreseen or derive from a lack of prudent planning do not qualify for such waiver.
We believe the ethanol and fuel shortage we are discussing today was foreseeable and in fact is exactly the result of a failure of prudent planning. The American Lung Association hopes no one will suggest the need for invoking the EPACT waiver authority.
Shortages in Ethanol Cause the Same Price Volatility as Gasoline Shortages
The wholesale or “rack” price of ethanol is well over a dollar more than it was a year ago. It should come as no surprise that ethanol producers will charge as much as they can get on the market. However, it is worth noting that when ethanol demand has surged in the past as with the phase out of MTBE in California and in the New York/Connecticut RFG markets, the ethanol industry has responded to such demand and provided the needed ethanol with modest impact on overall RFG price. We operate on the assumption that the ethanol industry will respond similarly in the case of the current shortage over the longer term. However, we believe the Department of Energy should be more proactive in alleviating ethanol shortages by encouraging alternative sources of ethanol supply from off-shore sources such as the Caribbean Basin and Brazil. Given that the expected shortage in ethanol supply this spring is occurring in the Mid-Atlantic and Texas, it should not be difficult to facilitate the location and shipment of foreign sources of ethanol to Hampton, Virginia and Houston, Texas to help meet unexpected demand.
EPA Must Act Now to Meet Anti-Backsliding Requirements to Curb Toxic Air Pollutants
Under EPACT, nine months after enactment EPA is required to establish standard for each refiner and importer designed to maintain the level of toxic air pollutant reduction achieved on average during 2001 and 2002. (Section 1506(b)). This so-called “anti-backsliding provision was enacted to ensure that as refiners reduced the amount of MTBE they used in RFG, the level of toxic air pollution from the use of such fuel did not increase. The dramatic shift away from MTBE use occurring this spring well illustrates why this provision is needed. Yet to my knowledge EPA has not instituted any effort to assemble the regulatory information or propose the anti-backsliding requirements required by the law. We call on EPA to move expeditiously in light of the current circumstances.
Again, I appreciate the opportunity to appear before the committee on behalf of the American Lung Association.