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[Senate Report 107-131]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 302
107th Congress                                                   Report
                                 SENATE
 1st Session                                                    107-131
_______________________________________________________________________

                     FEDERAL REFORMULATED FUELS ACT

                                OF 2001

                               __________

                              R E P O R T

                                 of the

                              COMMITTEE ON

                      ENVIRONMENT AND PUBLIC WORKS

                          UNITED STATES SENATE

                              to accompany

                                 S. 950

                             together with

                             MINORITY VIEWS

                                     

                                     

   December 20 (legislative day, December 18), 2001.--Ordered to be 
                                printed.

                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
99-010                     WASHINGTON : 2002
______________________________________________________________________
             For sale by the Superintendent of Documents, 
                   U.S. Government Printing Office
 Internet: bookstore.gpo.gov Phone: (202)512-1800 Fax: (202)512-2250 
             Mail: Stop SSOP, Washington, DC 20402-0001

                                     

               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                      one hundred seventh congress

JAMES M. JEFFORDS, Vermont Chairman  BOB SMITH, New Hampshire
MAX BAUCUS, Montana                  JOHN W. WARNER, Virginia
HARRY REID, Nevada                   JAMES M. INHOFE, Oklahoma
BOB GRAHAM, Florida                  CHRISTOPHER S. BOND, Missouri
JOSEPH I. LIEBERMAN, Connecticut     GEORGE V. VOINOVICH, Ohio
BARBARA BOXER, California            MICHAEL D. CRAPO, Idaho
RON WYDEN, Oregon                    LINCOLN CHAFEE, Rhode Island
THOMAS R. CARPER, Delaware           ARLEN SPECTER, Pennsylvania
HILLARY RODHAM CLINTON, New York     BEN NIGHTHORSE CAMPBELL, Colorado
JON S. CORZINE, New Jersey
                      Ken Connolly, Staff Director
                 Dave Conover, Minority Staff Director

                            C O N T E N T S

                               __________
                                                                   Page
General statement................................................     1
Background.......................................................     2
    Federal Reformulated Gasoline Program........................     2
    Oxygenates...................................................     4
    Methyl Tertiary Butyl Ether and Water Quality................     5
    Ethanol......................................................     6
Chronology.......................................................     8
Objectives of the Legislation....................................     8
Section-by-Section Analysis:
    Section. 1. Short title......................................     9
    Sec. 2. Leaking Underground Storage Tanks....................     9
    Sec. 3. Authority for Water Quality Protection from Fuels....    12
    Sec. 4. Waiver of Oxygen Content Requirement for Reformulated 
      Gasoline...................................................    12
    Sec. 5. Public Health and Environmental Impacts of Fuels and 
      Fuel Additives.............................................    14
    Sec. 6. Analysis of Motor Vehicle Fuel Changes...............    14
    Sec. 7. Elimination of Ethanol Waiver........................    16
    Sec. 8. Additional Opt-In Areas Under Reformulated Gasoline 
      Program....................................................    16
    Sec. 9. MTBE Merchant Producer Conversion Assistance.........    17
Appendix I: MTBE-Related Legislation in Congress and the States..    17
Appendix II: List of Reformulated Gasoline Program Areas.........    21
Appendix III: Letter from California Governor Gray Davis.........    26
Appendix IV: Letter from EPA Administrator Christine Todd Whitman    28
Appendix V: Letter from New Hampshire Governor Jeanne Shaheen....    38
Appendix VI: Summary of State Drinking Water and Groundwater 
  Standards for MTBE.............................................    43
Appendix VII: Tests on Oxygenated Fuels Containing Oxygenates 
  Other Than MTBE................................................    44
Hearings.........................................................    51
Legislative history..............................................    52
Rollcall votes...................................................    52
Regulatory impact statement......................................    52
Mandates assessment..............................................    53
Cost of legislation..............................................    54
Minority Views of Senator Inhofe.................................    57
Minority Views of Senator Voinovich..............................    67
Changes in existing law..........................................    71

  
                                                       Calendar No. 302
107th Congress                                                   Report
                                 SENATE
 1st Session                                                    107-131

======================================================================

 
                 FEDERAL REFORMULATED FUELS ACT OF 2001

                                _______
                                

   December 20 (legislative day, December 18), 2001.--Ordered to be 
                                printed

   Mr. Jeffords, from the Committee on Environment and Public Works, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 950]

                             together with

                             minority views

    The Committee on Environment and Public Works, to which was 
referred the bill (S. 950) 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 amendments 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 in 
nonattainment areas. 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 groundwater in a number of locations 
as early as the mid-1980's. This contamination was believed to 
be a minor, manageable problem until 1995. That year, MTBE 
contamination in Santa Monica, California 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 Federal and State legislative activities regarding 
MTBE. Due to the fact that MTBE is used to satisfy a particular 
requirement in the CAA, eliminating its use in gasoline will 
lead to related consequences for the environment, human health, 
the supply and cost of fuel, and the future of the industries 
involved in the manufacture and supply of oxygenates. Elements 
of this legislation relate to each of these consequences.

                               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 populations over 250,000, to 
meet criteria that are stricter than standards for conventional 
gasoline. In June 1996, one additional area\2\ was required to 
use RFG 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\
---------------------------------------------------------------------------
    \1\ 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).
    \2\ Sacramento, California.
    \3\ States that opted-in areas to the RFG program include Arizona, 
Connecticut (entire State), Delaware (entire State), District of 
Columbia, Kentucky, Maine, Maryland, Massachusetts (entire State), 
Missouri, New Hampshire, New Jersey (entire State), New York, 
Pennsylvania, Rhode Island (entire State), Texas, Virginia. The 
Governors of Arizona, Maine, New York and Pennsylvania subsequently 
opted-out certain opt-in areas. See Appendix II for a complete list of 
RFG areas.
---------------------------------------------------------------------------
    Areas that opted in to the RFG program prior to January 1, 
2000, are required to use RFG until January 1, 2003. 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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    The program set a variety of content and performance 
requirements, including a minimum content requirement for 
oxygen and maximum allowable benzene and heavy metal quantities 
in RFG. Through regulatory authority provided by the Act, EPA 
chose, in 1993, to adopt performance standards for toxic air 
pollutants and volatile organic compounds (VOCs) rather than 
the prescriptive fuels formula allowed under Section 
211(k)(3)(A). These performance standards required a 15 percent 
reduction in toxic air pollutants from baseline vehicles\5\ 
starting in 1995 and maintained through 1999, and required a 22 
percent reduction from baseline vehicles beginning in 2000, as 
part of Phase II. Phase II also requires reductions in NOx and 
VOCs.
---------------------------------------------------------------------------
    \5\ Baseline vehicles and fuel technology assumptions in EPA's 
complex model date from 1990, despite significant advances in vehicle 
and fuel systems technology.
---------------------------------------------------------------------------
    Motor vehicle emissions of carbon monoxide, volatile 
organic compounds, and, most notably, toxics have been reduced 
drastically in RFG areas. RFG use has allowed areas to exceed 
the statutory requirements to reduce toxic emissions, including 
emissions of benzene. This over-compliance is largely due to 
the dilution of the blendstock gasoline when the relatively 
toxic-free oxygenates, ethanol and MTBE, are added. (Although 
substantially toxic-free, MTBE is listed in Section 112 of the 
Clean Air Act Amendments of 1990 (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 in RFG 
areas (where MTBE was used) 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 March 29, 2001, EPA released a final strategy\6\ 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 identified 21 mobile source air toxics (MSATs). It is 
intended to ensure that refiners continue over-compliance with 
RFG and anti-dumping requirements by maintaining their average 
1998-2000 toxic emissions performance levels for RFG and 
conventional gasoline. The MSAT rule commits EPA to revisiting 
additional fuel and vehicle MSATs controls in a 2004 
rulemaking. The MSAT rule is intended to ensure that toxics 
overcompliance is maintained regardless of whether any 
oxygenates are used. The deadline in the CAAA for issuance of 
these regulations was June 1995.
---------------------------------------------------------------------------
    \6\ Federal Register Vol. 66, No. 61 pages 17229-17273, March 29, 
2001
---------------------------------------------------------------------------
    The final MSATs rule has been challenged by a number of 
parties. On May 24, 2001, the States of New York and 
Connecticut and the Sierra Club, Earth Justice, the Natural 
Resources Defense Council and the U.S. Public Interest Research 
Group filed suit against EPA, charging that the MSATs rule 
fails to achieve the pollution reductions mandated by the Clean 
Air Act. Other parties, including Amerada Hess, Hovensa LLC, 
and International Truck and Engine Corporation have filed 
petitions in the United States Court of Appeals challenging 
EPA's final rule on the grounds that it is inconsistent with 
section 202(l) of the Act, that EPA acted arbitrarily and 
capriciously in promulgating the rule and did not adequately 
follow required notice and comment rulemaking procedures.
    There is 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.\7\
---------------------------------------------------------------------------
    \7\ 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.
---------------------------------------------------------------------------
    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 levels of risk 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 high-emitting 
vehicles.\8\ More regular revisions and updating of this model 
is important for air quality planners. S. 950 requires the EPA 
to expedite resolution of the current complex model which 
generates important fuels-related emissions information and 
provides input for the MOBILE model so that vehicle 
manufacturers, fuel makers, air quality planners, and Congress 
have accurate information.
---------------------------------------------------------------------------
    \8\ National Research Council. ``Modeling Mobile-Source 
Emissions.'' Washington, DC: National Academy Press, May 2000.
---------------------------------------------------------------------------
Oxygenates
    The CAAA required that 2 percent by weight of RFG be 
oxygen. This requirement was not included in the Senate 
Environment and Public Works 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, a co-sponsor of the amendment, stated that the oxygen 
standard was fuel neutral. (Congressional Record, March 29, 
1989, page S3513) Most refiners, blenders, and importers opted 
to use a cheaper and more easily used 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.\9\
---------------------------------------------------------------------------
    \9\ American Petroleum Institute v. Environmental Protection 
Agency, 52 F. 3d 1113 (DC Cir. 1995).
---------------------------------------------------------------------------
    The principle benefits of oxygenates are the reduction of 
carbon monoxide emissions through more complete fuel combustion 
and the reduction of toxic air pollution. 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. In June 2001, EPA denied California's request. A 
copy of the denial letter 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.
    The State of New Hampshire is seeking to opt out of the 
entire RFG program. The State opted in to the program its four 
ozone nonattainment areas\10\ under Section 211(k)(2)(B) in 
1991. In May 2001, the State filed with EPA a petition to opt 
out of the Federal RFG program. The letter and the petition are 
attached in Appendix V.
---------------------------------------------------------------------------
    \10\ Rockingham, Hillsborough, Merrimack, and Strafford counties.
---------------------------------------------------------------------------
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 as an 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, the 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 VI.
    Currently, there are no comprehensive nationwide data on 
the extent of MTBE contamination. A few targeted studies have 
been conducted. In 2000, the U.S. Geological Survey completed a 
study that estimates up to 20 percent of the nation's drinking 
water supplies are at risk due to their proximity to 
underground fuel storage tanks. In 1998, Maine conducted a 
State-wide sampling that found 16 percent of tested wells 
contained some level of MTBE.
    The major sources of MTBE contamination are leaking 
underground storage tanks. Many underground storage tanks have 
been or are currently being upgraded or replaced per a recent 
deadline under a long-standing EPA regulation. Questions 
remain, however, regarding the ability of refiners, 
distributors, and manufacturers of MTBE to ensure that fuel 
storage systems are completely sealed from the environment. 
Other sources of MTBE contamination are automobile and tanker 
truck accidents, leaks from above ground tanks, leaks from 
pipelines, two-stroke water craft engine releases, storm water 
runoff, fueling over-fills, and residential releases.
    The EPA Blue Ribbon Panel recommended a suite of Federal, 
State, and local actions that could expedite remediation of 
MTBE contamination and protect water supplies from additional 
and future contamination. Cleanup is possible, but difficult 
and expensive. Contaminated water may be filtered, aerated, or 
bioremediated. MTBE may be pumped and treated or remediated in 
situ. All options require installation and use of special 
equipment as well as on-going operation and maintenance. States 
and communities are seeking financial assistance for the 
cleanup of MTBE. Existing Federal and State programs are not 
fully funded.
    Many States have enacted or are considering legislation to 
address MTBE contamination. Appendix I provides a complete list 
of all such State legislative activities. Legislation has been 
enacted to ban MTBE in several States including Arizona, 
California, Colorado, Connecticut, Illinois, Kansas, Michigan, 
Minnesota, Nebraska, New Jersey, New York, South Dakota, and 
Washington. EPA has started action to phase down or eliminate 
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.'' (Section 211(c)(1)) MTBE, as part 
of the RFG program, has provided air quality benefits, but its 
role in contaminating water is the main problem that argues 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 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 to distribute and blend ethanol 
into gasoline.
    Ethanol consumption, as part of the nation's total motor 
vehicle fuel use, is expected to increase as MTBE is banned by 
States and as a result of enactment of this legislation. This 
increase will, in turn, affect the nation's fuel supply and 
distribution system, air quality, and water quality. The 
Administrator and the States will have to monitor carefully 
and, as appropriate, deal with these consequences using both 
existing authorities and those established in this legislation 
to prevent economic and environmental harm.
    Ethanol can contribute to both increases and decreases of 
emissions of air pollutants. The increased volatility of 
ethanol blends of gasoline can lead to greater emissions of 
volatile organic compounds 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 more 
common in cold-weather conditions and regulated because of its 
adverse health effects.
    Adding ethanol to gasoline displaces benzene and other 
aromatics and can result in a reduction in emissions of those 
toxic compounds. Exhaust emissions of acetaldehyde, however, 
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 is classified as a probable human carcinogen. It 
can undergo photochemical reactions in the atmosphere to form 
peroxyacetyl nitrate (PAN). PAN is a respiratory irritant and 
has been shown to be mutagenic in cellular research. Further 
study is needed to confirm or refute that emissions of these 
substances pose significant health risks.
    Ethanol biodegrades 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 of gasoline 
containing ethanol. The BTEX plume will likely not begin to 
biodegrade until the ethanol is depleted, if the ethanol 
continues to consume all the oxygen available for 
biodegradation until it is completely broken down. This allows 
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 the RFG program to the CAA and
                                               includes the 2 percent oxygen requirement.
December 1993...............................  EPA promulgates final regulations to implement the RFG program.
June 1994...................................  EPA promulgates regulations to require 30 percent of the oxygen
                                               requirement in the RFG program be renewable oxygenates. The rule
                                               is challenged in the DC Circuit Court of Appeals and vacated by
                                               the Court in April 1995.
December 1994...............................  RFG is first sold.
May 1995....................................  United States Geological Survey reports detections of MTBE in
                                               groundwater in Denver, Colorado.
February 1996...............................  MTBE is detected in water supplies in Santa Monica, California.
                                               Seven of 11 municipal drinking water wells are closed,
                                               eliminating more than half of the city's daily water production.
                                               Contamination levels range from 610 ppb to 230,000 ppb.
January 1997................................  Monitoring program of water reservoirs begins in Southern
                                               California and leads to detections of MTBE concentrations as high
                                               as 29 ppb during the summer boating months.
December 1997...............................  U.S. EPA publishes a Drinking Water Advisory for MTBE that
                                               recommends an aesthetic limit of 20 to 40 ppb and a health limit
                                               of 70 ppb.
Spring 1998.................................  Maine experiences three incidents of small gasoline spills that
                                               contaminate water supplies. In Standish, an automobile accident
                                               is linked to contamination of 24 private wells (10 contained MTBE
                                               levels in excess of 100 ppb). In Whitefield, a gasoline spill is
                                               the likely source of 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 oxygenated fuel mandate 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, expansion 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 phase down or eliminate
                                               MTBE use 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 in New York within 3 years.
September 2000..............................  The Senate Environment and Public Works Committee reports S. 2962,
                                               the Federal Reformulated Fuels Act of 2000. Report 106-426.
March 2001..................................  U.S. EPA promulgates final regulation on Control of Emissions of
                                               Hazardous Air Pollutants from Mobile Sources, referred to as the
                                               MSAT rule.
May 2001....................................  New Hampshire submits to U.S. EPA a request to opt-out of the RFG
                                               program.
June 2001...................................  EPA issues denial of the request by California Governor Davis for
                                               a waiver of the oxygen mandate made in April 1999.
----------------------------------------------------------------------------------------------------------------

                     Objectives of the Legislation

    The Federal Reformulated Fuels Act, S. 950, is intended to 
address existing and potential MTBE contamination in the most 
cost-effective manner.
    In order to accomplish this objective, S.950 achieves the 
following items:

      Authorizes $200 million from the Leaking 
Underground Storage Tank (LUST) Trust Fund for State grants to 
clean up MTBE and other ether gasoline additives. Also 
authorizes an additional $200 million from the LUST Trust Fund 
for State and Federal activities to prevent releases and 
increase compliance under the UST program.
      Requires EPA to ban the use of MTBE within 4 
years of enactment.
      Expands existing EPA authority to allow for 
regulation of fuel additives for protection of water quality 
(current law only allows for regulation to protect air 
quality).
      Allows governors to waive oxygen mandate within 
90 days of enactment.
      Establishes anti-backsliding provisions by 
setting toxics emissions performance standards on a regional 
basis.
      Instructs EPA to require fuel producers to 
conduct tests on a regular basis to determine the health and 
environmental effects of new fuels and fuel additives.
      Requires EPA to study the health and 
environmental impacts of using other ethers as a substitute for 
MTBE.
      Requires EPA to release a draft fuel study within 
4 years of enactment. The study must contain an analysis of the 
changes in emissions of air pollutants and changes in overall 
air quality due to the use of fuels and fuel additives 
resulting from this bill. The final study must be published not 
later than 5 years from enactment.
      Eliminates the existing waiver of the Reid Vapor 
Pressure limitation for ethanol fuel blends.
      Allows Governors to opt-in both classified and 
non-classified areas to the RFG program.
      Authorizes a total of $750 million over three 
fiscal years for grants to merchant MTBE producers for 
assisting in the conversion to production of other fuel 
additives.

                      Section-By-Section Analysis

Section 1. Short Title
    The bill is entitled ``The Federal Reformulated Fuels 
Act.''
Section 2. 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 
authorizes an additional $200 million over 6 years from the 
LUST Trust Fund for EPA and States to conduct inspections, 
issue orders, and 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). It authorized 
the Agency to compel tank owners and operators either to take 
corrective action to clean up leaking tanks and comply with 
standards for USTs or to close the tanks. 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. 
Revenue for this Fund comes from a one-tenth of one cent tax on 
all petroleum products. This tax generates approximately $170 
million per year. 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 
Trust Fund for fiscal year 2001 was approximately $72 million. 
Congress has appropriated approximately $10 million per year 
from general revenues for State implementation of leak 
prevention and detection programs.
    In addition to the Federal LUST Trust Fund, many States 
have also established funds, capitalized through State gas 
taxes, fees, and other mechanisms, to pay for cleanups and to 
provide assistance to tank owners in complying with other 
requirements. States spend approximately $1 billion per year 
from their trust funds. In recent years, however, the claims 
against those funds have risen dramatically.
    More than a million leaking USTs have been closed under 
this program, EPA estimates that over 740,000 active USTs 
contain 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 this 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 2 of this bill 
addresses these concerns.
    Section 2(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 2(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.
    Relatively low levels of MTBE can be detected in 
groundwater. The detection of MTBE, by taste and smell, can 
make the water unpalatable, but not necessarily harmful. 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, even in situations where 
the level of MTBE is not so high as to present a threat to 
human health.
    Section 2(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 funds. New Section 9010 
authorizes EPA and the States to use funds appropriated from 
the LUST Trust Fund to conduct inspections, issue orders, or 
bring actions under Subtitle I. Funding authorized under this 
section is for both formal enforcement actions, such as 
judicial actions and administrative orders, and related 
measures to secure compliance, such as notices of violation or 
warnings. This increased funding for inspections and 
enforcement related activities will enable States and EPA to 
secure greater compliance with UST standards. Increased 
compliance will avoid future releases and resulting cleanup 
costs. Funds authorized under this provision may be used for 
cost recovery.
    This section does not 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 receiving, and will continue to receive, 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 with requirements that 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 2(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--
funding an immediate need to address MTBE, which is currently 
coming from leaking underground tanks and is creating problems 
in numerous drinking water wells, and facilitating 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 2002 through 2007 
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.
Section 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 fuel 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. 950. 
While no regulatory action is required to effect the 
elimination of MTBE, EPA is required to issue regulations to 
implement and enforce this ban. A savings clause in Section 3 
makes clear that nothing in S. 950 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.
Section 4. 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 4 of S. 950 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. Under 
section 4, the EPA must publish in the Federal Register the 
actual toxic reductions achieved by the RFG program (based on 
EPA RFG survey data for 1999 and 2000) in each Petroleum 
Administration Defense District (PADD) within 30 days of 
enactment. Within 270 days, EPA must promulgate regulations 
that set new regional toxics performance standards for States 
that waive the oxygen mandate. If EPA does not act within 270 
days of enactment, the reductions published in the Federal 
Register become the new standards for States that waive the 
mandate. The oxygenate waiver takes effect when the new toxics 
standard is in place.
    The new performance standards will be applied on an annual 
average importer or refinery-by-refinery basis to all RFG 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 will prevent backsliding that could result from 
changes in refinery product use or processes spurred by waivers 
of the oxygen mandate. The 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.
Section 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 fuels or fuel additives and 
during their use. Studies under this provision will be 
conducted on a regular basis. In addition, EPA is instructed to 
study the health and environmental impacts of using ETBE and 
other ethers as a substitute for MTBE.

                               Discussion

    The existing law allows the Administrator to require fuel 
producers to conduct tests to determine the health and 
environmental effects of fuels and fuel additives. This 
provision makes such testing mandatory.
    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.
    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. 
See Appendix VII 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.
Section 6. Analysis of Motor Vehicle Fuel Changes

                                Summary

    Section 6 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. 950. The 
analysis is to examine changes in all motor vehicle fuels and 
fuel additives and must attempt to identify and quantify any 
increase in emissions or air pollution caused by implementing 
this bill. A draft analysis is to be published within 4 years 
of enactment, and a final analysis is to be published within 5 
years of enactment. The Administrator should include in the 
analysis consideration of direct and evaporative emissions, as 
well as combustion by-products, from the use of these fuels and 
fuel additives in on-road and off-road vehicles.
    Section 6 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 this legislation, 
provides the Administrator with the authority to regulate, 
control, or prohibit the manufacture, introduction into 
commerce, offering for sale, or sale of any fuel or fuel 
additive, if, in the judgment of the Administrator, the 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 with respect to MTBE. 
The bill also adds water quality as an environmental protection 
criterion in Title II of the Act.
    Section 202(l) of the Act 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 
2006 allows EPA to reasonably determine the change in emissions 
between 1999-2000 and 2005-2006 due to changes in gasoline, as 
the 2006 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.
    An updated complex model may be useful for other related 
applications, such as emissions modeling for State planning. 
EPA could 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).
Section 7. Elimination of Ethanol Waiver

                                Summary

    Section 4 eliminates the RVP waiver for ethanol blends of 
conventional gasoline provided by Section 211(h)(4).

