[Senate Report 106-426]
[From the U.S. Government Publishing Office]
Calendar No. 845
106th Congress Report
SENATE
2d Session 106-426
_______________________________________________________________________
FEDERAL REFORMULATED FUELS ACT
OF 2000
__________
R E P O R T
of the
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
to accompany
S. 2962
together with
ADDITIONAL AND MINORITY VIEWS
September 28 (legislative day, September 22), 2000.--Ordered to be
printed.
?
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
one hundred sixth congress
BOB SMITH, New Hampshire, Chairman
JOHN W. WARNER, Virginia MAX BAUCUS, Montana
JAMES M. INHOFE, Oklahoma DANIEL PATRICK MOYNIHAN, New York
CRAIG THOMAS, Wyoming FRANK R. LAUTENBERG, New Jersey
CHRISTOPHER S. BOND, Missouri HARRY REID, Nevada
GEORGE V. VOINOVICH, Ohio BOB GRAHAM, Florida
MICHAEL D. CRAPO, Idaho JOSEPH I. LIEBERMAN, Connecticut
ROBERT F. BENNETT, Utah BARBARA BOXER, California
KAY BAILEY HUTCHISON, Texas RON WYDEN, Oregon
LINCOLN CHAFEE, Rhode Island
Dave Conover, Staff Director
Tom Sliter, Minority Staff Director
C O N T E N T S
__________
Page
General statement................................................ 1
Background....................................................... 2
Federal Reformulated Gasoline Program........................ 2
Oxygenates................................................... 4
Methyl Tertiary Butyl Ether and Water Quality................ 5
Ethanol...................................................... 6
Chronology....................................................... 7
Objectives of the Legislation.................................... 8
Section-by-Section Analysis:
Section. 1. Short title...................................... 9
Sec. 2. Waiver of Oxygen Content Requirement for Reformulated
Gasoline................................................... 9
Sec. 3. Authority for Water Quality Protection from Fuels.... 10
Sec. 4. Exclusion from Reid Vapor Pressure Requirement....... 11
Sec. 5. Public Health and Environmental Impacts of Fuels and
Fuel Additives............................................. 12
Sec. 6. Clean Alternative Fuel Program....................... 13
Sec. 7. Additional Opt-In Areas Under Reformulated Gasoline
Program.................................................... 16
Sec. 8. Leaking Underground Storage Tanks.................... 17
Sec. 9. Analysis of Motor Vehicle Fuel Changes and Additional
Performance Requirements................................... 19
Appendix I: State Legislation on MTBE Additives in
Reformulated Gasoline.................................. 22
Appendix II: List of Reformulated Gasoline Program Areas. 25
Appendix III: Letter from California Governor Gray Davis. 30
Appendix IV: Letter from EPA Assistant Administrator
Robert Perciasepe...................................... 31
Appendix V: Summary of State Drinking Water and
Groundwater Standards for MTBE......................... 36
Appendix VI: Tests on Oxygenated Fuels Containing
Oxygenates Other than MTBE............................. 37
Appendix VII: Analysis of Policy Scenarios for Reducing
or Eliminating MTBE.................................... 41
Letter from the Department of Energy................. 64
Summary of State Action Scenario Requested by the
Senate Committee on Environment and Public Works... 65
Appendix VIII: Chart, Comparison of Policy Options....... 67
Hearings......................................................... 67
Legislative history.............................................. 68
Rollcall votes................................................... 69
Regulatory impact statement...................................... 69
Mandates assessment.............................................. 70
Cost of legislation.............................................. 71
Additional Views of Senator Voinovich............................ 72
Additional Views of Senators Lautenberg, Moynihan, and Chafee.... 74
Additional Views of Senator Boxer................................ 75
Minority Views of Senator Inhofe................................. 79
Letter from J.L. Frank, Marathon Ashland Petroleum LLC....... 84
Minority Views of Senator Bond................................... 86
Minority Views of Senator Bennett................................ 89
Minority Views of Senator Hutchison.............................. 94
Changes to existing law.......................................... 95
Calendar No. 845
106th Congress Report
SENATE
2d Session 106-426
======================================================================
FEDERAL REFORMULATED FUELS ACT OF 2000
_______
September 28 (legislative day, September 22), 2000.--Ordered to be
printed.
Mr. Smith, of New Hampshire from the Committee on Environment and
Public Works, submitted the following
R E P O R T
[To accompany S. 2962]
together with
additional and minority views
The Committee on Environment and Public Works, to which was
referred the bill (S. 2962) to amend the Clean Air Act to
address problems concerning methyl tertiary butyl ether, and
for other purposes, having considered the same, reports
favorably thereon with an amendment and recommends that the
bill, as amended, do pass.
General Statement
The Reformulated Gasoline (RFG) program of the Clean Air
Act (CAA), added to the law in 1990, required the use of
oxygen-laden additives, called oxygenates, in RFG. To comply
with this requirement, refiners have relied heavily on methyl
tertiary butyl ether (MTBE). MTBE has also been used as an
additive in conventional gasoline at lower concentrations since
1979.
MTBE was detected in ground water in a number of locations
as early as the mid-1980's. This contamination was believed to
be a minor, manageable problem until 1995, when MTBE was found
in Santa Monica, California. MTBE contamination led to the
closure of wells producing more than half of that city's daily
water supply. Since that time, MTBE has been the focus of
numerous State and Federal efforts to ban its use. Appendix I
provides a list of State legislative activities regarding MTBE.
Due to the fact that MTBE is used to satisfy a particular
requirement in the CAA, eliminating its use in gasoline will
lead to related consequences for the environment, human health,
the supply and cost of fuel, and the future of the industries
involved in the manufacture and supply of oxygenates.
Background
The Federal Reformulated Gasoline Program
The Clean Air Act Amendments of 1990 (CAAA) established the
RFG program as a measure to reduce the growing impact of mobile
source emissions on air quality in urban areas. The program
requires gasoline in the nine nonattainment areas \1\ with the
highest ozone concentrations and a population over 250,000, to
meet formula and performance standards that are stricter than
standards for conventional gasoline. One additional area \2\
was required to use RFG in June 1996 after being redesignated
from serious to severe. Authority was given for other
nonattainment areas to opt-in to the RFG program at the
discretion of the Governor of a State \3\ Opt-in areas are
required to use RFG for a period of at least 4 years. The
extent of the opt-in authority recently has been challenged and
explicitly limited by the DC Circuit Court of Appeals \4\ This
legislation expands State authority to opt-in to the RFG
program beyond the limits the Court found in existing law.
Areas now using RFG represent approximately 30 percent of U.S.
gasoline consumption.
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\1\ Los Angeles, California; San Diego, California; Hartford,
Connecticut; New York, New York; Philadelphia, Pennsylvania; Chicago,
Illinois; Baltimore, Maryland; Houston, Texas; and Milwaukee,
Wisconsin. (See Appendix II).
\2\ Sacramento, California.
\3\ States that opted-in areas to the RFG program include Arizona,
Connecticut (entire State), Delaware (entire State), District of
Columbia, Kentucky, Maine, Maryland, Massachusetts (entire State),
Missouri, New Hampshire, New Jersey (entire State), New York,
Pennsylvania, Rhode Island (entire State), Texas, Virginia. The
Governors of Arizona, Maine, New York and Pennsylvania subsequently
opted-out certain opt-in areas. See Appendix II for a complete list of
RFG areas.
\4\ American Petroleum Institute v. Environmental Protection
Agency, 198 F. 3d 275 (DC Cir. 2000). The Court agreed with API, saying
that Congress did not grant EPA the authority to interpret the opt-in
provisions in Section 211 (k)(6) of the Clean Air Act so as to allow
areas that are not classified or are in attainment to adopt the Federal
RFG program via application by a Governor. Only areas that are
designated nonattainment for one of the specified classes of
nonattainment (marginal, moderate, serious, extreme, and severe) are
presently allowed to implement an RFG program.
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The program set a variety of content and performance
requirements, including a minimum content requirement for
oxygen and maximum allowable benzene and heavy metal quantities
in RFG. Through regulatory authority provided by the Act, EPA
chose, in 1993, to adopt performance standards for toxic air
pollutants and volatile organic compounds (VOCs) rather than
the prescriptive fuels formula allowed under Section 211
(k)(3)(A). These performance standards required a 15 percent
reduction in toxic air pollutants from baseline vehicles
\5\starting in 1995 and maintained through 1999, and require a
22 percent reduction from baseline vehicles beginning in 2000,
as part of Phase II. Phase II also requires reductions in NOx
and VOCs.
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\5\ Baseline vehicles and fuel technology assumptions in EPA's
complex model date from 1990, despite significant advances in vehicle
and fuel systems technology.
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Motor vehicle emissions of carbon monoxide, volatile
organic compounds, and most notably toxics have been
drastically reduced in RFG areas. RFG use has allowed areas to
exceed the statutory requirements to reduce toxic emissions,
including emissions of benzene. This over-compliance is largely
due to the dilution effect of the oxygenates MTBE and ethanol,
relatively toxic-free additives. Although substantially toxic-
free, MTBE is listed in Section 112 of the CAAA as a hazardous
air pollutant due to its adverse effects on human health when
inhaled. Recent data suggest that refiners have achieved a 27
percent or higher reduction in toxic air pollutants from the
1990 baseline. A 1998 study by the Northeast States for
Coordinated Air Use Management (NESCAUM) concluded that Phase
II RFG would reduce the public cancer risk by 20 percent.
On August 4, 2000, EPA released a proposed strategy to
further reduce air toxics emissions from motor fuels as an
effort to comply with its responsibility under Section 202 (l)
of the Act to establish additional standards for fuels or
vehicles to control hazardous air pollutant emissions. The
strategy identifies 21 mobile source air toxics (MSATs),
proposes a gasoline benzene control program to maintain the
current levels of refiner over-compliance with RFG and anti-
dumping requirements, and commits EPA to revisiting additional
fuel and vehicle MSATs controls in a 2004 rulemaking. The
deadline in the CAAA for issuance of these regulations was June
1995.
There is currently no specific deadline in the Act for EPA
to further reduce toxic air pollutants from mobile sources. The
Agency retains general authority to control emissions from
motor vehicles of any air pollutant that causes or contributes
to air pollution which may reasonably be anticipated to
endanger public health or welfare. In a discussion focused on
maintaining air toxics reductions from the RFG program, EPA's
Blue Ribbon Panel on Oxygenates in Gasoline specifically
recommended that ``EPA should explore and implement mechanisms
to achieve equivalent or improved public results that focus on
reducing those compounds that pose the greatest risk.'' \6\ The
Panel recognized that the current mass-based performance
requirements in the RFG program may not adequately account for
and consider that the different exhaust components pose
differential risks to public health due in large part to their
variable potency.
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\6\ U.S. EPA. ``Achieving Clean Air and Clean Water: The Report of
the Blue Ribbon Panel on Oxygenates in Gasoline.'' (EPA420-R-99-021)
Washington, DC: GPO, 1999.
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While the RFG program is considered a general success,
experts acknowledge that there is some uncertainty in
estimating the actual quantity of mobile source emissions. It
is difficult to verify the emission reductions associated with
the RFG program as distinct from other mobile source emission
reduction programs. In May 2000, the National Research Council
recommended that EPA make a number of improvements to the
Mobile Source Emissions Factor model (MOBILE), including
estimation of off-road vehicle emissions and incorporation of
both mobile source toxic emissions and high-emitting vehicles.
\7\ S. 2962 requires EPA to expedite resolution of the current
MOBILE6 model and more regularly update MOBILE so that vehicle
manufacturers, fuel makers, air quality planners, and Congress
have accurate information.
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\7\ National Research Council. ``Modeling Mobile-Source
Emissions.'' Washington, DC: National Academy Press, May 2000.
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Oxygenates
The CAAA required that 2 percent by weight of RFG be
oxygen. This requirement was not included in this committee's
reported version of S. 1630, the Clean Air Act Amendments of
1989. It was added on the Senate floor after vigorous debate
and was the only successful floor amendment. Proponents of that
requirement had expected ethanol to be the oxygenate of choice
for fuel providers. It was not regarded as a mandate to use
ethanol, however, even by its sponsors. During floor debate on
the measure, Senator Daschle stated that the oxygen standard
was ``fuel neutral.'' Most refiners, blenders, and importers
opted to use a cheaper and more readily available oxygenate,
MTBE, in many nonattainment areas. MTBE currently is used in
approximately 80 percent of RFG, while ethanol is used in
slightly less than 20 percent of that fuel.
In late 1993, EPA issued final regulations implementing the
RFG program. In 1994, EPA issued another set of final rules
that revised the RFG program. The revisions included a
requirement that renewable oxygenates be used to meet 30
percent of the 2 percent oxygen content requirement in RFG. The
1994 rules were challenged by the American Petroleum Institute
and the National Petroleum Refiners Association. The DC Circuit
Court of Appeals decided that EPA lacked the authority to
impose the renewable requirement and vacated the 1994
rulemaking. \8\
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\8\ American Petroleum Institute v. Environmental Protection
Agency, 52 F. 3d 1113 (DC Cir. 1995).
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Generally, the addition of oxygenates to gasoline allows
for more complete fuel combustion and lowers emissions of ozone
precursors. The oxygen content requirement formally took effect
in 1995 and is currently satisfied by refiner use of either
MTBE or ethanol. Today, approximately four billion gallons of
MTBE and 380 million gallons of ethanol (EtOH) are consumed to
meet this requirement. Most of the ethanol is produced and
consumed in the Midwest region of the country, while MTBE use
is concentrated in the Northeastern States, Texas and
California. Approximately 3.5 percent of ethanol and 30 percent
of MTBE is imported.
In addition to use in the RFG program, ethanol and MTBE are
used to help reduce emissions in carbon monoxide (CO)
nonattainment areas as part of the wintertime oxygenated fuels
program, which began in 1992. Originally, 40 CO nonattainment
areas were required to participate in this winter fuel program.
Today 15 areas in ten States participate. Approximately 46
million gallons of MTBE and 240 million gallons of ethanol are
used each year to satisfy the oxygenate requirement of this
program.
Section 211 (k)(2)(B) of the CAA provides EPA the authority
to waive the oxygen content requirement for RFG, in whole or in
part, for an ozone nonattainment area upon the determination by
the Administrator that compliance with the requirement would
prevent or interfere with the attainment of a National Ambient
Air Quality Standard (NAAQS). On April 12, 1999, California
submitted to EPA a petition requesting such a waiver. The
waiver request letter from Governor Gray Davis is attached in
Appendix III. EPA has not acted upon this waiver application to
date, and, although a decision is imminent, the outcome is
expected to be litigated. A recent letter from EPA to
Congressman Thomas J. Bliley, Chairman of the Committee on
Commerce, U.S. House of Representatives, explaining the status
of the effort to respond to the waiver request is attached in
Appendix IV. In providing the States with access to this waiver
authority on the condition of meeting a relatively stringent
test, and under EPA's authority under Section 211 (c)(4),
Congress sought to balance the desire for uniformity in our
nation's fuel supply with the obligation to empower States to
adopt measures necessary to meet national air quality
standards.
Methyl Tertiary Butyl Ether and Water Quality
MTBE has been used nationwide at low levels in gasoline
since 1979 to replace lead as an octane booster, or ``anti-
knocking'' agent. It is a fuel additive containing oxygen
manufactured from natural gas or petroleum sources. The use of
MTBE greatly expanded due to the oxygen content requirement of
the RFG program described above. Demand driven by the RFG
program caused MTBE's share of the total national gasoline
supply to grow from 1 percent in 1990 to the current 3 percent
level. Most of that increase has been concentrated in the
nonattainment areas of the Northeastern States, Texas, and
California.
The success of the RFG program has been overshadowed in
recent years by the discovery of MTBE in drinking water
supplies. When leaked or spilled into the environment, MTBE can
cause serious drinking water quality problems. MTBE moves
quickly through ground and water without significant
biodegredation or natural attenuation. Once in underground
water supplies, MTBE can be detected by smell and taste at
extremely low concentrations. Small amounts of MTBE can render
water supplies undrinkable, but the precise human health
effects of MTBE consumption at very low levels are unknown. In
1997, EPA issued a drinking water advisory that recommends an
aesthetic limit of 20 to 40 parts per billion (ppb) and a
health limit of 70 ppb. Many States have also established
drinking water standards for MTBE, some of which are more
stringent than EPA's advisory. A list of State standards is
attached in Appendix V.
Currently, there are no comprehensive nationwide data on
the extent of MTBE contamination. A few targeted studies have
been conducted. In 2000, the U.S. Geological Survey completed a
study that estimates up to 20 percent of the nation's drinking
water supplies are at risk due to their proximity to
underground fuel storage tanks. In 1998, Maine conducted a
state-wide sampling that found 16 percent of tested wells
contained some level of MTBE.
The major sources of MTBE contamination are leaking
underground storage tanks. Many underground storage tanks have
been or are currently being upgraded or replaced per a recent
deadline under a long-standing EPA regulation. Questions
remain, however, regarding the ability of refiners,
distributors, and manufacturers of MTBE to ensure that fuel
storage systems are completely sealed from the environment.
Other sources of MTBE contamination are automobile and tanker
truck accidents, leaks from above ground tanks, leaks from
pipelines, two-stroke water craft engine releases, storm water
runoff, fueling over-fills, and residential releases.
The EPA Blue Ribbon Panel recommended a suite of Federal,
State, and local actions that could expedite remediation of
MTBE contamination and protect water supplies from additional
and future contamination. Cleanup is possible, but difficult
and expensive. Contaminated water may be filtered, aerated, or
bioremediated. MTBE may be pumped and treated or remediated in
situ. All options require installation and use of special
equipment as well as on-going operation and maintenance.
States and communities are seeking financial assistance for
the cleanup of MTBE. Existing Federal and State programs are
not fully funded.
Many States have enacted or are considering legislation to
address MTBE contamination. Appendix I provides a complete list
of all such State legislative activities. Legislation has been
enacted to ban MTBE in several states including Arizona,
California, Colorado, Connecticut, Michigan, Minnesota, and New
York. EPA has started action to ban MTBE under the Toxic
Substances Control Act, but this action could take years to
complete. Both State and Federal efforts to ban MTBE continue
to face questions regarding the limits of existing authority to
ban a substance that is not yet proven to be hazardous to human
health at anticipated levels of exposure.
The CAA allows neither EPA nor the States to prohibit a
fuel or fuel additive unless ``any emission product of such
fuel or fuel additive causes, or contributes, to air pollution
which may reasonably be anticipated to endanger the public
health or welfare.'' MTBE, as part of the RFG program, has
provided air quality benefits, but its role in contaminating
water is the main problem that mitigates in favor of a ban of
MTBE use in gasoline.
Ethanol
Ethanol is used as an oxygenate in the RFG program and as
an octane enhancer in conventional gasoline. Some of the
physical and chemical properties of ethanol affect how it is
used as a gasoline additive. The volatility of gasoline
increases when blended with ethanol. Consequently, gasoline
blendstocks that are prepared for blending with ethanol must
undergo additional refinement in order to reduce volatility and
comply with evaporative performance standards. Manufacturing
such ``sub-RVP blendstock'' adds to the refiners' costs of
production.
Ethanol also is soluble in water. Since water is suspended
in gasoline and is present in pipelines and storage tanks along
the gasoline distribution system, ethanol blended with gasoline
can lead to pools of ethanol and water separating from the
gasoline. As a result, ethanol is blended at terminals and
refinery racks as close as possible to the point of retail sale
where it is delivered by truck. Often this involves filling a
truck with gasoline and ethanol from separate tanks. The two
fuels are then ``splash-blended'' by the motion of the truck as
the truck drives to its destination. These factors create a
need for additional infrastructure in order to distribute and
blend ethanol into gasoline.
Ethanol consumption, as part of the nation's total motor
vehicle fuel use, is expected to increase as MTBE is banned by
States and as a result of enactment of this legislation. This
increase will, in turn, affect the nation's fuel supply and
distribution system, air quality, and water quality. The
Administrator and the States will have to monitor carefully
and, as appropriate, deal with these consequences using both
existing authorities and those established in this legislation
to prevent economic and environmental harm.
Ethanol can contribute to both increases and decreases of
emissions of air pollutants. The increased volatility of
ethanol blends of gasoline can lead to greater emissions of
volatile organic chemicals that contribute to smog formation.
It can also play a role in ozone formation in warm-weather
conditions. On the other hand, ethanol is effective at reducing
carbon monoxide emissions. Carbon monoxide is a pollutant
regulated in cold-weather conditions because of its adverse
health effects.
Adding ethanol to gasoline will displace benzene and other
aromatics and can result in a reduction in emissions of those
toxic compounds. Exhaust emissions of acetaldehyde can increase
by as much as 100 percent when ethanol is blended at 5 percent
volume of gasoline. Ethanol blends typically contain 10 percent
ethanol as a result of tax incentives. Acetaldehyde can undergo
photochemical reactions in the atmosphere to form peroxyacetyl
nitrate (PAN). Acetaldehyde is classified as a probable human
carcinogen. PAN is a respiratory irritant and has been shown to
be mutagenic in cellular research. Further study is needed to
determine if emissions of these substances pose significant
health risks.
Ethanol will biodegrade more easily than other components
of gasoline. Some laboratory data and modeling have indicated
that this property can result in extending the plume of
benzene, toluene, and xylene (BTEX) in leaks or spills or
gasoline containing ethanol. The BTEX plume would not begin to
biodegrade until the ethanol is depleted because the ethanol
would consume all the oxygen available for biodegradation until
it is completely broken down. This would allow more time for
the BTEX plume to migrate in either soil or groundwater.
Chronology
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
November 1990.............................. President George Bush signs S. 1630, the Clean Air Act Amendments
of 1990. Public Law 101-549 added RFG program to the CAA and
includes 2 percent oxygen requirement.
December 1993.............................. EPA promulgates final regulations to implement the RFG program.
June 1994.................................. EPA promulgates regulations to require 30 percent of the oxygen
requirement in the RFG program be renewable oxygenates. The rule
is challenged in the DC Circuit Court of Appeals and vacated by
the Court in April 1995.
December 1994.............................. RFG is first sold.
May 1995................................... United States Geological Survey reports detections of MTBE in
groundwater in Denver, Colorado.
February 1996.............................. MTBE is detected in water supplies in Santa Monica, California.
Seven of 11 municipal drinking water wells are closed eliminating
more than half of the city's daily water production. Contamination
levels range from 610 ppb to 230,000 ppb.
January 1997............................... Monitoring program of water reservoirs begins in Southern
California and leads to detections of MTBE concentrations as high
as 29 ppb during the summer boating months.
December 1997.............................. U.S. EPA publishes a Drinking Water Advisory for MTBE that
recommends an aesthetic limit of 20 to 40 ppb and a health limit
of 70 ppb.
Spring 1998................................ Maine experiences three incidents of small gasoline spills that
contaminate water supplies. In Standish, an automobile accident is
linked to contamination of 24 private wells (10 contained MTBE
levels in excess of 100 ppb). In Whitefield, a gasoline spill is
the likely source of MTBE contamination of a well supplying water
to a public elementary school with MTBE levels of 800 ppb. In
Windham, surface spills and fuel over-fills at a convenience
store, with up-dated double-walled tanks, contaminate nearby
wells.
October 1998............................... Maine's request to opt-out of the RFG program is granted in Federal
Register notice.
March 1999................................. California Governor Gray Davis issues Executive Order D-5-99
calling for a phase-out of MTBE use in California by December
2002.
April 1999................................. California Governor Gray Davis sends letter to EPA requesting a
waiver from the oxygen mandate by making the claim that compliance
with the use of oxygenated fuel contributes to air pollution and
hampers the State's efforts to attain the NAAQS for ozone.
September 1999............................. EPA's Blue Ribbon Panel on Oxygenates in Gasoline issues its final
report. Among its recommendations are the elimination of the 2
percent oxygen mandate, maintenance of toxic emission reductions
achieved by the oxygen mandate, expanding available resources for
treatment of water contaminated by MTBE, and a substantial
reduction in the use of MTBE.
March 2000................................. Clinton Administration issues principles for elimination or phase
down of MTBE use in fuels nationwide and increased use of
renewable fuels. EPA initiates efforts to ban MTBE under the Toxic
Substances Control Act.
May 2000................................... Article is published in Environmental Science and Technology--the
U.S. Geological Survey determined that 9000 wells in 31 surveyed
States are at risk of gasoline contamination due to proximity to
leaking underground storage tanks. Sampling was not done to
determine actual MTBE contamination.
May 2000................................... New York Governor George Pataki signs legislation banning the use
of MTBE in gasoline within 3 years.
----------------------------------------------------------------------------------------------------------------
Objectives of the Legislation
The bill provides Governors the authority to waive the
mandate that RFG contain 2 percent oxygen by weight. In States
where that waiver is exercised, the bill provides additional
toxic emission performance standards and aromatic content
requirements.
The bill eliminates use of MTBE in gasoline within 4 years.
It also provides authority to the Administrator to limit or
eliminate use of fuels or fuel additives that cause or
contribute to water pollution.
The bill grants authority to States to amend State
Implementation Plans (SIP) to prohibit application of the Reid
Vapor Pressure (RVP) waiver for ethanol blends.
The bill makes mandatory the Administrator's existing
discretionary authority to require studies of fuels and fuel
additives.
The bill creates a program that reserves an increasing
portion of the total motor vehicle fuel pool consumed for fuel
that 1) reduces pollution relative to conventional fuel usage
and 2) displaces some petroleum consumption. Compliance with
this program occurs within the context of a market-based credit
trading system. This program requires each refiner to
demonstrate compliance either through the acquisition and
retirement of credits generated by the manufacture and sale of
clean vehicles or by blending ethanol into the fuel it
produces.
The bill provides explicit authority for States to opt-in
nonclassified areas to the RFG program.
The bill provides a one-time authorization of $200 million
from the Leaking Underground Storage Tank Trust Fund to conduct
corrective action with respect to MTBE.
The bill authorizes $200 million over 6 years from the LUST
Trust Fund for EPA and States to conduct inspections, issue
orders, or bring actions under Subtitle I of the Solid Waste
Disposal Act.
The bill requires a pair of analyses of vehicle fuel
changes and authorizes additional regulatory actions if
warranted by the underlying analyses to ensure protection of
human health and the environment.
Section-by-Section Summary
Section 1. Short Title
The bill is entitled ``The Federal Reformulated Fuels
Act.''
Sec. 2. Waiver of Oxygen Content Requirement for Reformulated Gasoline
Summary
Section 211 (k)(2) of current law requires RFG to contain 2
percent oxygen by weight. That section also places other
formula and performance requirements on gasoline to be sold as
RFG. Section 2 of S. 2962 allows Governors to waive the oxygen
content requirement and establishes additional performance
standards for RFG sold in States that exercise the waiver.
Discussion
The bill allows Governors 90 days from enactment to waive
the oxygen requirements in Section 211 (k)(2) for RFG sold or
dispensed within the State. The Governor must notify the
Administrator of the waiver. States that opt-in to the program,
including opt-in areas, are allowed to waive the oxygen
requirement as part of the opt-in application. States with
areas that are required to use RFG as a result of a
reclassification are permitted 90 days from reclassification to
waive the oxygen requirement. This relatively brief period of
90 days for a decision by a Governor is included to provide
refiners with ample opportunity to comply with changes in the
RFG requirements described below before the sale of a revised
formula of RFG is scheduled to start.
Gasoline sold in areas that have waived the oxygen mandate
will be required to meet all other RFG requirements.
Additionally, gasoline sold in those areas must maintain toxics
reductions and aromatic content achieved in areas that used
MTBE prior to waiving the oxygen mandate. EPA is required to
establish by regulation a new toxics performance standard based
on the annual aggregate reductions in emissions of toxic
pollutants in the years 1998 and 1999. A new formula
requirement for aromatic content will be established based on
data from the 2 years with the lowest content averages of the
years 1998, 1999, and 2000. The new standards will be based on
compliance survey data, annual aggregate reduction in toxic
emissions, and annual average aromatic content of RFG
containing MTBE. An upper bound for aromatic content will be
determined based on the 10 percent of RFG that has been blended
with MTBE and has contained the greatest volume of aromatic
content.
If the Administrator does not promulgate regulations
establishing new performance standards based on this data
within 270 days of enactment of S. 2962, statutory performance
standards become effective for both emissions of toxic air
pollutants and aromatic content of gasoline in RFG areas in
States for which the oxygen mandate has been waived by the
Governor. The statutory performance standard for emissions of
toxic air pollutants is 27.5 percent below aggregate emissions
of toxic air pollutants from baseline vehicles using baseline
gasoline. The statutory performance standard for aromatic
content is an annual average not to exceed 26 percent by volume
with a per gallon maximum of 45 percent. An alternative
statutory performance standard for aromatic content requires
that no gallon exceed 30 percent aromatic content by volume.
Refiners and gasoline suppliers would be able to choose the
standard with which its products will comply.
The statutory performance standards could be revised by
promulgation of regulations based on the data resources
described above. The bill does not restrict the Administrator's
authority to promulgate more stringent requirements under
Section 202 (l) of current law.
The new performance standards will be applied on an annual
average importer or refinery-by-refinery basis to all gasoline
sold in a State for which the Governor waives the oxygen
mandate. Credits for exceeding the performance standard will be
provided by the Administrator in the same manner as credits
provided under Section 211 (k)(3). The Administrator must
ensure that the granting or transfer of credits for use in
meeting toxics performance standards will not result in higher
average aggregate emissions of toxic air pollutants for the
nonattainment area in which such credits are used than would
occur in the absence of using such credits. The performance
standards will not apply in a State, such as California, which
has authority to regulate motor vehicles under Section 209 (b).
The provisions regarding performance standards for toxic
emissions and aromatic content will prevent backsliding that
could result from changes in refinery product use or processes
spurred by waivers of the oxygen mandate. The arbitrary 2
percent oxygen content mandate requires refiners to use more
oxygenates than would be necessary to meet the other
performance or content standards in Section 211 (k) of current
law. Refiners could respond to waivers of the oxygen mandate by
shifting to other high-octane components such as aromatics or
alkylates. These substitutes can lead to increased emissions of
toxic air pollutants, including benzene.
EPA should expeditiously issue a final decision in response
to the auto industry's January 1999 petition to limit the
Distillation Index of gasoline to no greater than 1200 degrees
Fahrenheit. Consideration of such a limit becomes more
important as additional, and more volatile, ethanol increases
in use.
Sec. 3. Authority for Water Quality Protection from Fuels
Summary
This section provides the Administrator with new authority
to address water pollution caused by the use of motor fuel or
fuel additives. It also eliminates the use of MTBE in gasoline
within 4 years.
Discussion
Section 211 (c) of the CAA allows EPA to regulate fuel and
fuel additives that cause or contribute to air pollution.
Section 3 of this bill expands current law to allow the
Administrator to control fuels and fuel additives that are
shown to cause or contribute to water pollution which may
reasonably be anticipated to endanger the public health or
welfare.
Section 3 creates a ban on the use of MTBE that shall be
effective not later than 4 years after enactment of S. 2962. No
regulatory action is required to effect the elimination of
MTBE. The Administrator is authorized to establish by
regulation a schedule to phaseout the use of MTBE in gasoline.
Use of this authority is not mandated by the bill. The
regulatory authority does not allow any use of MTBE in gasoline
beyond the 4 years after enactment of S. 2962.
A savings clause in Section 3 makes clear that nothing in
S. 2962 can be read to limit existing authority of States to
prohibit or control the use of MTBE. Additionally, the bill
does not grant new State authority outside of that available to
States acting in accordance with Section 209 of the CAA.
Sec. 4. Exclusion from Reid Vapor Pressure Requirement
Summary
Section 4 provides State authority to prevent the
application of the RVP waiver provided by Section 211 (h)(4)
for ethanol blends of conventional gasoline. Using the
authority provided by Section 4, a State can revise its SIP to
exclude any area from a 211 (h)(4) waiver. The Administrator
could approve a SIP revised to prohibit the application of an
ethanol RVP waiver if the State can demonstrate that
application of the waiver significantly interfered with
attainment or maintenance of the NAAQS for ozone.
Discussion
Blending ethanol with gasoline increases the RVP, a measure
of volatility, of gasoline. Under certain conditions gasoline
with a higher RVP will lead to increased evaporative emissions
of hydrocarbons that can exacerbate air quality problems unless
the base gasoline has been refined sufficiently to accommodate
the addition of ethanol. Manufacturing such a ``sub-RVP
blendstock'' adds to the refiners' costs of production. Many
factors interact to increase or reduce the probability of a
higher RVP fuel leading to a reduction in air quality. Under
current law, RVP limits are either required or recommended for
most of the fuel sold in the nation.
Since Section 2 and Section 6 of S. 2962 are likely to
result in significant increases in ethanol consumption over
time in attainment and nonattainment areas, the expanded
authority in this section is necessary to provide States with
the means to prevent any related increase in VOC emissions.
A State could use the authority in this section to
demonstrate that circumstances present in an area of the State
cause ethanol fuel blends, subject to the 211 (h)(4) waiver, to
interfere with efforts to attain or maintain the ozone NAAQS.
Based on such a demonstration, a revised SIP, once approved,
would prohibit the application of the waiver in 211 (h)(4).
This criteria for SIP approval is intended to be less stringent
than the criteria currently found in Section 211 (c)(4)(c),
e.g., a State would not need to show that no other reasonable
or practicable means exist to bring about timely attainment.
Sec. 5. Public Health and Environmental Impacts of Fuels and Fuel
Additives
Summary
The bill directs the Administrator to require tests to
determine potential public health effects of fuels or fuel
additives prior to registering the fuel or fuel additive for
use. Studies under this provision will be conducted on a
regular basis.
Discussion
The existing law allows the Administrator to require fuel
producers to conduct tests to determine the health and
environmental effects of new fuels and fuel additives. This
provision makes such testing mandatory prior to registration
and use.
The Administrator should use this authority to identify and
assess any adverse public health, welfare, or environmental
effects from the use of motor vehicle fuels or fuel additives
or the combustion products of such fuels or fuel additives. The
Administrator should use the authority to assess threats to
both air pollution and water pollution in order to effectively
exercise the authority in Section 211 (c) as amended by this
legislation. This provision is intended to prevent situations
such as the one presented by MTBE contamination of water
supplies from recurring.
To avoid such recurrences, the Blue Ribbon Panel on
Oxygenates in Gasoline recommended that EPA and others
accelerate ongoing research efforts into the inhalation and
ingestion health effects, air emission transformation
byproducts, and environmental behavior of all oxygenates and
other components likely to increase in the absence of MTBE.
This should include research on ethanol, alkylates, and
aromatics, as well as on gasoline compositions containing those
components.
EPA has provided a list of fuel and fuel additive testing
which is now underway, pursuant to Section 211 requirements,
and which the Agency has indicated is responsive to the Blue
Ribbon Panel recommendations. See Appendix VI for the list of
on-going studies. This testing is designed to provide specific
information on MTBE and five other oxygenates as well as
conventional gasoline containing typical gasoline components
that would substitute for oxygenates.
Sec. 6. Clean Alternative Fuel Program
Summary
Section 6 creates a program that reserves an increasing
portion of the total motor vehicle fuel pool consumed for fuel
that 1) reduces pollution relative to conventional fuel usage
and 2) displaces some petroleum consumption. Compliance with
this program occurs in the context of a market-based credit
program. Each fuel supplier has the option of blending a
quantity of renewable fuel into the fuel it sells, purchasing
and using credits generated by the manufacture and sale of
zero-emission or ``super ultra-low'' emission vehicles, or a
combination of both. The Administrator may also provide for
transfer of credit generated by renewable fuel use above levels
required by this bill.
This section provides that motor vehicle fuel sold
beginning in 2008 shall, on a 6-month average basis, be
comprised of a quantity of clean alternative fuel. Measured in
gasoline equivalent gallons, the percentage shall be 1.2 in
2008 and increase by 0.1 percent each year to reach 1.5 for
2011 and thereafter.
Section 6 creates a transition program for the period after
enactment of S. 2962 and prior to commencement of the Clean
Alternative Fuel program (2002-2007). During this period motor
vehicle fuel sold shall contain a quantity of renewable fuel.
The applicable percentage of renewable fuel shall be 0.6 in
2002 and increase by 0.1 percent each year to reach 1.1 percent
in 2007. Credits that qualify for use in the Clean Alternative
Fuel program could be used in the transition period to satisfy
not more than 10 percent of the applicable percentage of
renewable fuel.
This section provides a waiver from the requirements of the
Clean Alternative Fuel program and the transition program upon
a petition by one or more States, if the Administrator, after
consultation with the Secretary of Energy and the Secretary of
Agriculture, determines that those requirements would severely
harm the economy or environment of a State, region, or the
United States, or that there is an inadequate domestic supply
or distribution capacity to meet those requirements.
Discussion
Section 6 establishes a marketplace for competition between
alternate methods of satisfying the requirements of the
program. Competitors are given access to the market only on the
basis of manufacturing and selling vehicles that emit very
little or no air pollutants. Those vehicle sales generate
credits based on the extent that the vehicles minimize the
reliance on petroleum as a fuel source. Credits generated in
this manner could be bought and sold, or otherwise transferred.
Credits could be acquired and used to satisfy a petroleum
company's obligation under the Clean Alternative Fuel program.
A petroleum company could also satisfy its obligations by
selling fuel that contains or is comprised of a quantity of
renewable fuel, including ethanol, sufficient to satisfy the
applicable percentage of clean alternative fuel, and generate
credits if it exceeds the applicable percentage. Section 6 does
not require any demonstration that the use of renewable fuels,
including ethanol, would significantly reduce either the
emissions of air pollutants or the use of petroleum. Additional
study is needed to identify the extent and circumstances under
which renewable fuel might contribute to these goals.
For the purpose of this section, renewable fuel is defined
to mean a motor vehicle fuel produced from grain, starch,
oilseeds, or other biomass, or is a natural gas from a biogas
source, and is used to replace or reduce the quantity of fossil
fuel present in a fuel mixture used to operate a motor vehicle.
