- ISSUES CONCERNING THE USE OF MTBE IN REFORMULATED GASOLINE

[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]

ISSUES CONCERNING THE USE OF MTBE IN REFORMULATED GASOLINE

=======================================================================

HEARING

before the

SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS

of the

COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

__________

NOVEMBER 1, 2001

__________

Serial No. 107-73

__________

Printed for the use of the Committee on Energy and Commerce

Available via the World Wide Web: http://www.access.gpo.gov/congress/
house

76-306 U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2002
____________________________________________________________________________
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__________
COMMITTEE ON ENERGY AND COMMERCE

W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia SHERROD BROWN, Ohio
STEVE LARGENT, Oklahoma BART GORDON, Tennessee
RICHARD BURR, North Carolina PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
GREG GANSKE, Iowa ANNA G. ESHOO, California
CHARLIE NORWOOD, Georgia BART STUPAK, Michigan
BARBARA CUBIN, Wyoming ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois TOM SAWYER, Ohio
HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York DIANA DeGETTE, Colorado
ROY BLUNT, Missouri THOMAS M. BARRETT, Wisconsin
TOM DAVIS, Virginia BILL LUTHER, Minnesota
ED BRYANT, Tennessee LOIS CAPPS, California
ROBERT L. EHRLICH, Jr., Maryland MICHAEL F. DOYLE, Pennsylvania
STEVE BUYER, Indiana CHRISTOPHER JOHN, Louisiana
GEORGE RADANOVICH, California JANE HARMAN, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska

David V. Marventano, Staff Director

James D. Barnette, General Counsel

Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

______

Subcommittee on Oversight and Investigations

JAMES C. GREENWOOD, Pennsylvania, Chairman

MICHAEL BILIRAKIS, Florida PETER DEUTSCH, Florida
CLIFF STEARNS, Florida BART STUPAK, Michigan
PAUL E. GILLMOR, Ohio TED STRICKLAND, Ohio
STEVE LARGENT, Oklahoma DIANA DeGETTE, Colorado
RICHARD BURR, North Carolina CHRISTOPHER JOHN, Louisiana
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
Vice Chairman JOHN D. DINGELL, Michigan,
CHARLES F. BASS, New Hampshire (Ex Officio)
W.J. ``BILLY'' TAUZIN, Louisiana
(Ex Officio)

(ii)

C O N T E N T S

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Page

Testimony of:
Adams, Tom, President, Oxygenated Fuels Association.......... 36
Chamberlain, Denise K., Deputy Secretary for Air, Recycling,
and Radiation Protection, Pennsylvania Department of
Environmental Protection................................... 32
Dinneen, Bob, President and CEO, Renewable Fuels Association. 41
Early, A. Blakeman, Environmental Consultant, American Lung
Association................................................ 53
Hirsch, Robert M., Associate Director for Water, U.S.
Geological Survey.......................................... 21
Holmstead, Hon. Jeffrey, Assistant Administrator for Air and
Radiation, Environmental Protection Agency................. 6
Kahlenberg, David, Homeowner................................. 49
Kripowicz, Robert S., Acting Assistant Secretary for Fossil
Energy, U.S. Department of Energy.......................... 11
Murphy, Edward H., Downstream General Manager, American
Petroleum Institute........................................ 62
Ports, Michael, President, Ports Petroleum Company, Inc., on
behalf of National Association of Convenience Stores and
Society of Independent Gasoline Marketers of America....... 58
Stephenson, John, Director, Natural Resources and
Environment, U.S. General Accounting Office................ 14
Material submitted for the record by:
General Accounting Office, supplemental data................. 81

(iii)

ISSUES CONCERNING THE USE OF MTBE IN REFORMULATED GASOLINE

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THURSDAY, NOVEMBER 1, 2001

House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Oversight and Investigations,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:30 p.m., in
room 2322, Rayburn House Office Building, Hon. James C.
Greenwood (chairman) presiding.
Members present: Representatives Greenwood, Gillmor, Bass,
and Deutsch.
Also present: Representatives Barton and Green.
Staff present: Joseph Stanko, majority counsel; Robert J.
Myers, majority counsel; Peter Kielty, legislative clerk; and
Michael Goo, minority counsel.
Mr. Greenwood. The hearing before the Oversight and
Investigations Subcommittee will now come to order. We thank
the witnesses for their indulgence, and the Chair recognizes
himself for 5 minutes for an opening statement.
The Federal reformulated gasoline program, known by the
acronym RFG, was established in the Clean Air Act amendments of
1990. It did not get cleaner burning gas into consumers' gas
tanks until 1995.
By law, RFG must be used in certain severe and extreme non-
attainment areas. Additionally, a few other States in areas
voluntarily use RFG. RFG now makes up roughly 30 percent of the
gasoline supply, and most parties agree that its use has
reduced levels of ozone, carbon monoxide, and air toxicants.
The Clean Air Act requires that RFG meet a formula, and
part of that formula requires that RFG contain 2 percent oxygen
by weight. Currently, refineries meet this so-called oxygenate
requirement by using one of two additives, MTBE, methyl
tertiary-butyl ether, or ethanol.
MTBE has approximately 85 percent of the market and ethanol
the remaining 15 percent. Unfortunately, as the Energy and
Commerce Committee has heard in voluminous testimony presented
during the past few years, the use of MTBE in RFG has an
unfortunate environmental result.
Because of MTBE's chemical properties, if released to the
environment, it travels quickly through ground and surface
water. Accordingly, there has been an increasing number of
detections of MTBE in lakes, ground water, and other supplies
of drinking water.
In some cases, MTBE makes the water undrinkable due to its
pungent odor and taste, and those who have consumed and bathed
in MTBE contaminated water worry about the long-range health
threat.
A number of my constituents have had first-hand experience
with MTBE contamination, and I am pleased that today we will
hear from David Kahlenberg, of Doylestown, Pennsylvania, who
will relate to us on a personal level the level of difficulties
arising from these circumstances, and I thank you, David, for
your testimony.
Additionally, the subcommittee will hear testimony updating
members on the MTBE issue from the Environmental Protection
Agency, the Department of Energy, the United States Geological
Survey, the General Accounting Office, the Pennsylvania
Department of Environmental Protection, and a number of non-
government experts as well.
This hearing is particularly timely because EPA will for
the first time testify before Congress on its recent boutique
fuels report, which President Bush called for under his
national energy plan.
The term, boutique fuel, is used to describe State and
local fuel control programs that are different from the Federal
programs. Issued last week, EPA's report suggests several short
term administrative measures that would address price spikes,
and supply issues under the RFG program.
At the same time, the EPA also released a technical
document, called a White Paper, which explores several long
term solutions to minimize price spikes and address supply
issues caused by the proliferation of different gasoline grades
under State programs, the so-called boutique fuels issue.
One of the long term solutions that the EPA examined was
repealing the oxygenate mandate that requires the use of MTBE.
I am eager to hear from Assistant Administrator, Jeffrey
Holmstead, on these matters, and welcome him in his first
appearance before the Energy and Commerce Committee.
Finally, although this is not a Legislative hearing, I
would like to note that I have introduced legislation in this
Congress, H.R. 20, which takes a national approach in
addressing the problems caused by MTBE in unreformulated
gasoline.
The bill is based on recommendations issued in 1999 by the
U.S. Environmental Protection Agency's blue ribbon panel on
oxygenates, and would allow States to waive the Federal oxygen
mandate for RFG.
Any Governor would be able to petition the EPA to waive the
oxygen mandate for fuel sold in his or her State. The waiver
provision would not affect any other requirement of the RFG
program. All other environmental and performance standards
would continue to apply.
The bill enhances EPA's authority to control or prohibit
MTBE or other fuel oxygenates, allowing the EPA to reduce MTBE
to even lower levels in order to protect human health, welfare,
or the environment, by moving from a prescriptive and formula-
based regime, to a performance-based standard.
Finally, the bill would permit a State, subject to EPA
approval, to prohibit the sale of MTBE as a fuel additive, or
to require additional or earlier reductions in MTBE use in the
State.
Again, I look forward to the testimony of the subcommittee
and that the subcommittee will receive today, and hope that we
can soon build on this foundation, and to pass legislation that
will result in clean burning gasoline that does not carry with
it the risk of breathing another environmental problem, such as
drinking water contamination.
I know that many members of the committee share that
interest, and with this committee's history of creating
innovative solutions to tough environmental problems, I hope
that we can soon add MTBE to that list of solved issues. The
Chair recognizes the ranking member of the committee, Mr.
Deutsch, for 5 minutes for an opening statement.
Mr. Deutsch. I have no statement.
Mr. Greenwood. The Chair then recognizes the gentleman from
Ohio, Mr. Gillmor, for an opening statement.
Mr. Gillmor. Thank you very much, Mr. Chairman, for
yielding me this time, and I want to commend you for your work
in holding the hearing and looking into the issues concerning
the use of MTBE in gasoline.
I am also happy to see that on our second panel today we
have one Buckeye, Michael Ports, of Ports Petroleum, in
Wooster, Ohio. Long before Americans worried about anthrax, or
other potentially poisonous biological agents showing up in
their drinking water, they worried about MTBE.
This gasoline additive has generated more bills, more
votes, and more discussion than perhaps any other environmental
issue over the last 2 years. And we are all becoming more
familiar with the scientific data concerning MTBE's threat to
human health and the environment, particularly ground water.
In fact, many of the organizations testifying before our
panel today have either called for the reduction or elimination
of MTBE as a gasoline option. But if we are truly honest with
ourselves, we all know that this outcome is probably
politically infeasible.
However, that does not mean that we should not try to
mitigate some of the environmental harm that this chemical
imposes on our natural resources. As the chairman of the House
Subcommittee on Environment and Hazardous Materials, my panel
has jurisdiction over both protecting drinking water and
securing underground storage tanks.
The conundrums currently facing our drinking water and
underground tanks due to MTBE are well documented. And while
some in Congress have supported more targeted and short term
fixes to dealing with MTBE contamination, I think we need to
think more broadly.
In the coming weeks, I plan to be sitting down with parties
on all sides of the tanks and fuels issue. The leaking
underground storage tank trust fund now stands at $1.5 billion.
The trust fund receives more money in user fee taxes on gas
than what it spends in each fiscal year.
Right now the EPA's own website encourages States to use
the clean water revolving loan fund money to help clean up
MTBE. Since we have this money in the LUST fund, we need to get
more resources that have been raised from these very fuels out
into the hands of the people that clean up their spills.
While the focus of our hearing today is on MTBE, we must
ensure that all fuels, ethanol included, are safe to be stored,
transported, and do not present an imminent and substantial
threat to our Nation's ground water supply.
And once again, Mr. Chairman, I thank you for this time to
speak, and I commend you on this hearing, and I yield back.
Mr. Greenwood. The Chair thanks the gentleman from Ohio,
and recognizes for 5 minutes for his opening statement the
gentleman from Texas, Mr. Green.
Mr. Green. Mr. Chairman, I appreciate the courtesy since I
am not longer on the subcommittee, and I would just submit an
opening statement and not take the time. But I appreciate it.
[The prepared statement of Hon. Gene Green follows:]
Prepared Statement of Hon. Gene Green, a Representative in Congress
from the State of Texas
Mr. Chairman: Thank you for this opportunity to participate in this
hearing regarding the use of MTBE, one of the most effective fuel
additives currently in use in the United States today.
While the Energy and Commerce Committee has certainly held its fair
share of hearings into the topic of oxygenates like MTBE, much has
changed since last we visited the issue.
I look forward to hearing from today's witnesses regarding their
views.
First, as we are all so acutely aware, the events of September 11th
have again emphasized the clear need to focus on the energy security of
the United States.
As President Bush recently remarked, ``energy security is homeland
security.''
And of course, the six Presidents that preceded President Bush have
all concurred that an adequate supply of refined product is a critical
element of security, each having made explicit ``national security
findings'' on the subject.
The fact is that the amount of refined products required to supply
a modern military far exceeds the amount required in the past.
For example, during the peak of Operation Desert Storm, the half
million U.S. military personnel consumed more than 450,000 barrels of
light refined products per day, nearly four times the amount used in
WWII by the 2 million strong Allied Expeditionary Force that liberated
Europe.
Facts such as these demonstrate just how inappropriate it is to
even consider a phase out of MTBE under current circumstances.
As the Department of Energy has previously testified: ``MTBE's
contribution to gasoline supplies nationally is equivalent to about
400,000 barrels a day of gasoline production capacity or the gasoline
output of four to five large refineries.
Additionally, a loss of ability to use MTBE may also affect the
ability of the US gasoline market to draw gasoline supplies from
Europe, the major source of our price-sensitive gasoline imports, since
those refiners widely use MTBE, albeit typically at lower
concentrations than in the U.S.''
Mr. Chairman, we cannot and should not consider major changes in
U.S. fuels policy that might have the unfortunate side effect of
reducing U.S. supply of refined products.
Further, the only reason advanced to reduce MTBE use is water
quality, yet the most recent findings seem to indicate that detections
of MTBE are on the decline.
MTBE has been shown to biodegrade under many environmental
conditions.
Most MTBE plumes will stabilize over time. There are effective MTBE
remediation technologies, and surface water impacts have been reduced
by the phase-out of two-stroke motor boats on reservoirs.
It would appear to me that while water concerns regarding MTBE have
been greatly exaggerated, the positive impact of the additive on the
U.S. economy, air quality and security has never been more important.
Thank you Mr. Chairman, and I again appreciate the opportunity to
participate in today's hearing.

Mr. Greenwood. All right. Other members who arrive will
have their opening statements submitted for the record.
[Additional statement submitted for the record follows:]

Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee
on Energy and Commerce

I want to welcome our witnesses today and commend Chairman
Greenwood for his efforts in putting today's hearing together.
As many of you know, the tragic events of September 11th and
subsequent discoveries of anthrax contamination on Capitol Hill forced
us to postpone this hearing several times. I know that this has caused
some hardship to our witnesses and I want to thank them for their
patience and understanding during the past few weeks. It has simply
been vital that the Committee find time to continue its review of the
Reformulated Gasoline Program and the role of oxygenates used in this
program.
Reformulated gasoline makes up not only more than one-third of our
nation's gasoline supply, it represents a novel effort from the 1990
Clean Air Act Amendments--an effort to reduce pollution using gasoline,
instead of bolting on yet another treatment device on cars' tailpipes.
As such, the RFG program required years to develop and implement as
well as billions of dollars in refinery and distribution system
investments.
This effort has met with success, but has also spawned various
controversies and concerns. We will hear today from witnesses who argue
for eliminating the use of MTBE in the program, as well as those who
object to the underlying requirement that RFG contain a minimum 2%
level of oxygenates. We will also hear testimony which indicates that
MTBE is vital to the nation's gasoline supply, and from witnesses who
will defend the oxygenate's environmental performance.
I especially want to acknowledge the testimony that we will receive
from EPA concerning recently proposed improvements to the RFG program.
I welcome this testimony and the underlying analysis and effort on the
part of the Agency.
When this Committee drafted and introduced H.R. 4, the national
energy bill approved by the House this past August, it included several
provisions designed to avoid price spikes in the RFG program, help ease
gasoline costs to the consumer, and prevent seasonal gasoline supply
disruptions. The Committee also included a directive in H.R. 4 that EPA
comprehensively study the matter of boutique fuels and examine how
future fuel specifications will impact the program.
Accordingly, I was pleased when EPA announced last week that it
would implement virtually all of the boutique fuel reforms contained in
H.R. 4. These provisions should avert the need to drain gasoline
storage tanks each spring, as well as reduce unnecessary paperwork and
other burdensome procedures. I commend Administrator Whitman and
Assistant Administrator Holmstead for the Agency's decision to take
action on this matter, especially in light of the Senate's current
inability to move forward with an energy package.
Again, I want to extend my appreciation to the witnesses for their
efforts in scheduling, rescheduling, and finally being here today. Your
testimony, I am sure, will further inform this committee about the
multitude of complex and sometimes contentious issues surrounding RFG
and the use of oxygenates.

Mr. Greenwood. We will now turn to the panel, and let me
identify our first panel of witnesses.
They are the Honorable Jeffrey Holmstead, Assistant
Administrator for Air and Radiation from the Environmental
Protection Agency; Mr. Robert S. Kripowicz, Acting Assistant
Secretary for Fossil Energy at the U.S. Department of Energy;
Mr. John Stephenson, Director of the Natural Resources and
Environment, United States General Accounting Office, and Mr.
Robert Hirsch, Associate Director for Water, U.S. Geological
Survey.
I assume that the witnesses have been informed that this is
an investigational hearing and as such it is the practice of
this subcommittee to take testimony under oath. Do any of you
object to having your testimony offered under oath?
[No response.]
Mr. Greenwood. In that case, pursuant to the rules of this
committee and of the House, you should know that you are
entitled to be represented by counsel. Do any of you wish to be
represented by counsel for your testimony?
[No response.]
Mr. Greenwood. In that case, if you will rise, and I will
administer the oath.
[Witnesses sworn.]
Mr. Greenwood. Thank you. I should advise all here that we
may have a vote in about 5 minutes, but we will move ahead
anyway, and Mr. Holmstead, if you would begin. You are
recognize for 5 minutes to offer your testimony.
Mr. Holmstead. Thank you very much.
Mr. Greenwood. And thank you for being here.
Mr. Holmstead. My pleasure.

