MTBE: WHAT THE OIL COMPANIES KNEW AND WHEN THEY KNEW IT
The House Republican leadership is considering legislation to strictly limit oil company liability for contaminating groundwater in at least 28 states with the toxic gasoline additive MTBE, or methyl tertiary butyl ether. The oil industry and its friends in Congress say it's only fair to shield MTBE makers from lawsuits, since, they claim, it was the government that mandated oil companies to reformulate gas with MTBE in the first place, to clean the air.
The liability waiver is a top priority for House Majority Leader Tom DeLay and Energy and Commerce Committee chair Joe Barton, both of Texas, home of most the oil and chemical companies that produced MTBE until contamination problems prompted California and 16 other states to ban it. The waiver, included in a draft of the energy bill from Barton's committee, would prohibit lawsuits charging that the additive was a faulty product that the industry knew would leak from storage tanks and contaminate water supplies — the exact argument two California communities used in court to win multimillion-dollar settlements to clean up the contamination and secure new supplies. The bill not only closes the door to new defective-product lawsuits, but throws out of court all cases filed since Sept. 5, 2003. The bill bans MTBE nationwide in 2014, but in the interim gives the chemical's manufacturers $250 million a year — $2 billion total — in "transition assistance grants" to convert their facilities to other products.
Recently, evidence has surfaced that a decade ago, House Commerce Committee lawyers told members that using MTBE was the industry's choice, not the Environmental Protection Agency's requirement. A June 5, 1995 memo from staff counsel to a Commerce Committee subcommittee that included Barton explained that the EPA's Reformulated Gasoline Program (RFG) did not mandate or favor MTBE (made from methanol) over any other oxygenate that could be used to reformulate gasoline:
A major aspect of the debate on the 1990 Clean Air Act Amendments was the issue of "fuel neutrality." In essence, since various fuels and fuel constituents compete for the RFG and alternative fuels market, an effort was made to avoid dictating any particular fuel choice. On this matter . . . . the Committee on Energy and Commerce . . . could not have been more clear. The Committee stated at the time that, "It is intended that this (clean alternative fuels) be a fuel-neutral program. Although some believe that EPA has a strong preference for methanol, the Committee intends no such preference for that or any other fuel." [U.S. House of Representatives 1995] [Emphasis added.] [View Document]
Following release of the memo by Rep. Henry Waxman of California, a spokesman for Barton said the congressman still believes that oil companies were forced to produce MTBE when the federal government required the development of additives that make gasoline burn more cleanly.
But a different story emerges from internal industry documents and depositions, made public in recent successful lawsuits brought by cities and a California public inerest group called Communities for a Better Environment that want oil companies to pay to clean up water made undrinkable and unhealthy by MTBE. The documents, provided to EWG by CBE's lawyers Scott Summy and Celeste Evangelisti, show that the oil industry itself lobbied hard for the MTBE mandate because they made the additive and stood to profit.
In a 1995 deposition, a top ARCO executive admitted under oath, "The EPA did not initiate reformulated gasoline...." He clarified that "the oil industry... brought this [MTBE] forward as an alternative to what the EPA had initially proposed." [Excerpt | Full document]
By 1986, the oil industry was adding 54,000 barrels of MTBE to gasoline each day. By 1991, one year before the EPA requirements went into effect, the industry was using more than 100,000 barrels of MTBE per day in reformulated gasoline. [View document] Yet secret oil company studies, conducted at least as early as 1980, showed the industry knew that MTBE contaminated ground water virtually everywhere it was used.
Oil companies are pressing Congress for liability protection because hundreds of communities have serious MTBE contamination problems, and company documents are coming back to haunt them in the courtroom. In April, the documents convinced a California jury to find Shell, Texaco, Tosco, Lyondell Chemical (ARCO Chemical), and Equilon Enterprises liable for selling a defective product (gasoline with MTBE) while failing to warn of its pollution hazard, forcing a $60 million settlement with the water district for South Lake Tahoe. [View document].
“The Government Made Us Do It”
MTBE, or methyl tertiary butyl ether, is an “oxygenate” that makes gasoline burn cleaner and more efficiently. Unfortunately, it is also a foul-tasting, nasty-smelling, probable carcinogen that spreads rapidly when gasoline escapes from leaky underground storage tanks, contaminating sources of groundwater and drinking water from New York to California [View document]. Once in soil or water, MTBE breaks down very slowly while it accelerates the spread of other contaminants in gasoline, such as benzene, a known carcinogen. Some communities, including Santa Monica and South Lake Tahoe, Calif., face tens or hundreds of millions of dollars in costs of cleaning up MTBE or replacing contaminated water supplies. At least 16 states already have passed measures to ban or significantly limit the use of MTBE in gasoline, and a federal ban is more a question of when than if.
