U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1

79–010

" ! SENATE 106TH CONGRESS

2d Session

REPORT

2000

106–426

Calendar No. 845

FEDERAL REFORMULATED FUELS ACT

OF 2000

REPORT

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

JAMES M. INHOFE, Oklahoma

CRAIG THOMAS, Wyoming

CHRISTOPHER S. BOND, Missouri

GEORGE V. VOINOVICH, Ohio

MICHAEL D. CRAPO, Idaho

ROBERT F. BENNETT, Utah

KAY BAILEY HUTCHISON, Texas

LINCOLN CHAFEE, Rhode Island

MAX BAUCUS, Montana

DANIEL PATRICK MOYNIHAN, New York

FRANK R. LAUTENBERG, New Jersey

HARRY REID, Nevada

BOB GRAHAM, Florida

JOSEPH I. LIEBERMAN, Connecticut

BARBARA BOXER, California

RON WYDEN, Oregon

DAVE CONOVER, Staff Director

TOM SLITER, Minority Staff Director

(II)

iii

CONTENTS

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

79–010

Calendar No. 845

106TH CONGRESS REPORT

2d Session " ! SENATE 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

REPORT

[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

2

1Los 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). 2Sacramento, California.

3States 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. 5 Baseline vehicles and fuel technology assumptions in EPA’s complex model date from 1990,

despite significant advances in vehicle and fuel systems technology.

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.

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 5starting 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.

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 benVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00006 Fmt 6659 Sfmt 6601 S2962.RPT SENVIR1 PsN: SENVIR1
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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. 7 National Research Council. ‘‘Modeling Mobile-Source Emissions.’’ Washington, DC: National

Academy Press, May 2000.

zene. 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.

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 highemitting 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.

4

8 American Petroleum Institute v. Environmental Protection Agency, 52 F. 3d 1113 (DC Cir.

1995).

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

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

5

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.

6

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

7

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.

8

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.

9

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.

10

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.

11

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

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ment 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.

13

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

14

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,

15

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.

16

9Los 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. 11States 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.

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

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quired 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.

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

18

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 enforceVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00022 Fmt 6659 Sfmt 6601 S2962.RPT SENVIR1 PsN: SENVIR1
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ment 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.

20

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

21

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.

22

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 phaseout 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.

23

STATE LEGISLATION ON MTBE ADDITIVES IN REFORMULATED GASOLINE

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)

24

STATE LEGISLATION ON MTBE ADDITIVES IN REFORMULATED GASOLINE

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.

25

STATE LEGISLATION ON MTBE ADDITIVES IN REFORMULATED GASOLINE

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

26

List of Reformulated Gasoline Program Areas—Continued

U.S. Environmental Protection Agency, Office of Mobile Sources, April 5, 1999

Clean Air Act: Required Areas

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

27

List of Reformulated Gasoline Program Areas—Continued

U.S. Environmental Protection Agency, Office of Mobile Sources, April 5, 1999

Clean Air Act: Required Areas

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

28

List of Reformulated Gasoline Program Areas—Continued

U.S. Environmental Protection Agency, Office of Mobile Sources, April 5, 1999

Clean Air Act: Required Areas

MISSOURI (Effective Opt-In

Date is June 1, 1999).

St. Louis nonattainment area

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

29

List of Reformulated Gasoline Program Areas—Continued

U.S. Environmental Protection Agency, Office of Mobile Sources, April 5, 1999

Clean Air Act: Required Areas

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 optout 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.

30

List of Reformulated Gasoline Program Areas—Continued

U.S. Environmental Protection Agency, Office of Mobile Sources, April 5, 1999

Clean Air Act: Required Areas

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

31

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

32

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 nonoxygenated 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

33

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

34

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

35

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 nonoxygenated 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 nonoxygenated fuels) offsets the increase in CO resulting from reduction of oxygen in

36

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 nonoxygenated 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

37

Summary of State Drinking Water and Groundwater Standards For MTBE—Continued

State Groundwater (ppb) Type of Standard or Guideline

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 morVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00041 Fmt 6659 Sfmt 6601 S2962.RPT SENVIR1 PsN: SENVIR1
38

phologic 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.

39

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.