                               Discussion

    Blending ethanol with gasoline increases the RVP, a measure 
of volatility, of gasoline. Under certain conditions, gasoline 
with a higher RVP will have increased evaporative emissions of 
VOCs 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 S. 950 may result in increases in ethanol consumption 
over time in attainment and nonattainment areas, the 
elimination of the RVP waiver for ethanol will prevent any 
related increase in VOC emissions.
Section 8. Additional Opt-In Areas Under Reformulated Gasoline Program

                                Summary

    This section of the bill provides explicit State authority 
to allow 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.\11\ One additional area\12\ was 
required to sell RFG beginning in June 1996 after being 
redesignated from serious to severe. Several States\13\ have 
exercised the opt-in authority of Section 211(k)(6) to require 
the use of RFG. Areas that opted in to the RFG program prior to 
January 1, 2000, are required to use RFG until December 31, 
2003. 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 4 of 
this bill.
---------------------------------------------------------------------------
    \11\ Los Angeles, California; San Diego, California; Hartford, 
Connecticut; New York, New York; Philadelphia, Pennsylvania; Chicago, 
Illinois; Baltimore, Maryland; Houston, Texas; and Milwaukee, 
Wisconsin.
    \12\ Sacramento, California.
    \13\ States that opted-in to the RFG program include Connecticut 
(entire State), Delaware (entire State), District of Columbia, 
Kentucky, Maryland, Massachusetts (entire State), Missouri, New 
Hampshire, New Jersey (entire State), New York, Rhode Island (entire 
State), Texas, Virginia. The Governors of Arizona, Maine, New York and 
Pennsylvania opted-out certain opt-in areas.
---------------------------------------------------------------------------
Section 9. MTBE Merchant Producer Conversion Assistance
    Authorizes a total of $750 million over three fiscal years 
for grants to merchant MTBE producers for assisting in the 
conversion to production of other fuel additives.
                                ------                                

                               APPENDIX I

----------------------------------------------------------------------------------------------------------------
                                                                  MTBE-RELATED LEGISLATION IN THE SENATE OF THE
                                                                                 107th CONGRESS
----------------------------------------------------------------------------------------------------------------
S. 265...............................  Fitzgerald.............  MTBE is banned after 3 years. Gasoline
                                                                 containing MTBE must be labeled. EPA should
                                                                 assist local communities in testing and
                                                                 remediating contaminated drinking water
                                                                 supplies. Establishes an MTBE research grants
                                                                 program within EPA. Research and development
                                                                 efforts should be directed to allow ethanol use
                                                                 to expand sufficiently as the use of MTBE is
                                                                 phased out.
S. 670...............................  Daschle/Lugar..........  MTBE is banned within 4 years. Allows use of
                                                                 LUST Trust Fund. Phases in the use of
                                                                 alternative and renewable fuels, including
                                                                 ethanol.
S. 892...............................  Harkin.................  MTBE is to be phased out in 3 years. Gasoline
                                                                 containing MTBE must be labeled. Permits State
                                                                 restrictions on MTBE sale or use. EPA is
                                                                 required to revise reformulated gasoline
                                                                 performance standards. Requires the use of
                                                                 renewable fuels.
S. 947...............................  Feinstein/Inhofe.......  States are authorized to waive oxygen content
                                                                 requirements for reformulated gasoline.
S. 1006..............................  Hagel/Johnson..........  Phases in use of renewable fuels, including
                                                                 ethanol, under a motor vehicle renewable fuel
                                                                 program.
----------------------------------------------------------------------------------------------------------------

             ISSUE BRIEF--Methyl Tertiary Butyl Ether (MTBE)
    Prepared for the NCSL Clean Air Working Group and AFI Environment
                                Committee
 (Summarizes State legislative activity from 1999-2001, may not include
                        all proposed legislation)
------------------------------------------------------------------------
                                 STATE LEGISLATION ON MTBE ADDITIVES IN
                                         REFORMULATED GASOLINE
------------------------------------------------------------------------
Alabama......................  Little or no activity
Alaska.......................  Little or no activity
Arizona......................  FINAL ACTION. Arizona will ban MTBE no
                                later than 180 days after California
                                completes its phaseout of MTBE on
                                December 31, 2002, according to Senate
                                Bill 1504 (HB 2386)
Arkansas.....................  Little or no activity
California...................  FINAL ACTIONS. In March 1999, California
                                became the first State to officially ban
                                MTBE when Governor Gray Davis issued an
                                executive order for a three-year phase
                                out of the gasoline additive
                               California SB 989 codified the governor's
                                executive order for the phase-out of
                                MTBE. The legislature also required that
                                refiners submit quarterly reports to
                                detail the amount of MTBE used in
                                gasoline and how the amount compares to
                                last year's use
                               MTBE has shown up in hundreds more
                                underground fuel links in and water
                                quality experts have raised their
                                estimate of the number of MTBE spills
                                from 4,500 to nearly 6,600, a nearly 32
                                percent increase over the past year
Colorado.....................  FINAL ACTION. Colorado's Governor 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)
District of Columbia.........  Little or no activity
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
Georgia......................  Little or no activity
Hawaii.......................  FINAL ACTION. The Governor vetoed Hawaii
                                HB 3021 (passed House and Senate) which
                                would have banned MTBE by July 1, 2001
Idaho........................  Little or no activity
Illinois.....................  FINAL ACTION. HB 171 was signed into law.
                                Prohibits the use, sale, distribution,
                                blending or manufacturing of MTBE as a
                                fuel additive in the State beginning
                                three years after the effective date of
                                the legislation
Indiana......................  Little or no activity
Iowa.........................  FINAL ACTION. 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. FINAL ACTION
                                A resolution has been considered to urge
                                Congress or the State's congressional
                                delegation to change the Clean Air Act
                                to phase out MTBE
Kansas.......................  FINAL ACTION SB 37 was signed into law.
                                Prohibits the sale of gasoline
                                containing MTBE in quantities greater
                                than 0.5 percent by volume after July 1,
                                2004, provided the U.S. Environmental
                                Protection Agency has granted the State
                                a waiver allowing the State to ban or
                                control MTBE
Kentucky.....................  FINAL ACTION. House Resolution 151,
                                passed 3/23/2000, recognized the
                                benefits of ethanol as an effective
                                alternative to MTBE
                               FINAL ACTION. HB 849, which would have
                                banned the use of MTBE, died in
                                committee with the end of the
                                legislative session
                               FINAL ACTION. 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 in the House
Louisiana....................  Little or no activity
Maine........................  FINAL ACTION. Maine has not participated
                                in the RFG program since 1999 because of
                                concerns about a State study that
                                detected MTBE in 15 percent of drinking
                                water supplies. Although legislation to
                                ban MTBE was proposed, it was tabled
                                because the MTBE contamination of water
                                improved rapidly
Maryland.....................  FINAL ACTION. 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 ACTION. 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 HB
                                5570, 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.
                                However, SB 2946, 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)
Mississippi..................  Little or no activity
Missouri.....................  FINAL ACTION. 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
                               FINAL ACTION. 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)
Montana......................  Little or no activity
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
Nevada.......................  Little or no activity
New Hampshire................  FINAL ACTION. HB 758 was signed into law.
                                Authorizes the State to opt out of the
                                Federal reformulated gasoline program no
                                later than January 1, 2004, and empowers
                                the Department of Environmental Services
                                (DES) commissioner to work with the U.S.
                                Environmental Protection Agency to
                                achieve that objective. Authorizes the
                                DES commissioner to establish limits on
                                the manufacture, use or sale of MTBE.
                                Authorizes the DES commissioner to
                                implement an alternative or regional
                                gasoline approach. Establishes a
                                gasoline remediation and elimination of
                                ethers fund, and a fee to capitalize the
                                fund. The fund is to be used to mitigate
                                the presence of MTBE in groundwater
New Jersey...................  FINAL ACTION. SB 2137 Passed Senate;
                                Reported out of Assembly Committee
                                Prohibits the sale of gasoline
                                containing methyl tertiary butyl ether
                                (MTBE) on January 1, 2004. Directs the
                                Department of Environmental Protection
                                to seek from the U.S. Environmental
                                Protection Agency a waiver from the
                                Federal oxygenate in gasoline
                                requirement
New Mexico...................  Little or no activity
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
North Carolina...............  Little or no activity
North Dakota.................  Little or no activity
Ohio.........................  Little or no activity
Oklahoma.....................  Little or no activity
Oregon.......................  Little or no activity
Pennsylvania.................  FINAL ACTION. In June 1999, Pennsylvania
                                chose to no longer participate in the
                                Federal RFG program, citing MTBE health
                                effects as its primary reason. 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 levels 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 Carolina...............  Little or no activity
South Dakota.................  FINAL ACTION. SB 161 was signed into law.
                                Prohibits the sale, offering for sale,
                                or storing of petroleum products
                                containing or treated with methyl
                                tertiary butyl ether (MTBE)
Tennessee....................  Little or no activity
Texas........................  Little or no activity
Utah.........................  Little or no activity
Vermont......................  Little or no activity
Virginia.....................  FINAL ACTION. HB 909 was enacted (4/09/
                                2000), which directs State agencies to
                                study MTBE contamination of water
                                supplies and to examine its health
                                effects
Washington...................  FINAL ACTION. HB 1015 was signed into
                                law. Prohibits MTBE as a gasoline
                                additive after December 31, 2003
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
Wyoming......................  Little or no activity
------------------------------------------------------------------------

                              ----------                              

                              APPENDIX II

                                   List of Reformulated Gasoline Program Areas
         U.S. Environmental Protection Agency, Office of Transportation and Air Quality, January 5, 2001
----------------------------------------------------------------------------------------------------------------
                                                                  Clean Air Act: Required Areas
----------------------------------------------------------------------------------------------------------------
LOS ANGELES...................................  South Coast Air Basin, South East Desert, Ventura, CA
                                                Los Angeles County, CA
                                                Ventura County, CA
                                                Orange County, CA
                                                San Bernardino County (partial), CA
                                                Riverside County (partial), CA
SAN DIEGO County, CA..........................  San Diego County, CA
HARTFORD......................................  New Haven--Waterbury, CT
                                                Hartford County (partial), CT
                                                Litchfield County (partial), CT
                                                Middlesex County (partial), CT
                                                New London County (partial), CT
                                                New Haven County (partial), CT
                                                Tolland County (partial), CT
NEW YORK......................................  Northern New Jersey--Long Island--Connecticut area, NY-NJ-CT
                                                Fairfield County, CT
                                                Litchfield County, (partial), CT
                                                New Haven County (partial), CT
                                                Bergen County, NJ
                                                Essex County, NJ
                                                Hudson County, NJ
                                                Hunterdon County, NJ
                                                Middlesex County, NJ
                                                Monmouth County, NJ
                                                Morris County, NJ
                                                Ocean County, NJ
                                                Passaic County, NJ
                                                Somerset County, NJ
                                                Sussex County, NJ
                                                Union County, NJ
                                                Bronx County, NY
                                                Kings County, NY
                                                Nassau County, NY
                                                New York County, NY
                                                Orange County, NY
                                                Putnam, NY
                                                Queens County, NY
                                                Richmond County, NY
                                                Rockland County, NY
                                                Suffolk County, NY
                                                Westchester County, NY
PHILADELPHIA..................................  Wilmington--Trenton--Cecil County, MD area PA-NJ-DE-MD
                                                New Castle County, DE
                                                Kent County, DE
                                                Cecil County, MD
                                                Burlington County, NJ
                                                Camden County, NJ
                                                Cumberland County, NJ
                                                Gloucester County, NJ
                                                Mercer County, NJ
                                                Salem County, NJ
                                                Bucks County, PA
                                                Chester County, PA
                                                Delaware County, PA
                                                Montgomery County, PA
                                                Philadelphia County, PA
CHICAGO.......................................  Gary--Lake County, IL--Indiana--Wisconsin area
                                                Cook County, IL
                                                Du Page County, IL
                                                Kane County, IL
                                                Lake County, IL
                                                McHenry County, IL
                                                Will County, IL
                                                Grundy County, IL, (partial)
                                                Kendall County, IL,( partial)
                                                Lake County, IN
                                                Porter County, IN
BALTIMORE, MD.................................  Anne Arundel County, MD
                                                Baltimore County, MD
                                                Carroll County, MD
                                                Harford County, MD
                                                Howard County, MD
                                                The City of Baltimore, MD
HOUSTON.......................................  Galveston--Brazoria, TX
                                                Brazoria County, TX
                                                Chambers County, TX
                                                Fort Bend County, TX
                                                Galveston County, TX
                                                Harris County, TX
                                                Liberty County, TX
                                                Montgomery County, TX
                                                Waller County, TX
MILWAUKEE.....................................  Racine, WI
                                                Kenosha County, WI
                                                Milwaukee County, WI
                                                Ozaukee County, WI
                                                Racine County, WI
                                                Washington County, WI
                                                Waukesha County, WI
SACRAMENTO, CA * (newly required area)........  El Dorado County (partial), CA
                                                Placer County (partial), CA
                                                Sacramento County, CA
                                                Solano County (partial), CA
                                                Sutter County (partial), CA
                                                Yolo County, CA
``Opt-In'' Areas--Voluntary
CONNECTICUT, The Entire State 1...............  Litchfield County (partial), CT
                                                Hartford County (partial), CT
                                                Middlesex County (partial), CT
                                                New London County (partial), CT
                                                Tolland County (partial), CT
                                                Windham County, CT
DELAWARE, The Entire State 1..................  Sussex nonattainment area
                                                Sussex County, DE
DISTRICT OF COLUMBIA..........................  Washington, DC-MD-VA area (DC portion)
                                                Entire District of Columbia
KENTUCKY......................................  Cincinnati-Hamilton KY-OH area (KY portion)
                                                Boone County, KY
                                                Campbell County, KY
                                                Kenton County, KY Louisville, KY-IN area (KY portion)
                                                Jefferson County, KY
                                                Bullitt County (partial), KY
                                                Oldham County (partial), KY
MARYLAND......................................  Washington, DC-MD-VA area (MD portion)
                                                Calvert County, MD
                                                Charles County, MD
                                                Frederick County, MD
                                                Montgomery County, MD
                                                Prince Georges County, MD Kent & Queen Anne's nonattainment area
                                                Queen Anne's County, MD
                                                Kent County, MD
MASSACHUSETTS, The Entire State 1.............  Boston-Lawrence-Worcester (E. MA)
                                                Barnstable County, MA
                                                Bristol County, MA
                                                Dukes County, MA
                                                Essex County, MA
                                                Middlesex County, MA
                                                Nantucket County, MA
                                                Norfolk County, MA
                                                Plymouth County, MA
                                                Suffolk County, MA
                                                Worcester County, MA Springfield (Western MA) nonattainment
                                                 areas
                                                Berkshire County, MA
                                                Franklin County, MA
                                                Hampden County, MA
                                                Hampshire County, MA
MISSOURI (Effective Opt-In Date is June 1,      St. Louis nonattainment area
 1999).                                         St. Louis County
                                                St Louis (city)
                                                Franklin County
                                                Jefferson County
                                                St. Charles County
NEW HAMPSHIRE.................................  Boston-Lawrence-Worcester, MA-NH nonattainment area (NH portion)
                                                Hillsborough County, NH
                                                Rockingham County, NH
                                                Merrimack County, NH
                                                Strafford County, NH
NEW JERSEY, The Entire State 1................  Allentown-Bethlehem-Easton area (NJ portion)
                                                Warren County, NJ Atlantic City nonattainment area
                                                Atlantic County, NJ
                                                Cape May County, NJ
NEW YORK......................................  Essex nonattainment area
                                                Dutchess County, NY
                                                Essex County (partial), NY
RHODE ISLAND, The Entire State................  Providence nonattainment area
                                                Bristol County, RI
                                                Kent County, RI
                                                Newport County, RI
                                                Providence County, RI
                                                Washington County, RI
TEXAS.........................................  Dallas-Fort Worth nonattainment area
                                                Collin County, TX
                                                Dallas County, TX
                                                Denton County, TX
                                                Tarrant County, TX
VIRGINIA......................................  Washington DC-MD-VA area (VA portion)
                                                Alexandria, VA
                                                Arlington County, VA
                                                Fairfax, VA
                                                Fairfax County, VA
                                                Falls Church, VA
                                                Loudoun County, VA
                                                Manassas, VA
                                                Manassas Park, VA
                                                Prince William County, VA
                                                Stafford County, VA Richmond, VA nonattainment area
                                                Charles City County, VA
                                                Chesterfield County, VA
                                                Colonial Heights, VA
                                                Hanover County, VA
                                                Henrico County, VA
                                                Hopewell, VA
                                                Richmond, VA Norfolk-Virginia Beach-Newport News area
                                                Chesapeake, VA
                                                Hampton, VA
                                                James City County, VA
                                                Newport News, VA
                                                Norfolk, VA
                                                Poquoson, VA
                                                Portsmouth, VA
                                                Suffolk, VA
                                                Virginia Beach, VA
                                                Williamsburg, VA
                                                York County, VA.

``Opt-Out'' Areas**

MAINE.........................................  Hancock and Waldo Counties, ME--Hancock County--Waldo County
PENNSYLVANIA..................................  Allentown--Bethlehem--Easton, PA
                                                Carbon County
                                                Lehigh County
                                                Northampton County Altoona, PA
                                                Blair County Erie, PA
                                                Erie County Harrisburg--Lebanon--Carlisle, PA
                                                Cumberland County
                                                Dauphin County
                                                Lebanon County
                                                Perry County Johnstown, PA
                                                Cambria County
                                                Somerset County Lancaster, PA
                                                Lancaster County Pittsburgh--Beaver Valley, PA
                                                Allegheny County
                                                Beaver County
                                                Fayette County
                                                Washington County
                                                Westmoreland County
                                                Armstrong County
                                                Butler County Reading, PA
                                                Berks County Scranton--Wilkes-Barre, PA
                                                Columbia County
                                                Lackawanna County
                                                Luzerne County
                                                Monroe County
                                                Wyoming County York, PA
                                                Adams County
                                                York County Youngstown, OH--Warren, OH--Sharon, PA*
                                                Mercer, PA * Ohio counties have not opted-in.
NEW YORK......................................  Albany--Schenectady--Troy, NY
                                                Albany County
                                                Greene County
                                                Montgomery County
                                                Rensselear County
                                                Saratoga County
                                                Schenectady County
                                                 Jefferson County, NY
                                                 Buffalo--Niagara Falls, NY
                                                Erie County
                                                Niagara County
A proposed rule to remove the above ``opt-
 out'' areas from the requirements of the
 reformulated gasoline program was published
 June 14, 1995. [On January 1, 1995, a
 temporary exemption of the RFG requirements
 in these areas went into effect.

On July 1, 1995 this stay was extended until
 the Agency took final action]. The final
 rule, published July 8, 1996 [61 FR 35673],
 formally removed these areas from the list of
 RFG covered areas and provided States with
 general opt-out procedures.

The July 8 final rule was superseded by a
 final rule published October 20, 1997 [62 FR
 54552], revising the opt-out procedures.

ARIZONA.......................................  Phoenix nonattainment area
                                                Maricopa County (partial), AZ
Phoenix opted in the RFG program in 1997;
 retail stations were required to supply RFG
 by August 4, 1997.

In September 1997, the Governor of Arizona
 submitted an RFG opt-out petition for
 purposes of adopting a more stringent State
 RFG program in Phoenix.

EPA approved the opt-out petition which became
 effective on June 10, 1998.
MAINE.........................................  The following counties in Maine ``opted-out'' of the RFG
                                                 program--the effective opt-out date was March 10, 1999: Knox &
                                                 Lincoln nonattainment area
                                                Knox County, ME
                                                Lincoln County, ME Lewiston-Auburn nonattainment area
                                                Androscoggin County, ME
                                                Kennebec County, ME Portland nonattainment area
                                                Cumberland County, ME
                                                Sagadahoc County, ME
                                                York County, ME
----------------------------------------------------------------------------------------------------------------
* Reclassification of Sacramento from Serious to Severe was effective June 1, 1995. RFG was required as of June
  1, 1996.
**Note: These ``Opt-Out'' areas withdrew from the Federal RFG program before it went into effect on January 1,
  1995.

                              ----------                              

                              APPENDIX III

                                    Office of the Governor,
                                    Sacramento, CA, April 12, 1999.

The Honorable Carol M. Browner, Administrator,
Environmental Protection Agency,
401 M Street SW,
Washington, DC 20460.

Dear Ms. Browner: I am writing to request that the U.S. Environmental 
Protection Agency (EPA) take prompt action to waive Federal 
requirements that all gasoline sold in the Sacramento region and most 
of Southern California contain a minimum oxygen content pursuant to the 
provisions of the 1990 amendments to the Clean Air Act.
    As I am sure you are aware, on March 26, 1999, I concluded that the 
use of the oxygenate methyl tertiary-butyl ether (MTBE) in California 
gasoline poses a significant risk to California's environment, and, 
accordingly, directed that MTBE be phased out of California gasoline as 
soon as possible. A copy of my Executive Order D-5-99, which identifies 
the actions we will take to remove MTBE from gasoline, is enclosed.
    One of the essential elements for a rapid phase down, and eventual 
phase-out of MTBE in California, is action by the U.S. EPA to eliminate 
the current mandate that California gasoline subject to the Federal 
reformulated gasoline (RFG) program--about 70 percent of all gasoline 
in the State--must contain at least 2.0 percent by weight oxygen year-
round. Your action to provide this relief is needed for several 
compelling reasons.
    Many California refineries have the capability to produce 
significant amounts of gasoline that provides all of the required 
emission reductions without using MTBE or any other oxygenate. The only 
reason such MTBE-free gasoline is not being made available today is 
U.S. EPA's enforcement of the 2.0 percent oxygen requirement. Your 
approval of our requested action would enable several refiners to 
greatly reduce their use of MTBE in the very near future.
    In terms of the eventual phase-out of MTBE, your action is equally 
important. Under the current U.S. EPA requirements, once MTBE is phased 
out, the 70 percent of California gasoline that is sold in areas 
subject to the Federal RFG program would need to be oxygenated with 
ethanol. Relying on ethanol exclusively for this volume of gasoline, 
approximately 10 billion gallons per year, would increase the time 
needed to complete our phase-out of MTBE, and result in higher fuel 
costs to California consumers. Your action to allow the required 
emissions reductions to be achieved without using a minimum oxygen 
content in every gallon of fuel would allow us to reduce risks of 
future water contamination sooner, meet California's growing demand for 
fuel and allow flexibility to make more economical blends of gasoline.
    Finally, time is of the essence. California refineries must begin a 
time consuming and expensive retooling process to eliminate their 
current reliance on MTBE. In order to complete the phase-out of MTBE by 
December 31, 2002 or earlier, the refiners must start immediately with 
the planning and design phases of the necessary refinery and 
distribution system modifications. It is clear that the approach taken 
by industry will differ substantially depending on whether, upon 
completion of the modifications, refiners will be subject to a 
mandatory Federal RFG minimum oxygen requirement. Without the mandatory 
oxygen requirement, the industry can design in greater flexibility and 
less costly processes. But in order to make informed planning and 
design decisions, the refiner must know in 1999--not just in 2001 or 
2002 or 2003--that they will have flexibility with respect to oxygen 
requirements.
    Because California has historically experienced the worst air 
quality in the nation and has long been engaged in pioneering efforts 
to reduce the contribution of motor vehicles to air pollution, the 
State has been granted unique authority by the Clean Air Act and the 
EPA to administer a State fuels program to reduce motor vehicle 
emissions. California is the only area in the country where the Federal 
RFG requirements apply in conjunction with comprehensive and 
demonstrably more effective State standards for cleaner burning 
gasoline. The California regulations provide complete assurances that a 
waiver of the Federal RFG year-round minimum oxygen content requirement 
will not result in a loss of any air quality.
    Our regulations accomplish the needed emissions reductions without 
requiring a minimum level of oxygen. Numerous assessments by the auto 
and fuels industry, government agencies, and most recently scientists 
at the University of California confirm that a minimum oxygen content 
is not essential to making RFG that meets all emission reduction 
requirements. Therefore, application of the current minimum oxygen 
content requirement serves absolutely no purpose in California relative 
to its intended air quality rationale--to reduce ozone precursors and 
toxic emissions from vehicles.
    In contrast, the minimum oxygen content requirement is having one 
clear effect on another area of the environment. It is increasing the 
risk that leaking tanks and boat engine discharges pose to water 
quality. As the University of California study of MTBE indicated, 
California's ground and surface water resources are seriously at risk 
because of discharges of gasoline that has been oxygenated with MTBE. 
Over 60 percent of the reservoirs tested have detectable levels of 
MTBE, and many public drinking water sources in areas like Santa 
Monica, Santa Clara, Sacramento and South Lake Tahoe have been 
contaminated and shut down because of MTBE contamination. This is what 
led me to direct the appropriate State regulatory agencies to devise 
and carry out a plan to complete the expeditious phase-out of MTBE from 
California gasoline.
    However, in order for California to achieve this essential 
protection of water quality quickly and at an affordable cost, we must 
have flexibility relative to the minimum oxygen content currently 
enforced by U.S. EPA. We need this action quickly, and I am calling on 
you to use your broad authority to protect both the air and water 
environment by allowing California's reformulated gasoline rules, which 
provide all of the emission benefits of the Federal RFG, to be applied 
in lieu of the counterproductive Federal minimum oxygen content 
requirement.
    Your prompt approval of this request will help us limit any further 
contamination of drinking water while we transition away from MTBE. It 
will not risk any adverse impact on air quality due to California's 
more effective State gasoline regulations. It will enable us to devise 
the most expeditious and cost-effective solution to the MTBE problem in 
California. One that will protect our water and keep us on the road to 
clean air.
    Thank you for your consideration of this request. Enclosed is a 
more detailed discussion of this issue and materials that support our 
request. As always we are ready to work with you to ensure that 
California and the EPA are working together to ensure environmental 
protection.
            Sincerely,
                                                Gray Davis.
                              ----------                              

                              APPENDIX IV

              Letter from Environmental Protection Agency

                      U.S. Environmental Protection Agency,
                        Office of the Administrator, June 12, 2001.