TESTIMONY OF HON. JEFFREY HOLMSTEAD, ASSISTANT ADMINISTRATOR
FOR AIR AND RADIATION, U.S. ENVIRONMENTAL PROTECTION AGENCY;
ROBERT S. KRIPOWICZ, ACTING ASSISTANT SECRETARY FOR FOSSIL
ENERGY, U.S. DEPARTMENT OF ENERGY; JOHN STEPHENSON, DIRECTOR,
NATURAL RESOURCES AND ENVIRONMENT, U.S. GENERAL ACCOUNTING
OFFICE; AND ROBERT M. HIRSCH, ASSOCIATE DIRECTOR FOR WATER,
U.S. GEOLOGICAL SURVEY

Mr. Holmstead. I am very happy to be able to start my
career in the House before your subcommittee. So I look forward
to working with you more in the future.
Mr. Greenwood. We will be gentle on you.
Mr. Holmstead. Let me just briefly begin by reviewing the
history of the RFG program. You have already covered most of
that, Mr. Chairman, but for those of you who have not been
perhaps around this issue as much, before 1990, regulatory
efforts to reduce emissions from cars and other vehicles had
focused really almost exclusively on the vehicles themselves.
In the 1990 amendments to the Clean Air Act, Congress
recognized that it was also important to consider the fuels
that are used in those vehicles. As a result the 1990
amendments established a number of programs designed to achieve
cleaner motor vehicles and cleaner fuels.
These programs have been highly successful in protecting
the public health by reducing harmful exhaust from motor
vehicles. The RFG program was actually designed to serve
several goals.
These include improving air quality, enhancing energy
security, and encouraging the use of renewable fuels through
the use of oxygenates. The most important thing to know about
the RFG program is that it works. Gasoline refiners do a good
job of producing clean burning gasoline that helps the Nation's
efforts in improving air quality.
In a 1999 report, the National Research Council, a branch
of the National Academy of Sciences, said, quote, RFG usage can
cause a decrease in both exhaust and evaporative emissions from
motor vehicles.
Now, let me turn to the question that I think is most on
your mind, and that is the question of the use of MTBE as an
additive to gasoline. There are concerns, and we have concerns,
about the contamination of drinking water by MTBE in many areas
of the country.
Current data on MTBE in ground and surface waters indicate
numerous detections of MTBE, albeit usually at relatively low
levels. Data from the U.S. Geological Survey indicate a strong
relationship between the use of MTBE as a fuel additive in an
area and the detection of low levels of MTBE.
In response to concerns about such contamination, 13 States
have banned MTBE, one as early as the end of 2002. At least a
dozen more States are also considering similar bans. In recent
weeks, however, I should note that at least one State has
signaled that they may reconsider the effective date of its
ban.
Last year, the EPA published a so-called advanced notice of
proposed rulemaking, requesting comments on a possible phase
down or phaseout of MTBE from gasoline. This proposal or this
advanced notice of proposed rulemaking, was done under Section
6 of the Toxic Substances Control Act, usually known as TSCA.
TSCA gives the EPA authority to ban, phaseout, limit, or
control the manufacturer or use of any chemical substance if it
is deemed to pose an unreasonable risk to human, to public
health, or the environment.
Taking such action under TSCA is technically complicated
and time consuming, but at this point TSCA is the only
regulatory tool that the agency has for limiting or eliminating
the use of MTBE.
Governor Whitman has testified previously on this point,
and let me just reaffirm that we expect to have some sort of
regulatory proposal for inter-agency review on this issue by
the end of this year.
The Clean Air Act also authorizes States under certain
conditions to establish their own State or local clean air
programs that are different from RFG. These programs as you
mentioned are often referred to as boutique fuels.
The President's national energy policy directed EPA to
study opportunities, working with DOE, USDA, and other
agencies, to maintain or improve the environmental benefits of
State and local programs, while exploring ways to increase the
flexibility of the fuel information structure.
After an extensive outreach process, the EPA has initiated
an assessment of boutique fuels. We also evaluated the air
quality benefits that fuels provide and assess the impact of
these fuels on gasoline production and distribution.
As a result of this study, we identified two major issues.
The first is the need for greater flexibility in the process by
which fuel marketers make the transition from winter to
summertime gasoline.
In both 2000 and 2001, gasoline prices rose sharply during
the transition period, particularly in the midwest. EPA has now
proposed certain regulatory changes which we believe would help
to moderate these price spikes and perhaps even eliminate them
during the transition period.
The second issue that we identified during our boutique
fuel study is the growth in the number of different programs.
However, despite the growing number of individual boutique fuel
programs, EPA also found that the current gasoline production
and distribution system is able to provide adequate quantities
of fuel as long as there are no disruptions in the supply
chain.
If there is a disruption, such as a pipe line break or a
refinery fire, it can be difficult to provide gasoline supplies
of the required quality because of constraints imposed by these
boutique fuel requirements.
In addition, action taken by a growing number of States to
ban the use of MTBE could increase the number of boutique fuel
programs around the country. In addition to releasing a report
to the President that dealt specifically with some of the short
term actions that we can take administratively to help during
the transition period, EPA also released last week as you
mentioned a separate and more extensive staff white paper that
explores options for addressing boutique fuels in the longer
term.
The white paper presents a preliminary analysis of a number
of approaches that would reduce the number of fuel programs,
but still give States some flexibility to select from a limited
number of options.
The broad findings contained in the staff white paper are,
one, today's fuel distribution infrastructure is not
constrained by boutique fuel requirements unless there is a
disruption, such as a pipe line break or refinery fire.
And, No. 2, there are a number of factors that lead States
to adopt boutique fuel requirements, including individual air
quality needs, the costs relative to RFG, and concerns about
the oxygenate mandate, and potential contamination of ground
water with MTBE.
I should note that a more detailed analysis of possible
options remains to be done before any final action could be
taken. The white paper is designed to lay the ground work for
future analysis.
I should also point out, as I think you know, that any of
the options examined in the white paper would require action by
Congress to revise the Clean Air Act. EPA is now requesting
public comment on all these issues.
Mr. Chairman, we have learned a great deal about cleaner
burning fuel since 1990. We have learned that clean fuel
programs are critical to our Nation's effort to reduce the
harmful effects of air pollution.
We now know that MTBE, if leaked or spilled, can
contaminate water supplies more readily than other components
of gasoline, and we know that a number of States have exercised
the authority granted them by the Clean Air Act to establish
different fuel formulations that are now referred to as
boutique fuels.
As I stated also, we are committed to working with you and
with Congress to explore ways to maintain or enhance
environmental benefits of clean fuel programs, while seeking
ways to increase the flexibility of the fuels distribution
infrastructure, enhance our Nation's energy security, and
minimize the cost of motor vehicles to consumers. Thank you
very much.
[The prepared statement of Hon. Jeffrey Holmstead follows:]
Prepared Statement of Jeffrey Holmstead, Assistant Administrator,
Office of Air and Radiation, U.S. Environmental Protection Agency
Thank you, Mr. Chairman and Members of the Subcommittee, for the
invitation to appear here today. I appreciate the opportunity to
discuss the vital role cleaner burning gasoline plays in improving
America's air quality and EPA's efforts to respond to the President's
Energy Policy in regard to boutique fuels. I will also discuss our on-
going actions to address the use of MTBE as a gasoline additive.
Before discussing these issues, I will review the history and
development of the federal reformulated gasoline (RFG) program, and
discuss the air quality benefits derived from that program.
History of RFG
When Congress passed the Clean Air Act Amendments of 1990, it
established a number of programs to achieve cleaner motor vehicles and
cleaner fuels. These programs have been highly successful in protecting
public health by reducing harmful exhaust from the tailpipes of motor
vehicles. In the 1990 Amendments, after extensive deliberation,
Congress struck a balance between vehicle and fuel emission control
programs. The RFG program was designed to serve several goals. These
include improving air quality and extending the gasoline supply through
the use of oxygenates.
Congress established the overall requirements of the RFG program by
identifying the specific cities in which the fuel would be required and
setting specific performance standards for RFG, including a requirement
that such gasoline contain a minimum of two percent oxygen by weight.
The oil industry, states, oxygenate producers and other stakeholders
were involved in a successful regulatory negotiation that resulted in
the development of RFG proposed regulations in 1991. EPA published the
final regulations establishing the detailed requirements of the two-
phase program in early 1994.
The first phase of the federal reformulated gasoline program
introduced cleaner gasoline in January 1995 primarily to help reduce
vehicle emissions that cause ozone (smog) and toxic pollution in our
cities. The second phase of the program went into effect in January,
2000 and was designed to further reduce emissions of volatile organic
compounds (VOC), oxides of nitrogen (NOX) and air toxics.
Under the Clean Air Act, ten metropolitan areas that have the most
serious air pollution levels are required to use RFG. Although not
required to participate, some areas in the Northeast, in Kentucky,
Texas and Missouri have elected to join, or ``opt-in,'' to the RFG
program as a relatively cost-effective measure to help combat their air
pollution problems. Today, roughly 35 percent of this country's
gasoline consumption is cleaner-burning reformulated gasoline. The
Clean Air Act Amendments of 1990 also required that RFG contain two
percent minimum oxygen content by weight. Although neither the Clean
Air Act nor EPA requires the use of any specific oxygenate, ethanol and
MTBE are the only oxygenates used to any significant extent in the RFG
program, with fuel providers choosing to use MTBE in about 87 percent
of the RFG. Ethanol is used in 100 percent of RFG in Chicago and
Milwaukee, which are closer to major ethanol production centers.
Benefits of RFG
Ambient monitoring data from the first year of the RFG program
(1995) indicated that the use of RFG had significantly reduced vehicle-
related tailpipe emissions including air toxics. One of the air toxics
controlled by RFG is benzene, a known human carcinogen. The 1995 study
showed that the program reduced ambient levels of benzene dramatically
with a median reduction of 38 percent from the previous year. Overall,
the emission reductions that can be attributed to the RFG program are
equivalent to taking 16 million cars off the road. Since the RFG
program began six and one-half years ago, we estimate that it has
resulted in annual reductions of VOC and NOX combined of at
least 105,000 tons, and at least 24,000 tons of toxic air pollutants.
As an example of the benefits, EPA estimates that in Chicago alone,
the Phase II RFG program results in annual reductions of 8,000 tons of
VOC and NOX combined and 2,000 tons of toxic vehicle
emissions, benefitting almost 8 million citizens.
The Use of MTBE in Gasoline
There is significant concern about contamination of drinking water
in many areas of the country. Current data on MTBE in ground and
surface waters indicate numerous detections of MTBE at low levels. Data
from the U.S. Geological Survey indicates a strong relationship between
MTBE use as a fuel additive in an area and finding detections of low
levels of MTBE. In response to concerns about MTBE contamination,
twelve states have banned MTBE, one as early as the end of 2002. At
least a dozen more states are considering similar bans. Refiners and
other gasoline marketers are concerned that state laws that ban the use
of MTBE in future years present new challenges to this country's fuel
production and distribution system. In recent weeks, however, at least
one state has signaled that it may reconsider the effective date of its
MTBE ban.
Last year, EPA published an Advance Notice of Proposed Rulemaking
requesting comments on a phase down or phase out of MTBE from gasoline
under Section 6 of the Toxic Substances Control Act (TSCA). EPA
believes that TSCA is the only regulatory tool currently available to
the Agency for limiting or eliminating the use of MTBE. TSCA gives EPA
authority to ban, phase out, limit or control the manufacture or use of
any chemical substance deemed to pose an unreasonable risk to public
health or the environment. We expect to have a proposal prepared for
inter-agency review later this year.
Boutique Fuels
The Clean Air Act authorizes states to regulate fuels through their
own state implementation plans in order to achieve a national air
quality standard. This has resulted in a number of different
formulations being required by states--formulations that are often
referred to as boutique fuels. These state fuel programs can limit
flexibility in the fuel distribution system, particularly if a
disruption occurs.
The President's Energy Policy Report issued on May 17, 2001
directed that EPA, in consultation with USDA, DOE and other agencies:
study opportunities to maintain or improve the environmental
benefits of state and local ``boutique'' clean fuel programs
while exploring ways to increase the flexibility of the fuels
distribution infrastructure, improve fungibility, and provide
added gasoline market liquidity.
In response to this directive and to understand the current
situation and future outlook for boutique fuels, EPA consulted with
over 40 stakeholder groups, including gasoline refiners, distributors
and marketers, pipeline operators, auto manufacturers, state and local
government officials, and environmental and public health
organizations.
Following this extensive outreach process, EPA initiated its own
assessment of boutique fuels, focusing on the various types of fuels
and the factors that lead state and local governments to adopt boutique
fuel requirements. We also evaluated the air quality benefits the fuels
provide and assessed the impact of these fuels on the gasoline
production and distribution system. As a result of this evaluation, EPA
identified two major issues associated with federal, state and local
clean fuel programs. The first is the need for greater flexibility in
the process by which fuel marketers make the transition from winter to
summer grade reformulated gasoline. In both 2000 and 2001, gasoline
prices rose sharply during the transition period, particularly in the
Midwest, and EPA believes that regulatory changes could be a factor in
helping to moderate price spikes during future transition periods.
The second issue is the number of state and local boutique fuels
programs and the challenges that this presents to the gasoline
distribution system. EPA has identified several reasons why states have
adopted their own boutique fuels requirements, including reduced cost
compared with the federal RFG program, local air pollution control
needs, concerns about the oxygenate mandate in the RFG program, and
concerns about the use of MTBE, an oxygenated gasoline additive which
has been found to contaminate water supplies in some areas.
Despite the number of state and local fuel programs, EPA has also
found that the current gasoline production and distribution system is
able to provide adequate quantities of boutique fuels, as long as there
are no disruptions in the supply chain. If there is a disruption, such
as a pipeline break or refinery fire, it can be difficult to provide
gasoline supplies of the required quality because of constraints
created by these boutique fuel requirements. In addition, actions taken
by a growing number of states to ban the use of MTBE as a gasoline
additive are a major factor that would increase the number of boutique
fuel programs around the country.
In responding to the directive from the President's Energy Policy
Report, EPA has identified several actions it can take in the near term
to facilitate an orderly transition from winter to summer grade
reformulated gasoline. EPA is prepared to act quickly on this set of
administrative and regulatory actions to provide new flexibility to
refiners in advance of next year's spring transition season.
In summary, EPA will:

Propose to establish an alternative requirement of April 15
for receipt of summer fuel at terminals to ensure that
terminals blend down their RFG stocks more gradually. This
action should reduce the practice of draining tanks containing
winter grade RFG to extremely low levels shortly before May 1.
Allow 2 percent testing tolerance for the initial transition
to summer specifications. This action would benefit all
refiners by providing additional flexibility.
Allow previously certified fuel to be reclassified under
certain conditions. This would help alleviate limited inventory
in tight RFG markets.
Propose to simplify blendstock accounting requirements to
eliminate significant additional reporting for blendstock
transfers. This action will allow refiners more flexibility to
sell gasoline blendstocks.
As noted above, the second issue is the number of state and local
boutique fuel programs. In response to this issue EPA staff is
preparing a White Paper to address boutique fuels in the longer term.
This White Paper, which we will release for public review and comment,
will lay the groundwork for needed future study. The guiding principles
for our analyses are: 1) improve the fungibility and movement of
gasoline across the country; 2) maintain or improve emission
performance for each area of the country currently covered by federal,
state, or local fuel programs; 3) maintain or improve the ability of
fuel producers to produce sufficient gasoline to meet demand, and 4)
minimize the net cost when considering both production and
distribution.
Conclusion
Mr. Chairman and Members of the Subcommittee, we have learned a
great deal about cleaner burning fuels since 1990. We have learned that
the clean fuel programs I have talked about today are critical to our
nation's efforts to reduce the harmful effects of air pollution. We
have learned that MTBE, if leaked or spilled, can contaminate water
supplies more readily than other components of gasoline. We know that a
number of states have exercised the authority granted them by the Clean
Air Act to establish different fuel formulations that are now referred
to as boutique fuels. And we also believe that increasing the number of
boutique fuels may create additional challenges for fuel distribution.
We are committed to working with Congress to explore ways to
maintain or enhance environmental benefits of clean fuels programs
while exploring ways to increase the flexibility of the fuels
distribution infrastructure and minimize costs.
This concludes my prepared statement. I would be pleased to answer
any questions that you may have.

Mr. Greenwood. Thank you, Mr. Holmstead. We appreciate your
testimony. Mr. Kripowicz, am I pronouncing that correctly?
Mr. Kripowicz. Yes, your are, sir.
Mr. Greenwood. Thank you. We thank you for being with us,
and you are recognized for 5 minutes to offer your testimony.

TESTIMONY OF ROBERT S. KRIPOWICZ

Mr. Kripowicz. Mr. Chairman, and members of the
subcommittee, I am here today to provide the Department of
Energy's views on issues concerning the use of MTBE in
gasoline.
In the past few years the supply and demand balance in the
petroleum market in general, and in the gasoline market in
particular, has tightened considerably. Events in the world oil
markets contributed to the volatile prices that we experienced
this summer and last year.
The problems of market volatility and high prices were most
evident in the midwest, particularly in the ethanol blended
reformulated gasoline market. But supplies of other products,
including conventional gasoline and diesel fuel, were also
tight due largely to infrastructure limitations in that area.
Even though prices at the pump have declined recently the
Nation continues to face the challenge of assuring adequate
capacity to meet future demand for gasoline and other
transportation fuels.
Assuring adequate capacity and doing so in an
environmentally responsible manner will not be an easy matter.
But it will be a necessary one if our economy is to continue to
grow. At the Energy Department, we are working with industry to
help meet this challenge.
Our program includes support for alternative fuels,
research on advanced ethanol production from cellulose, and the
development of new and cleaner refining technologies. In many
cases, however, these activities focus on the longer term.
In the shorter term the choices are fewer, and any changes
to the current situation must carefully consider impacts on
price and supply. The Department has been addressing the issue
of MTBE for some time, and we fully appreciate the problems
that arise when MTBE is released into the environment,
primarily from leaking underground gasoline storage tanks.
As the committee is aware, there is an ongoing federally
mandated effort to fix and upgrade most of these tanks. Some
States, however, have chosen to resolve the problem by banning
the use of MTBE in gasoline.
We can appreciate that some States believe this is the best
option. However, we believe that such bans could potentially
threaten the adequacy of gasoline supplies in those States.
Today's refiners continue to confront the challenges of
meeting even tighter clean fuel standards for their gasoline.
The recently promulgated standards for Tier-II low-sulfur
gasoline in the mobile source air toxins requirements for
conventional and reformulated gasoline are two primary
examples.
As refiners look for ways to meet these additional
requirements, they will likely find oxygenates, such as MTBE,
even more necessary to increase volume, make up for lost
octane, and address other property changes, such as
distillation and toxic characteristics.
In the near term, eliminating MTBE as a gasoline blending
component could severely hinder the ability of many refiners to
produce clean affordable gasoline. This is because the
availability of substitute gasoline blending components with
similar qualities is very limited.
We recognize that recent information indicates that MTBE
might be replaced with other blend stocks, but we have not seen
any conclusive analysis to validate this. Nonetheless, this is
an area that needs further study.
It is also important to recognize that losing the
capability to use MTBE could also affect the ability of the
U.S. gasoline market to draw gasoline supplies from Europe,
which also contain MTBE. Europe is the major source of our
price sensitive gasoline imports for the northeast.
In short, the Department remains concerned about our
current and longer term energy supplies. We fully support the
requirements for cleaner fuels. We support the need for cleaner
air and for safe drinking water, but we would also encourage
that to the greatest extent possible that environmental
standards be implemented in ways that do not compromise the
adequacy or the affordability of energy supplies that are vital
to our economy.
Mr. Chairman, that completes my summary statement and I
would be happy to answer any questions.
[The prepared statement of Robert S. Kripowicz follows:]

Prepared Statement of Robert S. Kripowicz, Acting Assistant Secretary,
for Fossil Energy, U.S. Department of Energy

Mr. Chairman and Members of the Subcommittee, you have asked that
the Department of Energy provide an update on issues concerning the use
of methyl tertiary butyl ether (MTBE) in gasoline. I will address the
Committee's concerns, but would like to start with the broader National
Energy Policy context, and recent energy markets experience, as a
framework for these issues.
The early focus of this Administration on the development of a
comprehensive National Energy Policy was motivated to a significant
degree by the rising concerns over the adequacy and cost of energy
supplies, not the least of which are gasoline and other petroleum
products on which much of our economic activity depends. We have
observed over the past few years a tightening of the supply/demand
balance in the petroleum product market in general and gasoline in
particular. Events in the world oil markets have contributed to the
high and volatile prices we have experienced this summer and last year.
The Department's Energy Information Administration addressed these
near-term issues in testimony earlier this year and I will not repeat
that here. I will only note that we experienced tight supplies and
volatile prices again this summer in the Midwest. These problems were
most evident in the Chicago/Milwaukee ethanol-blended reformulated
gasoline (RFG) market, and supplies of other products including
conventional gasoline and diesel fuel also experienced severe tightness
largely because of ongoing infrastructure limitations in that area. The
longer term issues affecting infrastructure and petroleum product
supplies include:

--the poor investment climate throughout the 1990s associated with the
refining industry's historic over capacity and competition from
foreign refineries;
--the subsequent closure of uneconomic refineries, some of which were
also unable to meet new environmental requirements; and
--high investment requirements simply to maintain existing capacity due
to the imposition of a range of new clean fuel requirements
starting with reformulated gasoline in 1995 and continuing
through at least 2006.
Having experienced a decade of poor returns, facing legal
challenges related to permitting on previous refinery expansion, and
having to comply with significant new requirements for cleaner fuels
that will demand large stay-in-business investments, it is not
surprising that the financial decision-making in the refining industry
has responded very cautiously to the growth in gasoline (and other
transportation fuels) demand. Other parts of the petroleum product
supply system, including pipelines and terminals, have faced similar
financial situations that have discouraged investment and have left us
with constrained capacity.
Assuring adequate capacity to meet future demand in an
environmentally responsible manner in the longer term is not an easy
matter but we must take on this challenge. Our program activities
include support for alternative fuels, research on advanced cellulosic
ethanol production and development of new refining technologies. In the
short term, our choices are even fewer and any changes that have been
proposed must carefully consider impacts on price and supply. Under
this framework, I will address the issues related to MTBE in gasoline,
as requested by the Subcommittee.
MTBE Issues
The Department has been involved for some time with the EPA, other
Federal agencies and State organizations like the Northeast States for
Coordinated Air Use Management (NESCAUM) in addressing the issue of
MTBE, an oxygenate used in clean gasoline formulation affecting water
supplies. This problem arises primarily from leaking underground
gasoline storage tanks, and there is an ongoing, federally-mandated
effort to fix and upgrade most of these tanks. Individual States have
made additional efforts to address these leaking gasoline tanks and
their potential impacts on water supplies. However, some States have
made the choice to resolve the problem by banning the use of MTBE in
gasoline. This clearly is one option for addressing the problem and we
can appreciate that some States, like California and New York, believe
that it is the best option. However, we believe addressing these water
quality concerns with near-term bans of gasoline additives represents
would threaten the adequacy of gasoline supplies in those States.
As refiners face additional requirements to meet even tighter clean
fuel standards for their gasoline, like the recently promulgated
standards for Tier II low-sulfur gasoline and anti-backsliding toxic
emission control requirements for conventional and reformulated
gasolines, and address commercial considerations like the Unocal
patent, they will find oxygenates such as MTBE even more necessary and
valuable to increase volume, make up for lost octane, and address other
property changes such as distillation characteristics. The availability
of oxygenates also provides valuable immediate gasoline blending
flexibility to refiners trying to meet tight product specifications;
the oxygenates are aromatic-free, high octane, virtually sulfur-free
blendstocks that can be put in almost any shipment of gasoline to
offset performance shortfalls in other parts of the refinery. This is
particularly true for MTBE which can be blended at the refinery and
shipped in pipelines and which has little negative impact on vapor
pressure. The effect of being able to readily blend MTBE into gasoline
is to help assure product deliverability, reliable supplies, and
affordable gasoline prices to consumers. Recent information indicates
that MTBE, if banned, could be replaced with other blendstocks. We have
not seen any conclusive analysis that validates this contention, but
acknowledge this issue needs to be studied very carefully.
If a sufficient number of States were to restrict use of MTBE,
refiners and distributors might choose to remove MTBE from all gasoline
in that region to protect the fungibility of the gasoline distribution
system and avoid even more ``boutique'' fuels. Although MTBE
consumption is currently about 300,000 barrels per day nationally, in
replacement terms MTBE's contribution to gasoline supplies nationally
is greater because of its high quality. Additionally, a loss of ability
to use MTBE may also affect the ability of the U.S. gasoline market to
draw gasoline supplies from Europe, the major source of our price-
sensitive gasoline imports, since those refiners widely use MTBE,
albeit typically at lower concentrations than in the U.S.
Alternatively, gasolines with and without MTBE could be produced
but with less flexibility and fewer exchange opportunities in the
distribution system. In addition to the ongoing supply problems one
could expect from trying to produce both reformulated and conventional
gasolines without MTBE, regional refinery or distribution supply
problems could lead to additional short-term difficulties under near-
term State-by-State bans. One could expect these situations to
contribute to regional gasoline shortfalls and longer periods of price
volatility as markets struggle to re-balance on a State-by-State basis.
In addition, for Northeast States, which depend heavily on imported
reformulated gasoline, MTBE bans and the subsequent need for special
gasoline blendstocks for ethanol blending could be even more
problematic. Additionally, with the Mobile Source Air Toxics (MSAT)
rule implemented by EPA, refiners are required, starting in January
2002, to maintain the toxic performance of their gasoline at or above
the 1998 to 2000 baseline. Some refiners have produced gasoline with
toxics performance much better than was required to meet the RFG
performance guidelines because of market opportunities in the
petrochemical markets. The MSAT rule requires these refiners to
continue to produce gasoline that over-complies relative to toxic
performance into the future. The near-term elimination of MTBE as a
gasoline blending component would severely hinder these refiners'
ability to produce clean gasoline because the availability of
substitute gasoline blending components with similar quality is very
limited.
The Department of Energy remains concerned about our current and
longer-term energy supply situation. We will continue to work with EPA
and others to better understand the energy supply implications of all
our actions and look for additional ways to improve the current
capacity situation. While we fully support the various clean fuel
requirements that are necessary to achieve our air quality goals and we
share a strong desire to protect the nation's water quality, we believe
that it is important that these initiatives be implemented in a way
that has the least negative impact on fuel supplies. As we move
forward, the National Energy Policy provides important guidance and
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use,'' will
appropriately focus our attention on these impacts in future rule
makings. Assuring adequate supplies of energy, gasoline in this case,
in an environmentally responsible way and at reasonable prices to
support a strong economy is a key goal of this Administration.
Mr. Chairman, that ends my testimony and I would be happy to answer
any questions the Subcommittee may have.
Thank you.

Mr. Greenwood. Thank you for your testimony. Mr.
Stephenson, you are recognized for 5 minutes for yours.

TESTIMONY OF JOHN STEPHENSON

Mr. Stephenson. Thank you, Mr. Chairman, and members of the
subcommittee. I am here today to discuss GAO's recent report on
the Environmental Protection Agency's underground storage tank
program.
The program is relevant to today's hearing because studies
have shown that tanks that leak hazardous substances such as
MTBE can contaminate the soil and water and pose health risks
ranging from nausea, to kidney or liver damage, or even cancer.
Indeed, leaks of MTBE have been found in drinking water
sources and pose a very serious health risk and costly cleanup
burden. In 1984, Congress created the tank program to protect
the public from potential leaks from the then more than 2
million tanks located across the Nation, primarily at gas
stations.
Under the program, tank owners were required to install new
leak detection equipment by the end of 1993, and new spill,
overfill, and corrosion protection equipment by the end of
1998. If these conditions were not met, owners had to close or
remove their tanks.
In addition, the Congress created a trust fund in 1986 to
help the EPA and the States cover cleanup costs for tank owners
who could not afford to do so. The fund is replenished
primarily through a 10th of a cent per gallon gas tax, and at
the end of the fiscal year the fund's balance was around $1.5
billion.
Congress appropriates roughly $70 million against this fund
each year for cleanup purposes. In our study, GAO was asked to
determine the extent tanks are in compliance with program
requirements, how the States are inspecting tanks and enforcing
requirements, and whether upgraded tanks still leak.
We were not asked to assess cleanup status or costs.
Because the States implement the program, the information in
our report is primarily based on a survey that we conducted of
all 50 States and the District of Columbia. Here is what we
found.
About 1.5 million tanks have been permanently closed since
the program began in 1984, leaving about roughly 700,000 tanks
subject to program requirements. Of these 700,000 active tanks,
we estimate that about 89 percent were in compliance with
equipment requirements.
I have got a couple of visual aids over here. As you can
see in the chart, the level of compliance varies from State to
State. The darker color on that chart represents the lower
compliance rates. So, white is good, and gray is a little
better, and black is not so good.
Now 89 percent is a fairly good compliance rate.
Unfortunately, we estimate that almost 30 percent, more than
200,000 tank owners, were not properly operating and
maintaining their tanks, thus, increasing the chance for leaks.
For example, 15 States reported that leak detection
equipment was frequently turned off or improperly maintained.
The States and EPA attributed operation and maintenance
problems primarily to poorly trained staff.
The EPA and the States speculated that the remaining 11
percent or 76,000 tanks not in compliance with equipment
requirements are probably closed or abandoned. Nevertheless,
our report points out the importance of addressing even these
closed tanks because cleanup experience has shown that they may
continue to leak and pose health risks.
I should point out that these statistics are often based on
best guesses because many of the States do not physically
inspect all of their tanks. In fact, over half of the States do
not even meet the minimum inspection recommended by the EPA,
which is at least once every 3 years.
The second chart shows the inspection rates by State.
States with lower than EPA's minimum inspection rate are
depicted in dark colors.
Enforcing authority also varies considerably from State to
State. Most States can levy either citations or fines, but less
than half have the authority to prohibit fuel deliveries, which
is the most effective tool for ensuring compliance with program
requirements. And not surprisingly, all States stated that they
needed additional resources to improve their program.
We also found that some tanks, despite being upgraded with
the required equipment, may continue to leak. In fact 34 States
reported tank leaks, but some didn't know whether the leaks
occurred before or after the equipment had been installed. EPA,
as a part of four program initiatives that it is considering
right now, is thinking about new tank requirements, such as
double-walled tanks, to prevent further leaks.
To address the problems highlighted in our report, we
recommended that the EPA work with the States to (1) improve
training, (2) promote better inspections and enforcement; and,
(3) more specifically address the tanks that have not yet been
upgraded, closed, or removed. And we also suggested that
Congress consider expanding the use of the $1.5 billion trust
fund beyond its designated use for clean up, to also be used
for inspection and enforcement activities at the State level.
Mr. Chairman, that concludes my statement, and I will be happy
to answer any questions that you or members of the subcommittee
may have.
[The prepared statement of John Stephenson follows:]
Prepared Statement of John Stephenson, Director, Natural Resoources and
Environment, U.S. General Accounting Office
Mr. Chairman and Members of the Subcommittee: I am here today to
discuss our recent report on the Environmental Protection Agency's
(EPA) Underground Storage Tank (UST) program.¹ The program
is relevant to today's hearing because studies have shown that tanks
that leak hazardous substances, such as methyl tertiary butyl ether
(MTBE), contaminate the soil or water and can pose health risks ranging
from nausea to kidney or liver damage or even cancer. Indeed, leaks of
MTBE--a fuel additive for reducing emissions and raising octane, but
also a suspected carcinogen--have been found in drinking water sources
and pose a very serious health risk and costly cleanup burden.
---------------------------------------------------------------------------
\1\ Environmental Protection: Improved Inspections and Enforcement
Would Better Ensure the Safety of Underground Storage Tanks (GAO-01-
464, May 4, 2001).
---------------------------------------------------------------------------
In 1984, the Congress created the UST program to protect the public
from potential leaks from the then more than 2 million tanks located
across the nation, mostly at gas stations. Under the program, EPA
required tank owners to install new leak detection equipment by the end
of 1993 and new spill-, overfill-, and corrosion-prevention equipment
by the end of 1998. If these conditions were not met, owners had to
close or remove their tanks. In general, EPA has granted states the
authority to implement the program with agency oversight and
monitoring, or states operate their own program under state law with
limited EPA oversight. EPA has provided states funding (about $187,000
per state) for doing so. EPA retains authority for a small number of
tanks primarily located on Indian lands. In addition, the Congress
created a trust fund in 1986 to help EPA and the states cover tank
cleanup costs that owners and operators could not afford or were
reluctant to pay. The fund is replenished partly through a $ .001/
gallon tax on gasoline and other fuels. At the end of fiscal year 2000,
the fund had a balance of about $1.5 billion.
Because the states are primarily implementing the provisions of the
program, we conducted a survey of all 50 states and the District of
Columbia to determine whether tanks are complying with program
requirements, how EPA and the states are inspecting tanks and enforcing
the requirements, and whether upgraded tanks still leak. The findings
we are discussing today and that were included in our report are based
primarily on the survey results, as well as on visits to the three EPA
regions with the largest number of tanks to monitor. In summary, we
found that:

--About 1.5 million tanks had been permanently closed since the program
was created, leaving about 693,000 tanks subject to UST
requirements. Based on the states' responses to our survey, we
estimated that about 89 percent of these tanks had the required
protective equipment installed, but that almost 30 percent of
them--more than 200,000 tanks--were not being operated and
maintained properly, thus, increasing the chance of leaks. For
example, 19 states reported frequent problems with corrosion-
prevention equipment and 15 states reported that leak detection
equipment was frequently turned off or improperly maintained.
The states and EPA attributed these operation and maintenance
problems primarily to poorly trained staff. Of the remaining 11
percent, or 76,000, tanks that we estimated had not been
retrofitted with the required equipment, EPA and the states
speculated that the tanks were probably inactive and empty.
Nevertheless, it is important to address them because
experience has shown that they may have leaked in the past, but
the contamination, which poses health risks, is not discovered
until the tank is dug up for removal. However, most states and
EPA do not know if all inactive tanks are empty--and we could
not verify the accuracy and completeness of the compliance data
they reported--because they do not physically inspect all
tanks.
--In fact, over half of the states do not inspect all of their tanks
frequently enough to meet the minimum rate recommended by EPA--
at least once every 3 years. In addition, 27 states lack the
authority to prohibit fuel deliveries to stations with problem
tanks--one of the most effective tools for ensuring compliance
with program requirements--relying instead on issuing citations
and fines. States said that they did not have the money, staff,
or, authority to conduct more inspections or more strongly
enforce tank compliance.
--Finally, states reported that even tanks with the required leak
prevention and detection equipment installed continue to leak,
although the full extent of the problem is not known. In
response to our survey, 14 states reported some tank leaks, 17
states said their tanks seldom or never leaked, and 20 states
did not know if leaks occurred before the tanks were upgraded.
EPA and some localities have studies underway to obtain better
data on leaks from upgraded tanks. EPA, as part of a set of
four program initiatives it announced in October 2000, is also
considering whether it needs to set new tank requirements, such
as double-walled tanks, to prevent further leaks.
To address these problems, our report recommends that EPA work with
the states to determine training needs and ways to fill them, and to
more specifically address the estimated 76,000 tanks that have not yet
been upgraded, closed, or removed as required. Our report also contains
recommendations to EPA and suggestions to the Congress on ways to
promote better inspections and enforcement and to address related
resource shortfalls by expanding the use of the $1.5 billion trust fund
designated for tank cleanup to also cover additional inspection and
enforcement activities.
most tanks have been upgraded, but many are not properly operated and
maintained
Based on state responses to our survey, we estimated that nearly
617,000, or about 89 percent of the approximately 693,000 regulated
tanks, had been upgraded with the federally required equipment by the
end of fiscal year 2000. EPA data showed that about 70 percent of the
total number of tanks that its regions regulate on tribal lands had
also been upgraded.
With regard to the approximately 76,000 tanks that we estimated
have not been upgraded, closed, or removed as required, 17 states and
the 3 EPA regions we visited reported that they believed that most of
these tanks were either empty or inactive. However, another five states
reported that at least half of their non-upgraded tanks were still in
use. EPA and states assume that the tanks are empty or inactive and
therefore pose less risk. As a result, they may give them a lower
priority for resources. However, states also reported that they
generally did not discover tank leaks or contamination around tanks
until the empty or inactive tanks were removed from the ground during
replacement or closure. Consequently, unless EPA and the states address
these non-compliant tanks in a more timely manner, they may be
overlooking a potential source of soil and groundwater contamination.
Even though most tanks have been upgraded, we estimated from our
survey data that more than 200,000 of them, or about 29 percent, were
not being properly operated and maintained, increasing the risk of
leaks. The extent of operations and maintenance problems varied across
the states, as figure 1 illustrates.

Figure 1: Compliance With Federal Equipment Requirements Varies Among
States
(total active tanks per state)

[GRAPHIC] [TIFF OMITTED] T6306.001

The states reported a variety of operational and
maintenance problems, such as operators turning off leak
detection equipment. The states also reported that the majority
of problems occurred at tanks owned by small, independent
businesses; non-retail and commercial companies, such as cab
companies; and local governments. The states attributed these
problems to a lack of training for tank owners, installers,
operators, removers, and inspectors. These smaller businesses
and local government operations may find it more difficult to
afford adequate training, especially given the high turnover
rates among tank staff, or may give training a lower priority.
Almost all of the states reported a need for additional
resources to keep their own inspectors and program staff
trained, and 41 states requested additional technical
assistance from the federal government to provide such
training.
To date, EPA has provided states with a number of training
sessions and helpful tools, such as operation and maintenance
checklists and guidelines. One of EPA's tank program
initiatives is also intended to improve training and tank
compliance with federal requirements, such as setting annual
compliance targets with the states. At the time of our review,
the Agency was just beginning to work out the details of how it
will implement this initiative and had set up a working group
of state and EPA representatives to begin work on compliance
targets.

Most States Do Not Meet EPA's Recommendation to Inspect All Tanks Every
3 Years or Have the Enforcement Tools Needed to Identify and Correct
Problems

According to EPA's program managers, only physical
inspections can confirm whether tanks have been upgraded and
are being properly operated and maintained. However, only 19
states physically inspect all of their tanks at least once
every 3 years--the minimum that EPA considers necessary for
effective tank monitoring. Another 10 states inspect all tanks,
but less frequently. The remaining 22 states do not inspect all
tanks, but instead generally target inspections to potentially
problematic tanks, such as those close to drinking water
sources. In addition, not all of EPA's own regions comply with
the recommended rate. Two of the three regions that we visited
inspected tanks located on tribal land every 3 years. Figure 2
illustrates the states' reported inspection practices.

Figure 2: Frequency of Inspections Varies Among States (total active
tanks per state)

[GRAPHIC] [TIFF OMITTED] T6306.002

Figure 3: Many States Lack Authority to Prohibit Fuel Deliveriies to
Problem Tanks

(total active tanks per state)

[GRAPHIC] [TIFF OMITTED] T6306.004

Source: GAO's estimates based on responses to a survey of tank
program managers in all 50 states and the District of Columbia.
Note: EPA implements the federal tank program in Idaho and enforces
certain requirements in New York because these states lack some or all
of the necessary laws.
According to our survey results, some states and EPA
regions would need additional staff to conduct more frequent
inspections. For example, under staffing levels at the time of
our review, the inspectors in 11 states would each have to
visit more than 300 facilities a year to cover all tanks at
least once every 3 years, but EPA estimates that a qualified
inspector can only visit at most 200 facilities a year.
Moreover, because most states use their own employees to
conduct inspections, state legislatures would need to provide
them additional hiring authority and funding to acquire more
inspectors. Officials in 40 states said that they would support
a federal mandate requiring states to periodically inspect all
tanks, in part because they expect that such a mandate would
provide them needed leverage to obtain the requisite inspection
staff and funding from their state legislatures.
In addition to more frequent inspections, a number of
states stated that they need additional enforcement tools to
correct problem tanks. EPA's program managers stated that good
enforcement requires a variety of tools, including the ability
to issue citations or fines. One of the most effective tools is
the ability to prohibit suppliers from delivering fuel to
stations with problem tanks. However, as figure 3 illustrates,
27 states reported that they did not have the authority to stop
deliveries. In addition, EPA believes, and we agree, that the
law governing the tank program does not give the Agency clear
authority to regulate fuel suppliers and therefore prohibit
their deliveries.
Almost all of the states said they need additional
enforcement resources and 27 need additional authority. Members
of both an expert panel and an industry group, which EPA
convened to help it assess the tank program, likewise saw the
need for states to have more resources and more uniform and
consistent enforcement across states, including the authority
to prohibit fuel deliveries. They further noted that the fear
of being shut down would provide owners and operators a greater
incentive to comply with federal requirements.
Under its tank initiatives, EPA has said that it will
attempt to obtain state commitments to increase its inspection
and enforcement activities, or it may supplement state
activities in some cases. EPA's regions have the opportunity,
to some extent, to use the grants that they provide to the
states for their tank programs as a means to encourage more
inspections and better enforcement. However, the Agency does
not want to limit state funding to the point where this further
jeopardizes program implementation. The Congress may also wish
to consider making more funds available to states to improve
tank inspections and enforcement. For example, the Congress
could increase the amount of funds it provides from the Leaking
Underground Storage Tank trust fund, which the Congress
established to specifically provide funds for cleaning up
contamination from tanks. The Congress could then allow states
to spend a portion of these funds on inspections and
enforcement. It has considered taking this action in the past,
and 40 states said that they would welcome such funding
flexibility.