The Administrator shall issue a regulation governing the
generation of credits by a vehicle manufacturer that could be
used to satisfy the applicable percentages of clean alternative
fuel and renewable fuel in this section. Credits will be
calculated primarily upon the vehicle's expected lifetime
displacement of petroleum consumption. In establishing the
credits, the Administrator may give consideration to the use of
innovative, advanced, and alternative fuel technologies.
The credits generated will be a monetizable asset created
by the manufacture and sale of a vehicle that meets the Bin 1
or Bin 2 definitions in this section. A Bin 1 vehicle is a
light-duty motor vehicle that emits no air pollutants or a
heavy-duty motor vehicle that meets equivalent standards as
determined by the Administrator by regulation. A Bin 2 vehicle
is a light-duty motor vehicle that does not exceed the
standards for the category of motor vehicle with the least
emissions of any vehicle with an emissions profile. A Bin 2
vehicle is also a heavy duty motor vehicle that emits not more
than 50 percent of the allowable emissions of air pollutants
under the most stringent standards applicable to heavy duty
motor vehicles in the year the credit is generated. The term
``most stringent standards applicable'' includes the vehicle
emissions standards for heavy duty engines approved by the
United States District Court for the District of Columbia in
consent orders settling litigation between the U.S. Department
of Justice, EPA, and several heavy duty diesel engine
manufacturers.
The proceeds of the sale of credits could, but are not
required to, be used to reduce or offset the costs associated
with the production, promotion, or sale of the vehicles that
meet the definitions in Section 6. A person that generates
credits may use the credits or transfer all or a portion of the
credits to another person. Credits, or proceeds from the sale
or transfer of credits, may be transferred to a person,
nonprofit entity, or local government to provide any portion of
the non-Federal share required for an alternative fuel project
under the Congestion Mitigation and Air Quality Improvement
(CMAQ) program (Section 149 (e)(4) of title 23 U.S.C.) or a
voluntary supply commitment under the Clean Cities program
authorized in the Energy Policy Act of 1992 (42 U.S.C. 13255).
In the case of CMAQ, credits may be transferred directly from
the manufacturer to the Federal Government, and their market
value would correspondingly reduce the local match requirements
for alternative fuel projects.
Section 6 provides for petitions singly or jointly by
States to the Administrator to waive the applicable percentages
in whole or in part. Waiver petitions will be evaluated on the
basis of a demonstration that the applicable percentages would
severely harm the economy or environment of a State, a region,
or the United States, or a demonstration of an inadequate
domestic supply or distribution capacity to meet the
requirements of this section.
The waiver authority of the bill should be exercised to
avoid the use of ethanol in cases when it would cause
substantial harm to the environment. While ethanol can provide
important environmental benefits, it can also have
environmental drawbacks. For example, in certain areas of the
country, ethanol use can complicate reduction of summertime
ozone. Some tests indicate that ethanol use may increase
tailpipe emissions of nitrogen oxides. Similarly, because
ethanol is only produced in certain regions of the country,
some states may experience supply dislocations. These
dislocations should be avoided through use of the waiver
authority.
If any petitions are granted, the Administrator, after
consultation with the Secretary of Agriculture and the
Secretary of Energy, shall reduce the applicable national
percentage accordingly. The Administrator, and other relevant
agencies, should collect and maintain accurate data on fuel
price and supply, fuel related emission inventories, and ozone
and particulate matter formation from changes in fuel use in
order to act on any waiver requests in a timely fashion.
Based on data in the Administration's analyses provided at
the committee's request, industry projections, and staff
discussions with EPA and California Air Resources Board (CARB),
ethanol consumption in motor vehicle fuel could nearly triple
from today's levels by 2011 under S. 2962. This increase may be
less due to the generation and use of credits from the
manufacture and sale of extremely clean, alternative fuel
vehicles. The Administration's analyses, including a separate
base case scenario completed by the Department of Energy, are
attached in Appendix VII.
The significant changes in the nation's motor fuel supply
system contemplated by the bill are likely to affect gasoline
cost no later than 2003. There is no existing model of the
national fuel supply system that can adequately and accurately
account for all the variables involved in projecting such cost
effects. Still, available estimates of the average gasoline
cost impact of increasing ethanol use, employing the flexible
approach to market growth in this bill, indicate an additional
3-5 cents per gallon by the year 2005 is probable. Should the
bill not be enacted, multiple States ban MTBE, and the oxygen
content requirement is not made optional, the Administration's
analysis suggests that gasoline could be as much as 7-8 cents
per gallon more in 2005 than is otherwise expected. A graphic
representation of these cost effects is included in Appendix
VIII. The aforementioned Administration's analyses also include
projections of total ethanol demand under various probable
scenarios.
Current ethanol use reduces contributions into the Highway
Trust Fund by approximately $1 billion annually. This reduction
is due to the 5.4 cent exemption that ethanol, of a 10 percent
fuel blend, receives from the 18.4 cents per gallon Federal
excise tax imposed on gasoline and the diversion of 3.1 cents
of the excise tax collected on ethanol fuels to general
revenue. The 5.4 cent exemption diminishes to 5.1 cents over
the next 6 years, then expires in 2007.
This legislation is likely to increase ethanol consumption
and will therefore reduce contributions into the Highway Trust
Fund accordingly, assuming no change in tax law. Based on
informal Administration projections, this legislation will
first result in an observable increase in on-road consumption
of ethanol in 2004. This increase will have an effect on the
apportionments and allocations of state obligation authority
beginning in 2006, given existing Federal Highway financing
methods. The Transportation Equity Act for the 21st Century
(TEA-21) is due to be reauthorized by the end of 2003, so this
committee and Congress will need to address the impacts on the
Highway Trust Fund created by the changing fuel system prior to
that time.
The adverse impact of this tax exemption on the Highway
Trust Fund has been a topic of committee hearings and was
debated during committee action on this legislation. The
committee expects the General Accounting Office and the U.S.
Department of Transportation to provide additional data on the
impacts of this bill prior to the expiration of TEA-21.
The bill does not provide a market guarantee for any
specific fuel, given the waiver opportunities incorporated
herein for economic and environmental harm and the open
competition for the fuel requirements starting in 2008. The
Administrator, in cooperation with other relevant agencies
within the executive branch and after consulting with
interested members of the public and the appropriate
industries, should estimate annually the number of vehicles
meeting the definitions under this bill which may be
manufactured in the near future and the quantity of credits
that would be thereby generated and available for sale or
transfer. Such estimates will enhance competition and assist
refiners in meeting the fuel requirements imposed by this
legislation in an informed manner.
Sec. 7. Additional Opt-In Areas Under Reformulated Gasoline Program
Summary
This section of the bill provides explicit authority to
States that allows nonclassified areas to opt-in to the RFG
program.
Discussion
Currently, 17 States and the District of Columbia rely on
the RFG program as an emissions control strategy. Appendix II
provides a complete list of all RFG areas. The CAAA mandated
use of RFG in nine areas \9\ One additional area \10\ was
required to sell RFG beginning in June 1996 after being
redesignated from serious to severe. Several States \11\ have
exercised the opt-in authority of Section 211 (k)(6) to require
the use of RFG. Opt-in areas are required to use RFG for a
period of at least 4 years. The Act limits opt-in actions to
areas that previously violated the 1-hour ozone NAAQS and are
classified according to their current status in relation to
attainment of the NAAQS. States expend considerable resources
in an effort to avoid violating the NAAQS because of the
stringent requirements imposed on nonattainment areas by the
CAA. This section allows use of the RFG program for those areas
that seek to use it as an emissions control technique in the
State's strategy for avoiding new violations of the NAAQS.
Under this provision, once the SIP revision is approved the
area will be a covered area under the Federal program. The SIP
revision may include a waiver of the oxygen content requirement
under Section 2 of this bill.
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\9\ Los Angeles, California; San Diego, California; Hartford,
Connecticut; New York, New York; Philadelphia, Pennsylvania; Chicago,
Illinois; Baltimore, Maryland; Houston, Texas; and Milwaukee,
Wisconsin.
\10\ Sacramento, California.
\11\ States that opted-in to the RFG program include Connecticut
(entire State), Delaware (entire State), District of Columbia,
Kentucky, Maryland, Massachusetts (entire State), Missouri, New
Hampshire, New Jersey (entire State), New York, Rhode Island (entire
State), Texas, Virginia. The Governors of Arizona, Maine, New York and
Pennsylvania opted-out certain opt-in areas.
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Sec. 8. Leaking Underground Storage Tanks
Summary
The bill authorizes appropriations not to exceed $200
million from the Leaking Underground Storage Tank (LUST) Trust
Fund to be used for cleanup and treatment of MTBE. The bill
also authorizes $200 million over 6 years from the LUST Trust
Fund for EPA and States to conduct inspections, issue orders,
or bring actions under Subtitle I of the Solid Waste Disposal
Act.
Discussion
In 1984, Congress enacted, as Subtitle I of the Solid Waste
Disposal Act, a comprehensive program to address the problem of
leaking underground storage tanks. Among other things, the
program required EPA to develop leak detection and prevention
standards for underground storage tanks (USTs), and authorized
the Agency to compel tank owners and operators to take
corrective action to clean up leaking tanks and comply with
standards for USTs, or to close them. States have largely taken
the lead in implementing and enforcing the program
requirements, including corrective action requirements.
States receive Federal funds from the LUST Trust Fund,
which is paid for by a one-tenth of one cent tax on all
petroleum products, to carry out the requirements. This tax
generates approximately $170 million per year, and the interest
on the principal in the fund generates approximately $70
million annually (roughly the amount of annual appropriations
from the LUST Trust Fund). Amounts are appropriated each year
from the Trust Fund for the States and EPA to implement and
enforce the UST corrective action requirements; to conduct
cleanups in certain limited situations where there is no
financially viable responsible party or where a responsible
party fails to undertake the appropriate corrective action; to
take corrective action in cases of emergency; and to bring cost
recovery actions against parties to seek reimbursement of costs
expended from the Fund to clean up sites. The balance of the
trust fund is approximately $1.3 billion. The annual
appropriation from the LUST Trust Fund for fiscal year 2001 is
expected to be approximately $72 million. Congress has
appropriated approximately $10 million per year from general
revenues for State implementation of leak prevention and
detection programs. In addition to the Federal LUST Trust Fund,
many States have also established funds, capitalized through
State gas taxes, fees, and other mechanisms, to pay for
cleanups and to provide assistance to tank owners in complying
with other requirements. States spend approximately $1 billion
per year from their trust funds. However, in recent years, the
claims against those funds have risen dramatically.
While over a million leaking USTs have been closed under
this program, EPA estimates that there are currently over
740,000 active USTs containing petroleum products. Some of
these tanks have leaks, causing potential harm to human health
and the environment. A number of recent, high profile
contamination cases have highlighted the problem. MTBE has been
detected at thousands of leaking UST sites. In some cases,
drinking water wells have been closed due to these releases of
MTBE. According to EPA, States have reported more than 400,000
confirmed releases from USTs. Cleanups have been initiated for
approximately 357,000 releases and almost 242,000 cleanups have
been completed. In spite of this progress, many thousands of
cleanups remain to be completed. EPA, States, and the private
sector have suggested that lack of resources, both for cleanup
and for inspections and enforcement, have limited efforts to
fully address MTBE contamination and leaking USTs. Section 8 of
this bill addresses these concerns.
Section 8(a) reconfirms the authority of the Administrator
and the States to use funds from the LUST Trust Fund for the
cleanup of sites contaminated by MTBE from leaking USTs. In
addition, Section 8(a) authorizes the Administrator and the
States to conduct such cleanup activities using specifically
designated funds made available under new Section 9011(a) from
the LUST Trust Fund. In order to undertake a corrective action
under this subsection, the Administrator or a State must still
comply with the requirements of Section 9003 (h)(2) of the
Solid Waste Disposal Act. States are to exercise this authority
in accordance with their cooperative agreements.
Because MTBE can be detected in groundwater at relatively
low levels, which in turn makes the water unpalatable, but not
necessarily harmful, for drinking water purposes, this section
amends Section 9003 of the Solid Waste Disposal Act to clarify
that the Administrator and the States may undertake corrective
actions whenever the presence of MTBE in groundwater presents a
threat to public welfare. This clarification is intended to
reaffirm the authority of the Administrator and States to
undertake corrective actions with respect to release of MTBE to
groundwater, even in situations where the level of MTBE is not
so high as to present a threat to human health.
Section 8(b) amends Subtitle I of the Solid Waste Disposal
Act by creating a new Section 9010 giving States greater
flexibility in their use of LUST Trust funds. New Section 9010
authorizes EPA and the States to use funds appropriated from
the LUST Fund to conduct inspections, issue orders, or bring
actions under Subtitle I. This increased funding for
inspections and enforcement-related activities will enable
States and EPA to secure greater compliance which, in turn,
will avoid future releases and resulting cleanup costs. It will
also help protect human health and the environment. Funding
authorized under this section is for both formal enforcement
actions, such as judicial actions and administrative orders,
and related measures to secure compliance, such as notices of
violation or warnings. In addition, funds authorized under this
provision may be used for cost recovery.
This section is not intended to change current law on State
authority under authorized programs or Federal authority to
enforce the requirements of Subtitle I. Nor does this provision
affect EPA's authority to use other funds to enforce the UST
program. EPA receives funding from sources other than the LUST
Trust Fund to undertake inspection and enforcement related
activities for leak detection and other preventive
requirements. Any LUST Trust Fund appropriations used for such
enforcement activities by EPA are expected to supplement funds
that the Agency has been, and will be, receiving from sources
other than the LUST Trust Fund.
In addition to authorizing funding for States and EPA for
federally authorized programs, this section authorizes States
to use funds to undertake inspection and enforcement related
actions for State tank leak detection, prevention and other
requirements through State programs where requirements are
similar or identical to Subtitle I. State agencies currently
receive funding from EPA from sources other than the LUST Trust
Fund to undertake such activities for leak detection and other
preventive requirements. It is expected that States will
continue to receive funding from EPA from these other sources,
as well as from the LUST Trust Fund, for these activities. Any
LUST Trust Fund appropriations used for enforcement related
activities by States should supplement funds that the States
have been receiving, and will continue to receive, through
grants authorized under Section 2007 (f).
Section 8(b) also creates a new Section 9011 to increase
the levels of authorized funding for measures related to
corrective actions and enforcement. This section authorizes
appropriations for two major and equally important activities--
to fund an immediate need to address MTBE which is currently
coming from leaking underground tanks and is creating problems
in numerous drinking water wells, and to facilitate inspection
and enforcement activities to avoid similar problems being
created in the future. Section 9011 (1) authorizes a one-time
appropriation of $200 million for corrective actions with
respect to MTBE. The bill authorizes substantial funding to
clean up MTBE contamination in recognition of the fact that
this problem has arisen, in part, as a result of increased use
of MTBE by refiners in an effort to meet Federal oxygenate
requirements. Section 9011 (2) authorizes an additional $200
million over the period between fiscal years 2001 through 2006
to conduct inspections, or issue orders or bring actions under
Subtitle I. There is broad consensus that more resources are
needed to conduct inspections to ensure that underground tanks
comply with applicable regulations and to ensure early
detection of leaks and other problems. EPA has estimated that
it would cost approximately $93 million over what is currently
appropriated for the first year, and $70 million each year
thereafter, to inspect facilities on an annual basis. A
biannual inspection schedule would cost approximately $63
million over what is currently appropriated for the first 2
years combined, and $20 million additional annually thereafter.
Sec. 9. Analyses of Motor Vehicle Fuel Changes and Additional
Performance Requirements
Summary
Section 9 requires the Administrator to publish an analysis
of the changes in emissions of air pollutants and air quality
due to the implementation of the provisions in S. 2962. The
analysis will examine changes in all motor vehicle fuels and
fuel additives and will attempt to identify and quantify any
increase in emissions or air pollution caused by implementing
this bill. A draft analysis will be published within 4 years of
enactment, and a final analysis will be published within 5
years of enactment. The Administrator should include in the
analysis consideration of direct and evaporative emissions from
the use of these fuels and fuel additives, as well as
combustion by-products, in on-road and off-road vehicles.
S. 2962 directs the Administrator to promulgate regulations
to establish performance requirements to address any
significant changes in motor vehicle emissions or air quality
from a baseline period of 1998 through 2000. The regulations
are required to ensure that, as compared with emissions in the
baseline period, emissions from motor vehicle fuel or fuel
additives will not be significantly greater on a per gallon
average basis in any region or cause air quality to be
significantly worse in any region. A more than de minimus
increase in contribution to any criteria or toxic air pollutant
is presumed to worsen air quality unless the Administrator
determines that other factors ameliorate the effect of such
increases.
Section 9 also requires analysis of the mobile source title
of the CAA and regulations promulgated based on authority in
that title, including changes made to that title by S. 2962.
The analysis will be of the effects on public health and the
environment of motor vehicle fuel and fuel additives. A draft
analysis will be published within 7 years of enactment of S.
2962. A final analysis will be published within 8 years of
enactment of S. 2962.
Section 9 directs the Administrator to promulgate
additional performance requirements within 10 years of
enactment of S. 2962. The additional requirements will apply to
motor vehicle fuel and fuel additives, to their use, and to
motor vehicles. Additional requirements will be promulgated
both to ensure adequate protection of human health and the
environment and to achieve specific reductions in the use of
compounds or emission products that pose the greatest risk to
human health. In determining the effects of motor fuel and fuel
additives on public health and the environment, the analyses in
Section 9 will be required to take into account the entire life
cycle of the production, distribution, and use of motor vehicle
fuel and fuel additives.
Section 9 requires the Administrator to develop and
finalize an emissions model that reasonably reflects the
effects of characteristics or components of motor vehicle fuel
or emissions from vehicles in the motor vehicle fleet during
calendar year 2005.
Discussion
Section 211 (c) of the CAA, as amended by Section 3 (a)(1)
and (2) of this legislation, provides the Administrator with
the authority to regulate, control, or prohibit the
manufacture, introduction into commerce, offering for sale or
sale of any fuel or fuel additive, if, in the judgment of the
Administrator, any fuel or fuel additive or emission product
causes or contributes to air pollution or water pollution that
may reasonably be anticipated to endanger the public health or
welfare. The bill requires the Administrator to exercise this
authority and interprets a ``significant worsening of air
quality or a significant increase in emissions'' as a
circumstance that would ``reasonably be anticipated to endanger
the public health or welfare.'' The bill also adds ``water
quality'' as an environmental protection criterion in Title II
of the Act.
Section 202 (a) of the CAA requires the Administrator to
prescribe by regulation standards applicable to the emissions
of any air pollutant from any class of motor vehicles which, in
the Administrator's judgment, causes or contributes to air
pollution which may reasonably be anticipated to endanger
public health or welfare. Such regulation provides for time for
the appropriate technology development, giving consideration to
the cost of compliance. The bill requires the Administrator to
exercise this authority and interprets ``adequate protection of
public health and the environment'' as a charge substantially
similar to the Act's protection of ``public health or
welfare.''
In addition, Section 202 (l) requires the Administrator to
exercise the authorities in Sections 211 (c) and 202 (a) and to
promulgate, and from time to time revise, regulations
containing reasonable requirements to control hazardous air
pollutants from motor vehicles and fuels. The regulations must
reflect the greatest degree of reductions achievable,
considering cost and projected available technology, and must
focus on those categories of emissions that pose the greatest
risk to human health or about which significant uncertainties
remain.
The emissions model currently used by EPA to determine
compliance in both the RFG and conventional anti-dumping
gasoline programs is called the complex model. It uses 1990
average gasoline quality and 1990 model year motor vehicle
technology as its baseline, and models how changes in gasoline
qualities change emissions of these vehicles compared to 1990
gasoline. For purposes of this provision, EPA is authorized to
update its complex model to address changes in motor vehicle
technology since 1990. The motor vehicle fleet in calendar year
2005 will be different from model year 1990 vehicles. The
updated model is expected to contain a mix of technologies
with, for example, the newer Tier 2 technology entering the
fleet.
Developing an emissions model that reflects the actual mix
of motor vehicle technologies in the fleet during calendar year
2005 allows EPA to reasonably determine the change in emissions
between 1998-9 and 2005-6 due to changes in gasoline, as the
2005 calendar year fleet should still contain the kinds of
technologies found in the prior years, although with a
different mix of technologies. EPA should work with a
consortium of the automobile and oil industries and other
interested and qualified parties to design and conduct the
extensive vehicle and fuel combination testing that will be
necessary to update the complex model, as was done in
developing the current complex model.
Once EPA has developed this updated complex model, it may
be useful for other related applications, such as emissions
modeling for State planning. Under this provision, EPA also has
the discretion to use the updated model in the RFG and
conventional gasoline programs, including future RFG
rulemakings, where doing so would not be inconsistent with the
provisions of Section 211 (k).
APPENDIX I
STATE LEGISLATION ON MTBE ADDITIVES IN REFORMULATED GASOLINE
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Arizona..................................... FINAL ACTION.
Arizona will ban the MTBE no later than 180 days after California
completes its phaseout of MTBE on December 31, 2002, according to
Senate Bill 1504 (HB 2386), which was recently approved by the
Governor.
California.................................. FINAL ACTIONS.
In March 1999, California became the first State to
officially ban MTBE when Governor Gray Davis issued an executive
order for a three-year phase out of the gasoline additive.
California SB 989 codified the Governor's executive
order for the phase-out of MTBE. The legislature also required
that refiners submit quarterly reports to detail the amount of
MTBE used in gasoline and how the amount compares to last year's
use.
MTBE has shown up in hundreds more underground fuel
links in and water quality experts have raised their estimate of
the number of MTBE spills from 4,500 to nearly 6,600, a nearly 32
percent increase over the past year.
Colorado.................................... FINAL ACTION.
Colorado's Governor recently signed SB 190 into law, which
mandates a phasing out of MTBE by April 30, 2002. In areas where
MTBE is not currently sold or stored which includes Denver and
the rest of the Front Range of the Rocky Mountains the additive
will be banned immediately.
Connecticut................................. FINAL ACTION.
SB 571 (signed by Governor 6/1/2000) will phase out the use of
MTBE as a gasoline additive over a five-year period, and increase
penalties for the unlawful discharge of gasoline.
Delaware.................................... The legislature is studying the groundwater problem, but as of
now, no resolutions have passed or been proposed to phase out
MTBE. (Source at the Department of Environmental Control)
Florida..................................... Florida has been monitoring its public water system for MTBE since
the early 1990's; MTBE has not yet been found in amounts
exceeding the EPA guidelines. No MTBE legislation has passed as
of the present.
Hawaii...................................... FINAL ACTION.
The Governor recently vetoed Hawaii HB 3021 (passed House and
Senate) which would have banned MTBE by July 1, 2001.
Illinois.................................... FINAL ACTION.
A proposal to ban MTBE was blocked on 4/11/2000 in an Illinois
House committee. Rep. Bill Mitchell, (R-Forsyth), proposed the
original amendment to Senate Bill 1046 that would have banned
MTBE in Illinois by 2001.
PENDING ACTION.
Other resolutions have urged Congress and the executive branch to
take immediate steps to ban MTBE.
Iowa........................................ FINAL ACTIONS.
Iowa HB 2294 died in committee. It would have prohibited
the sale of MTBE, but would have permitted the sale or storage of
an ``incidental amount'' of MTBE if the Department of Natural
Resources found no threat to public health/ environment.
A resolution has been considered to urge Congress or the
State's congressional delegation to change the Clean Air Act to
phase out MTBE.
Kentucky.................................... FINAL ACTIONS.
House Resolution 151, passed 3/23/2000, recognized the
benefits of ethanol as an effective alternative to MTBE.
HB 849, which would have banned the use of MTBE, died in
committee with the end of the legislative session.
Senate Joint Resolution 68, which urged KY's
congressional delegation to support changes to the Clean Air Act
that would allow the State to opt out of the Federal RFG program,
passed in the Senate, but died in committee.
Maryland.................................... FINAL ACTIONS.
Legislation has been enacted creating a State Task Force
to investigate the contamination of water supplies MTBE and to
examine potential health effects. (HB 823)
Environmental officials have found the gasoline additive
MTBE in 66 of the 1,060 public water systems in Maryland they
investigated (03/08/2000).
Massachusetts............................... FINAL ACTIONS.
Resolution against MTBE failed in the legislature.
Although no ban is likely to be proposed, the Dept. of
Environmental Affairs is working with regional groups to monitor
water contamination and to eventually phase out MTBE additives.
NESCAUM, a coalition of New England regions, is the principle
organization working to monitor the situation.
Michigan.................................... FINAL ACTION.
On June 15, 2000, Michigan's Governor signed into law HB5570,
which bans MTBE beginning 1/1/2003, and directs the department of
environmental quality to study the environmental and health
effects of MTBE.
Minnesota................................... FINAL ACTION.
Minnesota HB 3131, a complete ban on MTBE, died in committee at
the end of this legislative session. However, SB2946, which
instead limits MTBE content in gasoline to 1/3 of one percent by
weight, and requires that MTBE be phased out by July 2005, was
signed into law. (Codified in Chapter 434)
Missouri.................................... FINAL ACTIONS.
Concurrent resolutions in the legislature urged the
governor to exercise the State's right to opt out of the RFG
program until a safe substitute for MTBE is identified (e.g., HCR
32, HCR 14).
Thus pressed by the Republicans, the Governor issued an
executive order which will ban MTBE after the EPA and Congress
meet certain conditions. These conditions include: a requirement
that the EPA provide a waiver for Missouri from provisions in the
Clean Air Act and the reformulated gasoline program (RFG); a
requirement that Congress prevent price increases or a decline in
air quality that could result from an MTBE ban; and assurance
from Congress that Missouri will not lose Federal highway funds
because of its ban of MTBE.
SB 966 (HB 1801), which was to codify the Governor's ban
on MTBE, died in committee at the end of the legislative session.
PENDING ACTION.
Missouri lawmakers are also urging quick action at the Federal
levels to ban MTBE and to promote ethanol as a replacement. (03/
29/2000)
Nebraska.................................... FINAL ACTION.
The much-talked-about ethanol mandate in Nebraska appears to be
finished for this year, and thus Gas station owners will not be
required to sell an ethanol blend. The ethanol mandate instead
evolved into a ban of MTBE (LB 1234), which was approved by the
Governor on 4/12/2000.
New Hampshire............................... FINAL ACTIONS.
In 1999, New Hampshire signed three actions on MTBE into
law; HB 592 established a legislative study committee to
investigate actions for reducing the effects of MTBE on surface
and groundwater; HJR 9 urges the U.S. Congress and the U.S.
Environmental Protection Agency to eliminate Federal requirements
for oxygenates; SB 70 requires that the commissioner of
environmental services limit the concentration of MTBE allowed in
gasoline and that the commissioner seek waivers from EPA for
MTBE.
SB 71, a complete ban on MTBE, passed the Senate in
1999; however, its House companion bill failed to pass early this
year.
New Hampshire has also introduced legislation that would
permit the State to enter into discussions with other
northeastern States about implementing a regional gasoline that
contains less MTBE.
New Jersey.................................. PENDING ACTION.
New Jersey (AB 218, AB 1667, AB 1923, SB 527) has several pieces
of legislation that would prohibit MTBE use. All are currently in
committee, and will carry over to the next legislative session.
New York.................................... FINAL ACTION.
Governor Pataki (R-NY) signed a bill banning MTBE by Jan. 1, 2004.
The New York ban, drafted partly in response to contamination
reported on Long Island and upstate, will prohibit the use, sale,
and importation of MTBE beginning January 1, 2004 under penalty
of up to $10,000, according to Pataki's office. (5/24/2000)
PENDING ACTION.
Legislation has also been proposed to direct State agencies to
study MTBE contamination of water supplies and to examine its
health effects.
Pennsylvania................................ FINAL ACTIONS.
In June 1999, Pennsylvania chose to no longer
participate in the Federal RFG program, citing MTBE health
effects as its primary reason. SB 989 codified the governor's
executive order for the phase out of MTBE.
Studies found 73 percent of Pennsylvania's drinking
water supplies were contaminated with MTBE.
Rhode Island................................ FINAL ACTION.
House Resolution 7999 (passed 06/07/2000) requests that the
Federal government lift the requirement for 2% oxygenate level in
reformulated gasoline.
PENDING ACTION.
Legislation has been proposed to direct State agencies to study
MTBE contamination of water supplies and to examine its health
effects.
South Dakota................................ FINAL ACTION.
South Dakota passed legislation (SB 1124 signed by the governor)
that limits MTBE content in gasoline to no more than 2 percent by
weight. PENDING ACTION. A proposed bill, South Dakota HB 1132,
would prohibit MTBE use entirely.
Virginia.................................... FINAL ACTION.
HB 909 was recently enacted (4/09/2000), which directs State
agencies to study MTBE contamination of water supplies and to
examine its health effects.
West Virginia............................... FINAL ACTION.
West Virginia SB 441, which would have prohibited MTBE use, died
in committee at the end of the legislative session.
Wisconsin................................... FINAL ACTION.
AB 838, a proposed ban on MTBE, failed to pass the Wisconsin
Assembly in 1999.
----------------------------------------------------------------------------------------------------------------
Source: National Conference of State Legislatures, July 2000.
------
APPENDIX II
List of Reformulated Gasoline Program Areas
U.S. Environmental Protection Agency, Office of Mobile Sources, April 5, 1999
----------------------------------------------------------------------------------------------------------------
Clean Air Act: Required Areas
----------------------------------------------------------------------------------------------------------------
LOS ANGELES................................... South Coast Air Basin, South East Desert, Ventura, CA
Los Angeles County, CA
Ventura County, CA
Orange County, CA
San Bernardino County (partial), CA
Riverside County (partial), CA
SAN DIEGO County, CA.......................... San Diego County, CA
HARTFORD...................................... New Haven--Waterbury, CT
Hartford County (partial), CT
Litchfield County (partial), CT
Middlesex County (partial), CT
New London County (partial), CT
New Haven County (partial), CT
Tolland County (partial), CT
NEW YORK...................................... Northern New Jersey--Long Island--Connecticut area, NY-NJ-CT
Fairfield County, CT
Litchfield County, (partial), CT
New Haven County (partial), CT
Bergen County, NJ
Essex County, NJ
Hudson County, NJ
Hunterdon County, NJ
Middlesex County, NJ
Monmouth County, NJ
Morris County, NJ
Ocean County, NJ
Passaic County, NJ
Somerset County, NJ
Sussex County, NJ
Union County, NJ
Bronx County, NY
Kings County, NY
Nassau County, NY
New York County, NY
Orange County, NY
Putnam, NY
Queens County, NY
Richmond County, NY
Rockland County, NY
Suffolk County, NY
Westchester County, NY
PHILADELPHIA.................................. Wilmington--Trenton--Cecil County, MD area PA-NJ-DE-MD
New Castle County, DE
Kent County, DE
Cecil County, MD
Burlington County, NJ
Camden County, NJ
Cumberland County, NJ
Gloucester County, NJ
Mercer County, NJ
Salem County, NJ
Bucks County, PA
Chester County, PA
Delaware County, PA
Montgomery County, PA
Philadelphia County, PA
CHICAGO....................................... Gary--Lake County, IL--Indiana--Wisconsin area
Cook County, IL
Du Page County, IL
Kane County, IL
Lake County, IL
McHenry County, IL
Will County, IL
Grundy County, IL, (partial)
Kendall County, IL,( partial)
Lake County, IN
Porter County, IN
BALTIMORE, MD................................. Anne Arundel County, MD
Baltimore County, MD
Carroll County, MD
Harford County, MD
Howard County, MD
The City of Baltimore, MD
HOUSTON....................................... Galveston--Brazoria, TX
Brazoria County, TX
Chambers County, TX
Fort Bend County, TX
Galveston County, TX
Harris County, TX
Liberty County, TX
Montgomery County, TX
Waller County, TX
MILWAUKEE..................................... Racine, WI
Kenosha County, WI
Milwaukee County, WI
Ozaukee County, WI
Racine County, WI
Washington County, WI
Waukesha County, WI
SACRAMENTO, CA * (newly required area)........ El Dorado County (partial), CA
Placer County (partial), CA
Sacramento County, CA
Solano County (partial), CA
Sutter County (partial), CA
Yolo County, CA
CONNECTICUT, The Entire State 1............... Litchfield County (partial), CT
Hartford County (partial), CT
Middlesex County (partial), CT
New London County (partial), CT
Tolland County (partial), CT
Windham County, CT
DELAWARE,..................................... The Entire State 1 Sussex nonattainment area
Sussex County, DE
DISTRICT OF COLUMBIA.......................... Washington, DC-MD-VA area (DC portion)
Entire District of Columbia
KENTUCKY...................................... Cincinnati-Hamilton KY-OH area (KY portion)
Boone County, KY
Campbell County, KY
Kenton County, KY Louisville, KY-IN area (KY portion)
Jefferson County, KY
Bullitt County (partial), KY
Oldham County (partial), KY
MARYLAND...................................... Washington, DC-MD-VA area (MD portion)
Calvert County, MD
Charles County, MD
Frederick County, MD
Montgomery County, MD
Prince Georges County, MD Kent & Queen Anne's nonattainment area
Queen Anne's County, MD
Kent County, MD
MASSACHUSETTS,................................ The Entire State 1 Boston-Lawrence-Worcester (E. MA)
Barnstable County, MA
Bristol County, MA
Dukes County, MA
Essex County, MA
Middlesex County, MA
Nantucket County, MA
Norfolk County, MA
Plymouth County, MA
Suffolk County, MA
Worcester County, MA Springfield (Western MA) nonattainment
areas
Berkshire County, MA
Franklin County, MA
Hampden County, MA
Hampshire County, MA
MISSOURI (Effective Opt-In Date is June 1, St. Louis nonattainment area
1999). St. Louis County
St Louis (city)
Franklin County
Jefferson County
St. Charles County
NEW HAMPSHIRE................................. Boston-Lawrence-Worcester, MA-NH nonattainment area (NH portion)
Hillsborough County, NH
Rockingham County, NH
Merrimack County, NH
Strafford County, NH
NEW JERSEY,................................... The Entire State 1 Allentown-Bethlehem-Easton area (NJ portion)
Warren County, NJ Atlantic City nonattainment area
Atlantic County, NJ
Cape May County, NJ
NEW YORK...................................... Essex nonattainment area
Dutchess County, NY
Essex County (partial), NY
RHODE ISLAND,................................. The Entire State Providence nonattainment area
Bristol County, RI
Kent County, RI
Newport County, RI
Providence County, RI
Washington County, RI
TEXAS......................................... Dallas-Fort Worth nonattainment area
Collin County, TX
Dallas County, TX
Denton County, TX
Tarrant County, TX
VIRGINIA...................................... Washington DC-MD-VA area (VA portion)
Alexandria, VA
Arlington County, VA
Fairfax, VA
Fairfax County, VA
Falls Church, VA
Loudoun County, VA
Manassas, VA
Manassas Park, VA
Prince William County, VA
Stafford County, VA Richmond, VA nonattainment area
Charles City County, VA
Chesterfield County, VA
Colonial Heights, VA
Hanover County, VA
Henrico County, VA
Hopewell, VA
Richmond, VA Norfolk-Virginia Beach-Newport News area
Chesapeake, VA
Hampton, VA
James City County, VA
Newport News, VA
Norfolk, VA
Poquoson, VA
Portsmouth, VA
Suffolk, VA
Virginia Beach, VA
Williamsburg, VA
York County, VA.
``Opt-Out'' Areas**
MAINE......................................... Hancock and Waldo Counties, ME--Hancock County--Waldo County
PENNSYLVANIA.................................. Allentown--Bethlehem--Easton, PA
Carbon County
Lehigh County
Northampton County Altoona, PA
Blair County Erie, PA
Erie County Harrisburg--Lebanon--Carlisle, PA
Cumberland County
Dauphin County
Lebanon County
Perry County Johnstown, PA
Cambria County
Somerset County Lancaster, PA
Lancaster County Pittsburgh--Beaver Valley, PA
Allegheny County
Beaver County
Fayette County
Washington County
Westmoreland County
Armstrong County
Butler County Reading, PA
Berks County Scranton--Wilkes-Barre, PA
Columbia County
Lackawanna County
Luzerne County
Monroe County
Wyoming County York, PA
Adams County
York County Youngstown, OH--Warren, OH--Sharon, PA*
Mercer, PA * Ohio counties have not opted-in.
NEW YORK...................................... Albany--Schenectady--Troy, NY
Albany County
Greene County
Montgomery County
Rensselear County
Saratoga County
Schenectady County
Jefferson County, NY
Buffalo--Niagara Falls, NY
Erie County
Niagara County
A proposed rule to remove the above ``opt-
out'' areas from the requirements of the
reformulated gasoline program was published
June 14, 1995. [On January 1, 1995, a
temporary exemption of the RFG requirements
in these areas went into effect. On July 1,
1995 this stay was extended until the Agency
took final action]. The final rule, published
July 8, 1996 [61 FR 35673], formally removed
these areas from the list of RFG covered
areas and provided States with general opt-
out procedures. The July 8 final rule was
superseded by a final rule published October
20, 1997 [62 FR 54552], revising the opt-out
procedures.
ARIZONA....................................... Phoenix nonattainment area
Maricopa County (partial), AZ
Phoenix opted in the RFG program in 1997;
retail stations were required to supply RFG
by August 4, 1997. In September 1997, the
Governor of Arizona submitted an RFG opt-out
petition for purposes of adopting a more
stringent State RFG program in Phoenix.
EPA approved the opt-out petition which became
effective on June 10, 1998.
MAINE......................................... The following counties in Maine ``opted-out'' of the RFG
program--the effective opt-out date was March 10, 1999: Knox &
Lincoln nonattainment area
Knox County, ME
Lincoln County, ME Lewiston-Auburn nonattainment area
Androscoggin County, ME
Kennebec County, ME Portland nonattainment area
Cumberland County, ME
Sagadahoc County, ME
York County, ME
----------------------------------------------------------------------------------------------------------------
* Reclassification of Sacramento from Serious to Severe was effective June 1, 1995. RFG was required as of June
1, 1996. ``Opt-In'' Areas (Voluntary):
**Note: These ``Opt-Out'' areas withdrew from the Federal RFG program before it went into effect on January 1,
1995. See below for details.
------
APPENDIX III
Office of the Governor,
Sacramento, CA, April 12, 1999.