The Honorable Governor Gray Davis,  
State Capitol,
Sacramento, California 95814.

Dear Governor Davis: On April 12, 1999, the State of California 
requested a waiver from the oxygen content requirement of the Federal 
reformulated gasoline (RFG) program. As you know, the RFG program and 
the oxygen content requirement were created by the 1990 Amendments to 
the Federal Clean Air Act. Because of the legal constraints imposed by 
the Clean Air Act, I cannot grant California's waiver request.
    Under the Clean Air Act, the Environmental Protection Agency is 
authorized to waive the oxygen content requirement only if there is 
clear evidence that the requirement will ``prevent or interfere with 
the attainment by the area of a national primary ambient air quality 
standard.'' Your request for a waiver is based on the assertion that a 
waiver of the oxygen content requirement would aid in reducing ozone 
and particulate matter (PM) in California and, therefore, that the 
oxygen requirement interferes with California's attainment of the 
national ambient air quality standards (NAAQS) for ozone and PM.
    Given the complexity of the issues involved, we have carefully 
reviewed all the information and analysis submitted by California. We 
have also performed our own comprehensive analysis to evaluate the 
possible emissions effects of a waiver. Based on our review of 
California's submission and our own analysis, we believe that a waiver 
of the oxygen requirement would likely result in a decrease in 
emissions of oxides of nitrogen (NOx), but an increase in emissions of 
carbon monoxide (CO). Our analysis also shows that there is significant 
uncertainty about whether emissions of volatile organic compounds 
(VOCs) would increase or decrease if a waiver is granted. Both VOC 
emissions and, to a lesser extent, CO emissions contribute to ozone 
formation in California. A more detailed description of this analysis 
is provided in the enclosure.
    California's own analysis shows that, even without the oxygen 
requirement, fuels used in California will contain a significant amount 
of ethanol. When ethanol blends are added to non-ethanol containing 
gasoline in vehicle fuel tanks, the overall volatility of the fuel in 
the tank can increase significantly. The increase in volatility from 
this ``commingling effect'' raises substantial uncertainty about 
whether a waiver of the oxygen requirement would increase or decrease 
VOC emissions. Because of this uncertainty and the expected increase in 
CO, it is not clear whether the waiver sought by California will 
actually help to reduce ozone levels. Thus, the State has not met its 
burden of showing that the oxygen requirement interferes with its 
attainment of the NAAQS.
    I understand that your waiver request is based in part on concerns 
about contamination of drinking water supplies with MTBE, which is 
widely used to meet the oxygenate requirement. The Bush Administration 
is very concerned about MTBE contamination in drinking water and 
groundwater. Clean air and clean water are equally important to us, and 
we do not want to pursue one at the expense of the other. As noted 
above, however, the legal requirements of the Clean Air Act limit EPA's 
ability to address these concerns. As I have indicated in the past, we 
are committed to working with Congress to develop legislation that 
addresses concerns about MTBE, while maintaining the air quality and 
other benefits of the RFG program.
    We would be glad to work with you and your staff if you have any 
questions about this decision or seek further guidance from the Agency 
on these issues.
            Sincerely,
                                    Christine Todd Whitman.

  Analysis of and Action on California's Request for a Waiver of the 
                       Oxygen Content in Gasoline

                            1. introduction
a. The Clean Air Act requirements
    Section 211(k)(2)(B) of the Act, 42 U.S.C. Sec. 7545(k)(2)(B), 
establishes an oxygen content requirement for Federal reformulated 
gasoline (RFG), and allows EPA to waive compliance with the requirement 
under certain circumstances. Section 211(k)(2)(B) reads:
    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 attainment by the area of a national primary ambient 
air quality standard.
    EPA has the discretion under this section to waive the oxygen 
content requirement, to the extent reasonably necessary, where EPA 
determines that compliance with the oxygen content requirement would 
interfere with attainment of the primary National Ambient Air Quality 
Standard (NAAQS) in an ozone nonattainment area. In evaluating 
California's request for waiver of the oxygen requirement, EPA has 
analyzed the likely composition of gasoline in the relevant 
nonattainment area(s) with and without a waiver of the oxygen content 
requirement and the resulting impact of oxygen content on emissions. 
This analysis is needed so EPA can assess the potential effect that a 
waiver would have on California's efforts to attain the ozone and 
particulate matter NAAQS.
b. California's waiver request
    In a letter dated April 12, 1999 from California Governor Gray 
Davis to Administrator Browner, California officially requested a 
waiver from the Federal oxygen requirement for reformulated gasoline, 
under Section 211(k)(2)(B).\1\ The April 12, 1999 submittal stated that 
``the ARB will be revising its CaRFG program this year, and continuing 
the oxygen mandate will make it more difficult to maintain the emission 
reductions benefits needed for California's SIP.'' The submittal did 
not, however, contain the technical analysis to support the statement 
that the oxygen requirement might actually prevent or interfere with 
the attainment of the NAAQS in California. As such, the Agency believed 
that the request submitted by California on April 12, 1999 did not 
provide enough detail about the underlying analyses upon which the 
request was premised to allow EPA to make a careful and fully informed 
decision on the request.
---------------------------------------------------------------------------
    \1\ (Filed in docket A-2000-10, document number II.D.-1; also 
available at http://www.arb.ca.gov/cbg/Oxy/wav/041299.pdf)
---------------------------------------------------------------------------
    Subsequent submittals from the California Air Resources Board 
(CARB) provided additional information necessary to evaluate 
California's request for a waiver from the oxygen requirement. In order 
to evaluate whether compliance with the oxygen content requirement 
prevents or interferes with a NAAQS, the Agency then began an 
independent evaluation of the data, modeling, and other information 
submitted by California in support of its request for a waiver from the 
Federal RFG oxygen requirement.
c. California's argument for a waiver
    California's waiver request rests first on CARB's assertion that 
additional NOx reductions are needed in California. CARB claims that 
the South Coast Air Quality Management District (SCAQMD) and Sacramento 
Metropolitan Air Quality Management District (SMAQMD) need additional 
NOx reductions beyond the commitments made in their recently approved 
State Implementation Plans (SIPs) for these areas to attain the 
National Ambient Air Quality Standards (NAAQS) for ozone and 
particulate matter.
    CARB then claims that without the oxygen requirement, California 
RFG Phase 3 (CaRFG) would achieve greater NOx reductions. CARB's 
assertion regarding the benefits achievable under CaRFG3 without the 
oxygen requirement is based primarily on the relationship between fuel 
oxygen and NOx formation. CARB claims that increases in gasoline oxygen 
content increase NOx emissions and therefore the requirement for oxygen 
in RFG prevents the State from achieving the maximum amount of NOx 
reduction from CaRFG3.\2\ In light of the additional NOx reductions 
needed in the SCAMQD and Sacramento RFG regions, CARB argues that NOx 
emissions resulting from compliance with the oxygen content requirement 
would interfere with the attainment of the ozone and PM NAAQS.
---------------------------------------------------------------------------
    \2\ Specifically, CARB varied the values of the aromatics, olefins, 
sulfur, T50, T90, and benzene fuel parameters of each of the two sets 
of complying fuels (i.e., 2 weight percent oxygen fuels and zero 
percent oxygen fuels) between the lower and upper bound limits that it 
defined for each parameter. CARB then generated over 10 million 
combinations of fuel properties within the bounds it defined, and using 
its Predictive Model for CaRFG3 (PM3) identified the subset of these 
hypothetical fuels which would comply with CARB's standards for its 
CaRFG3. CARB's simulation analysis showed that on average among the 
large number of complying formulations, the additional reduction in NOx 
associated with going from a 2 weight percent oxygen fuel to a zero 
oxygen fuel is about 1.5 percent. On the basis of this simulation 
analysis CARB claimed that the reduction of NOx is greater without 
oxygen independent of which fuel properties are varied.
---------------------------------------------------------------------------
    CARB acknowledges that reducing oxygen content would increase 
carbon monoxide (CO) emissions. CARB claims, however, that with a 
waiver there would be a reduction in oxygenated fuels (i.e., reduction 
of ethanol) which would lead to a decrease in the emissions associated 
with permeation of VOC through vehicle fuel system components such as 
hoses and seals that occurs with the use of ethanol as an oxygenate. 
Based on the use of reactivity factors, CARB argues that the VOC 
emission decrease from reduction in permeation losses offsets the 
increase in CO, resulting in an ozone neutral effect. (This is 
discussed in further detail in Section 4 below).
    CARB also acknowledges that with a waiver, both oxygenated and non-
oxygenated gasolines would be used, resulting in commingling of ethanol 
and non-ethanol gasolines in automobile gas tanks. Since ethanol acts 
to boost the Reid Vapor Pressure (RVP) of gasoline, such commingling 
would result in a VOC increase. CARB estimates that commingling would 
increase VOC emissions by an amount equivalent to an overall increase 
in RVP of 0.1 psi. CARB has set the flat limit of RVP in CaRFG3 0.1 psi 
lower than it otherwise would have been (i.e., 6.9 rather than 7.0) and 
asserts that the lower RVP offsets the VOC increase due to commingling.
d. Criteria for acting on California's request
    As previously stated, the Clean Air Act requires that, in order to 
waive the Federal RFG oxygen requirement, EPA must determine that the 
requirement will prevent or interfere with the State's ability to 
attain a NAAQS. The key question before the agency therefore involves 
the air quality impacts of a waiver for the relevant NAAQS.
    To address the air quality impact, it is critical to consider both 
the potential changes in gasoline quality which could occur if a waiver 
were granted and the potential emissions impacts of these changes. All 
relevant categories of emissions should reasonably be considered. This 
information is needed to evaluate the impacts of a waiver on each 
applicable NAAQS.
    EPA believes it should not make a determination of interference or 
prevention and should not grant a waiver unless the impacts of a waiver 
are clearly demonstrated for each applicable NAAQS. Absent such a clear 
demonstration, EPA is not able to determine whether a waiver would aid, 
hinder, or have no effect on attainment of a NAAQS. It is important 
that the impacts of a waiver be clearly demonstrated for each 
applicable NAAQS, because EPA believes it should not grant a waiver 
unless, at a minimum, it has been clearly demonstrated that granting a 
waiver would aid in attaining at least one NAAQS, and would not hinder 
attainment for any other NAAQS.
         2. epa's analysis of the emissions impacts of a waiver
a. Background
    EPA performed a complex analysis to evaluate the effect of a waiver 
on NOx, VOC, and CO inventories. In order to perform this analysis it 
was necessary to estimate both how emissions were likely to change as a 
result of fuel property changes, and how California Phase 3 RFG 
(CaRFG3) fuel properties were likely to differ with and without a 
waiver. EPA considered various pre-existing models and estimates 
relating fuel properties to emissions and, where warranted and 
feasible, produced new models to relate fuel properties and emissions 
for evaluation of the waiver. EPA also reviewed existing refinery 
modeling results which predicted the composition of CaRFG3 with and 
without a waiver. EPA ultimately concluded that additional refinery 
modeling was needed and, through its contractor MathPro, performed such 
modeling. EPA used these emission models in conjunction with refinery 
modeling results in order to estimate factors, generally as percent 
changes, which could then be applied to emissions inventory estimates 
to predict the tons/day emission changes in year 2005 resulting from a 
waiver. The analysis included both on-road and non-road emissions, and 
addressed emissions of NOx, CO, and VOC.
    The following brief description of the process highlights some of 
EPA's major decisions and assumptions. EPA's analysis is described in 
detail in our Technical Support Document (TSD), Docket Number A-2000-
10, Document II-B-2.
b. Refinery modeling
    EPA's initial waiver analysis included use of certain fuel property 
estimates from a December 9, 1999 MathPro refinery modeling analysis 
for the California Energy Commission. EPA concluded that this modeling, 
for reasons discussed in the technical support document, did not 
provide a sufficient basis for evaluation of California's waiver 
request. Consequently, EPA commissioned MathPro to do additional 
modeling.
    The EPA MathPro modeling provided property estimates for oxygenated 
CaRFG3 if no waiver were granted, and property and market share 
estimates for non-oxygenated and oxygenated CaRFG3 if a waiver were 
granted. The refinery modeling investigated a number of cases in which 
refiners blended CaRFG3 with and without a waiver using the phase 3 
predictive model, the flat limit reference specifications, and the 
exhaust plus evaporative VOC compliance option. In these cases the 
impact of various factors was considered. Specifically, this modeling 
evaluated the properties of CaRFG3 where oxygen was used at 2.0 percent 
or 2.7 percent by weight, the constraints of the Unocal patent were 
imposed (requiring refiners to avoid the parameter ranges established 
by the patent) or eliminated (assuming, for whatever reasons, refiners 
did not need to avoid the patent), and where MTBE use outside of 
California was assumed to be reduced (e.g., because of MTBE bans or 
refiner liability concerns) or assumed to continue at current levels.
    The modeling predicted non-oxygenated CaRFG3 shares ranging from 35 
percent to 74 percent if a waiver were granted, with six of the eight 
cases being greater than the 40 percent non-oxygenated share EPA had 
assumed based on earlier modeling. With an increase in oxygen content 
from 2.0 percent to 2.7 percent by weight, all else being constant, the 
analysis predicts a decrease in non-oxygenated market share. Also, it 
predicts that a reduction of MTBE use outside of California would 
result in an increase in the non-oxygenated market share of the CaRFG3 
pool. The Unocal Patent may also affect the non-oxygenated/oxygenated 
market split. Specifically, avoidance of T50 less than 2101 F could 
limit the use of alkylate for premium CaRFG3, possibly increasing the 
use of oxygen. Based on the refinery modeling, we concluded that under 
a number of sets of foreseeable ``waiver'' circumstances, there would 
be substantial quantities of both oxygenated and non-oxygenated CaRFG3 
produced. EPA's refinery modeling provides a number of alternative 
cases, incorporating the finalized version of the Phase 3 predictive 
model and CaRFG3 flat limit reference specifications. This allowed EPA 
to examine potential waiver emissions impacts under various alternative 
scenarios which incorporate a variety of potential conditions. EPA 
evaluated emission impacts for the eight basic cases from the modeling 
and for four cases where the ``no waiver'' oxygen level was 2.7 weight 
percent, and the ``waiver'' oxygen level for the oxygenated portion of 
the pool was 2.0 percent.
c. Emissions modeling
    At the time that EPA began its analysis of the California waiver 
request, there were several available emission models which related 
fuel properties to emissions of on-road light duty vehicles. These were 
the complex model (the compliance model for Federal RFG), the Phase 2 
predictive model (the compliance model for phase 2 California RFG), and 
the PM3 (the compliance model for phase 3 California RFG which had not 
yet been officially adopted). Each of these models was based on 
statistical regression analysis of thousands of emission test results. 
The Phase 3 predictive model was developed using statistical procedures 
and software not available for use in developing the complex model or 
the Phase 2 predictive model. Although additional data were used to 
develop the Phase 3 model, much of the same data were used in the 
development of all three models.
    EPA was concerned that considerable disparity existed among the 
models in the estimated direction and magnitude of the NOx response to 
changes in oxygen content, all else being constant. The Phase 2 and 
Phase 3 models both indicate a NOx increase with increasing oxygen, 
however the Phase 3 model shows a much steeper response. The Complex 
Model, by contrast, predicts that NOx will decrease slightly as oxygen 
increases. It should be noted that the magnitude of the NOx response to 
oxygen, even as predicted by the Phase 3 model, is not large when 
compared to NOx emission differences between vehicles, or test-to-test 
variability in emissions. The small size of the oxygen effect on NOx 
emissions indicated in all of these models makes it difficult to detect 
statistically and to quantify precisely. In an attempt to resolve the 
uncertainty about the NOx/oxygen relationship, EPA staff and a 
consultant audited the process that CARB staff used to develop the 
Phase 3 predictive model.\3\ Additionally, EPA independently developed 
alternative models for NOx as a function of fuel properties for the 
Tech 4 vehicles.\4\
---------------------------------------------------------------------------
    \3\ EPA utilized the consulting expertise of Southwest Research 
Institute (SwRI) which had previously been involved in emissions 
modeling efforts such as development of EPA's complex model.
    \4\ For modeling purposes, CARB separated vehicles into technology 
classes 3, 4, and 5. Tech 3 vehicles represent the oldest technology 
vehicles, Tech 4 represents ``middle-aged'' vehicles which make up the 
majority of the fleet and its emissions, and Tech 5 represents the 
newest technology vehicles. For a more complete description, see the 
TSD.
---------------------------------------------------------------------------
    EPA's audit of CARB's model included a review of the decisions for 
inclusion and exclusion of data from the data set, the statistical 
approach, treatment of ``high emitters'' and selection of a final 
model. EPA also reviewed the sufficiency of data and the approach taken 
in CARB's representation of Tech 5 emissions in the predictive model. 
EPA's review raised a number of concerns about CARB's model development 
process. These concerns included CARBs decision not to consider high 
emitter terms for potential inclusion in the model, its decision to 
discard the primary results of the Phase 3 model-building process and 
return to the terms from the earlier Phase 2 effort, and modeling of 
emissions from Tech 5 vehicles. These concerns contributed to EPA's 
decision to pursue its development of alternative Tech 4 models for 
both NOx and exhaust VOCs (modeling non-methane hydrocarbons), for 
evaluation of the waiver request. EPA additionally concluded that there 
was considerable uncertainty about the accuracy of CARB's Tech 5 
models, given the small amount of Tech 5 data and CARB's modeling 
approach which relied heavily on Tech 4 data to develop the Tech 5 
models. Consequently, based on engineering judgment, EPA concluded that 
the best approach for waiver evaluation was to assume that Tech 5 NOx, 
VOC and CO exhaust emissions would not be affected by fuel property 
differences. EPA elected to use the Tech 3 portion of the phase 3 
predictive model, and the allocations of exhaust VOCs and NOx emissions 
that would occur with a waiver (based on the use of CARB's emission 
inventory model EMFAC7g) among the three technology groups assumed in 
the predictive model.
    While the Phase 3 predictive model contains an equation to 
calculate a CO credit as a function of oxygen content it does not 
explicitly calculate CO mass emissions as a function of fuel 
properties. EPA used CARB's assumptions regarding oxygen effect on CO 
(contained in Appendix G--``Estimation of a CO Credit'' of its staff 
report for the CaRFG3 rule) in calculating CO changes. However, EPA did 
not assume that the CO would change due to changes in sulfur or T50. 
EPA split the CO change among the Tech 3, Tech 4 and Tech 5 categories 
as CARB did, assuming that there would be no change in CO as a result 
of oxygen reduction in Tech 5 vehicles (which CARB assumed as well).
    When EPA developed its alternative Tech 4 models, a number of 
possible candidate models resulted. Certain of these models did not 
show substantially different predictive utility based on statistical 
criteria. Therefore, EPA had to use engineering judgment of the likely 
effect on emissions as well as statistical measures to select the 
models it would use for evaluating California's waiver petition. 
Ultimately, EPA selected six different NOx models and decided to 
average results in order to determine applicable percent change factors 
for the waiver analysis. Similarly, EPA selected three models from 
among the candidate NMHC exhaust models. Two of these NMHC models 
contained terms which indicated that ``high emitters'' and ``normal 
emitters'' would respond differently to certain fuel property changes. 
EPA requested information, based on EMFAC7G, from CARB in order to 
properly weight normal and high emitter contributions.
    EPA also included non-exhaust VOC emission effects in its analysis. 
Such effects could arise from differences in RVP in as-blended gasoline 
under a waiver compared to no waiver, and from in-vehicle commingling 
of ethanol-oxygenated and non-oxygenated gasoline. Additionally, 
permeation VOC emissions through non-metallic fuel system components 
are expected to be higher with ethanol-oxygenated gasolines than with 
non-oxygenated gasolines.
    To quantify RVP-related changes in evaporative emissions, EPA used 
an equation, based on EMFAC7G, published in a report prepared by Sierra 
Research for the American Methanol Institute.\5\ This equation 
expresses evaporative emissions, in tons per day, as a function of RVP. 
Rather than use the tons per day estimates directly, EPA calculated 
percent change factors, and applied them to evaporative VOC emission 
inventory estimates. CARB estimated, in its February 7, 2000 submittal, 
that the difference in VOC emissions due to permeation losses when 
comparing non-oxygenated gasoline to gasoline/ethanol blends with 2.0 
weight percent oxygen is about 13 tons/day for all Federal RFG areas, 
assuming 100 percent penetration of non-oxygenated fuels. EPA 
quantified permeation effects by adjusting proportionally for various 
non-oxygenated penetrations and oxygen contents different than 2.0 
weight percent, assuming that 60 percent of these permeation losses 
would represent SCAQMD.
---------------------------------------------------------------------------
    \5\ Report No. SR00-0101 ``Potential Evaporative Emission Impacts 
Associated with the Introduction of Ethanol-Gasoline Blends in 
California'' January 11, 2000.
---------------------------------------------------------------------------
    The MathPro modeling indicated that the as-blended RVP of the 
CaRFG3 pool with a waiver would be lower than the RVP without a waiver 
for all scenarios. This results in a net reduction in VOC emissions for 
all scenarios with a waiver when exhaust, as-blended evaporative and 
permeation emission changes are considered. If EPA were to grant a 
waiver, however, in-vehicle commingling of ethanol blended oxygenated 
gasoline and non-oxygenated CaRFG3 would cause additional RVP increases 
to occur. California has estimated the likely magnitude of this 
increase to be about 0.1 psi (basically the lower of several RVP 
increases produced by CARB's analysis). EPA reviewed CARB's evaluation 
of the commingling effect. EPA also evaluated the possible commingling 
effect under various potential conditions. This analysis used a pre-
existing EPA commingling model to help assess the average in-vehicle 
RVP increases that could occur if ethanol-oxygenated gasoline were 
commingled with non-oxygenated gasoline during vehicle refueling. Since 
EPA's model assumes that ethanol would be blended at 10 volume percent, 
EPA multiplied the model's RVP increase estimates by 0.8 (as CARB did) 
to evaluate potential RVP increases when ethanol is blended at 5.7 
volume percent (2.0 weight percent oxygen). EPA also considered the 
analysis contained in the Sierra Research report cited earlier. EPA 
found that an RVP increase close to 0.2 psi is as likely to occur under 
a fairly broad set of conditions as a 0.1 psi increase. Since EPA 
recognized that there is considerable uncertainty about the magnitude 
of the commingling RVP increase, EPA evaluated net VOC (exhaust + as-
blended evaporative + commingling evaporative + permeation) changes at 
various levels of RVP boost from 0 psi to 0.3 psi. For this analysis, 
EPA assumed that commingling RVP increases apply to non-road as well as 
on-road vehicles. EPA concluded that, depending on the scenario and the 
magnitude of the RVP increase, the net VOC benefit with the waiver 
would change and significantly could be reversed by the commingling 
component of VOC emissions. These results are discussed below.
    EPA expected that non-road exhaust emission changes would be a 
function of oxygen content. We used information in an EPA document, 
Report No. NR-003, in conjunction with statewide California non-road 
inventory data to determine percent change factors for the waiver 
analysis.\6\ Non-road RVP-related evaporative emissions were modeled 
using the on-road percent change factors. EPA recognized that the 
extremely limited amount of data available to estimate non-road effects 
added considerable uncertainty to the analysis. Furthermore, EPA had to 
make a number of assumptions to derive baseline non-road gasoline 
emission inventory estimates for the SCAQMD, and to separate the VOC 
estimate into exhaust and evaporative components.\7\
---------------------------------------------------------------------------
    \6\ ``Exhaust Emission Effects of Fuel Sulfur and Oxygen on 
Gasoline Nonroad Engines'', Report No. NR-003, November 24, 1997, 
Christian E. Lindhjem, U.S. EPA
    \7\ Inventory assumptions are described in a memo in the Document 
II-B-1 in Docket A-2000-10.
---------------------------------------------------------------------------
         3. emissions changes expected to result from a waiver
    EPA's evaluation of the emissions impacts of a waiver, as discussed 
below, shows a likely decrease of NOx under all scenarios examined, an 
increase in CO under these scenarios, and significant uncertainty about 
the change in VOC emissions. The VOC emissions impact ranges from a 
decrease in VOC to an increase, largely depending on the level of 
commingling emissions and whether they are or are not accounted for.
    NOx Emissions Effects. The changes that refiners would make to the 
composition of California gasoline in response to a waiver, when 
evaluated with EPA's NOx emissions model, would likely reduce NOx 
emissions under every scenario that we evaluated (see Table 1). This 
finding, which is unique to California's regulatory structure and 
specific to California refineries' technical configurations, is 
directionally in agreement with CARB predictions, though the two 
analyses have important differences.
    CO Emissions Effects. With a waiver, CO emissions would increase in 
all scenarios, as indicated in Table 1. This is because oxygenated 
gasoline generally produces lower CO emissions and a mixed pool of 
gasoline with significant quantities of non-oxygenated gasoline would 
result in poorer CO emissions performance. The refinery modeling, under 
various scenarios, estimates the proportion of the gasoline that would 
be oxygenated with a waiver and thus drives the inventory effects. 
CARB's model was used to determine the CO effects brought about by 
changes in oxygen content.
    VOC Emissions Effects. Our analysis shows that the impact of a 
waiver on VOC emissions would be mixed. Exhaust VOC emissions would be 
higher with a waiver, as indicated when EPA's VOC emissions model is 
used to predict exhaust VOC emissions from the fuels that our refinery 
analysis indicates are likely to be produced with and without a waiver. 
But the refinery modeling also indicates that the RVP of both 
oxygenated and non-oxygenated fuels produced under a waiver would be 
lower than without a waiver, with a consequent reduction in ``as-
blended'' evaporative emissions. Additionally, the smaller proportion 
of gasoline containing ethanol in the waiver case would also tend to 
reduce permeation emissions. (Permeation is the escape of gasoline 
components through the material used in soft fuel system components. 
Such losses are increased by the presence of ethanol in gasoline.) In 
the absence of any commingling considerations (discussed below), the 
net result of these opposite exhaust and non-exhaust effects would be a 
reduction in VOC emissions with a waiver, though the magnitude of the 
reduction varies across scenarios. As with NOx, the conclusion that the 
RVP of fuels produced with a waiver would be lower than without a 
waiver is based on the specific circumstances of California regulations 
and the fuel formulation decisions likely to be made by refineries 
supplying the California market.
    Commingling effects on VOC emissions occur when ethanol-oxygenated 
gasolines and gasolines without ethanol are mixed in vehicle fuel 
tanks. This is due to the volatility boost caused when ethanol is added 
to all-hydrocarbon gasoline. This boost in volatility occurs even when 
a small amount of ethanol is added to gasoline. Therefore, in order to 
produce an ethanol-containing RFG meeting evaporative emissions 
requirements, the hydrocarbon blendstock to which the ethanol is added 
must have very low volatility to accommodate increased volatility 
produced by the ethanol. If the non-oxygenated RFGs are ``commingled'' 
in vehicle fuel tanks with ethanol RFG, the ethanol will similarly 
increase the volatility of these non-oxygenated RFGs resulting in an 
overall volatility of the ``commingled'' blends greater than that of 
either the ethanol RFG or the non-oxygenated RFG prior to commingling. 
In other words, when a vehicle with a partially full tank is refueled 
with a different type of gasoline (i.e., ethanol-oxygenated in the tank 
and non-oxygenated added or vice versa), the presence of ethanol will 
cause the resulting mixture to have an overall RVP greater than the 
original RVP of either of the gasolines prior to refueling.
    Without a waiver it is reasonable to believe that there would be no 
appreciable commingling effects, since all of the gasoline in the RFG 
areas would contain ethanol.\8\ With a waiver, commingling would 
certainly occur and would exert an upward pressure on VOC emissions. 
While the directional impact on emissions from commingling is clear, 
its magnitude is very difficult to forecast as it depends upon 
estimates of the oxygenated/non-oxygenated market share, the oxygen 
content used in ethanol-oxygenated RFG, and vehicle owners' refueling 
behavior (including brand loyalty and full versus partial fill-ups), 
among other variables.
---------------------------------------------------------------------------
    \8\ There is actually always some commingling where one of two 
adjacent areas has ethanol in its gasoline owing to travel across area 
boundaries and the resulting fuel mixing. Some of this will occur in 
California with or without a waiver. We considered the difference in 
the magnitude of this cross-border commingling between waiver and non-
waiver situations to be small enough to ignore for the purposes of this 
analysis.
---------------------------------------------------------------------------
    CARB estimated that commingling would have the effect of raising 
the RVP of gasoline by about 0.1 psi. CARB's analysis assumed ethanol 
use in 100 percent of premium gasoline and 46 percent of regular 
gasoline, no grade switching (thus restricting the occurrence of 
commingling only vehicles using regular (i.e., non-premium) gasoline), 
a gasoline pool comprising 75 percent regular gasoline and 25 percent 
premium, and 63 percent of regular grade customers switching brands, 
potentially resulting in commingling. Using a ``simplified'' analysis 
CARB calculated the RVP boost for each possible outcome under two 
scenarios (three refills with initial tank volume at the quarter tank 
level and 4 refills at the half tank level) and averaged the results 
for each scenario. CARB estimated the RVP increase of the gasoline pool 
by multiplying the average result by the commingling probability (63 
percent) and the regular grade market share (75 percent). Average 
increases (above 7 psi) were 0.12 psi for the quarter tank scenario and 
0.16 psi for the half tank scenario. These calculations were based on 
ethanol content of 10 volume percent (about 3.5 weight percent oxygen) 
in ethanol oxygenated gasoline. CARB determined, based on the 
University of California, Davis commingling model, that the boost with 
5.7 volume percent ethanol content RFG (about 2.0 weight percent 
oxygen) would be about 80 percent of the boost with 10 volume 
percent.\9\ Consequently, CARB applied an 80 percent adjustment factor 
to its 10 volume percent RVP boost estimates to estimate the boost if 
5.7 volume percent ethanol content oxygenated RFG were used. Resultant 
estimates were 0.10 psi for the quarter tank scenario and 0.13 psi for 
the half tank scenario.
---------------------------------------------------------------------------
    \9\ A commingling model developed by Dr. D.M. Rocke, University of 
California at Davis.
---------------------------------------------------------------------------
    We believe that a 0.2 psi estimate of the commingling effect (as 
seen in Table 1 and further explained in the Technical Support 
Document) is at least as likely to be the case as CARB's 0.1 psi 
estimate. CARB estimated the commingling effect by calculating a small 
number of refueling iterations under a set of assumptions that would 
tend to produce an RVP boost estimate at the lower end of the range of 
likely RVP increases (i.e., 100 percent ethanol use in premium 
gasoline, no grade switching, and ethanol content at 5.7 volume 
percent). Furthermore, EPA's analysis indicates that even with these 
assumptions concerning ethanol use, content and grade switching, the 
commingling effect is still likely to be about 0.17 psi which is closer 
to 0.2 psi than 0.1 psi.
    In finalizing version 3 of the California RFG regulations, CARB 
adopted a 0.1 psi reduction in allowable RVP to compensate for the 
expected increase in VOC associated with commingling if a waiver were 
granted. If we credit CARB's 0.1 psi reduction in allowable RVP against 
the additional 0.2 psi equivalent increase in VOC emissions from 
commingling, the net increase in VOC emissions expected from a 
commingling effect would be 0.1 psi. If this figure is used in 
estimating the effect of a waiver on the VOC inventory, all but two of 
our modeled scenarios show overall VOC reductions with a waiver, but 
considerably smaller reductions than are predicted using CARB's 
approach (assumption of a commingling effect of 0.1 psi, with the 
entire effect offset by the 0.1 psi RVP reduction). See the Table 1 
column labeled ``VOC 0.1 psi boost''\10\
---------------------------------------------------------------------------
    \10\ For purposes of this decision EPA does not need to decide 
whether it is appropriate to offset the expected increase in emissions 
from commingling with the 0.1 psi RVP reduction adopted by CARB, as 
even if the 0.1 psi offset is applied, as discussed below, VOC 
reductions are too uncertain to resolve what the effect of a waiver on 
ozone would be.
---------------------------------------------------------------------------
    The columns for VOC emissions reflect the estimated impact of a 
waiver on actual VOC emissions (in tons/day), considering exhaust and 
evaporative emissions, including commingling and permeation, from on-
road and non-road vehicles. The columns differ based on the estimates 
of average increase in RVP associated with commingling. For example, 
``VOC 0.1 psi boost'' would reflect the impact of a waiver on the VOC 
inventory if commingling increases the average RVP by 0.2 psi, but this 
increase is treated as partially offset by CARB's adoption of a 0.1 psi 
reduction in RVP.\11\ The column ``VOC no boost'' would reflect the 
impact on the VOC inventory if commingling increases RVP by 0.1 psi, 
and this increase is treated as fully offset by CARB'S adoption of a 
0.1 psi reduction.
---------------------------------------------------------------------------
    \11\ This column would also reflect the impact of a waiver on the 
VOC inventory if commingling increases the average RVP of the gasoline 
by 0.1 psi and the impact is not offset.
---------------------------------------------------------------------------
    The impact of a waiver on the VOC inventory differs considerably 
depending on the estimates of commingling (comparing the VOC columns of 
Table 1). This highlights the importance of commingling emissions in 
assessing the overall VOC impact of a waiver. Using the 0.2 psi 
commingling effect (based on the discussion above), and crediting 
CARB's 0.1 psi RVP adjustment, results in substantially less overall 
VOC reduction than otherwise, and we still have reasonably likely 
scenarios where there is a net VOC increase. Not only is commingling a 
quantitatively important factor in VOC emissions, it is also a 
component that is very sensitive to variables such as brand loyalty 
whose values have been only crudely estimated. As a result of this 
sensitivity, a plausible case can be made for commingling effects 
ranging all the way from 0.1 psi to 0.3 psi (see the Technical Support 
Document).
    Our analysis indicates a waiver would likely result in a decrease 
in emissions of NOx, an increase in exhaust VOC, a decrease in 
evaporative VOC (as-blended), and an increase in CO. However, we are 
less confident about on-road permeation effects and off-road emissions 
of CO, NOx and VOC. The consistent decreases in NOx emissions shown by 
our analysis also indicate that there would likely also be an overall 
decrease in nitrogen-containing PM emissions. There is much uncertainty 
about the estimation of permeation and other emissions on off-road 
vehicles/engines as discussed in detail in the Technical Support 
Document. Finally, there is significant uncertainty regarding 
commingling effects. In summary, the impact of a waiver on VOC 
emissions is considerably more complex to model than the impact of a 
waiver on either NOx or CO emissions, and there is significant 
uncertainty as to the overall VOC effect of a waiverBin both the amount 
and the direction of the effect.