In House-Senate negotiations to craft a compromise federal energy bill, pressure is building to follow the lead of many states and ban MTBE nationally by the year 2006. Members of Congress from corn-producing states support the phase out in part because ethanol made from corn is the primary MTBE substitute. Oil-state politicians, in turn, are demanding that any ban on MTBE shield its makers from product-defect liability. The proposal would not preclude suits against parties responsible for allowing MTBE to leak from storage tanks, but would provide immunity from suits claiming that MTBE itself was a defective product – precisely the charge that won a $60 million settlement for the South Lake Tahoe Water District this year. The jury in that case found five oil and chemical companies liable for selling a defective product – MTBE –while failing to warn of its pollution risks. [View document]
On Sept. 27, 2002, the Associated Press reported that the House proposal for liability relief has a good chance of being accepted by Senate negotiators: “Democrats and Republicans alike view it as a small price to pay in return for getting the politically popular ethanol provision into an energy bill only weeks before the upcoming elections.” Rep. Billy Tauzin, R-LA, who is chairing the energy bill negotiations, said it’s only fair that MTBE makers are shielded “when the government is responsible” for oil companies adopting the additive to meet federal air quality requirements. “We mandated MTBE to help the environment,” Tauzin said.
A lawyer who defends MTBE manufacturers told the AP, “You can’t be held liable for just complying with the law.” [View story]
The congressman and the lawyer aren’t the only ones spreading the tale that oil companies were just following orders. Most news outlets have told the MTBE story as a lesson in the unintended consequences of efforts to reduce air pollution.
In 1997, the Los Angeles Times let stand without challenge the statement of a West Coast refiner: “[T]he issue of potential contamination of the state’s water was not adequately considered prior to implementation of the federal and state reformulated gasoline regulations... Consequently, we find ourselves in a Catch-22, since the current regulatory framework effectively leaves us no choice but to use MTBE to meet clean fuel standards.” This spin has traveled the high and low roads, reaching the editorial pages of The New York Times, Los Angeles Times, Dallas Morning News, St. Louis Post-Dispatch, Newsday and Denver Post, and providing California talk-show hosts with fuel for a belligerent populist campaign against overzealous environmental regulation.
The MTBE Papers
The paper trail, dating at least to 1980, tells a different story: How the oil companies took an unwanted byproduct of gasoline refining that was expensive to dispose of and created a profitable market for what they, until then, had been required to handle as toxic waste. Beginning in the mid-1980s, well in advance of the 1992 federal mandate to reformulate gasoline to meet the standards of the Clean Air Act, the petrochemical industry promoted MTBE to U.S. and state regulators as the additive of choice – only much later admitting it doesn’t do much to reduce air pollution after all.
Thousands of pages of internal documents and sworn depositions from the producers at Shell, Exxon, Mobil, ARCO, Chevron, Unocal, Texaco and Tosco (now Valero) have come to light through a lawsuit by Communities for a Better Environment, a California public interest group. Many of the same documents were used in a suit by the South Lake Tahoe Water District against four oil companies and Lyondell Chemical Co. of Houston (ARCO Chemical Company), the nation’s largest MTBE producer. In the CBE suit, several of the companies settled last year by agreeing to clean up MTBE spills at more than 1,300 California gas stations; the others continue to contest the case.
Earlier this year, a jury in the Tahoe case found Lyondell, Shell, Texaco, Equilon, and Tosco guilty of irresponsibly manufacturing and distributing a product they knew would contaminate water. In addition, the jury found by “clear and convincing evidence” that both Shell Oil Company and Lyondell Chemical Company acted with “malice” by failing to warn customers of the almost certain environmental dangers of MTBE water contamination. [View document]
In an interview with The Sacramento Bee, the jury foreman said he found the MTBE papers, which demonstrated the industry’s early knowledge that MTBE would threaten water supplies “among the most compelling evidence he recorded in 635 pages of handwritten notes.” The foreman stated that “[t]here were lessons to be learned, but (Shell) didn’t (learn them) because it saw money to be made in selling the product.” After the jury verdict establishing liability, but before the jury could assess monetary damages, the companies settled the case for $60 million.
