To amend section 211 of the Clean Air Act to modify the provisions regarding the oxygen content of reformulated gasoline and to improve the regulation of the fuel additive, methyl tertiary butyl ether (MTBE), and for other purposes.

SECTION 1. WAIVER OF OXYGEN CONTENT REQUIREMENTS.

    Section 211(k) of the Clean Air Act (42 U.S.C. 7545(k)) is amended 
by adding the following new paragraph at the end:
            ``(11) Waiver of oxygen content requirement.--
                    ``(A) In general.--Upon petition to the 
                Administrator by the Governor of a State, the 
                Administrator shall waive any oxygen content 
                requirement in effect under this subsection for that 
                State.
                    ``(B) Action by environmental protection agency.--
                Not later than 270 days after the date of receipt of a 
                petition submitted under subparagraph (A), the 
                Administrator shall grant the waiver of the oxygen 
                content requirement requested in the petition. If, by 
                the date that is 270 days after the date of receipt of 
                such a petition, the Administrator has not granted the 
                petition, the petition shall be deemed to be granted. 
                The waiver under this subparagraph shall take effect on 
                the date 90 days after the petition is granted or 
                deemed granted unless the Administrator establishes an 
                earlier effective date.
                    ``(C) Special rule.--The oxygen content requirement 
                in effect under this subsection shall not apply to a 
                State referred to in subsection (c)(4)(B).''.

SEC. 2. CONTROL OF OXYGENATES.

    (a) EPA Authority.--(1) Section 211(c)(1) of the Clean Air Act (42 
U.S.C. 7545(c)(1)) is amended by inserting ``(A)'' after ``(1)'' by 
redesignating subparagraphs (A) and (B) as clauses (i) and (ii) and by 
adding the following at the end thereof:
    ``(B) The Administrator may, by regulation, control or prohibit the 
use of any oxygenate (including methyl tertiary butyl ether, `MTBE') as 
a fuel, or fuel additive for fuel, for use in a motor vehicle, motor 
vehicle engine, or nonroad engine or nonroad vehicle if in the judgment 
of the Administrator such oxygenate causes or contributes to 
contamination of drinking water which may reasonably be anticipated to 
endanger public health, welfare, or the environment in the United 
States.''.
    (2) Section 211(c)(2)(A) of such Act (42 U.S.C. 7545(c)(2)(A)) is 
amended by inserting ``(i) of subparagraph'' before ``(A) of 
paragraph''.
    (3) Section 211(c)(2)(B) of such Act (42 U.S.C. 7545(c)(2)(B)) is 
amended by striking ``(B)'' and inserting ``(ii) of subparagraph (A)''.
    (4) Section 211(c)(2)(C) of such Act (42 U.S.C. 7545(c)(2)(C)) is 
amended by inserting ``clause (i) or (ii) of subparagraph (A) of'' 
before ``paragraph (1)''.
    (5) Section 211(c)(2) of such Act (42 U.S.C. 7545(c)(2)) is amended 
by adding the following at the end thereof:
    ``(D) If the Administrator seeks to control or prohibit the use of 
any oxygenate under subparagraph (B) of paragraph (1), the 
Administrator shall take into account information as to whether such 
control or prohibition will affect the use of any other oxygenate in a 
manner which may reasonably be anticipated to endanger public health, 
welfare, or the environment in the United States.''.
    (b) MTBE Levels.--Section 211(c) of the Clean Air Act (42 U.S.C. 
7545(c)) is amended by adding the following at the end thereof:
    ``(5) MTBE levels.--Within 1 year after the enactment of this 
paragraph, the Administrator shall promulgate regulations to require 
that, for the calendar year beginning January 1, 2005, and for each 
calendar year thereafter, the annual volume of methyl tertiary butyl 
ether (MTBE) manufactured or introduced into commerce in a calendar 
year in the United States for use as a fuel, or fuel additive for fuel, 
for use in a motor vehicle, motor vehicle engine, or nonroad engine or 
nonroad vehicle shall not exceed the average annual volume of MTBE 
estimated by the Administrator to have been manufactured or introduced 
into commerce in calendar years 1986 through 1991 in the United States 
for use as a fuel or fuel additive for fuel, for use in a motor 
vehicle, motor vehicle engine, or nonroad engine or nonroad vehicle. 
The regulations under this paragraph may include regulations regarding 
the quantity of MTBE on a per-gallon basis or annual average basis 
provided that such an annual average standard has associated with it a 
per-gallon maximum standard.''.
    (c) State Authority.--Section 211(c)(4) of the Clean Air Act (42 
U.S.C. 7545(c)(4)) is amended by adding the following at the end:
    ``(D) The Administrator may permit any State to prescribe and 
enforce controls or prohibitions on the use of methyl tertiary butyl 
ether (MTBE) as a fuel additive in fuel offered for sale, or sold, at 
retail in a calendar year in that State in order to reduce the volume 
of MTBE offered for sale, or sold, at retail in that State to levels 
below the levels estimated by the State to be offered for sale, or 
sold, at retail in that State under paragraph (1)(B) or (5). The 
Administrator may also permit any such State to establish such controls 
or prohibitions on MTBE on a more expeditious schedule than required 
under paragraph (1)(B) or (5). Any State seeking additional controls 
or prohibitions or a more expeditious schedule under this subparagraph 
shall submit a petition to the Administrator. The Administrator may 
only grant such a petition if the Administrator finds that the controls 
on MTBE in effect under paragraph (1)(B) or (5) will not prevent MTBE 
from causing or contributing to air pollution in that State, or 
contamination of drinking water in that State, which may reasonably be 
anticipated to endanger public health, welfare, or the environment. No 
State may submit such a petition to the Administrator before the date 1 
year after the enactment of this subparagraph. The Administrator shall 
act on such petitions within 180 days of receipt. No State referred to 
in subparagraph (B) shall be subject to the requirements of this 
subparagraph.
    ``(E) Subparagraph (D) shall not limit the authority of any State 
under any other provision of law to prescribe and enforce any control 
or prohibition on the use of methyl tertiary butyl ether (MTBE) as a 
fuel additive.''.