                                                                Table 1: Waiver Impacts at Various Commingling-Related RVP Boosts
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Waiver Case Oxygen Market Shares and Oxy   Emission Inventory Changes (tons/day) (On-road, off-
                                                                                                                  Levels                      road and all exhaust and evaporative VOC such as
                                                                                                ------------------------------------------              permeation and commingling)
       No Waiver Oxy Level          Waiver Oxy Level   Nationwide MTBE Use     Unocal Patent                                      Year-   ------------------------------------------------------
                                                                                                                       % Non-     round                           VOC 0.1    VOC 0.2
                                                                                                      % Oxyfuel       Oxyfuel     Oxygen      NOx       VOC no      psi        psi         CO
                                                                                                                                   Avg                boost\12\  boost\13\  boost\14\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2.0.............................  2.0................  Reduced............  Patent not avoided.  35................         65        1.0      -6.60      -4.02       2.54       9.23     173.13
2.7.............................  2.7................  Reduced............  Patent not avoided.  40................         60        1.5      -7.53     -15.24      -9.15      -2.94     225.19
2.7.............................  2.0................  Reduced............  Patent not avoided.  35................         65        1.0      -9.61     -16.23     -10.14      -3.93     274.24
2.0.............................  2.0................  Continues..........  Patent not avoided.  50................         50        1.3      -5.08      -4.10       2.46       9.15     133.18
2.7.............................  2.7................  Continues..........  Patent not avoided.  60................         40        1.9      -4.68      -9.72      -3.51       2.81     150.12
2.7.............................  2.0................  Continues..........  Patent not avoided.  50................         50        1.3      -8.21     -16.35     -10.26      -4.05     230.93
2.0.............................  2.0................  Reduced............  Patent avoided.....  26................         74        0.9      -7.20      -9.05      -2.69       3.79     197.11
2.7.............................  2.7................  Reduced............  Patent avoided.....  46................         54        1.6      -7.08     -12.12      -5.96       0.33     202.67
2.7.............................  2.0................  Reduced............  Patent avoided.....  26................         74        0.9     -10.89     -15.55      -9.44      -3.20     300.23
2.0.............................  2.0................  Continues..........  Patent avoided.....  50................         50        1.3      -4.84      -8.17      -1.80       4.69     133.18
2.7.............................  2.7................  Continues..........  Patent avoided.....  65................         35        2.0      -4.78      -9.35      -3.13       3.20     131.36
2.7.............................  2.0................  Continues..........  Patent avoided.....  50................         50        1.3      -8.73     -14.73      -8.61      -2.36     230.93
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\12\ This scenario is equivalent to a 0.1 psi RVP boost from commingling completely offset by California's 0.1 psi adjustment to its standards.
\13\ Equivalent to a 0.2 psi RVP boost from commingling offset by California's 0.1 psi adjustment to its standards resulting in a net commingling effect of 0.1 psi.
\14\ Equivalent to a 0.3 psi RVP boost from commingling offset by California's 0.1 psi adjustment to its standards resulting in a net commingling effect of 0.2 psi.

         4. effects on ozone of emission changes from a waiver
    Given an expected reduction in NOx, an increase in CO, and 
significant uncertainty about the overall change in VOCs, the evidence 
is not clear what impact the emissions changes from a waiver would have 
on ozone.
    All three of the pollutants discussed above influence ozone 
formation. The atmospheric chemistry is complex, but directionally we 
would expect NOx reductions to reduce ozone formation, CO increases to 
contribute to ozone formation, and VOC emissions to either increase or 
reduce ozone, depending on whether VOC emissions increase or decrease. 
In order to determine the direction of the overall impact on ozone from 
the changes in these three pollutants, we must consider the expected 
change in each of them and the overall balance that results from the 
directionally different impacts on ozone.
    EPA does not believe that the evidence provided by California and 
developed through its own analyses clearly demonstrates what effect a 
waiver would have an on ozone. This is because: 1) there are three 
pollutants whose emission rates would be altered by a waiver, and all 
three affect ozone formation, 2) these pollutants are not equivalent, 
on a ton-for-ton basis, in their effects on ozone formation, and 3) 
while NOx will go down with a waiver, CO is expected to go up and VOC 
may go up or down resulting in an uncertain impact on ozone. (The 
uncertainties regarding the combined effect on ozone are more 
thoroughly discussed in the TSD.)
                             5. conclusion
    EPA has carefully evaluated all of the information in front of it, 
including information submitted by CARB, other interested parties, and 
developed by EPA. After considering what effect a waiver might have on 
the properties of California reformulated gasoline, and the effect this 
change in fuel properties would have on emissions from highway and off-
road vehicles and equipment, EPA concludes that there has been no clear 
demonstration as to what effect a waiver would have on ozone. There is 
significant uncertainty associated with determining the expected 
emissions impact of a waiver, largely based on uncertainty regarding 
the expected impact on VOCs produced when gasoline containing ethanol 
is mixed with other gasolines in the marketplace. As a result, there is 
significant uncertainty in balancing the emissions impacts of the three 
different pollutants involved, each of which affect ozone, and 
determining their overall effect on ozone. This uncertainty has not 
been resolved, even using the approach suggested by CARB. Since there 
has been no clear demonstration of what effect a waiver would have on 
ozone, it is appropriate to deny California's request for a waiver.\15\
---------------------------------------------------------------------------
    \15\ Since we are denying California's request based upon 
uncertainty associated with the effect of a waiver on ozone, we need 
not decide whether the expected reduction in NOx from a waiver and the 
associated reduction in PM would support a determination of 
interference with the PM NAAQS.
---------------------------------------------------------------------------
                              ----------                              

                               APPENDIX V

                                  State of New Hampshire,  
                                    Office of the Governor,
                                         Concord, NH, May 30, 2001.

Hon. Christine Todd Whitman, Administrator
U.S. Environmental Protection Agency
Ariel Rios Federal Building
1200 Pennsylvania Avenue, NW
Washington, DC 20460

Re: Petition to Opt Out of the Federal Reformulated Gasoline Program

Dear Administrator Whitman: I am writing to follow-up on my letter of 
April 16, 2001 notifying you of my decision to withdraw the State of 
New Hampshire from the Federal Reformulated Gasoline (RFG) program 
immediately.
    I understand that EPA regulations require that any opt-out petition 
must describe the role that RFG plays in our State Implementation Plan 
(SIP), and identify those alternative air quality control measures that 
the State will adopt to replace RFG in our SIP. Enclosed is the 
documentation necessary to meet this requirement. I also understand 
that these measures must be implemented by the State and approved by 
EPA into our SIP before New Hampshire's opt-out can become effective. 
Therefore, at my direction, the New Hampshire Department of 
Environmental Services has commenced the rulemaking process that will 
enable these measures to be incorporated into the State's SIP at the 
earliest possible date.
    New Hampshire's citizens and elected officials are deeply concerned 
about the impacts of MtBE on our drinking water supplies. In the last 
six years, MtBE contamination of water supplies has increased steadily, 
to the point where over 16 percent of public water supplies statewide 
have some level of MtBE contamination, with one county having more than 
24 percent--nearly one in four--of its public water supplies 
contaminated to some degree by MtBE. Recently, the New Hampshire House 
of Representatives passed legislation (HB 758) directing the State to 
opt-out of the RFG program as soon as possible. This bill is now 
pending in the New Hampshire State Senate, where passage is also 
likely. The fact that New Hampshire's legislative and executive 
branches are speaking with one voice on this issue is indicative of the 
importance New Hampshire citizens place on clean water and the urgency 
with which they want the MtBE problem resolved. I hope EPA will 
recognize this importance and urgency, and respond by acting quickly 
and affirmatively on New Hampshire's petition to opt-out of the Federal 
RFG program and to enable the State to do so without delay.
    Thank you for your attention to this critical matter. Please feel 
free to contact me or Robert Varney, Commissioner of the Department of 
Environmental Services, as needed.
            Very truly yours,
                                            Jeanne Shaheen.
                                 ______
                                 