Oil Companies Knew MTBE Was a Threat to Water Supplies
Even though MTBE was not classified as a probable cause of cancer in humans until 1995, refiners knew much earlier that its powerfully foul taste and smell meant that small concentrations could render water undrinkable, and that once it got into water supplies it was all but impossible to clean up. A Shell hydrogeologist testified in the South Lake Tahoe case that he first dealt with an MTBE spill in 1980 in Rockaway, N.J., where seven MTBE plumes were leaking from underground storage tanks. [Excerpt | Full document] By 1981, when the Shell scientist wrote an internal report on the Rockaway plumes, the joke inside Shell was that MTBE really stood for “Most Things Biodegrade Easier.” Later, other versions of the joke circulated, including “Menace Threatening Our Bountiful Environment,” or apropos to the present attempt to limit liability, “Major Threat to Better Earnings.” [Excerpt | Full document] and [Excerpt | Full document]
In 1983, Shell was one of at least nine companies surveyed by a task force of the American Petroleum Institute on “the environmental fate and health effects” of MTBE and other oxygenates. Shell’s Environmental Affairs department replied to the trade association: “In our spill situation the MTBE was detectable (by drinking) in 7 to 15 parts per billion so even if it were not a factor to health, it still had to be removed to below the detectable amount in order to use the water.” (emphasis added). [View document] The survey, the results of which were later distributed to all API members, asked for information about the number and extent of spills, chemical analysis of the spill and the contaminated water, and health effects to people in the community.
Clearly, Shell was not the only company that knew about MTBE problems. An environmental engineer for ExxonMobil (the companies merged in 1999), testified that he learned of MTBE contamination from Exxon gasoline in 1980, when a tank leak in Jacksonville, Maryland, fouled wells for a planned subdivision. The ExxonMobil engineer said it was learned MTBE had also leaked into the subdivision’s wells from a Gulf and an Amoco station. [View document]
Storage Tanks Were Known to be Leaking in the 1970s and 1980s
Refiners also knew that underground gasoline storage tanks were susceptible to leaks, a fact that would amplify the problem with MTBE. In 1973, an Exxon report on the problem said: “The subject of underground leaks at service stations is one of growing concern to gasoline marketers. Large sums of money, time, and effort are exhausted on a continuing basis in the location and detection of leaking tanks and lines.” [Excerpt | Full document]
In 1981, an ARCO memo said leaking tanks were “a major problem.... The issue is essentially a health/safety and environmental one. Escaping vapors can seep into basements, sewers and conduits, creating not only a nuisance but the danger of explosion and/or fire. Escaping gasoline also enters and pollutes the water table. (Groundwater is a major source of the U.S. water supply.) Certain chemicals in gasoline (namely the aromatics like benzene) may be carcinogenic or toxic in certain quantities.” [View document]
By 1980, Exxon had an annual testing program for tanks and found that 27 percent were leaking; two years later the failure rate was up to 38 percent. [View document] In 1981, Shell and ARCO, the first refiners to add MTBE, estimated that 20 percent of all U.S. underground storage tanks were leaking. [View document] Five years later, in 1986, the EPA concurred. [Excerpt | Full document] Prior knowledge of the extent of leaking gasoline storage tanks was a major part of South Lake Tahoe’s case: Fully aware that tanks were leaking, the petrochemical industry nonetheless introduced an additive known to rapidly percolate down to groundwater from gasoline distribution systems with known leaks. Efforts were ongoing to upgrade storage tank systems, but when industry learned quickly that the new tanks were still leaking, it continued to expand the use of MTBE anyway.