The Honorable Carol M. Browner, Administrator,
Environmental Protection Agency,
401 M Street SW,
Washington, DC 20460.
Dear Ms. Browner: I am writing to request that the U.S. Environmental
Protection Agency (EPA) take prompt action to waive Federal
requirements that all gasoline sold in the Sacramento region and most
of Southern California contain a minimum oxygen content pursuant to the
provisions of the 1990 amendments to the Clean Air Act.
As I am sure you are aware, on March 26, 1999, I concluded that the
use of the oxygenate methyl tertiary-butyl ether (MTBE) in California
gasoline poses a significant risk to California's environment, and,
accordingly, directed that MTBE be phased out of California gasoline as
soon as possible. A copy of my Executive Order D-5-99, which identifies
the actions we will take to remove MTBE from gasoline, is enclosed.
One of the essential elements for a rapid phase down, and eventual
phase-out of MTBE in California, is action by the U.S. EPA to eliminate
the current mandate that California gasoline subject to the Federal
reformulated gasoline (RFG) program--about 70 percent of all gasoline
in the State--must contain at least 2.0 percent by weight oxygen year-
round. Your action to provide this relief is needed for several
compelling reasons.
Many California refineries have the capability to produce
significant amounts of gasoline that provides all of the required
emission reductions without using MTBE or any other oxygenate. The only
reason such MTBE-free gasoline is not being made available today is
U.S. EPA's enforcement of the 2.0 percent oxygen requirement. Your
approval of our requested action would enable several refiners to
greatly reduce their use of MTBE in the very near future.
In terms of the eventual phase-out of MTBE, your action is equally
important. Under the current U.S. EPA requirements, once MTBE is phased
out, the 70 percent of California gasoline that is sold in areas
subject to the Federal RFG program would need to be oxygenated with
ethanol. Relying on ethanol exclusively for this volume of gasoline,
approximately 10 billion gallons per year, would increase the time
needed to complete our phase-out of MTBE, and result in higher fuel
costs to California consumers. Your action to allow the required
emissions reductions to be achieved without using a minimum oxygen
content in every gallon of fuel would allow us to reduce risks of
future water contamination sooner, meet California's growing demand for
fuel and allow flexibility to make more economical blends of gasoline.
Finally, time is of the essence. California refineries must begin a
time consuming and expensive retooling process to eliminate their
current reliance on MTBE. In order to complete the phase-out of MTBE by
December 31, 2002 or earlier, the refiners must start immediately with
the planning and design phases of the necessary refinery and
distribution system modifications. It is clear that the approach taken
by industry will differ substantially depending on whether, upon
completion of the modifications, refiners will be subject to a
mandatory Federal RFG minimum oxygen requirement. Without the mandatory
oxygen requirement, the industry can design in greater flexibility and
less costly processes. But in order to make informed planning and
design decisions, the refiner must know in 1999--not just in 2001 or
2002 or 2003--that they will have flexibility with respect to oxygen
requirements.
Because California has historically experienced the worst air
quality in the nation and has long been engaged in pioneering efforts
to reduce the contribution of motor vehicles to air pollution, the
State has been granted unique authority by the Clean Air Act and the
EPA to administer a State fuels program to reduce motor vehicle
emissions. California is the only area in the country where the Federal
RFG requirements apply in conjunction with comprehensive and
demonstrably more effective State standards for cleaner burning
gasoline. The California regulations provide complete assurances that a
waiver of the Federal RFG year-round minimum oxygen content requirement
will not result in a loss of any air quality.
Our regulations accomplish the needed emissions reductions without
requiring a minimum level of oxygen. Numerous assessments by the auto
and fuels industry, government agencies, and most recently scientists
at the University of California confirm that a minimum oxygen content
is not essential to making RFG that meets all emission reduction
requirements. Therefore, application of the current minimum oxygen
content requirement serves absolutely no purpose in California relative
to its intended air quality rationale--to reduce ozone precursors and
toxic emissions from vehicles.
In contrast, the minimum oxygen content requirement is having one
clear effect on another area of the environment. It is increasing the
risk that leaking tanks and boat engine discharges pose to water
quality. As the University of California study of MTBE indicated,
California's ground and surface water resources are seriously at risk
because of discharges of gasoline that has been oxygenated with MTBE.
Over 60 percent of the reservoirs tested have detectable levels of
MTBE, and many public drinking water sources in areas like Santa
Monica, Santa Clara, Sacramento and South Lake Tahoe have been
contaminated and shut down because of MTBE contamination. This is what
led me to direct the appropriate State regulatory agencies to devise
and carry out a plan to complete the expeditious phase-out of MTBE from
California gasoline.
However, in order for California to achieve this essential
protection of water quality quickly and at an affordable cost, we must
have flexibility relative to the minimum oxygen content currently
enforced by U.S. EPA. We need this action quickly, and I am calling on
you to use your broad authority to protect both the air and water
environment by allowing California's reformulated gasoline rules, which
provide all of the emission benefits of the Federal RFG, to be applied
in lieu of the counterproductive Federal minimum oxygen content
requirement.
Your prompt approval of this request will help us limit any further
contamination of drinking water while we transition away from MTBE. It
will not risk any adverse impact on air quality due to California's
more effective State gasoline regulations. It will enable us to devise
the most expeditious and cost-effective solution to the MTBE problem in
California. One that will protect our water and keep us on the road to
clean air.
Thank you for your consideration of this request. Enclosed is a
more detailed discussion of this issue and materials that support our
request. As always we are ready to work with you to ensure that
California and the EPA are working together to ensure environmental
protection.
Sincerely,
Gray Davis.
------
APPENDIX IV
U.S. Environmental Protection Agency,
Washington, DC 20460, August 21, 2000.
The Honorable Thomas J. Bliley, Chairman,
Committee on Commerce,
U.S. House of Representatives,
Washington, DC 20515-6115
Dear Mr. Chairman: I am writing in response to your inquiry of July 31,
2000, to Administrator Carol Browner regarding various issues related
to the Environmental Protection Agency's (EPA's) consideration of
California's request for waiver of the reformulated gasoline (RFG)
program's oxygen content requirement. This letter and the enclosures
provide information responsive to Questions 2 and 3 of your inquiry and
follows our initial response of August 3, 2000. Other relevant
documents will be provided in a subsequent letter according to the
schedule agreed upon by committee and EPA staff.
In response to Question 2 of your July 31, 2000 inquiry, we are
providing all records relating to work performed by the Southwest
Research Institute (SwRI) that relates to our consideration of
California's request for a waiver from the Federal oxygen requirement
in RFG. Enclosure 1 contains SwRI's submittals to EPA, which include
draft versions of its assessment of California's predictive model and
of alternative models, faxed submissions (data plots, data points for
regression models) and e-mails of communication between SwRI and EPA.
All records provided in this response are those created or that we
received after March 1, 200() since records prior to this date were
included in our March 10, 2000 response to the committee.
In Question 3 you asked about the status of the various technical
issues associated with the waiver decision. This is discussed below.
The statute requires that, in order for EPA to grant a waiver from
the oxygen requirement, EPA must determine that the requirement would
prevent or interfere with an area attaining a National Ambient Air
Quality Standard (NAAQS). California's request is the first and only
request that EPA has received under this waiver provision. In order to
make the determination of whether to grant a waiver, many complex legal
and technical questions must be addressed.
California claims that requiring the use of oxygen will increase
emissions of oxides of nitrogen (NOx) compared to not requiring its use
and thereby interfere with California's ability to meet the NAAQS for
ozone (and for particulate matter through transformation of NOx). In
order to evaluate such a claim, several issues must be evaluated.
EPA must first evaluate the effect of fuel oxygen on any emissions
that may affect ozone formation. These emissions include not only NOx
but also emissions of volatile organic compounds (VOC) and carbon
monoxide (CO). Although the NOx oxygen relationship is crucial in
making any decision about an oxygen waiver, other information is just
as crucial to a decision on the California request. This is because
oxygen content can impact the level of VOC and CO emissions in both on-
road and off-road vehicles which, in turn, can affect ozone formation.
Furthermore, the use of oxygen influences other properties of gasoline
and these other property changes also have critical emissions effects.
Finally, the use or non-use of oxygenates in gasoline can result in
other effects such as commingling and permeation which are discussed
below.
Another critical issue concerns an assessment of the formulation of
fuels California refiners would produce should a waiver be granted.
This is crucial since if both the gasoline made with oxygen and without
oxygen in California precisely meet California's Phase 3 standards,
then no NOx increase or decrease would be experienced regardless of the
existence of an oxygen requirement. California, however, presents
evidence and arguments to show that, if a waiver were granted, the non-
oxygenated California RFG (CaRFG) would be produced having properties
that result in NOx overcompliance. In order to evaluate if NOx
overcompliance would actually occur, refinery modeling must be
performed to estimate the properties of CA gasoline that refiners would
choose to make in meeting Phase 3 standards with and without a waiver
of the oxygen requirement. This type of modeling, which attempts to
optimize California gasoline production, is complex and includes the
use of many assumptions, such as the cost of various gasoline
components in future years. In short, this type of analysis attempts to
predict how California gasoline producers will formulate their gasoline
in the future under different regulatory scenarios. Since it is
infeasible to model each gasoline producer separately, this analysis
estimates a set of properties representative of the gasoline pool.
Other critical issues include the effect of fuel property changes
on emissions of off-road engines, the potential that ethanol-containing
fuels may cause increased evaporative emissions due to permeation
through synthetic vehicle fuel system components, and the potential
that a ``mixed market'' of ethanol-containing fuels and non-oxygenated
fuels may produce higher evaporative emissions as a result of
commingling of these two types of fuels in vehicle fuel tanks. For each
of these issues (commingling, permeation, and fuel property effects on
off-road emissions), limited data exist for a thorough evaluation.
(Enclosure 2 is a summary of the technical issues that EPA has been
studying which includes answers to your questions regarding the status
of our evaluation.)
Finally, once we have evaluated the various emissions effects
produced by reformulation of California fuels and by the other factors
mentioned above, EPA must then evaluate whether these emission changes
will prevent or interfere with attainment of the ozone NAAQS.
Although the initial California request for a waiver was received
in April 1999, the State did not provide technical justification for
the petition at that time. In July 1999 an initial technical analysis
was received from California. Additionally, as you pointed out in your
letter, EPA's Blue Ribbon Panel (BRP) on oxygenates did not complete
its analysis until late July 1999 and the report was not published
until September. We continue to believe that the conclusions of the
Blue Ribbon Panel report were crucial in determining the appropriate
policy objectives the Agency should take into consideration when
considering oxygenate use.
Based upon California's July 1999 submission, EPA responded to
California on August 6, 1999, asking for clarification on several
issues. Between August and December 1999, EPA and the California Air
Resources Board (CARB) staff conducted two telephone conference calls
in which CARB presented recalculations of emissions effects.
In December 1999 two important developments occurred which
significantly affected the course of EPA's work to evaluate
California's request. First, on December 9, MathPro, Inc., completed an
analysis for the California Energy Commission which presented
information regarding how refineries in California might reformulate
their gasolines in order to meet CARB fuel standards if there were no
Federal oxygen requirement. Almost simultaneously, CARB adopted
California RFG3 standards and changes to its predictive model. Shortly
thereafter, on December 24, 1999, California submitted to EPA a major
new analysis and technical justification for their request. This new
submission precipitated additional EPA questions about the analysis and
on January 20, 2000, EPA submitted questions to CARB. Four EPA staffers
and an EPA contractor from Southwest Research Institute traveled to
California and met with CARB staff to discuss the new analysis on
January 24 and 25, 2000. Finally, on February 7, 2000, CARB submitted
additional information to EPA based upon the January discussions. Upon
an initial but non-comprehensive review of the February submission, EPA
believed the State had submitted sufficient information for EPA to
evaluate its waiver request.
The developments between December 1999 and February 2000, were
critical in defining the parameters associated with California's
request and, therefore, the major part of EPA's analysis and evaluation
has occurred since February. During that same timeframe, EPA began the
necessary administrative procedures to contract with Southwest Research
Institute to help EPA evaluate the statistical procedures and
assumptions used by California to produce its predictive model, as well
as to conduct an independent evaluation of the effect of fuel
properties, including oxygen content, on NOx and VOC emissions. (This
firm conducted much of the analysis associated with EPA's original
complex model in the early 1990's.) This contractor analysis continues
today.
In late spring of this year, EPA staff began to assess whether
further analyses needed to be performed. This included consideration of
further analyses on one of the crucial questions at issue which is the
expected level of oxygenate use should a waiver be granted. This is
because the use or non-use of oxygenates in a portion of California
gasoline would affect all of the properties and associated emissions of
gasoline in the California marketplace under a waiver of the oxygen
requirement. Therefore, the question of comparing emissions with and
without an oxygen requirement would hinge, in part, on the expected use
of oxygen should a waiver be granted.
Among other things, EPA was utilizing the December MathPro study to
help estimate the properties of California gasoline with and without a
waiver in order to estimate emissions levels. Staff discussions with
various experts have called into question some of the assumptions and
conclusions of the MathPro study based upon newer information now
available. Specifically, in the December 1999 report, MathPro estimated
that approximately 60 percent of California summertime gasoline would
be oxygenated with ethanol even if a waiver were granted. Furthermore,
MathPro estimated that the gasoline that is oxygenated would contain
oxygen at a level of 2.7 percent by weight. Since the study was
conducted, California finalized its new Phase 3 standards and
predictive model. Directionally, at least, the newly finalized model
might lead refiners to use less oxygen should they have the choice.
Additionally, in continuing discussions in May of this year, CARB staff
said refiner reports indicated that less than 60 percent of the
California market would be oxygenated should a waiver be granted. This
called into question the MathPro analysis. Later, California staff also
indicated that pipeline product specification development in California
show that gasoline shippers believe that oxygenates are likely to be
used at a 2.0 percent oxygen level and not the 2.7 percent originally
predicted by MathPro. These discussions concerning the MathPro analysis
also called into question the accuracy of some of the technical aspects
of the modeling contained in the original December MathPro report. In
early July, EPA began exploring contractual arrangements to have
MathPro re-examine its study. EPA believes that further analyses of the
original MathPro refinery modeling is central to deciding California's
request, and important technical issues remain unresolved. We are
taking steps to pursue this analysis to ensure that EPA's decision on
the complicated issues underlying California's request is based on a
sound, robust analysis.
In addition, EPA has received comments from other stakeholders on
many of these issues. The Renewable Fuels Association and the National
Corn Growers Association have sent letters to EPA expressing
substantive technical and legal views on California's waiver request.
For example, these groups state that, if the waiver is granted, ethanol
blending in California would not be widespread. They also question
other results of the MathPro analysis and, in fact, present alternative
refinery modeling results. As part of EPA's independent analysis of the
waiver request, the Agency takes into account the comments it receives
from other stakeholders.
Once the analyses described above have been completed and we have
evaluated the results, each piece must be integrated into the total
picture of how these fuel changes will affect California's ability to
meet the ozone and particulate NAAQS. We certainly understand the
committee's interest in knowing when EPA will complete its evaluation
and release a proposed decision on California's waiver request. As we
have explained in previous correspondence to you and to other
interested parties, the analysis and evaluation of these issues has
proven to be far more complex than we had originally expected. The need
to re-examine the MathPro refinery modeling was unforeseen, but is
critical to our deliberations. We currently estimate that this work
will take at least 10 to 12 weeks from this date to complete. At that
point in time we would expect the other analyses described herein to
also be complete. Since all of the work products are inter-related,
EPA's technical and legal staff will then begin to integrate the
various results into a complete and comprehensive analysis which we
believe will allow us to go forward to propose a decision on the
California waiver request. I can assure you this work will be completed
as expeditiously as possible once all the individual technical work
products are available to us.
In summary, the technical analyses involved in consideration of
California's request have been continuing since the end of last year
when the actual parameters associated with California's predictive
model and Phase 3 standards were finalized and the initial MathPro
report was available. EPA has vigorously pursued answers to the
questions associated with the request as is evidenced by the contractor
analyses and the internal EPA analyses that have been performed. The
question of interference with the NAAQS is an extremely complex issue.
We are therefore making every effort to assure that our analysis is
founded squarely on the best science and modeling available.
Please note that the documents that we have provided in the
enclosure to this letter are pre-decisional and deliberative in nature.
In providing you with these records, we are not waiving the Agency's
ability to invoke exemption 5 under the Freedom of Information Act
(FOIA) for deliberative or attorney-client privileged documents or the
work product/attorney client privileges in general. We therefore
request that you preserve the confidentiality of these documents by
refraining from providing copies of those records, or from otherwise
communicating the contents of those records, to persons other than
those with a need to know as part of this Congressional oversight
review.
I appreciate the opportunity to be of service, and trust that this
information will help to clarify the current status of the Agency's
deliberations.
Sincerely,
Robert Perciasepe, Assistant Administrator.
Enclosure 1: Documents responsive to Question 2 of July 31, 2000 letter
from the Honorable Tom Bliley to Administrator Carol Browner [Note:
Enclosure 1 is not included in this report].
Enclosure 2: Status of Technical Issues.
______
Enclosure 2: Status of Technical Issues
OXYGENATE/NOX RELATIONSHIP
Specific technical information EPA is reviewing or producing for
review:
We are examining the relationship of NOx emissions to oxygen
content in reformulated gasoline. This requires that we consider the
effect of changes of other fuel properties, as well as fuel oxygen
content, on NOx emissions, since use of oxygen affects the other
aspects of fuel composition. This involves use of emissions test and
fuel property data from a number of separate studies designed to
examine the effects of fuel property changes on emissions. California
has combined these data into a single data base in order to develop a
statistical model, the predictive model, which relates fuel property
changes to emission changes. California has updated the predictive
model for use with its phase 3 reformulated gasoline (CaRFG3).
California has used this model to support its claim that use of oxygen
will increase NOx emissions. We are reviewing development of the
updated predictive model, and we are independently developing
alternative models relating NOx emissions to fuel properties.
When the EPA or contract personnel began working to produce or
review such technical information:
EPA began work on this in January, 2000. EPA's contractor,
Southwest Research Institute (SwRI), began working on this task in
February, 2000.
Specific issues being reviewed:
Prior to development of the alternative NOx models, it was
necessary for EPA to make a number of technical decisions. These
decisions included evaluation of available data, characterization and
treatment of high emitters, choice of statistical regression technique
and choice of distillation parameters to include in the models. EPA
must review its model development decisions and ensure that they are
documented. EPA's model development process yielded a number of
possible candidate models. EPA must review these alternative models and
select the model or models which it believes best characterizes the
oxygen/NOx relationship.
OXYGENATE/VOC RELATIONSHIP
Specific technical information EPA is reviewing or producing for
review:
EPA is examining the relationship of exhaust VOC emissions to the
oxygen content in reformulated gasoline. EPA's basic approach is
similar to that described above to evaluate the oxygenate/NOx
relationship. This approach involves use of emissions data to build
models that relate exhaust hydrocarbon emissions to oxygen content and
the other fuel properties.
When the EPA or contract personnel began working to produce or
review such technical information:
EPA's contractor, SwRI, began working on this task in late April,
2000.
Specific issues being reviewed:
The same issues applicable to EPA's evaluation of the oxygen/NOx
relationship are applicable here. The normal emitter/high emitter issue
may be more complicated with respect to the VOC model than the NOx
model.
COMMINGLING
Specific technical information EPA is reviewing or producing for
review:
We are examining the potential increases in VOC emissions that
could result from the commingling of non-oxygenated fuels with ethanol-
oxygenated fuels in vehicle gas tanks.
When the EPA or contract personnel began working to produce or
review such technical information:
EPA began work on this in February, 2000.
Specific issues being reviewed:
The degree of commingling which will occur under a waiver is
influenced by consumer brand and grade loyalty, the market shares for
ethanol and non-oxygenated gasoline within a given area, and other
factors relating to consumer refueling behavior and fuel oxygenate
content. EPA is reviewing estimates of the commingling effect which
various assumptions and models provided by CARB and other parties.
PERMEATION
Specific technical information EPA is reviewing or producing for
review:
We are examining CARB's data and other data available on additional
evaporative VOC emissions from permeation through soft rubber/plastic
fuel system components, due to ethanol-blended gasoline.
When the EPA or contract personnel began working to produce or
review such technical information:
EPA began work on this in February, 2000.
Specific issues being reviewed:
We are reviewing estimates of additional VOC emissions associated
with permeation. We are considering whether the reduction of VOC
emissions (associated with eliminating permeation emissions through
displacement of ethanol RFG with non-oxygenated fuels) offsets the
increase in CO resulting from reduction of oxygen in RFG. We will
review any new data or analyses which may better quantify the
permeation effect.
REFINERY MODELING
Specific technical information EPA is reviewing or producing for
review:
We are examining refinery modeling conducted by MathPro for
Chevron/Tosco and for the California Energy Commission that predicts
the penetration of non-oxygenated fuels if a waiver were to be granted,
and also identifies the fuel parameters in non-oxygenated RFG. We are
working to initiate new work to clarify MathPro's original analyses.
When the EPA or contract personnel began working to produce or
review such technical information:
EPA began work on this in February, 2000.
Specific issues being reviewed:
Degree of penetration of non-oxygenated fuels and what the fuel
parameters are for non-oxygenated RFG with respect to varying degrees
of penetration.
OFF-ROAD EMISSIONS
Specific technical information EPA is reviewing or producing for
review:
We used EPA's report NR-003, ``Exhaust Emission Effects of Fuel
Sulfur and Oxygen on Gasoline Nonroad Engines'' which summarized data
from several emission testing studies of fuel oxygen effects on nonroad
engine emissions. We are using information in this report to assess the
specific mix of off-road engines and emissions inventory found in
California.
When the EPA or contract personnel began working to produce or
review such technical information:
EPA began work on this in February, 2000.
Specific issues being reviewed:
Effect of oxygen on emissions of off-road vehicles in California.
Integration of Emissions Analyses and Evaluation of NAAQS
Interference.
Specific technical information EPA is reviewing or producing for
review:
The other analyses and work products described herein and the
California SIP.
When the EPA or contract personnel began working to produce or
review such technical information:
EPA began work on this in March, 2000.
Specific issues being reviewed:
Net effect on emissions of the factors covered in the other
analyses and the impact of these emissions on California's ability to
attain the ozone and PM NAAQS.
------
APPENDIX V
Summary of State Drinking Water and Groundwater Standards For MTBE
----------------------------------------------------------------------------------------------------------------
State Groundwater (ppb) Type of Standard or Guideline
----------------------------------------------------------------------------------------------------------------
Alabama............................... 20....................... Guideline or Action Level
Arizona............................... 35....................... Guideline or Action Level
California............................ 13/5..................... Public Health Goal/ Enforceable Aesthetic
Std.
Connecticut........................... 70....................... Guideline or Action Level
Florida............................... 50/500................... Primary Drinking Waster Std./Non-Potable
Water Std.
Hawaii................................ 20....................... Groundwater Cleanup Level for Drinking Water
Idaho................................. 52/261/511............... Pathway Dependent Action Level
Illinois.............................. 70....................... Guideline or Action Level
Kansas................................ 20 to 40................. Health Advisory
Louisiana............................. 18....................... Guideline or Action Level (10% of MCL)
Maine................................. 35/25.................... Drinking Water Std./Action Level
Maryland.............................. 10/50.................... Guideline or Action Level/Drinking Water Std.
Massachusetts......................... 70/50,000................ Primary Drinking Water Std./Vapors in
Buildings
Michigan.............................. 240/20 to 40............. Enforceable Guideline/Aesthetic Guideline
Missouri.............................. 400/40................... Guideline for Non-potable and Potable Water
Montana............................... 30....................... Guideline or Action Level
New Hampshire......................... 70/15/13................. Current Primary Drinking Water Std./Action
Level Prop. Primary Drinking Water Std. &
Groundwater Cleanup Level
New Jersey............................ 70....................... Primary Drinking Water Std.
New Mexico............................ 100...................... Interim Action Level
Nevada................................ 20/200................... Interim Action Level for Nearby Receptors/
Incomplete Exposure Pathway
New York.............................. 50/10.................... Primary Drinking Water Std./Groundwater
Cleanup Std.
North Carolina........................ 200...................... Guideline or Action Level
Ohio.................................. 40....................... Action Level
Oklahoma.............................. 20....................... Action Level
Oregon................................ 20 to 40................. Revised Guideline
Pennsylvania.......................... 20 to 40................. Health Advisory
Rhode Island.......................... 40/500................... Primary Drinking Water Std./Non-potable Water
South Carolina........................ 20 to 40................. Interim MCLG
Texas................................. 15....................... Guideline or Action Level
Utah.................................. 200/70................... Groundwater Cleanup Level/Drinking Water
Cleanup Level
Vermont............................... 40/1..................... Primary Drinking Water Std./Action Level
Washington............................ 20....................... Guideline or Action Level
West Virginia......................... 20 to 40................. Health Advisory
Wisconsin............................. 60/12.................... Groundwater Enforcement Std./Action Level
Wyoming............................... 200...................... Primary Drinking Water Std.
----------------------------------------------------------------------------------------------------------------
Source: New Hampshire Department of Environmental Services, January 20, 2000
------
APPENDIX VI
Tests on Oxygenated Fuels Containing Oxygenates Other than MTBE
Source: U.S. Environmental Protection Agency
September 2000
Ethanol (EtOH)
Subchronic Inhalation Toxicity Study, with Specific Health
Effect Assessments.
Fertility/Teratology Assessment, which includes animal
studies designed to provide information on potential health
hazards to the fetus arising from the mothers repeated
inhalation exposure to vehicle/engine emissions before and
during her pregnancy.
In vivo Micronucleus Assay, which is an in vivo cytogenetic
test which uses erythrocytes in the bone marrow of animals to
detect chemical damage to the chromosomes or mitotic apparatus
of mammalian cells.
In vivo Sister Chromatid Exchange Assay to detect the
ability of a chemical to enhance the exchange of DNA between
two sister chromatids of a duplicating chromosome.
Neuropathology Assessment including histopathological and
biochemical techniques designed to develop data in animals on
morphologic changes in the nervous system associated with
repeated inhalation exposures.
Glial Fibrillary Acidic Protein Assay to determine
chemically induced injury to the brain and central nervous
system.
Histopathology Assessment including preparation of the
animals targeted for pathologic examination of the lungs shall
include inflation of the lungs with fixative which will permit
later examination of the lung tissues by electron microscopy,
if followup to light microscopy is indicated. In addition,
respiratory tract histopathology shall be conducted.
Immunotoxicity Screening describing the performance and
analysis of the required primary antibody response (IgM) to
sheep red blood cell antigen by either the Jerne and Nordin
splenic antibody plaque forming cell assay or by an enzyme-
linked immunosorbent assay (ELISA).
Inhalation Pharmacokinetic Studies which develop and
validate a physiologically based pharmacokinetic (PBPK) model
to quantitatively describe test substance disposition (uptake,
distribution, metabolism and elimination).
Ethyl tertiary butyl ether (ETBE)
Subchronic Inhalation Toxicity Study, with Specific Health
Effect Assessments.
Fertility/Teratology Assessment.
In vivo Micronucleus Assay.
In vivo Sister Chromatid Exchange Assay.
Neuropathology Assessment.
Glial Fibrillary Acidic Protein Assay.
Histopathology Assessment.
Immunotoxicity Screening.
Inhalation Pharmacokinetic Studies.
Tertiary amyl methyl ether (TAME)
Subchronic Inhalation Toxicity Study, with Specific Health
Effect Assessments.
Fertility/Teratology Assessment.
In vivo Micronucleus Assay.
In vivo Sister Chromatid Exchange Assay.
Neuropathology Assessment.
Glial Fibrillary Acidic Protein Assay.
Histopathology Assessment.
Immunotoxicity Screening.
Inhalation Pharmacokinetic Studies.
Di-isopropyl ether (DIPE)
Subchronic Inhalation Toxicity Study, with Specific Health
Effect Assessments.
Fertility/Teratology Assessment.
In vivo Micronucleus Assay.
In vivo Sister Chromatid Exchange Assay.
Neuropathology Assessment.
Glial Fibrillary Acidic Protein Assay.
Histopathology Assessment.
Immunotoxicity Screening.
Inhalation Pharmacokinetic Studies.
Tertiary butyl alcohol (TBA)
Subchronic Inhalation Toxicity Study, with Specific Health
Effect Assessments.
Fertility/Teratology Assessment.
In vivo Micronucleus Assay.
In vivo Sister Chromatid Exchange Assay.
Neuropathology Assessment.
Glial Fibrillary Acidic Protein Assay.
Histopathology Assessment.
Immunotoxicity Screening.
Inhalation Pharmacokinetic Studies.
Tests on Non-Oxygenated Gasoline and MTBE-Gasoline
Subchronic Inhalation Toxicity Study, with Specific Health
Effect Assessments.
Two-Generation Reproductive Study which includes animal
studies designed to provide information on potential health
hazards to the fetus arising from the mothers repeated
inhalation exposure to vehicle/engine emissions before and
during her pregnancy. This study will include neuropathology
and Glial Fibrillary Acidic Protein Assay assessments conducted
on the first generation of pups no sooner than 21 days after
birth and no later than 28 days.
In vivo Micronucleus Assay which is an in vivo cytogenetic
test which uses erythrocytes in the bone marrow of animals to
detect chemical damage to the chromosomes or mitotic apparatus
of mammalian cells.
In vivo Sister Chromatid Exchange Assay to detect the
ability of a chemical to enhance the exchange of DNA between
two sister chromatids of a duplicating chromosome.
Neuropathology Assessment including histopathological and
biochemical techniques designed to develop data in animals on
morphologic changes in the nervous system associated with
repeated inhalation exposures.
Glial Fibrillary Acidic Protein Assay to determine
chemically induced injury to the brain and central nervous
system.
Histopathology Assessment including preparation of the
animals targeted for pathologic examination of the lungs shall
include inflation of the lungs with fixative which will permit
later examination of the lung tissues by electron microscopy,
if followup to light microscopy is indicated. In addition,
respiratory tract histopathology shall be conducted.
Immunotoxicity Screening describing the performance and
analysis of the required primary antibody response (IgM) to
sheep red blood cell antigen by either the Jerne and Nordin
splenic antibody plaque forming cell assay or by an enzyme-
linked immunosorbent assay (ELISA).
Inhalation Pharmacokinetic Studies which develop and
validate a physiologically based pharmacokinetic (PBPK) model
to quantitatively describe test substance disposition (uptake,
distribution, metabolism and elimination).
Two-species Developmental Study which is a developmental
study to determine chemically induced changes in development.
Two-year cancer bioassay to determine the chemically
induced development of tumors.
Exposure Testing
Quantify personal exposures to motor vehicle gasoline and
MTBE-oxyfuel emissions (both evaporative and combustion-
related) in microenvironments which represent the upper end of
the frequency distribution of such exposures. This would
include determination of the quantitative relationship between
the personal exposures measured in the selected
microenvironments, fixed site measurements in these
microenvironments, and available ambient emission measurements;
determination of how the high-end personal exposures (i.e.,
exposures approaching the 99th percentile), differ in cities
and seasons of the year in which oxyfuel is used (MTBE-
containing reformulated gasoline (RFG) or wintertime oxygenated
gasoline) as compared with cities and seasons in which oxyfuels
are typically not used; determination of the relative
contributions of fuel combustion vs. evaporation as the source
of personal exposures to gasoline and oxyfuel emissions and the
study would provide sufficient information to serve as a
baseline for extrapolation to other sites and, if possible,
other oxygenated fuels.
Animal Testing
--------------------------------------------------------------------------------------------------------------------------------------------------------
Draft Report Due Final Report Due
Test Group Fuel Mixture Toxicology Studies Studies Initiation to EPA Comments Due to RG to EPA
--------------------------------------------------------------------------------------------------------------------------------------------------------
Group A........................ Baseline Gasoline-- Study Set 1: 0 months.......... 26 months......... 28 months......... 30 months
Gasoline MTBE. Subchronic
w/ Neurotoxicity,
Immunotoxicity,
and In Vivo/In
Vitro
Genotoxicity*.
Developmen
tal Toxicity (Two
Species).
----------------------
Study Set 2: 12 months......... 36 months......... 38 months......... 40 months
Two
Generation
Reproductive
Toxicity.
----------------------
Study Set 3: 12 months......... 52 months......... 54 months......... 56 months
Oncogenici
ty (One Species).
----------------------
Group B........................ Gasoline Ethanol.. Study Set 4: 6 months.......... 32 months......... 34 months......... 36 months
Gasoline TAME..... Subchronic
Gasoline ETBE..... w/Neurotoxicity,
Immunotoxicity,
and In Vivo/In
Vitro
Genotoxicity*.
Developmen
tal Toxicity (One
Species).
----------------------
Study Set 5: 18 months......... 38 months......... 40 months......... 42 months
One
Generation
Reproductive
Toxicity.
----------------------
Group C........................ Gasoline DIPE..... Study Set 6: 18 months......... 38 months......... 40 months......... 42 months
Gasoline TBA...... Subchronic
w/Neurotoxicity,
Immunotoxicity,
and In Vivo/In
Vitro
Genotoxicity*.
Developmen
tal Toxicity (One
Species).
----------------------
Study Set 7: 30 months......... 50 months......... 52 months......... 54 months
One
Generation
Reproductive
Toxicity.
----------------------
Group D........................ EtOH, TAME, ETBE, Study Set 8: 6 months.......... 26 months......... 28 months......... 30 months
DIPE, TBA. Neat
Oxygenate PK
(where applicable).
--------------------------------------------------------------------------------------------------------------------------------------------------------
*To include the in vivo micronucleus assay and the in vivo sister chromatid exchange assay, as well as the in vitro salmonella test specified in 40 CFR
para. 79.68.
------
Exposure Studies
----------------------------------------------------------------------------------------------------------------
Exposure Assessment Task Original Schedule Revised Schedule
----------------------------------------------------------------------------------------------------------------
Incorporate going monitoring studies................. not considered.............. 6 months
API submits draft peer-reviewed protocol including 3 months.................... 12 months
individual peer review comments and disposition of
comments.
EPA provides comments on draft protocol to API....... 5 months.................... 14 months
API submits revised draft protocol to EPA............ 7 months.................... 16 months
EPA approves/disapproves revised draft protocol...... 9 months.................... 18 months
API submits draft final report for review by EPA 24 months................... 42 months
including individual peer review comments and
disposition of comments.
EPA provides comments on draft final report.......... 26 months................... 44 months
API submits final report to EPA on results of testing 28 months................... 48 months
----------------------------------------------------------------------------------------------------------------
------
APPENDIX VII
Analysis of Policy Scenarios for Reducing or Eliminating MTBE
June 2000
Executive Summary
In March, the Administration outlined a legislative
framework for protecting the nation's drinking water from MTBE
(Methyl Tertiary-Butyl Ether) contamination, that would also
preserve clean air benefits and promote greater production and
use of renewable fuels. Since then, several Members of Congress
have requested that the Administration provide additional
analysis to further inform the legislative process.
The primary purpose of this analysis is to examine the
economic consequences of either reducing or eliminating MTBE,
while maintaining air quality and increasing the use of
renewable fuels. It is our conclusion that legislation, along
the lines of the Administration's principles, can address the
MTBE problem in a cost-effective manner while providing
additional benefits.
Rationale for Action: The Clean Air Act Reformulated
Gasoline (RFG) program has delivered significant benefits to
the nation's air quality. However, MTBE--the primary oxygenate
used in RFG--poses risks to the nation's drinking water.
Consistent with the advice of the Federal Blue Ribbon Panel on
Oxygenates in Gasoline, the Administration has advocated the
significant reduction or phase-out of MTBE. Legislation is the
fastest and best way to achieve this goal. If Congress fails to
enact Federal legislation, the costs could be significant as
States continue to ban MTBE (as California and New York have
already done) and gasoline refiners work to meet the existing
RFG program without the flexibility provided in the
Administration's framework.
Balanced Approach: A balanced legislative approach must not
only reduce or eliminate MTBE, but must also maintain air
quality benefits and replace the existing oxygenate requirement
in the Clean Air Act with a renewable fuels standard. Such a
standard will stimulate the biomass ethanol industry and permit
annual and geographic averaging which allows refineries the
flexibility to seek out low-cost approaches to produce fuel,
something that unilateral State action would not achieve.
Indeed, a renewable fuels standard that would result in the
same volume of ethanol consumed nationwide as maintaining the
current oxygenate mandate would have lower costs to refiners
and consumers than retaining the oxygenate requirement.
We modeled the effect of reducing or eliminating the use of
MTBE, repealing the oxygenate requirement, and establishing a
renewable fuels standard. The model estimated that maintaining
air quality benefits and totally eliminating MTBE would cost
about 3 cents per gallon while a 3 percent cap on the use of
MTBE (which would achieve significant improvements in water
quality) would cost about 2 cents per gallon. Eliminating MTBE
or reducing to a 3 percent cap--with a repeal of the oxygenate
requirement--would increase ethanol consumption to a level
roughly comparable to the effect of a 1.7 percent renewable
fuel standard. The cost of a 2 percent renewable fuels standard
is estimated at about 2 cents per gallon in 2005. Maintaining
toxic emissions benefits would have a modest impact on
production costs. In 2005, legislation along these lines would
reduce receipts into the Highway Trust Fund by about $600
million to $900 million per year, depending on the amount of
ethanol consumed.
The actual costs in 2005 of this approach could be lower
for several reasons. For example, the opportunities for
refiners to reuse existing MTBE equipment could reduce capital
costs more than was assumed in our analysis. Further, if States
follow California and New York and ban MTBE while the oxygenate
mandate remains in place, the cost of no action significantly
rises, which would reduce the incremental costs of a balanced
approach. Finally, we anticipate that costs would continue to
fall after 2005 as additional technological breakthroughs
further increase the efficiency of producing renewable fuels.