Petition to Opt New Hampshire Out of the Federal Reformulated Gasoline 
                                Program
    New Hampshire Governor Jeanne Shaheen wrote to U.S. Environmental 
Protection Agency (EPA) Administrator Christine Todd Whitman on April 
16, 2001 conveying the intent of the State of New Hampshire to opt out 
of the Federal Reformulated Gasoline (RFG) program. Significant 
quantities of oxygenating compounds are required to be present in 
gasoline under the Federal RFG program. Since the Federal RFG program 
commenced in 1995, the oxygenate methyl tertiary-butyl ether (MtBE), 
has become a significant contamination threat to New Hampshire's 
groundwater and surface water resources. Existing Federal statutory and 
regulatory barriers to reducing and/or phasing-out the use of MtBE 
leave States with few constructive options to rectify this 
environmental and public health problem. New Hampshire has enjoyed the 
notable air quality benefits of the Federal RFG program, and would like 
to maintain its contribution to air quality. At this point, however, 
there appears to be no effective, legal route by which New Hampshire 
can address the MtBE problem except to opt out of the Federal RFG 
program.
    MtBE is the additive most often used by petroleum refiners serving 
the Northeast to meet the Federal Clean Air Act (CAA) Sec. 211k(2)(B) 
requirement that RFG contain 2.0 percent oxygen by weight (i.e., the 
``oxygen mandate''). Since the MtBE problem originated with this 
statutory provision, the best resolution is Congressional action to 
repeal the oxygenate mandate. Having invested considerable effort and 
resources pursuing such action over the last two years, however, New 
Hampshire is concerned that Congressional action to address the 
underlying origin of the MtBE problem may not happen in the near 
future. Faced with no other viable, effective, or legal alternative 
under the Federal Clean Air Act to reduce or eliminate MtBE 
concentrations in New Hampshire's gasoline, the State is compelled to 
submit this formal petition to opt out of the Federal RFG program.
    Under authority provided in Sec. 211(k)(6) of the Federal Clean Air 
Act, New Hampshire petitioned EPA to participate in the Federal RFG 
program on October 22, 1991. Notice of EPA's approval of this request 
was posted in the Federal Register on December 23, 1991 (56 FR 66444). 
The State of New Hampshire, in accordance with the procedures outlined 
40 CFR 80.72, now hereby petitions EPA to opt out of the Federal RFG 
program and to remove all New Hampshire counties from the list of 
``covered areas'' delineated in 40 CFR 80.70. Upon approval--of this 
petition by EPAt the four-county area in New Hampshire where Federal 
RFG is currently required (specifically Hillsborough, Merrimack, 
Rockingham, and Strafford counties) will no longer be subject to the 
requirements of the Federal Clean Air Act Section 211(k) and the 
Federal RFG rule (40 CFR Part 80) for gasoline supplied and sold in 
those areas, including the specification that such gasoline contain 2 
percent oxygen by weight.
    Based on a review of the applicable statutory provisions and EPA's 
RFG rule, as well as discussions. With EPA's regional staff, New 
Hampshire understands that the submissions required for EPA approval of 
the State's request to opt out of the RFG program include:
      A formal opt out request pursuant to 40 CFR 80.72, 
including a list of all prior State Implementation Plan (SIP) 
submittals which utilize Federal RFG emission reduction benefits--
benefits that must be replaced upon eliminating Federal RFG in New 
Hampshire;
      SIP revisions containing the State rules promulgated to 
replace the emission reductions benefits provided by Federal RFG; and
      A request for a waiver of CAA Sec. 211(c)(4)(A), pursuant 
to Sec. 211(c)(4)(C), in order to adopt a State control measure that 
affects federally regulated fuels or fuel component.
    This document is the formal request to opt out of the Federal RFG 
program, and it outlines all New Hampshire SIP submittals that use RFG 
emission benefits to satisfy Federal emission reduction requirements. 
It also describes New Hampshire's plans for satisfying those' 
requirements via other means. The New Hampshire Department of 
Environmental Services (DES) has initiated expedited rulemaking 
procedure?to enact replacement emissions reductions and is preparing 
the necessary SIP amendments.
    RFG has been included in certain New Hampshire SIP revisions as a 
mobile source emissions control measure for volatile organic compounds 
(VOCs), nitrogen oxides (NOx), and carbon monoxide (CO). Attachment 2 
lists these SIP revisions and their approval status at EPA. As detailed 
further below, New Hampshire will replace Federal RFG as a VOC and/or 
NOx control measure by adopting rules implementing ``Oxy-Free 
Reformulated Gasoline'' (OFRFG) that will be substantively identical to 
Federal RFG, except that no minimum oxygen content will be required.
    New Hampshire's Sec. 211(c)(4)(A) waiver request will be submitted 
concurrent with the State's SIP modifications in order to enact State 
rules on OFRFG. At the present time, New Hampshire's ozone 
nonattainment areas have achieved ``clean data'' status, where three-
year average monitored ozone concentrations are consistent with the 
National Ambient Air Quality Standard (NAAQS). The State of New 
Hampshire believes that the mobile source VOC and NOx benefits of 
Federal RFG have contributed to this achievement, and that these fuel-
related air quality benefits must be retained in order to meet the 
ozone NAAQS on a going-forward basis. New Hampshire's approach of 
substituting OFRFG for Federal RFG retains these benefits, simplifies 
the demonstration of equivalency with RFG, can be more readily 
implemented than other control measures, and should accommodate timely 
approval of this petition.
    The CAA and the Federal RFG rule in 40 CFR 80.41 impose 
requirements on refiners that RFG meet a complex combination of 
specifications and emissions reduction performance standards for VOCs 
and NOx. OFRFG will be adopted as a State rule that will incorporate by 
reference applicable Federal RFG requirements, except for the oxygen 
requirement. New Hampshire recognizes that to the extent that OFRFG is 
equivalent to Federal RFG, OFRFG may also result in lower toxic 
emissions. However, the State believes that maximizing the similarity 
between OFRFG and Federal RFG will provide greater consistency with 
respect to recently adopted Federal regulations relative to gasoline 
toxics and in refiners' production processes, resulting in lower costs.
    New Hampshire's plans for OFRFG are consistent with the findings 
and recommendations of EPA's independent Blue Ribbon Panel on the use 
of oxygenates in gasoline, which recommended elimination of the minimum 
oxygen requirement for Federal RFG. This position was supported by EPA 
and the American Petroleum Institute, both of which were represented on 
the panel. DES anticipates that refiners serving New Hampshire will 
seek to reduce MtBE levels for both environmental and economic reasons. 
MtBE is one of the most expensive components of gasoline, so refiners 
may reduce MtBE levels simply to reduce costs. In addition, since MtBE 
poses such a threat to water resources, it increases the potential 
environmental liability claims that refiners, distributors, and 
retailers face.
    Appropriate testing, certification, and enforcement procedures for 
OFRFG will be adopted as necessary after consultation with EPA's 
regional staff. In combination, these steps will ensure that OFRFG 
provides the air quality benefits necessary to meet Federal emission 
reduction requirements and the commitments reflected in the cited New 
Hampshire SIP revisions.
    OFRFG will be required in the same areas of New Hampshire where 
Federal RFG is currently required (i.e., Hillsborough, Merrimack, 
Rockingham, and Strafford counties), and will--by definition--provide 
reductions in VOC and NOx emissions equivalent to Federal RFG. Relative 
to the State's use of Federal RFG for CO reductions, New Hampshire will 
demonstrate that new vehicle and fuel standards (including the Federal 
Tier 2 Vehicle/Gasoline Sulfur Rule), coupled with New Hampshire's 
fleet turnover, will provide the necessary CO emissions reductions to 
maintain the integrity of the State's CO SIP commitments.
    Attachment 2 shows that New Hampshire has seven SIP revisions that 
use RFG as a control measure to achieve federally required emission 
reductions. Of these, five include RFG as a VOC and/or NOx control 
measure, and three of these have received final approval from EPA. Two 
SIP revisions include RFG as a CO control measure to maintain 
attainment of the Federal CO standard, and both of these have received 
final approval from EPA. The following sections address each of these 
SIP submittals, describing RFG's contribution to the required emission 
reductions and how OFRFG will provide the same degree of emission 
reductions as the Federal RFG program.
Approved SIP Revisions Which Include Federal RFG as a VOC Control 
        Measure
    Federal RFG is used as a VOC control measure in the following EPA-
approved New Hampshire SIP revisions:
      1996 15 percent VOC Rate of Progress Plan (approved 
December 7, 1998, 63 FR 67405);
      Stage II Comparability Analysis SIP Revision (approved 
September 29, 1999,64 FR 52434); and
      Clean Fuel Vehicles SIP Revision (approved September 29, 
199964 FR 52434).
    To replace Federal RFG as a VOC control measure in these SIP 
revisions, DES will adopt rules implementing OFRFG. By definition, 
OFRFG will provide reductions in VOC emissions equivalent to Federal 
RFG, so no change from the VOC emission reduction values in the 
existing SIP revisions is expected. OFRFG will be required in the same 
areas of New Hampshire that Federal RFG is currently required (i.e., 
Hillsborough, Merrimack, Rockingham, and Strafford counties). Upon 
final adoption of its OFRFG rules, DES will submit corresponding 
modifications to these currently approved SIP revisions. Using an 
expedited process, DES intends to complete this rulemaking within 60 
days.
Approved SIP Revisions Which Include Federal RFG as a CO Control 
        Measure
    Federal RFG is referenced as part of New Hampshire's demonstration 
that the Manchester and Nashua areas will continue to maintain 
attainment of the National Ambient Air Quality Standard (NAAQS) for CO, 
as outlined in the following maintenance plan SIP revisions:
      Redesignation to Attainment for CO in Manchester, NH 
(approved November 29, 2000, 65 FR 71060); and
      Redesignation to Attainment for CO in Nashua, NH(approved 
November 29, 2000, 65 FR 71060).
    While some CO benefits are associated with the use of Federal RFG 
in older vehicles, the Manchester and Nashua areas have monitored 
attainment with the CO NAAQS since 1990 (i.e., five years before the 
Federal RFG program was implemented in New Hampshire). Federal RFG was 
clearly not necessary to attain the CO standard in these areas, and is 
not necessary to continue to maintain compliance with the CO NAAQS in 
the future. New Hampshire will submit revisions to these approved SIP 
provisions demonstrating that fleet turnover and new Federal vehicle 
and fuel standards will provide adequate CO emissions reduction 
benefits to maintain the integrity of the State's CO SIP commitments. 
DES will work with EPA regional staff and CO modeling staff at the New 
Hampshire Department of Transportation to determine how best to make 
this demonstration, and to expeditiously follow through with all 
necessary submittals to correspondingly modify New Hampshire's 
currently approved CO SIP revisions. The time frame for this process 
depends on the availability of EPA regional staff, but is anticipated 
to proceed expeditiously.
New Hampshire Post-1996 Reasonable Further Progress Plan SIP Revision
    Federal RFG is used as a VOC control measure in New Hampshire's 
Post-1996 Reasonable Further Progress Plan SIP Revision. EPA approval 
of this SIP revision is currently pending. New Hampshire does not 
intend to withdraw this SIP revision. However, because opting out of 
the Federal RFG program could affect both the administrative 
completeness and the ultimate approval of this SIP revision, the State 
will replace Federal RFG as a VOC control measure by adopting rules to 
implement a OFRFG that will provide VOC emissions reductions equivalent 
to those achieved by Federal RFG. As a result, no change from the VOC 
emission reduction values in the pending SIP revision is expected. As 
noted above, OFRFG will be required in the same areas of New Hampshire 
that Federal RFG is currently required (i.e., Hillsborough, Merrimack, 
Rockingham, and Strafford counties). Also as noted above, upon final 
adoption of its OFRFG rules, DES will submit a corresponding 
modification to this currently pending SIP revision. Using an expedited 
process, DES intends to complete this rulemaking within 60 days.
New Hampshire 2003 Ozone Attainment Demonstration SIP Revision
    Federal RFG is used as a VOC and NOx control measure in New 
Hampshire's 2003 Ozone Attainment Demonstration SIP Revision. 
Specifically, the photochemical modeling conducted to demonstrate 
attainment in this SIP revision assumed that Federal RFG would be 
required in New Hampshire's four-county nonattainment area. EPA 
approval of this SIP revision is currently pending. New Hampshire does 
not intend to withdraw this SIP revision. However, because opting out 
of the Federal RFG program could affect both the administrative 
completeness and the ultimate approval of this SIP revision, New 
Hampshire will replace Federal RFG as a VOC and NOx control measure by 
adopting rules to implement a OFRFG that will provide VOC and NOx 
emissions reductions equivalent to those achieved by Federal RFG. As a 
result, no change from the VOC and NOx emission reduction values in the 
pending SIP revision is expected. Again, OFRFG will be required in the 
same areas of New Hampshire that Federal RFG is currently required 
(i.e., Hillsborough, Merrimack, Rockingham, and Strafford counties). 
Upon final adoption of its OFRFG rules, DES will submit a corresponding 
modification to this currently pending SIP revision. Using the 
expedited process noted above, DES intends to complete this rulemaking 
within 60 days.
    Currently, 40 CPR 80.72(c) prohibits States from opting out of the 
Federal RFG program until January 1, 2004. But for this constraint, EPA 
and New Hampshire could together move rapidly to alleviate the 
increasing threat of MtBE contamination by enabling the State to opt 
out of the Federal RFG program prior to January 1, 2004. Given the 
extent of the MtBE contamination that has resulted from the use of 
Federal RFG, the State of New Hampshire re-emphasizes and reiterates 
the request made in Governor Shaheen's April 16, 2001 letter that EPA 
address this section of the Federal RFG rule, either in a formal 
rulemaking process or through the use of enforcement discretion, to 
allow New Hampshire to pursue all earlier opt out date than January 1, 
2004, and to provide such other relief as may be possible.
            Submitted this 30th day of May in the year 2001,
                            Robert W. Varney, Commissioner.
                New Hampshire Department of Environmental Services.

                              Attachment 2

----------------------------------------------------------------------------------------------------------------
   State Implementation Plan (SIP)
               Revision                    Submission Date        EPA Approval Status    Federal Register Notice
----------------------------------------------------------------------------------------------------------------
New Hampshire 1996 15% VOC Rate of     Submitted to EPA August  Approved by EPA          63 FR 67405
 Progress Plan.                         29, 1996.                December 7, 1998.
New Hampshire State II Comparability   Submitted to EPA April   Approved by EPA          64 FR 52434
 Analysis.                              30, 1998.                September 29, 1999.
New Hampshire Clean Vehicles SIP.....  Submitted to EPA June    Approved by EPA          64 FR 52434
                                        7, 1994.                 September 29, 1999.
Carbon Monoxide (CO) SIP Revision      Submitted to EPA         Approved by EPA          65 FR 71060
 Redesignation to Attainment for CO     December 11, 1998.       November 29, 2000.
 in Manchester, NH.
Carbon Monoxide (CO) SIP Revision      Submitted to EPA         Approved by EPA          65 FR 71060
 Redesignation to Attainment for CO     November 30, 1998.       November 29, 2000.
 in Nashua, NH.
New Hampshire Post-1996 Reasonable     Submitted to EPA         EPA approval is          n/a
 Further Progress Plan.                 September 27, 1996.      pending. EPA found
                                                                 that the submittal was
                                                                 complete on October 9,
                                                                 1996. New Hampshire
                                                                 fulfilled its
                                                                 obligations under the
                                                                 Clean Air Act Section
                                                                 182(c)(2)(B) with the
                                                                 State's submittal on
                                                                 September 27, 1996..
New Hampshire 2003 Ozone Attainment    Phase I submitted to     EPA approval is          n/a
 Demonstration.                         EPA June 2, 1995;        pending. New Hampshire
                                        found complete by EPA    fulfilled its
                                        December 2, 1995;.       obligations under the
                                       Phase II submitted to     Clean Air Act Section
                                        EPA June 30, 1998.       182(c)(2)(B) with the
                                                                 State's submittal on
                                                                 June 2, 1995 and June
                                                                 30, 1998..
----------------------------------------------------------------------------------------------------------------

                               __________

                              APPENDIX VI

                       Summary of State Drinking Water and Groundwater Standards For MTBE
----------------------------------------------------------------------------------------------------------------
                 State                      Groundwater (ppb)              Type of Standard or Guideline
----------------------------------------------------------------------------------------------------------------
Alabama...............................  20.......................  Guideline or Action Level
Arizona...............................  35.......................  Guideline or Action Level
California............................  13/5.....................  Public Health Goal/ Enforceable Aesthetic
                                                                    Std.
Connecticut...........................  70.......................  Guideline or Action Level
Florida...............................  50/500...................  Primary Drinking Waster Std./Non-Potable
                                                                    Water Std.
Hawaii................................  20.......................  Groundwater Cleanup Level for Drinking Water
Idaho.................................  52/261/511...............  Pathway Dependent Action Level
Illinois..............................  70.......................  Guideline or Action Level
Kansas................................  20 to 40.................  Health Advisory
Louisiana.............................  18.......................  Guideline or Action Level (10% of MCL)
Maine.................................  35/25....................  Drinking Water Std./Action Level
Maryland..............................  10/50....................  Guideline or Action Level/Drinking Water Std.
Massachusetts.........................  70/50,000................  Primary Drinking Water Std./Vapors in
                                                                    Buildings
Michigan..............................  240/20 to 40.............  Enforceable Guideline/Aesthetic Guideline
Missouri..............................  400/40...................  Guideline for Non-potable and Potable Water
Montana...............................  30.......................  Guideline or Action Level
New Hampshire.........................  70/15/13.................  Current Primary Drinking Water Std./Action
                                                                    Level Prop. Primary Drinking Water Std. &
                                                                    Groundwater Cleanup Level
New Jersey............................  70.......................  Primary Drinking Water Std.
New Mexico............................  100......................  Interim Action Level
Nevada................................  20/200...................  Interim Action Level for Nearby Receptors/
                                                                    Incomplete Exposure Pathway
New York..............................  50/10....................  Primary Drinking Water Std./Groundwater
                                                                    Cleanup Std.
North Carolina........................  200......................  Guideline or Action Level
Ohio..................................  40.......................  Action Level
Oklahoma..............................  20.......................  Action Level
Oregon................................  20 to 40.................  Revised Guideline
Pennsylvania..........................  20 to 40.................  Health Advisory
Rhode Island..........................  40/500...................  Primary Drinking Water Std./Non-potable Water
South Carolina........................  20 to 40.................  Interim MCLG
Texas.................................  15.......................  Guideline or Action Level
Utah..................................  200/70...................  Groundwater Cleanup Level/Drinking Water
                                                                    Cleanup Level
Vermont...............................  40/1.....................  Primary Drinking Water Std./Action Level
Washington............................  20.......................  Guideline or Action Level
West Virginia.........................  20 to 40.................  Health Advisory
Wisconsin.............................  60/12....................  Groundwater Enforcement Std./Action Level
Wyoming...............................  200......................  Primary Drinking Water Std.
----------------------------------------------------------------------------------------------------------------
Source: New Hampshire Department of Environmental Services, January 20, 2000

                              ----------                              

                              APPENDIX VII

    Tests on Oxygenated Fuels Containing Oxygenates Other than MTBE

              Source: U.S. Environmental Protection Agency

    Blue Ribbon Panel Recommendation: EPA and others should 
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 of gasoline compositions containing those 
components.
Listing of ongoing research on health effects responsive to this BRP 
        recommendation.
    Fuel and fuel additive testing required under Clean Air Act 
Section 211 is underway and will provide specific health 
information on MTBE and five other oxygenates as well as 
conventional gasoline containing typical gasoline components 
that would substitute for oxygenates. The more expanded testing 
on MTBE gasoline and conventional non-oxygenated gasoline will 
provide information that will likely be applicable to the other 
oxygenates as well. Pharmacokinetic testing on the oxygenates 
should provide information that may link health effects that 
may be common to more than one oxygenate. The pharmacokinetic 
testing may also allow extrapolations to be made regarding 
route of exposure. For example, inhalation toxicology testing 
could be extrapolated to ingestion routes of exposure. Using 
pharmacokinetic modeling and health effects data, EPA's Office 
of Research and Development is in the process of updating and 
expanding the MTBE file in the Agency's Integrated Risk 
Information System (IRIS) database. In addition to updating the 
inhalation reference concentration (RfC) currently on IRIS, the 
file will contain an oral reference dose (RfD) and cancer 
assessment when completed (an external review draft is expected 
in spring of 2002). These assessments are expected to be of 
relevance to establishing drinking water standards and other 
guidance on MTBE in water. Similar efforts will begin in 2002 
to develop an IRIS file for ethanol, using ingestion health 
effects data to estimate inhalation health risk. Finally, the 
exposure testing will produce valuable information regarding 
the transformation byproducts and environmental behavior of all 
oxygenates and other hydrocarbon gasoline components.

    Tests on Oxygenated Fuels Containing Oxygenates Other than MTBE

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 mother's repeated 
inhalation exposure to vehicle/engine emissions before and 
during her pregnancy.
      In vivo Micronucleus Assay which is an in vivo 
cytogenetic test which uses erythrocytes in the bone marrow of 
animals to detect chemical damage to the chromosomes or mitotic 
apparatus of mammalian cells.
      In vivo Sister Chromatid Exchange Assay to detect 
the ability of a chemical to enhance the exchange of DNA 
between two sister chromatids of a duplicating chromosome.
      Neuropathology Assessment including 
histopathological and biochemical techniques designed to 
develop data in animals on morphologic changes in the nervous 
system associated with repeated inhalation exposures.
      Glial Fibrillary Acidic Protein Assay to 
determine chemically induced injury to the brain and central 
nervous system.
      Histopathology Assessment including preparation 
of the animals targeted for pathologic examination of the lungs 
shall include inflation of the lungs with fixative which will 
permit later examination of the lung tissues by electron 
microscopy, if follow-up to light microscopy is indicated. In 
addition, respiratory tract histopathology shall be conducted.
      Immunotoxicity Screening describing the 
performance and analysis of the required primary antibody 
response (IgM) to sheep red blood cell antigen by either the 
Jerne and Nordin splenic antibody plaque forming cell assay or 
by an enzyme-linked immunosorbent assay (ELISA)
      Inhalation Pharmacokinetic Studies which develop 
and validate a physiologically-based pharmacokinetic (PBPK) 
model to quantitatively describe test substance disposition 
(uptake, distribution, metabolism and elimination).
Ethyl tertiary butyl ether (ETBE)
      Subchronic Inhalation Toxicity Study, with 
Specific Health Effect Assessments
      Fertility/Teratology Assessment
      In vivo Micronucleus Assay
      In vivo Sister Chromatid Exchange Assay
      Neuropathology Assessment
      Glial Fibrillary Acidic Protein Assay
      Histopathology Assessment
      Immunotoxicity Screening
      Inhalation Pharmacokinetic Studies
Tertiary amyl methyl ether (TAME)
      Subchronic Inhalation Toxicity Study, with 
Specific Health Effect Assessments
      Fertility/Teratology Assessment
      In vivo Micronucleus Assay
      In vivo Sister Chromatid Exchange Assay
      Neuropathology Assessment
      Glial Fibrillary Acidic Protein Assay
      Histopathology Assessment
      Immunotoxicity Screening
      Inhalation Pharmacokinetic Studies
Di-isopropyl ether (DIPE)
      Subchronic Inhalation Toxicity Study, with 
Specific Health Effect Assessments
      Fertility/Teratology Assessment
      In vivo Micronucleus Assay
      In vivo Sister Chromatid Exchange Assay
      Neuropathology Assessment
      Glial Fibrillary Acidic Protein Assay
      Histopathology Assessment
      Immunotoxicity Screening
      Inhalation Pharmacokinetic Studies
Tertiary butyl alcohol (TBA)
      Subchronic Inhalation Toxicity Study, with 
Specific Health Effect Assessments
      Fertility/Teratology Assessment
      In vivo Micronucleus Assay
      In vivo Sister Chromatid Exchange Assay
      Neuropathology Assessment
      Glial Fibrillary Acidic Protein Assay
      Histopathology Assessment
      Immunotoxicity Screening
      Inhalation Pharmacokinetic Studies
Tests on Non-Oxygenated Gasoline and MTBE-Gasoline
      Subchronic Inhalation Toxicity Study, with 
Specific Health Effect Assessments
      Two-Generation Reproductive Study which includes 
animal studies designed to provide information on potential 
health hazards to the fetus arising from the mother's 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 follow-up to light microscopy is indicated. In 
addition, respiratory tract histopathology shall be conducted.
      Immunotoxicity Screening describing the 
performance and analysis of the required primary antibody 
response (IgM) to sheep red blood cell antigen by either the 
Jerne and Nordin splenic antibody plaque forming cell assay or 
by an enzyme-linked immunosorbent assay (ELISA)
      Inhalation Pharmacokinetic Studies which develop 
and validate a physiologically-based pharmacokinetic (PBPK) 
model to quantitatively describe test substance disposition 
(uptake, distribution, metabolism and elimination).
      Two-species Developmental Study which is a 
developmental study to determine chemically induced changes in 
development.
      Two-year cancer bioassay to determine the 
chemically induced development of tumors.
Exposure Testing
    Quantify personal exposures to motor vehicle gasoline and 
MTBE-oxyfuel emissions (both evaporative and combustion-
related) in microenvironments which represent the upper end of 
the frequency distribution of such exposures. This would 
include determination of the quantitative relationship between 
the personal exposures measured in the selected 
microenvironments, fixed site measurements in these 
microenvironments, and available ambient emission measurements; 
determination of how the high-end personal exposures (i.e, 
exposures approaching the 99th percentile), differ in cities 
and seasons of the year in which oxyfuel is used (MTBE-
containing reformulated gasoline (RFG) or wintertime oxygenated 
gasoline) as compared with cities and seasons in which oxyfuels 
are typically not used; determination of the relative 
contributions of fuel combustion vs. evaporation as the source 
of personal exposures to gasoline and oxyfuel emissions. The 
study would provide sufficient information to serve as a 
baseline for extrapolation to other sites and, if possible, 
other oxygenated fuels.

