## Top MTBE Manufacturer Slams EPA Ruling on Oxygenated Fuels

##### 24 March 2006

Lyondell Chemical, the top manufacturer of methyl tertiary-butyl ether (MTBE) in the US, has issued a statement sharply critical of the EPA’s ruling earlier this year to revoke the two percent oxygenation requirement for reformulated gasoline (RFG) nationwide. (Earlier post.)

The company argues that the ruling will result in rapid cessation of the use of MTBE as an additive (due to liability issues), that ethanol cannot bridge the volume difference, and that the subsequent disruption in gasoline supply will push prices up throughout the summer of 2006.

Lyondell is requesting that the EPA withdraw its ruling, and instead promulgate a “more flexible” rule that provides an “orderly transition” by providing legal protection for the ongoing use of MTBE in fuel.

The EPA’s ruling removing the oxygen content requirement eliminates what chemical companies see as a valuable legal defense against tort suits involving MTBE leaking from underground storage tanks. As a result, companies are moving to halt their MTBE production and use.

In 2005, refiners blended about 140,000 barrels per day of MTBE into gasoline, representing 11% of the total volume of RFG and about 1.6% of the total gasoline pool.

Lyondell argues that the high-octane, cleaner burning properties of MTBE also enable refiners to blend in natural gas-based hydrocarbons (pentanes and hexanes) that could not otherwise be added to gasoline. Those additional hydrocarbons add an additional 120,000 barrels per day to the volume of RFG, representing an additional 1.4% of the total gasoline pool.

In other words, the rapid elimination of MTBE from the fuel supply would, in Lyondell’s argument, result in a 260,000 barrel per day shortfall in supply at the same time that the industry is estimating the need to produce an additional 160,000 barrels per day due to projected increased demand. The combination results in the need to produce a total of about 420,000 new barrels of gasoline per day.

The ethanol industry produced some 255,000 barrels per day of fuel ethanol in 2005, and would have to add an additional 140,000 barrels per day just to offset the MTBE absence.

Consequently, the resulting near-term, direct impact on the UNited States economy will be $6–$13 billion over a two-month spike, and a sustained increased of $350–$700 million per year (excluding impact of reduced economic activity due to higher gasoline prices).

—Lyondell statement

Lyondell instead proposes the following for a revised approach that is based on continuing the use of MTBE:

• EPA should develop a transition rule that expressly pre-empts state tort claims regarding the contents of EPA-approved gasoline.

• EPA should affirm that MTBE is not a defective product

• The transition rule should include a provision modifying the RFG rule to prevent ozone backsliding upon withdrawal of the 2% oxygen requirement

In the mid-1970’s, Lyondell developed MTBE as a high-octane gasoline component which not only replaced octane lost in the phasing out of lead, but also added oxygen to gasoline.

MTBE is considered a potential human carcinogen. In comparison to petroleum products, MTBE poses additional problems when it escapes into the environment through leaks or spills.

MTBE is capable of traveling through soil rapidly, is much more soluble in water than most other petroleum constituents, and is more resistant to biodegradation.

As a result, it often travels farther than other gasoline constituents, making it more likely to impact public and private drinking water wells. Because of its affinity for water and, consequently, its tendency to form large plumes, petroleum releases with MTBE can be more difficult and costly to remediate than petroleum releases that do not contain MTBE.

—EPA MTBE Fact Sheet

MTBE is now prohibited in 25 states (with seven more considering the same action) due to concerns over the contamination of groundwater caused by fuel spills and leaking from underground storage tanks.

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It would seem this is positive confirmation we're guaranteed to see $3/gallon gasoline in the summertime. In addition to all the other issues that will cause a natural rise in prices, it sounds as though the lack of MTBE due to lawsuit fears will cause the prices to spike even further than they naturally would. There's two things about this that are not bad, however. First off, this should not affect commercial trucking and locomotives, since those use diesel, which has never used MTBE, to my knowledge. Jet-B also should have no reliance on MTBE since it's essentially kerosene. Secondly,$3/gallon seems to be the threshold where folks finally start giving conservation a very close consideration in their vehicle buying decisions and driving habits.

This may even speed the adoption of diesel vehicles if the lack of MTBE causes a spike in gasoline prices, thus making diesel more attractive on a per-gallon basis. Considering ULSD becomes effective this fall, this may in fact be good timing in the grand scheme of things.

Here's some background info on the reasons why refiners used to prefer MTBE over ethanol as an oxygenate:

http://www.calgasoline.com/factetha.htm

EPA made its ruling to avoid groundwater contamination risks associated with single-walled storage tanks at US gas stations. I suppose it could also have incurred legal liabilities of its own had it failed to act.

As for the supposed supply shortages, the ethanol futures traders at the CBOT don't appear to be in a feeding frenzy:

http://www.cbot.com/cbot/pub/page/0,3181,1754,00.html

Even if MTBE has been used to assist the burning of gasoline, continuence of its use is not justifiable if ground water contamination leading to cancer has been proven. There is no question in my mind that it is the job of the EPA to protect our health; they could not act in any other manner. It is the job of the US public to drive more conservativly and to purchase higher mpg vehicles. Furthermore, it is the job of our automobile companies to produce higher mpg vehicles and to produce vehicles which will run on alternate energy sources such as good batteries.

Our health concerns should over-ride economic ones. Do we not now have laws that prevent smoking in public areas to protect individuals from second hand smoke which causes cancer? Did it not take many decades to recognize the fact that cigarette smoke causes cancer? Do we need to wait for people to prove they have contracted cancer from water polluted MTBE sources before action is taken?