Union Tribune

May 6, 2002

Energy bill would shield fuel industry from liability

By TOBY ECKERT 
COPLEY NEWS SERVICE 

WASHINGTON A small provision in the energy bill recently
passed by the Senate would give a big legal break to the fuel
industry, critics say.

The industry would be shielded from some legal liability if
gasoline additives mandated by the legislation turn out to be
environmentally harmful.

The provision was prompted by the legal headaches that oil and
chemical companies are facing in California and other states
over widespread water pollution linked to MTBE, a potentially
cancer-causing fuel additive that would be phased out under the
legislation.

Though the liability provision would not apply to the existing
MTBE cases, environmentalists and municipal water agencies
contend that it could relieve polluters from financial
responsibility for future cleanups involving other additives.

The legislation calls for tripling the amount of "renewable fuels,"
primarily corn-derived ethanol, in gasoline by 2012.

"The action by the Senate underscores that we haven't learned
our lessons from the MTBE debacle," said Stephen Hall,
executive director of the Association of California Water
Agencies. 

"We don't know the health effects of ethanol in water supplies,
yet we are charging ahead to replace MTBE with ethanol. This is
just where we were a decade ago with MTBE."

The oil industry counters that the provision is relatively minor
and that other liability laws would still apply. Refiners deserve
some legal protection if Congress is ordering them to use certain
substances in gasoline, industry officials argue.

"We don't know of any problems with any renewables," including
ethanol, said Edward Murphy, a general manager at the
American Petroleum Institute, an industry group. "But we will be
required to add 5 billion gallons of renewables to gasoline. In the
future, we don't know what might fall into the category of
renewables.

"Frankly, the MTBE thing burned us."

Congress initially ordered the use of emission-cutting gas
additives in highly polluted areas such as Los Angeles and San
Diego in 1990. In many states, MTBE methyl tertiary butyl
ether became the additive of choice, approved by the
Environmental Protection Agency, until it began to appear in
drinking wells from Maine to Lake Tahoe.

Cleanup costs have been estimated at nearly $30 billion,
according to one study.

Last month, a San Francisco jury ruled that three companies
Shell Oil, Lyondell Chemical and Tosco Corp. were responsible
for MTBE contamination in South Lake Tahoe and that gas
blended with MTBE was a defective product.

A clause in the Senate energy bill says that "no renewable fuel, as
defined by this Act . . . nor any motor vehicle fuel containing
such renewable fuel, shall be deemed defective in design or
manufacture by virtue of the fact that it is, or contains, such
renewable fuel," if it is not prohibited by the EPA.

Lawyers familiar with MTBE litigation said a defective product
finding is often crucial to getting a full financial recovery in a
liability case. It allows plaintiffs to go after the makers of a
damaging product rather than mom-and-pop sellers, like gas
station owners in the case of MTBE.

"Defective product claims are the ones that allow you to hold
them responsible. It's a big deal," said Joe Lawrence, assistant
city attorney for Santa Monica, which has sued several oil
companies and other firms for alleged MTBE contamination of its
drinking water.

But the Petroleum Institute's Murphy called the liability
provision "a very, very limited protection" and said other legal
avenues would still be open for environmental cleanups and
other actions.

"It's only that a court could not find that, just by adding ethanol
or another additive, that gas is inherently defective," he said.

The ethanol industry, which would be the prime beneficiary of
the fuel additive mandate, insists its product is safe. Some
studies have indicated that ethanol slows the breakdown of
benzene, a toxic substance in gas, after spills, but experts say
more research is needed.

The Senate legislation would require the EPA to study the
environmental impacts of ethanol and several other additives.

Just last week, the EPA said factories that convert corn into the
gasoline additive ethanol are releasing carbon monoxide,
methanol and some carcinogens at levels "many times greater"
than they promised.

The renewable fuels mandate was added to the energy bill by
Senate Majority Leader Tom Daschle, D-S.D., after oil
companies, the ethanol industry and environmentalists worked
out a deal on the issue behind closed doors.

No congressional hearings were held on the provision, though it
was subject to an often-heated debate on the Senate floor.

An attempt by Sen. Barbara Boxer, D-Calif., to eliminate the
liability shield failed.

Environmentalists involved in drafting the legislation said they
were opposed to the liability provision, but supported the
overall renewable fuels language because it was the only
politically viable way to phase out MTBE and achieve other
environmental goals.

"This (protection) was demanded by the oil industry, and the
ethanol industry is supporting it only because it's part of the
deal," said A. Blakeman Early, an environmental consultant for
the American Lung Association.

Early agreed with Murphy's assessment that the provision
wouldn't allow polluters to completely escape liability.

"But it's still bad policy. It creates incentives in the wrong
direction, that we might have another MTBE problem in the
future," Early said.

"We're just hoping we can constructively address this in
conference" committee discussions between the Senate and
House, he said.

The conference committee will attempt to work out major
differences between the energy bills passed by the two
chambers. The House bill does not contain a similar renewable
fuels provision.