                                                          Animal Testing Approximate Schedules
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Draft Report Due to                           Final Report Due to
             Test Group                   Fuel Mixture         Toxicology Studies             EPA             Comments Due to RG            EPA
--------------------------------------------------------------------------------------------------------------------------------------------------------
Group A............................  Baseline Gasoline--     Study Set 1...........  App. 1/2002..........  App. 3/2002..........
                                      Gasoline MTBE.           Subchronic w/ App. 2/2002..........  App. 4/2002 App. 5/
                                                               Neurotoxicity,                                2002.
                                                              Immunotoxicity, and                           App. 6/2002..........
                                                              In Vivo/In Vitro
                                                              Genotoxicity\1\.
                                                               Developmenta
                                                              l Toxicity (Two
                                                              Species).
                                                            --------------------------------------------------------------------------------------------
                                                             Study Set 2...........  App. 9/2002..........  App. 11/2002.........  App. 1/2003
                                                               Two
                                                              Generation
                                                              Reproductive Toxicity.
                                                            --------------------------------------------------------------------------------------------
                                                             Study Set 3...........  App. 3/2004..........  App. 5/2004..........  App. 7/2004
                                                               Oncogenicity
                                                              (One Species).
                                                            --------------------------------------------------------------------------------------------
Group B............................  Gasoline Ethanol......  Study Set 4...........  App. 8/2002..........  App. 10/2002.........  App. 12/2002
                                     Gasoline TAME.........    Subchronic w/ App. 8/2002..........  App. 10/2002.........  App. 12/2002
                                     Gasoline ETBE.........    Neurotoxicity,
                                                              Immunotoxicity, and
                                                              In Vivo/In Vitro
                                                              Genotoxicity \1\.
                                                               Developmenta
                                                              l Toxicity (One
                                                              Species).
                                                            --------------------------------------------------------------------------------------------
                                                             Study Set 5...........  App. 12/2002.........  App. 2/2003..........  App. 4/2003
                                                               One
                                                              Generation
                                                              Reproductive Toxicity.
                                                            --------------------------------------------------------------------------------------------
Group C............................  Gasoline DIPE.........  Study Set 6...........  App. 11/2002.........  App. 1/2003..........  App. 3/2003
                                     Gasoline TBA..........    Subchronic w/ App. 12/2002.........  App. 2/2003..........  App. 4/2003
                                                               Neurotoxicity,
                                                              Immunotoxicity, and
                                                              In Vivo/In Vitro
                                                              Genotoxicity\1\.
                                                               Developmenta
                                                              l Toxicity (One
                                                              Species).
                                                            --------------------------------------------------------------------------------------------
                                                             Study Set 7...........  App. 5/2003..........  App. 7/2003..........  App 9/2003
                                                               One
                                                              Generation
                                                              Reproductive Toxicity.
                                                            --------------------------------------------------------------------------------------------
Group D............................  EtOH, TAME, ETBE,       Study Set 8...........  App. 6/2002..........  App. 8/2002..........  App. 10/2002
                                      DIPE, TBA.               Neat
                                                              Oxygenate PK(EtOH,
                                                              ETBE completed).
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\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                Schedule
------------------------------------------------------------------------
Incorporate results of pilot studies................  App. 2/2002
API submits revised draft protocol to EPA...........  App. 3/2002
EPA approves/disapproves revised draft protocol.....  App. 5/2002
API completes microenvironmental studies............  App. 4/2003
API submits draft final report for review by EPA      App.10/2003
 including individual peer review comments and
 disposition of comments.
EPA provides comments on draft final report.........  App. 12/2003
API submits final report to EPA on results of         App. 4/2004
 testing.
------------------------------------------------------------------------

                                Hearings

    On December 9, 1997, the Committee on Environment and 
Public Works held a field hearing in Sacramento, CA on the 
presence of MTBE in the nation's water supply. Testimony was 
given by Nancy J. Balter, Principal, Center for Environmental 
Health and Human Toxicology, and former Associate Professor of 
pharmacology, Georgetown University Medical Center; Nachman 
Brautbar, Professor of clinical medicine, University of 
Southern California School of Medicine; Cynthia Dougherty, 
Director, Office of Groundwater and Drinking Water, 
Environmental Protection Agency; Stephen K. Hall, Executive 
Director, Association of California Water Agencies; The 
Honorable Tom Hayden, California State Senator; The Honorable 
Richard Mountjoy, California State Senator; Gary Patton, 
Counsel, The Planning and Conservation League; Craig Perkins, 
Director of Environment and Public Works Management, City of 
Santa Monica, California; Peter M. Rooney, Secretary, 
California State Environmental Protection Agency; David Spath, 
Chief, Drinking Water and Environmental Management Division, 
California State Environmental Protection Agency; and John 
Zogorski, Chief of National Synthesis on Volatile Organic 
Compounds and MTBE, U.S. Geological Survey.
    On September 16, 1998, the Committee on Environment and 
Public Works held a hearing on S.1576, a bill to amend the 
Clean Air Act to permit the exclusive application of California 
State regulations regarding reformulated gasoline in certain 
areas within the State. Testimony was given by The Honorable 
Brian Bilbray, U.S. Representative from the State of 
California; John D. Dunlap, III, Chairman, California Air 
Resources Board; Douglas A. Durante, Executive Director, Clean 
Fuels Development Coalition; The Honorable Dianne Feinstein, 
U.S. Senator from the State of California; Daniel S. Greenbaum, 
President, Health Effects Institute; Al Jessel, Senior Fuels 
Specialist, Chevron Products Company; and Ned Sullivan, 
Commissioner, Maine Department of Environmental Conservation.
    On October 5, 1999, the Subcommittee on Clean Air, 
Wetlands, Private Property and Nuclear Safety of the Committee 
on Environment and Public Works held a hearing on the Blue 
Ribbon Panel findings on MTBE. Testimony was given by Robert H. 
Campbell, Chairman and Chief Executive Officer, Sunoco, Inc.; 
The Honorable Jake Garn, Vice Chairman, Huntsman Corporation; 
Daniel S. Greenbaum, President, Health Effects Institute; and 
Michael P. Kenny, Executive Officer, California Air Resources 
Board.
    On June 14, 2000, the Subcommittee on Clean Air, Wetlands, 
Private Property and Nuclear Safety of the Committee on 
Environment and Public Works held a hearing on the 
environmental benefits and impacts of ethanol under the Clean 
Air Act. Testimony was given by Dan Greenbaum, President, 
Health Effects Institute; Blake Early, Environmental 
Consultant, American Lung Association; Michael Graboski, 
Director, Colorado Institute for Fuels and High Altitude Engine 
Research, Colorado Department of Chemical Engineering, Colorado 
School of Mines; Bob Slaughter, Director, National 
Petrochemical & Refiners Association; Jack Huggins, Vice 
President, Williams Energy Services; Jason Grumet, Executive 
Director, Northeast States for Coordinated Air Use Management; 
Stephen Gatto, President and Chief Executive Officer, BC 
International; Gordon Proctor, Director, Ohio Department of 
Transportation; The Honorable Charles Grassley, United States 
Senator from the State of Iowa; The Honorable Tom Harkin, 
United States Senator from the State of Iowa; The Honorable 
Richard Durbin, United States Senator from the State of 
Illinois.
    On April 27, 2001, the Committee on Environment and Public 
Works held a field hearing in Salem, NH on the use of the 
gasoline additive methyl tertiary butyl ether (MTBE). Testimony 
was given by Christina Miller, homeowner in Derry, New 
Hampshire; the Honorable Arthur Klemm, Senate President, New 
Hampshire State Senate; Robert Varney, Director, New Hampshire 
Department of Environmental Services; Dr. Nancy Kinner, 
Professor civil engineering, University of New Hampshire; Bill 
Holmberg, resident of Bow; Patty Aho, Maine Petroleum 
Association.

                          Legislative History

    On May 24, 2001, S. 950 was received in the Senate, read 
twice, and referred to the Committee on Environment and Public 
Works. On September 25, 2001, the committee held a business 
meeting to consider the bill. The bill, as amended, was ordered 
reported.

                             Rollcall Votes

    On September 25, 2001, at 9:30 a.m., the committee held a 
business meeting to consider S. 950 and other bills. The 
committee recessed at 10:35 a.m. to reconvene at the call of 
the chair.
    The committee reconvened in the President's Room (S 216, 
U.S. Capitol). The committee began consideration of S. 950. 
Upon no further discussion of the bill, a motion to report the 
bill was taken by voice vote. A motion to report the bill as 
introduced was agreed to by voice vote. Recorded as voting 
against were Senators Bond, Crapo, Inhofe, Voinovich, and 
Warner.

                      Regulatory Impact Statement

    The regulatory authority granted by this bill is structured 
to streamline and make flexible the imposition of any new 
requirements.
    No regulatory action is required to effect the elimination 
of MTBE in Section 3, though the Administrator will need to 
issue regulations to implement and enforce this ban. 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 authority to waive the oxygen mandate granted to 
Governors under Section 4 of this bill requires no regulatory 
action to become effective. Section 4 authorizes regulations to 
establish new performance standards for toxic emissions. 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 4. 
Compliance with the performance standards is managed through 
existing regulatory structures under Section 211(k) of the CAA.
    The statutory elimination of the ethanol waiver by Section 
7 does not require regulatory action, but may require the 
Administrator to provide guidance and technical assistance to 
refiners and air quality planners on the change in fuel 
characteristics.
    The provisions in Section 8 regarding additional opt-in 
areas rely entirely on existing authority and regulatory 
structures for revisions and approvals of SIPs.

                          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 4 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 7 of the bill 
eliminates the one-pound-per-square-inch waiver of Reid Vapor 
Pressure requirements that is available for fuel blends 
containing gasoline and 10 percent ethanol under Section 
211(h)(4) of the Clean Air Act. The elimination of the waiver 
may increase fuel costs, particularly in non-attainment areas 
using ethanol blends, as refiners will be required to provide 
for a lower RVP blendstock to achieve air quality goals.
    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 
Control Act requires that a statement of the cost of the 
reported bill, prepared by the Congressional Budget Office, be 
included in the report. That statement follows:
                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, November 9, 2001.

Hon. James Jeffords, Chairman,
Committee on Environment and Public Works,
U.S. Senate, Washington, DC.

Dear Mr. Chairman: The Congressional Budget Office has prepared 
the enclosed cost estimate for S. 950, the Federal Reformulated 
Fuels Act of 2001.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Susanne S. 
Mehlman (for Federal costs), who can be reached at 226-2860, 
and Elyse Goldman (for the State and local impact), who can be 
reached at 225-3220.
            Sincerely,
                                             Dan L. Crippen
                              ----------                              

S. 950, Federal Reformulated Fuels Act of 2001, as ordered reported by 
        the Senate Committee on Environment and Public Works on 
        September 25, 2001

                                SUMMARY

    The Clean Air Act (CAA) Amendments of 1990 set up the 
reformulated gasoline program (RFG), which requires regions in 
certain States with severe air pollution to use reformulated 
gasoline. Other States are given the option of participating in 
the RFG program. Participating States are required to add 
chemicals called Aoxygenates
    to gasoline to reduce pollution from fuel emissions. One of 
the most commonly used oxygenates is methyl tertiary butyl 
ether (MTBE), but in recent years concerns have been raised 
about the effects of MTBE on drinking water.
    Under S. 950, the use of MTBE would be banned four years 
after enactment. This bill also would allow States who chose to 
opt-in to the RFG program to waive the oxygenate requirement in 
gasoline sold in their respective States. S. 950 would 
authorize the appropriation of $370 million over the 2002-2006 
period from the Environmental Protection Agency's (EPA's) 
Leaking Underground Storage Tank (LUST) Trust Fund. This 
funding would be used for grants to States for the cleanup and 
treatment of MTBE contamination and for enforcement and 
inspection activities related to any LUST sites.
    S. 950 also would authorize the appropriation of $750 
million to EPA over the 2002-2004 period for grants to assist 
manufacturers of MTBE to convert facilities to produce 
substitute fuel additives instead of MTBE. This bill also would 
require EPA to draft and publish various notices and rules 
concerning discontinuing the use of MTBE, and to conduct 
several studies on motor vehicle fuels and emissions standards.
    Assuming appropriation of the authorized necessary amounts, 
CBO estimates that implementing S. 950 would cost about $1 
billion over the 2002-2006 period. The bill would not affect 
direct spending or receipts; therefore, pay-as-you-go 
procedures would not apply.
    S. 950 contains no intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act (UMRA) and would impose no 
costs on State, local, and tribal governments. The act would 
benefit States by authorizing $370 million in grants from the 
LUST Trust Fund for a variety of activities. S. 950 also would 
benefit States by giving them flexibility in determining 
whether to use oxygenates in their gasoline.

                ESTIMATED COST TO THE FEDERAL GOVERNMENT

    The estimated budgetary impact of S. 950 is shown in the 
following table. The costs of this legislation fall within 
budget function 300 (natural resources and environment).

                                     By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------------------------------------------
                                                                   2001    2002    2003    2004    2005    2006
----------------------------------------------------------------------------------------------------------------
          CHANGES IN SPENDING SUBJECT TO APPROPRIATION
LUST Spending Under Current Law.................................
    Budget Authority\1\72.......................................       0       0       0       0       0
    Estimated Outlays...........................................      70      53      29      11       4       0

Proposed Changes................................................
    LUST Program................................................
        Authorization Level.....................................       0     250      30      30      30      30
        Estimated Outlays.......................................       0      63      95      81      51      41

    Grants to MTBE manufacturers................................
        Authorization Level.....................................       0     250     250     250       0       0
        Estimated Outlays.......................................       0     100     213     250     150      38

    EPA Administrative Support..................................
        Estimated Authorization Level...........................       0       3       4       2       2       2
        Estimated Outlays.......................................       0       3       4       2       2       2

Total Spending Under S. 950.....................................
    Estimated Authorization Level...............................      72     503     284     282      32      32
    Estimated Outlays...........................................      70     219     341     344     207      81
----------------------------------------------------------------------------------------------------------------
\1\ The 2001 level was appropriated to the Environmental Protection Agency to administer the LUST program in
  that year. This program has not yet received a full-year appropriation for 2002.

                           BASIS OF ESTIMATE

    For this estimate, CBO assumes that the bill will be 
enacted near the beginning of fiscal year 2002, that the full 
amounts authorized will be appropriated for each fiscal year, 
and that outlays will occur at rates similar to EPA's LUST 
program and other similar grant programs.
    S. 950 would authorize the appropriation of $1.1 billion 
over the 2002-2006 period and also would increase EPA's costs 
for administrative activities that are not specifically 
authorized under the bill. This legislation would make EPA 
responsible for various activities related to discontinuing the 
use of MTBE, such as drafting and issuing notices and 
conducting various studies related to motor vehicle fuels and 
emissions standards. Based on information from EPA, CBO 
estimates that conducting this work would cost about $13 
million, subject to the availability of appropriated funds.

Pay-As-You-Go Considerations: None.

Estimated Impact on State, Local, and Tribal Governments
    S. 950 contains no intergovernmental mandates as defined in 
UMRA and would impose no costs on State, local, or tribal 
governments. The bill would benefit States by authorizing the 
appropriation of $370 million in grants from the LUST Trust 
Fund for a variety of activities. S. 950 also would benefit 
States by giving them flexibility in determining whether to use 
oxygenates in their gasoline.
Estimated Impact on the Private Sector
    CBO's estimate of the bill's impact on the private sector 
will be provided at a later date.

Estimate Prepared By: Federal Costs: Susanne S. Mehlman Impact 
on State, Local, and Tribal Governments: Elyse Goldman.

Estimate Approved By: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                 MINORITY VIEWS OF SENATOR JAMES INHOFE

    These views are submitted to explain certain shortcomings 
in to S. 950, the Federal Reformulated Fuels Act of 2001, as 
approved by the Senate Committee on Environment and Public 
Works. In summary, I believe that S. 950 falls short of 
balancing our need for environmental protection with our need 
for sound national energy policy.

GENERAL CONCERNS: S. 950 IS A DIRECT IMPEDIMENT TO THE ENERGY SECURITY 
                          OF THE UNITED STATES

    In addition to serving on the Senate Committee on 
Environment and Public Works, it is my honor and privilege to 
serve as the ranking Republican member of the Readiness and 
Management Support Subcommittee of the Senate Committee on 
Armed Services. In that capacity, I have undertaken a careful 
review of the defense readiness of the United States, 
particularly as it relates to energy security. This is one of 
the many reasons that comprehensive energy legislation has been 
and remains one of the most important agenda items of the 
Congress. I fear that S. 950 is a hasty and ill-conceived piece 
of legislation. In its great desire to address the political 
circumstances surrounding the fuel additive MTBE, this bill 
makes our energy security considerably worse by shortening 
supply and limiting the diversity of its sources.
    Never has the Congress needed to be more cognizant of the 
relationship between energy and national security than needs to 
be now. As I observed on the floor of Senate on November 1, 
2001, the United States is currently 56.6 percent dependent 
upon foreign countries for our oil supply. There is a 
bipartisan and historic consensus that such dependence is 
dangerous. Five different Presidents--Eisenhower, Kennedy, 
Nixon, Ford and Carter--imposed restrictions on imports of 
refined petroleum products because they recognized that 
maintaining domestic refining capacity was essential to 
national security. While declining to act upon it, President 
Clinton also made a similar finding.
    We know that the current risk factors are just as acute. I 
recently asked Deputy Defense Secretary Paul Wolfowitz a 
question regarding the strategic risk imposed by enhanced 
dependence of foreign sources--particularly from the Middle 
East. He responded, ``[It] is a serious strategic issue. . . . 
My sense is that [our] dependency is projected to grow, not to 
decline. . . . I think you're right to point out that it's not 
only that we would, in a sense, be dependent upon Iraqi oil, 
but the oil as a weapon. The possibility of taking that oil off 
the market and doing enormous economic damage with it is a very 
serious problem.''
    The inability of this nation to produce sufficient volumes 
of motor fuels constitutes a real threat to national security 
for several reasons.\1\ First, the amount of refined products 
required to supply a modern military far exceeds the amount 
required in the past. For example, during the peak of Operation 
Desert Storm, the half million U.S. military personnel consumed 
more than 450,000 barrels of light refined products per day, 
nearly four times the amount used in WWII by the 2 million 
strong Allied Expeditionary Force that liberated Europe.
    Second, the nature of modern warfare necessitates the use 
of high volumes of gasoline and other refined products. The 
shorter warning time requires massive air lifts of supplies 
overseas, and the increased emphasis on heavy bombing and 
maneuver warfare such as that used in the Gulf War create a 
significant demand for refined products. Further, because these 
modern conflicts are likely to take place in underdeveloped 
regions and because of the short warning period, much of the 
refined products necessary for mobilization must originate from 
domestic sources.
    At mark-up for S. 950, I raised the objection that the bill 
would eliminate large volumes of the current gasoline pool in 
the United States. I was assured that the bill would be 
perfected before any final adoption, and that many Senators 
shared my concerns regarding security implications. I look 
forward to working with the chairman and ranking member on 
those changes.

              SECTION 2B LEAKING UNDERGROUND STORAGE TANKS

    In general, I have no objection to programs that make 
greater resources available to carry out corrective actions and 
engage in other remediation activities related to instances of 
leaking underground storage tanks. Of course, precisely because 
it has not been shown that MTBE constitutes any threat to human 
health and the environment, we must be careful to allow those 
empowered to use these resources the flexibility to address 
MTBE concerns even in the absence of the finding of any threat 
to human health and the environment. I am not certain the 
current language in S. 950 does so. It should be so clarified.
    I would also observe that Section 2 contains the solution 
to gasoline contamination that makes the draconian provisions 
of Section 3 superfluous. Simply stated, if we fix the tanks 
and thereby improve the handling of gasoline, it makes no sense 
to then ban a single fuel additive among the many gasoline 
components that may leak. Indeed, EPA's own Blue Ribbon Panel B 
the study that arguably launched the interest in this 
legislation B bluntly stated, ``The major source of groundwater 
contamination appears to be releases from underground gasoline 
storage systems.''
    It is my understanding that the comprehensive energy 
legislation adopted by the House of Representatives already 
contains similar LUST language regarding fuel additives. I 
further understanding that the Senate Environment and Public 
Works Committee may take up specific fixes to the LUST program. 
In either event, it would appear that the need for this 
legislation may well have been overtaken by events.

        SECTION 3--BANNING THE SALE OF GASOLINE CONTAINING MTBE

    MTBE represents an important contribution to refining 
volume and fuel diversity. By harnessing natural gas resources 
to augment the gasoline supply with non-petroleum alternatives, 
MTBE represents the crucial price and supply moderators in the 
modern fuel pool. The Undersecretary of Energy Bob Card 
testified before the Senate Energy and Natural Resources 
Committee in June 2001 that eliminating MTBE from the fuel pool 
amounts to a tremendous constriction in fuel supply, thus 
straining refining capacity. He stated:
    MTBE's contribution to gasoline supplies nationally is 
equivalent to about 400,000 barrels a day of gasoline 
production capacity or the gasoline output of four to five 
large refineries. Additionally, a loss of ability to use MTBE 
may also affect the ability of the US gasoline market to draw 
gasoline supplies from Europe, the major source of our price-
sensitive gasoline imports, since those refiners widely use 
MTBE, albeit typically at lower concentrations than in the 
U.S.\2\
    DOE has further reported that banning MTBE in the United 
States further undermines the ability of the country to rely 
upon secure sources of gasoline supply from around the world. 
MTBE will continue to be used by our closest trading partners 
and strategic allies, thus reducing the fungibility of supply 
for the United States, and again straining capacity. The same 
DOE statement continued, ``In addition to the ongoing supply 
problems one could expect from trying to produce both 
reformulated and conventional gasolines without MTBE, regional 
refinery or distribution supply problems could lead to 
additional short-term difficulties under State-by-State bans. 
One would expect these situations to contribute to regional 
gasoline shortfalls and longer periods of price volatility as 
markets struggle to re-balance on a State-by-State basis. In 
addition, for Northeast States, which depend heavily on 
imported reformulated gasoline, MTBE bans and the subsequent 
need for special gasoline blendstocks for ethanol blending 
could be even more problematic.''\3\
    Some have argued that should MTBE exit the market, ethanol 
will simply fill the gap. However, there is much uncertainty in 
such an approach. First, and most generally, I am concerned 
about the conclusions of some studies, which state that ethanol 
still has a net negative energy yield. This means that energy 
input into ethanol production exceeds the energy output on a 
BTU basis. Professor David Pimental of Cornell University 
released the most recent study conducted on the subject this 
year. His conclusions are clear:
    Numerous studies have concluded that ethanol production 
does not enhance energy security, is not a renewable energy 
source, is not an economical fuel, and does not insure clean 
air. Further its production uses land suitable for crop 
production and causes environmental degradation (Pimentel, 
1991; Pimentel and Pimentel, 1996).\4\
    Ethanol advocates cite contrary studies on the subject of 
net energy yield (including a recent one from the USDA), but 
these studies consistently fail to consider all the energy 
inputs necessary to produce ethanol.\5\ Pimental's bottom line 
conclusion on energy input is staggering:
    The total energy input to produce 1,000 liters of ethanol 
is 8.7 million kcal. However, 1,000 liters of ethanol has an 
energy value of only 5.1 million kcal. Thus, there is a net 
energy loss of 3.6 million kcal per 1,000 liters of ethanol 
produced. Put another way, about 70 percent more energy is 
required to produce 1,000 liters of ethanol than the energy 
that actually is in the ethanol.\6\
    The history with the ethanol tax subsidy underscores the 
inability of ethanol to add to energy security. The General 
Accounting Office reviewed the history of the subsidy in 1997, 
and concluded that, ``ethanol tax incentives have not 
significantly enhanced U.S. energy security.''\7\ The 
Department of Energy has also rejected the notion that a 
renewable fuels mandate could significantly reduce imports or 
enhance security.\8\
    As ranking member of the Subcommittee on Transportation, 
Infrastructure, and Nuclear Safety, I also have very serious 
concerns about the impact of the increased use of ethanol on 
the Highway Trust Fund. Increasing the use of ethanol by 500 
percent would translate into a 500 percent increase in the 
impact of the ethanol subsidy to the Highway Trust Fund. The 
Highway Trust Fund must not suffer as a result of an explicit 
or implicit ethanol mandate.
    However, with the above statements having been made on 
ethanol, as a matter of national energy policy, I would like to 
see a day when domestically-produced ethanol is widely used 
because of technological development rather than government 
mandates and subsidies.
    While I believe the legislation should not be adopted until 
such time as these troubling supply and security questions can 
be answered with certainty, there are some changes that must be 
made before any serious consideration can be given to final 
passage of this bill. At the very least, DOE must be empowered 
to review any changes to the legal status of a fuel additive in 
the nation as a whole or in any part of the United States. DOE 
must evaluate the likely consequence of any change in the legal 
status of fuel additives in light of such national interest 
considerations such as security, price, and supply of energy, 
and DOE's favorable recommendation should be a precondition of 
any change in status becoming operative. Such a suggestion is 
clearly consistent with the current scheme of the Clean Air 
Act, in the sense that the Act is a comprehensive national 
program that occupies the field of fuel additives based on 
national environmental priorities and concerns regarding 
interstate commerce. Having DOE explicitly review any 
authorized change is fuel-additive status fits well within this 
existing scheme.
    Section 3 of S. 950 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 (although it would not provide it 
without any authority in this regard to limit MTBE); and (3) it 
would require the EPA Administrator to ban the use of MTBE in 
gasoline not later than four 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. 950 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. 950 amends Section 211(c)(4)(B) to give 
the State of California additional authority to regulate water 
quality. For the reasons cited above, we believe it is 
inappropriate to use the Clean Air Act to give any jurisdiction 
additional authority to regulate water quality.
The Ban on MTBE is Arbitrary and Unprecedented
    Section 3 of S. 950 requires the EPA Administrator to ban 
the use of MTBE in gasoline not later than four 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. In fact, after extensive scientific 
review, MTBE has not been designated as a significant risk to 
human health.
    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-1990s. 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, a prohibition 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.\9\ 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. Indeed, a study 
in the March 2001 edition of Soil, Sediment & Groundwater 
indicates that the average MTBE concentrations in California 
have steadily declined over the 1995 to 1999 time period, as 
California came into compliance with new LUST standards.
    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. 950 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.
    In no event have these extraordinary burdens of proof been 
met. Regarding health impacts, a consensus has emerged. Reviews 
by scientific panels from the U.S. Government (the National 
Toxicology Program), State governments (such as California's 
own Carcinogenic Identification Committee), and even 
international health organizations (such as the World Health 
Organization's International Agency for Research on Cancer and, 
more recently, the European Community) all have declined to 
list MTBE as a human carcinogen. Further, the Health Effects 
Institute, which chaired the EPA Blue Ribbon Panel, released a 
report on June 15, 2001 based on three new, independent 
studies. HEI stated that ``effects of MTBE exposure are likely 
to be no more, and may be less, that the effects seen in 
previous studies.'' Therefore, they concluded ``MTBE would be 
considered less likely to have adverse effects than previously 
thought.''
    Recent work in Europe again has demonstrated how outdated 
the committee's assumptions are as they relate to MTBE. In a 
report released in December 2001, the European Commission 
reported findings of two Finnish reports, both of which have 
now been published in the Official Journal of the European 
Communities. The main conclusion is that there is no risk to 
human health from MTBE. Just as this committee recognized in 
Section 2 of this bill, the European Commission has instead 
opted for commonsense measures to address the handling of 
gasoline and the protection of groundwater. Bans on MTBE are 
not part of the recommendations.
    The ban of MTBE is also objectionable because it is to be 
implemented in four 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 
phase out of Class I chlorofluorocarbons (CFCs) over a ten-year 
period, and a phase out 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 ten-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 
eleven years. Indeed, the investments required to make the 
Clean Air Act RFG work were substantial enough to warrant a 
five year planning and implementation period. It is hard to 
understand the rationale for banning the use of MTBE in four 
years or less.
    The ban on MTBE in four years or less raises issues of both 
workability and fairness. As described initially in these 
views, there are serious concerns that gasoline and home 
heating oil markets will be seriously disrupted by the abrupt 
ban on MTBE. MTBE constitutes approximately three percent of 
the total national gasoline pool, and approximately ten 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 four 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 four 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 four 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 4--WAIVER OF THE OXYGEN CONTENT REQUIREMENT FOR REFORMLATED 
                                GASOLINE

    In addition to allowing States to waive the reformulated 
gasoline oxygen content requirement, this section of the bill 
would impose new air toxics requirements that would apply in 
areas where the oxygen mandate has been waived.
    The air toxics provision in Section 4 are extraordinarily 
complicated and would require EPA to develop new regional air 
toxics standards that would apply to RFG in areas of the 
country that waive the RFG oxygen mandate unless EPA's existing 
air toxics standards are more stringent. In areas that do not 
waive the oxygen mandate, and in areas of the country that do 
not use RFG, EPA's existing air toxics standards would apply. 
While the intent is to maintain the air toxics benefits of the 
RFG program, the scheme outlined in section 4 is too complex, 
and will likely result in the imposition of numerous different 
air toxics standards, which will likely further fragment 
gasoline markets. The fragmentation of gasoline markets makes 
it more difficult for the industry to supply consumers with the 
fuels they need, particularly if there is an unexpected 
disruption in the gasoline supply and distribution system, 
because it hinders the ability of the industry to shift 
supplies from one market to another.
    Moreover, the air toxics provisions in section 4 are 
unnecessary. On March 29, 2001, EPA published a new rule in the 
Federal Register that ensures that the air toxics emissions 
reductions achieved in the past will be maintained into the 
future, regardless of any other changes to the RFG 
requirements. This new rule requires that refineries continue 
to attain the same level of air toxics emissions performance 
that they attained in 1998-2000. EPA's rule ensures that 
refineries will continue to make RFG with the same high 
performance that they did in the past even if the RFG oxygen 
mandate is repealed, or the use of MTBE is limited. Moreover, 
in the new rule, EPA commits to continue to evaluate air toxics 
emissions and to propose additional mobile source air toxics 
standards, as appropriate, by July 1, 2004 and to take final 
action on such proposal by July 1, 2005. And all of this is 
moving forward notwithstanding the fact that EPA expressly 
declined to promulgate more stringent RFG air toxics controls 
in 1994 on the basis that the benefits could be achieved at a 
much lower cost by controlling air toxics emissions through 
other EPA programs. 59 Fed. Reg. 7755-56.
    Rather than create a new and more complex program to 
maintain the air toxic emission reduction benefits of the RFG 
program, which could add to the boutique fuels problem and 
exacerbate the gasoline supply situation, Congress should give 
the new EPA regulations time to work.

