Fuel additive hot point in energy bill

By Richard Simon
Los Angeles Times

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Legal protection for makers of the additive methyl tertiary-butyl ether, or MTBE, is emerging as one of the more contentious provisions in the energy legislation. The bill seeks to reduce dependence on foreign oil and prevent problems like the 2000-01 California electricity crisis and the Northeast blackout last summer.

The bill would provide between $16 billion and $20 billion in tax breaks to promote energy production and conservation, establish programs to modernize the nation's electric grid and mandate greater use of corn-based ethanol in gasoline.

The measure faces its first test tomorrow before a House-Senate conference committee. There, criticism is expected over a provision that would shield MTBE manufacturers from product-liability lawsuits, retroactive to Sept. 5.

The legislation could undermine pending court cases, such as a suit filed Sept. 30 by New Hampshire officials against oil and chemical companies in connection with contamination allegedly caused by MTBE.

MTBE helps cut auto-emission pollution but is blamed for contaminating groundwater.

While earlier versions of the bill provided so-called transition assistance of about $800 million to help MTBE manufacturers retool plants to make other gasoline products, the latest version increases that amount to up to $2 billion over 10 years.

The legal protections have been championed by House Majority Leader Tom DeLay, R-Texas, whose state is among the major producers of the fuel additive.

A lobbyist for the MTBE manufacturers said the transition assistance serves the public interest because it would encourage makers of the fuel additive to accelerate production of different clean-fuel products. "The most inveterate foes of MTBE tell you that they would prefer for MTBE to leave the marketplace a lot faster than 2015," the date by which the substance must be phased out nationally, said lobbyist Scott Segal.

GOP aides said Sept. 5 was chosen as the cutoff date for liability protection because that was the first day House-Senate negotiators formally met to write the final version of the energy bill.

Critics of the legal protections, including many water agencies, have said it could shift an estimated $29 billion cost for cleaning up water supplies to taxpayers and water customers.

Industry officials have contended Congress was responsible for promoting the use of MTBE by requiring cleaner-burning gasoline in the smoggiest U.S. regions.

Consumers may not notice a direct benefit from the energy deal except an eventual stabilization of skyrocketing natural-gas prices in about five years when an Alaska-to-Chicago natural-gas pipeline is built, said Severin Borenstein, a business professor who is director of the University of California Energy Institute.

The bill would provide $18 billion in loan guarantees to private companies to build a natural-gas pipeline from Alaska.

The bill also would give authority to a new Electric Reliability Organization to oversee the technical aspects of running and interconnecting the nation's electrical grid. It "becomes a traffic cop who can write tickets" to enforce technical standards that have been only voluntary, said Jim Owen, spokesman for the Edison Electric Institute, a utility lobby.

At the same time, marketing and business aspects would get only voluntary oversight and less regulation than the Federal Energy Regulatory Commission had planned.

Material from Knight Ridder Newspapers is included in this report.

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