In addition, if the ethanol tax incentive expires in 2007, as
scheduled, the impact on the highway trust fund would be
significantly diminished.
Conclusion: We must take steps to protect America's
drinking water supplies from further MTBE contamination and
legislation is the fastest and best way to achieve this.
Congress should adopt legislation consistent with the
Administration's principles, which provide for addressing the
MTBE problem while maintaining air quality gains and promoting
growth in renewable fuels. Taken as a package, this approach
represents a responsible and effective approach to addressing
this serious problem.
I. The Reformulated Gasoline Program
A. Origin of the Reformulated Gasoline Program
To promote cleaner motor vehicles and cleaner fuels, the
1990 Clean Air Act Amendments established the Federal
reformulated gasoline (RFG) program. In 1995, this program was
introduced to the market cleaner fuels meeting more stringent
emission performance requirements. The 1990 Clean Air Act
Amendments also required that RFG contain at least 2 percent
oxygen by weight. The addition of oxygenates causes gasoline to
burn cleaner and more efficiently, thereby reducing toxic air
pollutants, carbon monoxide, and smog-forming emissions. \1\
The RFG program initially was mandated only for the nine
metropolitan areas in the country with the worst smog: Los
Angeles, San Diego, Chicago, Houston, Milwaukee, Baltimore,
Philadelphia, Hartford, and New York City. Seventeen States and
the District of Columbia currently use RFG, either because of
Clean Air Act requirements, or on a voluntary basis to achieve
air quality standards.
---------------------------------------------------------------------------
\1\ The 1990 Clean Air Act Amendments also established a wintertime
oxygenate gasoline program to reduce emissions of carbon monoxide
starting in 1992. This program requires oxygenated gasoline to contain
2.7 percent oxygen by weight. Oxygenated gasoline makes up about 3
percent of all gasoline sold in the winter and 1.3 percent of all
gasoline sold per year.
---------------------------------------------------------------------------
B. Use of RFG Has Led to Cleaner Air
The RFG program has produced substantial environmental
benefits. Phase I of the RFG program (1995-1999) aimed to
reduce air pollution that causes smog by 64,000 tons per year
in RFG areas. Phase II, beginning this year, has more stringent
standards that will reduce smog pollutants by an additional
41,000 tons per year in RFG areas. This program also reduces
emissions of toxic air pollutants such as benzene, a known
human carcinogen. Phase I and Phase II RFG combined to reduce
toxic pollutants by about 24,000 tons per year in RFG areas,
the equivalent of eliminating the toxic emissions from over 13
million vehicles. From 1995 through 1999, RFG exceeded the
required average reductions of smog-forming volatile organic
compounds (VOCs), tonics, and oxides of nitrogen (NOx) (Blue
Ribbon Panel [BRP] 1999; see table 1). Most notably, overall
toxics reductions averaged about 27 percent versus the 17
percent required. Benzene showed the most dramatic declines
with a median reduction of 38 percent in the first year of the
program (EPA 1995). This year, Phase II RFG will implement more
stringent emissions standards: a 27 percent reduction in VOCs,
22 percent reduction in tonics, and a 7 percent reduction in
NOx emissions.
Table 1. Reformulated Gasoline Average Emission Reduction
Requirements\1\
------------------------------------------------------------------------
Phase I RFG Phase II RFG
------------------------------------------------------------------------
Volatile Organic Compounds.. 17%................. 27%
Nitrogen Oxides............. 2%.................. 7%
Toxics...................... 17%................. 22%
------------------------------------------------------------------------
\1\Reductions are from 1990 nationwide baseline.
RFG and the Gasoline Market
The 1990 Clean Air Act Amendments require RFG to contain 2
percent oxygen by weight, but neither the Act nor EPA requires
the use of a specific oxygenate in RFG. Both ethanol and methyl
tertiary-butyl ether (MTBE) are used as oxygenates in the
current RFG program. MTBE is the oxygen additive most commonly
used by the petroleum industry to satisfy the 2 percent oxygen
mandate, primarily because of its low cost, ease of transport,
and low volatility. Approximately 87 percent of RFG contains
MTBE, and most of the rest contains ethanol. The petroleum
industry has used MTBE in much smaller amounts to replace lead
as an octane and performance enhancer since the late 1970's.
In response to the 1990 Clean Air Act Amendments,
refineries undertook substantial investments to increase their
production of MTBE and other oxygenates. Between 1990 and 1994,
MTBE consumption doubled. By 1997, MTBE consumption was more
than three times the 1990 level (EIA 2000). Approximately 4.5
billion gallons of MTBE are used each year in gasoline (nearly
300,000 barrels per day out of a total of 8.2 million barrels/
day of gasoline). MTBE, ethanol, and other oxygenates combined
allowed for the production of about 2.5 million barrels per day
of RFG in 1997, nearly one-third of the total gasoline market
(see figure 1). RFG now represents about half of all gasoline
production on the east coast and a little less than 20 percent
of gasoline production in the Midwest and gulf coast. The West
Coast consumed 36 percent of all RFG in 1997 (EIA 2000).
II. MTBE
A. The MTBE water Contamination Problem
Significant concern has arisen about contamination of
drinking water by MTBE in many areas of the country. Because of
the odor and taste of MTBE-contaminated water, EPA established
a drinking water advisory range of 20 to 40 parts per billion
(ppb) (EPA 1997). Drinking water systems with MTBE
concentrations at or above the advisory range may smell and
taste so bad that the water becomes unusable for personal
consumption. For example, Santa Monica in 1996 experienced MTBE
concentrations up to 600 ppb (15 to 30 times greater than the
EPA advisory range) necessitating the removal from service of
half of the city's drinking water supply (Johnson et al. 2000).
Some research also indicates that MTBE could potentially
pose a public health risk. MTBE has been found to cause cancer
in laboratory test animals. Based on this research, the
National Science and Technology Council (1997) concluded that
``it is reasonable to regard this alkyl ether oxygenate [MTBE]
as posing a potential carcinogenic hazard and risk to humans''
(p. 4-29). No human carcinogenicity studies on MTBE, however,
have been published to date.
Current data on MTBE levels in ground and surface waters
indicate widespread and numerous detections of MTBE at low
levels (BRP 1999, Johnson et al. 2000). Recent testing by the
United States Geological Survey showed the detection of MTBE in
approximately 20 percent of the ground water in RFG areas and a
2 percent detection rate in non-RFG areas (BRP 1999). In most
instances, the concentrations of MTBE are below the levels of
public health concern and are not above the range set by EPA's
drinking water advisory. However, the detection rate of high
levels of MTBE (greater than 20 ppb) is 19 times greater in RFG
areas than in non-RFG areas (BRP 1999). The detection of MTBE
at high concentrations usually results from leaking underground
or aboveground Mel storage tanks and pipelines (BRP 1999).
Several States have responded to concerns about MTBE by
establishing drinking water standards (see table 2). In fact,
California has banned MTBE effective no later than December 31,
2002, and New York has banned MTBE effective in 2004.
Table 2. State Drinking Water Standards, Guidelines, and Action Levels
------------------------------------------------------------------------
------------------------------------------------------------------------
States with primary drinking Maine (35 ppb)
water standards (health- New Jersey (70 ppb)
based). New York (50 ppb)
South Carolina (20-40 ppb)
States with a Secondary California (5 ppb), enforceable
Standard (aesthetic).
States with enforceable Michigan (240 ppb), health-based
guidelines. West Virginia (20-40 ppb), EPA advisory
States with a guideline or Arizona (35 ppb), health-based
action level in place. California (13 ppb), health-based
Connecticut (70 ppb), health-based
Illinois (70 ppb), health-based
Kansas (20-40 ppb), EPA advisory
Maryland (10 ppb), aesthetically-based
Massachusetts (70 ppb), health-based
New Hampshire (15 ppb), aesthetically-
based
Pennsylvania (20-40 ppb), EPA advisory
Rhode Island (20-40 ppb), EPA advisory
Vermont (40 ppb), EPA advisory
Wisconsin (60 ppb), health-based
------------------------------------------------------------------------
B. Blue Ribbon Panel Report on Oxygenates
In response to water quality concerns associated with the
use of oxygenates in gasoline, EPA established a Blue Ribbon
Panel (BRP) of leading experts from public health and
scientific communities, water utilities, environmental groups,
industry, and local and State government, including California,
to assess issues posed by the use of oxygenates in gasoline in
California and the rest of the nation. The Panel was charged
with: 1) examining the role of oxygenates in meeting the
nation's goal of clean air; 2) evaluating each product's
efficiency in providing clean air benefits and the existence of
alternatives; 3) assessing the behavior of oxygenates in the
environment; 4) reviewing any known health effects; and 5)
comparing the cost of production and use and each product's
availability--both at present and in the future. In September
1999, the Blue Ribbon Panel made the following recommendations
for blending fuel for clean air and water:
``Given the complexity of the national fuel system, the
advantages and disadvantages of each of the fuel blending
options the Panel considered (see Appendix A), and the need to
maintain the air quality benefits of the current program, the
Panel recommends an integrated package of actions by both
Congress and EPA that should be implemented as quickly as
possible. The key elements of that package, described in more
detail below, are:
Action agreed to broadly by the Panel to reduce
the use of MTBE substantially (with some members supporting its
complete phase-out), and action by Congress to clarify Federal
and State authority to regulate and/or eliminate the use of
gasoline additives that threaten drinking water supplies;
Action by Congress to remove the current 2
percent oxygen requirement to ensure that adequate fuel
supplies can be blended in a cost-effective manner while
quickly reducing usage of MTBE; and
Action by EPA to ensure that there is no loss of
current air quality benefits'' (BRP 1999, p. 6; emphasis in
original).
C. Administration's Principles
Based on the findings and the recommendations of the Blue
Ribbon Panel, the Administration has proposed a set of
legislative principles to address concerns about the continued
use of MTBE:
Recommendation #1: Amend the Clean Air Act to provide the
authority to significantly reduce or eliminate the use of MTBE.
Recommendation #2: As MTBE use is reduced or eliminated,
ensure that air quality gains are not diminished.
Recommendation #3: Replace the existing oxygen requirement
contained in the Clean Air Act with a renewable fuel standard
for all gasoline.
The Administration believes that these principles provide
for an environmentally sound and cost-effective approach to
addressing the risks posed by the current use of MTBE while
helping the farm economy and promoting energy diversity.
D. Environmental Benefits of Significantly Reducing or
Eliminating the Use of MTBE
Water Quality Benefits
Significantly reducing or eliminating MTBE, consistent with
the Administration's principles, would provide substantial
water quality benefits. With a 3 percent MTBE per gallon cap or
MTBE phase-down, the share of MTBE in blended gas throughout
the country would be lower than it is today in many non-RFG
areas. The 3 percent cap would reduce MTBE to pre-1990 levels
and should significantly reduce MTBE contamination of
groundwater (Moran et al. 1998). This would generate
significant benefits by reducing human exposure to MTBE,
reducing the number of drinking water supplies requiring
remediation, and reducing the need to find alternative drinking
water supplies for those cases when MTBE contamination renders
a supply unusable.
The remediation costs of drinking water supplies
contaminated with MTBE could be quite significant. Several
surveys summarized by the Blue Ribbon Panel found that
underground storage tank release sites contaminated with MTBE
could have substantially higher clean-up costs than comparable
sites without MTBE contamination. For example, a study on
groundwater contamination in California found that ``on average
MTBE-contaminated sites may be 140 percent of the cost of
remediating conventional gasoline sites'' (BRP 1999, p. 56).
Air Quality Benefits
Maintaining the emissions reductions goals under Phase II
of the RFG program will preserve the significant environmental
gains achieved by reducing smog-forming and toxic emissions.
The air quality improvements expected under the RFG program
provide important human health benefits since repeated
exposures to unhealthy levels of ozone (smog) may increase
susceptibility to respiratory infection, cause lung
inflammation, and aggravate pre-existing respiratory diseases
such as asthma. Further, preserving current toxics performance
in gasoline ensures that the risk reductions from decreased
exposure to carcinogens in vehicle exhaust achieved to date are
not reversed.
III. Renewable Fuels Standard
A. Benefits to Rural Communities
The establishment of a renewable fuels standard would boost
the use of renewable fuels, such as ethanol, and could benefit
the nation's farmers. In an analysis conducted in 1999, USDA
evaluated the effect a renewable feels standard would have on
the domestic farm economy. In that analysis, renewable fuels
account for 1 percent of the nation's gasoline in 2001 and
increase linearly to 2.5 percent in 2010. The analysis was
limited to the effects on the farm economy of increased
production of corn-based ethanol. With 2.5 percent of the
nation's gasoline consisting of ethanol by 2010, U.S. corn
ethanol production would increase from a baseline projection of
1.7 billion gallons in 2010 to 3 billion gallons. The price of
corn would be 15 cents per bushel more in 2010 than in the
absence of the standard and average 11 cents per bushel more
during 2002-2010. With higher corn prices and greater corn
production, U.S. net farm income would increase by $1.4 billion
in 2010, and would average $750 million more per year during
2002-2010 (USDA 1999).
The establishment of a renewable fuels standard would also
help boost the United States' fast-growing market for bioenergy
generally. A standard would greatly increase the demand for
energy crops and for agricultural and forest wastes of all
types. Since the cost of transporting the raw materials is
high, most of the value-added work would occur in rural
communities, providing new revenue streams for farmers and
cash-flow for rural economic development.
B. Potentially Lower Fiscal Farm Program Outlays
The Administration and the Congress have demonstrated a
strong commitment to provide financial support to farmers when
market prices fall. The government provides that support
through two primary mechanisms: the Federal Agriculture
Improvement and Reform Act of 1996 (1996 Farm Bill) and ad hoc
emergency supplemental assistance legislation. Through these
mechanisms, total farm program outlays rose to $10.1 billion in
fiscal year 1998, $19.2 billion in fiscal year 1999, and will
increase substantially in fiscal year 2000. Corn producers
currently receive more in direct farm support payments than
producers of any other commodity. A part of these payments is
based on the price of corn. When the market price of corn is
below the price support loan rate, corn producers receive a
payment equal to the difference between the loan rate and the
market price. These payments, known as loan deficiency payments
or marketing loan gains, totaled $2.2 billion for 1999 corn
production and are forecast to total $3.2 billion for 2000
production.
In the most recent USDA baseline projections, the price of
corn rises well above the price support loan rate after 2002
(WAOB 2000). Nevertheless, a renewable fuels standard could
prevent or help offset some unexpected future decline in the
price of corn below the loan rate. In such a scenario, the
renewable standard could either prevent the market price of
corn from falling low enough to trigger this government subsidy
or could keep it from falling as far below as it might
otherwise. From the farmers' perspective, the renewable
standard would substitute for part or all of the loan
deficiency program in maintaining the price of corn, while the
Federal Government expenditures on agriculture would fall,
freeing up resources for other socially beneficial uses. The
renewable standard could also obviate the need for ad hoc
assistance payments. \2\ However, if corn prices follow current
USDA baseline projections, loan deficiency payments and ad hoc
payments would not be expected, and the renewable standard
would provide the kinds of benefits to farmers described above
and not impact fiscal outlays.
---------------------------------------------------------------------------
\2\ While potentially offsetting farm program outlays, a renewable
standard could impact other aspects of the budget, such as the Highway
Trust Fund. Please refer to section VI for a discussion of how
increased ethanol consumption could reduce Highway Trust Fund receipts.
---------------------------------------------------------------------------
C. Diversifying the Nation's Energy Portfolio
A renewable fuels standard would increase the role of
biofuels in the nation's energy portfolio. Because ethanol can
substitute for petroleum-based products, it is an important
strategic option for expanding the array of energy sources
available to fuel the economy. Increasing the share of ethanol
in all transportation fuel would decrease the amount of crude
oil necessary to fuel vehicles.
As mentioned above, in addition to current R&D programs and
tax incentives, a renewable fuels standard would stimulate the
demand for ethanol, promoting further development of the
biomass ethanol industry. Unlike the corn-based ethanol
industry, ethanol made from cellulosic biomass uses trees,
crops, and agricultural and forestry wastes. A recent EIA
analysis finds that the nascent biomass ethanol industry should
grow substantially over the coming decades (DiPardo 2000). EIA
projects biomass ethanol production to increase by a factor of
13 between 2001 and 2010. Even under a pessimistic technology
case, biomass ethanol increases 9fold over this period.
However, the optimistic high technology case would have biomass
ethanol 16 times greater in 2010 than in 2001, and with a
successful technological breakthrough in enzymatic hydrolysis,
2020 production could exceed 2.8 billion gallons per year (see
figure 2). Some other studies have found that the potential for
biomass ethanol could be even greater with other technological
breakthroughs. To the extent that it spurs the development of
the domestic biomass industry generally, a renewable fuels
standard could help drive technology breakthroughs that lead to
the low cost production of electrical power, chemicals and
other everyday products from biomass--further expanding both
economic opportunities and energy diversity.
D. Environmental Benefits
Renewable fuels have the potential to provide substantial
life-cycle carbon dioxide and greenhouse gas emission benefits
relative to gasoline from crude oil. Fuels produced from food
grains such as corn, which use fossil fuels in the farming
process, typically provide a 10 to 30 percent reduction in
life-cycle greenhouse gas emissions relative to gasoline.
Future use of biomass feedstocks such as fast-growing grasses
or trees, which would not be expected to utilize many fossil
fuels in the growing process, could provide life-cycle
greenhouse gas emission reductions of 60 to 80 percent relative
to gasoline. \3\ Additionally, the deep-rooted plants commonly
used for biomass--such as poplar, willow, and switch grass--are
helpful in controlling erosion, filtering chemicals and
sediment from water runoff, and slowing floodwaters.
---------------------------------------------------------------------------
\3\ Substantial emissions reduction through biofuels is consistent
with the Administration's larger objectives under the President's
Bioenergy and Bioproducts Executive Order. Achieving the goal
established with the release of this order would reduce 2010 greenhouse
gas emissions by up to 100 million metric tons of carbon--the
equivalent of taking more than 70 million cars off the road.
---------------------------------------------------------------------------
IV. The Economics of Oxygenate Production
A. Economics of Replacing MTBE
The refining industry uses MTBE for several reasons. First,
MTBE is an oxygenate that is also high in octane. Second, MTBE,
like all oxygenates, contains no sulfur or aromatics, making it
easier to meet the gasoline sulfur and toxics standards. Third,
MTBE has very good distillation characteristics, and refiners
can transport gasoline blended with MTBE through the existing
pipelines. Replacing barrels of MTBE thus requires refiners to
replace a high quality component of gasoline.
Several key issues can affect the cost of reducing or
eliminating MTBE:
Time. Providing more time may enable firms to
further reduce costs by modifying production processes and
building additional capacity and infrastructure. The California
Energy Commission (1999), for example, concluded that 3 years
to phase-out MTBE in California was sufficient to avoid severe
gasoline shortages and price spikes while extending the phase-
out period for another 3 years could reduce costs by as much as
60 percent. Adequate lead time also allows refiners to take
advantage of new desulfurization technologies that could lessen
the octane and yield loss that can occur with the reduction in
sulfur content. This could mitigate some of the cost of an MTBE
phase-down.
Certainty. With a variety of environmental rules
affecting or potentially affecting refinery production,
regulatory certainty could facilitate refiner investment. This
is also critical as refiners consider potential economies of
scale in making investments that could address multiple
environmental rules at once (for example, gasoline sulfur and
MTBE).
Flexibility. The petroleum industry comprises a
wide variety of companies. The best decision for one may not be
the best solution for all. Any legislation should allow the
industry the flexibility to find the lowest cost method for
achieving the goals consistent with the Administration's
principles.
Fungibility. The BRP notes that ``Refiners/
marketers have indicated that to meet consumer fuel demand and
to minimize supply shortages, the scope of any future fuel
changes should be national or regional. Permitting State-
specific fuel changes (e.g., RVP, low sulfur) may lead to
greater uncertainty in fuel supply and may cause periodic
shortages unless there is a mechanism to ensure consistency
across State boundaries'' (p. 68).
B. The Economics of Ethanol Production and Use
Ethanol is the primary alternative oxygenate to MTBE. While
ethanol has a higher oxygen content than MTBE, ethanol must be
blended with higher cost blendstocks and it has higher
transportation costs. It is more costly for producers to ship
gasoline containing ethanol via pipelines because the residual
water in the pipelines makes the ethanol separate from the
gasoline. Instead, producers ship subgrades of gasoline and
ethanol separately, blending the two at later points in the
distribution system. The higher transportation costs
concentrate ethanol consumption in the Midwest, home of most of
the nation's ethanol production. Additionally, adding ethanol
to conventional gasoline increases evaporative emissions, which
can contribute to smog pollution. In RFG, blending ethanol with
low volatility blend stock as well as geographic and annual
averaging under a renewable fuels standard can address this
problem. Finally, ethanol, like other oxygenates, has positive
impacts on gasoline toxic emissions by changing gasoline
blending characteristics.
Continued expansion of the ethanol industry depends on
several factors: petroleum markets, market factors affecting
the net feedstock cost, new technological advances, and energy,
environmental, and agricultural policy. Currently, ethanol
receives a $0.54 per gallon tax incentive that has positively
affected its production. Expansion of existing ethanol plants
and construction of new plants require capital investment. Both
capital and operation and maintenance costs have declined
significantly during the past 10 years, and are expected to
decline further in the near future. Capital investment per
gallon of ethanol for the dry mill process has decreased from
$2 per gallon in early 1980's to about $1.10 per gallon today.
The wet mill ethanol plants require a larger capital investment
and have higher operation and maintenance costs; however, the
net corn cost per gallon is significantly lower relative to a
dry mill. Lowering net feedstock costs and other costs
associated with ethanol production will improve the
competitiveness of ethanol as a fuel or fuel additive. Analysis
published by USDA suggests that long-term technological
improvements could reduce ethanol production costs by 9 to 15
cents per gallon. USDA researchers believe that additional
savings of 8 to 13 cents per gallon may be possible through co-
product development and process improvement (Holmann and
Rendleman 1993).
V. Analysis of Addressing MTBE
A few studies have examined the gasoline production costs
of reducing the use of MTBE (MathPro 2000, Hadder 1999). The
models employed in these studies can assess the increased
capital and production costs associated with a change in MTBE
policy. They can also characterize the change in production
processes and fuel inputs, such as for ethanol. These models
can estimate total and average costs, but not marginal costs.
EIA's National Energy Modeling System (NEMS), however, can
project not only total costs, but also marginal costs (which
includes a return on capital investment). EIA does this by
modeling the entire gasoline market, including costs of
production in both domestic and foreign refineries. In a well-
functioning market with adequate supply capacity, the marginal
cost of producing a gallon of gasoline equals the price of a
gallon of gasoline paid by consumers.
This marginal cost reflects the cost to produce the last,
or marginal, gallon of gasoline in the market. A refiner
produces a gallon of gasoline only if the market price is equal
to or above the cost to produce this gallon. If the market
price is below the cost of producing this gallon, then a
refiner would not find it profitable to produce it. Therefore,
the increase in the gasoline price under a new oxygenate policy
corresponds to the marginal cost of producing this last gallon
of gasoline under this policy. The estimate of marginal cost is
a very important measure since this determines the production
decisions of refiners (where marginal cost of production equals
market price) and reflects the cost borne by consumers of a new
oxygenate policy. Marginal costs and average costs are not
comparable, although for a given oxygenate policy, the marginal
cost of gasoline generally should exceed its average cost.
Using price changes based on estimated marginal costs has
several advantages over focusing on average cost differences
alone. Refinery models do not account for the impact of higher
production costs on consumer demand and foreign refinery
production. Thus, this type of model produces estimates of cost
changes that are less than the likely price changes that will
be paid by consumers. The impact of any change in oxygenate
policy on the Highway Trust Fund depends on the total demand
for gasoline, which would vary depending on the price changes
associated with this policy.
In its Annual Energy Outlook 2000 study, EIA (1999)
evaluated an MTBE reduction scenario using the NEMS model. EIA
made the following key assumptions in the analysis:
The 2 percent oxygenate mandate is eliminated in
2003.
The MTBE content of gasoline would be limited to
3 percent of gasoline by volume per gallon starting in 2003.
California would discontinue its MTBE ban and opt
for the 3 percent cap.
Consistent with the Blue Ribbon Panel
recommendations, toxic emissions benefits are maintained.
Following on this work, the Administration requested that
EIA undertake several additional analyses to better understand
the implications of various oxygenate policies.
A. Methodology
EIA performed the MTBE analyses using the petroleum market
module (PMM) in HEMS. The PMM represents domestic refinery
operations and the marketing of petroleum products to
consumption regions. PMM solves for petroleum product prices,
crude oil and product import activity (in conjunction with the
international energy module and the oil and gas supply module),
and domestic refinery capacity expansion and fuel consumption.
PMM is a regional, linear programming representation of the
U.S. petroleum market. Refining operations are represented by a
three region linear programming formulation of the five
Petroleum Administration for Defense Districts (PADDs). PADDs I
(East Coast) and V (West Coast) are each treated as single
regions, while PADDs II (Midwest), III (Gulf Coast), and IV
(Rocky Mountains) are aggregated into one region. Each region
is considered as a single firm where more than 59 distinct
refinery processes are modeled. Refining capacity is allowed to
expand in each region over each 3-year period. That is, in 2001
the model looks ahead to 2004 to determine how much new
capacity is required and then allows additions of new capacity
in 2002, 2003, and 2004. The capacity planning decisions begin
anew for 2007 at the end of the 2004. As a result, cumulative
investment for any given year may include investment for future
expectations. Products are produced to annual average
specifications and demands with calibrations to account for
non-linear blending qualities such as RVP in motor gasoline.
EIA models EPA's complex model requirements through
specification constraints on aromatics, benzene, sulfur, RVP,
E200, E300, olefins, and oxygen content. The specification
constraints conform to EPA's complex model requirements for
emissions reductions of VOCs, NOx, and tonics. Changes to the
PMM for the MTBE analyses included the return on investment
(ROI) charge rate from 15 percent ROI to a 10 percent ROI to be
more consistent with other analyses. Investment decisions ROI
remained at 15 percent.
B. Scenarios
EIA evaluated four scenarios under the assumption that the
oxygenate requirement is waived and emissions of air toxics are
held to their current level (maintaining toxic emissions
benefits) (see table 3). The various options for each scenario
included banning MTBE in 2003, imposing a 3 percent by volume
cap (the pre-1990 MTBE content of gasoline) in 2003, no
renewable fuels standard, and a 2 percent renewable fuels
standard in 2005 \4\. The MTBE content refers to a nationwide
standard including California and New York, despite existing
State laws to phase-out MTBE. EIA did not undertake an analysis
of reducing or banning MTBE and maintaining the oxygenate
mandate. \5\
---------------------------------------------------------------------------
\4\ Note that a 2 percent renewable fuels standard in 2005 would
likely have comparable 2005 effects as a 3 percent standard for 2010.
Since current renewable fuel production is slightly over 1 percent of
the market, constant growth necessary to achieve a 3 percent target in
2010 would require renewable fuels to make up about 2 percent of the
market in 2005
\5\ Performing analyses of scenarios that represent States banning
MTBE without Federal actions to eliminate the oxygenate mandate would
require significant changes to the EIA Petroleum Market Model (PMM).
First, representation of imported supplies of RFG requires re-
estimation of supply curves. EIA constructs import supply functions for
all imported petroleum products using the World Oil Refining,
Logistics, and Demand (WORLD) model, which is a worldwide refinery LP
that requires significant resources to operate and generate import
supply curves. Second, EIA's PMM would require significant structural
changes to handle imported subspecification blends of RFG that would be
shipped to the demand regions where final blending with ethanol occurs.
Third, testing of the PMM capability to manufacture all the domestic
supplies to RFG as subspecification blends of RFG has not been
completed. Finally, EIA would have to re-estimate RFG specifications
that would conform to EPA's RFG2 complex model on an annual basis.
\6\ This is the same scenario as the AEO2000 MTBE side case,
however EIA modified this scenario from the AEO2000 to correct for an
error detected while performing the additional MTBE analyses. The
oxygenate specification for sub-specification gasoline, which is
blending with ethanol to bring it into specification, was incorrect in
the reference case. This correction changed the differential investment
and gasoline prices for the AEO MTBE reduction side case to 1.9 cents
per gallon and 2.4 cents per gallon in 2003 and 2005 respectively.
Additional, differential cumulative investment for 2005 changed to $1.9
billion.
Table 3. Scenarios Evaluated with EIA Model
------------------------------------------------------------------------
Renewable Fuels
Scenario MTBE Content, Standard, effective
effective in 2003 in 2005
------------------------------------------------------------------------
EIA1\6\..................... 3%.................. 0%
EIA2........................ 0%.................. 0%
EIA3........................ 3%.................. 2%
EIA4........................ 0%.................. 2%
------------------------------------------------------------------------
C. Key Assumptions
In undertaking this analysis, EIA made a number of critical
assumptions that could affect the results and the conclusions
drawn from this work. The key premises, limitations, and
uncertainties are:
Geographic coverage of MTBE 3 percent cap. To
simplify the analysis, the cases analyzing the 3 percent MTBE
cap assume that both California and New York decide to repeal
their laws requiring the phase-out of MTBE and instead opt for
the 3 percent cap.
Starting date of repeal of oxygenate mandate. The
elimination of the RFG oxygenate requirement becomes effective
starting in 2003.
Maintaining toxic emissions benefits. Maintaining
toxic emissions benefits refers to keeping the current levels
of toxic emissions in RFG, without allowing for toxic emissions
to fall to the level of the Phase II standards. Failing to
maintain toxic emissions benefits could result in toxic
emissions at the Phase II standard level.
Low sulfur assumptions. EIA's model does not
account for the recently promulgated Tier 2/gasoline sulfur
regulations. Because refineries will already be making
renovations to meet low sulfur gasoline requirements,
additional modifications to accommodate limits on MTBE may
prove less costly than if the refineries had to modify their
processes to accommodate the MTBE policy change alone. As a
result, the EIA model would overestimate the costs if such
positive synergies exist. However, reducing the sulfur content
of gasoline may require making up both octane and volume
losses, potentially increasing the costs of restricting the use
of MTBE.
Assumed gasoline demand. The gasoline forecast is
based on EIA's Annual Energy Outlook 2000 demand forecast: 9.4
million barrels per day in 2005 and 10.2 million barrels per
day in 2010.
Starting date of renewable fuels standard. The
renewable fuels standard cases involve the phasing up of the
share of ethanol in the gasoline market through 2005 based on
the level established in the standard. National credit trading
and annual averaging is allowed under the renewable fuels
standard to provide the industry flexibility in complying with
the standard.
Cost of increased ethanol production. The ELk
model solves for the increase in ethanol prices resulting from
greater demand. There is substantial uncertainty about the
price increases resulting from a near doubling of ethanol
volumes. In these analyses, ethanol production costs are
projected to increase by 33 to 37 cents per gallon.
D. Results
In the scenarios evaluated by EIA, a 3 percent MTBE per
gallon cap in 2003 is projected to increase gasoline prices
about 2 cents per gallon, while eliminating MTBE would increase
gasoline prices about 3 cents per gallon (see figure 3). Adding
a 2 percent renewable fuels standard is projected to increase
gasoline prices in the 5 cents per gallon range in 2005 (see
figure 4). The actual costs in 2005 could be lower for several
reasons. For example, the opportunities for refiners to reuse
existing MTBE equipment could reduce capital costs more than
was assumed in our analysis. We anticipate that costs would
continue to fall after 2005 as additional technological
breakthroughs further increase the efficiency of producing
renewable fuels. Finally, if States continue to ban MTBE while
the oxygenate mandate remains in effect, the costs of the
current Federal policy could be significant.
The required reduction or elimination of MTBE significantly
increases the demand for ethanol despite the assumed repeal of
the 2 percent oxygenate requirement (see figure 4). In the
scenario where MTBE is limited to 3 percent volume per gallon
without a renewable fuels standard, the volume of ethanol
consumed increases 60 percent between 2000 and 2005.
Eliminating MTBE results in about a 65 percent increase in
ethanol over this period of time. The ethanol increase under
the two ``no renewable standard'' scenarios is comparable to
the effect of a 1.7 percent renewable standard in 2005. A
renewable fuels standard of 2 percent results in a little less
than 90 percent increase in ethanol consumption over this 5-
year period. With a significant reduction or elimination of
MTBE and improvement in ethanol production methods, the cost of
the renewable standard will decline over time.
E. Results from Other Analyses
Two other studies have also analyzed the impacts of
eliminating or reducing the use of MTBE on a national level
under a variety of scenarios:
The National Petroleum Council (NPC) study
(MathPro 2000) used MathPro Incorporated's refinery LP modeling
system.
Oak Ridge National Laboratory used its ORNL
Refinery Yield Model (see Hadder 1997, 1999 for previous
modeling results).
Both models have detailed representations of refinery
production and can provide information about the impacts of a
change in MTBE policy on production costs, ethanol demand, and
other relevant issues. However, these models take total
domestic gasoline production as an assumption, and do not
account for the change in consumer demand and foreign
production in response to price changes that would alter the
total gasoline produced in domestic refineries. Thus, while
assumptions about the total amount of gasoline produced may
bias cost estimates up or down, we believe that this summary of
modeling work is illustrative of what the relative impacts of
different policy scenarios could be. The results from these two
models can further characterize the economic implications of
various policy options associated with a change in MTBE policy
and complement the results from EIA.
Maintaining Toxic Emissions Benefits
The EIA model did not assess the impacts that failing to
maintain current air toxic emissions benefits would have on
gasoline prices and ethanol demand. However, ORNL and MathPro
did evaluate a set of scenarios with different assumptions
about the allowed toxic emissions and are useful for
identifying the potential impact a requirement to maintain air
quality benefits could have. Maintaining current toxic
emissions levels would likely increase the demand for ethanol.
For example, in the ORNL analysis, ethanol use in the East and
Gulf Coasts double under this requirement relative to a
scenario without such a requirement. The effects of maintaining
toxic emissions benefits on production costs appear to be
relatively modest. In the ORNL analyses, this requirement
increases the average production cost of fuel by 0.2 to 0.7
cent more per gallon for all gasoline produced in East and Gulf
Coast refineries. \7\ The MathPro analysis found this
requirement would increase the average production cost by about
0.2 cent per gallon.
---------------------------------------------------------------------------
\7\ It is important to note that the results from the MathPro and
ORNL analyses represent average costs, while the EIA results reflect
marginal costs. Thus, the results between these analyses are not
comparable.
---------------------------------------------------------------------------
Repealing the Oxygenate Mandate
One of the Administration's principles is to repeal the
oxygenate mandate for RFG. Without a repeal, but with a phase-
down or elimination of MTBE, refiners making RFG will be faced
with a de facto requirement to use ethanol in all RFG produced.
This creates a demand for significantly greater volumes of
ethanol than are currently available, a need to move ethanol to
new and more distant markets, and increased difficulty and
costs for producing summer RFG (ethanol's higher volatility
would need to be offset by less volatile petroleum blendstocks)
in RFG areas where ethanol is not now used. While ethanol, like
other oxygenates, has valuable characteristics for making RFG,
cost savings and greater production reliability will be gained
from allowing refiners flexibility to choose when, where, and
in what amounts to use it. For summer RFG these average
production cost savings are on the order of 1 cent per gallon
of RFG. A renewable fuels standard with averaging on a national
and annual basis would provide refiners more flexibility to
produce and transport gasoline to meet Clean Air Act
requirements, thereby helping to hold down increases in
gasoline production costs. Indeed, a renewable fuels standard
that would result in the same volume of ethanol consumed
nationwide as maintaining the current oxygenate mandate would
have lower costs to refiners and consumers than the oxygenate
mandate. The opportunity to average, or trade, geographically
and across the seasons of the year is a critical distinction
between the renewable fuel standard and the oxygenate mandate.
Renewable Fuels Standard
The MathPro study did not assess the impacts of a renewable
fuels standard. The ORNL analysis, however, did consider
several scenarios including a 2 percent standard. Banning MTBE
with a 2 percent renewable fuels standard would increase
average production costs by up to 2.0 cents per gallon in the
East and Gulf Coasts, and 1.1 cents per gallon in the Midwest.
The saline scenarios without the 2 percent renewable standard
would have slightly lower cost impacts. East and Gulf Coast
average gasoline production costs would increase up to 1.7
cents per gallon and Midwest costs would increase 0.7 cent per
gallon. The 2 percent renewable standard in the ORNL analyses
increase ethanol production by 24 percent, with average
gasoline production costs increases ranging from less than 20
percent (0.3 cent per gallon) in the East arid Gulf Coasts to
more than 50 percent (0.4 cent per gallon) in the Midwest.
VI. Highway Trust Fund Receipt Impacts
The principal source of revenue impacts for the Highway
Trust Fund would reflect a shift from gasoline to gasoline-
ethanol blends. Gasohol, gasoline blended with ethanol, bears a
lower tax rate than gasoline as part of an existing program to
promote renewable fuels. \8\ The substitution of gasohol (taxed
at 13 to 15.3 cents per gallon depending on ethanol content)
for gasoline (taxed at 18.4 cents per gallon) would result in
reduced receipts for the Highway Account of the Highway Trust
Fund.
---------------------------------------------------------------------------
\8\ The Energy Tax Act of 1978 (P.L. 95-618) began the renewable
fuel tax incentives program, which has undergone several modifications
since then, most recently through TEA-21 (P.L. 105-178). The renewable
final tax incentive program expires in 2007.
---------------------------------------------------------------------------
In addition, the General Fund retains a portion of the tax
on gasohol or other ethanol fuel. This retention is unique to
alcohol fuels among all highway feels. For each gallon of
gasoline-ethanol blended product, the General Fund retains 2.5
cents per gallon of the tax. If the blend contains 10 percent
ethanol, then the Fund retains 3.1 cents per gallon. At current
ethanol usage rates, the Highway Trust Fund receives about $1
billion per year less in revenues because of the reduced tax
rate and diversion of some receipts to the General Fund.