           SECTION 6--ANALYSIS OF MOTOR VEHICLE FUEL CHANGES

    Section 6 is greatly reduced from the Section 9 in the past 
committee bill on this subject, S. 2962. While I am glad that 
the committee has addressed the concern raised previously that 
no predicate had been laid for additional EPA automotive 
authority, it is plain that Section 6 is not particularly well-
designed. For example, under Section 3 of the bill, adverse air 
quality consequences flowing from the ban on MTBE would begin 
virtually immediately (and in no event later than four years 
from the date of enactment). However, not until four years 
after the date of enactment does Section 6 require even a draft 
analysis of impact, to be finalized a year after that. Only 
then would modeling changes be contemplated. In effect, the cow 
Section 6 seeks will be well out of the barn before Section 6 
could possibly be effective.

 SECTION 7--ELIMINATION OF THE 1-PSI RVP WAIVER FOR ETHANOL BLENDS OF 
                         CONVENTIONAL GASOLINE

    The provision, which would eliminate the 1-psi RVP waiver 
for ethanol blends of conventional gasoline, is likely to have 
an adverse impact on conventional gasoline supply and cost. 
Without the 1-psi waiver, the cost to manufacture the 
appropriate blendstock for ethanol blending would increase. 
Many ethanol blenders blend ethanol directly with regular 
gasoline. This process would no longer be allowed and a special 
low RVP blendstock for ethanol blending would have to be 
produced and moved through the distribution system, which is 
likely to increase supply problems. The net result is likely to 
be a reduction in ethanol blending in gasoline and therefore a 
reduction in Midwest total gasoline supply. This is not 
appropriate given the recent tightness in gasoline supply.

        SECTION 8--ADDITIONAL OPT-IN AREAS UNDER THE RFG PROGRAM

    This provision would allow for expansion of the RFG program 
to any area of the country. This section provides no 
consideration of the impact of such an expansion on the 
gasoline distribution system, or the overall costs of the RFG 
program. Congress debated at great length the geographic scope 
of the RFG program in the 1990 Clean Air Act Amendments and 
rejected a national RFG program based on need, supply, and 
cost. These same factors apply to an even greater extent today 
as refining capability has been and will continue to be further 
constrained in light of numerous fuels regulations industry 
must comply with in a short time frame, such as the recently 
promulgated gasoline and diesel sulfur rules, and the mobile 
source air toxics rule. There is no justification to expand the 
scope of the RFG program.

        SECTION 9B--MTBE MERCHANT PRODUCER CONVERSION ASSISTANCE

    I commend the committee for recognizing in this provision 
that MTBE producers answered the explicit call of Federal 
requirement for oxygenates when they manufactured and marketed 
their product. As I have suggested at the mark up held on 
similar legislation in the last Congress (S. 2962), users and 
producers of MTBE are deserving of liability protection for the 
same reason that conversion assistance is also justified: the 
government required the use of products like MTBE; the 
government must hold harmless those that answered the call of 
its mandate. Essentially, we should bear in mind that: (1) MTBE 
is widely used because of a Federal mandate, the oxygenate 
standard; (2) MTBE has been effective in addressing the energy 
and environmental concerns that lay at the heart of a larger 
Federal program requiring the use of RFG; (3) the government, 
as a result of the first two points, bears great responsibility 
for any attendant MTBE liability; and (4) failure to address 
MTBE liability may undermine any incentive for additive 
manufacturers to produce new generations of additives that will 
be needed to replace MTBE and to meet future energy and 
environmental goals.
    In Congress, we have considered liability protections in a 
variety of settings, including medical care, firefighter 
assistance, educational institutions, firearms, nuclear energy, 
and many other areas. The point is that liability protection 
makes sense when we are seeking to protect a greater principle, 
such as sound public policy or fairness. Both justifications 
are present in the current case, and lay at the heart of the 
judgment the committee made with respect to conversion 
assistance.
    The conversion assistance program itself is an important 
element to the bill. It reflects the solemn commitment that the 
bill's primary author made to Senators on the committee. Not 
only is the provision fair; it is vital if we are to expect 
companies to respond to future demands for clean fuel 
additives. I commend the committee for adopting Section 9, but 
advise vigilance to make sure that adequate funds are 
appropriated to satisfy Section 9's authorization.

                                ENDNOTES

    \1\ National Defense Council Foundation, The Growing 
Refining Gap, A Threat to National Security. vi (Apr. 29, 
1994).
    \2\ Bob Card, Undersecretary of Energy, Hearings before the 
Senate Committee on Energy and Natural Resources, June 21, 
2001.
    \3\ Id.
    \4\ David Pimental, The Limits of Biomass Utilization, 
August 16, 2001 at 9.
    \5\ Pimental at 10 (``When investigators ignore some of the 
energy inputs in biomass production and processing they reach 
an incomplete and deficient analysis for ethanol production. In 
a recent USDA report (Shapouri et al., 1995), no energy inputs 
were listed for machinery, irrigation, or for transportation. 
All of these are major energy input costs in U.S. corn 
production (Table 3). Another way of reducing the energy inputs 
for ethanol production is to arbitrarily select lower 
production costs for the inputs. For instance, Shapouri et al. 
(1995) list the cost of a kilogram of nitrogen production at 
12,000 kcal/kg, considerably lower than FAO which list the cost 
of nitrogen production at 18,590 kcal per kg. Using the lower 
figure reduces the energy inputs in corn production by about 50 
percent. Other workers have used a similar approach to that of 
Shapouri et al. (1995).'').
    \6\ Id.
    \7\ U.S. General Accounting Office, Tax Policy: Effects of 
the Alcohol Fuels Tax Incentive, March 6, 1997.
    \8\ Blake Early, Sierra Club Testimony Before the Senate 
Committee on Environment and Public Works, at Congressional 
Record, Aug. 3, 1994, at S10472 (``As my testimony points out, 
even the EPA's initial analysis of the program failed to 
establish that mandated renewable oxygenate use would result in 
a net reduction of global warming gases. In proposing the 
renewable oxygen program, EPA claimed DOE support for its 
assertion that the renewable oxygen program `would reduce 
foreign oil imports, * * * reduce fossil energy use, and lower 
emissions of harmful greenhouse gases. The DOE has now 
challenged these EPA claims and recently released a report from 
Argonne National Laboratories showing that the renewable 
oxygenate requirement is more likely to increase--not reduce--
foreign oil imports, fossil energy use, and global greenhouse 
gas emissions.'').
    \9\ See Chris Bowman, ``Through Tahoe's Murk, Officials 
Look at `Crisis:' Leaders Briefed on Cleanup Strategies,'' 
Sacramento Bee, August 5, 2000.

             MINORITY VIEWS OF SENATOR GEORGE V. VOINOVICH

Introduction
    The Clean Air Act Amendments of 1990 require the mixing of 
an oxygenate with gasoline in an effort to reduce vehicle and 
toxic emissions. However, the most common oxygenate, methyl 
tetiary butyl ether (MTBE), has been found to contaminate 
groundwater. MTBE, primarily made from natural gas or petroleum 
products, is listed as a hazardous substance under the 
Comprehensive Environmental Response Compensation and Liability 
Act of 1990 (CERCLA), but has not been listed as a carcinogen 
by either the National Institute of Environmental Health 
Sciences or the International Agency on Research on Cancer.
    Last year, this Committee responded to the issues and 
serious health concerns raised by using MTBE by marking up a 
bill that banned MTBE. That legislation created an ethanol 
requirement aimed at ensuring that the MTBE could be replaced 
and our domestic fuel supply would grow by encouraging the use 
of ethanol. This legislation however, does not encourage 
ethanol. In fact, it removes the incentive to use ethanol by 
removing the oxygenate mandate. Further, it discourages its use 
by removing the ethanol vapor pressure waiver thus making it 
harder to blend ethanol.
    While I support banning MTBE, I am concerned about certain 
clean air regulations that would result in the reduced use of 
ethanol. Oxygenated fuels that use additives such as ethanol 
have been found to reduce carbon monoxide emissions from 
automobile exhaust by fourteen percent. Additionally, because 
ethanol and other additives typically make up about ten percent 
of one gallon of gasoline, eliminating them would require the 
country to use an additional five hundred thousand to one 
million barrels of gasoline per day. This amounts to 
approximately six to twelve percent of our total daily domestic 
supply.
    Although it is generally more expensive, there are several 
advantages to using ethanol over MTBE. Primarily, since it is 
an agricultural product, ethanol is a renewable energy source 
that helps to address our nation=s energy concerns. In 
addition, ethanol is readily biodegradable, thereby eliminating 
some of the potential concerns about groundwater contamination 
that have been associated with MTBE.
    According to the U.S. Department of Energy, there are four 
provisions in S. 950 that create problems directly related to 
gas supply in this country. The effects of which will be felt 
greatest and primarily in the Northeast regions of the U.S.
National MTBE Ban in 4 Years
    The DOE analysis states that the MTBE ban would create 
economic problems in the Northeast by eliminating nearly three 
hundred thousand barrels per day (depending on how California 
is viewed) of what is arguably the highest quality gasoline 
blend stock. Also, the ban would limit refiners= ability to 
bring additional blend stock material, such as light straight 
run and raffinate, into the general gasoline pool.
    Presumably, this ban would reduce the supply of 
reformulated gasoline (RFG) because blending clean gas will 
become more difficult. In addition to this, the ban will 
decrease the amount of gasoline available for import from 
Europe because most of this gasoline contains MTBE and is sent 
to northeastern markets.
    Additionally, in light of the 2002 toxic anti-backsliding 
rule that EPA put into effect this year, any loss of or 
limitation on additional use of MTBE (or other ethers) will 
severely limit refiners= ability to make incremental barrels of 
RFG or other Aclean gasolines.@ Refiners have had meetings with 
DOE and EPA in which this combined effect of the toxics rule 
and MTBE limitations have been clarified. Therefore, S. 950 
will impose additional limitations on RFG supply capability.
    Overall, DOE estimates the total impact of this provision 
is over four hundred thousand barrels per day of lost gasoline 
volume, most of which is concentrated in the east and more so 
in the northeast.
Removal of Ethanol Vapor Pressure (RVP) Waiver
    This bill eliminates the Vapor Pressure waiver for ethanol. 
In order to meet the new vapor pressure, some gasoline 
components will need to be removed. This will inevitably result 
in an immediate loss of nearly 20 thousand barrels per day with 
this number increasing if there is a renewable mandate. If an 
ethanol mandate is added later on the floor, and this provision 
remains, the loss would catapult to nearly 80 thousand barrels 
a day. Therefore, instead of getting 100% of ethanol produced 
gasoline, some of the gasoline components will need to be 
removed thereby reducing the overall amount of gasoline 
produced.
    In the 2003/2004 time frame, ethanol will be blended into 
at least 1 million barrels per day of conventional gasoline 
(where this waiver applies). With a renewable mandate this 
volume will increase in later years. The loss of the waiver 
will result in at least a 2% volume loss (lighter gasoline 
components will have to be removed to accommodate the high RVP 
ethanol) on each gallon of gasoline with ethanol.
    If a renewable mandate (RFS) is imposed as is almost 
certain, in order to obtain passage of the RFG oxygenate waiver 
in S. 950, the volume of ethanol used could increase by at 
least 4 billion gallons and the volume of gasoline (presumably 
conventional) affected would expand to nearly four million 
barrels per day. However, the volume loss associated with this 
would be on the order of nearly .8 million barrels per day. As 
noted, much of this loss will be concentrated in the mid-west 
gasoline market where ethanol is currently blended into 
conventional gasoline. This is a gasoline market that is 
already short in capacity.
The Additional Gasoline Toxics Controls
    This bill calls for a complicated program of additional 
gasoline toxics control based on PADD level average baseline 
performance, applicable only to those states that request a 
waiver of the RFG oxygenate requirement. Presumably, this would 
be most or all of the RFG states, leaving marginal gasoline 
suppliers (those with poorer gasoline toxics performance) with 
less competitive markets and less total supply access. In times 
like these where there is severe market imbalance, the ultimate 
result will be higher and more volatile prices.
    The toxics language is based on regional averages. The 
result will be an undetermined number of Amarginal@ or mostly 
smaller refiners going out of business. Additionally, the EPA=s 
new toxics rule for gasoline proposed this year decreases the 
methods available to reduce the toxics and produce RFG at the 
same time. This legislation makes it even more difficult since 
MTBE would have been the toxic reduction mechanism of choice. 
The banning of MTBE will therefore cause production losses of 
1-4% for refineries making reformulated gasoline.
The State Oxygenate Waiver Option
    This provision has no effect on gasoline volume, in and of 
itself, beyond those already noted. However, it does introduce 
other grades of (boutique) fuels into the system. Over the last 
few years boutique fuels have caused most if not all of our 
supply problems and price spikes. Under this bill, this problem 
will worsen the gasoline supply situation, just as individual 
state RFG toxic requirements do whenever there is a supply 
upset. This will further limit supply options when there are 
refinery or pipeline problems.

                                Summary

    This legislation and the state actions that it encourages 
will no doubt reduce U.S. gasoline supply capability, during 
the critical summer high gasoline demand months. This decrease 
will amount to a loss of at least .5 million barrels per day of 
gasoline blendstock availability. There will be an additional 
loss of imported gasoline supply due to the tighter toxic 
standards, bans on MTBE and requirements for sub-RVP 
blendstocks for ethanol blending.
    To place things in proper perspective, currently, the U.S. 
uses approximately 8.5 million barrels of gasoline per day. 
Imported gasoline accounts for 3 to 4 million barrels per day 
of U.S. supply. Essentially all of the imported gasoline is 
shipped to the East Coast markets. A reduction of .5 million 
barrels per day is equal to a 6% reduction of total U.S. daily 
gasoline supply. By banning MTBE and not encouraging the growth 
of ethanol, S. 950 ignores the fuel needs of the Northeast, 
which would be most directly affected by this legislation. The 
result would be crippling gasoline shortages and price hikes.
    Ethanol ensures a replacement for MTBE, while increasing 
our domestic fuel supply. Ethanol is good for the environment. 
It is an oxygenate which promotes cleaner air, and reduces the 
amount of carbon monoxide, a poison. Earlier this year, the 
Auto Alliance reported to the California Air Resources Board 
that a recent study found that ethanol has a measurable impact 
on air quality in even the newest, cleanest and most efficient 
cars and fuels.
    S. 950, however, does not encourage the use of ethanol and 
eliminates the incentive to use it by removing the oxygenate 
mandate. Additionally, the bill discourages ethanol use by 
removing the ethanol vapor pressure waiver, which would make it 
harder to blend ethanol. Although some environmentalists may 
complain about a potential increase in volatile organic 
compounds (VOCs) caused by ethanol, the EPA has studied this 
issue and asserts that any increase in VOC emissions caused by 
ethanol will be offset by the reductions in carbon monoxide.
    The analysis conducted by the Department of Energy found 
that S. 950 would reduce our gasoline supply anywhere between 
.5 and one million barrels per day, or six to twelve percent. 
As a nation, we have reached a point where we should be 
encouraging the growth of our domestic ethanol production, if 
for no other reason than to displace the amount of oil we 
import from the Middle East and other countries.
    As we seek to resolve our current national energy crisis 
and preserve the environment for the many generations to 
follow, we must do so without compromising our domestic fuel 
supply. It is obvious that the effects of this legislation will 
potentially leave the U.S. at the mercy of foreign oil 
producing countries, while ignoring our own ability to produce 
clean, domestic gasoline for ourselves.

                        Changes in Existing Law

    In compliance with section 12 of rule XXVI of the Standing 
Rules of the Senate, changes in existing law made by the bill 
as reported are shown as follows: Existing law proposed to be 
omitted is enclosed in [black brackets], new matter is printed 
in italic, existing law in which no change is proposed is shown 
in roman:
                              ----------                              

                            CLEAN AIR ACT\1\

           [As Amended Through P.L. 106-55, August 17, 1999]

              Part A--Air Quality and Emission Limitations

                         findings and purposes

      Sec. 101. (a) The Congress finds--
---------------------------------------------------------------------------
    \1\ The Clean Air Act (42 U.S.C. 7401-7626) consists of Public Law 
159 (July 14, 1955; 69 Stat. 322) and the amendments made by subsequent 
enactments.