Some Tanks Continue to Leak Even After They Have Been Upgraded,
Although the Extent of this Problem is Unknown

In fiscal year 2000, EPA and the states confirmed a total
of more than 14,500 leaks or releases from regulated tanks,
although the Agency and many of the states could not verify
whether the releases had occurred before or after the tanks had
been upgraded. According to our survey, 14 states said that
they had traced newly discovered leaks or releases that year to
upgraded tanks, while another 17 states said they seldom or
never detected such leaks. The remaining 20 states could not
confirm whether or not their upgraded tanks leaked.
EPA recognizes the need to collect better data to determine
the extent and cause of leaks from upgraded tanks, the
effectiveness of the current equipment, and if there is a need
to strengthen existing equipment standards. The Agency has
launched studies in several of its regions to obtain such data,
but it may have trouble concluding whether leaks occurred after
the upgrades. In a study of local tanks, researchers in Santa
Clara County, California, concluded that upgraded tanks do not
provide complete protection against leaks, and even properly
operated and maintained tank monitoring systems cannot
guarantee that leaks are detected. EPA, as one of its program
initiatives, plans to undertake a nationwide effort to assess
the adequacy of existing equipment requirements to prevent
leaks and releases and if there is a need to strengthen these
requirements, such as requiring double-walled tanks. The states
and the industry and expert groups support EPA's actions.
In closing, the states and EPA cannot ensure that all
regulated tanks have the required equipment to prevent health
risks from fuel leaks, spills, and overfills or that tanks are
safely operated and maintained. Many states are not inspecting
all of their tanks to make sure that they do not leak, nor can
they prohibit fuel from being delivered to problem tanks. EPA
has the opportunity to help its regions and states correct
these limitations through its tank initiatives, but it is
difficult to determine whether the Agency's proposed actions
will be sufficient because it is just defining its
implementation plans. The Congress also has the opportunity to
help provide EPA and the states the additional inspection and
enforcement authority and resources they need to improve tank
compliance and safety.
Therefore, to better ensure that underground storage tanks
meet federal requirements to prevent contamination that poses
health risks, we have recommended to the Administrator, EPA,
that the Agency

(1) work with the states to address the remaining non-upgraded
tanks, such as reviewing available information to
determine those that pose the greatest risks and
setting up timetables to remove or close these tanks,
(2) supplement the training support it has provided to date by
having each region work with each of the states in its
jurisdiction to determine specific training needs and
tailored ways to meet them,
(3) negotiate with each state to reach a minimum frequency for
physical inspections of all its tanks, and
(4) present to the Congress an estimate of the total additional
resources the Agency and states need to conduct the
training, inspection, and enforcement actions necessary
to ensure tank compliance with federal requirements.
In addition, the Congress may want to consider EPA's
estimate of resource needs and determine whether to increase
the resources it provides for the program. For example, one way
would be to increase the amount of funds it appropriates from
the trust fund and allow states to spend a limited portion on
training, inspection, and enforcement activities, as long as
cleanups are not delayed. The Congress may also want to (1)
authorize EPA to require physical inspections of all tanks on a
periodic basis, (2) authorize EPA to prohibit fuel deliveries
to tanks that do not comply with federal requirements, and (3)
require that states have similar authority to prohibit fuel
deliveries.

Contact and Acknowledgments

For further information, please contact John Stephenson at
(202) 512-3841. Individuals making key contributions to this
testimony were Fran Featherston, Rich Johnson, Eileen Larence,
Gerald Laudermilk, and Jonathan McMurray.
Mr. Greenwood. Thank you for your testimony.
Mr. Hirsch, you are recognized for 5 minutes for your
testimony. Thank you for being with us.

TESTIMONY OF ROBERT M. HIRSCH

Mr. Hirsch. Thank you, Chairman Greenwood and other
committee members. I appreciate the opportunity to appear
before the subcommittee to testify on the findings of the U.S.
Geological Survey's studies on water quality issues related to
MTBE.
The mission of the USGS is to assess the quantity and
quality of the earth's resources and to provide information
that will assist resource managers and policymakers at the
Federal, State, and local levels in making sound decisions.
Assessment of water-quality conditions and research on the fate
and transport of pollutants in water are important parts of the
overall mission of the USGS.
My written testimony covers the results of several studies
of MTBE that we have conducted over the past years, and I
request that my full remarks be entered into the record, and I
will present a general overview of these findings.
It is important to note that USGS studies of MTBE generally
used detection limit levels of .2 micrograms per liter of
water. This is a level that is 100th of the EPA consumer
advisory level of 20 micrograms per liter.
We use these low detection levels to help enhance our
understanding and early warning capability, but it must be
understood that a detection does not necessary mean that there
is a taste, odor, or health problem.
Our focus on MTBE began as a result of some early findings
from our National Water Quality Assessment Program in 1993.
NAWQA, as this program is called, is a regional and national
scale resource assessment program.
Initial monitoring data from 700 wells that were randomly
distributed across urban and agricultural settings, and
analyzed for a broad array of volatile organic compounds,
pesticides, and other contaminants, showed that 25 percent of
the urban wells, and 1 percent of the agricultural wells, had
detectable amounts of MTBE.
Most of those detections were at low concentrations, and
only six of the 200 urban wells had concentrations that
exceeded the EPA consumer advisory level. At the time MTBE was
a chemical for which usage had increased dramatically in recent
years, and we knew that it moved in the subsurface differently
from other gasoline components.
And thus even though it was detected in few wells and at
very low levels, we believed that it would be prudent to
continue studying it at many locations over a period of several
years to learn more about its national distribution and fate.
Since our early study in 1993, the USGS has sampled over
4,200 wells or springs for MTBE and a wide range of other
compounds. Nationally, only 5 percent of the wells sampled even
had detectable amounts of MTBE. However, in areas of high MTBE
use, MTBE was detected in about 20 percent of the wells.
It is important to note that in this entire study of 4,200
wells, only one domestic well exceeded the EPA advisory level,
and no community water supply wells exceeded the EPA advisory
level.
Our data suggests that most of the higher concentrations of
MTBE that we do observe are associated with leaking underground
storage tanks. These instances of contamination are likely to
be the result of a legacy from older tanks.
Recent investments all across the Nation to remove or to
replace many tanks and to upgrade tanks that are still in use
are expected to significantly decrease the frequency of
gasoline leaks, and thus this problem should diminish with
time. At this point, this is only a hypothesis.
Our continued monitoring will help to determine if these
postulated trends are a reality. We also conduct research on
the fate and transport of MTBE in ground water and surface
water. Our research is demonstrating that MTBE does biodegrade
under a wide range of environmental settings, although at a
slower rate than many of the components of traditionally
formulated gasoline.
These ongoing studies have important implications for
predicting the future concentrations of MTBE in water where
contamination has already occurred. These results are important
for the design and selection of remediation plans.
There are multiple strategies for dealing with situations
where MTBE contamination of ground water has taken place, and
these should include strategies that take maximum advantage of
the natural attenuation that we observe in our research.
More research is needed to help provide guidance on the
most cost effective strategies for protecting drinking water
sources in those areas that have become contaminated. I also
believe that more research is needed to explore the water
quality impacts of possible alternatives to MTBE.
In summary, the USGS has not found widespread high level
MTBE contamination of rivers, reservoirs, or ground water that
are used as sources of community water systems. We have,
however, identified MTBE and some other volatile organic
compounds fairly frequently in ground water at concentrations
below the EPA advisory level.
We believe that it is prudent to continue our monitoring
and research so that we can verify that the threat remains
relatively low and to further the understanding of this
chemical to help protect the water resources for the future.
I wanted the chairman to know that we do have some data
specifically to Bucks County, Pennsylvania, and that these
results are very consistent with the national patterns. And we
have just begun a State-wide study of MTBE in Pennsylvania in
cooperation with the Pennsylvania Department of Environmental
Protection, and we would be happy to provide you or your staff
with briefings on this work.
I appreciate the opportunity to testify before this
subcommittee on the results of the USGS assessments, and
research on MTBE, and I am happy to try to respond to any
questions the subcommittee may wish to ask. Thank you, Mr.
Chairman.
[The prepared statement of Robert M. Hirsch follows:]

Prepared Statement of Robert M. Hirsch, Associate Director for Water,
U.S. Geological Survey, U.S. Department of the Interior

Chairman Greenwood and other committee members, I appreciate the
opportunity to appear before the Subcommittee on Oversight and
Investigations to testify on the findings of U.S. Geological Survey
(USGS) studies on water-quality issues related to methyl tertiary-butyl
ether, commonly referred to as MTBE.
As you may know, the mission of the USGS is to assess the quantity
and the quality of the earth's resources and to provide information
that will assist resource managers and policy makers at the Federal,
State, and local levels in making sound decisions. Assessment of water-
quality conditions and research on the fate and transport of pollutants
in water are important parts of the overall mission of the USGS.
USGS studies over the past 8 years have shown that MTBE typically
is present at very low concentrations in shallow ground water within
areas where MTBE is used. Our studies also suggest that MTBE levels do
not appear to be increasing over time and are almost always below
levels of concern from aesthetic and public health standpoints. The few
locations in our database with high concentrations of MTBE may be
associated with leaking underground storage tanks.
Based on comparisons with the U.S. Environmental Protection
Agency's (USEPA) drinking water advisory, the health threat to water
supplies is small compared to other water-related issues. MTBE is
primarily an aesthetic (taste and odor) problem. However, we believe it
may be prudent to continue our monitoring and research within available
resources so that we can verify that the threat remains low and to
further the understanding of this chemical to contribute to effective
strategies to protect our Nation's water supplies and to efficiently
remediate those ground waters that have become contaminated.
The results I will present today come from about a decade of
sampling and study of MTBE and other Volatile Organic Compounds (VOCs).
MTBE is one of about 60 VOCs that we measure on a routine basis in our
water-quality studies.
The single largest study we have made of MTBE is part of our
National Water Quality Assessment (NAWQA) Program. Based on initial
monitoring data for wells sampled in 1993-94 in the NAWQA Program, we
published a report on the occurrence of MTBE in shallow ground water in
urban and agricultural areas. At that time our data set was fairly
small--about 200 randomly selected wells in urban areas and 500
randomly selected wells in agricultural areas. We reported finding MTBE
in about 25 percent of urban wells and 1 percent of agricultural wells.
Many of the MTBE detections were low concentrations. In fact, only 3
percent of the urban detections exceeded 20 micrograms per liter, the
lower limit of USEPA's consumer advisory for taste and odor. Also, many
of the urban wells that contained MTBE were located in Denver,
Colorado, and in New England, both areas with extensive use of MTBE
prior to our sampling. At the time, MTBE was a chemical for which usage
had increased dramatically in recent years and we knew it moved in the
subsurface differently from other gasoline components. Thus, even
though it was detected in few wells and at very low levels, we believed
it would be prudent to continue studying it at many locations and over
a period of several years to learn more about its national distribution
and fate.
Since our first report in 1995, we have sampled additional wells in
the NAWQA Program. This now gives us much better coverage of aquifers
across the Nation. For the period 1993-2000, we sampled 4,260 wells (or
springs) for MTBE and a wide range of other compounds. Of this total,
396 are public water-supply wells; 1,847 are domestic wells; and 2,017
are monitoring wells (or other wells not used for drinking water). At a
reporting level of 0.2 micrograms per liter (a level that is one one-
hundredth of the USEPA advisory level), we detected MTBE in 5.2 percent
of the wells sampled. Most of the MTBE detections are low
concentrations. None of the public water-supply wells and only one
domestic well had MTBE at a concentration above the lower limit of
USEPA's advisory. Through our interpretations of this large data set we
have also determined that low-levels of MTBE are detected in about 1
out of 5 wells in MTBE high-use areas. Although we do not expect to see
a great change in these results over time, we recognize that there may
be a delay in the detection of MTBE in some wells--particularly those
that are deeper and may be farther from the source of contamination.
MTBE is the second most frequently detected volatile organic compound
(VOC). Chloroform, a drinking-water disinfection by-product and a
commercial solvent, is the most frequently detected VOC.
Based on our NAWQA findings and interests of other agencies, we
have undertaken two allied, large-scale studies to further our
understanding of the occurrence of MTBE and other VOCs. We have
completed a study in cooperation with the USEPA's Office of Ground
Water and Drinking Water. For the period 1993-98, we have compiled
information on the occurrence of MTBE and other VOCs in drinking water
supplied by Community Water Systems in 12 States in the Northeast and
Mid-Atlantic Regions of the United States. Parts of these Regions are
designated Reformulated Gasoline (RFG) Areas and, in general, these RFG
Areas have used MTBE in gasoline in large amounts for many years. USGS
obtained the MTBE/VOC data from each State's drinking-water program. We
then randomly selected about 20 percent of the almost 11,000 Community
Water Systems in the study area for our analysis. States with MTBE data
included Connecticut, Maine, Maryland, Massachusetts, New Hampshire,
New Jersey, New York, Rhode Island, Vermont, and Virginia. Data for
MTBE were not available for Delaware and Pennsylvania, at the time the
study was completed.
At a reporting level of one microgram per liter, about 9 percent of
the Community Water Systems had detectable MTBE in their drinking
water; however, most of the detections were low concentrations. Ten
Community Water Systems had MTBE concentrations that equaled or
exceeded the lower limit of the USEPA advisory, or about 1 percent of
all Community Water Systems with MTBE data. We also confirmed that MTBE
was detected more frequently in RFG Areas than elsewhere in the two
Regions. Furthermore, larger Community Water Systems located in urban
centers had a larger incidence of MTBE detections.
We are also working with the Metropolitan Water District of
Southern California, and the Oregon Graduate Institute of Science and
Technology, to complete a study of MTBE, other ether gasoline
oxygenates, and other VOCs in select reservoirs, rivers, and wells that
supply Community Water Systems. This study was partly funded through
the American Water Works Association Research Foundation (AWWARF). We
are in the final year of this 4-year project.
For this study, we tested the source water of 954 randomly selected
Community Water Systems, including 579 wells, 171 rivers, and 204
reservoirs. Samples were collected in all 50 States and Puerto Rico,
and varied sizes of systems were included. All sampling for this
project is completed; however, some of our intended interpretations and
report writing are not yet completed and peer reviewed. Initial
findings, which were reported on June 20, 2001, at the Annual
Conference of the American Water Works Association, were similar to our
findings noted earlier in this statement. Specifically, when detected
in source waters, the concentrations of MTBE were almost always below
the USEPA advisory. However, MTBE was found in about 9 percent of all
sources sampled (at a reporting level of 0.2 micrograms per liter), and
it was the second most frequently detected VOC. A larger detection
frequency of MTBE was found in surface-water sources (14 percent), than
ground-water sources (5 percent). In general, the detection of MTBE
increased with increasing size of the Community Water Systems. MTBE was
detected in about 4 percent of Community Water Systems serving less
than 10,000 people, and in nearly 15 percent of systems serving greater
than 50,000 people. Many of the surface-water sources sampled in the
AWWARF study were large rivers and reservoirs that had recreational
watercraft usage. Older models of watercraft motors are known to
release a fraction of non-combusted gasoline to water and this, in
part, may explain the larger occurrence of MTBE in surface-water
sources.
We also conduct research on the fate and transport of MTBE in
ground water and surface water through the USGS Toxic Substances
Hydrology Program. In this program, we explore the range of geochemical
and microbiological processes that determine how MTBE will behave when
it enters soil, ground water or surface water. This research is
demonstrating that MTBE does biodegrade under a wide range of
environmental settings although at slower rates than many of the
components of traditionally formulated gasoline. These ongoing studies
have important implications for predicting the future concentrations of
MTBE in water, where contamination has already occurred. These results
are also important for the design and selection of remediation plans.
As part of the Toxic Substances Hydrology Program research, USGS
scientists have demonstrated that naturally occurring microorganisms
can biodegrade MTBE in many hydrologic environments, and in some cases,
to harmless by-products. In some situations, however, biodegradation
may be incomplete and tert-butyl alcohol (TBA) can be formed.
Especially noteworthy are the observations that MTBE biodegrades in
ground water and soil where sufficient oxygen is present and in bed
sediments of streams, lakes, wetlands, and estuaries where MTBE-
contaminated ground water can ultimately discharge. Essentially, these
environments can be considered to be natural sinks for MTBE removal. As
noted earlier, MTBE is expected to degrade slower in ground water than
gasoline hydrocarbons of traditional gasoline formations. The length of
time required to complete this removal is currently a topic of ongoing
investigation.
The USGS has actively participated in two previous Federal reviews
of MTBE and other oxygenates in gasoline. A Blue Ribbon Panel was
appointed by the Administrator of the USEPA to investigate the air-
quality benefits and water-quality concerns associated with oxygenates
in gasoline, and to provide independent advice and recommendations on
ways to maintain air quality while protecting water quality. In 1998-
1999, Dr. John Zogorski of the USGS served as a water-quality
consultant to the Blue Ribbon Panel and three USGS scientists testified
before the Panel. An important finding of the Blue Ribbon Panel is that
the major source of MTBE ground-water contamination appears to be
releases from underground gasoline storage systems. Many of these tanks
have been removed permanently or upgraded in the 1990s, and thus this
source is likely to diminish in the coming years. Other major sources
of water contamination were stated to be from small and large gasoline
spills and from recreational watercraft, especially those with older
model 2-cycle motors. USGS has documented low levels of MTBE in urban
air, urban precipitation, and urban stormwater, and these sources may
cause low concentrations of MTBE in surface water and ground water.
MTBE has also been found in spills of home fuel oil in Northeastern
States.
During 1995-96, at the request of the USEPA and the Office of
Science and Technology Policy (OSTP), the USGS co-chaired an
interagency panel to summarize what was known and unknown about the
water-quality implications of the production, distribution, storage,
and use of fuel. Our efforts were published in 1997 as a chapter in a
report entitled ``Interagency Assessment of Oxygenated Fuels'' prepared
by the National Science and Technology Council, Committee on
Environment and Natural Resources. The chapter summarizes the
scientific literature and data on the sources, occurrences,
concentrations, behavior, and the fate of fuel oxygenates in ground
water and surface water. We also discussed the implications for
drinking water and aquatic life, and made recommendations of
information needed to better characterize the occurrence of MTBE and
other oxygenates in the Nation's drinking-water supplies.
Furthermore, last year, USGS and Oregon Graduate Institute
scientists co-authored a feature article in the journal Environmental
Science and Technology, a publication of the American Chemical Society.
A salient part of the article summarized important information about
MTBE including: growth in production; solubility, transport and
degradation in ground water; releases from leaking underground fuel
tanks; and the effect of select factors, such as aquifer recharge, the
presence of low permeability stratum, and water utility pumping rates.
This information helped to determine the likelihood of MTBE reaching
community water-supply wells. Based on available but admittedly
incomplete data for 31 States, the authors determined that about 9,000
community wells may have one or more leaking underground storage tanks
nearby (i.e., within 1-km radius of the well). Because detailed
information on the community wells, storage tanks, and hydrogeology
were not available, the authors could not determine the number of wells
at risk.
Unfortunately, some of the press coverage of this article
inaccurately stated that 9,000 drinking-water wells were contaminated
with MTBE. As stated in the journal publication, not all community
wells with gasoline releases nearby are at risk because not all
gasoline releases contain MTBE, and not all MTBE-gasoline releases are
sufficiently large to pollute a nearby well. Also, many wells draw
water from the deeper zones of aquifers and many wells are largely
isolated from land-surface contamination by low permeability stratum,
technically called aquitards. Based on these factors, data from the
studies mentioned previously, and a recent survey by others, we would
estimate that the number of community wells contaminated is far lower
than 9,000 for 31 States.
In summary, the USGS has not found widespread, high-level MTBE
contamination in rivers, reservoirs, and ground water that are actively
used as the sources for Community Water Systems. Furthermore, we have
not found such contamination in public wells and domestic wells sampled
in our NAWQA Program, or in the drinking water of Community Water
Systems in 10 Northeastern and Mid-Atlantic States. We have, however,
identified MTBE (and some other VOCs) fairly frequently in ground
water, source water, and drinking water at concentrations below USEPA's
advisory. We also conclude that the frequency of detection of MTBE is
larger in RFG Areas, in comparison to other areas of the Nation.
Approximately 85 million people reside in RFG areas that use MTBE
extensively, and drinking water in these areas is provided almost
equally from surface water and ground water.
There are multiple strategies for dealing with situations where
MTBE contamination of ground water has taken place and these should
include strategies that take maximum advantage of the natural
attenuation that we observe in our research. Within available
resources, more research would be helpful to provide guidance on the
most cost-effective strategies for protecting drinking water sources in
those areas that have become contaminated.
I appreciate the opportunity to testify on the results of USGS
assessments and research on MTBE. I am happy to try to respond to any
questions of the Subcommittee.

