The article below describes two separate paths that EPA is considering for 
regulating MTBE.  They are also considering action on a request from the 
state of California to grant its request for an oxygenate waiver through 
regulatory means.  Taken in conjunction with the increased interest on 
Capitol Hill for moving oxygenate waiver or MTBE phase out legislation, the 
future does not look very bright for MTBE.  

We will continue to pursue on Capitol Hill our Enron-developed approach which 
proposes stranded cost recovery and liability protection for US MTBE 
producers. The House and Senate will be moving forward with hearings and 
legislation shortly, and we will keep you posted on our efforts and other 
developments.

********

E&E Newsline
Feb. 24,2000
Volume II, Issue 18

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1. AIR POLLUTION/WATER POLLUTION
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EPA FLOATS TWO PROPOSALS AFFECTING MTBE, REFORMULATED GASOLINE

     The Environmental Protection Agency has advanced proposals dealing
with the touchy issues of methyl tertiary butyl ether regulation and with
the reformulated gasoline program to the White House Office of Management
and Budget, and although the two proposals are being kept under wraps they
have already spurred controversy and debate.

     Both items were forwarded to OMB Feb. 15 and both will appear in
the Federal Register probably after 90 days of OMB review, the standard
time allotted for such proposals.

     With neither proposal having been made public, speculation abounds
about both.

     The first item -- which is being reviewed by OMB as an advanced
notice of proposed rulemaking (ANPR) -- aims to control MTBE, a synthetic
"oxygenate" added to gasoline to lower emissions of air pollutants. The
Clean Air Act mandates that certain urban areas with high levels of air
pollution contain 2 percent-by-weight level of oxygenates in their gasoline
in order to reduce emissions of ozone-forming hydrocarbons and carbon
monoxide. To comply with this reformulated gas (RFG) mandate, MTBE is
relied on for over 80 percent of the gasoline, ethanol is used in almost 15
percent, and other oxygenates make up for the remaining amount.

     Although MTBE has been heralded for its role in reducing air
emissions, it is under attack because of environmental contamination,
particularly to groundwater. In fact, both the Senate and House have plans
to move legislation to allow states to waive the oxygenate mandate, and
California has requested a waiver from the RFG requirements, an issue that
could induce other states that have problems with MTBE contamination to
take similar action.

     Now, however, EPA appears poised to take action of its own.
According to sources, the EPA plan would seek to control MTBE under the
Toxic Substances Control Act. TSCA provides EPA the authority to prohibit
certain chemicals or substances if the agency concludes it "presents or
will present an unreasonable risk of injury to health or the environment."

     "MTBE clearly meets this test," claimed Sen. Barbara Boxer (D-
Calif.), who has in the past fought to have MTBE phased out.

     However, Terry Wigglesworth, executive director of the Oxygenated
Fuels Association, which represents MTBE producers, argued otherwise. "TSCA
is not a good technical choice," she said of EPA's proposal. Among the
hurdles EPA will face with the proposal, she predicted, is that under TSCA,
EPA must look at the risks to human health and the environment, "but there
are enormous air quality benefits due to MTBE use, for example there have
been significant reductions in ozone and air toxic emissions, such as
benzene."

     "Also under TSCA, EPA must determine if the risk could be reduced
by other federal laws already being administered," she explained, pointing
specifically to the underground storage tank program, which she said has
not been complied with too well.

     In a Feb. 22 letter to EPA Administrator Carol Browner, Boxer said,
"Some critics of this approach argue that MTBE contamination may be
controlled by upgrading our underground storage tanks. This won't solve the
MTBE problem, however, because we now know that even those new tanks leak."
She also said, "MTBE poses a more pervasive water contamination problem
than the other harmful constituents of gasoline like benzene because it
moves through water faster, farther and persists longer than those
constituents."

     Whether EPA's proposal would entail banning, phasing out or capping
MTBE use is unclear and was disputed among various sources. However, one
industry source said that EPA was not taking a stance on that issue and
would first take public comment through the ANPR and proposed rule.

     Although sources indicated that the ANPR would not typically be
printed in the Federal Register until the 90-day review period has expired,
"We heard EPA asked OMB to fast track it," one industry source said. And a
federal government source also hinted that the proposal would be reviewed
very quickly.

     The second proposal is shrouded in even more ambiguity. What is
certain is that the proposal would entail an "adjustment" to RFG, as stated
by an OMB source.

     Environmental and industry sources said that the hints they've
gotten indicate that the proposal entails an offset for carbon monoxide.
According to these sources, EPA has discussed this option with stakeholders
in the past.

     Under the proposal, certain RFG provisions concerning emissions of
volatile organic compounds would be loosened as long as there were
significant reductions in CO emissions. VOCs are blamed for ozone
production, and carbon monoxide also contributes to ozone.

     According to an environmentalist, this proposal would encourage
increased reliance on ethanol by refineries.

     Wigglesworth spoke against this proposal, saying, "Any loosening of
requirements to maintain actual air quality benefits that we've achieved
through cleaner burning gasoline that would turn back the clock on cleaner
air or air quality would be unacceptable."