A. Impact of Highway Trust Fund revenue reductions on the
Federal-aid Highway Program
With the passage of the Transportation Equity Act for the
21st Century (TEA-21) (P.L. 105-178), the funding level for the
Federal-aid Highway Program is directly linked to income to the
Highway Account of the Highway Trust Fund. When the President's
Budget is submitted to Congress, the Federal-aid Highway
Program authorization and obligation limitation levels are
adjusted to the extent that new projections of Highway Account
receipts for the budget year and actual Highway Account
receipts for the year 2 years earlier are higher or lower than
the receipt estimates used for TEA-21. Increased use of ethanol
blends would reduce Trust Fund tax receipts and reduce the size
of the Highway Program on a dollar-for-dollar basis. Funding
for each element of the Federal-aid Highway Program (except
emergency relief) and the Motor Carrier Safety Assistance
Program would be reduced as a result of the reduced income to
the Trust Fund.
Based on the EIA model results, we assessed the impacts of
four MTBE policy scenarios on Highway Trust Fund receipts. The
Department of the Treasury conducted this analysis using the
same methodology as in the fiscal year 2001 Administration
budget submission to Congress. TEA-21 expires in fiscal year
2003, so these scenarios also assume a continuation of current
law. Tax receipts appropriated to the Highway Trust Fund are
estimated to total $37.6 billion in fiscal year 2005. Thus, the
potential trust fund impacts, ranging between more than $0.5
billion and a little under $1 billion per year, would be on the
order of 1 to 2 percent of the total fund (see figure 5).
However, if the tax incentive expires in 2007, as currently
scheduled, the impact on the trust fund would be significantly
diminished.
B. Impact of shift to ethanol fuels on the distribution of
certain highway program funds
Statutory formulas determine the distribution of most
Federal-aid Highway Program funds among the States. TEA-21
established the current apportionment formulas that reflect a
negotiated balance among the States for equitable formulas. In
two cases, these formulas use ``contributions'' to the Highway
Account of the Highway Trust Fund as a factor in apportioning
funds among the States. For the Surface Transportation Program,
authorized at almost $6 billion a year through 2003, 35 percent
of the funds each year are distributed among the States based
on each State's relative share of contributions to the Highway
Account of the Highway Trust Fund. A second formula, the
Minimum Guarantee, guarantees that each State's share of
apportionments of Federal-aid Highway Program funds will be not
less than 90.5 percent of its share of contributions to the
Highway Account of the Highway Trust Fund. The Minimum
Guarantee has an indefinite authorization (such sums as may be
necessary). Almost $7 billion were distributed under the
Minimum Guarantee for fiscal year 2000. Analysis of the
distributional impacts on the Highway Trust Fund will be
provided separately.
VII. Conclusion
We must take steps to protect America's drinking water
supplies from further MTBE contamination and legislation is the
fastest and best way to achieve this. Based on the examination
of the economic consequences of policies reducing or
eliminating MTBE presented here, we believe that that
legislation, along the lines of the Administration's
principles, can address the MTBE problem in a cost-effective
manner while providing additional benefits. The risks posed to
the nation's water supplies by MTBE contamination can be
addressed while maintaining the air quality benefits of the
reformulated gasoline program. Moreover, repealing the
oxygenate mandate while implementing a renewable feels standard
would promote growth in renewable feels while providing greater
flexibility to refiners. 'oaken as a package, this approach
represents a responsible and effective approach to addressing
this serious problem.
VIII. References
Blue Ribbon Panel on Oxygenates in Gasoline. 1999.
Achieving Clean Air and Clean Water: The Report of the Blue
Ribbon Panel on Oxygenates in Gasoline. Washington, DC:
Environmental Protection Agency. EPA420-R-99-021. September 15.
California Environmental Protection Agency. 1999. Potential
Health Risks of Ethanol in Gasoline. Of floe of Environmental
Health Hazard Assessment. December.
DiPardo, J. 2000. Outlook for Biomass Ethanol Production
and Demand. Washington, DC: Energy Information Administration,
Department of Energy.
Energy Information Administration. 2000. MTBE, Oxygenates,
and Motor Gasoline. Washington, DC: Energy Information
Administration, Department of Energy. http://www.eia.doe.gov/
emeu/steo/pub/special/mtbe.html.
Energy Information Administration. 1999. Annual Energy
Outlook 2000. Washington, DC: Energy Information
Administration, Department of Energy. DOE/EIA-0383.
Environmental Protection Agency. 1997. Drinking Water
Advisory: Consumer Acceptability Advice and Health Effects
Analysis on Methyl Tertiary-Butyl Ether (MTBE). Washington, DC:
Of lice of Water, Environmental Protection Agency.
Environmental Protection Agency. 1995. National Air Quality
and Emissions Trends Report. Washington, DC: Environmental
Protection Agency.
Hadder, G.R. 1999. Estimating Refining Impacts of Revised
Oxygenate Requirements for Gasoline. Draft report. Oak Ridge,
TN: Oak Ridge National Laboratory. May 10.
Hadder, G.R. 1997. Re-estimation of the Refining Cost of
Reformulated Gasoline NOx Control. Draft report. Oak Ridge, TN:
Oak Ridge National Laboratory. February 26.
Holmann, Neil and C. Matt Rendleman. 1993. Emerging
Technologies in Ethanol Production. Washington, DC: Economic
Research Service, USDA. AIB-693.
Johnson, R., J. Pankow, D. Bender, C. Price, and J.
Zogorski. 2000. MTBE: To What Extent Will Past Releases
Contaminate Community Water Supply Wells? Environmental Science
and Technology, May 1, pp. 2A-9A.
MathPro, Inc. 2000. The Refining Economics of a National
MTBE Ban and a National Standard for Driveability Index. A
study performed for the National Petroleum Council Committee on
Refining. West Bethesda, MD. March 15, 2000.
Moran, Michael J., John S. Zogorski, and Paul J. Squillace.
1998. MTBE in Ground Water of the United States--Occurrence,
Potential Sources, and Long-Range Transport. In: American Water
Works Association Proceedings, June 21-25, 1998. Texas:
American Water Works Association, vol. D, pp. 287-309.
National Science and Technology Council. 1997. Interagency
Assessment of Oxygenate Fuels. Washington, DC: Committee on
Environment and Natural Resources, NSTC.
U.S. Department of Agriculture. 1999. Preliminary Analysis
of a Minimum Renewable Fuels Standard for Gasoline. Washington,
DC: Of lice of Energy Policy and New Uses, USDA. July 28.
World Agricultural Outlook Board (WAOB). 2000. Agricultural
Baseline Projections to 2009. Washington, DC: WAOB, Of floe of
the Chief Economist, USDA. Prepared by the Interagency
Agricultural Projections Committee. Staff Report No. WAOB-2000-
1. February.
Impacts of Various MTBE Reduction Scenarios on the Federal-aid Highway
Programs
The report, Analysis of Policy Scenarios for Reducing or
Eliminating MTBE, analyzed the economic consequences of either
reducing or eliminating MTBE, while maintaining air quality and
increasing the use of renewable fuels. Four different scenarios
were evaluated under the assumption that the oxygenate
requirement is waived and emissions of air toxics are held to
their current level (maintaining toxic emissions benefits). The
various options for each scenario included banning MTBE
beginning in 2003, imposing a 3 percent by volume cap (the pre-
1990 MTBE content of gasoline) in 2003, no renewable fuels
standard, and a 2 percent renewable fuels standard in 2005. The
MTBE content refers to a nationwide standard including
California and New York, despite existing State laws to
phaseout MTBE. Note that while the scenarios evaluated contain
elements of a number of legislative proposals, they do not
correspond to specific bills.
Scenarios Evaluated
------------------------------------------------------------------------
Renewable Fuels
Scenario MTBE Content Standard Effective
Effective in 2003 in 2005
------------------------------------------------------------------------
EIA1........................ 3%.................. 0%
EIA2........................ 0%.................. 0%
EIA3........................ 3%.................. 2%
EIA4........................ 0%.................. 2%
------------------------------------------------------------------------
This document illustrates the impact of the scenarios on
the distribution of funds under the Federal-aid Highway
Program. The assumptions of the scenarios impact the Federal-
aid Highway Program in two ways: First, in cases where ethanol
blends are substituted for gasoline, receipts to the Highway
Account of the Highway Trust Fund are reduced compared to the
estimates made for the fiscal year 2001 President's Budget
submission. Under current law, which expires at the end of
fiscal year 2003, Federal-aid Highway Program authorizations
are linked to the receipts to the Highway Account.
Second, there would be distributional effects. These are
caused by the fact that two of the components of the Federal-
aid Highway Program--the Surface Transportation Program and the
Minimum Guarantee--use contributions to the Highway Account of
the Highway Trust Fund as a factor in the distribution of
funds. States using increasing amounts of ethanol fuels, which
are taxed at lower rates than gasoline, will contribute a
smaller share of the Highway Account receipts. Thus, the
Federal-aid Highway Program ``pie'' is smaller and the portion
of the reduced pie that each State receives also shifts. States
using increased amounts of ethanol will contribute less to the
Highway Account and receive proportionately smaller shares of
the reduced funding and other States will receive
proportionately larger shares of the funds.
The following table shows estimates of the share of the
Federal-aid Highway Pro gram apportioned funds (formula funds)
that each State would receive under each scenario in fiscal
year 2005. The shares resulting from the scenarios are compared
to a baseline that reflects current fuel consumption patterns
and the fiscal year 2001 President's Budget revenue estimates.
------
Comparison of fiscal year 2005 State Shares of Federal-Aid Highway Program Apportionments under MTBE Scenarios\2\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Scenario EIA1 Scenario EIA2 Scenario EIA3 Scenario EIA4
-------------------------------------------------------------------------------
State Baseline\3\ Delta Delta Delta Delta
Share (%) (%) Share (%) (%) Share (%) (%) Share (%) (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Alabama.................................................... 2.0092 1.9740 -0.0352 1.9683 -0.0409 1.9743 -0.0349 1.9684 -0.0408
Alaska..................................................... 1.1753 1.1546 -0.0207 1.1506 -0.0247 1.1548 -0.0205 1.1503 0.0250
Arizona.................................................... 1.6864 1.6924 0.0060 1.6930 0.0065 1.6922 0.0057 1.6936 0.0072
Arkansas................................................... 1.3166 1.3338 0.0171 0.3414 0.0247 1.3337 0.0170 1.3414 0.0247
California................................................. 9.0883 9.1678 0.0795 9.1797 0.0914 9.1667 0.0785 9.1833 0.0950
Colorado................................................... 1.1547 1.1344 -0.0203 1.1305 -0.0242 1.1346 -0.0201 1.1302 -0.0245
Connecticut................................................ 1.4979 1.4716 -0.0264 1.4665 -0.0315 1.4718 -0.0262 1.4661 -0.0319
Delaware................................................... 0.4364 0.4287 -0.0077 0.4272 -0.0092 0.4288 -0.0076 0.4271 -0.0093
Dist. of Col............................................... 0.3902 0.3833 -0.0069 0.3820 -0.0082 0.3834 -0.0068 0.3819 -0.0083
Florida.................................................... 4.7102 4.8680 0.1578 4.8967 0.1865 4.8676 0.1574 4.8967 0.1865
Georgia.................................................... 3.5052 3.6143 0.1091 3.6356 0.1304 3.6141 0.1088 3.6357 0.1304
Hawaii..................................................... 0.5107 0.5017 -0.0090 0.4999 -0.0107 0.5017 -0.0089 0.4998 -0.0109
Idaho...................................................... 0.7646 0.7512 -0.0134 0.7486 -0.0160 0.7513 -0.0133 0.7484 -0.0162
Illinois................................................... 3.3359 3.2771 -0.0588 3.2658 -0.0701 3.2776 -0.0583 3.2649 -0.0710
Indiana.................................................... 2.4439 2.3815 -0.0624 2.3663 -0.0776 2.3810 -0.0629 2.3676 -0.0763
Iowa....................................................... 1.1857 1.1648 -0.0209 1.1607 -0.0249 1.1649 -0.0207 1.1604 -0.0252
Kansas..................................................... 1.1558 1.1354 -0.0204 1.1315 -0.0243 1.1356 -0.0202 1.1312 -0.0246
Kentucky................................................... 1.7638 1.8080 0.0441 1.8166 0.0528 1.8078 0.0440 1.8167 0.0529
Louisiana.................................................. 1.6160 1.6655 0.0494 1.6750 0.0590 1.6653 0.0493 1.6750 0.0590
Maine...................................................... 0.5257 0.5166 -0.0091 0.5148 -0.0109 0.5167 -0.0091 0.5147 -0.0111
Maryland................................................... 1.5721 1.6191 0.0469 1.6276 0.0554 1.6189 0.0468 1.6276 0.0555
Massachusetts.............................................. 1.8549 1.8226 -0.0324 1.8162 -0.0387 1.8228 -0.0321 1.8258 -0.0392
Michigan................................................... 3.1541 3.1818 0.0227 3.1840 0.0299 3.184 0.0273 3.184 0.0307
Minnesota.................................................. 1.4789 1.4529 -0.0261 1.4478 -0.0311 1.4531 -0.0258 1.4475 -0.0315
Mississippi................................................ 1.2335 1.2714 0.0379 1.2789 0.0454 1.2713 0.0378 1.2789 0.0454
Missouri................................................... 2.4439 2.5005 0.0567 2.5114 0.0675 2.5003 0.0565 2.5115 0.0677
Montana.................................................... 0.9794 0.9621 -0.0173 0.9588 -0.0206 0.9623 -0.0171 0.9586 -0.0208
Nebraska................................................... 0.7662 0.7527 -0.0135 0.7501 -0.0161 0.7528 -0.0134 0.7499 -0.0163
Nevada..................................................... 0.7149 0.7023 -0.0126 0.6999 -0.0150 0.7024 -0.0125 0.6997 -0.0152
New Hampshire.............................................. 0.5126 0.5036 -0.0090 0.5019 -0.0107 0.5037 -0.0089 0.5017 -0.0108
New Jersey................................................. 2.6027 2.6671 0.0644 2.6784 0.0757 2.6669 0.0642 2.6787 0.0760
New Mexico................................................. 0.9750 0.9578 -0.0172 0.9545 -0.0205 0.9579 -0.0170 0.9542 -0.0207
New York................................................... 5.0926 5.0029 -0.0897 4.9855 -0.1070 5.0036 -0.0890 4.9843 -0.1083
North Carolina............................................. 2.7913 2.7734 -0.0179 2.7703 -0.0210 2.7729 -0.0184 2.7712 -0.0202
North Dakota............................................... 0.6464 0.6350 -0.0114 0.6328 -0.0136 0.6351 -0.0113 0.6326 -0.0137
Ohio....................................................... 3.4228 3.3196 -0.1032 3.3081 -0.0114 3.3200 -0.1027 3.3072 -0.1155
Oklahoma................................................... 1.5242 1.5617 0.0375 1.5708 0.0466 1.5616 0.0374 1.5708 0.0466
Oregon..................................................... 1.2215 1.2004 -0.0212 1.1962 -0.0253 1.2005 -0.0210 1.1959 -0.0256
Pennsylvania............................................... 4.9868 4.9001 -0.0866 4.8832 -0.1036 4.9008 -0.0859 4.8819 -0.1049
Rhode Island............................................... 0.5910 0.5806 -0.0104 0.5786 -0.0124 0.5807 -0.0103 0.5785 -0.0125
South Carolina............................................. 1.6380 1.6896 0.0515 1.6995 0.0614 1.6895 0.0514 1.6995 0.0614
South Dakota............................................... 0.7208 0.7084 -0.0124 0.7060 -0.0149 0.7085 -0.0123 0.7058 -0.0150
Tennessee.................................................. 2.2566 2.3258 0.0692 2.3393 0.0827 2.3256 0.0690 2.3393 0.0827
Texas...................................................... 7.2594 7.3417 0.0823 7.3532 0.0938 7.3408 0.0814 7.3547 0.0953
Utah....................................................... 0.7724 0.7627 -0.0097 0.7609 -0.0116 0.7626 -0.0098 0.7612 -0.0112
Vermont.................................................... 0.4511 0.4431 -0.0079 0.4416 -0.0095 0.4432 -0.0079 0.4415 -0.0096
Virginia................................................... 2.5311 2.5007 -0.0304 2.4969 -0.0342 2.5003 -0.0308 2.4978 -0.0334
Washington................................................. 1.7632 1.7321 -0.0311 1.7261 -0.0371 1.7324 -0.0308 1.7257 -0.0375
West Virginia.............................................. 1.1165 1.0968 -0.0197 1.0930 -0.035 1.0970 -0.0195 1.0928 -0.0237
Wisconsin.................................................. 1.9645 1.9299 -0.0346 1.9232 -0.0413 1.9302 -0.0343 1.9227 -0.0418
Wyoming.................................................... 0.6889 0.6769 -0.0121 0.6745 -0.0144 0.6770 -0.0120 0.6743 -0.0146
Total.................................................. 100.0000 100.0000 ....... 100.0000 ....... 100.0000 ....... 100.0000 .......
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ This document is a supplement to the report, Analysis of Policy Scenarios for Reducing or Eliminating MTBE. A full description of the analysis and
the development of the scenarios may be found in that report.
\2\ The scenarios evaluated do not correspond to specific legislative proposals and are for illustrative purposes only.
\3\ For comparison purposes a baseline is provided. It is based on current fuel consumption patterns and revenue estimates for fiscal year 2005 from the
fiscal year 2001 President's Budget.
----------
Department of Energy,
Washington, DC 20585, July 17, 2000.
The Honorable Bob Smith, Chairman,
Committee on Environment and Public Works,
U.S. Senate,
Washington DC 20510
Dear Mr. Smith: As you requested in your letter of June 30, 2000, we
have developed a ``State Action'' MTBE ban scenario. The ``State
Action'' scenario assumes that States ban MTBE but that no Federal
action related to the oxygen requirement for reformulated gasoline
(RFG) will occur. This scenario supplements four other scenarios
related to MTBE reduction, that were completed at the request of the
President's Council of Economic Advisers in May 2000.
The ``State Action'' scenario assumes no waiver of the Federal
oxygen requirement for RFG, States ban MTBE starting in 2003, and all
areas currently participating in the RFG program continue to do so.
Given these assumptions the average price of all gasoline (both RFG and
conventional) in the United States is between 7 and 8 cents per gallon
higher between 2003 and 20 35 than the reference case Since RFG makes
up about 30 percent of the national gasoline pool, the expected price
increases for complying gasoline in RFG areas would be substantially
higher. In the ``State Action'' scenario, ethanol demand increases to
229,000 barrels per day in 2005, which is more than double the
consumption estimated for 2000, and about 100,000 barrels per day above
the reference case demand in 2005. Further details about results and
methodology of the Estate Actions scenario are provided in the enclosed
summary document.
We appreciate the opportunity to contribute to the analysis of this
issue. If you have any questions or comments, please contact me or have
your staff contact Mary Hutzler at 586-2222.
Sincerely,
L.A. Pettis, Acting Administrator,
Energy Information Administration.
______
Summary of ``State Action'' Scenario Requested by the Senate Committee
on Environment Public Works
The Energy Information Administration completed this
analysis at the request of the Senate Committee on Environment
and Public Works as part of its assessment of legislative
options related to methyl tertiary butyl ether (MTBE) reduction
The committee requested a ``State Action'' scenario, which
assumes that MTBE will be banned by States, but the Federal
oxygen requirement for reformulated gasoline (RFG) will not be
waived. This ``State Action'' scenario supplements four MTBE
related scenarios completed earlier at the request of the
President's Council of Economic Advisers. The ``State Action''
scenario resulted in about 100,000 barrels per day additional
ethanol blending and U.S. average gasoline prices (both RFG and
conventional) of 7 to 8 cents per gallon higher than the
reference case. Since RFG makes up about 30 percent of the
national gasoline pool, the expected price increases for
complying gasoline in RFG areas would be substantially higher.
The incremental price increase of this scenario is larger than
any of the options explored previously. The methodology and
results of this analysis as they compare to the reference case
and the previous MTBE scenarios are described below.
Methodology
The analysis was performed using the Petroleum Market
Module (PMM) in the National Energy Modeling System (NEMS). The
PMM represents domestic refinery operations and the marketing
of petroleum products to consumption regions. PMM solves for
petroleum product prices, crude oil and product import activity
(in conjunction with the international energy module and the
oil and gas supply module), and domestic refinery capacity
expansion and fuel consumption. PMM is a regional, linear
programing representation of the U.S. petroleum market.
Refining operations are represented by a three region linear
programming formulation of the five Petroleum Administration
for Defense Districts (PADDs). PADDs I (East Coast) and V (West
Coast) are each treated as single regions, while PADDs II
(Midwest), III (Gulf Coast), and IV (Rocky Mountains) are
aggregated into one region. Each region is considered as a
single firm where more than 59 distinct refinery processes are
modeled. Refining capacity is allowed to expand in each region
over each non-overlapping 3-year period. That is, in 2001 the
model looks ahead to 2004 to determine how much new capacity is
required and then allows additions of new capacity in 2002,
2003, and 2004. The capacity planning decisions begin anew for
2007 at the end of 2004. As a result, cumulative investment for
any given year includes investment to meet future expectations
of market demand. As with the four previous scenarios, the
``State Action'' scenario assumes a return on investment (ROI)
component of 10 percent with a 15 percent hurdle rate for
investment decisions.
In the model, products are produced to actual average
specifications and demands with calibrations to account for
non-linear blending, qualities such as Reid Vapor Pressure
(RVP) in motor gasoline. The PMM models EPA's complex model
requirements through specification constraints on aromatics,
benzene, sulfur, RVP, E200, E300, olefins, and oxygen content.
The specification constraints conform to EPA's complex model
requirements for emissions reductions of VOCs, NOx, and toxics.
Key Assumptions of ``State Action'' Scenario
States ban MTBE in 2003.
The Federal minimum oxygen requirement of 2.0
percent (weight) for RFG remains intact. No waivers of the
Federal statutory requirement are granted.
No renewable fuels standard is assumed.
Maintaining toxic emissions benefits. Air toxic
emissions from RFG are assumed to be maintained at current
levels.
Low sulfur assumptions. The PMM does not accost
for the recently promulgated Tier 2/gasoline sulfur
regulations. Investments for meeting the low-sulfur gasoline
requirements may simplify additional modifications to
accommodate limits on MTBE, making MTBE reduction less costly
than it would have been on its own. On the other hand, sulfur
reduction may result in both octane and volume losses,
potentially increasing the costs of restricting the use of
MTBE.
Assumed gasoline demand. The gasoline forecast is
based on the Annual Energy Outlook 2000 demand forecast: 9.4
million barrels per day in 2005 and 10.2 million barrels per
day in 2010.
Areas that currently use RFG are assumed to
continue to use RFG.
MTBE use outside the United States will continue.
As with the previous scenarios, no ban or reduction in the use
of MTBE is assumed for other countries. Assuming an
international reduction in MTBE use would have implications for
import availability that have not been analyzed.
Cost of increased ethanol blending. The PMM
solves for the increase in ethanol prices resulting from
greater demand. All additional ethanol requirements are assumed
to be met win domestic supply. The level of ethanol production
required this scenario is associated with production costs
which are between 35 and 40 cents per gallon higher than the
reference case between 2003 and 2005. These costs do not
reflect any additional infrastructure costs that might be
associated with the expansion of ethanol blending.
Results of the ``State Action'' Scenario
The results of this scenario can be evaluated in terms of
incremental differences from a reference case Like the ``State
Action'' case, the reference case assumes that the Federal
oxygen requirement for RFG remains intact. However, the
reference case reflects no phase-out of MTBE outside of
California. \1\
---------------------------------------------------------------------------
\1\ The reference case is similar to the reference case in the
Annual Energy Outlook 2000, but uses a return on investment (ROI) of 10
percent instead of 15 percent, to be more consistent with other
industry studies. This reference case also includes a minor correction
to the specifications of sub-specification gasoline which is blended
with ethanol to produce finished gasoline.
---------------------------------------------------------------------------
The ``State Action'' scenario resulted in higher U.S.
average gasoline prices of about 8 cents per gallon in 2003,
declining to 7 cents per gallon by 2005 compared to the
reference case In this scenario ethanol demand increases to
229,000 thousand barrels per day in 2005 which is more than
double the consumption estimated for 2000, and about 100,000
barrels per day above the reference case demand.
----------
Appendix VIII
Hearings
On December 9, 1997, the Committee on Environment and
Public Works held a field hearing on the presence of MTBE in
the nation's water supply. The hearing was held in Sacramento,
California. Testimony was given by Nancy J. Balter, principal,
Center for Environmental Health and Human Toxicology, and
former associate professor of pharmacology, Georgetown
University Medical Center; Nachman Brautbar, professor of
clinical medicine, University of Southern California School of
Medicine; Cynthia Dougherty, Director, Office of Groundwater
and Drinking Water, Environmental Protection Agency; Stephen K.
Hall, executive director, Association of California Water
Agencies; The Honorable Tom Hayden, California State Senator;
The Honorable Richard Mountjoy, California State Senator; Gary
Patton, counsel, The Planning and Conservation League; Craig
Perkins, Director of Environment and Public Works Management,
City of Santa Monica, California; Peter M. Rooney, Secretary,
California State Environmental Protection Agency; David Spath,
Chief, Drinking Water and Environmental Management Division,
California State Environmental Protection Agency; and John
Zogorski, Chief of National Synthesis on Volatile Organic
Compounds and MTBE, U.S. Geological Survey.
On September 16, 1998, the Committee on Environment and
Public Works held a hearing on S. 1576, a bill to amend the
Clean Air Act to permit the exclusive application of California
State regulations regarding reformulated gasoline in certain
areas within the state. Testimony was given by The Honorable
Brian Bilbray, U.S. Representative from the State of
California; John D. Dunlap, III, chairman, California Air
Resources Board; Douglas A. Durante, executive director, Clean
Fuels Development Coalition; The Honorable Dianne Feinstein,
U.S. Senator from the State of California; Daniel S. Greenbaum,
president, Health Effects Institute; Al Jessel, senior fuels
specialist, Chevron Products Company; and Ned Sullivan,
commissioner, Maine Department of Environmental Conservation.
On October 5, 1999, the Subcommittee on Clean Air,
Wetlands, Private Property and Nuclear Safety of the Committee
on Environment and Public Works held a hearing on the Blue
Ribbon Panel findings on MTBE. Testimony was given by Robert H.
Campbell, chairman and chief executive officer, Sunoco, Inc.;
The Honorable Jake Garn, vice chairman, Huntsman Corporation;
Daniel S. Greenbaum, president, Health Effects Institute; and
Michael P. Kenny, executive officer, California Air Resources
Board.
On June 14, 2000, the Subcommittee on Clean Air, Wetlands,
Private Property and Nuclear Safety of the Committee on
Environment and Public Works held a hearing on the
environmental benefits and impacts of ethanol under the Clean
Air Act. Testimony was given by Dan Greenbaum, president,
Health Effects Institute; Blake Early, environmental
consultant, American Lung Association; Michael Graboski,
director, Colorado Institute for Fuels and High Altitude Engine
Research, Colorado Department of Chemical Engineering, Colorado
School of Mines; Bob Slaughter, director, National
Petrochemical & Refiners Association; Jack Huggins, vice
president, Williams Energy Services; Jason Grumet, executive
director, Northeast States for Coordinated Air Use Management;
Stephen Gatto, president and chief executive officer, BC
International; Gordon Proctor, director, Ohio Department of
Transportation; The Honorable Charles Grassley, United States
Senator from the State of Iowa; The Honorable Tom Harkin,
United States Senator from the State of Iowa; The Honorable
Richard Durbin, United States Senator from the State of
Illinois.
Legislative History
On July 27, 2000, S. 2962 was received in the Senate, read
twice, and referred to the Committee on Environment and Public
Works. On September 7, 2000, the committee held a business
meeting to consider the bill. The bill, as amended, was ordered
Reported on September 7, 2000.
Roll Call Votes
On September 7, 2000 at 9:30 a.m., the committee held a
business meeting to consider S. 2962. A manager's amendment
offered by Senator Smith was agreed to by unanimous consent. An
amendment relating to the waivers under the Clean Alternative
Fuel program the offered by Senator Inhofe was agreed to by
voice vote. A second amendment relating to limiting liability
for mandated fuel additives offered by Senator Inhofe was
defeated by voice vote. An amendment to establish a Transition
Investment Program for MTBE producers offered by Senator
Hutchison was defeated by voice vote. Two amendments that
struck most provisions of the bill, one on risk analysis and
another authorizing additional funds for MTBE cleanup, offered
by Senator Bennett were defeated en bloc by voice vote. The
committee recessed at 11:35 a.m. to reconvene at the call of
the chair.
The committee reconvened at 12:20 p.m. in the President's
Room (S-216, U.S. Capitol). The committee continued
consideration of S. 2962. Upon no further discussion of the
bill, a motion to report the bill was taken by recorded vote.
Senator Boxer's motion to report the bill, as amended, was
agreed to by 11 ayes, 6 nays, and 1 not voting. Voting in favor
were Senators Baucus, Boxer, Chafee, Crapo, Graham, Lautenberg,
Moynihan, Reid, Voinovich, Wyden, and Smith. Voting against
were Senators Bennett, Bond, Hutchison, Inhofe, Thomas, and
Warner. Senator Lieberman was recorded as not voting.
Regulatory Impact Statement
The regulatory authority granted by this bill is structured
to streamline and make flexible the imposition of any new
requirements.
The authority to waive the oxygen mandate granted to
Governors under Section 2 of this bill requires no regulatory
action to become effective. Section 2 authorizes regulations to
establish new performance standards for toxic emissions and
aromatic content of gasoline. If regulations are not
promulgated within 270 days, statutory performance standards
become effective, rendering regulations unnecessary. The
statutory performance standards could be revised by regulation
based on data described in Section 2. Compliance with the
performance standards is managed through existing regulatory
structures under Section 211 (k) of the CAA.
No regulatory action is required to effect the elimination
of MTBE. Regulatory authority is provided to the Administrator
to implement a phase down prior to the ban on use of MTBE. Use
of this authority is not mandated by the bill. The
Administrator's existing authority to limit the use of fuels or
fuel additives is expanded by the bill to allow consideration
of water pollution effects.
The provision in Section 4 that allows for adjusting RVP
requirements relies entirely on existing authority and
regulatory structures for revision and approval of SIPs.
Section 6 creates new regulatory authority to implement
market-based compliance strategies. It is expected that the
credit-trading regulations could largely be drawn from existing
regulatory structures used to implement Title 2 and Title 4 of
the CAA. Regulations necessary to govern the calculation of
credits are the exception and would be new. The definitions of
vehicles eligible for credits under this section have been
primarily drawn from existing regulatory structures and
promulgated regulations, including the Tier 2 vehicle emission
regulations.
Section 6 provides new regulatory authority for granting
waivers of the provisions of this section. This authority would
only be used in response to a waiver application by one or more
States.
The provisions in Section 7 regarding additional opt-in
areas rely entirely on existing authority and regulatory
structures for revisions and approvals of SIPs.
Section 9 of the bill adds mandatory deadlines for the
exercise of EPA's existing regulatory authority to maintain air
quality through standards and performance requirements for
motor fuels, fuel additives, and vehicles. The Administrator
must issue regulations: a) not later than 7 years after
enactment, to ensure that the requirements of this bill
affecting motor vehicle fuels and fuel additives will not lead
to a worsening of air quality or significantly increased
emissions on a per gallon average compared to a 1998-2000
baseline; and b) not later than 10 years after enactment, to
establish performance requirements for motor vehicle fuels,
fuel additives, and vehicles which are necessary to adequately
protect public health and the environment and achieve specific
reductions in the use of compounds or associated emission
products that pose the greatest risk to human health. Both
regulations are preceded by analyses which require the
Administrator to consider the entire life cycle of the
production, distribution, and use of motor vehicle fuels, fuel
additives, and vehicles. Compliance with both regulations is
required as expeditiously as practicable, taking into account
costs and lead time, similar to conditions in Section 202 (i)
of the CAA.
Mandates Assessment
In compliance with the Unfunded Mandates Reform Act of 1995
(Pub. L. 104-4), the committee finds that this bill imposes no
Federal intergovernmental unfunded mandates on State, local or
tribal governments. All of the bill's governmental directives
are imposed on Federal agencies. Furthermore, Section 2 of the
bill provides relief from the mandate in current law that RFG
contain 2 percent oxygen by weight. This bill provides
authority to the Governor of a State to waive that CAA mandate.
In addition, the committee finds that this bill does not
preempt any State, local or tribal law.
The committee finds that this bill imposes two mandates on
the private sector. Section 3 of the bill prohibits the use of
MTBE as a fuel additive. This ban requires the private sector
to identify and use alternative fuel additives, which may
increase fuel production costs. Section 6 of the bill
establishes a Clean Alternative Fuel program that reserves an
increasing portion of the total motor vehicle fuel pool for
fuel that: 1) reduces pollution relative to conventional fuel
usage; and 2) displaces some petroleum consumption. This new
program is expected to increase the cost of fuel production.
Section 423(c) of the Unfunded Mandates Reform Act requires
each report to contain an estimate of the direct costs to the
private sector required to comply with the Federal mandates.
The committee is unable to include such estimates at this time
because the Congressional Budget Office has not completed an
analysis of the bill as reported by the committee.
Cost of Legislation
Section 403 of the Congressional Budget and Impoundment Act
requires each report to contain a statement of the cost of a
reported bill prepared by the Congressional Budget Office.
Senate Rule XXVI paragraph 11(a)(3) allows the report to
include a statement of the reasons why compliance by the
committee is impracticable. The committee is unable to include
a statement of the cost at this time because the Congressional
Budget Office has not finished an analysis of the bill.
Additional Views of Senator George V. Voinovich
As a member of this committee, I supported S. 2962 because
I believe it contains three of my main environmental priorities
banning MTBE, protecting air and water quality, and encouraging
the use of ethanol and other alternative fuels.
I have been a strong supporter of the use of ethanol for
its environmental benefits toward reducing carbon monoxide,
particulate matter and toxics. In addition, I believe it
benefits the agricultural community through the use of corn.
And I support the use of ethanol as a way to help reduce our
nation's dependence on foreign oil.
Ethanol has been beneficial to the environment and the
agricultural community. It has been used successfully to
improve air quality in areas that use Reformulated Gasoline
(RFG). It also has reduced carbon monoxide emissions under the
Oxygenated Fuels program in carbon monoxide nonattainment
areas.
Like MTBE, another oxygenate used in RFG, ethanol helps
lower emissions of volatile organic compounds (VOCs), toxics,
carbon monoxide and particulate matter. According to EPA, RFG
is responsible for 17 percent reductions in VOC emissions and
30 percent reductions in toxic emissions. Oxygenates, such as
ethanol, also reduce the use of aromatics in gasoline, many of
which are known or potential human carcinogens.
Unlike MTBE, however, ethanol does not contaminate ground
water and drinking water systems.
In addition, the production of ethanol is helping our
nation's farmers. The U.S. Department of Agriculture estimates
that about 555 million bushels of corn are used to produce
about 1.4 billion gallons of fuel ethanol.
I also believe one of the important benefits of using
ethanol is that it is domestically produced. While I do not
believe that ethanol will take the place of conventional
gasoline, I believe it is important to support its growth as a
tool to help reduce this country's reliance on foreign oil and
gasoline imports. Today, our oil imports have risen to about 55
percent.
However, as chairman of the Transportation and
Infrastructure Subcommittee, I believe we need to keep in mind
the effects that increased ethanol use would have on the
Highway Trust Fund.
The sale of ethanol-blended gasoline results in a loss of
highway revenues because of the ethanol tax credit. Under
current law, the tax on gasohol comprised of 10 percent ethanol
is 5.4 cents per gallon less than the tax on gasoline. As a
result, tax deposits to the Highway Trust Fund's highway
account will be reduced approximately $387 million this year
alone. By increasing the sale of ethanol blended fuel, the bill
will exacerbate that revenue loss, perhaps by a substantial
amount.
Ohio's contribution to the highway trust fund is reduced by
8.5 cents for each gallon of ethanol-blended fuel sold in the
State. I would expect that ethanol use will continue to rise
and will continue to reduce not only Ohio's contributions to
the trust fund, but other States' as well.
For Ohio, these reduced contributions to the highway trust
fund reduce Ohio's Federal highway funding by $185 million
annually. To put that number in perspective, it equals 21
percent of Ohio's total Federal obligation ceiling. It equals
two-thirds of our State's entire construction budget. And, it
equals the Ohio Department of Transportation's budget for
routine bridge repair and replacement each year.
There is a way to ameliorate that problem to some extent.
Specifically, over $400 million per year of the tax on ethanol-
blended fuels is diverted from the Highway Trust Fund into the
General Fund. Before the next highway reauthorization bill is
enacted, we should work with the Finance Committee to shift
that tax into the Highway Trust Fund where it belongs.
Under current law, 10 percent ethanol-blended gasohol is
taxed at 13 cents per gallon. 9.8 cents is deposited into the
Highway Trust Fund; 0.1 cent goes to the Leaking Underground
Storage Tank Fund; and the remaining 3.1 cents goes to the
General Fund. I received a commitment from the chairman and
ranking member of this committee to encourage the Finance
Committee to move the 3.1-cent ethanol tax out of the General
Fund and into the Highway Trust Fund.
Further, I am pleased that the committee adopted an
amendment that I offered to place an average annual cap of 26
percent by volume on the amount of aromatics to be used in
Reformulated Gasoline (RFG). Aromatics are produced in the
gasoline refining process. They along with oxygenates have high
octane and are used to increase performance in vehicles. It is
likely that the aromatic content of gasoline would increase due
to the removal of oxygenates from RFG. During the combustion
process, aromatics are partially converted to benzene a known
carcinogen xylene and toluene. In addition, aromatics are known
to increase ozone pollution.