Mr. Greenwood. Thank you for your testimony, Mr. Hirsch.
The Chair recognizes himself for 5 minutes for questions. Let
me address the first one to you, Mr. Holmstead, if I could.
The issues involving MTBE, and ethanol, and RFG, are not
new. We have been debating them for years, but the problem as I
see it continues. So, a rather simple, if direct, question.
Ignoring for a minute any limitations placed on you by
relevant statutes, do you think we should do anything to reduce
the use or phaseout MTBE; and are you personally comfortable
with the continued use of MTBE gasoline? I lied when I said I
was going to be easy on you.
Mr. Holmstead. Well, it is a little hard for me to switch
into a world where I am ignoring the legal constraints posed by
the Clean Air Act and other statutes, and as you know, my
expertise is in the Clean Air Act and the environmental
benefits of oxygenates, as opposed to the problems with the
water quality.
I know that we are troubled, and Administrator Whitman is
troubled, by the continuing contamination of drinking water and
the ground water. I have heard recent reports suggesting that
perhaps the problem is not as big as we expected a couple of
years ago.
And if that is the case that would be good news. In terms
of how I or we as an administration would make the final
decision, I guess what I should say is that we will be getting
out a proposal, and it will be ready to go into inter-agency
review within the next month or so.
And that will include an exploration of the possibility of
phasing down or phasing out MTBE, and that is a commitment that
Governor Whitman has made. Until we are able to see the
analysis that comes in in response to that proposal, and to
better understand what the tradeoffs are, I am a little
reluctant to say right now that this is how we will or won't
proceed.
Mr. Greenwood. Now, that would be pursuant to TSCA, and
that is a TSCA rulemaking, and how long under the best of
circumstances do you think realistically that would take?
Mr. Holmstead. Before a final rule could come out, again I
am not a TSCA expert, but my understanding is that is likely to
be at least a couple of years.
Mr. Greenwood. My understanding is that it is more likely
to be five. At least that is based on history. I have been
informed by oil refiners for some time that if they had the
option, and if they didn't have the prescription for the 2
percent oxygenate, that they could in fact provide motors with
reformulated gasoline that would meet all of the air quality
standards in the Clean Air Act and do it without MTBE.
I would like each of you to comment on whether you agree
with that statement, and whether you believe if that is in fact
a possibility.
Mr. Holmstead. I think they can certainly do it without
MTBE. Whether they can do it without an oxygenate I think is a
more difficult question. I don't think anybody believes that
you need to have MTBE in order to satisfy the performance
requirements of the Clean Air Act.
There is a more difficult question about whether you can do
it without having some form of oxygenate, and I guess one of
the concerns we have is whether the current performance
standard captures all of the benefit from oxygenate, and that
is something that we are looking at.
But I think in response to your question that we would
agree that as long as there is an oxygenate, then you could
meet the performance requirements without MTBE.
Mr. Greenwood. Mr. Kripowicz, would you like to comment on
that?
Mr. Kripowicz. Yes, sir. I am a technology man, and so I
would say that probably the refiners are correct, and that in
some fashion they would be able to meet the RFG requirements.
But I would say that at this point, at least in the short term,
it would have a significant impact on price and more than
likely on quantity, too, on supply.
Mr. Greenwood. Are you able to quantify that increase in
price?
Mr. Kripowicz. No, sir. You would have to do some analysis
to look at that, but there are no easy ways to do it. that we
know of right now. Again, I suspect that there are technical
feasible ways to do it, but we would have to get that kind of
data from the industry to be able to judge the price impact.
Mr. Greenwood. I don't know whether either of the other
witnesses feel that you have the capacity to respond to that.
Nodding, Mr. Stevenson says no, and Mr. Hirsch?
Mr. Hirsch. I don't have the expertise at all to comment on
the question of the air quality impacts, but the question
arises in my mind is do we fully understand the water quality
impacts associated with any of the possible alternatives.
There has been quite a bit of research on behavior of MTBE
in water since the mid-90's, and I am not aware that there has
been anywhere near that amount of research on any of the
alternatives as to what kinds of issues one might be entering
into with some of the alternatives from a water quality
perspective.
Mr. Greenwood. My time has expired, and the Chair
recognizes the gentleman from Texas, Mr. Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman, and our goal is to make
sure that we are through before we go vote, and so you don't
have to wait for us, but the second panel will. Let me first
start out with, one, I appreciate the panel being here, and Mr.
Chairman, you have done a good job of getting a good cross-
section.
First, Mr. Hirsch, on the U.S. Geological Survey, let me
again hear you. You said in the USGS Survey that you found that
MTBE was well below the EPA advisory levels?
Mr. Hirsch. In the vast majority of cases. We see a few
cases that exceed it, but they are in the nationwide range of a
very few percent of the cases.
Mr. Green. And again it was a very low threat in your
testimony. Mr. Kripowicz.
Mr. Kripowicz. Yes, sir.
Mr. Green. Okay. I do good with Spanish names being from
Texas.
Mr. Kripowicz. You are doing quite fine with mine.
Mr. Green. In your testimony, you talked about the supply
problems, and we heard under questioning from the chairman
about there could be another substance used for oxygenate other
than MTBE, which is ethanol. There is no other substance other
than ethanol or MTBE that could be used as an oxygenate; is
that correct?
Mr. Kripowicz. There may be other substances, but the
supply of substances would be quite small. You would need a
period of time in order to be able to produce them in quantity,
which is why you end up with a supply problem in the immediate
term.
Mr. Green. And the concern that you have shared in your
testimony as to the refiners, and that it would be a supply
problem, you can pipeline MTBE, for example, from Houston to
California, or to New Jersey. But how do you get ethanol long
distances?
Mr. Kripowicz. That is something that the system has to
look at, because for long distances ethanol has a tendency to
pick up water. So you have to look at different methods of
transporting it or specific dedicated piping.
Mr. Green. So with current technologies ethanol is not as
easy to transport long distances as MTBE?
Mr. Kripowicz. That's correct, sir.
Mr. Green. On the GAO maps, those are really good. If we
could put up that last map, it showed the compliance with
Federal requirements varies among the States, the active tanks.
I think it was the third map or maybe not. Maybe it was the
first one.
The compliance is unknown, and I know that the concern is
that, for example, in New Jersey and some of the States, do
some of the States that are not in compliance, are they some of
the 15 that you know of that have banned the use of MTBE?
When you look at that map, the darker the State, the less
in compliance they are. And I don't have a list, but I know
that California and some of the northeastern States would seem
like their compliance is either unknown or they are less than
70 percent reported in compliance.
And I was just wondering if there was a correlation between
not inspecting the tanks or compliance with Federal
requirements in deciding, well, we don't inspect, and so we
will just ban the use of MTBE.
Mr. Stephenson. We didn't do the analysis specifically, but
I don't think there would be a correlation between the tank
program and MTBE. I don't think they first considered have we
banned MTBE and then that would have a bearing on the
inspection program or the compliance program that they put up.
But we could do that analysis for you.
Mr. Green. Well, it would be interesting, because I know
that California is the largest State, and they are one of ones
that has either--is it 30 to 70 percent tanks reported to be in
compliance?
Mr. Stephenson. Right.
Mr. Green. And I know that they are going through the
process now to ban MTBE.
Mr. Stephenson. Well, they have already done it.
Mr. Green. And some other States may be going through the
process, and I noticed that New Jersey actually is not in
compliance. We don't know----
Mr. Stephenson. Well, they did not have enough data for us
to meaningfully determine whether they were in compliance or
not. Now, remember that all of these were based on surveys of
the State Program Coordinators for the tank program, and some
of them inspect and some of them don't. So some of them are
based on best guesses in some cases. They don't have actual
data on all their tanks.
Mr. Green. And I guess my concern would be that maybe if we
are having a problem with any substance in our soil that we
might want to look at storage tanks first instead of just
banning a certain substance, because what else might be found
other than MTBE that is leaking from that storage tank.
Mr. Stephenson. There are lots of other dangerous things
that leak from tanks other than MTBE.
Mr. Green. My bottom line is that anything that makes my
car or truck run, I don't want to drink or taste, whether it is
MTBE, a can of paste, or something much worse.
Let me now talk with our EPA. How come the EPA decided to
do, and I know that it was before your watch, but decided to
use the Toxic Substances Act? I am not aware of anything, any
study that has been shown--and I don't know, as maybe the EPA
is now--that MTBE may smell and taste bad, but considering
other substances, it is not toxic.
Are you aware of any studies that the EPA has, or has been
aware of?
Mr. Holmstead. I know that there are some studies
suggesting possible health effects. I know that there are
ongoing studies now to look at that very question, but I think
it is fair to say that the bigger issues surrounding MTBE have
to do with the fact that it makes water perhaps unusable.
Now, in terms of the Toxic Substances Control Act, it is
not really limited to--the EPA doesn't have to make a specific
finding that something is toxic in order to be able to address
it under that Act. But there is this balancing test between
risk and benefit.
And so as you well know, the issue of whether something is
toxic or not is always a difficult question, and the dose is
really the thing that matters. So almost anything is toxic at a
high enough dose.
Mr. Green. Okay. But today we had testimony from the USGS
that said that it is well below or below the levels that the
EPA says is their own advisory levels, and it is a low threat.
And in your testimony, you talked about the benefits from
the very first year of oxygenated fuels for air quality. And
has there been any lessening of that since 1995, and that your
testimony said that each year we have seen much cleaner air?
And I know coming from Houston that we benefit from
oxygenate fuels, and hopefully L.A. will be dirtier this year
than we are, and it will be because of oxygenated fuels.
Mr. Holmstead. Again, it is important to remember that the
RFG program doesn't require the use of MTBE. It is true that
that program has been very successful in helping to clean up
the air, but that program doesn't require the use of MTBE. So
it is not quite right to say that it is MTBE that has cleaned
up the air.
Mr. Green. Mr. Chairman, let me just put something into the
record, or at least mention it. Since Europe also uses MTBE for
their oxygenates, has the EPA taken time to look at how
European countries, the European Union has responded to MTBE?
Mr. Holmstead. I'm sure the answer is yes. I can't tell you
what they are. I think in Europe that MTBE is used strictly as
an octane booster. It is not used in the same quantities,
because I don't believe that they have a specific oxygenate
mandate. But they do use MTBE, but I believe it is in smaller
concentrations.
Mr. Green. Well, what brought it up was the testimony from
the Department of Energy that said that if we ban MTBE that it
would limit our ability to bring gasoline, for example, from
Europe.
And so that brought up, well, what is Europe doing, because
typically they are much more environmental friendly than we
are. And you might check to see that there is only one
consideration of banning MTBE, which was Denmark. But they
identified it as a leaky storage tank problem, and that is how
they were addressing it, and maybe we need to look at that.
Mr. Greenwood. The gentleman's time has expired, and I
would inform the panel, the witnesses, that we have a series of
votes that should take about 20 minutes. And I would ask your
forbearance that you would remain here.
It would be my expectation that we may have other members
after this vote come back and want to pose questions to you. So
we will recess until approximately 3:30.
[Brief recess.]
Mr. Greenwood. The committee will reconvene. Without
objection, the opening statement of the chairman of the full
committee, Billy Tauzin, will be made a part of the record.
Does the gentleman from Texas, Mr. Barton, care to inquire?
Mr. Barton. No.
Mr. Greenwood. Does the gentleman from New Hampshire care
to inquire?
Mr. Bass. I just want the facts, all the facts.
Mr. Greenwood. I should give fair warning that if he
passes, this panel will be dismissed, and we will go to the
second panel.
Mr. Barton. If we are on the first panel, I will pass.
Mr. Greenwood. In that case, gentlemen, we kept you here
for no reason whatsoever. But more billable hours for everyone
else. Thank you for your testimony and we appreciate it.
And we would call the second panel, which consists of Ms.
Denise Chamberlain, from the Pennsylvania Department of
Environmental Protection. She is the Deputy Secretary for Air,
Recycling and Radiation Protection; Mr. Tom Adams, President of
the Oxygenated Fuels Association; Mr. Bob Dinneen, President
and CEO of the Renewable Fuels Association; Mr. David
Kahlenberg, who is a homeowner from my County of Bucks,
Doylestown, Pennsylvania; Mr. A. Blakeman Early, a
environmental consultant to the American Lung Association; Mr.
Michael Ports, President of the Ports Petroleum Company, who
will testify on behalf of the National Association of
Convenience Stores and the Society of Independent Gasoline
Marketers of America; and Mr. Edward H. Murphy, Downstream
General Manager, of the American Petroleum Institute.
If you lady and gentlemen will be seated. We welcome each
and every one of you, and thank you for your forbearance this
afternoon. I know that you have been waiting a long time to
testify.
I assume that each of you have been informed that this is
an investigative hearing, and therefore it is the custom of our
committee to take testimony under oath. Do any of you object to
offering your testimony under oath?
Seeing no objection, I should inform you that the rules of
the committee and the rules of the House entitle you to be
represented by counsel. Do any of you care to be represented by
counsel as you offer your testimony? Seeing no such interest, I
would ask you if you would rise and raise your hand right, and
I will administer the oath.
[Witnesses sworn.]
Mr. Greenwood. So saying, you are all under oath, and we
welcome your testimony, and we will begin with you, Ms.
Chamberlain. Thank you for being here. You are recognized for 5
minutes for your testimony.

TESTIMONY OF DENISE K. CHAMBERLAIN, DEPUTY SECRETARY FOR AIR,
RECYCLING, AND RADIATION PROTECTION, PENNSYLVANIA DEPARTMENT OF
ENVIRONMENTAL PROTECTION; TOM ADAMS, PRESIDENT, OXYGENATED
FUELS ASSOCIATION; BOB DINNEEN, PRESIDENT AND CEO, RENEWABLE
FUELS ASSOCIATION; DAVID KAHLENBERG, HOMEOWNER; A. BLAKEMAN
EARLY, ENVIRONMENTAL CONSULTANT, AMERICAN LUNG ASSOCIATION;
MICHAEL PORTS, PRESIDENT, PORTS PETROLEUM COMPANY, INC., ON
BEHALF OF NATIONAL ASSOCIATION OF CONVENIENCE STORES AND
SOCIETY OF INDEPENDENT GASOLINE MARKETERS OF AMERICA; AND
EDWARD H. MURPHY, DOWNSTREAM GENERAL MANAGER, AMERICAN
PETROLEUM INSTITUTE

Ms. Chamberlain. Mr. Chairman, and members of the
subcommittee, my name is Denise Chamberlain, and I am the
Deputy Secretary of Air, Recycling, and Radiation Protection at
the Pennsylvania Department of Environmental Protection.
I am accompanied by Arleen Shulman from our Air Quality
Program.
On behalf of DEP Secretary Hess, I would like to thank
Chairman Greenwood, and Ranking Member Deutsch, and the
Subcommittee on Oversight and Investigations for the
opportunity to speak to you today about a problem faced not
only by Pennsylvania, but by many States in our Nation: meeting
protective air quality standards without compromising our
environmental and public health responsibilities for other
media.
As you know, the Federal Clean Air Act directly mandates
that certain areas of the country use reformulated gasoline
with its 2 percent oxygen mandate. In Pennsylvania, this
affects the five-county Philadelphia area. While the RFG
program does not mandate specific oxygenates, economics has led
refiners in the Northeast/Mid-Atlantic region to use MTBE to
meet the oxygen requirement.
Reformulated gasoline has been an important part of our
overall strategy in the Philadelphia area to reduce automotive
exhaust emissions of ground level ozone and toxins. Its uses
has had a positive air benefit by lowering cancer risks and
respiratory effects to people exposed to vehicle pollution, but
the importance of oxygenates in reformulated gasoline's air
benefits is questionable.
A cruel dilemma has resulted for Pennsylvania and many
other States from MTBE's use. Because of the oxygen mandate in
reformulated gasoline requiring high levels of MTBE in
gasoline, MTBE has contaminated our ground water. Six million
Pennsylvanians rely on ground water for their drinking water
supplies. Even in its tiniest proportions, 5 parts per billion,
MTBE has an easily detectable smell--turpentine--making the
drinking water supplies virtually undrinkable.
Unlike other components of gasoline, MTBE dissolves and
spreads more readily into the ground water, and does not
degrade easily, and is difficult and costly to remove.
Accidental releases at dispensing sites, leaking product
pipe lines, and leaks from underground storage tanks, have
forced wells to close, run up millions of dollars in clean up
costs, spurred State legislative action, sparked lawsuits, and
has generated significant national concern about the continued
use of MTBE as an additive in gasoline.
In Southeast Pennsylvania, the area using reformulated
gasoline with its elevated MTBE levels, the effect has been
most dramatic. Over 40 percent of the public and private wells
affected by MTBE contamination in Pennsylvania are in our
southeast region.
For example, in Bucks County, Pennsylvania, one release
from an underground storage tank affected private residential
wells in two municipalities. In an area within 2,500 feet of
the leak, 27 public drinking water wells were contaminated.
Twenty percent of those wells had MTBE concentrations above
the EPA advisory level. Another example, in Blue Bell,
Montgomery County, 13 private water supplies were impacted by
the release from one location.
MTBE contamination problems are not restricted to Southeast
Pennsylvania. Within the Commonwealth, 1,619 sites have MTBE
ground water contamination. Of those sites, contamination has
migrated to 45 public water supply wells, and 363 single family
wells.
Since 1998, the Commonwealth alone has spent almost $7
million on cleanup, and another $4.2 million is budgeted for
future cleanups. Now, we have to deal with this legacy of
contamination.
Some of the initiatives in our action plan include
continuing to work with USGS to study the distribution and
concentrations of MTBE in Pennsylvania's ground water in high
MTBE use areas, and to estimate the vulnerability of ground
water in various geologies. The study will be completed in June
2002.
We are working with your General Assembly to provide
additional revenues to adequately address cleanups that address
catastrophic releases of MTBE than our current program allow.
Implementing one of our Nation's leading third-party tank
inspection programs that has been used as a model by EPA. This
year, the Underground Storage Tank third-party and DEP
inspectors visited more than 2,800 sites involving over 5,000
tank inspections.
Enforcing ground water and soil cleanup standards put in
place under our Act 2 Land Recycling Program and corrective
action initiatives.
Working with other Mid-Atlantic States and EPA to develop
tools to assess the extent of MTBE contaminants in ground water
and to establish inspections and corrective action priorities,
and increasing education and outreach on leak detection and
MTBE impacts.
We have talked about what we have done to address the MTBE
already in the ground water and to prevent contamination in the
future from leaks and spills. It is clear that our actions are
addressing the effect of the problem, but we need your help to
deal with the root cause.
The long term solution, however, is to reduce or eliminate
the use of MTBE in reformulated gasoline. We need to do this in
a way that the air quality benefits realized by reformulate
gasoline will not be lost and in a manner that will not
significantly disrupt our Nation's fuel supply, or force
Americans to pay exorbitant prices at the pump.
How can Pennsylvania do this? The answer is that we can't
do it alone. Some States have tried to go their own way.
California and New York, among others, passed State legislation
that has banned the use of MTBE.
The result in these States has been considerable
uncertainty about what happens after the bans take effect.
Without relief from the Federal Government regarding the
oxygenate requirement, MTBE banning States must use ethanol to
meet the requirement.
Estimates appear to change almost daily about whether
ethanol can be produced in sufficient quantities to meet
California requirements, and even if it can be produced,
California is now questioning if that supply can be adequately
transported to California refineries and fuel terminals.
We believe that Congress has the ability and the
opportunity to provide a stable solution to the problem, as
well as remove the incentives that States have at this time to
enact MTBE bans and invent special fuels to serve their air
quality and water supply needs.
Pennsylvania continues to support the legislation
introduced by Representative Greenwood that would control or
limit the use of MTBE on a national level, and allow a State
waiver from 2 percent oxygenate requirement in reformulated
gasoline. We think that this is a reasonable compromise in our
efforts to have clean air, but not at the expense of polluting
our ground water.
This concludes my testimony right now, and I would like to
have the rest of it summarized in the testimony. We would be
happy to answer any questions you might have.
[The prepared statement of Denise K. Chamberlain follows:]