SEC. 3. MAINTENANCE OF EMISSION CONTROL BENEFITS.

    (a) Toxic Air Pollutants.--Section 211(k)(3) of the Clean Air Act 
(42 U.S.C. 7545(k)(3)) is amended by adding the following at the end:
                    ``(C) Maintaining toxic control benefits in oxygen 
                waiver areas.--(i) Not later than 90 days after the 
                date of enactment of this subparagraph, the 
                Administrator shall propose, and not later than later 
                than 270 days after the enactment of this subparagraph, 
                promulgate, regulations under this subparagraph 
                (consistent with section 211(k)(3)(B)(ii) of the Clean 
                Air Act) establishing regional performance standards to 
                ensure that the levels of reductions of toxic air 
                pollutants achieved under the Reformulated Gasoline 
                Program in effect under this subsection are maintained 
                in areas where the oxygen content requirement is waived 
                under paragraph (11).
                    ``(ii) For purposes of establishing regional 
                performance standards under this subparagraph, the 
                Administrator shall determine the reductions of toxic 
                air pollutants achieved under the Reformulated Gasoline 
                Program in effect under this subsection on average in 
                calendar years 1998 and 1999 in various regions 
                selected, in consultation with the Secretary of Energy. 
                Such regions shall be selected on the basis of the 
                existing gasoline distribution and supply network to 
                the extent practicable. The Administrator's 
                determination shall be based on compliance survey data, 
                other appropriate and reliable data and the 
                Environmental Protection Agency's existing Phase II 
                complex model.
                    ``(iii) The Administrator shall convert the average 
                air toxic reductions, calculated as described in clause 
                (ii), into annual average regional performance 
                standards. Such regional performance standards shall 
                apply to reformulated gasoline to be sold, or offered 
                for sale, or introduced into commerce in areas where 
                the oxygen content requirement is waived under 
                paragraph (11).
                    ``(iv) The performance standards under this 
                subparagraph shall not apply to the extent that 
                regulations under this Act (including the Environmental 
                Protection Agency's existing Phase II Reformulated 
                Gasoline air toxics performance standards, or 
                regulations promulgated under section 202(l)) are more 
                stringent than such performance standards. The 
                performance standards under this subparagraph shall not 
                apply in any State referred to in section 211(c)(4)(B).
                    ``(v) Pending promulgation of regulations under 
                this subparagraph, the Environmental Protection 
                Agency's Phase II Reformulated Gasoline complex model 
                toxic performance standards shall apply in areas where 
                the oxygen content requirement is waived under 
                paragraph (11).''.
    (b) Criteria Air Pollutants.--Section 211 of the Clean Air Act (42 
U.S.C. 7545) is amended by adding at the end the following:
    ``(p) Conventional Gasoline.--
            ``(1) In general.--Not later than October 1, 2007--
                    ``(A) the Administrator shall determine whether the 
                use of conventional gasoline during the period of 
                calendar years 2005 and 2006 resulted in a greater 
                volume of emissions of criteria air pollutants listed 
                under section 108, determined on the basis of a 
                weighted average of those pollutants, than the volume 
                of such emissions during the period of calendar years 
                1998 and 1999; and
                    ``(B) if the Administrator determines that a 
                significant increase in emissions occurred, the 
                Administrator shall promulgate such regulations under 
                subsection (c) concerning the use of conventional 
                gasoline as are appropriate regarding that increase.
            ``(2) Applicability to certain states.--The Administrator 
        shall make the determination under paragraph (1)(A) without 
        regard to, and the regulations promulgated under paragraph 
        (1)(B) shall not apply to, any State that has received a waiver 
        under section 209(b).''.

SEC. 4. ASSURANCE OF ADEQUATE FUEL SUPPLY.

    Any regulation or modification of fuel properties promulgated by, 
or approved by the Administrator of the Environmental Protection Agency 
under the amendments made by this Act, shall take into account the need 
to provide lead time for refinery and fuel distribution system 
modifications necessary to assure adequate fuel supply for all States. 
Such regulation or modification shall include provisions for the 
banking and trading of allowances within, but not between, the regions 
referred to in section 211(k)(3)(C) of the Clean Air Act.

Summary: Amends the Clean Air Act to authorize the Administrator of the Environmental Protection Agency to waive oxygen content requirements for reformulated gasoline upon petition of a State. Permits the Administrator to control or prohibit the use of any oxygenate (including methyl tertiary butyl ether (MTBE)) as a fuel or fuel additive if the oxygenate contributes to contamination of drinking water which may be anticipated to endanger public health, welfare, or the environment. Caps the annual volume of MTBE manufactured or introduced into commerce as a fuel or fuel additive, beginning in 2005, at the average annual volume estimated to have been manufactured or introduced into commerce in 1986 through 1991. Grants States certain authority to prescribe and enforce controls on the use of MTBE as a fuel additive. Directs the Administrator to establish regional performance standards to ensure that levels of reductions of toxic air pollutants achieved under the Reformulated Gasoline Program are maintained in areas where the oxygen content requirement is waived. Requires any regulation or modification of fuel properties made by this Act to take into account the need to provide lead time for refinery and fuel distribution system modifications necessary to assure adequate fuel supply for all States.