Essentially what this bill will do, with the inclusion of
my amendment, is prevent any potential air pollution increases
associated with aromatics, including benzene, xylene and
toluene. The purpose of S. 2962 is to address a water
contamination problem caused by the use of MTBE. However, with
the inclusion of the aromatics amendment, this committee has
sent a signal that the use of aromatics, which increase
pollution and emissions of known carcinogens, is not
acceptable.
Additional Views of Senators Lautenberg, Moynihan, and Chafee
We support the bill as the most viable approach to
eliminating the use of MTBE as a gasoline additive, while
preserving the air quality benefits of the reformulated
gasoline (RFG) program. We are taking this opportunity to
clarify our views regarding the conditions under which a State
may waive the Clean Alternative Fuel Requirements of the bill.
Without the waiver provision, the bill could ultimately
lead to a near tripling of ethanol use nationwide. Our view is
that ethanol should be used in gasoline when it can help reduce
air pollution, that ethanol should not be used if the result is
increased air pollution, and that implementation of the Clean
Alternative Fuel Requirements Waiver Program should reflect
this philosophy.
Ethanol use can provide important environmental benefits.
For example, ethanol use helps to reduce carbon monoxide
tailpipe emissions from older vehicles. Also, because ethanol
is a good source of octane that contains no aromatics and
modest levels of sulfur, refiners can use it to help achieve
limits on toxic aromatics and sulfur in the RFG program.
At the same time, however, ethanol use can have substantial
environmental drawbacks. Ethanol can significantly increase
volatility when mixed with gasoline. Therefore, because
evaporation of gasoline hydrocarbons is a major contributor to
smog in most areas, ethanol use can complicate reduction of
summertime smog. In addition, some tests show that ethanol in
RFG increases tailpipe emissions of nitrogen oxides (NOx).
Furthermore, tests also indicate that NOx increases are
converted in the atmosphere to particulate pollution.
In addition to environmental considerations, we appreciate
the fact that the bill allows economic harm to be considered in
granting a waiver from the Clean Alternative Fuel Requirements.
Oil refiners have warned us that excessive use of ethanol,
particularly in the summertime, may cause supply dislocations.
We strongly believe the EPA should implement the waiver program
in a way that prevents such supply dislocations.
We strongly believe the U.S. Environmental Protection
Agency (EPA) should take environmental and economic factors,
such as those mentioned here, into consideration when deciding
whether to grant a State's request to waive the requirements.
Additional Views of Senator Barbara Boxer
I was pleased to support S. 2962 as reported by the
committee. I am also pleased to join in the majority views
contained in this report. On August 4, 1999, the full Senate
approved my Sense of the Senate calling for the phase-out of
MTBE. In S. 2962, this committee has crafted a comprehensive
solution to the MTBE problem that gives effect to the view of
the Senate that MTBE must be phased out.
I write separately here to underscore the committee's work
on two very important issues, and to urge the adoption of the
bill by the full Senate.
The first issue is the committee's decision to provide for
a direct and complete phase-out of MTBE. The second issue is
the committee's decision to reject efforts to protect oil
companies from lawsuits that would hold them responsible for
cleaning up MTBE-contaminated groundwater and drinking water
across the nation.
Almost 3 years ago, my friend, the late Senator John
Chafee, permitted me to chair what turned out to be the first
of many hearings this committee would hold on MTBE. I held that
hearing in the wake of news that Santa Monica, California had
lost the majority of its drinking water supply because a
little-known fuel additive called MTBE had leaked into Santa
Monica's major drinking water wells from underground fuel
tanks.
Since Santa Monica, it has been estimated that some 10,000
groundwater wells in California are likely to be contaminated
with MTBE. Lake Tahoe, Glenville, and other small communities
in California have lost drinking water supplies to the
turpentine taste and smell of MTBE. And we also now know, MTBE
is not just a California problem. According to a March 2000
report of the U.S. Geological Survey, up to one third of the
nation's drinking water supplies may now be contaminated with
MTBE.
The basic facts I learned at that first MTBE hearing led me
to call for MTBE's phase-out. Those facts remain unchallenged
today and accurately foretold the contamination crisis we now
face.
First, MTBE is one of the most widely used chemicals in the
U.S. In 1997, in fact, MTBE was the second most-produced
chemical in the nation. Second, it only takes a very small
amount of MTBE to contaminate a drinking water supply with the
detectable taste and odor of turpentine. Third, MTBE is
classified by the Environmental Protection Agency (EPA) as a
possible human carcinogen. Fourth, when MTBE leaks from an
underground storage tank, from a motor boat or from a gas tank
after a car accident into groundwater, it moves through that
water very fast and very far. And, finally, unlike the other
harmful toxins in gasoline, MTBE resists degrading once in
water and is very expensive to remove from water.
In the years which followed that first hearing, a variety
of solutions were proposed and considered before the solution
of a complete MTBE phase-out was ultimately embraced by the
committee in S. 2962. A discussion of those other proposals
helps show why the committee found a complete phase-out to be
the best solution to the MTBE problem.
The first proposed approach to the MTBE problem was simply
to upgrade our nation's underground fuel storage tanks to
prevent MTBE leaks. Proponents of this approach noted that any
leak of gasoline from an underground tank poses a serious
threat because, in addition to MTBE, gasoline contains highly
toxic chemicals like benzene. Because such leaks are clearly
dangerous for a variety of reasons, the argument went, we
should focus upon making that system fail-safe.
While we must do all we can to ensure that underground fuel
tanks don't leak, I did not believe that simply replacing old
fuel tanks with new ones would solve the MTBE problem. The tank
proposal ignores the other routes MTBE follows to our drinking
water. It also ignores the fact that, as the EPA MTBE Blue
Ribbon Panel noted, tanks--even new ones--will leak. Sometimes
tanks aren't installed properly or have other defects that
contribute to leaks.
For example, a July 22, 1999 study by the Santa Clara
Valley Water District found that many of its new tanks are
leaking. The study reviewed a total of 28 sites with fully
upgraded storage tank systems which had not previously shown
MTBE contamination to observe whether MTBE had leaked from
those tanks. MTBE was detected in groundwater at 13 of these
sites at concentrations ranging from 1 part per billion to
200,000 parts per billion.
The second approach to dealing with the MTBE problem was a
proposal to amend the Clean Air Act to remove the requirement
that reformulated gasoline contain 2 percent oxygen by weight.
Proponents of this approach argued that oil companies only use
MTBE to meet this Clean Air Act mandate. If that legal mandate
were removed, the argument went, oil companies would
voluntarily stop using MTBE and there would be no need for a
direct MTBE ban.
But the Clean Air Act requirement is not the only reason
oil companies choose to use MTBE. MTBE has been used since the
1970's as an octane booster and as a cheap way stretch gasoline
supplies. So long as there are reasons for oil companies to use
MTBE unrelated to the Clean Air Act's oxygen requirement, it
was my view that oil companies would go right on using it.
And I didn't need to look further than California to prove
it.
In California, the San Francisco Bay Area complies with
clean air standards and, as a result, the Clean Air Act oxygen
mandate doesn't apply there. Even in the absence of that
mandate, however, in May 1999, two large oil companies added
substantial amounts of MTBE to gasoline there in order to
stretch supplies. There was no reason to believe that it
wouldn't happen again.
The third approach to dealing with the MTBE problem was to
substantially reduce its use, but to not phase it out entirely.
This was, in fact, the recommendation of approximately half of
the EPA MTBE Blue Ribbon Panel. (The remainder of the members
called for a total phaseout.)
If it were the case that it took a large amount of MTBE to
contaminate a drinking water supply, this approach may have
worked. Unfortunately, it only takes an extremely small amount
of MTBE to contaminate a drinking water supply. Public water
agencies in California estimate that a single tablespoon of
MTBE can contaminate the amount of water it takes to fill an
Olympic-size pool.
The fourth approach, and the one the committee adopted in
S. 2962, was to simply phaseout MTBE over a 4-year period. That
is the approach taken in my legislation (S. 1037). That is the
approach I have urged EPA to take since 1998, and which finally
culminated in the EPA Toxic Substances Control Act (TSCA)
rulemaking to ban MTBE, which is now in its preliminary stages.
In my view, a total and complete phase-out is the only way
to ensure that MTBE does not continue to poison our nation's
drinking water.
The other issue I would like to underscore here is the
committee's consideration and rejection of the Big Oil bailout
amendment. That amendment would have provided oil companies
with broad protection from lawsuits seeking to hold them
responsible for cleaning up MTBE contamination. The rejection
of this amendment was particularly important to California
because several such cases have been brought there, including
in Santa Monica and Lake Tahoe.
Proponents of the bailout amendment argued in committee
that providing oil companies with protection from lawsuits is
appropriate because Congress told oil companies to use MTBE.
But the words ``methyl tertiary butyl ether'' appear
nowhere in the Clean Air Act.
Others argued that through adoption of the oxygen mandate,
Congress was responsible for creating the market for MTBE and
encouraging its use. Some of my colleagues also argued that oil
companies didn't realize that MTBE would pose the pervasive
drinking water threat we now know it to be.
As a result, amendment proponents concluded that Congress--
and by extension American taxpayers--should pay to clean up
MTBE contamination.
The history of both MTBE use and the committee's
consideration of the oxygen requirement, however, don't support
any of these arguments for the Big Oil bailout amendment.
First, long before the first word of the Clean Air Act
Amendments of 1990 was ever written, oil companies were both
using MTBE and planning to increase its use. In 1979, ARCO
first asked EPA for approval to use MTBE in gasoline at volumes
up to 7 percent as a way of boosting octane after lead was
removed from gasoline. Noting that this decision ``increase[d]
dramatically'' the use of MTBE, in 1986 EPA's Interagency
Testing Committee recommended MTBE for listing and testing
under TSCA.
So the market for MTBE existed long before the oxygen
requirement of the Clean Air Act was written. MTBE was not a
product invented to comply with that law.
Second, long before MTBE became an issue in California and
elsewhere, oil companies knew it would pose a drinking water
threat. The first noted release of MTBE wasn't Santa Monica in
1996, but Rockaway, New Jersey in 1980. There, a MTBE release
from a Shell gas station contaminated a public drinking water
supply.
By 1986, the Maine Department of Environmental Protection
(DEP) presented a paper to the National Waterworks Association
and the American Petroleum Institute accurately concluding that
MTBE ``is more soluble and [a] more rapidly spreading ground
water contaminant than other components of gasoline'' and that
MTBE ``is more difficult to remove from contaminated water than
other components of gasoline.''
The Maine DEP urged the oil industry not to use MTBE stored
in underground fuel tanks, and to adopt other stringent
protections if the industry still chose to continue using it
despite the warnings.
The oil industry response to both the Maine paper and EPA's
proposed MTBE TSCA listing was to defend MTBE rather than
publicly investigate the concerns. In comments to the agency on
the TSCA listing, oil companies argued that MTBE did not
present a significant risk to the environment, that sufficient
data existed to make that claim, and that EPA should not
require companies to develop that data in order to evaluate the
risk MTBE posed to drinking water.
So, it's not right to say that the MTBE drinking water
problem is a surprise to the oil industry.
Third, it is not entirely accurate to say Congress foisted
the 2 percent requirement on a reluctant oil industry. In fact,
at least one major oil company both advocated the adoption of
the 2 percent oxygen requirement and touted the ``environmental
benefits'' of using MTBE to meet it. That testimony is found in
the committee's 1989 hearing record on the Clean Air Act
Amendments of 1990. Other segments of the oil industry
supported the oxygen requirement as a means to defeating an
alternative fuels requirement.
But even if all this history didn't exist, what possible
justification could there be for preventing a full and
impartial airing of the liability issue in our courts? Just
like the manufacturer of any other defective product, the oil
industry should not be let off the hook without such a hearing
for what promises to be an extremely costly environmental
cleanup effort.
While there is no reliable national estimate of what these
costs will be, the estimated cost of cleaning up the MTBE-
contaminated water in Santa Monica alone is $150 to $200
million. That's just one water supply and does not include the
substantial legal costs Santa Monica has incurred or the costs
of importing water to the people there.
Discovery is now going on in the California litigation. We
can expect that this will produce a clearer picture of just
what the oil industry knew or should have known about MTBE. The
committee didn't see fit to cutoff this process, and I would
urge my colleagues in the full Senate and House to reject any
attempt to add such liability protection to S. 2962 as it moves
forward for full consideration.
Minority Views of Senator Jim Inhofe
As the chairman of the Clean Air, Wetlands, Private
Property and Nuclear Safety Subcommittee I must object
strenuously to S. 2962 as reported by the Environment and
Public Works Committee. The bill completely rewrites major
sections of the Clean Air Act without the benefit of
Congressional hearings to understand the complete impact on our
Nation's environment and energy policy.
While I chaired two subcommittee hearings on MTBE and
ethanol, and the full committee held two hearings on MTBE, none
of the hearings addressed the issue of a renewable fuels
mandate, which comprises the bulk of the legislation reported
out of the committee. In addition, the expanded authority for
the EPA to regulate fuels and motor vehicles under Section 9
has not been justified or vetted through the hearing process,
and is an issue which should be considered as part of the
broader Clean Air Reauthorization process which this committee
has committed to addressing in the next Congress.
I agree with the necessity of addressing the problem of
MTBE being found in the drinking water of several States.
However, I believe this legislation, as reported out of the
Environment and Public Works Committee addresses too many
extraneous issues to the problem at hand. A far better approach
would be targeted legislation which addresses this specific
issue of MTBE in the drinking water. In my opinion, the
committee has failed to address this issue by trying to address
too much. The following are specific comments of the various
sections of the legislation and the accompanying majority
report. In addition, I am attaching a copy of a letter from Mr.
J.L. Frank, the President of Marathon Ashland Petroleum LLC.
Section 2. Waiver of Oxygen Content Requirement for Reformulated
Gasoline
The bill would substantially tighten air toxics and
aromatics emission standards for reformulated gasoline
(``RFG'') where the oxygenate mandate is waived. It will grant
EPA authority to issue standard-setting regulations. However,
27.5 percent air toxics emission reduction and 26 percent, by
volume, aromatics requirements will apply if EPA fails to issue
regulations within 270 days, or declines to promulgate them.
The proposed toxics and aromatics provisions far exceed
simply maintaining the air toxics benefits of the RFG program.
EPA is unlikely to be able to promulgate the air toxics and
aromatics regulations called for by the bill within 270 days.
Therefore, the reality is that the 27.5 percent air toxics
emission reduction and 26 percent, by volume, aromatics
requirements specified in the bill will be applicable. The
nationwide 27.5 percent toxics standard equals the highest
level of current regional over-compliance (this occurs in the
Northeast U.S.). Enforcing this amount of over-compliance
nationally will further restrict refiners' ability to make and
distribute Federal RFG and will impose unfair additional costs
on refineries exceeding current environmental requirements by a
smaller margin than those in the Northeast.
For example, RFG currently delivered to the Louisville, KY,
St. Louis, MO, Dallas, TX, and Houston, TX areas over-complies
with the existing toxics requirement for RFG but does not
achieve a 27.5 percent reduction. If the Governors of these
States waive the oxygenate mandate, refiners serving any of
these areas are likely to have to modify their refineries to
meet the more stringent standards, yet the bill provides no
time to allow for these changes. This could adversely affect
gasoline supplies and consumers, leading to fuel shortages and
price spikes.
Also important is the fact that EPA recently issued a
Notice of Proposed Rulemaking to further regulate mobile source
air toxics. Congress should work with EPA and its technical
experts rather than act independently. The air toxics and
aromatics requirements specified in S. 2962 are not needed or
justifiable. If Congress nevertheless chooses to act on toxics,
it should maintain RFG toxics over-compliance on a regional
basis in the context of legislation that reduces MTBE usage and
eliminates the oxygen requirement.
The majority report gratuitously urges EPA to expeditiously
act on the auto industry's 1999 petition to limit the
distillation index of gasoline. Like many provisions of this
bill, resolution of the distillation index issue is not
necessary to address the MTBE issue.
Section 4. Exclusion from Reid Vapor Pressure Requirement
Section 4 allows States to eliminate the 1-psi RVP waiver
for conventional gasoline blended with ethanol. If States can
eliminate the existing 1 psi RVP waiver for ethanol blends,
this will adversely affect conventional gasoline supply and
cost. The cost to manufacture the appropriate blendstock will
increase since extra-low volatility gasoline will be required
in order to make room for ethanol's higher volatility. Also,
moving a special low RVP blendstock through the distribution
system will probably create supply problems, reduce ethanol
blending, and reduce total gasoline supply in the Midwest.
Tight gasoline supplies could drive up prices and hurt
consumers.
Section 6. Clean Alternative Fuels Program
The Clean Alternative Fuels Program mandates a dramatic
increase in ethanol via a renewable fuels requirement. The
program requires that ethanol make up 0.6 percent of the total
motor fuel pool in 2002 and 1.1 percent in 2007. However, the
percentages are misleading because compliance is based on
gasoline-equivalent (or energy-equivalent) gallons and the
mandate is over all motor vehicle fuels, including diesel. The
actual volumes over the national gasoline pool are larger with
percentages ranging from 1.1 percent in 2002 to 2.0 percent in
2007. This will significantly expand the mandated use of
ethanol under Federal RFG and oxy-fuel programs, which is
currently roughly one-half of 1 percent of the national
gasoline market. These provisions would quadruple the federally
mandated ethanol use by requiring an ethanol level of 2.0
percent of the national gasoline pool in 2007. This compares
with 14 percent growth in gasoline consumption over this time
period, according to the most recent DOE projections.
In 2008, even more ethanol is required. The mandate grows
to 2.2 percent in 2008 and to 2.7 percent in 2011. This would
increase the federally mandated share of ethanol in 2011 by
roughly more than 400 percent relative to today's level. There
is no justification for this magnitude of increase, especially
considering that the growth of the gasoline market will be less
than 20 percent over this time period.
The bill prefers ethanol to other renewable fuels over the
early years of the program. The bill discourages the use of
other alternative fuels by restricting the amount of such fuels
that can be used during the transition period of the renewable
fuels mandate. In later years, i.e., 2008 and beyond, the bill
supposedly structures an alternative fuels mandate, but it will
remain an ethanol mandate. Bin 1 and bin 2 vehicles may not be
successful in the marketplace. Also, once refiners and fuel
distributors have put ethanol blending and distributing
infrastructure in place in the early years of the program, it
is unlikely that they will switch in a significant way to non-
ethanol alternative fuels in the out years due to the incentive
to avoid stranded investments. Ethanol will remain the only
realistic option to meet the mandated levels contained in the
legislation.
This legislation will have large adverse consequences for
the Highway Trust Fund due to the existing 5.4 cents per gallon
excise tax exemption for 10 percent ethanol blends and the 2.5
cents per gallon diversion from the Highway Trust Fund to
general revenues for ethanol-containing motor fuel. Loss to the
Fund will grow from the current annual level of $1.2 billion to
$2.4 billion in 2007 and to $3.5 billion in 2011 under this
legislation.
The ethanol mandate will have two additional negative
impacts: it will likely increase the cost of gasoline and
further limit refiners' ability to provide adequate supply.
This is especially true if coupled with elimination of the 1
psi RVP waiver for ethanol blends of conventional gasoline. The
bill requires that the mandates be met on a semi-annual basis,
thus forcing use of ethanol during the summer when the
volatility of gasoline must be controlled. Required summertime
use of ethanol will increase the cost of making gasoline to
meet environmental specifications imposed by State and Federal
law. Refiners will have to pay more to make special low-
volatility blend stocks for ethanol blending. Limited
availability of these blend stocks played an important role in
limiting refiners' ability to deal with supply interruptions in
the Midwest earlier this year, and according to the
Congressional Research Service was a significant factor in the
recent Midwest market volatility.
The mandates will likely mean higher-cost gasoline in the
Northeast. Yet, it will not provide people in the Northeast any
benefits. In addition, the legislation attempts to maintain the
air quality benefits of the RFG program while requiring the use
of ethanol, just as EPA's renewable oxygenate rule tried to do
in 1994, but that is unlikely to be the case. The D.C. Circuit
held that the mandated use of ethanol would likely increase
smog at the beginning and end of the summertime high ozone
season. American Petroleum Institute v. EPA, 52 F.3d 1113 (D.C.
Cir. 1995). It should go without saying that the air quality
benefits of the RFG program can be maintained without requiring
use of ethanol.
Some in the Northeast States assert that the proposed new
mandate will mean more ethanol in the Midwest, while Northeast
refiners will avoid using ethanol by purchasing credits. This
is unlikely. Refiners cannot base their compliance plans on the
hope that excess credits will be available, and recent EIA/DOE
analysis indicates that wide-spread ethanol use will occur in
all regions of the country should this legislation by enacted
into law, in part because few, if any, credits will be
generated.
When discussing the credit trading provisions of section 6,
the majority report suggests that credits can only be generated
through the use of bin 1 or 2 vehicles. That is incorrect.
Section 6 of the bill expressly provides that credits can be
generated through the use of more renewable fuels than
required.
The majority report suggests that the renewable fuel/
alternative fuel mandate will decrease U.S. dependence on
imports. That is unlikely. It is not expected that the
increased ethanol use that would result as a consequence of
enactment of this legislation would significantly reduce
petroleum consumption in the United State since for every 100
Btu generated through the combustion of ethanol it takes 75 Btu
of petroleum products to manufacture the ethanol.
The majority report suggests that the cost of the mandates
will likely be in the range of 3-5 cents per gallon in 2005.
The majority's cost estimates do not reflect the U.S.
government's most recent projections. A DOE/EIA analysis
indicates an average increase in gasoline prices of 5.7 cents
per gallon under this legislation, exceeding the 3-5 cents
ranged stated above. The analysis also indicates that RFG
prices would be significantly above the estimated price
increase of 5.7 cents per gallon for average gasoline
(conventional gasoline and RFG).
The majority report states that ``Should the bill not be
enacted, and multiple States ban MTBE, and the oxygen content
requirement is not made optional, the Administration's analysis
suggests that gasoline could be as much as 7-8 cents per gallon
more in 2005 than is otherwise expected.'' Once again, the
majority's projections do not reflect the U.S. government's
most recent projections. A recent DOE/EIA analysis indicates
that should the bill not be enacted, and multiple States ban
MTBE and the Federal 2 (wt percent) oxygen requirement be
repealed and no renewable or alternative fuel standards be
imposed that average gasoline prices would rise by 3.1 cents
per gallon. This option represents the most cost-effective
solution to addressing the MTBE issue and is why the EPA-
appointed Blue Ribbon Panel recommended this approach.
Section 7. Additional Opt-In Areas under Reformulated Gasoline Program
The RFG opt-in provision permits any area of the country to
opt into the RFG program, using a SIP (State Implementation
Plan) revision process. This provision overturns provisions in
the Clean Air Act Amendments and fails to consider the impact
of RFG opt-ins on the gasoline distribution system and the
increase in overall costs. In addition, it also overturns a
court decision American Petroleum Institute v. EPA, 198 F. 3d
275 (DC Cir. 2000). Congress should not overturn a court
decision without at least conducting hearings to understand the
implications involved in the court decision. In 1990, the
dimensions of the RFG program were debated extensively by
Congress, which rejected a national RFG program based on need,
supply, and cost. These same factors apply with all the more
force now since refining capability already risks being
substantially constrained as a result of numerous costly new
fuels regulations industry must comply with in a short
timeframe. Extending the RFG program to attainment areas cannot
be justified.
Section 9. Analysis of Motor Vehicle Fuel Changes and Additional
Performance Requirements
The legislation also contains provisions requiring EPA to
issue two sets of additional regulations within 10 years of
enactment. One set, to be finalized within 7 years, will
require that emissions from motor vehicle fuel and fuel
additives will not be significantly greater on a per gallon
average basis in any region than in 1998-2000 and that they
will not result in worse air quality. The second set of
regulations will be completed in 10 years and could affect both
fuels and vehicles. They will set performance standards to
protect public health and the environment and achieve a
specific reduction in the use of compounds or associated
emission products that threaten the most risk to human health.
These provisions of the bill unnecessarily lock EPA into
rulemaking activity and fail to take into account EPA's ongoing
rulemaking activity and authority under the existing Act. EPA
just recently promulgated more stringent Tier 2 vehicle
standards and more stringent gasoline sulfur requirements. EPA
also recently proposed to regulate diesel sulfur, and gasoline
benzene levels. Furthermore, EPA has authority under existing
sections 202 and 211 to regulate vehicles and fuels if needed
to protect the public health and welfare.
The majority report states that ``A more than de minimis
increase in contribution to any criteria or toxic air pollutant
is presumed to worsen air quality unless the Administrator
determines that other factors ameliorate the effect of such
increases.'' That is not an accurate reflection of the bill
language. Furthermore, there is no basis to presume that a mere
increase in mass emissions necessarily translates into air
pollution that may reasonably be anticipated to endanger public
health or welfare.
Other Issues
The General Statements and Background section refers to the
U.S. Geological Survey which estimated up to 20 percent of the
nation's drinking supplies are at risk due to their proximity
to underground fuel storage tanks. It is important to note that
this survey was conducted between 1988 and 1998 when most
systems were still out of compliance. According to the
Association of State and Territorial Solid Waste Management
Officials less than 50 percent of all underground storage tanks
were in compliance prior to 1998 and that as recent as 1996
only 30 percent were in compliance. Therefore, the detection
data reflects a time period before most of the underground
tanks were upgraded to the current standards.
The General Statements and Background section of the
majority's report contains numerous misstatements and errors.
It states that opt-in areas are required to remain in the RFG
program for 4 years. That is incorrect. Opt-in areas are
required to remain in the RFG program until the end of 2003. If
an area were to opt into the RFG program today, it would only
be required to remain in the program until the end of 2003, not
4 years.
The General Statements and Background section also states
that ``Recent data suggests that refiners have achieved a 27
percent or higher reduction in toxic air pollutants from the
1990 baseline.'' This is an overstatement. While a 27 percent
reduction was attained in the Northeast, the amount of over-
compliance was less in other areas of the country. That is why
the imposition of a statutorily mandated 27.5 percent reduction
results in an increase in stringency rather than just
maintenance of current over-compliance.
The General Statements and Background section asserts that
EPA has not yet met its rulemaking obligation under section
202(l) of the existing law. That is incorrect. The reformulated
gasoline and conventional gasoline anti-dumping regulations
that EPA promulgated in 1994 controlled air toxics from all
U.S. gasoline. Those regulations were based on the study
required under section 202(l) of the Act.
The General Statements and Background section states that
``Generally, the addition of oxygenates to gasoline allows for
more complete fuel combustion, and lowers emissions of ozone
precursors, such as nitrogen oxides and volatile organic
compounds.'' This statement fails to take into account the
findings of the National Research Council, Ozone-Forming
Potential of Reformulated Gasoline, 1999. (requested by EPA),
which stated ``The use of commonly available oxygenates in RFG
has little impact on improving ozone air quality and has some
disadvantages.''
The General Statements and Background section fails to
mention that the EPA Blue Ribbon Panel recommended a targeted
approach to address the MTBE issue, and did not recommend a
renewable fuels or alternative fuels mandate. Specifically, the
BRP recommended a phase-down of MTBE to pre-RFG levels and the
elimination of the Federal 2 (wt percent) oxygen requirement in
RFG.
In conclusion, I commend the chairman for his agreement to
work through a number of these issues prior to floor action on
the committee Bill, and I agree with him that a number of these
issues will have to be debated before the whole Senate. I
appreciate his willingness to work with me on these issues and
his commitment to solving the problem of MTBE in our drinking
water supply.
------
Letter from Marathon Ashland Petroleum LLC
September 8, 2000.
The Honorable James Inhofe,
U.S. Senate,
453 Russell Senate Office Building,
Washington, DC 20510-3603
Dear Senator Inhofe: I write today to express my profound concern
regarding yesterday's decision by the Environment and Public Works
Committee to report for full Senate consideration S. 2962, the Federal
Reformulated Fuels Act of 2000. This bill goes far beyond providing a
narrow legislative solution to the issues which have arisen concerning
the use of MTBE (methyl tertiary butyl ether) in gasoline. Instead it
represents a massive rewrite of the fuels provisions of the Clean Air
Act.
As the president of a major U.S. refining, marketing and
transportation company, I find this action astonishing. It has only
been a matter of weeks since I personally appeared before Congressional
committees and participated in numerous member requested meetings to
answer questions about the critical gasoline supply and demand
imbalances in the Midwest, which led to significant price spikes during
late spring and early summer of this year.
Throughout this difficult period, as we identified a series of
factors which contributed to these imbalances including the roll out of
the Phase II Reformulated Gasoline (RFG) program, I was told repeatedly
that my industry had failed to warn public officials that supply
imbalances were likely to occur.
This time, as Congress considers legislating another set of radical
changes to Federal fuel requirements, l feel compelled to go on record
to state clearly our belief that implementation of the provisions of S.
2962 will impose a burden on the consuming public of unacceptable and
entirely unnecessary price spikes.
We strongly oppose the sweeping changes to Title II of the Clean
Air Act contained in this legislation. Provisions such as the
imposition of new air toxics standards for RFG and conventional
gasoline areas, and the imposition of an aromatics cap, which will
dangerously restrict refining flexibility, are serious, substantive
changes which threaten to impose long range negative effects on both
our industry and the economy at large.
An eleventh hour rush to legislate absent the benefit of the fact
finding and robust debate that characterize traditional Clean Air Act
Reauthorization efforts is bad public policy. Given the logistical
impossibility of this sort of reasoned approach in the remaining days
before adjournment, we strongly urge you to go no further in this
Congress with this piece of legislation.
You may have heard that the oil industry opposes this legislation
because of its expansive renewable fuels requirement. My company is the
single largest blender of ethanol in gasoline in the United States. Let
me explain our perspective on this issue.
We categorically oppose fuel mandates because history has shown
that they inevitably lead to higher gasoline costs and tighter and less
reliable fuel supplies, not because we want to avoid using ethanol.
Ethanol is a significant element of our gasoline pool and we will
continue to blend it into our product so long as it remains an
economically viable component of gasoline. We simply believe that
additional mandates are unnecessary and ill advised.
There are other unintended negative consequences of this
legislation. The bill provides for a nearly unfettered ability by
States to adopt Federal RFG requirements. This flies in the face of
what we understood in 1990 to be the intent of Congress, which was that
cleaner and more expensive gasoline should be required only in areas
experiencing the worst air quality problems. S. 2962 ignores this
intent and dismisses the impact on the nation's supply and distribution
systems of a radically expanded RFG program.
Further, facilitating the ability of States to opt in to the RFG
program significantly increases the risk posed by the proliferation of
boutique fuels. To the extent that this patchwork approach to fuels
increases, our industry's ability to respond to supply shortages
decreases radically due to the limitations in the existing supply and
distribution infrastructure.
Additionally, damage to our nation's highway system will be
inevitable under this legislation. Due to the disparate Federal excise
tax treatment of gasoline and gasohol (gasoline blended with ethanol),
every gallon of gasoline replaced by gasohol represents a loss to the
tax-funded Highway Trust Fund. When such losses are multiplied by the
annually increasing mandate for ethanol usage in S. 2962, the deficit
to the Trust Fund amounts to billions of dollars.
I would like to close by emphasizing that we strongly support the
need to address the problems associated with the use of MTBE. To that
end, we urge Congress to support a much more narrow legislative
approach, such as that which is embodied in legislation introduced by
Senators Inhofe and Bingaman, which addresses the issue of oxygen
content in RFG consistent with the recommendations of the EPA's own
Blue Ribbon Panel on Oxygenates.
Sincerely,
J.L. Frank, President.
Minority Views of Senator Christopher S. Bond
I commend the chairman for his diligence and attempt to
find a workable solution to the MTBE water contamination issue.
S. 2962 could provide some tremendous gains for the use of
ethanol which would be a positive step for our environment,
rural farm economy, and a positive step in reducing our
dependence on foreign oil.
This country, requires a renewable, environmentally
friendly alternative to MTBE that helps create local jobs,
which adds value to our farmer's products, and which moves us
away from this energy hostage situation we are in where our
reliance on foreign-produced oil makes our producers, consumers
and economy subject to the whims of international cartel
autocrats. In my opinion, that alternative is ethanol.
The Federal oxygen content requirement was adopted in 1990
for several reasons. First, those of us in Congress understood
that oxygenates provide a source of clean octane--displacing
toxic compounds such as benzene and reducing ozone-forming
exhaust emissions of hydrocarbons and carbon monoxide. EPA has
stated the program is equivalent to taking 16 million vehicles
off the road each year. Congress also recognized the energy
security benefits of substituting a certain percentage of
imported petroleum with domestically produced renewable fuel
such as ethanol. When the Clean Air Act Amendments of 1990 were
passed, there were more than 500,000 American troops stationed
in the Middle East poised to begin Desert Storm. Promoting
renewables that are domestically produced, such as ethanol, is
a critical element toward regaining our independence from
foreign oil. Finally, we knew that oxygenates would provide an
opportunity to help the U.S. farm economy which was suffering
from falling export markets and low prices by creating
additional opportunities for our domestic resources and
products such as ethanol.
So, Congress enacted the oxygenate program as a means of
providing clean octane to address air quality, but also to
address the problems of energy security and rural economic
development. Today, the fundamental objectives of providing
clean octane for clean air, reducing dependence on imported
petroleum, and increasing farm income remain as valid as they
were in 1990.
I firmly believe that ethanol does play and will continue
to play in our nation's environmental, economic and energy
security. Unfortunately, some are trying to use the sins of
MTBE as a reason to pull the plug on clean-burning ethanol.
Ethanol is widely marketed across the country to increase
octane and reduce emissions through its clean burning
properties as an oxygenate. Ethanol, which contains
approximately 35 percent oxygen, enhances combustion and
therefore contributes to a more efficient burn of gasoline,
reducing carbon monoxide emissions, a contributor to harmful
ozone formation, by as much as 30 percent. The use of ethanol
reduces emissions of all the major pollutants regulated by the
Environmental Protection Agency (EPA), including ozone, carbon
monoxide (CO), particulate matter (PM10), and
nitrogen oxides (NOx). Ethanol is also an effective tool for
reducing air toxics. As a renewable fuel, ethanol can
dramatically reduce emissions. In addition, ethanol is an
organic, non-toxic, biodegradable substance, that will not harm
our nation's water quality.
Ethanol provides significant benefits to the economy,
particularly in farming communities across rural America.
Earlier this year, I participated in the first ethanol plant
grand-opening in Missouri. This facility is a 15 million gallon
per year facility located in Macon, Missouri and owned by
farmers across the State. The ethanol facility not only
provides new jobs, but a value-added market for their
commodities. In light of today's record low prices, value-added
ethanol processing provides a much-needed economic opportunity.
In a letter written by Secretary Glickman, where he assumes a
phaseout of MTBE and maintaining the oxygenate requirement, he
stated, ``The increase in farm and ethanol production caused by
replacing MTBE with ethanol is projected to create 13,000 jobs
across the economy by 2010. Over a third of the new jobs,
4,300, would be created in the ethanol sector itself. Another
6,400 jobs are created in the trade, transportation, and
service sectors. Farm sector jobs increase by 575. Jobs in
other industries, food processing, and energy sectors increase
by 1,600.''
It is clear to me and many others that ethanol is good for
the environment, both our water and our air, as well as our
economy.
Therefore, I support the Clean Alternative Fuel Program
contained in this legislation which encourages the use of
domestically produced resources such as ethanol. By encouraging
growth in domestic renewable energy resources we will reduce
our nation's dependence on imported oil and provide a much-
needed economic stimulus to rural economies with the added
environmental benefit of reducing emissions.
S. 2962 also allows areas wishing to opt into the
reformulated gasoline program the clear authority to do so. The
court ruling earlier this year created some confusion and
disappointment, especially for areas seeking to opt-in as a way
to avoid new violations under the Clean Air Act.
Finally, the legislation attempts to address the issue of
leaking underground storage tanks and MTBE. By authorizing
resources to help with the MTBE clean-ups necessary because of
leaking underground storage tanks we can help the States
address this problem that could unfortunately still grow.
However, I believe the bill falls far short of protecting
and maintaining the clean air benefits that were made possible
by the oxygenate requirement. I firmly believe that if we
eliminate the oxygenate requirement we need to ensure the
benefits of the requirement, both public health and clean air,
are at minimum maintained. Benefits of oxygenates are less
aromatics, less olefins, reduced carbon monoxide, reduced
ozone, and lower toxic emissions. Unfortunately, few of these
things are adequately addressed.
In addition, I believe that this bill could result in some
unintended consequences. There are provisions in the
legislation which are drafted in ways that are too broad and
which provide new authority to the EPA which was never the
intent of this legislation.
This bill does contain many positives, most importantly
because it recognizes the importance of domestic resources such
as ethanol and the role these resources can play in our fuel
supply and the environment. However, improvements still must be
made. I am committed to continuing my efforts on this issue to
ensure that any enacted legislation is a good clean air bill,
good clean water bill, good rural farm economy bill, and a good
domestic energy bill.
Minority Views of Senator Robert F. Bennett
DISSENTING VIEWS ON S. 2962, THE FEDERAL REFORMULATED FUELS ACT OF 2000
I submit these views to explain my opposition to S. 2962,
the Federal Reformulated Fuels Act of 2000, as approved by the
Senate Committee on Environment and Public Works. In summary, I
am concerned that the statutory ban on the use of MTBE in motor
vehicle fuels is arbitrary and sets a dangerous precedent for
private sector participation in future federally mandated
environmental programs. Further, I have concerns about the
Clean Alternative Fuel program becoming a vehicle for mandating
greater consumption of ethanol rather than truly encouraging
the development of various alternative fuels. I am also
disturbed by the manner in which the bill attempts to ensure
environmental anti-backsliding and the creation of additional
authority for the Environmental Protection Agency to regulate
motor vehicles.