The Industry, not the EPA, Promoted MTBE as an Oxygenate
Recently disclosed court documents clearly show that the oil companies, not state or federal regulators, were the boosters of MTBE. The industry developed and promoted the concept of using reformulated gasoline to reduce air emissions, assuring the EPA that reformulated gasoline would be better than other options being considered. ARCO Chemical Co.’s Manager of Business Development from 1987 to 1998 testified: “What I recall is the EPA actually promoting using methanol blends... and the refining industry said here’s another option... we can reformulate gasoline to reduce the emissions... that would be equal to or better than you would get by substituting or mandating the use of methanol vehicles... [T]he oil industry... brought this forward as an alternative to what the EPA had initially proposed.” He continued, “The EPA did not initiate reformulated gasoline.” [Excerpt | Full document]
Well before the EPA mandated reformulated gasoline in 1992, the oil industry was aggressively promoting MTBE. According to the American Petroleum Institute, refiners were adding an average of 74,000 barrels of MTBE to gasoline per day from 1986 through 1991, roughly one third of the peak amount added to gasoline in 1998. [View document]
In 1987, a representative of ARCO Chemical (later absorbed by Lyondell), which was rapidly expanding its MTBE production, testified before the Colorado Air Quality Control Commission that the additive would reduce emissions and improve gas mileage, that supply and price were no barrier, and that consumers didn’t need to be warned about the presence of MTBE in gasoline. [Excerpt | Full document] Nothing was said about the leak and contamination problems that ARCO and the rest of the industry had known about for at least seven years. ARCO’s representative testified that in the 1980s he played a similar role in “assisting” the states of Arizona and Nevada in the development of oxygenate programs – programs that resulted in those states adopting MTBE. [Excerpt | Full document]
The Industry Attacked Safety Studies and Withheld Information From Regulators
In 1986, the Maine Department of Environmental Protection published a report documenting extensive MTBE groundwater contamination in the state. The authors identified MTBE as a “rapidly spreading groundwater contaminant” and discussed the option that “MTBE could be abandoned as an additive in gasoline stored underground” or that gas with MTBE “be stored only in double-contained facilities.” [Excerpt | Full document] The Maine Paper was perhaps the earliest warning from government health officials about the dangers of MTBE. To the oil companies, it was a call to arms. Documents show that even as they were internally disseminating this study and treating its findings seriously, the oil companies joined forces to attack the study’s authors and the article’s “damage” in an effort to discredit their findings and downplay the risks of MTBE.
The industry disinformation effort began even before publication of the paper. A 1987 ARCO memo details the continued attack on the authors and their research:
“We initially became involved with the Maine DEP prior to the presentation of their first version of this paper at the National Well Water Conference on November 13, 1986... Since the paper was presented last November, we have been working with API, the newly formed MTBE Committee [of the Oxygenated Fuels Association], and on our view to assess the potential impact of this paper on state policymakers [and] to contain the potential ’damage’ from this paper....“ [View document]
The memo goes on to explain how the Maine Petroleum Council, the state affiliate of the API, was preparing a paper claiming that MTBE didn’t speed up the spread of benzene in water, that MTBE “only spreads slightly further” than benzene and other contaminants, and that MTBE could be easily removed from water with existing technology – none of which is true. Internally, however, the industry admitted the Maine paper was a scientifically credible threat. A 1987 letter from an ARCO refining executive to his Unocal counterpart admits the MTBE task force didn’t “have any data to refute comments made in the paper that MTBE may spread further in a plume or may be more difficult to remove/clean up than other gasoline constituents.” [View document]
In 1987, at the same time that ARCO and API were leading the attack on the Maine Paper, the U.S. EPA issued a request to the industry for “more information on the presence and persistence of MTBE in groundwater.” As reported last year by the San Francisco Chronicle and The Sacramento Bee, ARCO responded: “Where gasoline containing MTBE is stored at refineries, terminals or service stations, there is little information on MTBE in groundwater. We feel that there are no unique handling problems when gasoline containing MTBE is compared to hydrocarbon-only gasoline.” [View document]
Internal Memos Warning Against MTBE Were Ignored
There were voices within the industry that warned against the use of MTBE, on grounds both of public health and cleanup costs from the inevitable leaks. A document dated April 3, 1984 from an Exxon employee said:
“[W]e have ethical and environmental concerns that are not too well defined at this point; e.g., (1) possible leakage of [storage] tanks into underground water systems of a gasoline component that is soluble in water to a much greater extent [than other chemicals], (2) potential necessity of treating water bottoms as a ’hazardous waste,’ [and] (3) delivery of a fuel to our customers that potentially provides poorer fuel economy.... ” (Emphasis added.) [View document]
That same year, an Exxon engineer wrote the first in a series of memos outlining “reasons MTBE could add to ground water incident costs and adverse public exposure:”
“Based on higher mobility and taste/odor characteristics of MTBE, Exxon’s experiences with contaminations in Maryland and our knowledge of Shell’s experience with MTBE contamination incidents, the number of well contamination incidents is estimated to increase three times following the widespread introduction of MTBE into Exxon gasoline....” Later, the document notes: “Any increase in potential groundwater contamination will also increase risk exposure to major incidents.” [Excerpt | Full document]
An Exxon memo from 1985 discusses MTBE’s “much higher aqueous solubility” than benzene and other gasoline components:
“This can be a factor in instances where underground storage tanks develop a leak which ultimately may find its way to the underground aquifer. When these compounds dissolve in ground water and migrate through the soil matrix they separate into distinct plumes. MTBE creates the most mobile of the common gasoline plumes. MTBE is not a known carcinogen like Benzene however we can be required by public health agencies to remove it based on its taste and odor characteristics.” [View document]