Stan:

I have not talked directly with Coastal about their specific approach, but am 
aware of efforts to find tax relief for conversion of MTBE facilities to 
alkalytes.   This is also an option that has been discussed in the OFA and 
MTBE Producer groups.   It certainly could be a viable "fallback" position to 
stranded cost recovery.

However, Coastal is very differently situated than Enron in terms of stranded 
costs or liability protection.   Refiners can't make as good a case for 
stranded costs as the merchant producers of MTBE who developed unique 
facilites directly in response to the Clean Air Act oxygenate mandate.   On 
liability protection, refiners and marketers are more directly responsible 
for groundwater contamination with MTBE because they have the leaking tanks 
-- so they have what could be characterized as "contributory negligence", 
where MTBE producers do not.

I agree with Steve Kean's response -- going after liability protection is 
probably going to be more viable than finding stranded costs.   We will keep 
pressing both issues, and distinguishing ourselves as one of the "good 
actors" that responded to the Clean Air Act to produce MTBE and has not 
contributed to gasoline spills.

 In terms of conversion to alkalytes, one of the complicating factors is the 
"tax" angle.   In all the current legislative efforts in the House and 
Senate, the sponsors are avoiding inclusion of tax provisions so that the 
bills do not have to go through review by the separate tax committees, which 
would delay the legislation probably to its demise.   Passing separate tax 
legislation that contains alkalyte conversion provisions may also be 
difficult -- in general, it will be hard for Congress to pass even modest tax 
legislation this year.   

If this emerges as a viable strategy, however, I think it is worth 
consideration.   I will talk with Coastal to see what their strategy is and 
follow up with you and Jim Prentice to see if it's appropriate to pursue.

Jeff





Stanley Horton
04/10/2000 05:49 PM
Sent by: Cindy Stark
To: Jeffrey Keeler/Corp/Enron@ENRON
cc: Cynthia Sandherr/Corp/Enron@ENRON, Steven J Kean/HOU/EES@EES, Shelley 
Corman/ET&S/Enron@ENRON 

Subject: MTBE

Jeff:

At the fundraiser for Senator Thomas, I had the opportunity to discuss with 
David Arledge (Coastal Corp's Chairman & CEO) the MTBE issue.

Coastal's position is somewhat different than Enron's.  Coastal is advocating 
some sort of tax relief on alkalytes, which is the product they would convert 
their plant to produce.  They also advocate protection of litigation.

David believes that Congress cannot approve a multi-million dollar bailout of 
MTBE producers but can pass a tax relief bill that would encourage MTBE 
producers to convert their plants.

Two questions for you:   1) What do you think of Coastal's approach? and  2) 
Have you discussed the approach with Coastal?

Stan