US: Cleanup Costs for Toxic Gas Additive Could be Billions

SACRAMENTO - Staring at potential payouts in the billions of dollars,
the U.S. oil industry is maneuvering to escape responsibility for
cleaning up after MTBE, the now-banned toxic gasoline additive that has
seeped into drinking water across the country.

If the campaign is successful, critics say taxpayers will be forced to pick up the unpaid bill.

Oil producers have attached so
much importance to immunity from liability that the issue has taken a
place right alongside opening the Arctic National Wildlife Refuge and
tax breaks as Congress crafts a broad new energy policy.

The House has already approved legislation
sponsored by a powerful Texas Republican, Rep. Joe Barton, that would
deliver what the industry wants, brushing aside protests from
California water officials, Republican Gov. Arnold Schwarzenegger and
Democratic Attorney General Bill Lockyer.

However, the U.S. Senate is widely expected to
withstand industry pressure as it takes up its own energy bill this
week, shifting the showdown to a conference committee later this
summer.

That could set the stage for a possible repeat of 2003 when an energy bill collapsed, partially over an impasse involving MTBE.

California officials contend that a vital source
of funding to clean up groundwater contamination could vanish if the
industry avoids liability.

"Any such provision would seriously undermine
efforts to protect precious groundwater and surface water sources from
the harmful effects of MTBE contamination and unfairly shift cleanup
costs to taxpayers," Lockyer said in a letter of opposition.

Oil interests counter that it's not fair to
punish them for complying with a 1990 congressional order to blend a
smog-fighting additive into gasoline as part of amendments to the Clean
Air Act. The industry chose to use Methyl Tertiary Butyl Ether, or
MTBE.

"This is, above all, an issue of fairness," Red
Cavaney, president of the American Petroleum Institute, told a House
committee in February.

"Any industry that acts as mandated by the
federal government to meet a societal need - in this case, cleaner air
and improved health - should not be victimized for doing what the
government required it to do," he said.

A federal shield would make it much more difficult for water agencies to collect, but not impossible.

No figures are available nationally, but the
opposing parties have tossed around wildly disparate cleanup estimates
that range from $2 billion to $29 billion.

Most MTBE-related claims are based on
defective-product liability law, which allows agencies to go after the
producers of MTBE. If the industry is awarded immunity, communities may
be armed only with difficult-to-prove negligence standards that would
limit their targets to companies that own gas stations or independents,
water agencies contend.

"I haven't heard of anyone who thinks the mom
and pop gas stations will come up with millions to clean up this mess,"
said Dave Reynolds, who monitors MTBE issues for a coalition of
California water agencies.

But with the additive no longer on the market,
the threat to public health may be contained, according to Dave Spath,
California's drinking water chief.

"The situation has stabilized . . . It has not
reached as many drinking water sources as we once feared," Spath said.
"That doesn't mean there isn't a lot of cleanup to be done."

In 2000, MTBE was detected at levels high enough
to be a threat to health in 31 California counties, including five
locations in San Diego County, according to the Department of Health
Services.

"It's not a big local issue," said Ken Weinberg, director of water Resources for the San Diego County Water Authority.

Yet the authority opposes immunity for the
industry because "it's not a good policy to exempt polluters from
liability," Weinberg said.

Several California entities have filed legal
claims against various producers, which prompted Republican leaders in
the House to insert a retroactive enforcement date that could
extinguish many cases.

Those seeking redress in court in include:
Fresno, Riverside, Roseville, the Quincy Community Services district,
California Water Services Co., the California-American Water Co. and a
coalition of Sacramento-based agencies.

Under pressure to clear the skies, Congress had
ordered oil producers to blend an oxygenate with gasoline to make gas
burn cleaner. But, in a key decision at the heart of the latest
controversy, Congress didn't mandate which oxygenate. By all accounts,
the oil industry selected MTBE because it was readily available and
cheaper than the limited supplies of ethanol or other alternatives.

"It was the oil companies that decided exactly
what they were going to use," insisted Alan Lloyd, head of the
California Environmental Protection Agency. By virtue of that decision,
the industry should be held accountable for the pollution, Lloyd said.

The dangers of MTBE first came to light on a
large scale in the Lake Tahoe and Santa Monica cases, which involved
dozens of drinking water wells that had to be shut down. A coalition of
water officials and environmentalists launched a nationwide crusade
against MTBE. In California, then-Gov. Gray Davis banned the additive
starting in 2004. Many other states soon followed. The pending federal
legislation would ban the additive starting in 2015.

Oil interests say the only way to meet demands for cleaner-burning fuel at the time was to use MTBE.

"Congress knew MTBE was going to be used in huge
volumes. Congress was fully aware of the potential problems," said
Frank Maisano, an energy industry lobbyist.

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