40

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

Test Group Fuel Mixture Toxicology Studies Studies Initiation

Draft Report

Due to EPA

Comments

Due to RG

Final Report

Due to EPA

Group A ......... Baseline Gasoline—Gasoline MTBE.

Study Set 1:

• Subchronic w/ Neurotoxicity,

Immunotoxicity, and In Vivo/In

Vitro Genotoxicity*.

• Developmental Toxicity (Two

Species).

0 months 26 months 28 months 30 months

Study Set 2:

• Two Generation Reproductive

Toxicity.

12 months 36 months 38 months 40 months

Study Set 3:

• Oncogenicity (One Species) ....

12 months 52 months 54 months 56 months

Group B ......... Gasoline Ethanol

Gasoline TAME ..

Gasoline ETBE ..

Study Set 4:

• Subchronic w/Neurotoxicity,

Immunotoxicity, and In Vivo/In

Vitro Genotoxicity*.

• Developmental Toxicity (One

Species).

6 months 32 months 34 months 36 months

Study Set 5:

• One Generation Reproductive

Toxicity.

18 months 38 months 40 months 42 months

Group C ......... Gasoline DIPE ...

Gasoline TBA ....

Study Set 6:

• Subchronic w/Neurotoxicity,

Immunotoxicity, and In Vivo/In

Vitro Genotoxicity*.

• Developmental Toxicity (One

Species).

18 months 38 months 40 months 42 months

Study Set 7:

• One Generation Reproductive

Toxicity.

30 months 50 months 52 months 54 months

41

Animal Testing—Continued

Test Group Fuel Mixture Toxicology Studies Studies Initiation

Draft Report

Due to EPA

Comments

Due to RG

Final Report

Due to EPA

Group D ......... EtOH, TAME,

ETBE, DIPE,

TBA.

Study Set 8:

• Neat Oxygenate PK (where applicable).

6 months 26 months 28 months 30 months

*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 individual peer review comments and disposition of comments.3 months ............. 12 months

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 including individual peer review

comments and disposition of comments.

24 months ........... 42 months

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

42

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.

43

1The 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.

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.

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 Requirements1

Phase I RFG Phase II RFG

Volatile Organic Compounds .................. 17% ....................................................... 27%

Nitrogen Oxides ....................................... 2% ......................................................... 7%

Toxics ...................................................... 17% ....................................................... 22%

1Reductions are from 1990 nationwide baseline.

44

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).

45

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 water

standards (health-based).

Maine (35 ppb)

New Jersey (70 ppb)

New York (50 ppb)

South Carolina (20–40 ppb)

States with a Secondary Standard (aesthetic).California (5 ppb), enforceable

States with enforceable guidelines .......... Michigan (240 ppb), health-based

West Virginia (20–40 ppb), EPA advisory

46

Table 2. State Drinking Water Standards, Guidelines, and Action Levels

States with a guideline or action level in

place.

Arizona (35 ppb), health-based

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:

47

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.

48

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 valueadded 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’ perVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00052 Fmt 6659 Sfmt 6601 S2962.RPT SENVIR1 PsN: SENVIR1
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2While 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.

spective, 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.

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.

50

3Substantial 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.

D. Environmental Benefits

Renewable fuels have the potential to provide substantial lifecycle 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 fastgrowing 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.

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 transVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00054 Fmt 6659 Sfmt 6601 S2962.RPT SENVIR1 PsN: SENVIR1
51

port 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.

52

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. ReVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00056 Fmt 6659 Sfmt 6601 S2962.RPT SENVIR1 PsN: SENVIR1
53

finery 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.

54

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 5Performing 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. 6This 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.

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

Table 3. Scenarios Evaluated with EIA Model

Scenario MTBE Content, effective in 2003 Renewable Fuels Standard, effective in 2005

EIA16 ....................................................... 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

55

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.

56

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.

57

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

58

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.

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.

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

59

8The 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.

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.

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 Federalaid 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

60

$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 Federalaid 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.

