March 29, 2006
<b>Opening Statement from Chairman James M. Inhofe
Senate Committee on Environment and Public Works
Oversight Hearing on the Impact of the Elimination of MTBE</b>
Wednesday, March 29, 2006
MTBE may be the most carefully scrutinized and debated substance since the 1990 Clean Air Act amendments required its use. Todayís oversight hearing on the impacts on the elimination of MTBE is the latest in a long history before this committee. I am going to summarize that history.
The 1990 Clean Air Act amendments established the reformulated gasoline or RFG program, which most regard as an environmental success story. Yet, the inclusion of the oxygenate requirement as a component of the RFG program resulted in a few unintended consequences.
I would like to remind my colleagues that the two percent oxygen requirement was not included in the bill passed by this committee, which laid the foundation for the amended Clean Air Act. Rather, the oxygenate requirement was added after vigorous debate and was the only successful amendment on the Senate floor.
Senators from both sides of the aisle hoped that the requirement would lay the groundwork for greater ethanol use, but acknowledged that MTBE would likely be preferred as it is more affordable for consumers.
Yet, although MTBE exceeded air-related goals, it tainted the taste and smell of water in some instances. Further, the two percent oxygenate requirement and air quality concerns of certain areas created boutique fuel regions, leading to higher prices during supply problems.
Last year, this Committee passed S. 606, the Reliable Fuels Act which called for the elimination of the two percent requirement and a phase-out of MTBE within four years, while preserving the authority of states to continue its use.
As was the case with the bill that passed this Committee in 1989, S. 606 was changed in material ways after we reported the bill and today the nation faces, although temporary, some potential unintended consequences.
Pursuant to the Energy Bill, the two percent oxygenate requirement will be repealed this May.
A majority of members recommended that oxygenate producers and marketers be afforded liability protection against defective product lawsuits for their mere compliance with the law. Unfortunately, that provision was not included in the Energy Bill either.
Therefore, refiners have been forced to stop using MTBE more suddenly than stakeholders, industry, or this Committee had ever considered.
Fact: MTBE has been the preferred oxygenate used in reformulated gasoline, and its elimination means a corresponding loss of fuel supply that must be made up.
Fact: Ethanol is needed to replace MTBE.
Fact: The ethanol industry, refiners, marketers, and infrastructure operators are working hard to make sure that the transition is as painless as possible.
The green bar on this chart from EIA illustrates just how much ethanol is currently being produced ñ a significant amount in a relatively short period of time.
However, the sudden elimination of MTBE and the current state of the ethanol industry means that significant volumes of ethanol must be imported.
The orange bar shows about 130,000 barrels per day of additional ethanol is needed to replace MTBE. In other words, the U.S. needs to come up with close to half of the ethanol currently being produced domestically.
Actually, the transition means even greater supply loss than this chart illustrates because the production of ethanol-blended RFG yields five to six percent less fuel per barrel.
It is critical for the nation to increase its petroleum and bio-refinery capacity. My legislation ñ the Gas PRICE Act and Energy Price Reduction Act amendment to the LIHEAP bill ñ would assist with the transition away from MTBE.
We would expedite the permitting process for traditional as well as renewable fuel infrastructure so that regions of the country will not have to face the temporary supply shortfalls and corresponding price increases likely this summer.
Congress must be mindful of the unintended consequences before considering any future action. I urge my colleagues, stakeholders, and the public to allow the recently enacted fuels title of the Energy Bill to be fully implemented.
As EIA and our other witnesses will testify, the nationís fuel system requires infrastructure, investment, and most importantly, time to develop.
The refining industryís positions dealing with fuels policy ñ warning against sudden transitions, the need for liability protection, etc. ñ are well understood.
This hearing is squarely centered on the imminent future not the past. I look forward to hearing from our witnesses and if they have any policy recommendations for Congress, including the likelihood of importing more ethanol.
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