SECTION 3--BANNING THE SALE OF GASOLINE CONTAINING MTBE
Section 3 of S. 2962 would make three amendments to the
Clean Air Act: (1) it would amend the Clean Air Act to include
new authority for EPA to regulate, control or prohibit a fuel
or fuel additive based on water pollution; (2) it would give
California special authority beyond that already given to any
other state to regulate motor vehicle emissions for the purpose
of protecting water quality; and (3) it would require the EPA
Administrator to ban the use of MTBE in gasoline not later than
4 years after the date of enactment. I have concerns with each
of these provisions.
The Clean Air Act Should Not be Used to Regulate Water Quality
Section 3(a) of S. 2962 amends Section 211(c)(1) of the
Clean Air Act to give EPA the authority to regulate fuels and
fuel additives not only to protect air quality, but also to
prevent water pollution. This amendment would create a clumsy
and inefficient overlap of regulatory authorities. The Clean
Air Act is intended to regulate air quality. The committee has
failed to show that other existing authorities, such as the
Clean Water Act and Subtitle I of the Resource Conservation and
Recovery Act pertaining to leaking underground storage tanks
containing petroleum, are inadequate to address the problem of
groundwater contamination. Even if such a showing were made,
the appropriate response would be to modify those authorities,
not add new authorities in an unrelated statute. Unless and
until Congress develops one comprehensive environmental
statute, the Clean Air Act should not be used to regulate water
quality.
The State of California Should Not be Given Special Authority to
Regulate Water Quality
Section 3(a) of S. 2962 amends Section 211(c)(4)(B) to give
the State of California additional authority to regulate water
quality. For the reasons cited above, I believe it is
inappropriate to use the Clean Air Act to give any jurisdiction
additional authority to regulate water quality.
The ban on MTBE is arbitrary and unprecedented
Section 3 of S. 2962 requires the EPA Administrator to ban
the use of MTBE in gasoline not later than 4 years after the
date of enactment. This statutory prohibition is arbitrary and
unprecedented in several respects.
First, the bill makes no finding that MTBE presents a
serious risk to public health. Indeed, the proponents of the
bill acknowledge that the health effects of exposure to low
levels of MTBE are unknown. Clearly, additional scientific
analysis is needed.
The committee fails to take any notice of information
indicating that recent efforts to prevent gasoline (including
MTBE) from being released into the environment are succeeding
and, as a result, human exposure to MTBE is diminished. The
committee's action obviously is rooted in the consequences of
underground storage tanks that were allowed to leak gasoline
into groundwater supplies in the early and mid-1990's. Since
then, however, new regulations on underground storage tanks
have gone into effect, minimizing the potential for releases of
gasoline into the environment. In addition, prohibitions on the
use of two-cycle engines on lakes and reservoirs has further
minimized the risk of gasoline (including gasoline containing
MTBE) in drinking water supplies. Unfortunately, the
committee's action fails to take into account these
developments. As a result, the bill bears little logical
relation to the actual factual circumstances.
While Congress has acted to ban certain toxic chemicals, it
has never done so without an extensive scientific record and,
in some cases, with an opportunity for the appropriate
administrative agency to revisit the prohibition based on
additional factual information. Congress has enacted only one
statutory prohibition on a toxic chemical, a ban on PCBs in the
Toxic Substances Control Act, enacted in 1976. But even this
prohibition allowed EPA to permit the use of PCBs where it
could be shown that there was no unreasonable risk.
Furthermore, while EPA has taken regulatory action before to
take chemicals out of commerce, such as asbestos, lead, and a
few major pesticides, EPA only exercised its authority after
substantial scientific analysis and an opportunity for public
review and comment. Contrary to this precedent, S. 2962 neither
allows EPA to make additional findings concerning the actual
risk to human health nor allows EPA to exercise its regulatory
expertise to provide for exceptions or changes based on changed
circumstances. In this respect, the ban of MTBE is both
arbitrary and unprecedented.
The ban of MTBE in also objectionable because it is to be
implemented in 4 years or less. In other parts of the Clean Air
Act, Congress has taken action to prohibit the sale of certain
chemicals or change the design of certain products, but never
according to such an abrupt schedule. In Title VI of the 1990
Clean Air Act Amendments, for example, Congress mandated a
phaseout of Class I chlorofluorocarbons (CFCs) over a 10-year
period, and a phaseout of Class II CFCs over a 30-year period.
Likewise, in Title IV of the 1990 Clean Air Act Amendments,
Congress ordered a reduction in emissions of sulfur dioxide
over a 10-year period. Title II of the 1990 Clean Air Act
Amendments provides for a tightening of standards for
automobile emissions that extends in a two-step process over 11
years. Indeed, the investments required to make the Clean Air
Act RFG work were substantial enough to warrant a 5-year
planning and implementation period. It is hard to understand
the rationale for banning the use of MTBE in 4 years or less.
The ban on MTBE in 4 years or less raises issues of both
workability and fairness. MTBE constitutes approximately 3
percent of the total national gasoline pool, and approximately
10 percent of the gasoline pool in areas of the United States
using RFG. It is unlikely that gasoline markets can adjust to
this lost volume without significant price increases and supply
disruptions. And even as more crude oil is used to meet the
demand for motor vehicle fuels, the supplies of crude oil
necessary to produce home heating oil are reduced.
Finally, the ban on MTBE in 4 years or less is unfair to
those who took risks and committed significant resources to
make the RFG program successful. As Chairman Smith has stated
on several occasions, Congress created the market for fuel
additive oxygenates for an important purpose--to address
serious air quality problems in many areas of the United
States. MTBE producers, especially petrochemical companies,
made significant investments to provide the necessary volumes
of oxygenates. The ban on MTBE in 4 years or less deprives
these producers of a reasonable return on their investment and
may threaten their economic well being and the economic well
being of their shareholders.
The ban on MTBE not only harms MTBE manufacturers, it also
sets a dangerous precedent that could inhibit the success of
federally mandated environmental programs in the future. While
Congress can establish conditions for participating in
interstate commerce, it cannot compel a business to produce a
particular product. Thus, to encourage the development of such
products, Congress must ensure that the rules for participating
in markets are clear and fair, and that the participant has a
reasonable expectation to earn a return on an investment. The
proposed ban on MTBE in 4 years or less sends a disquieting
message that Congress can arbitrarily change the rules at any
time, with potentially ruinous consequences for those who have
taken risks and made good faith investments.
SECTION 6 CLEAN ALTERNATIVE FUEL PROGRAM
Section 6 of S. 2962 creates a program intended to
encourage the use of alternative fuels. In fact, this extremely
complex provision raises a myriad of problems related to the
federally mandated threefold expansion of ethanol in both
gasoline and diesel fuels sold throughout the United States.
While some have argued that this Program provides a measure
of competition, I believe that the consensus view is that the
Program constitutes a virtual mandate for ethanol. The amount
of ethanol usage eventually required under the Program, given
our understanding of the term ``gasoline equivalency,'' would
be almost four times current usage. Given the probable role
that the use of ethanol played in the high Midwestern gasoline
prices this summer, and given that each gallon of ethanol sold
subtracts yet another 54 cents from the Highway Trust Fund, I
am troubled by an ethanol mandate. Further, at the June 14,
2000, hearing before our Subcommittee on Clean Air, Wetlands,
Private Property and Nuclear Safety, I raised the following
environmental objections to increased ethanol use:
First, because ethanol is highly volatile, it cannot be
counted upon to be as effective in controlling emissions of
ozone and its precursors. Second, because ethanol has a net
negative energy balance, we cannot expect its widespread use
either to assist with energy security or control of greenhouse
gases. Third, because ethanol is highly soluble, it takes the
most toxic parts of gasoline, including cancer-causing benzene,
and spreads it in water. Fourth, because ethanol has been
listed as a carcinogen by the World Health Organization, the
State of California, and the National Toxics Program, it is of
greater public health concern than MTBE. Finally, because
combustion of ethanol releases harmful aldehydes, it is of
little assistance in controlling air toxics.
In short, because the proposed Clean Alternative Fuels
Program does not address the threats posed to energy price and
security, to America's infrastructure, and to the environment,
I believe the Program would be bad public policy.
SECTION 9--ANALYSIS OF MOTOR VEHICLE FUEL CHANGES AND ADDITIONAL
PERFORMANCE REQUIREMENTS
Section 9 of the bill amends Section 211 of the Clean Air
Act to impose two new sets of rulemaking requirements on EPA.
The problems with each of these sets of rulemaking requirements
are described below.
The Anti-Backsliding Analysis and Regulations Fail to Protect Public
Health
Section 9 provides that not later than 5 years after the
date of enactment, EPA must complete an analysis of ``the
changes in emissions of air pollutants and air quality due to
the use of motor vehicle fuel and fuel additives resulting
from'' the implementation of S. 2962. Two years later, i.e.,
not later than 7 years after the date of enactment, EPA must
promulgate regulations to ensure that, as compared with
emissions due to the use of motor vehicle fuel and fuel
additives during the period of 1998 through 2000, emissions due
to the use of motor vehicle fuel and fuel additives will not
(1) be significant greater on a per-gallon average basis in any
region; or (2) cause air quality to be significantly worse in
any region.
EPA's analysis will almost certainly show that air quality
has deteriorated as a result of implementation of the
provisions of S. 2962. First, the anti-backsliding provisions
that will apply in areas that have waived out of the oxygen
requirement for RFG are inadequate: they do not cover all
pollutants that come from motor vehicles, and the statutory
default standards are weaker than actual levels already
attained under Phase I of the RFG program. Second, Section 3
requires EPA to ban the use of MTBE in motor vehicle fuel, but
provides no assurance that the additives used to replace MTBE
will not result in increased air emissions. While Section 3
gives EPA 4 years to institute a ban on MTBE, it also gives EPA
broad authority to begin a phaseout earlier. Therefore, it is
altogether possible that the increased air emissions that would
result from the phaseout of MTBE would be recorded in the
analysis which is required under this part of Section 9 of the
bill. Third, the use of an increasing amount of alternative
fuel in motor vehicle fuels, as prescribed by Section 6 of the
bill, is also likely to contribute to air quality
deterioration.
The anti-backsliding provisions of Section 9 would likely
be insufficient to prevent any air quality deterioration that
would occur as the provisions of S. 2962 are implemented. As
described above, the adverse air quality impacts of the bill
would begin just 9 months after the date of enactment--the
latest date on which the oxygen waiver provision can become
effective--and would continue as the MTBE ban becomes effective
under Section 3 and as the alternative fuel requirements are
implemented under Section 6. However, the regulations intended
to prevent such deterioration are not due until 7 years after
the date of enactment, and even then, the effective date of any
standards promulgated by the regulations would be a year or two
later. So, for a period of 7 years or more, air quality is
allowed to degrade.
The additional authority provided to EPA to regulate motor vehicles,
fuels and fuel additives is overly broad
Section 9 of S. 2962 contains a second grant of authority
to EPA which is equally problematic. Not later than 10 years
after the date of enactment, EPA is required to issue
regulations establishing performance standards for motor
vehicle fuel and fuel additives, the use of motor vehicle fuel
and fuel additives, and motor vehicles that are necessary (1)
to ensure adequate protection of public health and the
environment and (2) to achieve specific reductions in the use
of compounds or associated emission projects that pose the
greatest risk to human health. The bill further requires that
in conducting the analysis required, the Administrator must
take into account the effects of motor vehicle fuel and fuel
additives on public health and the environment over the entire
life cycle of the production, distribution, and use of motor
vehicle fuel and fuel additives evaluated in the analyses.
The problem with this grant of authority to EPA is that it
fails to provide the EPA Administrator with any intelligible
parameters for decisionmaking. It compels the EPA Administrator
to promulgate regulations not only for motor vehicle fuels and
fuel additives, but also for motor vehicles themselves, at a
highly subjective standard i.e., ``to ensure adequate
protection of public health and the environment.'' The same
standards must also achieve ``specific reductions'' in the use
of compounds or associated emission products emission products
that pose the greatest risk to human health, but fails to
provide any guidance as to what levels reductions are
appropriate. This provision of the bill clearly represents an
overly broad delegation of authority to EPA.
Minority Views of Senator Kay Bailey Hutchison
I would like to elaborate on some of the objections I
raised at the mark-up regarding the need for appropriate
transitional incentives for manufacturers of MTBE. These
incentives would facilitate the transition of productive
manufacturing facilities to new generations of clean-fuel
additives. Although I have serious misgivings about the
alternative fuel mandate contained in the bill, one thing is
clear: having a variety of clean-fuel additives--including
those made by current MTBE manufacturers--makes sense if we are
to have an adequate, reasonably priced supply of clean burning
fuel.
At the committee mark-up, the chairman noted that the MTBE
manufacturing base ``was created as a result of a Congressional
mandate to clean up the Nation's air. And I believe that you
are justified in making the point that whether it be a
transition from MTBE to something else or retrofitting,
whatever it takes to make this product or to either eliminate
the product or make the product such that it does not cause the
problems, I think you're justified in saying that industry
should have transition funding.'' Of course, I certainly agree
with the chairman on this point and wish to expound further.
This is at first a fairness issue. The Federal Government
mandated the private investment of billions of dollars in
bringing additional MTBE capacity on line in order to meet the
requirements of the Clean Air Act. By any measure, the
reformulated gasoline program has been a great success,
exceeding its air quality objectives. Under the circumstances,
it was a reasonable expectation on the part of these companies
and their workers that the program would be in place for time
sufficient to justify the investment. If we are now to end this
mandate, it is only fair that we provide incentives to
transition away from MTBE to other alternatives.
Consumer considerations justify a transition incentive
program. This bill establishes an enormous government mandate
for the use of ethanol. Certain physical properties of ethanol,
including its volatility, difficulty in transporting, and
expensive blendstocks, make it more expensive to use than MTBE.
Indeed, the Congressional Research Service, in a June 16, 2000,
memorandum, observed that use of ethanol contributed to the
severe gasoline price increases in the upper Midwest this
summer. To avoid greatly exacerbating this problem, we must
seek all alternatives that technology can provide. A transition
fund can help do that.
Changes in Existing Law
In compliance with section 12 of rule XXVI of the Standing
Rules of the Senate, changes in existing law made by the bill
as reported are shown as follows: Existing law proposed to be
omitted is enclosed in [black brackets], new matter is printed
in italic, existing law in which no change is proposed is shown
in roman:
----------
CLEAN AIR ACT\1\
[As Amended Through P.L. 106-55, August 17, 1999]
Part A--Air Quality and Emission Limitations
findings and purposes
Sec. 101. (a) The Congress finds--
---------------------------------------------------------------------------
\1\ The Clean Air Act (42 U.S.C. 7401-7626) consists of Public Law
159 (July 14, 1955; 69 Stat. 322) and the amendments made by subsequent
enactments.
* * * * * * *
---------------------------------------------------------------------------
regulation of fuels
Sec. 211. (a) * * *
* * * * * * *
(b)(1) For the purpose of registration of fuels and fuel
additives, the Administrator shall require--
(A) the manufacturer of any fuel to notify him as
to the commercial identifying name and manufacturer of
any additive contained in such fuel; the range of
concentration of any additive in the fuel; and the
purpose-in-use of any such additive; and
(B) the manufacturer of any additive to notify him
as to the chemical composition of such additive.
(2) For the purpose of registration of fuels and fuel
additives, the Administrator [may also] shall, on a regular
basis require the manufacturer of any fuel or fuel additive--
[(A) to conduct tests to determine potential public
health effects of such fuel or additive (including, but
not limited to, carcinogenic, teratogenic, or mutagenic
effects), and]
(A) to conduct tests to determine potential public
health and environmental effects of the fuel or
additive (including carcinogenic, teratogenic, or
mutagenic effects); and
(B) to furnish the description of any analytical
technique that can be used to detect and measure any
additive in such fuel, the recommended range of
concentration of such additive, and the recommended
purpose-in-use of such additive, and such other
information as is reasonable and necessary to determine
the emissions resulting from the use of the fuel or
additive contained in such fuel, the effect of such
fuel or additive on the emission control performance of
any vehicle, vehicle engine, nonroad engine or nonroad
vehicle, or the extent to which such emissions affect
the public health or welfare.
Tests under subparagraph (A) shall be conducted in conformity
with test procedures and protocols established by the
Administrator. The results of such tests shall not be
considered confidential.
(3) Upon compliance with the provisions of this
subsection, including assurances that the Administrator will
receive changes in the information required, the Administrator
shall register such fuel or fuel additive.
(c)(1) The Administrator may, from time to time on the
basis of information obtained under subsection (b) of this
section or other information available to him, by regulation,
control or prohibit the manufacture, introduction into
commerce, offering for sale, or sale of any fuel or fuel
additive for use in a motor vehicle, motor vehicle engine, or
nonroad engine or nonroad vehicle (A) if in the judgment of the
Administrator any fuel or fuel additive or emission product of
such fuel or fuel additive causes, or contributes, to [air
pollution which] air pollution, or water pollution, that may
reasonably be anticipated to endanger the public health or
welfare, or (B) if emission products of such fuel or fuel
additive will impair to a significant degree the performance of
any emission control device or system which is in general use,
or which the Administrator finds has been developed to a point
where in a reasonable time it would be in general use were such
regulation to be promulgated.
(2)(A) No fuel, class of fuels, or fuel additive may be
controlled or prohibited by the Administrator pursuant to
clause (A) of paragraph (1) except after consideration of all
relevant medical and scientific evidence available to him,
including consideration of other technologically or
economically feasible means of achieving emission standards
under section 202.
(B) No fuel or fuel additive may be controlled or
prohibited by the Administrator pursuant to clause (B) of
paragraph (1) except after consideration of available
scientific and economic data, including a cost benefit analysis
comparing emission control devices or systems which are or will
be in general use and require the proposed control or
prohibition with emission control devices or systems which are
or will be in general use and do not require the proposed
control or prohibition. On request of a manufacturer of motor
vehicles, motor vehicle engines, fuels, or fuel additives
submitted within 10 days of notice of proposed rulemaking, the
Administrator shall hold a public hearing and publish findings
with respect to any matter he is required to consider under
this subparagraph. Such findings shall be published at the time
of promulgation of final regulations.
(C) No fuel or fuel additive may be prohibited by the
Administrator under paragraph (1) unless he finds, and
publishes such finding, that in his judgment such prohibition
will not cause the use of any other fuel or fuel additive which
will produce emissions which will endanger the public health or
welfare to the same or greater degree than the use of the fuel
or fuel additive proposed to be prohibited.
(3)(A) For the purpose of obtaining evidence and data to
carry out paragraph (2), the Administrator may require the
manufacturer of any motor vehicle or motor vehicle engine to
furnish any information which has been developed concerning the
emissions from motor vehicles resulting from the use of any
fuel or fuel additive, or the effect of such use on the
performance of any emission control device or system.
(B) In obtaining information under subparagraph (A),
section 307 (a) (relating to subpenas) shall be applicable.
(4)(A) Except as otherwise provided in subparagraph (B)
or (C), no State (or political subdivision thereof) may
prescribe or attempt to enforce, for the purposes of motor
vehicle emission control, any control or prohibition respecting
any characteristic or component of a fuel or fuel additive in a
motor vehicle or motor vehicle engine--
(i) if the Administrator has found that no control
or prohibition of the characteristic or component of a
fuel or fuel additive under paragraph (1) is necessary
and has published his finding in the Federal Register,
or
(ii) if the Administrator has prescribed under
paragraph (1) a control or prohibition applicable to
such characteristic or component of a fuel or fuel
additive, unless State prohibition or control is
identical to the prohibition or control prescribed by
the Administrator.
(B) Any State for which application of section 209(a) has
at any time been waived under section 209(b) may at any time
prescribe and enforce, for the purpose of motor vehicle
emission control or water quality protection, a control or
prohibition respecting any fuel or fuel additive.
(C) A State may prescribe and enforce, for purposes of
motor vehicle emission control, a control or prohibition
respecting the use of a fuel or fuel additive in a motor
vehicle or motor vehicle engine if an applicable implementation
plan for such State under section 110 so provides. The
Administrator may approve such provision in an implementation
plan, or promulgate an implementation plan containing such a
provision, only if he finds that the State control or
prohibition is necessary to achieve the national primary or
secondary ambient air quality standard which the plan
implements. The Administrator may find that a State control or
prohibition is necessary to achieve that standard if no other
measures that would bring about timely attainment exist, or if
other measures exist and are technically possible to implement,
but are unreasonable or impracticable. The Administrator may
make a finding of necessity under this subparagraph even if the
plan for the area does not contain an approved demonstration of
timely attainment.
(5) Ban on the use of mtbe.--
(A) In general.--Not later than 4 years after the
date of enactment of this paragraph, the Administrator
shall ban use of methyl tertiary butyl ether in
gasoline.
(B) Regulations concerning phase-out.--The
Administrator may establish by regulation a schedule to
phase out the use of methyl tertiary butyl ether in
gasoline during the period preceding the effective date
of the ban under subparagraph (A).
(d) Penalties and Injunctions.--
(1) Civil penalties.--Any person who violates
subsection (a), (f), (g), (k), (l), (m), or (n) of this
section or the regulations prescribed under subsection
(c), (h), (i), (k), (l), (m), [or (n)] (n), or (o) of
this section or who fails to furnish any information or
conduct any tests required by the Administrator under
subsection (b) of this section shall be liable to the
United States for a civil penalty of not more than the
sum of $25,000 for every day of such violation and the
amount of economic benefit or savings resulting from
the violation. Any violation with respect to a
regulation prescribed under subsection (c), (k), (l),
[or (m)] (m), or (o) of this section which establishes
a regulatory standard based upon a multiday averaging
period shall constitute a separate day of violation for
each and every day in the averaging period. Civil
penalties shall be assessed in accordance with
subsections (b) and (c) of section 205.
(2) Injunctive authority.--The district courts of
the United States shall have jurisdiction to restrain
violations of subsections (a), (f), (g), (k), (l), (m),
and (n) of this section and of the regulations
prescribed under subsections (c), (h), (i), (k), (l),
(m), [and (n)] (n), and (o) of this section, to award
other appropriate relief, and to compel the furnishing
of information and the conduct of tests required by the
Administrator under subsection (b) of this section.
Actions to restrain such violations and compel such
actions shall be brought by and in the name of the
United States. In any such action, subpoenas for
witnesses who are required to attend a district court
in any district may run into any other district.
* * * * * * *
(k) Reformulated Gasoline for Conventional Vehicles.--
(1) EPA regulations.--[Within 1 year after the
enactment of the Clean Air Act Amendments of 1990]
(A) In general.--Not later than November
15, 1991, the Administrator shall promulgate
regulations under this section establishing
requirements for reformulated gasoline to be
used in gasoline-fueled vehicles in specified
nonattainment areas. Such regulations shall
require the greatest reduction in emissions of
ozone forming volatile organic compounds
(during the high ozone season) and emissions of
toxic air pollutants (during the entire year)
achievable through the reformulation of
conventional gasoline, taking into
consideration the cost of achieving such
emission reductions, any nonair-quality and
other air-quality related health and
environmental impacts and energy requirements.
(B) Waiver of oxygen content requirement.--
(i) Authority of the governor.--
(I) In general.--
Notwithstanding any other
provision of this subsection, a
Governor of a State, upon
notification by the Governor to
the Administrator during the
90-day period beginning on the
date of enactment of this
subparagraph, or during the 90-
day period beginning on the
date on which an area in the
State becomes a covered area by
operation of the second
sentence of paragraph (11)(D),
may waive the application of
paragraphs (2)(B) and (3)(A)(v)
to gasoline sold or dispensed
in the State.
(II) Opt-in areas.--A
Governor of a State that
submits an application under
paragraph (6) may, as part of
that application, waive the
application of paragraphs
(2)(B) and (3)(A)(v) to
gasoline sold or dispensed in
the State.
(ii) Treatment as reformulated
gasoline.--In the case of a State for
which the Governor invokes the waiver
described in clause (i), gasoline that
complies with all provisions of this
subsection other than paragraphs (2)(B)
and (3)(A)(v) shall be considered to be
reformulated gasoline for the purposes
of this subsection.
(iii) Effective date of waiver.--A
waiver under clause (i) shall take
effect on the earlier of--
(I) the date on which the
performance standard under
subparagraph (C) takes effect;
or
(II) the date that is 270
days after the date of
enactment of this subparagraph.
(C) Maintenance of toxic air pollutant
emission and aromatic hydrocarbon content
reductions.--
(i) In general.--As soon as
practicable after the date of enactment
of this subparagraph, the Administrator
shall--
(I) promulgate regulations
consistent with subparagraph
(A) and paragraph (3)(B)(ii) to
ensure that reductions of toxic
air pollutant emissions and
aromatic hydrocarbon content
achieved under the reformulated
gasoline program under this
section before the date of
enactment of this subparagraph
are maintained in States for
which the Governor waives the
oxygenate requirement under
subparagraph (B)(i); or
(II) determine that the
requirement described in clause
(iv)--
(aa) is consistent
with the bases for a
performance standard
described in clause
(ii); and
(bb) shall be
deemed to be the
performance standard
under clause (ii) and
shall be applied in
accordance with clause
(iii).
(ii) Performance standard.--The
Administrator, in regulations
promulgated under clause (i)(I), shall
establish an annual average performance
standard based on--
(I) compliance survey data;
(II) the annual aggregate
reductions in emissions of
toxic air pollutants achieved
under the reformulated gasoline
program during calendar years
1998 and 1999, determined on
the basis of the volume of
reformulated gasoline
containing methyl tertiary
butyl ether that is sold
throughout the United States;
(III) the annual average
aromatic hydrocarbon content of
gasoline sold under the
reformulated gasoline program
during the 2 of the calendar
years 1998, 1999, and 2000 for
which that content is the
lowest, determined on the basis
of the volume of reformulated
gasoline containing methyl
tertiary butyl ether that is
sold throughout the United
States;
(IV) the annual average
aromatic hydrocarbon content of
the 10 percent of the gasoline
sold under the reformulated
gasoline program during the 2
calendar years described in
subclause (III) for which that
content is the greatest,
determined on the basis of the
volume of reformulated gasoline
containing methyl tertiary
butyl ether that is sold
throughout the United States;
and
(V) such other information
as the Administrator determines
to be appropriate.
(iii) Applicability.--
(I) In general.--The
performance standards under
this subparagraph shall be
applied on an annual average
importer or refinery-by-
refinery basis to all
reformulated gasoline that is
sold or introduced into
commerce in a State for which
the Governor waives the
oxygenate requirement under
subparagraph (B)(i).
(II) More stringent
requirements.--The performance
standards under this
subparagraph shall not apply to
the extent that any requirement
under section 202(l) is more
stringent than the performance
standard.
(III) State standards.--The
performance standards under
this subparagraph shall not
apply in any State that has
received a waiver under section
209(b).
(IV) Credit program.--The
Administrator shall provide for
the granting of credits for
exceeding the performance
standards under this
subparagraph in the same manner
as provided in paragraph (7).
(iv) Statutory performance
standard.--
(I) In general.--Subject to
subclause (IV), if the
regulations under clause (i)(I)
have not been promulgated by
the date that is 270 days after
the date of enactment of this
subparagraph, the requirement
described in subclause (II)
shall be deemed to be the
performance standard under
clause (ii) and shall be
applied in accordance with
clause (iii).
(II) Toxic air pollutant
emissions.--The aggregate
emissions of toxic air
pollutants from baseline
vehicles when using
reformulated gasoline shall be
27.5 percent below the
aggregate emissions of toxic
air pollutants from baseline
vehicles when using baseline
gasoline.
(III) Aromatic hydrocarbon
content.--
(aa) Annual
average.--The annual
average aromatic
hydrocarbon content of
reformulated gasoline
shall not exceed 26
percent by volume.
(bb) Maximum per
gallon.--No gallon of
reformulated gasoline
shall have an aromatic
hydrocarbon content in
excess of 45 percent.
(cc) Alternative
requirement.--The
requirements under
items (aa) and (bb)
shall be deemed to be
met if no gallon of
reformulated gasoline
has an aromatic
hydrocarbon content in
excess of 30 percent.
(IV) Subsequent
regulations.--The Administrator
may modify the performance
standard established under
subclause (I) through
promulgation of regulations
under clause (i)(I).
(2) General requirements.--The regulations referred
to in paragraph (1) shall require that reformulated
gasoline comply with paragraph (3) and with each of the
following requirements (subject to paragraph (7)):
(A) NOx emissions.--The
emissions of oxides of nitrogen
(NOx) from baseline vehicles when
using the reformulated gasoline shall be no
greater than the level of such emissions from
such vehicles when using baseline gasoline. If
the Administrator determines that compliance
with the limitation on emissions of oxides of
nitrogen under the preceding sentence is
technically infeasible, considering the other
requirements applicable under this subsection
to such gasoline, the Administrator may, as
appropriate to ensure compliance with this
subparagraph, adjust (or waive entirely), any
other requirements of this paragraph (including
the oxygen content requirement contained in
subparagraph (B)) or any requirements
applicable under paragraph (3)(A).
(B) Oxygen content.--The oxygen content of
the gasoline shall equal or exceed 2.0 percent
by weight (subject to a testing tolerance
established by the Administrator) except as
otherwise required by this Act. The
Administrator may waive, in whole or in part,
the application of this subparagraph for any
ozone nonattainment area upon a determination
by the Administrator that compliance with such
requirement would prevent or interfere with the
attainment by the area of a national primary
ambient air quality standard.
(C) Benzene content.--The benzene content
of the gasoline shall not exceed 1.0 percent by
volume.
(D) Heavy metals.--The gasoline shall have
no heavy metals, including lead or manganese.
The Administrator may waive the prohibition
contained in this subparagraph for a heavy
metal (other than lead) if the Administrator
determines that addition of the heavy metal to
the gasoline will not increase, on an aggregate
mass or cancer-risk basis, toxic air pollutant
emissions from motor vehicles.
(3) More stringent of formula or performance
standards.--The regulations referred to in paragraph
(1) shall require compliance with the more stringent of
either the requirements set forth in subparagraph (A)
or the requirements of subparagraph (B) of this
paragraph. For purposes of determining the more
stringent provision, clause (i) and clause (ii) of
subparagraph (B) shall be considered independently.
(A) Formula.--
(i) Benzene.--The benzene content
of the reformulated gasoline shall not
exceed 1.0 percent by volume.
(ii) Aromatics.--The aromatic
hydrocarbon content of the reformulated
gasoline shall not exceed 25 percent by
volume.
(iii) Lead.--The reformulated
gasoline shall have no lead content.
(iv) Detergents.--The reformulated
gasoline shall contain additives to
prevent the accumulation of deposits in
engines or vehicle fuel supply systems.
(v) Oxygen content.--The oxygen
content of the reformulated gasoline
shall equal or exceed 2.0 percent by
weight (subject to a testing tolerance
established by the Administrator)
except as otherwise required by this
Act.
(B) Performance standard.--
(i) VOC emissions.--During the high
ozone season (as defined by the
Administrator), the aggregate emissions
of ozone forming volatile organic
compounds from baseline vehicles when
using the reformulated gasoline shall
be 15 percent below the aggregate
emissions of ozone forming volatile
organic compounds from such vehicles
when using baseline gasoline. Effective
in calendar year 2000 and thereafter,
25 percent shall be substituted for 15
percent in applying this clause, except
that the Administrator may adjust such
25 percent requirement to provide for a
lesser or greater reduction based on
technological feasibility, considering
the cost of achieving such reductions
in VOC emissions. No such adjustment
shall provide for less than a 20
percent reduction below the aggregate
emissions of such air pollutants from
such vehicles when using baseline
gasoline. The reductions required under
this clause shall be on a mass basis.
(ii) Toxics.--During the entire
year, the aggregate emissions of toxic
air pollutants from baseline vehicles
when using the reformulated gasoline
shall be 15 percent below the aggregate
emissions of toxic air pollutants from
such vehicles when using baseline
gasoline. Effective in calendar year
2000 and thereafter, 25 percent shall
be substituted for 15 percent in
applying this clause, except that the
Administrator may adjust such 25
percent requirement to provide for a
lesser or greater reduction based on
technological feasibility, considering
the cost of achieving such reductions
in toxic air pollutants. No such
adjustment shall provide for less than
a 20 percent reduction below the
aggregate emissions of such air
pollutants from such vehicles when
using baseline gasoline. The reductions
required under this clause shall be on
a mass basis.
Any reduction greater than a specific percentage
reduction required under this subparagraph shall be
treated as satisfying such percentage reduction
requirement.
(4) Certification procedures.--
(A) Regulations.--The regulations under
this subsection shall include procedures under
which the Administrator shall certify
reformulated gasoline as complying with the
requirements established pursuant to this
subsection. Under such regulations, the
Administrator shall establish procedures for
any person to petition the Administrator to
certify a fuel formulation, or slate of fuel
formulations. Such procedures shall further
require that the Administrator shall approve or
deny such petition within 180 days of receipt.
If the Administrator fails to act within such
180-day period, the fuel shall be deemed
certified until the Administrator completes
action on the petition.
(B) Certification; equivalency.--The
Administrator shall certify a fuel formulation
or slate of fuel formulations as complying with
this subsection if such fuel or fuels--
(i) comply with the requirements of
paragraph (2), and
(ii) achieve equivalent or greater
reductions in emissions of ozone
forming volatile organic compounds and
emissions of toxic air pollutants than
are achieved by a reformulated gasoline
meeting the applicable requirements of
paragraph (3).
(C) EPA determination of emissions level.--
Within 1 year after the enactment of the Clean
Air Act Amendments of 1990, the Administrator
shall determine the level of emissions of ozone
forming volatile organic compounds and
emissions of toxic air pollutants emitted by
baseline vehicles when operating on baseline
gasoline. For purposes of this subsection,
within 1 year after the enactment of the Clean
Air Act Amendments of 1990, the Administrator
shall, by rule, determine appropriate measures
of, and methodology for, ascertaining the
emissions of air pollutants (including
calculations, equipment, and testing
tolerances).
(5) Prohibition.--Effective beginning January 1,
1995, each of the following shall be a violation of
this subsection:
(A) The sale or dispensing by any person of
conventional gasoline to ultimate consumers in
any covered area.
(B) The sale or dispensing by any refiner,
blender, importer, or marketer of conventional
gasoline for resale in any covered area,
without (i) segregating such gasoline from
reformulated gasoline, and (ii) clearly marking
such conventional gasoline as ``conventional
gasoline, not for sale to ultimate consumer in
a covered area''.
Any refiner, blender, importer or marketer who
purchases property segregated and marked conventional
gasoline, and thereafter labels, represents, or
wholesales such gasoline as reformulated gasoline shall
also be in violation of this subsection. The
Administrator may impose sampling, testing, and
recordkeeping requirements upon any refiner, blender,
importer, or marketer to prevent violations of this
section.
[(6) Opt-in areas.--(A) Upon]
(6) Opt-in areas.--
(A) Classified areas.--
(i) In general.--Upon the
application of the Governor of a State,
the Administrator shall apply the
prohibition set forth in paragraph (5)
in any area in the State classified
under subpart 2 of part D of title I as
a Marginal, Moderate, Serious, or
Severe Area (without regard to whether
or not the 1980 population of the area
exceeds 250,000). In any such case, the
Administrator shall establish an
effective date for such prohibition as
he deems appropriate, not later than
January 1, 1995, or 1 year after such
application is received, whichever is
later. The Administrator shall publish
such application in the Federal
Register upon receipt.
[(B) If]
(ii) Effect of insufficient
domestic capacity to produce
reformulated gasoline.--If the
Administrator determines, on the
Administrator's own motion or on
petition of any person, after
consultation with the Secretary of
Energy, that there is insufficient
domestic capacity to produce gasoline
certified under this subsection, the
Administrator shall, by rule, extend
the effective date of such prohibition
in Marginal, Moderate, Serious, or
Severe Areas referred to in
[subparagraph (A)] clause (i) for one
additional year, and may, by rule,
renew such extension for 2 additional
one-year periods. The Administrator
shall act on any petition submitted
under [this paragraph] this
subparagraph within 6 months after
receipt of the petition. The
Administrator shall issue such
extensions for areas with a lower ozone
classification before issuing any such
extension for areas with a higher
classification.
(B) Nonclassified areas.--
(i) In general.--In accordance with
section 110, a State may submit to the
Administrator, and the Administrator
may approve, a State implementation
plan revision that provides for
application of the prohibition
specified in paragraph (5) in any
portion of the State that is not a
covered area or an area referred to in
subparagraph (A)(i).
(ii) Period of effectiveness.--
Under clause (i), the State
implementation plan shall establish a
period of effectiveness for applying
the prohibition specified in paragraph
(5) to a portion of a State that--
(I) commences not later
than 1 year after the date of
approval by the Administrator
of the State implementation
plan; and
(II) ends not earlier than
4 years after the date of
commencement under subclause
(I).
(7) Credits.--(A) The regulations promulgated under
this subsection shall provide for the granting of an
appropriate amount of credits to a person who refines,
blends, or imports and certifies a gasoline or slate of
gasoline that--
(i) has an oxygen content (by weight) that
exceeds the minimum oxygen content specified in
paragraph (2);
(ii) has an aromatic hydrocarbon content
(by volume) that is less than the maximum
aromatic hydrocarbon content required to comply
with paragraph (3); or
(iii) has a benzene content (by volume)
that is less than the maximum benzene content
specified in paragraph (2).
(B) The regulations described in subparagraph (A)
shall also provide that a person who is granted credits
may use such credits, or transfer all or a portion of
such credits to another person for use within the same
nonattainment area, for the purpose of complying with
this subsection.
(C) The regulations promulgated under subparagraphs
(A) and (B) shall ensure the enforcement of the
requirements for the issuance, application, and
transfer of the credits. Such regulations shall
prohibit the granting or transfer of such credits for
use with respect to any gasoline in a nonattainment
area, to the extent the use of such credits would
result in any of the following:
(i) An average gasoline aromatic
hydrocarbon content (by volume) for the
nonattainment (taking into account all gasoline
sold for use in conventional gasoline-fueled
vehicles in the nonattainment area) higher than
the average fuel aromatic hydrocarbon content
(by volume) that would occur in the absence of
using any such credits.