61

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

62

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

Scenario MTBE Content Effective in 2003 Renewable Fuels Standard Effective 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 HighVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00066 Fmt 6659 Sfmt 6601 S2962.RPT SENVIR1 PsN: SENVIR1
63

way 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 Federalaid 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 Scenarios2

State Baseline3

Scenario EIA1 Scenario EIA2 Scenario EIA3 Scenario EIA4

Share (%) Delta (%) Share (%) Delta (%) Share (%) Delta (%) Share (%) Delta (%)

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

64

Comparison of fiscal year 2005 State Shares of Federal-Aid Highway Program Apportionments under MTBE Scenarios2

State Baseline3

Scenario EIA1 Scenario EIA2 Scenario EIA3 Scenario EIA4

Share (%) Delta (%) Share (%) Delta (%) Share (%) Delta (%) Share (%) Delta (%)

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.

65

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’’ sceVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00069 Fmt 6659 Sfmt 6601 S2962.RPT SENVIR1 PsN: SENVIR1
66

nario 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 requireVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00070 Fmt 6659 Sfmt 6601 S2962.RPT SENVIR1 PsN: SENVIR1
67

1The 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.

ment for RFG remains intact. However, the reference case reflects

no phase-out of MTBE outside of California. 1

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

68

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

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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.

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Section 6 creates new regulatory authority to implement marketbased 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

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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.

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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

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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. Spe- cifically, 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.

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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.

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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.

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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.

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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

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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.

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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.

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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 extralow 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

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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 refinVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00085 Fmt 6602 Sfmt 6602 S2962.RPT SENVIR1 PsN: SENVIR1
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ers 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

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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

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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

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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.

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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

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sions. 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, valueadded 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

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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.

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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.

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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

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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 NuVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00095 Fmt 6602 Sfmt 6602 S2962.RPT SENVIR1 PsN: SENVIR1
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clear 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

93

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.

94

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.

95

1The 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.

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 øblack brackets¿, new matter is printed in italic, existing

law in which no change is proposed is shown in roman:

CLEAN AIR ACT1

[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—

* * * * * * *

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 ømay also¿ shall, on a regular basis require the

manufacturer of any fuel or fuel additive—

ø(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.

96

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 øair 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

97

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), øor (n)¿ (n),

or (o) of this section or who fails to furnish any information or

conduct any tests required by the Administrator under subVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00101 Fmt 6602 Sfmt 6602 S2962.RPT SENVIR1 PsN: SENVIR1
98

section (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),

øor (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), øand (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.—øWithin 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,

99

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 volVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00103 Fmt 6602 Sfmt 6602 S2962.RPT SENVIR1 PsN: SENVIR1
100

ume 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 reformuVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00104 Fmt 6602 Sfmt 6602 S2962.RPT SENVIR1 PsN: SENVIR1
101

lated 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 requireVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00105 Fmt 6602 Sfmt 6602 S2962.RPT SENVIR1 PsN: SENVIR1
102

ments 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 vehiVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00106 Fmt 6602 Sfmt 6602 S2962.RPT SENVIR1 PsN: SENVIR1
103

cles 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.

104

The Administrator may impose sampling, testing, and recordkeeping requirements upon any refiner, blender, importer, or

marketer to prevent violations of this section.

ø(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.

ø(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

øsubparagraph (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 øthis 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

105

(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) carVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00109 Fmt 6602 Sfmt 6602 S2962.RPT SENVIR1 PsN: SENVIR1
106

bon 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.

ø(10)¿ (11) DEFINITIONS.—For purposes of this

subsection—

(A) BASELINE VEHICLES.—The term ‘‘baseline vehicles’’

mean representative model year 1990 vehicles.

107

(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 RegulaVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00111 Fmt 6602 Sfmt 6601 S2962.RPT SENVIR1 PsN: SENVIR1
108

tions (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

109

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—

110

(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

111

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 ADDI- TIONAL 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—

112

(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

113

1The 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).

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.

ø(o)¿ (q) FUEL AND FUEL ADDITIVE IMPORTERS AND IMPORTA- TION.—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]

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. * * *

* * * * * * *

øSec. 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

114

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

115

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

116

1So in law. Probably should be ‘‘subsections’’.

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.

(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.

117

(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.

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(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

119

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

øparagraphs (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

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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 expoVerDate 11-MAY-2000 15:16 Sep 28, 2000 Jkt 079010 PO 00000 Frm 00124 Fmt 6602 Sfmt 6601 S2962.RPT SENVIR1 PsN: SENVIR1
121

sure 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

øSEC. 9010. For authorization of appropriations to carry out

this subtitle, see section 2007(g).¿

122

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.

* * * * * * *

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