Prepared Statement of Denise K. Chamberlain, Deputy Secretary for Air,
Recycling and Radiation Protection, Pennsylvania Department of
Environmental Protection

Mr. Chairman and members of the Subcommittee: Good morning. My name
is Denise Chamberlain and I am Deputy Secretary of Air, Recycling and
Radiation Protection for the Pennsylvania Department of Environmental
Protection. I am accompanied by Arleen Shulman from our Air Quality
Program.
On behalf of DEP Secretary Hess, I would like to thank Chairman
Greenwood, Ranking Member Deutsch, and the Subcommittee on Oversight
and Investigations for the opportunity to speak with you about a
problem faced not only by Pennsylvania but also by many states in our
nation: meeting protective air quality standards without compromising
our environmental and public health responsibilities for other media.
As you know, the federal Clean Air Act directly mandates that
certain areas of the country use reformulated gasoline (RFG) with its
two percent oxygen mandate. In Pennsylvania, this affects the five-
county Philadelphia area. While the RFG Program does not mandate
specific oxygenates, economics has led refiners in the Northeast/Mid-
Atlantic region to use methyl tertiary-butyl ether (MTBE) to meet the
oxygen requirement.
Reformulated gasoline has been an important part of our overall
strategy in the Philadelphia area to reduce automotive exhaust
emissions of ground-level ozone and toxics. Its use has had a positive
air benefit by lowering cancer risks and respiratory effects to people
exposed to vehicle pollution. But the importance of oxygenates in
reformulated gasoline's air benefits is questionable.
A cruel dilemma has resulted for Pennsylvania and many other states
from MTBE's use. Because of the oxygen mandate in reformulated gasoline
requiring high levels of MTBE in gasoline, MTBE has contaminated our
groundwater. Fifty-five percent (55%) of Pennsylvania relies on
groundwater for its drinking water supplies. Even in its tiniest
proportions, 5 parts per billion, MTBE has an easily detectable smell--
turpentine--making drinking water supplies undrinkable. Unlike other
components of gasoline, MTBE dissolves and spreads more readily in
groundwater, does not degrade easily, and is difficult and costly to
remove. Accidental releases at dispensing sites, leaking product
pipelines and leaks from underground storage tanks have forced wells to
close, run up millions of dollars in cleanup costs, spurred state
legislative action, sparked lawsuits and has generated significant
national concern about the continued addition of MTBE in gasoline.
In Southeast Pennsylvania, the area using reformulated gasoline
with its elevated MTBE levels, the effect has been most dramatic. Over
forty percent (40%) of public and private wells affected by MTBE
contamination in Pennsylvania are in our Southeast region. For example,
in Bucks County, Pennsylvania, one release from an underground storage
tank affected private residential wells in three municipalities. In an
area within 2,500 ft of the leak, 27 public drinking water wells were
contaminated. Twenty percent (20%) of those wells had MTBE
concentrations above the EPA advisory level. Another example--in Blue
Bell, Montgomery County, 13 private water supplies were impacted by the
release from one location.
MTBE contamination problems are not restricted to Southeast
Pennsylvania. Within the Commonwealth, 1,619 sites have MTBE
groundwater contamination. 45 are public water supply wells and 363 are
single-family wells. Since 1998, the Commonwealth alone has spent
almost $7 million on cleanup with another $4.2 million budgeted for
future cleanups.
Now we have to deal with that legacy of contamination. Some of the
initiatives in our action plan include:

Continuing to work with USGS to study the distribution and
concentrations of MTBE in Pennsylvania's groundwater in high
MTBE use areas and to estimate the vulnerability of groundwater
in various geologies. The study will be completed in June 2002.
We are working with our General Assembly to provide additional
revenues to more adequately fund cleanups that address
catastrophic releases of MTBE then our current programs allow.
Implementing one of the nation's leading third-party tank
inspection programs that has been used as a model by EPA. This
past year, Underground Storage Tank (UST) third-party and DEP
inspectors visited more than 2,800 sites involving over 5,000
tank inspections.
Enforcing groundwater and soil cleanup standards put in place
under our Act 2 Land Recycling program and corrective action
initiatives.
Working with the other Mid-Atlantic States and EPA to develop
tools to assess the extent of MTBE contaminants in groundwater
and to establish inspections and corrective action priorities.
And increasing education and outreach on leak detection and
MTBE impacts.
We've talked about what we've done to begin to address MTBE already
in the groundwater and to prevent contamination in the future from
leaks and spills.
It is clear that our actions are addressing the effect of the
problem, but we need your help to deal with the root cause. The long-
term solution, however, is to reduce or eliminate the use of MTBE in
reformulated gasoline. We need to do this in a way that the air quality
benefits realized by reformulated gasoline will not be lost and in a
manner that will not significantly disrupt our nation's fuel supply or
force Americans to pay exorbitant prices at the pump. How can
Pennsylvania do this? The answer is that we can't do it alone.
Some states have tried to go their own way. California and New
York, among others, passed state legislation that has banned the use of
MTBE. The result in these states has been considerable uncertainty
about what happens after the bans take effect. Without relief from the
federal government regarding the oxygenate requirement, MTBE banning
states must use ethanol to meet the requirement. Estimates appear to
change almost daily about whether ethanol can be produced in sufficient
quantities to meet California's requirements and, even if it can be
produced, California is now questioning if that supply can be
adequately transported to California refineries and fuel terminals.
If more states are forced to independently ban MTBE in response to
the threat to precious water supplies, the logistics of ethanol
replacement could become even more problematic. The result could well
be fuel supply disruption and higher prices to consumers at a time when
our economy, and national priorities, may not be able to afford it.
Congress has the ability and the opportunity to provide a stable
solution to the problem as well as remove the incentives that states
have at this time to enact MTBE bans and invent special fuels to serve
their air quality and water quality needs. Pennsylvania continues to
support legislation introduced by Representative Greenwood that would
control or limit the use of MTBE on a national level and allow a state
waiver from the 2% oxygenate requirement in reformulated gasoline. We
think this is a reasonable compromise in our efforts to have clean air
but not at the expense of polluting groundwater.
H.R. 20 addresses the major concerns of not only Pennsylvania but
also all the other states across the country. It protects water quality
through limits on the use of MTBE. It allows states to seek a waiver
from the oxygenate content requirements. It calls for regional
performance standards that ensure that levels of reductions achieved
under the reformulated gasoline program are maintained in areas where
waivers are granted and reduces the potential for boutique fuel
proliferation. It ensures that adequate lead-time is given to make
modifications to our fuel refining and distribution systems that assure
adequate fuel supply for all states. It provides the refining industry
with the ability to meet the reformulated gasoline requirements without
hamstringing them with the unnecessary oxygenate mandate.
In contrast, maintaining the oxygen mandate in reformulated
gasoline while phasing out MTBE may ultimately be a mandate for the
direct substitution of ethanol. While ethanol, a renewable fuel,
definitely can play a role in the energy security of this nation, using
it as a direct replacement in the Northeast for MTBE in reformulated
gasoline raises air quality issues that require serious consideration
involving increased volatile organic compound emissions, in addition to
concerns of supply and price.
As the Subcommittee continues to study the issues of MTBE, special
fuels and the nation's fuel supply system, we urge you to keep in mind
the needs of states like Pennsylvania. We need to continue to reduce
air pollution and may need to rely on fuel strategies to do so. Fuels
can be a powerful emission reduction measure, as reformulated gasoline
and upcoming federal rules lowering sulfur in both gasoline and diesel
shows.
So, we ask that Congress give EPA and us the tools to help us
protect both air and water and not sacrifice one for the other.
Mr. Chairman, that concludes my testimony. Thank you for providing
me with this opportunity to testify.

Mr. Greenwood. Thank you. Your testimony in full will be a
part of the record.
Mr. Adams, you are recognized for 5 minutes for your
testimony. Thank you for being here.

TESTIMONY OF TOM ADAMS

Mr. Adams. Mr. Chairman, my name is Tom Adams, and I am the
President of Oxygenated Fuels Association, and I am most
grateful for the hearing that you having today. It has provided
a great deal of balance and understanding to the issue of what
is going on.
For a long time, MTBE frankly has been considered something
as the skunk at the garden party. It tastes bad, and it smells
bad, and it has got a reputation this way and a reputation that
way.
I want to present the positive side and then a potential
solution to be thinking about, part of which Mr. Gillmor
suggested, and part of the direction that you are going in, and
to be helpful along the way with that process.
To emphasize I want to start off with the amount that is
involved that we are talking about. It is used in 80 to 85
percent of the RFG produced today, and the equivalent for many
people in this room, and most everybody understands barrels and
stuff, and I don't.
So I had to translate it. Daily in the United States about
220,000 barrels, and that is 9.24 million gallons, or about
3.37 billion gallons of MTBE, are produced for the gasoline
supply. We are not talking barrels there. We are talking
gallons, and that gives me more of a picture of what it looks
like, and it is major.
The health issue is very positive, as has been pointed out
in the Washington Post, and the recent study of the U.S. air
quality improved, and you mentioned it in your opening
statement. It has cut smog, forming pollution emissions by 17
percent, and it is the equivalent of removing 64,000 tons of
harmful pollution from the air.
It has reduced emissions of benzene, which is a known human
carcinogen, by 43 percent. And cleaner burning MTBE accounts
for a large part of this overall emission reduction. It has a
good side to its story and this is a very positive part of it
that I think that frequently is forgotten.
It allows for more complete fuel combustion, and it reduces
carbon monoxide emissions. It helps during the winter months;
smog forming, basic organic compounds in the summer time, and
on, and on, and on.
It does have a very positive side to it, and it is a part
of the economy as DOE has said earlier with regard to supply
and distribution. Hey, guys, we really need to study and look
at this for a while before we come up with anything going with
regard to a particular direction of whether to do something in
a major way, perhaps toward elimination.
The second issue, and I will treat this very quickly, as
you asked the question earlier, Mr. Chairman, or I believe it
was you, or perhaps a member of the panel, about the health
impacts. We have just heard from Ms. Chamberlain and I would
like to point out that a consensus has emerged.
Reviews by the scientific panels from the U.S. Government,
the national toxicology program, and the State governments,
such as California's own cariogenic identification committee,
and even international health organizations such as the World
Health Organization's international agency for research on
cancer, and more recently the European community, have all
declined to name MTBE as a carcinogen.
So when we are looking at this, we hear about MTBE leaking
out of a tank, and MTBE being the bad guy. It is not just MTBE.
There are a lot of other constituents in gasoline that are
truly quite negative and harmful to the environment and to the
human beings.
If you find MTBE, it is the canary in the mine shaft. It is
saying, hey, you can taste this, and you can smell this, but
what is coming along with this are benzene, touline, and truly
carcinogenics that are negative.
And so the bottom line is that we go to the next topic,
which is the leaking underground storage tanks. We don't want
this stuff coming out. None of us want it in our water supply,
and there is no reason for it.
But as the GAO has pointed out in a very thorough report,
many States and the Federal Government, even though they are
trying very hard to have an effective program are not doing
enough to properly and effectively enforce the LUST laws
requiring that leaks be detected and stopped before they become
Ms. Chamberlain's environmental issue.
We don't have a problem if we have got good tanks, whether
they be double-lined recommended by EPA as they are thinking
about, and in many instances you even have States where they
know a tank is leaking, and there is no law that forbids, and
they continue to fill the tank.
Some States do have laws against that and others don't.
Much needs to be done in the leaking underground storage tank
area. There is room for that and it is the solution to much of
the problem that exists today. We don't know enough about all
of the effects of MTBE, or ethanol, or any other future type
additives that might be considered as we go down the pike.
MTBE, which is the chosen oxygenate, perhaps wasn't looked
at as thoroughly as they might with regard to water solubility,
and these new items that they want to use down the line, no one
has studied or looked at this, and yet potential decrees are
coming to life either to ban it or to let's switch to something
else.
We really need to look thoroughly before taking action is
what I am saying. The bottom line is supply and distribution. I
think DOE covered the area very well. It is just apparent that
the cost to the consumer will be quite substantial if you end
up with less MTBE in the marketplace.
And in our current situation, and based on a statement that
I heard you make this morning on the radio with regard to the
current situation we find ourselves in in this world, there is
a great deal of concern about keeping things operating, and
national security, and to tinker with a system at this point in
time in any direction toward a change would not necessarily be
wise. A positive action would be working on the underground
storage tank system. Thank you.
[The prepared statement of Tom Adams follows:]

Prepared Statement of Tom Adams, President, Oxygenated Fuels
Association

Chairman Greenwood and Members of the Committee, I want to thank
you for this opportunity to appear on behalf of the Oxygenated Fuels
Association to address issues related to national energy and fuels
policy and the role of MTBE. OFA is the national trade association of
manufacturers of oxygenates, principally MTBE. For a variety of
environmental, commercial and performance-related reasons, MTBE has
become the oxygenate of choice for making RFG outside the Midwest. MTBE
is used in 80-85 percent of all the RFG produced today and comprises
significant volumes of the national gasoline supply. As the Dept. of
Energy points out, MTBE is valuable not only from the standpoint of
it's benefit to cleaner air, it is contributing over 400,000 barrels of
gasoline production which is equal to the output of 5 US refineries.
This hearing is quite timely for a number of reasons, not the least
of which is the continuing interest on the part of the Administration
and the Congress to develop a comprehensive energy program for this
nation, while ensuring environmental progress. MTBE is a central
element of ensuring both. Adequate fuel supply and distribution is a
critical component of the economy's health and we and others believe
that it is incumbent upon our leaders to take a reasoned and
responsible approach to addressing this issue. As President of a trade
association representing companies who are engaged in providing a
significant component of the nation's gasoline requirements, I want to
clear away some of the underbrush surrounding the use of MTBE and the
role it plays in maintaining a clean and secure source of octane as
well as insuring an adequate supply of gasoline at reasonable prices.
First, I would like to address, head on, the issue of MTBE and
water quality, which I know is of personal concern to you and others on
this Committee. First--the facts. Invariably, the presence of MTBE in
groundwater has been directly linked to underground storage tanks
(USTs) leaking gasoline for an extended period of time--even years in
some instances. These leaks, confirms a recently released report by the
General Accounting Office (GAO), ``are typically due to inadequate or
non-existent UST inspection, enforcement and/or maintenance
practices.'' MTBE is easier to smell and detect in water than other
gasoline constituents, however, make no mistake about it, the presence
of MTBE in a water system means that gasoline is leaking from a
containment system. MTBE has rarely been detected in groundwater at
levels deemed unsafe by the US EPA. The vast majority of MTBE
detections have been at concentrations below five parts per billion
(ppb)--far below the EPA Consumer Advisory for MTBE that sets a
suggested standard for prolonged exposure of 20 to 40 ppb to avoid
unpleasant taste and odor. Several states have confirmed that MTBE does
not pose a threat to public health or water sources. For instance, the
New Jersey Department of Environmental Protection reported that data
from 400 of the state's public community drinking water supplies found
no instance where MTBE approached New Jersey's drinking water standard
for MTBE. The New Jersey report noted that, ``MTBE contamination is not
currently a public health concern in New Jersey public drinking water
supplies.'' In another case, California, in early October, the
California Department of Health Services reported that MTBE has been
detected in only 0.9 percent of all water sources sampled (79 of
9,062), with only 0.2 percent of all samples exceeding California's
primary health standard for MTBE (21 of 9,062).
In addition, an August report by the engineering consultant firm
Malcolm Pirnie on water quality impacts in California finds that
detections of MTBE in both surface and public water supplies have
steadily decreased since 1998--the year in which new federal tank
design improvements went into affect. The EPA's Blue Ribbon Panel
Report and the UC-Davis Study both based their recommendations to
reduce MTBE use largely on the assumption that MTBE groundwater
detections would increase. The fear expressed by the Blue Ribbon Panel
was that MTBE was not a health or environmental threat, but that; it
could become such a threat if not properly controlled. We are seeing
``the tip of the iceberg'' was the refrain among some Blue Ribbon Panel
participants. While it is always prudent to be cautious, it is very
important to now understand that the key assumptions made by the Blue
Ribbon Panel and UC-Davis have not come true--MTBE detections are not
wide-spread, and, more importantly, MTBE is not being found at levels
that pose a threat to human health, the environment, and even at levels
that may cause consumers to taste or smell MTBE in water. In short, it
appears that there never was an ``iceberg.''
There are reasons why MTBE detections have not become the threat
predicted by the Blue Ribbon Panel. Ongoing state and federal UST
upgrade initiatives have helped to control releases of gasoline into
the environmental. The collective focus, as stated in the GAO report,
toward properly designing, installing and maintaining modern gasoline
storage systems has helped to ensure better containment of gasoline,
providing an increased margin of safety. At the time of the Blue Ribbon
Panel, EPA estimated that more than 20 percent of all USTs failed to
comply with federal installation and maintenance requirements. Today,
more than 90 percent of USTs meet federal requirements for improved
installation and maintenance. As a result, gasoline leaks are been
significantly reduced and, therefore, MTBE detections (like all
gasoline components) are not posing the problems predicted by the Blue
Ribbon Panel.
However, further improvement to the nation's USTs program must
continue. As the GAO Report recommended, many states and the federal
government are not doing enough to properly and effectively enforce
current UST laws requiring that leaks be detected and stopped before
they become an environmental issue. For example, at the time of the
Blue Ribbon Panel, EPA estimated that 40 percent of all UST failed to
meet federal requirements for leak detection. Today, EPA reports that
there has been LITTLE IMPROVEMENT in leak detection compliance. This
lack of enforcement allows known gasoline leaks to continue unabated,
risking the health of citizens and the environment. Effectively
detecting gasoline leaks from UST through improved detection,
monitoring and enforcement--as federal law requires and the GAO Report
specifically recommended--is the key to preventing gasoline
contamination.
In virtually every instance today where gasoline (with or without
MTBE) is detected in a monitoring well or water resource, it can be
directly linked to the failure to properly enforce current laws that
require rapid leak detection and monitoring.
OFA looks forward to working with this Committee and industry to
develop cost-effective ways to further improve our nation's tank
system.In those instances where gasoline containing MTBE does escape
from a leaking underground gasoline storage tank, recent studies prove
that it can be easily and cost effectively remediated. A recent Malcolm
Pirnie evaluation of California MTBE remediation efforts concludes
``[i]n summary, unit costs for remediation of MTBE impacted sites, and
unit costs for MTBE removal from groundwater are likely to decrease in
the future as a consequence of research efforts . . .'' Further, a
review of recent EPA data in response to a survey of states remediation
practices and findings relating to MTBE finds that MTBE remediation
costs are consistent with the costs of remediation of gasoline
generally.
It is apparent that the cost of properly enforcing current UST law
is more cost-effective than banning the use of one of the most
effective clean-burning gasoline components used today--especially at a
time when gasoline supplies are tight, prices are high, and, in light
of the events of September 11, issues of energy security are more
important than ever.
I would like to specifically discuss Pennsylvania's experience with
MTBE and underground storage tanks.
Like many other states, Pennsylvania has created a mechanism to
assist their underground storage tank owner/operators to meet their
obligations under federal law. Effective 2-1-94, UST owner/operators
have been covered by the Underground Storage Tank Indemnification Fund,
which, after the payment of a $5,000 deductible, covers releases up to
$1,000,000. Revenue for the Fund is derived from fees paid by UST
owners/operators. The Fund is required to be actuarially sound and from
a financial standpoint is extremely strong. Activities of the Fund are
administered by a board composed of various state agencies and parties
from the regulated community.
Recognizing that prevention of releases was the best way to protect
the integrity of the Fund and protect the environment, the Board worked
with the Pennsylvania Legislature to adopt a number of measures. First,
they created a low interest loan fund to assist small tank owner/
operators meet the upgrade requirements under federal law. Second, the
Board appropriated money to create a program where out-of-service and
abandoned tanks would have their contents pumped out and the tanks
sealed at no cost to small operators. Funds were also set aside for DEP
to clean up sites where there was no identifiable responsible party.
Another interesting fact obtained from the 2000 Annual Report of
the Fund shows that average cost to clean up a release in the
Commonwealth is $106,656. The southeast part of the state, where RFG is
required to be sold, actually has the lowest cost per cleanup level at
$96,860.
Congress has already begun consideration of measures to
specifically provide additional protection against possible gasoline
leaks from UST systems. In late July, the House passed its
Comprehensive Energy Package (HR 4). Included in that Bill was language
to appropriate an additional $200,000,000 from the LUST Trust Fund for
the assessment, corrective action, inspection and monitoring for
possible MTBE detections. More recently, industry has developed
legislative language to provide increased funding for states to be used
specifically for improved enforcement, inspection and compliance
initiatives. OFA feels that this legislative approach is the proper
course of action to best ensure that gasoline containment systems are
not continuing to leak into the environment.
Regarding health impacts, a consensus has emerged. Reviews by
scientific panels from the US government (the National Toxicology
Program), state governments (such as California's own Carcinogenic
Identification Committee) and even international health organizations
(such as the World Health Organization's International Agency for
Research on Cancer and, more recently, the European Community) all have
declined to list MTBE as a human carcinogen. Indeed, the Health Effects
Institute, in June of this year released a report stating that
``effects of MTBE exposure are likely to be no more, and may be less,
than the effects seen in previous studies.'' Therefore, they concluded,
``MTBE would be considered less likely to have adverse effects than
previously thought.''
Now then, to air quality and MTBE's role in Reformulate Gasoline.
MTBE is not a new gasoline additive limited only to RFG. It was first
used in gasoline in the late-1970's as an octane enhancer to replace
lead. Today, estimates show that MTBE is blended to some degree in
approximately 30 to 50 percent of all gasoline sold in the US,
including RFG. By every measure, clean-burning RFG blended with MTBE
has exceeded all pollution reduction goals substantially and cost-
effectively improving the nation's air quality. RFG has cut smog-
forming pollutant emissions by over 17 percent, the equivalent of
removing 64,000 tons of harmful pollution from the air we breathe or
taking 10 million vehicles off our roads. RFG has reduced emissions of
benzene, a known human carcinogen, by some 43 percent, while reducing
total toxic air emissions by about 22 percent. Cleaner-burning MTBE
accounts for a large part of the overall emission reductions from RFG.
In 1998, the Northeast States for Coordinated Air Use Management found
that RFG with MTBE substantially reduced ``the relative cancer risk
associated with gasoline vapors and automobile exhaust compared to
conventional gasoline,'' concluding that today's RFG reduced cancer
risk by 20 percent over conventional gasoline.
Finally, by requiring RFG to contain a minimum 2.0 percent oxygen
by weight, Congress recognized, in the 1990 Clean Air Act, that
oxygenated compounds such as MTBE enable refiners to reduce air
pollution while maintaining octane levels and fuel performance and
stretching the use of a barrel of oil. In RFG, oxygenates allow for
more complete fuel combustion, reduce carbon monoxide emissions during
the winter months, smog-forming volatile organic compounds (VOCs) in
the summertime, and toxic air emissions year-round. Despite other
oxygen choices, refiners have overwhelmingly turned to MTBE to satisfy
the RFG oxygen content requirements.
For the reasons mentioned above, it is our view that legislators
carefully examine the issues surrounding MTBE. What is the truth vs.
speculation.
I'd like to leave you with these facts:

MTBE is an integral component for extending the nation's
gasoline supplies and has been vital in helping to minimize
gasoline supply shortages. With current crude oil imports
exceeding 50 percent of overall demand and US refineries
essentially operating at full capacity, there is no margin for
error with regard to gasoline supply. Banning or reducing the
use of MTBE is equivalent to shutting down five US refineries,
which would further tighten supplies and substantially impact
gasoline prices for consumers. Daily in the United States about
220,000 barrels, that's 9.24 million gallons (about 3.37
billion gallons per year) of MTBE are produced for our gasoline
supply.
Up to 15 volume percent of MTBE can be easily blended into
finished gasoline. It is particularly valuable during refinery
outages and peak summertime demand when additional supplies are
needed most. It comprises approximately 4 volume percent of the
overall US gasoline pool; and in some areas it makes up over 10
volume percent of the RFG supply.
Because MTBE is mainly produced mostly from natural gas
derivatives, it reduced dependence on foreign oil and is less
susceptible to supply shocks. DOE reports that MTBE use
accounts for 71 percent of the Energy Policy Act's requirements
for use of alternative fuels.
A number of economic studies indicate that removing MTBE from
the gasoline supply will significantly reduce the production
and increase the market cost of gasoline, as much as $3.6-$10
billion/year (not including additional subsidies for blending
additional ethanol, any unplanned refinery outages and
distribution system disruptions). Much of these increased
gasoline costs will lead directly to increased profits for
refiners. The California Energy Commission describes an
immediate MTBE phase out as ``catastrophic.'' The CEC estimates
the refiner cost of phasing out MTBE (in California only) to be
at least 5 to 7 cents/gallon.
Thank you, Mr. Chairman for this opportunity to testify. I look
forward to working with you on these matters and welcome any questions
you and the Members of the Committee have at this time.

Mr. Greenwood. Thank you, Mr. Adams.
Mr. Dinneen, you are recognized for 5 minutes for your
testimony. Thank you for being here.

TESTIMONY OF BOB DINNEEN

Mr. Dinneen. Thank you, Mr. Chairman, and good afternoon,
Mr. Chairman, and members of the committee. On behalf of the
Nation's ethanol producers, I want to thank you for the
opportunity to be here today and provide testimony at this
important hearing, and I give you great credit for the
leadership that you have taken on this important issue.
Now, I have a lengthy statement prepared by staff, far more
erudite than I, that goes into great detail about the
environmental benefits of oxygenates generally, and ethanol
specifically, which I commend to your staff.
But I have no intention of reading it here today, because
at some point I would like to be invited back. But what I do
want to say, however, is that the RFG oxygen standard has done
exactly what the Congress intended when it created it in 1990.
The combination of the performance standards and the oxygen
standard have combined to provide greater environmental
benefits than would have been achieved by the performance
standards alone. But how one views the efficacy of the oxygen
standard depends entirely on one's perspective.
From the perspective of Illinois EPA Director Tom Skinner,
where ethanol RFG is used in Chicago and Milwaukee, the program
has been a tremendous success, because he has seen dramatic air
quality improvement without any degradation of drinking water
supplies.
From the perspective of California, or New York, or
Pennsylvania, Mr. Chairman, the program has been far from the
stellar success that was envisioned by the Congress. But that
is not because of the oxygen requirement. That is obviously
because of the detection of MTBE in drinking water supplies.
The oxygen content requirement has nothing to do with it. I
can't tell you what to do about MTBE contamination. I can tell
you that simply eliminating the oxygen standard as a way of
getting at that problem is not necessary, and quite frankly is
tantamount to throwing the baby out with the bath water.
Now, some argue that eliminating the oxygen standard is
necessary because there simply isn't enough ethanol to meet the
demand if MTBE is removed. We believe that such concerns are
absolutely unfounded given the unprecedented growth of ethanol
production that has occurred over the past several years.
Let's review some of the numbers. Because ethanol has twice
the oxygen content of MTBE, refiners would need only half as
much volume to meet the oxygen requirement of RFG. The
Department of Energy estimates that the demand for ethanol and
RFG if MTBE were to be eliminated would be approximately 2.5
billion gallons.
Now, U.S. ethanols current capacity is approximately 2.3
billion gallons. But there are 13 plants under construction
today, and 33 expansions to existing facilities that are
underway today that are going to add 340 million additional
gallons by next summer.
Beyond that, Mr. Chairman, there are planned facilities in
parts of the country that you don't typically see ethanol
production today, beyond the traditional grain belt. Mr.
Chairman, there is a planned facility in York County,
Pennsylvania. There are planned facilities in Oregon, in Maine,
in Tennessee.
As the industry grows, it is going to grow far beyond the
grain belt, and with new technologies, and new feed stocks, and
that's why this industry is absolutely the fastest growing and
the most dynamic industry that there is today.
In fact, after an exhaustive study this summer by the
California Energy Commission, they determined that there is
going to be more than 4 billion gallons of ethanol production
by the end of 2003. That is more than enough to meet the 2.5
billion gallons needed for RFG, while continuing to supply
existing oxifuel and octane markets, which currently compromise
about 1.2 billion gallons of ethanol demand.
Mr. Chairman, I am a realist, and I recognize that refiners
have made a politically compelling case for flexibility,
despite our industry's capability to supply the market. But I
would remind the committee that the oxygen standard was adopted
to promoting a number of important policy goals.
Among those were rural economic development, fuel
diversity, and energy security. Those objectives are as
important today as they were in 1990, perhaps even more so.
Now, legislation has been introduced, H.R. 2423, that would
create a much more flexible renewable fuel standard that would
perverse the public policy goals of the Clean Air Act, while
providing refiners far more flexibility.
Mr. Chairman, I would encourage you to add a similar
provision to your bill. Finally, let me just make a couple of
comments about boutique fuels. I am not smart enough to know
whether the myriad of State authorized low RVP programs around
the country is a problem.
The recently released EPA report seems to suggest that it
is not a problem until there is a disruption in supply or
distribution. What I can tell you is that simply eliminating
the oxygen standard will not reduce the number of boutique
fuels at all, and would actually exacerbate the problem by
reducing gasoline supply.
The only way to address regional and seasonal gasoline
price spikes is to increase supply, and that is exactly what
the oxygen standard is doing, and that a renewable fuel
standard could do.
H.R. 2249 introduced by Congressman Blunt and Rush, and
supported by Speaker Hastert, reduces the number of fuels to
just three, enhancing fuel fungibility, without reducing fuel
supplies. That is the kind of bill that I believe deserves the
support of this committee.
Mr. Chairman, we have an energy problem in this country. We
simply don't have enough domestic production. Refineries are
operating at 96 percent of capacity, and there has not been a
new refinery built in this country in 25 years, and imports are
rising at an alarming rate.
The dependency on foreign oil stifles our economy,
constrains our environmental policies, and dictates our foreign
policy. President Bush recently stated that we will not have
homeland security until we have energy independence. He is
absolutely right.
Increasing the production use of fuel ethanol is an
important first step toward that goal, and I am here to tell
you that farmers are prepared to be the foot soldiers in the
battle for energy independence.
It is time for Congress to pull the trigger on a renewable
fuel standard that will provide a more secure energy and
economic future for all Americans. I thank you, Mr. Chairman.
[The prepared statement of Bob Dinneen follows:]

Prepared Statement of Bob Dinneen, President, Renewable Fuels
Association

Good morning Mr. Chairman and Members of the Committee. I am very
pleased to be here to discuss the reformulated gasoline program (RFG)
generally, and the RFG oxygen content requirement specifically. These
are important issues with far-reaching consequences for both consumers
and air quality, and I appreciate the opportunity to provide comments
on behalf of the domestic ethanol industry.
The Renewable Fuels Association (RFA) is the national trade
association for the domestic ethanol industry. Our membership includes
a broad cross-section of ethanol producers, marketers, agricultural
organizations and state agencies interested in the increased
development and use of fuel ethanol. There are 57 ethanol production
facilities in 21 states in operation today, including a growing number
of farmer-owned cooperatives that have begun production in just the
past five years. The industry currently is on track to produce a record
1.8 billion gallons of ethanol in 2001, utilizing more than 700 million
bushels of grain and making ethanol the third largest user of corn,
behind only feed and export markets.

THE REFORMULATED GASOLINE PROGRAM WITH OXYGENATES:

The Clean Air Act Amendments of 1990 established the oxygen
requirement in the federal RFG program to achieve several important
public policy goals, including environmental benefits from the
reduction of vehicle emissions, rural economic benefits to be gained
from increased use of agricultural commodities in the production of
renewable fuels, and energy security with the increased use of
domestically-produced fuels. These public policy drivers remain
critically important today.
The federal RFG program, with its oxygen content requirement, has
effectively improved air quality. According to the Environmental
Protection Agency (EPA), RFG is reducing ozone-forming hydrocarbon
emissions by 41,000 tons and toxic pollutants such as benzene by 24,000
tons annually, the equivalent of taking 16 million vehicles off the
road each year. A study by the Northeast States for Coordinated Air Use
Management (NESCAUM) demonstrates that RFG reduces the cancer risk from
gasoline by about 20 percent. These benefits significantly exceed the
Clean Air Act's performance standards for hydrocarbons and toxics, at
least in part because of the federal oxygen content requirement.
However, the widespread use of MTBE to satisfy the oxygen
requirement has had a negative impact on water quality. As the Congress
considers policies to address MTBE contamination and assure affordable
and plentiful fuel supplies, the value of providing increased market
opportunities for domestically produced renewable energy, such as
ethanol, should be a top priority. Recent tragic events and the war
against terrorism in the Middle East underscore our nation's dangerous
dependence upon unstable regions of the country for our energy
supplies. At the same time, American farmers continue to face record
low commodity prices and depressed export markets. The RFA supports
policies that maintain the air quality benefits of the existing RFG
program and recognize the laudable policy drivers behind the oxygen
standard: the environmental, rural economic and energy security
benefits of renewable fuels such as ethanol.

PROTECT THE ENVIRONMENT:

The RFG program assures air quality benefits through the
combination of emissions performance standards and an oxygen
requirement. As a result, the RFG program has provided toxic reductions
in excess of those required by the performance standards alone. The
oxygen standard has also provided reductions in carbon monoxide, fine
particulates and polycyclic organic matter, for which there are no
performance standards.

Aromatic Content
The RFG program was initiated largely in response to environmental
concerns about the rising levels of aromatics in gasoline. To replace
the lost octane associated with the lead phase-down of the late 70's,
refiners dramatically increased aromatic levels. By the mid-80's, some
premium gasolines had BTX levels as high as 50 percent. Seeing this,
Congress created the RFG program in 1990, including a specific cap on
aromatic levels. EPA forfeited that cap in the regulations implementing
the RFG program in favor of a complex model, with the understanding
that the use of oxygenates in RFG would supply the octane and volume
provided by aromatics.
Indeed, the RFG program has been successful in large part because
of the significant reduction in aromatics in gasoline that results from
oxygenate blending. It has long been recognized that adding high octane
oxygenates to the gasoline pool has resulted in a substantial decrease
in the use of aromatics. While conventional gasoline contains more than
30% aromatics, EPA's 2000 RFG survey found that MTBE gasoline contained
about 19.2% aromatics while ethanol RFG contained 17.5% aromatics.
If the octane loss due to the likely phase out of MTBE is not
replaced with ethanol, the use of aromatics will most certainly
increase. In testimony before the MTBE Blue Ribbon panel, one major
refiner suggested that if MTBE were banned and the oxygen requirement
was removed, refiners would replace the lost octane with aromatics such
as toluene. Many aromatics, such as benzene, toluene and xylene (BTX),
are now listed by EPA as ``Mobile Source Air Toxics, MSATs.''
Increasing aromatics in fuels increases both hydrocarbon and carbon
monoxide emissions. Aromatics exhausted from motor vehicles are potent
ozone formers that also photochemically react in the atmosphere to
produce fine particulate aerosols composed of diesel-like particulate
matter. They also dealkylate in the exhaust to yield cancer-forming
benzene.
Congress should assure that as MTBE use is reduced, the cap on
aromatics originally included as an RFG specification is re-
established.

Nitrogen Oxide Emissions:
Nitrogen oxides react in the atmosphere to produce ozone, acid rain
and fine particulate. Just this month, the Automobile Manufacturers
released a study that examined oxygen and sulfur effects on
NOX emissions from production prototypes of low and ultra
low emitting vehicles that are expected to produce more than half of
the exhaust NOX from the automobile fleet in 2005. The data
demonstrates that the non-oxygenated fuels produce more NOX
than fuels with oxygen contents of 2% from MTBE and 4% from ethanol. If
California was to update its model to account for high emitting
vehicles and use the newest vehicle emission data, oxygenates would not
increase NOX above NOX emissions from non-
oxygenated gasoline.

Hydrocarbon and Carbon Monoxide Emissions:
Hydrocarbons and carbon monoxide are responsible for ozone
formation. In fact, the National Academy of Sciences concluded last
year that CO is responsible for as much as 20% of the ozone coming from
automobiles. EPA and the California Air Resources Board (CARB) have
recognized the benefit of carbon monoxide reduction by high oxygen
fuels through a gasoline vapor pressure allowance.
Motor vehicles emit hydrocarbons in the form of exhaust and
evaporative emissions. If the hydrocarbons are aromatics, they will
also make particulates in the atmosphere. Data collected in a large
number of investigations shows conclusively that adding oxygenate to
gasoline reduces exhaust hydrocarbon and CO emissions from both normal
and higher emitting vehicles regardless of their model year.
Importantly, data collected by the Auto Industry on new and prototype
LEV and ULEV vehicles in California shows that hydrocarbon and carbon
monoxide emissions from these vehicles are decreased by a similar
percentage through the addition of oxygen to gasoline as compared to
the in-use fleet.

Particulate Matter:
Cars and pickup trucks in the existing fleet are significant
contributors of fine particulate emissions. While cars and trucks emit
smaller amounts of particulate than large diesel trucks, they represent
95% or more of the vehicles on the road and may be responsible for up
to half of the exhaust particulate emissions from cars, buses and
trucks. Fine particulate is responsible for chronic respiratory
problems. Diesel particulate has been also linked to cancer; in terms
of particulate size and chemistry, diesel particulate and automobile
particulate are similar.
Oxygenates dramatically reduce particulate emissions. Because the
RFG program includes no performance standards for PM, these benefits
would be lost if the oxygen standard is repealed.