(ii) An average gasoline oxygen content (by
weight) for the nonattainment area (taking into
account all gasoline sold for use in
conventional gasoline-fueled vehicles in the
nonattainment area) lower than the average
gasoline oxygen content (by weight) that would
occur in the absence of using any such credits.
(iii) An average benzene content (by
volume) for the nonattainment area (taking into
account all gasoline sold for use in
conventional gasoline-fueled vehicles in the
nonattainment area) higher than the average
benzene content (by volume) that would occur in
the absence of using any such credits.
(8) Anti-dumping rules.--
(A) In general.--Within 1 year after the
enactment of the Clean Air Act Amendments of
1990, the Administrator shall promulgate
regulations applicable to each refiner,
blender, or importer of gasoline ensuring that
gasoline sold or introduced into commerce by
such refiner, blender, or importer (other than
reformulated gasoline subject to the
requirements of paragraph (1)) does not result
in average per gallon emissions (measured on a
mass basis) of (i) volatile organic compounds,
(ii) oxides of nitrogen, (iii) carbon monoxide,
and (iv) toxic air pollutants in excess of such
emissions of such pollutants attributable to
gasoline sold or introduced into commerce in
calendar year 1990 by that refiner, blender, or
importer. Such regulations shall take effect
beginning January 1, 1995.
(B) Adjustments.--In evaluating compliance
with the requirements of subparagraph (A), the
Administrator shall make appropriate
adjustments to insure that no credit is
provided for improvement in motor vehicle
emissions control in motor vehicles sold after
the calendar year 1990.
(C) Compliance determined for each
pollutant independently.--In determining
whether there is an increase in emissions in
violation of the prohibition contained in
subparagraph (A) the Administrator shall
consider an increase in each air pollutant
referred to in clauses (i) through (iv) as a
separate violation of such prohibition, except
that the Administrator shall promulgate
regulations to provide that any increase in
emissions of oxides of nitrogen resulting from
adding oxygenates to gasoline may be offset by
an equivalent or greater reduction (on a mass
basis) in emissions of volatile organic
compounds, carbon monoxide, or toxic air
pollutants, or any combination of the
foregoing.
(D) Compliance period.--The Administrator
shall promulgate an appropriate compliance
period or appropriate compliance periods to be
used for assessing compliance with the
prohibition contained in subparagraph (A).
(E) Baseline for determining compliance.--
If the Administrator determines that no
adequate and reliable data exists regarding the
composition of gasoline sold or introduced into
commerce by a refiner, blender, or importer in
calendar year 1990, for such refiner, blender,
or importer, baseline gasoline shall be
substituted for such 1990 gasoline in
determining compliance with subparagraph (A).
(9) Emissions from entire vehicle.--In applying the
requirements of this subsection, the Administrator
shall take into account emissions from the entire motor
vehicle, including evaporative, running, refueling, and
exhaust emissions.
(10) Exclusion from reid vapor pressure
requirement.--Notwithstanding subsection (c)(4)(C), the
Administrator may approve a revision of a State
implementation plan that excludes an area from a waiver
provided under subsection (h)(4) if--
(A) the State demonstrates that the
increases in volatile organic compound
emissions resulting from the waiver
significantly interfere with attainment or
maintenance of the national ambient air quality
standard for ozone; and
(B) the Administrator determines that the
exclusion is reasonable and practicable.
[(10)] (11) Definitions.--For purposes of this
subsection--
(A) Baseline vehicles.--The term ``baseline
vehicles'' mean representative model year 1990
vehicles.
(B) Baseline gasoline.--
(i) Summertime.--The term
``baseline gasoline'' means in the case
of gasoline sold during the high ozone
period (as defined by the
Administrator) a gasoline which meets
the following specifications:
BASELINE GASOLINE FUEL PROPERTIES
API Gravity........................... 57.4
Sulfur, ppm........................... 339
Benzene, %............................ 1.53
RVP, psi.............................. 8.7
Octane, R+M/2......................... 87.3
IBP, F................................ 91
10%, F................................ 128
50%, F................................ 218
90%, F................................ 330
End Point, F.......................... 415
Aromatics, %.......................... 32.0
Olefins, %............................ 9.2
Saturates, %.......................... 58.8
(ii) Wintertime.--The Administrator
shall establish the specifications of
``baseline gasoline'' for gasoline sold
at times other than the high ozone
period (as defined by the
Administrator). Such specifications
shall be the specifications of 1990
industry average gasoline sold during
such period.
(C) Toxic air pollutants.--The term ``toxic
air pollutants'' means the aggregate emissions
of the following:
Benzene
1,3 Butadiene
Polycyclic organic matter (POM)
Acetaldehyde
Formaldehyde.
(D) Covered area.--The 9 ozone
nonattainment areas having a 1980 population in
excess of 250,000 and having the highest ozone
design value during the period 1987 through
1989 shall be ``covered areas'' for purposes of
this subsection. Effective one year after the
reclassification of any ozone nonattainment
area as a Severe ozone nonattainment area under
section 181(b), such Severe area shall also be
a ``covered area'' for purposes of this
subsection.
(E) Reformulated gasoline.--The term
``reformulated gasoline'' means any gasoline
which is certified by the Administrator under
this section as complying with this subsection.
(F) Conventional gasoline.--The term
``conventional gasoline'' means any gasoline
which does not meet specifications set by a
certification under this subsection.
* * * * * * *
(o) Clean Alternative Fuel Program.--
(1) Definitions.--In this subsection:
(A) Bin 1 vehicle.--The term ``bin 1
vehicle'' means--
(i) a light-duty motor vehicle that
does not exceed the standards for bin
no. 1 specified in table S04-1 of
section 86.1811-04 of title 40, Code of
Federal Regulations (published at 65
Fed. Reg. 6855 on February 10, 2000);
and
(ii) a heavy-duty motor vehicle
that does not exceed standards
equivalent to the standards described
in clause (i), as determined by the
Administrator by regulation.
(B) Bin 2 vehicle.--The term ``bin 2
vehicle'' means--
(i) a light-duty motor vehicle that
does not exceed the standards for bin
no. 2 specified in table S04-1 of
section 86.1811-04 of title 40, Code of
Federal Regulations (published at 65
Fed. Reg. 6855 on February 10, 2000);
and
(ii) a heavy-duty motor vehicle
that emits not more than 50 percent of
the allowable emissions of air
pollutants under the most stringent
standards applicable to heavy-duty
motor vehicles, as determined by the
Administrator by regulation.
(C) Biomass ethanol.--The term ``biomass
ethanol'' means ethanol derived from any
lignocellulosic or hemicellulosic matter that
is available on a renewable or recurring basis,
including--
(i) dedicated energy crops and
trees;
(ii) wood and wood residues;
(iii) plants;
(iv) grasses;
(v) agricultural commodities and
residues;
(vi) fibers;
(vii) animal wastes and other waste
materials; and
(viii) municipal solid waste.
(D) Clean alternative fuel.--The term
``clean alternative fuel'' means--
(i) renewable fuel;
(ii) credit for motor vehicle fuel
used to operate a bin 1 vehicle, as
generated under paragraph (5)(A)(ii);
and
(iii) credit for motor vehicle fuel
used to operate a bin 2 vehicle, as
generated under paragraph (5)(A)(ii).
(E) Renewable fuel.--
(i) In general.--The term
``renewable fuel'' means motor vehicle
fuel that--
(I)(aa) is produced from
grain, starch, oilseeds, or
other biomass; or
(bb) is natural gas
produced from a biogas source,
including a landfill, sewage
waste treatment plant, feedlot,
or other place where decaying
organic material is found; and
(II) is used to replace or
reduce the quantity of fossil
fuel present in a fuel mixture
used to operate a motor
vehicle.
(ii) Inclusion.--The term
``renewable fuel'' includes biomass
ethanol.
(2) Clean alternative fuel program.--
(A) Clean alternative fuel requirements.--
The motor vehicle fuel sold or introduced into
commerce in the United States in calendar year
2008 or any calendar year thereafter by a
refiner, blender, or importer shall, on a 6-
month average basis, be comprised of a quantity
of clean alternative fuel, measured in
gasoline-equivalent gallons (as determined by
the Secretary of Energy), that is not less than
the applicable percentage by volume for the 6-
month period.
(B) Applicable percentage.--For the
purposes of subparagraph (A), the applicable
percentage for a 6-month period of a calendar
year shall be determined in accordance with the
following table:
Applicable percentage
``Calendar year: of clean alternative fuel:
2008...................................................... 1.2
2009...................................................... 1.3
2010...................................................... 1.4
2011 and thereafter....................................... 1.5.
(3) Transition program.--
(A) Renewable fuel requirements.--
(i) In general.--Subject to
subparagraph (B), all motor vehicle
fuel sold or introduced into commerce
in the United States in any of calendar
years 2002 through 2007 by a refiner,
blender, or importer shall contain, on
a 6-month average basis, a quantity of
renewable fuel, measured in gasoline-
equivalent gallons (as determined by
the Secretary of Energy), that is not
less than the applicable percentage by
volume for the 6-month period.
(ii) Applicable percentage.--For
the purposes of clause (i), the
applicable percentage for a 6-month
period of a calendar year shall be
determined in accordance with the
following table:
Applicable percentage
``Calendar year: of renewable fuel:
2002...................................................... 0.6
2003...................................................... 0.7
2004...................................................... 0.8
2005...................................................... 0.9
2006...................................................... 1.0
2007...................................................... 1.1.
(B) Credit for motor vehicle fuel used to
operate bin 1 vehicles or bin 2 vehicles.--
Credit for motor vehicle fuel used to operate
bin 1 vehicles or bin 2 vehicles, as generated
under paragraph (5)(A)(ii), may be used to meet
not more than 10 percent of the renewable fuel
requirement under subparagraph (A).
(4) Biomass ethanol.--For the purposes of
paragraphs (2) and (3), 1 gallon of biomass ethanol
shall be considered to be the equivalent of 1.5 gallons
of renewable fuel.
(5) Credit program.--
(A) In general.--The regulations
promulgated to carry out this subsection shall
provide for the generation of an appropriate
amount of credits by--
(i) a person that refines, blends,
or imports motor vehicle fuel that
contains, on a 6-month average basis, a
quantity of clean alternative fuel or
renewable fuel that is greater than the
quantity required for that 6-month
period under paragraph (2) or (3),
respectively; and
(ii) a person that manufactures bin
1 vehicles or bin 2 vehicles.
(B) Calculation of credits.--In determining
the appropriate amount of credits generated by
a vehicle manufacturer under subparagraph
(A)(ii), the Administrator, in consultation
with the Secretary of Energy, shall give
priority to the extent to which bin 1 vehicles
or bin 2 vehicles, as compared to vehicles that
are not bin 1 vehicles or bin 2 vehicles but
are similar in size, weight, and other
appropriate factors--
(i) use innovative or advanced
technology;
(ii) result in less petroleum
consumption; and
(iii) are efficient in their use of
petroleum or other form of energy.
(C) Use of credits.--
(i) In general.--A person that
generates credits under subparagraph
(A) may use the credits, or transfer
all or a portion of the credits to
another person, for the purpose of
complying with paragraph (2) or (3).
(ii) Use of vehicle manufacturer
credits to provide non-federal
contributions under other law.--Credits
generated under subparagraph (A)(ii)
and transferred to a person, nonprofit
entity, or local government may be used
to provide any portion of--
(I) the non-Federal share
required for an alternative
fuel project under section
149(e)(4) of title 23, United
States Code; or
(II) a voluntary supply
commitment under section 505 of
the Energy Policy Act of 1992
(42 U.S.C. 13255).
(D) Expiration of credits.--A credit
generated under this paragraph shall expire 1
year after the date on which the credit was
generated.
(6) Waivers.--
(A) In general.--The Administrator, in
consultation with the Secretary of Agriculture
and the Secretary of Energy, may waive the
requirements of paragraph (2) or (3) in whole
or in part on petition by a State or States by
reducing the national quantity of clean
alternative fuel required under this
subsection--
(i) based on a determination by the
Administrator, after public notice and
opportunity for comment, that
implementation of the requirements
would severely harm the economy or
environment of a State, a region, or
the United States; or
(ii) based on a determination by
the Administrator, after public notice
and opportunity for comment, that there
is an inadequate domestic supply or
distribution capacity to meet the
requirements.
(B) Petitions for waivers.--The
Administrator, in consultation with the
Secretary of Agriculture and the Secretary of
Energy--
(i) shall approve or deny a State
petition for a waiver of the
requirements of paragraph (2) or (3)
within 180 days after the date on which
the petition is received; but
(ii) may extend that period for up
to 60 additional days to provide for
public notice and opportunity for
comment and for consideration of the
comments submitted.
(C) Termination of waivers.--A waiver
granted under subparagraph (A) shall terminate
after 1 year, but may be renewed by the
Administrator after consultation with the
Secretary of Agriculture and the Secretary of
Energy.
(D) Oxygen content waivers.--The grant or
denial of a waiver under subsection (k)(2)(B)
shall not affect the requirements of this
subsection.
(7) Small refiners.--The Administrator may provide
an exemption from the requirements of paragraph (2) or
(3), in whole or in part, for small refiners (as
defined by the Administrator).
(8) Regulations.--Not later than 270 days after the
date of enactment of this paragraph, the Administrator
shall promulgate regulations to carry out this
subsection.
(p) Analyses of Motor Vehicle Fuel Changes and Additional
Performance Requirements.--
(1) Anti-backsliding analysis and regulations.--
(A) Analysis.--
(i) Draft analysis.--Not later than
4 years after the date of enactment of
this subsection, the Administrator
shall publish for public comment a
draft analysis of the changes in
emissions of air pollutants and air
quality due to the use of motor vehicle
fuel and fuel additives resulting from
implementation of the amendments made
by the Federal Reformulated Fuels Act
of 2000.
(ii) Final analysis.--After
providing a reasonable opportunity for
comment but not later than 5 years
after the date of enactment of this
subsection, the Administrator shall
publish the analysis in final form.
(B) Additional performance requirements.--
(i) Proposed regulations.--Not
later than 6 years after the date of
enactment of this subsection, the
Administrator shall publish proposed
regulations establishing performance
requirements that are adequate, at a
minimum, to ensure that, as compared
with emissions due to the use of motor
vehicle fuel and fuel additives during
the period of 1998 through 2000,
emissions due to the use of motor
vehicle fuel and fuel additives will
not--
(I) be significantly
greater on a per-gallon average
basis in any region; or
(II) cause air quality to
be significantly worse in any
region.
(ii) Final regulations.--After
providing a reasonable opportunity for
comment but not later than 7 years
after the date of enactment of this
subsection, the Administrator shall
promulgate the regulations in final
form.
(iii) Deadline for compliance.--The
regulations shall require compliance as
expeditiously as practicable, taking
into account costs and lead time
necessary to ensure the availability of
a reliable and adequate motor vehicle
fuel supply.
(2) Mobile source title analysis and regulations.--
(A) Analysis.--
(i) Draft analysis.--Not later than
7 years after the date of enactment of
this subsection, the Administrator
shall publish for public comment a
draft analysis of the effects of motor
vehicle fuel and fuel additives on
public health and the environment,
including the changes in fuel and fuel
additives resulting from implementation
of the Federal Reformulated Fuels Act
of 2000.
(ii) Final analysis.--After
providing a reasonable opportunity for
comment but not later than 8 years
after the date of enactment of this
subsection, the Administrator shall
publish the analysis in final form.
(B) Additional performance requirements.--
(i) Proposed regulations.--Not
later than 9 years after the date of
enactment of this subsection, the
Administrator shall publish proposed
regulations establishing performance
requirements for motor vehicle fuel and
fuel additives, the use of motor
vehicle fuel and fuel additives, and
motor vehicles that are necessary--
(I) to ensure adequate
protection of public health and
the environment; and
(II) to achieve specific
reductions in the use of
compounds or associated
emission products that pose the
greatest risk to human health.
(ii) Final regulations.--After
providing a reasonable opportunity for
comment but not later than 10 years
after the date of enactment of this
subsection, the Administrator shall
promulgate the regulations in final
form.
(iii) Deadline for compliance.--The
regulations shall require compliance as
expeditiously as practicable, taking
into account costs and lead time
necessary to ensure the availability of
a reliable and adequate motor vehicle
fuel supply.
(3) Life cycle analysis.--In conducting the
analyses under paragraphs (1) and (2), the
Administrator shall take into account the effects of
motor vehicle fuel and fuel additives on public health
and the environment over the entire life cycle of the
production, distribution, and use of motor vehicle fuel
and fuel additives evaluated in the analyses.
(4) Emissions model.--For the purposes of this
subsection, as soon as the necessary data are
available, the Administrator shall develop and finalize
an emissions model that reasonably reflects the effects
of fuel characteristics or components on emissions from
vehicles in the motor vehicle fleet during calendar
year 2005.
[(o)] (q) Fuel and Fuel Additive Importers and
Importation.--For the purposes of this section, the term
``manufacturer'' includes an importer and the term
``manufacture'' includes importation.
[42 U.S.C. 7545]
* * * * * * *
SOLID WASTE DISPOSAL ACT 1
[As Amended Through P.L. 106-55, August 17, 1999]
---------------------------------------------------------------------------
1 The Solid Waste Disposal Act (42 U.S.C. 6901-6992k)
consists of title II of Public Law 89-272 and the amendments made by
subsequent enactments. This Act is popularly referred to as the
Resource Conservation and Recovery Act, after the short title of the
law that amended the Solid Waste Disposal Act in its entirety in 1976
(P.L. 94-580).
---------------------------------------------------------------------------
Sec. 1001. This title (hereinafter in this title referred
to as ``this Act''), together with the following table of
contents, may be cited as the ``Solid Waste Disposal Act'':
Subtitle A--General Provisions
Sec. 1001. * * *
* * * * * * *
[Sec. 9010. Authorization of appropriations.]
Sec. 9010. Release prevention and compliance.
Sec. 9011. Authorization of appropriations.
* * * * * * *
release detection, prevention, and correction regulations
Sec. 9003. (a) Regulations.--The Administrator, after
notice and opportunity for public comment, and at least three
months before the effective dates specified in subsection (f),
shall promulgate release detection, prevention, and correction
regulations applicable to all owners and operators of
underground storage tanks, as may be necessary to protect human
health and the environment.
(b) Distinctions in Regulations.--In promulgating
regulations under this section, the Administrator may
distinguish between types, classes, and ages of underground
storage tanks. In making such distinctions, the Administrator
may take into consideration factors, including, but not limited
to: location of the tanks, soil and climate conditions, uses of
the tanks, history of maintenance, age of the tanks, current
industry recommended practices, national consensus codes,
hydrogeology, water table, size of the tanks, quantity of
regulated substances periodically deposited in or dispensed
from the tank, the technical capability of the owners and
operators, and the compatibility of the regulated substance and
the materials of which the tank is fabricated.
(c) Requirements.--The regulations promulgated pursuant
to this section shall include, but need not be limited to, the
following requirements respecting all underground storage
tanks--
(1) requirements for maintaining a leak detection
system, an inventory control system together with tank
testing, or a comparable system or method designed to
identify releases in a manner consistent with the
protection of human health and the environment;
(2) requirements for maintaining records of any
monitoring or leak detection system or inventory
control system or tank testing or comparable system;
(3) requirements for reporting of releases and
corrective action taken in response to a release from
an underground storage tank;
(4) requirements for taking corrective action in
response to a release from an underground storage tank;
(5) requirements for the closure of tanks to
prevent future releases of regulated substances into
the environment; and
(6) requirements for maintaining evidence for
financial responsibility for taking corrective action
and compensating third parties for bodily injury and
property damage caused by sudden and nonsudden
accidental releases arising from operating an
underground storage tank.
(d) Financial Responsibility.--(1) Financial
responsibility required by this subsection may be established
in accordance with regulations promulgated by the Administrator
by any one, or any combination, of the following: insurance,
guarantee, surety bond, letter of credit, qualification as a
self-insurer. In promulgating requirements under this
subsection, the Administrator is authorized to specify policy
or other contractual terms, conditions, or defenses which are
necessary or are unacceptable in establishing such evidence of
financial responsibility in order to effectuate the purposes of
this subtitle or any other method satisfactory to the
Administrator.
(2) In any case where the owner or operator is in
bankruptcy, reorganization, or arrangement pursuant to the
Federal Bankruptcy Code or where with reasonable diligence
jurisdiction in any State court of the Federal Courts cannot be
obtained over an owner or operator likely to be solvent at the
time of judgment, any claim arising from conduct for which
evidence of financial responsibility must be provided under
this subsection may be asserted directly against the guarantor
providing such evidence of financial responsibility. In the
case of any action pursuant to this paragraph such guarantor
shall be entitled to invoke all rights and defenses which would
have been available to the owner or operator if any action had
been brought against the owner or operator by the claimant and
which would have been available to the guarantor if an action
had been brought against the guarantor by the owner or
operator.
(3) The total liability of any guarantor shall be limited
to the aggregate amount which the guarantor has provided as
evidence of financial responsibility to the owner or operator
under this section. Nothing in this subsection shall be
construed to limit any other State or Federal statutory,
contractual or common law liability of a guarantor to its owner
or operator including, but not limited to, the liability of
such guarantor for bad faith either in negotiating or in
failing to negotiate the settlement of any claim. Nothing in
this subsection shall be construed to diminish the liability of
any person under section 107 or 111 of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980
or other applicable law.
(4) For the purpose of this subsection, the term
``guarantor'' means any person, other than the owner or
operator, who provides evidence of financial responsibility for
an owner or operator under this subsection.
(5)(A) The Administrator, in promulgating financial
responsibility regulations under this section, may establish an
amount of coverage for particular classes or categories of
underground storage tanks containing petroleum which shall
satisfy such regulations and which shall not be less than
$1,000,000 for each occurrence with an appropriate aggregate
requirement.
(B) The Administrator may set amounts lower than the
amounts required by subparagraph (A) of this paragraph for
underground storage tanks containing petroleum which are at
facilities not engaged in petroleum production, refining, or
marketing and which are not used to handle substantial
quantities of petroleum.
(C) In establishing classes and categories for purposes
of this paragraph, the Administrator may consider the following
factors:
(i) The size, type, location, storage, and handling
capacity of underground storage tanks in the class or
category and the volume of petroleum handled by such
tanks.
(ii) The likelihood of release and the potential
extent of damage from any release from underground
storage tanks in the class or category.
(iii) The economic impact of the limits on the
owners and operators of each such class or category,
particularly relating to the small business segment of
the petroleum marketing industry.
(iv) The availability of methods of financial
responsibility in amounts greater than the amount
established by this paragraph.
(v) Such other factors as the Administrator deems
pertinent.
(D) The Administrator may suspend enforcement of the
financial responsibility requirements for a particular class or
category of underground storage tanks or in a particular State,
if the Administrator makes a determination that methods of
financial responsibility satisfying the requirements of this
subsection are not generally available for underground storage
tanks in that class or category; and--
(i) steps are being taken to form a risk retention
group for such class of tanks; or
(ii) such State is taking steps to establish a fund
pursuant to section 9004(c)(1) of this Act to be
submitted as evidence of financial responsibility.
A suspension by the Administrator pursuant to this paragraph
shall extend for a period not to exceed 180 days. A
determination to suspend may be made with respect to the same
class or category or for the same State at the end of such
period, but only if substantial progress has been made in
establishing a risk retention group, or the owners or operators
in the class or category demonstrate, and the Administrator
finds, that the formation of such a group is not possible and
that the State is unable or unwilling to establish such a fund
pursuant to clause (ii).
(e) New Tank Performance Standards.--The Administrator
shall, not later than three months prior to the effective date
specified in subsection (f), issue performance standards for
underground storage tanks brought into use on or after the
effective date of such standards. The performance standards for
new underground storage tanks shall include, but need not be
limited to, design, construction, installation, release
detection, and compatibility standards.
(f) Effective Dates.--(1) Regulations issued pursuant to
subsection \1\ (c) and (d) of this section, and standards
issued pursuant to subsection (e) of this section, for
underground storage tanks containing regulated substances
defined in section 9001(2)(B) (petroleum, including crude oil
or any fraction thereof which is liquid at standard conditions
of temperature and pressure) shall be effective not later than
thirty months after the date of enactment of the Hazardous and
Solid Waste Amendments of 1984.
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\1\ So in law. Probably should be ``subsections''.
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(2) Standards issued pursuant to subsection (e) of this
section (entitled ``New Tank Performance Standards'') for
underground storage tanks containing regulated substances
defined in section 9001(2)(A) shall be effective not later than
thirty-six months after the date of enactment of the Hazardous
and Solid Waste Amendments of 1984.
(3) Regulations issued pursuant to subsection (c) of this
section (entitled ``Requirements'') and standards issued
pursuant to subsection (d) of this section (entitled
``Financial Responsibility'') for underground storage tanks
containing regulated substances defined in section 9001(2)(A)
shall be effective not later than forty-eight months after the
date of enactment of the Hazardous and Solid Waste Amendments
of 1984.
(g) Interim Prohibition.--(1) Until the effective date of
the standards promulgated by the Administrator under subsection
(e) and after one hundred and eighty days after the date of the
enactment of the Hazardous and Solid Waste Amendments of 1984,
no person may install an underground storage tank for the
purpose of storing regulated substances unless such tank
(whether of single or double wall construction)--
(A) will prevent releases due to corrosion or
structural failure for the operational life of the
tank;
(B) is cathodically protected against corrosion,
constructed of noncorrosive material, steel clad with a
noncorrosive material, or designed in a manner to
prevent the release or threatened release of any stored
substance; and
(C) the material used in the construction or lining
of the tank is compatible with the substance to be
stored.
(2) Notwithstanding paragraph (1), if soil tests
conducted in accordance with ASTM Standard G57-78, or another
standard approved by the Administrator, show that soil
resistivity in an installation location is 12,000 ohm/cm or
more (unless a more stringent standard is prescribed by the
Administrator by rule), a storage tank without corrosion
protection may be installed in that location during the period
referred to in paragraph (1).
(h) EPA Response Program for Petroleum.--
(1) Before regulations.--Before the effective date
of regulations under subsection (c), the Administrator
(or a State pursuant to paragraph (7)) is authorized
to--
(A) require the owner or operator of an
underground storage tank to undertake
corrective action with respect to any release
of petroleum when the Administrator (or the
State) determines that such corrective action
will be done properly and promptly by the owner
or operator of the underground storage tank
from which the release occurs; or
(B) undertake corrective action with
respect to any release of petroleum into the
environment from an underground storage tank if
such action is necessary, in the judgment of
the Administrator (or the State), to protect
human health and the environment.
The corrective action undertaken or required by this
paragraph shall be such as may be necessary to protect
human health and the environment. The Administrator
shall use funds in the Leaking Underground Storage Tank
Trust Fund for payment of costs incurred for corrective
action under subparagraph (B), enforcement action under
subparagraph (A), and cost recovery under paragraph (6)
of this subsection. Subject to the priority
requirements of paragraph (3), the Administrator (or
the State) shall give priority in undertaking such
actions under subparagraph (B) to cases where the
Administrator (or the State) cannot identify a solvent
owner or operator of the tank who will undertake action
properly.
(2) After regulations.--Following the effective
date of regulations under subsection (c), all actions
or orders of the Administrator (or a State pursuant to
paragraph (7)) described in paragraph (1) of this
subsection shall be in conformity with such
regulations. Following such effective date, the
Administrator (or the State) may undertake corrective
action with respect to any release of petroleum into
the environment from an underground storage tank only
if such action is necessary, in the judgment of the
Administrator (or the State), to protect human health
and the environment and one or more of the following
situations exists:
(A) No person can be found, within 90 days
or such shorter period as may be necessary to
protect human health and the environment, who
is--
(i) an owner or operator of the
tank concerned,
(ii) subject to such corrective
action regulations, and
(iii) capable of carrying out such
corrective action properly.
(B) A situation exists which requires
prompt action by the Administrator (or the
State) under this paragraph to protect human
health and the environment.
(C) Corrective action costs at a facility
exceed the amount of coverage required by the
Administrator pursuant to the provisions of
subsections (c) and (d)(5) of this section and,
considering the class or category of
underground storage tank from which the release
occurred, expenditures from the Leaking
Underground Storage Tank Trust Fund are
necessary to assure an effective corrective
action.
(D) The owner or operator of the tank has
failed or refused to comply with an order of
the Administrator under this subsection or
section 9006 or with the order of a State under
this subsection to comply with the corrective
action regulations.
(3) Priority of corrective actions.--The
Administrator (or a State pursuant to paragraph (7))
shall give priority in undertaking corrective actions
under this subsection, and in issuing orders requiring
owners or operators to undertake such actions, to
releases of petroleum from underground storage tanks
which pose the greatest threat to human health and the
environment.
(4) Corrective action orders.--The Administrator is
authorized to issue orders to the owner or operator of
an underground storage tank to carry out subparagraph
(A) of paragraph (1) or to carry out regulations issued
under subsection (c)(4). A State acting pursuant to
paragraph (7) of this subsection is authorized to carry
out subparagraph (A) of paragraph (1) only until the
State's program is approved by the Administrator under
section 9004 of this subtitle. Such orders shall be
issued and enforced in the same manner and subject to
the same requirements as orders under section 9006.
(5) Allowable corrective actions.--The corrective
actions undertaken by the Administrator (or a State
pursuant to paragraph (7)) under paragraph (1) or (2)
may include temporary or permanent relocation of
residents and alternative household water supplies. In
connection with the performance of any corrective
action under paragraph (1) or (2), the Administrator
may undertake an exposure assessment as defined in
paragraph (10) of this subsection or provide for such
an assessment in a cooperative agreement with a State
pursuant to paragraph (7) of this subsection. The costs
of any such assessment may be treated as corrective
action for purposes of paragraph (6), relating to cost
recovery.
(6) Recovery of costs.--
(A) In general.--Whenever costs have been
incurred by the Administrator, or by a State
pursuant to paragraph (7), for undertaking
corrective action or enforcement action with
respect to the release of petroleum from an
underground storage tank, the owner or operator
of such tank shall be liable to the
Administrator or the State for such costs. The
liability under this paragraph shall be
construed to be the standard of liability which
obtains under section 311 of the Federal Water
Pollution Control Act.
(B) Recovery.--In determining the equities
for seeking the recovery of costs under
subparagraph (A), the Administrator (or a State
pursuant to paragraph (7) of this subsection)
may consider the amount of financial
responsibility required to be maintained under
subsections (c) and (d)(5) of this section and
the factors considered in establishing such
amount under subsection (d)(5).
(C) Effect on liability.--
(i) No transfers of liability.--No
indemnification, hold harmless, or
similar agreement or conveyance shall
be effective to transfer from the owner
or operator of any underground storage
tank or from any person who may be
liable for a release or threat of
release under this subsection, to any
other person the liability imposed
under this subsection. Nothing in this
subsection shall bar any agreement to
insure, hold harmless, or indemnify a
party to such agreement for any
liability under this section.
(ii) No bar to cause of action.--
Nothing in this subsection, including
the provisions of clause (i) of this
subparagraph, shall bar a cause of
action that an owner or operator or any
other person subject to liability under
this section, or a guarantor, has or
would have, by reason of subrogation or
otherwise against any person.
(D) Facility.--For purposes of this
paragraph, the term ``facility'' means, with
respect to any owner or operator, all
underground storage tanks used for the storage
of petroleum which are owned or operated by
such owner or operator and located on a single
parcel of property (or on any contiguous or
adjacent property).
(7) State authorities.--
(A) General.--A State may exercise the
authorities in [paragraphs (1) and (2) of this
subsection] paragraphs (1), (2), and (12),
subject to the terms and conditions of
paragraphs (3), (5), (9), (10), and (11), and
including the authorities of paragraphs (4),
(6), and (8) of this subsection and subsection
9010(a) if--
(i) the Administrator determines
that the State has the capabilities to
carry out effective corrective actions
and enforcement activities; and
(ii) the Administrator enters into
a cooperative agreement with the State
setting out the actions to be
undertaken by the State.
The Administrator may provide funds from the
Leaking Underground Storage Tank Trust Fund for
the reasonable costs of the State's actions
under the cooperative agreement.
(B) Cost share.--Following the effective
date of the regulations under subsection (c) of
this section, the State shall pay 10 per centum
of the cost of corrective actions undertaken
either by the Administrator or by the State
under a cooperative agreement, except that the
Administrator may take corrective action at a
facility where immediate action is necessary to
respond to an imminent and substantial
endangerment to human health or the environment
if the State fails to pay the cost share.
(8) Emergency procurement powers.--Notwithstanding
any other provision of law, the Administrator may
authorize the use of such emergency procurement powers
as he deems necessary.
(9) Definition of owner or operator.--
(A) In general.--As used in this subtitle,
the terms ``owner'' and ``operator'' do not
include a person that, without participating in
the management of an underground storage tank
and otherwise not engaged in petroleum
production, refining, or marketing, holds
indicia of ownership primarily to protect the
person's security interest.
(B) Security interest holders.--The
provisions regarding holders of security
interests in subparagraphs (E) through (G) of
section 101(20) and the provisions regarding
fiduciaries at section 107(n) of the
Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 shall
apply in determining a person's liability as an
owner or operator of an underground storage
tank for the purposes of this subtitle.
(C) Effect on rule.--Nothing in
subparagraph (B) shall be construed as
modifying or affecting the final rule issued by
the Administrator on September 7, 1995 (60 Fed.
Reg. 46,692), or as limiting the authority of
the Administrator to amend the final rule, in
accordance with applicable law. The final rule
in effect on the date of enactment of this
subparagraph shall prevail over any
inconsistent provision regarding holders of
security interests in subparagraphs (E) through
(G) of section 101(20) or any inconsistent
provision regarding fiduciaries in section
107(n) of the Comprehensive Environmental
Response, Compensation, and Liability Act of
1980. Any amendment to the final rule shall be
consistent with the provisions regarding
holders of security interests in subparagraphs
(E) through (G) of section 101(20) and the
provisions regarding fiduciaries in section
107(n) of the Comprehensive Environmental
Response, Compensation, and Liability Act of
1980. This subparagraph does not preclude
judicial review of any amendment of the final
rule made after the date of enactment of this
subparagraph.
(10) Definition of exposure assessment.--As used in
this subsection, the term ``exposure assessment'' means
an assessment to determine the extent of exposure of,
or potential for exposure of, individuals to petroleum
from a release from an underground storage tank based
on such factors as the nature and extent of
contamination and the existence of or potential for
pathways of human exposure (including ground or surface
water contamination, air emissions, and food chain
contamination), the size of the community within the
likely pathways of exposure, and the comparison of
expected human exposure levels to the short-term and
long-term health effects associated with identified
contaminants and any available recommended exposure or
tolerance limits for such contaminants. Such assessment
shall not delay corrective action to abate immediate
hazards or reduce exposure.
(11) Facilities without financial responsibility.--
At any facility where the owner or operator has failed
to maintain evidence of financial responsibility in
amounts at least equal to the amounts established by
subsection (d)(5)(A) of this section (or a lesser
amount if such amount is applicable to such facility as
a result of subsection (d)(5)(B) of this section) for
whatever reason the Administrator shall expend no
monies from the Leaking Underground Storage Tank Trust
Fund to clean up releases at such facility pursuant to
the provisions of paragraph (1) or (2) of this
subsection. At such facilities the Administrator shall
use the authorities provided in subparagraph (A) of
paragraph (1) and paragraph (4) of this subsection and
section 9006 of this subtitle to order corrective
action to clean up such releases. States acting
pursuant to paragraph (7) of this subsection shall use
the authorities provided in subparagraph (A) of
paragraph (1) and paragraph (4) of this subsection to
order corrective action to clean up such releases.
Notwithstanding the provisions of this paragraph, the
Administrator may use monies from the fund to take the
corrective actions authorized by paragraph (5) of this
subsection to protect human health at such facilities
and shall seek full recovery of the costs of all such
actions pursuant to the provisions of paragraph (6)(A)
of this subsection and without consideration of the
factors in paragraph (6)(B) of this subsection. Nothing
in this paragraph shall prevent the Administrator (or a
State pursuant to paragraph (7) of this subsection)
from taking corrective action at a facility where there
is no solvent owner or operator or where immediate
action is necessary to respond to an imminent and
substantial endangerment of human health or the
environment.
(12) Remediation of mtbe contamination.--
(A) In general.--The Administrator and the
States may use funds made available under
section 9011(1) to carry out corrective actions
with respect to a release of methyl tertiary
butyl ether that presents a threat to human
health, welfare, or the environment.
(B) Applicable authority.--Subparagraph (A)
shall be carried out--
(i) in accordance with paragraph
(2); and
(ii) in the case of a State, in
accordance with a cooperative agreement
entered into by the Administrator and
the State under paragraph (7).
* * * * * * *
authorization of appropriations
[Sec. 9010. For authorization of appropriations to carry
out this subtitle, see section 2007(g).]
SEC. 9010. RELEASE PREVENTION AND COMPLIANCE.
Funds made available under section 9011(2) from the Leaking
Underground Storage Tank Trust Fund may be used for conducting
inspections, or for issuing orders or bringing actions under
this subtitle--
(1) by a State (pursuant to section 9003(h)(7))
acting under--
(A) a program approved under section 9004;
or
(B) State requirements regulating
underground storage tanks that are similar or
identical to this subtitle; and
(2) by the Administrator, acting under this
subtitle or a State program approved under section
9004.
SEC. 9011. AUTHORIZATION OF APPROPRIATIONS.
In addition to amounts made available under section
2007(f), there are authorized to be appropriated from the
Leaking Underground Storage Tank Trust Fund--
(1) to carry out section 9003(h)(12), $200,000,000
for fiscal year 2001, to remain available until
expended; and
(2) to carry out section 9010--
(A) $50,000,000 for fiscal year 2001; and
(B) $30,000,000 for each of fiscal years
2002 through 2006.
* * * * * * *