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House Votes to Keep Contentious MTBE Protections in Energy Bill

The House last Thursday defeated a Democratic non-binding motion that would have instructed House conferees on the omnibus energy bill to strike provisions offering producers of the gasoline additive, methyl tertiary butyl ether (MTBE), protection from liability lawsuits stemming from contamination of groundwater sites.

By 201 to 217, lawmakers rejected a motion to instruct House conferees to remove the so-called "safe harbor" protections that would relieve MTBE producers of the obligation to pay for the damage that their product has been alleged to have caused. Rep. Lois Capps (D-CA), who offered the motion, said MTBE was responsible for contaminating the groundwater at more than 2,300 sites in dozens of states. She pegged cleanup costs at $25-33 billion, but said they could go as high as $85 billion. Industry said the costs were substantially lower.

The special legal protection for MTBE producers, which is included in the House energy measure but not the Senate bill, sank the broad energy bill in Congress in 2003. "The MTBE provisions once again threaten passage of this bill," Capps said. She urged her colleagues to reject "this ridiculous bailout."

The House-Senate conference on the energy bill (HR 6) got under way last Thursday. House conferees were named following the vote on the MTBE motion, with Rep. Joe Barton (R-TX), chairman of the House Energy and Commerce Committee, chairing the conference committee (see related story).

In April, Capps was unsuccessful in her effort to get the MTBE liability shield struck from the House energy bill. At the time, she argued that the liability protection was an unfunded mandate on state and local governments and the private sector, and thus violated the Unfunded Mandates Reform Act. Her amendment was narrowly defeated.

Energy analyst Christine Tezak of Stanford Washington Research Group said last week "speculation has been high" that Barton "may be making progress on a 'deal' to keep the defective product liability protection language" for MTBE producers in the comprehensive energy bill.

"While this is no easy task, we have heard that discussions are now focused on a trust fund approach (as opposed to higher appropriations for the existing Leaking Underground Storage Tank Fund) to which industry would contribute. This is viewed by many governors as a superior outcome than an increase in authorizations for the LUST fund program that would be subject to annual appropriations -- for those appropriations might not happen at all in years of budget austerity," Tezak wrote in her "Energy Policy Bulletin" issued last Thursday.

Capps was critical of the trust fund approach, noting that it would set aside only $4-8 billion to aid in MTBE cleanup. She said, however, there's "one big problem" -- the cleanup costs will be about $25-33 billion, and could go as high as $85 billion. Capps further said that at least half of the cost of the fund would come out of taxpayers' pockets.

"It is our understanding that some key members of the Senate may be interested in considering a trust fund in the neighborhood of $8 billion," Tezak said. "Details are really sketchy -- no clue yet whether contributions would be required at one time or over a period of time or how any allocation among refining industry participants might be divided. We also have no verification that MTBE manufacturers have endorsed Barton's latest efforts."

Resolving the MTBE issue would "dramatically brighten the outlook" for an energy bill conference report to emerge from conference this summer, she said. "We still think enactment by Aug. 1 [as requested by President Bush] is a stretch, but a conference report in early September looks pretty doable," Tezak said.

She acknowledges, however, that Supreme Court nominations could play havoc with the energy bill. "If the Bush administration chooses particularly controversial nominees (there would be two if Chief Justice Rhenquist also announces retirement...), the atmosphere in the Senate might become poisoned, the existing truce could dissolve, and all legislation outside the budget runs the risk of filibuster from the Democrats," Tezak noted. Rhenquist last week emphatically denied rumors that he would retire soon.

"There is still, at this time, too high a probability of this judicial nominee problem to allow us to lift our overall odds of enactment of a comprehensive energy bill this year above 60%."

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