Running On MTBE: Closing The Pumps On The Oxygen Content Requirement

Debate is raging in Congress and in many state legislatures regarding the federal Clean Air Act’s reformulated gasoline (RFG) program, which requires the addition of so-called oxygenates in nearly a third of all gasoline sold in the United States. Recent concerns about contamination of water supplies by methyl tertiary butyl ether (MTBE), the most widely used oxygenate, have led California to order the phaseout of its use by 2003. Some other states and federal legislators would also like to reduce or eliminate MTBE usage. However, if MTBE is phased out, but the oxygen content requirement is retained, the likely replacement will be ethanol, which has a number of serious disadvantages.

The best response to MTBE concerns is to entirely eliminate the oxygen content requirement from the RFG program. The advantages of doing so are noted both by a 1999 National Research Council Report entitled “Ozone Forming Potential of Reformulated Gasoline,” (NRC Report) and the Environmental Protection Agency’s recently released “Report of the Blue Ribbon Panel on Oxygenates in Gasoline,” (Blue Ribbon Panel Report).

Background. The 1970 amendments to the Clean Air Act imposed heavy regulations on motor vehicle emissions. Over the next twenty years, tailpipe emissions of many pollutants, including those that contribute to ground-level ozone or smog declined substantially. In fact, air quality improved despite increases in the number of cars and trucks owned and miles driven. However, other than new measures that led to the introduction of lead-free gasoline, the composition of motor vehicle fuels remained relatively unregulated.

Given the downward trends in motor vehicle emissions (and expected continued declines as older cars and trucks are continually replaced by newer, cleaner ones), it is arguable that there was no need for the federal government to regulate fuel content. Nonetheless, the 1990 amendments to the Clean Air Act established detailed requirements for gasoline. Among other things, the Act created the RFG program, designed to reduce ozone in the nine smoggiest areas of the country, as well as any other areas with ozone levels classified as “severe”. Since 1995, all gasoline sold in these areas, amounting to approximately 30 percent of the nation’s supply, must meet particular compositional requirements and emissions performance standards in order to be certified as RFG by EPA.

2 These standards are scheduled to be tightened by January 1, 2000.

Most controversial is the requirement that, irrespective of environmental performance, RFG must have at least 2 percent oxygen content by weight. As gasoline normally contains little or no oxygen, this requirement necessitates the addition of so- called oxygenates. The oxygenate of choice has become MTBE, rather than ethanol, despite the fact that the latter enjoys substantial tax breaks and other politically created advantages. Compared to ethanol, MTBE is cheaper and easier to incorporate into the fuel supply. Further, because it is more volatile than MTBE, ethanol is also less environmentally friendly, especially in the summer months when evaporative emissions can be a substantial source of smog-forming compounds, in addition to exhaust emissions. Today, MTBE comprises 85 percent of the oxygenates market, compared to 8 percent for ethanol. No other oxygenate has come into widespread use.3

The backlash against MTBE. Over the last few years, however, reports of MTBE leaking into groundwater have sparked a backlash against its use. One particularly bad leak from an underground storage tank in Santa Monica, reports of MTBE causing odor and taste problems in water supplies throughout California, and fears of cancer have given rise to a California ban on the use of MTBE by January 1, 2003. Several Northeast states are also trying to curtail MTBE use, though their ability to do so may be limited by the Clean Air Act.

For the first time since the inception of the RFG program, the Environmental Protection Agency has come out against MTBE. The Blue Ribbon Panel Report, released last September, concluded that MTBE use should be substantially reduced due to concerns over its effect on the water supply. This position represents a sharp turnaround for the agency, which prior to the California ban had strongly supported the use of MTBE, and generally denied the existence of serious public health tradeoffs.

The NRC Report did not look into the threat to the water supply, but focused on the potential air quality benefits of using MTBE or ethanol as an oxygenate in gasoline. The report concluded, “the addition of MTBE or ethanol appears to have only a small effect on the exhaust emissions of RFGs.”

The problems posed by MTBE in the water supply are likely overstated. In fact, the Blue Ribbon Panel found no actual evidence of a public health threat. Further, leakage rates will probably be reduced through ongoing improvements in gasoline storage and shipment under existing laws. Thus, there is no real need for the proposed outright federal ban on MTBE use in H.R. 1367 by Rep. Bob Franks (R- NJ), H.R. 1398 by Rep. Richard Pombo (R-CA), H.R. 1705 by Frank Pallone, Jr. (D-NJ), and S. 1037 by Sen. Barbara Boxer (D-CA). This is particularly true given that an MTBE ban would also put an end to the successful and safe use of small quantities of MTBE in conventional gasoline as an octane booster. Nonetheless, the risks of continued use of MTBE as an oxygenate are not offset by significant air quality benefits. Given the California phaseout and efforts in other states, it appears that MTBE’s use will decline in the coming years, irrespective of any federal efforts.

Ethanol opportunism. All other things being equal, the apparent demise of MTBE should bode very well for ethanol; the only other viable oxygenate. The powerful ethanol lobby, working with legislators from several Midwestern states – the source of most of the corn from which ethanol is derived as well as a good deal of the nation’s ethanol refining capacity – hope to capitalize on the situation. In fact, Senator Daschle (D-SD) is expected to soon introduce a bill designed to expand the use of ethanol in motor vehicles.

Outside of those with a self-interest in promoting ethanol, there is little support for a de-facto ethanol mandate. In addition to raising the price of gasoline, many doubt that there exists the necessary quantities and transportation infrastructure in order for ethanol to fill any oxygenates void left by MTBE. Further, despite years of hype about the ecological virtues of so-called renewable fuels like ethanol, a consensus now exists that this choice will not provide air quality benefits. Indeed, despite being anti-MTBE, neither the NRC Report nor the Blue Ribbon Panel Report endorsed increased ethanol use.

The oxygen content requirement. Fortunately, the MTBE battle has broadened into a larger debate over whether oxygenates are needed at all. H.R. 11 by Rep. Brian Bilbray (R-CA) and S. 266 by Sen. Dianne Feinstein (D-CA), would essentially eliminate the oxygen content requirement in California, and S. 645, also by Feinstein, would do so for all states. The NRC Report concluded that “the use of commonly available oxygenates in RFG has little impact on improving ozone air quality and has some disadvantages.”4 The Blue Ribbon Panel Report also called for the elimination of the oxygenates mandate. If eliminated, refiners would have the flexibility to meet the emissions standards required of RFG without being tied to a minimum MTBE or ethanol content, and most believe this challenge can be met.

Federal laws should not endeavor to micromanage by which means environmental end goals are met. For this reason, the oxygen content requirement should be repealed.

1Ben Lieberman ([email protected]) is a policy analyst at CEI.

2 In addition to the RFG program to address ozone, the Clean Air Act has also instituted a separate oxygenated fuels requirement for areas that are not in attainment with the Carbon Monoxide (CO) standard. Ethanol is widely used as the oxygenate in this program, as CO is a problem primarily in winter, when ethanol’s disadvantage of high evaporative emissions is reduced because ambient temperatures are lower.

3 Blue Ribbon Panel Report, p.1

4 NRC Report, p.7