I just wanted to make sure you guys know everything I do.  Actually this is somewhat bullish considering past legislative attempts.
---------------------- Forwarded by Stanley Horton/Corp/Enron on 05/24/2001 03:25 PM ---------------------------


Jeffrey Keeler
05/24/2001 12:52 PM
To:	Stanley Horton/Corp/Enron@Enron, James Prentice/Enron@EnronXGate, Michael Terraso/OTS/Enron@ENRON, Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Linda Robertson/NA/Enron@ENRON, <Pat Shortridge@erols.com>, Joe Hartsoe/Corp/Enron@ENRON, Marc Phillips/OTS/Enron@ENRON, Jim Peterson/OTS/Enron@ENRON, Adam Pollock/ENRON@enronXgate, Lisa Yoho/NA/Enron@Enron, Chris Long/Corp/Enron@ENRON, Lisa Jacobson/ENRON@enronXgate
cc:	 

Subject:	MTBE legislation

Today, Senators Bob Smith (R-NH) and Harry Reid (D-NV) will introduce an MTBE bill. which is expected to be slightly different than we've seen in previous Congresses.  

We expect it to include:  

1) a 4-year date certain to eliminate MTBE, with EPA determining the phaseout schedule
2)  a lifting of the 2% oxygenate standard upon perfunctory petition by State governors within 90 days from date of enactment
3)  and environmental "anti-backsliding" provision focused only on air-toxics and using a 2000 baseline with a 27.5% percent standard (the way I understand it right now, RFG must perform 27.5% better than 2000 baseline for conventional gasoline)
4) provisions for MTBE producer "transition assistance"

Brief analysis:  

We'll have more details shortly, but the bill looks a little better than previous efforts.  A number of bills have been introduced this Congress, but this will probably be the leading effort.  

As you know, Enron has led efforts to include the "transition assistance" piece -- which is still largely undefined in the legislation -- but we are pleased with the inclusion of a "placeholder" while the Senate decides on the best approach.  We will continue to lead the development of such incentives (which will likely take the form of EPA/DOE funding for MTBE producers who convert plants to produce iso-octane or alkylate).

An MTBE ban is of course not good, but a "date certain" gives producers more flexibility to determine their options rather than reduce production under several steps of a phase out.   Allowing states to get a waiver of the oxy standard is probably a given in any legislation, but will face some opposition from the ethanol community -- who just want a simple MTBE ban.

The anti-backsliding provision is still being refined, but looks fairly lame.  We need more details to make an accurate assessment, but its likely that environmental groups will want a bit more.

One political factor -- with Sen. Jim Jeffords leaving the Republican party, Democrats will be given control of the Senate Environment Committee, which will consider this bill.  They will likely allow Jeffords to chair the committee.  The significance is that Sen. Bob Smith (R-NH) is the current chair, and has been able to use that position to drive his past bills on MTBE -- in losing the chairmanship, his legislation may face a longer road through Committee.

I will keep you posted as the legislation evolves.

Jeffrey Keeler
Director, Environmental Strategies
Enron
Washington DC office - (202) 466-9157
Cell Phone (203) 464-1541