           *       *       *       *       *       *       *

---------------------------------------------------------------------------

                          regulation of fuels

      Sec. 211. (a) * * *

           *       *       *       *       *       *       *

      (b)(1) For the purpose of registration of fuels and fuel 
additives, the Administrator shall require--
            (A) the manufacturer of any fuel to notify him as 
        to the commercial identifying name and manufacturer of 
        any additive contained in such fuel; the range of 
        concentration of any additive in the fuel; and the 
        purpose-in-use of any such additive; and
            (B) the manufacturer of any additive to notify him 
        as to the chemical composition of such additive.
      (2) For the purpose of registration of fuels and fuel 
additives, the Administrator [may also] shall, on a regular 
basis require the manufacturer of any fuel or fuel additive--
            [(A) to conduct tests to determine potential public 
        health effects of such fuel or additive (including, but 
        not limited to, carcinogenic, teratogenic, or mutagenic 
        effects), and]
            (A) to conduct tests to determine potential public 
        health and environmental effects of the fuel or 
        additive (including carcinogenic, teratogenic, or 
        mutagenic effects); and
            (B) to furnish the description of any analytical 
        technique that can be used to detect and measure any 
        additive in such fuel, the recommended range of 
        concentration of such additive, and the recommended 
        purpose-in-use of such additive, and such other 
        information as is reasonable and necessary to determine 
        the emissions resulting from the use of the fuel or 
        additive contained in such fuel, the effect of such 
        fuel or additive on the emission control performance of 
        any vehicle, vehicle engine, nonroad engine or nonroad 
        vehicle, or the extent to which such emissions affect 
        the public health or welfare.
Tests under subparagraph (A) shall be conducted in conformity 
with test procedures and protocols established by the 
Administrator. The results of such tests shall not be 
considered confidential.
      (3) Upon compliance with the provisions of this 
subsection, including assurances that the Administrator will 
receive changes in the information required, the Administrator 
shall register such fuel or fuel additive.
    (4) Ethyl tertiary butyl ether.--
            (A) In general.--Not later than 2 years after the 
        date of enactment of this paragraph, the Administrator 
        shall--
                    (i) conduct a study on the effects on 
                public health, air quality, and water resources 
                of increased use of, and the feasibility of 
                using as substitutes for methyl tertiary butyl 
                ether in gasoline--
                            (I) ethyl tertiary butyl ether; and
                            (II) other ethers, as determined by 
                        the Administrator; and
                    (ii) submit to the Committee on Energy and 
                Commerce of the House of Representatives and 
                the Committee on Environment and Public Works 
                of the Senate a report describing the results 
                of the study.
            (B) Contracts for study.--In carrying out this 
        paragraph, the Administrator may enter into 1 or more 
        contracts with nongovernmental entities.
      (c)(1) The Administrator may, from time to time on the 
basis of information obtained under subsection (b) of this 
section or other information available to him, by regulation, 
control or prohibit the manufacture, introduction into 
commerce, offering for sale, or sale of any fuel or fuel 
additive for use in a motor vehicle, motor vehicle engine, or 
nonroad engine or nonroad vehicle (A) if in the judgment of the 
Administrator any fuel or fuel additive or emission product of 
such fuel or fuel additive causes, or contributes, to [air 
pollution which] air pollution, or water pollution, that may 
reasonably be anticipated to endanger the public health or 
welfare, or (B) if emission products of such fuel or fuel 
additive will impair to a significant degree the performance of 
any emission control device or system which is in general use, 
or which the Administrator finds has been developed to a point 
where in a reasonable time it would be in general use were such 
regulation to be promulgated.
      (2)(A) No fuel, class of fuels, or fuel additive may be 
controlled or prohibited by the Administrator pursuant to 
clause (A) of paragraph (1) except after consideration of all 
relevant medical and scientific evidence available to him, 
including consideration of other technologically or 
economically feasible means of achieving emission standards 
under section 202.
      (B) No fuel or fuel additive may be controlled or 
prohibited by the Administrator pursuant to clause (B) of 
paragraph (1) except after consideration of available 
scientific and economic data, including a cost benefit analysis 
comparing emission control devices or systems which are or will 
be in general use and require the proposed control or 
prohibition with emission control devices or systems which are 
or will be in general use and do not require the proposed 
control or prohibition. On request of a manufacturer of motor 
vehicles, motor vehicle engines, fuels, or fuel additives 
submitted within 10 days of notice of proposed rulemaking, the 
Administrator shall hold a public hearing and publish findings 
with respect to any matter he is required to consider under 
this subparagraph. Such findings shall be published at the time 
of promulgation of final regulations.
      (C) No fuel or fuel additive may be prohibited by the 
Administrator under paragraph (1) unless he finds, and 
publishes such finding, that in his judgment such prohibition 
will not cause the use of any other fuel or fuel additive which 
will produce emissions which will endanger the public health or 
welfare to the same or greater degree than the use of the fuel 
or fuel additive proposed to be prohibited.
      (3)(A) For the purpose of obtaining evidence and data to 
carry out paragraph (2), the Administrator may require the 
manufacturer of any motor vehicle or motor vehicle engine to 
furnish any information which has been developed concerning the 
emissions from motor vehicles resulting from the use of any 
fuel or fuel additive, or the effect of such use on the 
performance of any emission control device or system.
      (B) In obtaining information under subparagraph (A), 
section 307 (a) (relating to subpenas) shall be applicable.
      (4)(A) Except as otherwise provided in subparagraph (B) 
or (C), no State (or political subdivision thereof) may 
prescribe or attempt to enforce, for the purposes of motor 
vehicle emission control, any control or prohibition respecting 
any characteristic or component of a fuel or fuel additive in a 
motor vehicle or motor vehicle engine--
            (i) if the Administrator has found that no control 
        or prohibition of the characteristic or component of a 
        fuel or fuel additive under paragraph (1) is necessary 
        and has published his finding in the Federal Register, 
        or
            (ii) if the Administrator has prescribed under 
        paragraph (1) a control or prohibition applicable to 
        such characteristic or component of a fuel or fuel 
        additive, unless State prohibition or control is 
        identical to the prohibition or control prescribed by 
        the Administrator.
      (B) Any State for which application of section 209(a) has 
at any time been waived under section 209(b) may at any time 
prescribe and enforce, for the purpose of motor vehicle 
emission control or water quality protection, a control or 
prohibition respecting any fuel or fuel additive.
      (C) A State may prescribe and enforce, for purposes of 
motor vehicle emission control, a control or prohibition 
respecting the use of a fuel or fuel additive in a motor 
vehicle or motor vehicle engine if an applicable implementation 
plan for such State under section 110 so provides. The 
Administrator may approve such provision in an implementation 
plan, or promulgate an implementation plan containing such a 
provision, only if he finds that the State control or 
prohibition is necessary to achieve the national primary or 
secondary ambient air quality standard which the plan 
implements. The Administrator may find that a State control or 
prohibition is necessary to achieve that standard if no other 
measures that would bring about timely attainment exist, or if 
other measures exist and are technically possible to implement, 
but are unreasonable or impracticable. The Administrator may 
make a finding of necessity under this subparagraph even if the 
plan for the area does not contain an approved demonstration of 
timely attainment.
    (5) Ban on the use of mtbe.--Not later than 4 years after 
the date of enactment of this paragraph, the Administrator 
shall ban use of methyl tertiary butyl ether in motor vehicle 
fuel.
    (6) MTBE merchant producer conversion assistance.--
            (A) In general.--The Administrator may make grants 
        to merchant producers of methyl tertiary butyl ether in 
        the United States to assist the producers in the 
        conversion of eligible production facilities described 
        in subparagraph (B) to the production of other fuel 
        additives that--
                    (i) will be consumed in nonattainment 
                areas;
                    (ii) will assist the nonattainment areas in 
                achieving attainment with a national primary 
                ambient air quality standard;
                    (iii) will not degrade air quality or 
                surface or ground water quality or resources; 
                and
                    (iv) have been registered and tested in 
                accordance with the requirements of this 
                section.
            (B) Eligible production facilities.--A production 
        facility shall be eligible to receive a grant under 
        this paragraph if the production facility--
                    (i) is located in the United States; and
                            (ii) produced methyl tertiary butyl 
                        ether for consumption in nonattainment 
                        areas during the period--
                            (I) beginning on the date of 
                        enactment of this paragraph; and
                            (II) ending on the effective date 
                        of the ban on the use of methyl 
                        tertiary butyl ether under paragraph 
                        (5).
            (C) Authorization of appropriations.--There is 
        authorized to be appropriated to carry out this 
        paragraph $250,000,000 for each of fiscal years 2002 
        through 2004.
    (d) Penalties and Injunctions.--
            (1) Civil penalties.--Any person who violates 
        subsection (a), (f), (g), (k), (l), (m), or (n) of this 
        section or the regulations prescribed under subsection 
        (c), (h), (i), (k), (l), (m), [or (n)] (n), or (o) of 
        this section or who fails to furnish any information or 
        conduct any tests required by the Administrator under 
        subsection (b) of this section shall be liable to the 
        United States for a civil penalty of not more than the 
        sum of $25,000 for every day of such violation and the 
        amount of economic benefit or savings resulting from 
        the violation. Any violation with respect to a 
        regulation prescribed under subsection (c), (k), (l), 
        [or (m)] (m), or (o) of this section which establishes 
        a regulatory standard based upon a multiday averaging 
        period shall constitute a separate day of violation for 
        each and every day in the averaging period. Civil 
        penalties shall be assessed in accordance with 
        subsections (b) and (c) of section 205.
            (2) Injunctive authority.--The district courts of 
        the United States shall have jurisdiction to restrain 
        violations of subsections (a), (f), (g), (k), (l), (m), 
        and (n) of this section and of the regulations 
        prescribed under subsections (c), (h), (i), (k), (l), 
        (m), [and (n)] (n), and (o) of this section, to award 
        other appropriate relief, and to compel the furnishing 
        of information and the conduct of tests required by the 
        Administrator under subsection (b) of this section. 
        Actions to restrain such violations and compel such 
        actions shall be brought by and in the name of the 
        United States. In any such action, subpoenas for 
        witnesses who are required to attend a district court 
        in any district may run into any other district.

           *       *       *       *       *       *       *

    (h) Reid Vapor Pressure Requirements.--
            (1) Prohibition.--Not later than 6 months after the 
        date of the enactment of the Clean Air Act Amendments 
        of 1990, the Administrator shall promulgate regulations 
        making it unlawful for any person during the high ozone 
        season (as defined by the Administrator) to sell, offer 
        for sale, dispense, supply, offer for supply, 
        transport, or introduce into commerce gasoline with a 
        Reid Vapor Pressure in excess of 9.0 pounds per square 
        inch (psi). Such regulations shall also establish more 
        stringent Reid Vapor Pressure standards in a 
        nonattainment area as the Administrator finds necessary 
        to generally achieve comparable evaporative emissions 
        (on a per-vehicle basis) in nonattainment areas, taking 
        into consideration the enforceability of such 
        standards, the need of an area for emission control, 
        and economic factors.
            (2) Attainment areas.--The regulations under this 
        subsection shall not make it unlawful for any person to 
        sell, offer for supply, transport, or introduce into 
        commerce gasoline with a Reid Vapor Pressure of 9.0 
        pounds per square inch (psi) or lower in any area 
        designated under section 107 as an attainment area. 
        Notwithstanding the preceding sentence, the 
        Administrator may impose a Reid vapor pressure 
        requirement lower than 9.0 pounds per square inch (psi) 
        in any area, formerly an ozone nonattainment area, 
        which has been redesignated as an attainment area.
            (3) Effective date; enforcement.--The regulations 
        under this subsection shall provide that the 
        requirements of this subsection shall take effect not 
        later than the high ozone season for 1992, and shall 
        include such provisions as the Administrator determines 
        are necessary to implement and enforce the requirements 
        of this subsection.
            [(4) Ethanol waiver.--For fuel blends containing 
        gasoline and 10 percent denatured anhydrous ethanol, 
        the Reid vapor pressure limitation under this 
        subsection shall be one pound per square inch (psi) 
        greater than the applicable Reid vapor pressure 
        limitations established under paragraph (1); Provided, 
        however, That a distributor, blender, marketer, 
        reseller, carrier, retailer, or wholesale purchaser-
        consumer shall be deemed to be in full compliance with 
        the provisions of this subsection and the regulations 
        promulgated thereunder if it can demonstrate (by 
        showing receipt of a certification or other evidence 
        acceptable to the Administrator) that--
                    [(A) the gasoline portion of the blend 
                complies with the Reid vapor pressure 
                limitations promulgated pursuant to this 
                subsection;
                    [(B) the ethanol portion of the blend does 
                not exceed its waiver condition under 
                subsection (f)(4); and
                    [(C) no additional alcohol or other 
                additive has been added to increase the Reid 
                Vapor Pressure of the ethanol portion of the 
                blend.
            [(5)] (4) Areas covered.--The provisions of this 
        subsection shall apply only to the 48 contiguous States 
        and the District of Columbia.

           *       *       *       *       *       *       *

    (k) Reformulated Gasoline for Conventional Vehicles.--
            (1) EPA regulations.--[Within 1 year after the 
        enactment of the Clean Air Act Amendments of 1990]
                    (A) In general.--Not later than November 
                15, 1991, the Administrator shall promulgate 
                regulations under this section establishing 
                requirements for reformulated gasoline to be 
                used in gasoline-fueled vehicles in specified 
                nonattainment areas. Such regulations shall 
                require the greatest reduction in emissions of 
                ozone forming volatile organic compounds 
                (during the high ozone season) and emissions of 
                toxic air pollutants (during the entire year) 
                achievable through the reformulation of 
                conventional gasoline, taking into 
                consideration the cost of achieving such 
                emission reductions, any nonair-quality and 
                other air-quality related health and 
                environmental impacts and energy requirements.
                    (B) Waiver of oxygen content requirement.--
                            (i) Authority of the governor.--
                                    (I) In general.--
                                Notwithstanding any other 
                                provision of this subsection, a 
                                Governor of a State, upon 
                                notification by the Governor to 
                                the Administrator during the 
                                90-day period beginning on the 
                                date of enactment of this 
                                subparagraph, or during the 90-
                                day period beginning on the 
                                date on which an area in the 
                                State becomes a covered area by 
                                operation of the second 
                                sentence of paragraph (10)(D), 
                                may waive the application of 
                                paragraphs (2)(B) and (3)(A)(v) 
                                to gasoline sold or dispensed 
                                in the State.
                                    (II) Opt-in areas.--A 
                                Governor of a State that 
                                submits an application under 
                                paragraph (6) may, as part of 
                                that application, waive the 
                                application of paragraphs 
                                (2)(B) and (3)(A)(v) to 
                                gasoline sold or dispensed in 
                                the State.
                            (ii) Treatment as reformulated 
                        gasoline.--In the case of a State for 
                        which the Governor invokes the waiver 
                        described in clause (i), gasoline that 
                        complies with all provisions of this 
                        subsection other than paragraphs (2)(B) 
                        and (3)(A)(v) shall be considered to be 
                        reformulated gasoline for the purposes 
                        of this subsection.
                            (iii) Effective date of waiver.--A 
                        waiver under clause (i) shall take 
                        effect on the earlier of--
                                    (I) the date on which the 
                                performance standard under 
                                subparagraph (C) takes effect; 
                                or
                                    (II) the date that is 270 
                                days after the date of 
                                enactment of this subparagraph.
                    (C) Maintenance of toxic air pollutant 
                emission and aromatic hydrocarbon content 
                reductions.--
                            (i) In general.--As soon as 
                        practicable after the date of enactment 
                        of this subparagraph, the Administrator 
                        shall--
                                    (I) promulgate regulations 
                                consistent with subparagraph 
                                (A) and paragraph (3)(B)(ii) to 
                                ensure that reductions of toxic 
                                air pollutant emissions 
                                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) PADD performance standards.--
                        The Administrator, in regulations 
                        promulgated under clause (i)(I), shall 
                        establish annual average performance 
                        standards for each Petroleum 
                        Administration for Defense District 
                        (referred to in this subparagraph as a 
                        ``PADD') based on--
                                    (I) the average of the 
                                annual aggregate reductions in 
                                emissions of toxic air 
                                pollutants achieved under the 
                                reformulated gasoline program 
                                in each PADD during calendar 
                                years 1999 and 2000, determined 
                                on the basis of the 1999 and 
                                2000 Reformulated Gasoline 
                                Survey Data, as collected by 
                                the Administrator; and
                                    (II) 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 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 
                                standards.
                                    (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 
                        standards.--
                                    (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 (III) 
                                shall be deemed to be the 
                                performance standards under 
                                clause (ii) and shall be 
                                applied in accordance with 
                                clause (iii).
                                    (II) Publication in federal 
                                register.--Not later than 30 
                                days after the date of 
                                enactment of this subparagraph, 
                                the Administrator shall publish 
                                in the Federal Register, for 
                                each PADD, the percentage equal 
                                to the average of the annual 
                                aggregate reductions in the 
                                PADD described in clause 
                                (ii)(I).
                                    (III) Toxic air pollutant 
                                emissions.--The annual 
                                aggregate emissions of toxic 
                                air pollutants from baseline 
                                vehicles when using 
                                reformulated gasoline in each 
                                PADD shall be not greater 
                                than--
                                            (aa) the aggregate 
                                        emissions of toxic air 
                                        pollutants from 
                                        baseline vehicles when 
                                        using baseline gasoline 
                                        in the PADD; reduced by
                                            (bb) the quantity 
                                        obtained by multiplying 
                                        the aggregate emissions 
                                        described in item (aa) 
                                        for the PADD by the 
                                        percentage published 
                                        under subclause (II) 
                                        for the PADD.
                                    (IV) Subsequent 
                                regulations.--Through 
                                promulgation of regulations 
                                under clause (i)(I), the 
                                Administrator may modify the 
                                performance standards 
                                established under subclause (I) 
                                to require each PADD to achieve 
                                a greater percentage reduction 
                                than the percentage published 
                                under subclause (II) for the 
                                PADD.

           *       *       *       *       *       *       *

            [(6) Opt-in areas.--(A) Upon]
            (6) Opt-in areas.--
                    (A) Classified areas.--
                            (i) In general.--Upon the 
                        application of the Governor of a State, 
                        the Administrator shall apply the 
                        prohibition set forth in paragraph (5) 
                        in any area in the State classified 
                        under subpart 2 of part D of title I as 
                        a Marginal, Moderate, Serious, or 
                        Severe Area (without regard to whether 
                        or not the 1980 population of the area 
                        exceeds 250,000). In any such case, the 
                        Administrator shall establish an 
                        effective date for such prohibition as 
                        he deems appropriate, not later than 
                        January 1, 1995, or 1 year after such 
                        application is received, whichever is 
                        later. The Administrator shall publish 
                        such application in the Federal 
                        Register upon receipt.
            [(B) If]
                            (ii) Effect of insufficient 
                        domestic capacity to produce 
                        reformulated gasoline.--If the 
                        Administrator determines, on the 
                        Administrator's own motion or on 
                        petition of any person, after 
                        consultation with the Secretary of 
                        Energy, that there is insufficient 
                        domestic capacity to produce gasoline 
                        certified under this subsection, the 
                        Administrator shall, by rule, extend 
                        the effective date of such prohibition 
                        in Marginal, Moderate, Serious, or 
                        Severe Areas referred to in 
                        [subparagraph (A)] clause (i) for one 
                        additional year, and may, by rule, 
                        renew such extension for 2 additional 
                        one-year periods. The Administrator 
                        shall act on any petition submitted 
                        under [this paragraph] this 
                        subparagraph within 6 months after 
                        receipt of the petition. The 
                        Administrator shall issue such 
                        extensions for areas with a lower ozone 
                        classification before issuing any such 
                        extension for areas with a higher 
                        classification.
                    (B) Nonclassified areas.--
                            (i) In general.--In accordance with 
                        section 110, a State may submit to the 
                        Administrator, and the Administrator 
                        may approve, a State implementation 
                        plan revision that provides for 
                        application of the prohibition 
                        specified in paragraph (5) in any 
                        portion of the State that is not a 
                        covered area or an area referred to in 
                        subparagraph (A)(i).
                            (ii) Period of effectiveness.--
                        Under clause (i), the State 
                        implementation plan shall establish a 
                        period of effectiveness for applying 
                        the prohibition specified in paragraph 
                        (5) to a portion of a State that--
                                    (I) commences not later 
                                than 1 year after the date of 
                                approval by the Administrator 
                                of the State implementation 
                                plan; and
                                    (II) ends not earlier than 
                                4 years after the date of 
                                commencement under subclause 
                                (I).

           *       *       *       *       *       *       *

            (10) Exclusion from reid vapor pressure 
        requirement.--Notwithstanding subsection (c)(4)(C), the 
        Administrator may approve a revision of a State 
        implementation plan that excludes an area from a waiver 
        provided under subsection (h)(4) if--
                    (A) the State demonstrates that the 
                increases in volatile organic compound 
                emissions resulting from the waiver 
                significantly interfere with attainment or 
                maintenance of the national ambient air quality 
                standard for ozone; and
                    (B) the Administrator determines that the 
                exclusion is reasonable and practicable.
            [(10)] (11) Definitions.-- * * *

           *       *       *       *       *       *       *

    (o) Analyses of Motor Vehicle Fuel Changes and Emissions 
Model.--
            (1) Anti-backsliding analysis.--
                    (A) 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 2001.
                    (B) 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.
            (2) Emissions model.--For the purposes of this 
        subsection, as soon as the necessary data are 
        available, the Administrator shall develop and finalize 
        an emissions model that reasonably reflects the effects 
        of fuel characteristics or components on emissions from 
        vehicles in the motor vehicle fleet during calendar 
        year 2005.
    [(o)] (p) Fuel and Fuel Additive Importers and 
Importation.--For the purposes of this section, the term 
``manufacturer'' includes an importer and the term 
``manufacture'' includes importation.

           *       *       *       *       *       *       *

                    SOLID WASTE DISPOSAL ACT 1

        [As Amended Through P.L. 106-55, August 17, 1999]
---------------------------------------------------------------------------

    1 The Solid Waste Disposal Act (42 U.S.C. 6901-6992k) 
consists of title II of Public Law 89-272 and the amendments made by 
subsequent enactments. This Act is popularly referred to as the 
Resource Conservation and Recovery Act, after the short title of the 
law that amended the Solid Waste Disposal Act in its entirety in 1976 
(P.L. 94-580).
---------------------------------------------------------------------------
      Sec. 1001. This title (hereinafter in this title referred 
to as ``this Act''), together with the following table of 
contents, may be cited as the ``Solid Waste Disposal Act'':

                     Subtitle A--General Provisions

Sec. 1001.  * * *
      * * * * * * *
[Sec. 9010. Authorization of appropriations.]
Sec. 9010. Release prevention and compliance.
Sec. 9011. Authorization of appropriations.

           *       *       *       *       *       *       *

                       definitions and exemptions

      Sec. 9001. For the purposes of this subtitle--
            (1) * * *

           *       *       *       *       *       *       *

            (3) The term ``owner'' means--
                    (A) in the case of an underground storage 
                tank in use on the date of enactment of the 
                Hazardous and Solid Waste Amendments of 1984, 
                or brought into use after that date, any person 
                who owns an underground storage tank used for 
                the storage, use, or dispensing of regulated 
                [sustances] substances,

           *       *       *       *       *       *       *

       release detection, prevention, and correction regulations

      Sec. 9003. (a) * * *

           *       *       *       *       *       *       *

      (f) Effective Dates.--(1) Regulations issued pursuant to 
[subsection (c) and (d) of this section] subsections (c) and 
(d), 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.

           *       *       *       *       *       *       *

      (h) EPA Response Program for Petroleum.--
            (1) * * *

           *       *       *       *       *       *       *

            (7) State authorities.--
                    (A) General.--A State may exercise the 
                authorities in [paragraphs (1) and (2) of this 
                subsection] paragraphs (1), (2), and (12), 
                subject to the terms and conditions of 
                paragraphs (3), (5), (9), (10), and (11), and 
                including the authorities of paragraphs (4), 
                (6), and (8) of this subsection and subsection 
                9010(a) if--

           *       *       *       *       *       *       *

            (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).

           *       *       *       *       *       *       *

                       approval of state programs

      Sec. 9004. (a) Elements of State Program.--Beginning 30 
months after the date of enactment of the Hazardous and Solid 
Waste Amendments of 1984, any State may, submit an underground 
storage tank release detection, prevention, and correction 
program for review and approval by the Administrator. The 
program may cover tanks used to store regulated substances 
[referred to in 9001(2) (A) or (B) or both. A State program may 
be approved by the Administrator under this section only if the 
State demonstrates that the State program includes the 
following requirements and standards and provides for adequate 
enforcement of compliance with such requirements and standards] 
referred to in subparagraph (A) or (B), or both, of section 
9001(2)--

           *       *       *       *       *       *       *

        inspections, monitoring, testing, and corrective action

      Sec. 9005. (a) Furnishing Information.--For the purposes 
of developing or assisting in the development of any 
regulation, conducting any [study taking] study, taking any 
corrective action, or enforcing the provisions of this 
subtitle, any owner or operator of an underground storage tank 
(or any tank subject to study under section 9009 that is used 
for storing regulated substances) shall, upon request of any 
officer, employee or representative of the Environmental 
Protection Agency, duly designated by the Administrator, or 
upon request of any duly designated officer, employee, or 
representative of a State acting parsuant to subsection (h)(7) 
of section 9003 or with an approved program, furnish 
information relating to such tanks, their associated equipment, 
their contents, conduct monitoring or testing, permit such 
officer at all reasonable times to have access to, and to copy 
all records relating to such tanks and permit such officer to 
have access for corrective action. For the purposes of 
developing or assisting in the development of any regulation, 
conducting any study, taking corrective action, or enforcing 
the provisions of this subtitle, such officers, employees, or 
representatives are authorized--
            (1) to enter at reasonable times any establishment 
        or other place where an underground storage tank is 
        located;
            (2) to inspect and obtain samples from any person 
        of any regulated substances contained in such tank;
            (3) to conduct monitoring or testing of the tanks, 
        associated equipment, contents, or surrounding soils, 
        air, surface water or ground water, and
            (4) to take corrective action.
Each such inspection shall be commenced and completed with 
reasonable promptness.
      (b) Confidentiality.--(1) Any records, reports, or 
information obtained from any persons under this section shall 
be available to the public, except that upon a showing 
satisfactory to the Administrator (or the State, as the case 
may be) by any person that records, reports, or information, or 
a particular part thereof, to which the Administrator (or the 
State, as the case may be) or any officer, employee, or 
representative thereof has access under this section if made 
public, would divulge information entitled to protection under 
section 1905 of title 18 of the United States Code, such 
information or particular portion thereof shall be considered 
confidential in accordance with the purposes of that section, 
except that such record, report, document, or information may 
be disclosed to other officers, employees, or authorized 
representatives of the United States concerned with carrying 
out this Act, or when [relevent] relevant in any proceeding 
under this Act.
      (2) Any person not subject to the provisions of section 
1905 of title 18 of the United States Code who knowingly and 
willfully divulges or discloses any information entitled to 
protection under this subsection shall, upon conviction, be 
subject to a fine of not more than $5,000 or to imprisonment 
not to exceed one year, or both.
      (3) In submitting data under this subtitle, a person 
required to provide such data may--
            (A) designate the data which such person believes 
        is entitled to protection under this subsection, and
            (B) submit such designated data separately from 
        other data submitted under this subtitle.
A designation under this paragraph shall be made in writing and 
in such manner as the Administrator may prescribe.
      (4) Notwithstanding any limitation contained in this 
section or any other provision of law, all information reported 
to, or otherwise obtained, by the Administrator (or any 
representative of the Administrator) under this Act shall be 
made available, upon written request of any duly authorized 
committee of the Congress, to such committee (including 
records, reports, or information obtained by representatives of 
the [Evironmental] Environmental Protection Agency).

           *       *       *       *       *       *       *

                    [authorization of appropriations

      [Sec. 9010. For authorization of appropriations to carry 
out this subtitle, see section 2007(g).]

SEC. 9010. RELEASE PREVENTION AND COMPLIANCE.

    Funds made available under section 9011(2) from the Leaking 
Underground Storage Tank Trust Fund may be used for conducting 
inspections, or for issuing orders or bringing actions under 
this subtitle--
            (1) by a State (pursuant to section 9003(h)(7)) 
        acting under--
                    (A) a program approved under section 9004; 
                or
                    (B) State requirements regulating 
                underground storage tanks that are similar or 
                identical to this subtitle; and
            (2) by the Administrator, acting under this 
        subtitle or a State program approved under section 
        9004.

SEC. 9011. AUTHORIZATION OF APPROPRIATIONS.

    In addition to amounts made available under section 
2007(f), there are authorized to be appropriated from the 
Leaking Underground Storage Tank Trust Fund--
            (1) to carry out section 9003(h)(12), $200,000,000 
        for fiscal year 2001, to remain available until 
        expended; and
            (2) to carry out section 9010--
                    (A) $50,000,000 for fiscal year 2002; and
                    (B) $30,000,000 for each of fiscal years 
                2003 through 2007.

           *       *       *       *       *       *       *

                                  
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