Polycyclic Organic Matter in Motor Vehicle Exhaust:
POM's are heavy aromatics that are similar to compounds found in
diesel exhaust, coal tar and cigarette smoke, and are estimated to be 7
times more carcinogenic than benzene. The mass of POM found in motor
vehicle exhaust is small compared to other air toxics. However, when
potency is considered, POM's are nearly as important as benzene and 1,3
butadiene emissions in terms of their cancer risk. Raising the aromatic
content of gasoline could further increase the POM risk. EPA's complex
model does not consider specific fuel affects such as oxygenates and
aromatics on POM emissions.
Recent studies have shown that the addition of oxygenates reduces
POM emissions substantially, an average of 33% with 3.5 wt.% oxygen
fuels compared to non-oxygenated fuel. Thus, we would expect that
decreasing the use of oxygenate and increasing aromatics would further
raise the risk of increased POM in the environment.

Cancer-Effects:
The EPA year 2000 RFG survey was analyzed to compare toxic
emissions for ethanol and MTBE gasoline. On a mass basis toxics were
reduced by 31.4% for MTBE gasoline compared to the baseline fuel. For
ethanol fuels, the reduction was 27.5%. The difference is attributed to
the greater degree of benzene removal from gasoline manufactured on the
gulf coast because of strong markets for chemical grade benzene. The
average concentration of benzene in MTBE gasoline was 0.60% in 2000 and
0.66% in 1999 while it was 0.77% in 2000 and 0.92% in 1999 in ethanol
gasoline.
According to the survey, MTBE gasoline contains more aromatics and
olefins than ethanol gasoline. The average aromatics and olefins for
MTBE gasoline were 19.15% and 10.50% respectively. For ethanol gasoline
the averages were 17.49% and 6.72%. When considering potency weighted
toxics, MTBE gasoline reduced the cancer risk by 28.9% while ethanol
gasoline reduced the risk by 34.8%.

[GRAPHIC] [TIFF OMITTED] T6306.003

Any policies considered by Congress to address MTBE
contamination should ensure that the emissions reductions
benefits of oxygenates outlined above are maintained, and that
there is no backsliding on emissions of aromatics,
NOX, hydrocarbon, carbon monoxide, particulate
matter and polycyclic organic matter. In addition, EPA should
conduct a rigorous analysis of the ``real world'' emissions
benefits of oxygen, including the impact on higher emitting
vehicles, off-road vehicles and off-cycle driving (areas where
the impact of oxygen is more critical) to assure there is no
backsliding from these effects.

Enhance Energy Security:

``We will not have homeland security until we have
energy independence.''
President George Bush, October, 2001

The need for domestically produced energy supplies has
never been greater. Recent tragic events showcase the danger of
our growing dependence on imported petroleum, which continues
to threaten our national energy security. Today we are more
reliant than ever before on foreign nations to supply our
insatiable and growing appetite for oil, importing 57% of our
petroleum. At the same time, U.S. oil production has fallen to
the lowest point in 30 years. By importing more refined
petroleum products than ever before, the U.S. is sending value-
added refining jobs overseas. Meanwhile, demand for refined
products will continue to grow.
Refineries are operating at historically high rates of
utilization, exceeding 95% on an annual basis. Refiners have
limited investment in recent years, using much of their
existing refining capacity cushion to meet increased gasoline
demand. Meanwhile, no new refineries have been built in 25
years.
According to the National Petrochemical & Refiners
Association, ``The U.S. is gravitating toward a situation in
which demand for refined products is overtaking the capability
of traditional supply sources . . . With existing refining
capacity essentially full, the U.S. will have to find
additional sources to cover the incremental demand.'' As a
domestic, renewable source of energy, ethanol can increase fuel
supplies, reduce our dependence on foreign oil and increase the
United States' ability to control its own security and economic
future.
Blending of oxygenates like ethanol directly increases the
supply of gasoline. Ethanol can and should be a more consistent
partner with domestic oil companies to provide the incremental
additional supplies that are obviously needed. Ethanol is
blended with gasoline after the refinery process. Therefore,
blending ethanol adds additional volume to the transportation
fuel market and helps ease the burden on the refinery sector
that has no hope for quick expansion. The ethanol industry is
producing at a record pace. In 2001 we will again shatter all
previous production records. And the ethanol industry can
double production within two years to meet new demand created
by a phase out of MTBE. We are prepared to meet the challenge
of providing increased fuel supplies--today.
In light of recent events, Congress must tread cautiously
with regard to fuel supply and availability. MTBE currently
represents about 3% of the nation's transportation fuel supply.
If it is precipitously eliminated without providing for a
replacement of that supply, gasoline prices will clearly rise.
Indeed, a recent memo by the Department of Energy concluded
that eliminating MTBE use without replacing it with a renewable
fuel such as ethanol would reduce our gasoline supply by
between 500,000 and one million barrels per day, or 6-12% of
current gasoline consumption.

Economic Development:

The processing of grains and other agricultural biomass for
ethanol production provides an important value added market for
American farmers, helping to raise the value of commodities
they produce. As the third largest use of corn behind feed and
exports, ethanol production utilizes nearly seven percent of
the U.S. corn crop, or over 600 million bushels of corn, adding
$4.5 billion in farm revenue annually. The U.S. Department of
Agriculture (USDA) has determined that ethanol production adds
25-30 cents to every bushel of corn.
Ethanol production facilities provide much-needed economic
stimulus and new capital investment to rural communities faced
with record low commodity prices and shrinking export markets.
There has not been an oil refinery built in this country in 25
years. But during that time there have been 57 ethanol
refineries built, stimulating rural economies and creating
jobs. Industry growth offers enormous potential for overall
economic growth and additional employment in local communities
throughout the country. According to a Midwestern Governors'
Conference report, the economic impact of the demand for
ethanol:

Adds $4.5 billion to farm revenue annually
Boosts total employment by 195,200 jobs
Increases state tax receipts by $450 million
Improves the U.S. balance of trade by $2 billion
Results in $3.6 billion in annual savings to the
Federal Treasury

Rising Ethanol Production Capacity:

The U.S. ethanol industry is expanding rapidly to meet new
market demand created as states phase out the use of MTBE. In
addition to the over 2 billion gallons of current production
capacity, 34 existing ethanol plants are undergoing expansion,
adding an additional 235 million gallons of capacity, and
another 13 plants with a combined capacity of nearly 300
million gallons are currently under construction. Projects
planned for 2002/2003 will result in an additional one billion
gallons of production capacity, for a total of 3.5 billion
gallons by the end of 2003. A recent industry survey conducted
by the California Energy Commission concluded there would be
two billion gallons of new ethanol production capacity on line
by 2003, more than enough to meet the 580 million gallons of
oxygenate demand created in California and the 800 million
gallons in the northeast.

U.S. Ethanol Production
(Million gallons/year)
----------------------------------------------------------------------------------------------------------------
Year 2001 2002 2003 2004 2005
----------------------------------------------------------------------------------------------------------------
Existing Plants w/Expansions....................................... 2219 2481 2689 2774 2852
New Plants......................................................... 82 518 1329 1387 1575
Total.............................................................. 2301 2999 4018 4161 4427
----------------------------------------------------------------------------------------------------------------
Source: California Energy Commission Survey, August, 2001

There is ample grain to greatly expand ethanol capacity. USDA has
estimated that, in the shorter term, corn could be used to produce
about 6 billion gallons per year of ethanol without disrupting
commodity markets. The Department of Energy has projected that 10
billion or more gallons per year of ethanol could be produced from crop
residues (rice straw, sugarcane bagasse) and dedicated biomass crops
produced on idled land by 2025.

BOUTIQUE FUELS

Last week, U.S. EPA released a staff ``White Paper'' on boutique
fuels that looks at changes that could be made to the Clean Air Act to
reduce the number of fuels nationwide over the long term. Many of the
options outlined would require legislative and regulatory action. The
analysis includes four main fuel options that are meant to capture a
wide range of possible future fuel programs in terms of economic and
environmental impacts and the degree to which they simplify the current
fuel system. As for the RFG oxygen requirement, EPA recommends that if
it is removed it should be replaced by a nationwide renewable fuel
program. The Agency correctly notes the Congressional objectives of the
oxygen mandate. ``When Congress authorized the RFG program and its
mandated oxygen content requirement, they did so with the intent of
enhancing agricultural markets through the demand for ethanol that
would result, enhancing energy security and improving air quality,''
the report states.
The Agency acknowledges the air quality benefits of oxygenates
generally, and the additional greenhouse gas emissions benefits of
renewable ethanol, specifically. ``It is our belief that any changes to
the CAA oxygen requirement in RFG, including the mandate's role in
cleaner fuels, should be carefully studied and, if adopted, should be
coupled with an alternative requirement for a national renewable fuel
program.''
The Agency concludes there will be no additional costs, and
possible cost savings, associated with an RFS in lieu of the RFG oxygen
mandate. In terms of impact on production capacity, EPA concludes
eliminating the oxygen standard with no nationwide renewable fuel
requirement to replace it would result in an ``overall decrease in
gasoline production capacity.''

LEGISLATION:

The members of the Renewable Fuels Association understand that the
Congress is faced with a daunting challenge of determining how best to
protect water supplies by reducing the use of MTBE without sacrificing
air quality or increasing fuel prices. I believe the framework of the
Chairman's bill, H.R. 20, provides a good starting point for
discussion. But by eliminating the RFG oxygen requirement, without
protecting against backsliding in the areas discussed above for which
there are no performance standards, the bill fails to adequately
protect air quality. H.R. 608, legislation introduced by Rep. Greg
Ganske, addresses the source of the problem, MTBE use, without
forfeiting the environmental benefits of oxygenates. The RFA believes
this bill would be a more appropriate vehicle to address MTBE water
contamination.
But there are other energy issues that the Congress needs to
consider in light of recent events. The Committee has also sought to
address the issue of boutique fuels. Representatives Roy Blunt (R-MO)
and Bobby Rush (D-IL) have introduced bi-partisan legislation, H.R.
2249, to reduce the number of boutique fuels while preserving air
quality. The legislation would reduce the number of fuel formulations
in the U.S. from 15 down to 3, including California RFG, federal RFG
and conventional gasoline. The RFA supports this effort as a means to
improve gasoline fungibility and reduce consumer costs. Congress should
look at this issue closely, and remove states' authority to further
balkanize gasoline markets.
As for enacting a comprehensive national energy policy, renewable,
domestically produced fuels can and should play a larger role in
meeting our nation's energy needs. H.R. 2423, the Renewable Fuels for
Energy Security Act of 2001, would expand domestic liquid fuel
production by requiring that renewable fuels like ethanol and biodiesel
supply an increasing percentage of the U.S. motor gasoline market to
facilitate a movement away from greater and greater imports of oil.
When fully implemented in 2016, renewable fuels would comprise 5% of
the fuel market, an eight-fold increase from today's use.
As the country attempts to grapple with a lack of refining capacity
and increased reliance on imported oil, this legislation provides a
positive roadmap for increasing energy security and stimulating rural
economies by harnessing America's renewable energy potential. America
has the resources to address our long-term energy needs without having
to rely on the benevolence of OPEC. We should be investing here at
home, not overseas, to build a sustainable energy future for our
children. America's farmers are willing and able to help us with our
energy crisis. The federal government should be willing to help them by
promoting increased value-added market opportunities. It's a win-win
situation.

CONCLUSION:

We see ethanol as a solution. Farmers are prepared to be the foot
soldiers in the battle for energy independence. Increasing ethanol use
will allow MTBE to be reduced cost-effectively while protecting
precious water resources and air quality. Stimulating rural economies
by increasing the demand for grain used in ethanol production will help
American farmers. Encouraging new ethanol production from cellulose
feedstocks will provide additional economic and environmental benefits
as ethanol production is expanded beyond the grain belt. The bottom
line is that we need to protect both air quality and water quality.
With ethanol, we can.
Thank you.

Mr. Greenwood. Thank you, sir. Mr. Kahlenberg, welcome.
Thank you for being with us, and you are recognize for 5
minutes for your testimony, and I would suggest that you bring
the microphone pretty close to you, because it is pretty
directional.

TESTIMONY OF DAVID KAHLENBERG

Mr. Kahlenberg. Okay. Thank you. I would like to thank
Representative Greenwood and the members of the committee for
giving me the opportunity today to relay my personal
experiences with MTBE contamination.
Our main concerns that we have regarding MTBEs and gasoline
stem from the potential contamination that can occur in ground
water, specifically in areas close in proximity to drinking
water sources.
The quality and taste of water is affected, and there are
unknown effects with ingesting drinking water with MTBE. There
are no Federal standards for what is considered acceptable in
the MTBE, although there are advisory levels.
State regulations vary from 5 part per billion in
California, but maybe much higher in other States. I reside in
Doylestown, Pennsylvania, and our house is located about a
half-a-mile away from two different gas stations.
In October of last year, we learned that there was MTBE
contamination being released from two gas stations. We found
out from co-workers, and the communication was not all that
terrific. As soon as we found out, we started researching what
is MTBE. We didn't now what it was.
And we tried to find out anything that we could through
town meetings, newspapers, the internet, and so on and so
forth. We stopped drinking our well water immediately, and we
had no choice but to continue bathing and cooking with the
water.
In November, we contacted one of the gas stations who had
set up a hot line for residents in the area, and we explained
that although we would like our well tested, that under the DEP
guidelines, all residents with 2,500 feet were able to have
their well tested, and were required to, and that the company
had done it.
My house was one parcel over that limit, and as a result,
the company refused to test my well. We requested it anyway
because we were concerned. We had a 2-year old child, and not
to mention our own health to be concerned about.
At that point in time, there were some results available,
and we were told that the streets near our house, that the
residents that they had results for, there were no detectable
levels in their wells.
However, they did make a commitment to us that should they
find that any of the residents on my street actually had come
up with detectable levels that they would in fact be back in
touch with us.
In the middle of December of last year, we needed our
well's neutralizer be serviced, and it has nothing to do with
MTBE, but we needed our well's neutralizer serviced, and we had
an odd taste that we were experiencing in our well.
And we contacted a company to have it serviced, and the
service company actually--it was just a rare coincidence
actually, and I view myself very lucky on that day, and that
person who actually serviced our well was the same person who
ended up putting in a carbon filter treatment system on my next
door neighbor's house.
And he had that system put in by the gas company, and MTBE
was in their well, and we found out about that, and we
contacted Exxon the next morning actually, and asked that our
well be tested, and if nothing else, to put a treatment system
in our well.
And the response that we got was that although the company
was willing to put a treatment system in my neighbor's house,
they weren't willing to even test my water. We were very upset
about that, and in fact at that time we were told by the
company that they weren't responsible for the contamination of
any of the wells in my area.
So we had no choice and we had our well tested by a State
certified lab to understand what could have been affecting us.
And what we found out was in fact that we had MTBE present in
our well at a level of 12 parts per billion, which is more than
two times what is allowed in California, and slightly more than
half the acceptable level in Pennsylvania.
Once we found out all these results, we were again in
contact with the companies and its various different offices,
and we tried to get support in having a treatment system put in
our well.
At that point in time, we were also notifying all
neighbors, and we actually found out at that time that a lot of
our neighbors also weren't aware of the contamination that was
in the area and that surprised us as well.
Well, needless to say that through many discussions that we
had we actually had the company agree to test our well, and if
they found MTBE, and they confirmed the results, they would put
a treatment system on.
And I am happy to say that they did the testing, and they
have found the contamination, and they have cleaned up our well
by putting a treatment system in. However, they still don't
claim responsibility to this day in fact for what had happened
to us.
In June of this year, there was a formal letter from the
companies involved to the public, which told them the extent of
the contamination, and formally told us that they were not
responsible for contaminating our well.
This was determined based on a characterization report that
they wrote for the DEP. Neither the companies involved, nor the
DEP, have offered reasonable alternatives and potential sources
for the contamination in my house and for our other neighbors
like myself in the area.
At the same time, we were told that the company will no
longer maintain our well service, which they were providing us
bottled water, as well as testing our well. And that we were
required to maintain our system on our own.
The cost for maintaining the system, depending on how much
testing we end up having done, is somewhere between a thousand
and $2,000 a year. So it is a substantial cost. And in speaking
with different parties involved, there is a lack of site
characterization there for my area, and so we don't understand
what is involved there.
We feel that there aren't any other reasonable sources;
however, we are left to our own volition if we are to actually
learn anything more about the contamination and what caused it.
What is most upsetting is the fact that in the early 1990's
it ends up going through records, and actually the
contamination was known to exist on this site. They knew that
the soils were contaminated as well as the water. However,
there was no testing in the immediate residents in the area who
had public drinking water.
The townships were also not involved. Given the results of
all the water samples collected from the early 1990's through
the present, it is likely that we don't know how many people
may be contaminated by MTBE in the country, and it has taken 8
years for the residents living in the immediate vicinity of the
area where I live to actually be notified of the situation,
where each family could have taken precautionary measures to
not be exposed to potential carcinogens or other health
hazards.
Even after formal submission of the characterization plan
by the company, they still don't know how the contamination
occurred at the gas station that is a half-a-mile away from my
home. So it is possible that there are other gas stations
involved, and a bigger problem.
And like Mr. Adams said earlier, I think that there is a
lot of potential things to come, and that MTBE is only one
marker compound for perhaps a larger problem coming, and thank
you for the opportunity, and I welcome any questions.
[The prepared statement of David and Jill Kahlenberg
follows:]

Prepared Statement of David and Jill Kahlenberg

We would like to thank Representative Greenwood and the
distinguished members of this subcommittee for the opportunity to relay
our personal experiences with MTBE contamination in drinking water
during this hearing.
Our main concerns regarding the use of MTBE in gasoline stem from
the potential contamination that can occur in groundwater, specifically
in areas in close proximity to drinking water sources. The quality and
taste of drinking water that is contaminated is affected, and there are
potential unknown health affects of ingesting the contaminated water
and from inhalation of vapors from the affected water in every day
life. Further, there are no federal standards for what is considered an
acceptable level of MTBE contamination in drinking water. State
regulations vary and begin at 5 ppb in California but can be
significantly higher in other states.
We reside at 3714 St. George Circle, Doylestown, PA in Buckingham
Township. Our house is located approximately 2,550 feet from the
ExxonMobil gas stations at the intersection of Routes 202 and 313
(Poole's Corner). This intersection borders the Doylestown Borough,
Doylestown Township and Buckingham Township.
In October 2000, we learned of MTBE contamination to the
groundwater in our area by the two gas stations located at Poole's
Corner through an off-hand conversation with a co-worker who also lives
in the immediate area; not from the PA DEP, the townships or
ExxonMobil. We have since learned that Buckingham Township was informed
about the contamination from residents of the area, and not from
ExxonMobil, the PA DEP or any of the neighboring townships.
At that point, we began researching information regarding the
Poole's Corner contamination and general information regarding MTBE
through town meetings, newspapers, the internet and conversations with
other residents. As a precautionary measure from potential health
affects, we stopped utilizing our well water for drinking, however, we
continued to use the water from our well for bathing and cooking.
On November 6, 2000, we called the Exxon hotline set up for
residents of the Poole's Corner area to discuss our situation. We were
referred to Mr. Barry Wood of ExxonMobil. He explained at that time,
the testing would occur only on houses within a 2,500-foot radius of
the gas stations, as mandated by the PA DEP. Because our house is
located one parcel beyond the established radius, our house would not
be tested. We requested sampling anyway due to our concern over the
potential for having contaminated drinking water due to the potential
health affects to our then two-year-old child. However, Mr. Wood
reviewed with us the test results from all of the houses tested located
on Yorkshire Road and Knights Way, the streets adjacent to, or facing,
our house. All of the tested houses on these streets had shown a non-
detectable level of MTBE. At this time, no tests had been performed on
parcels located on St. George Circle. At the end of our conversation,
Mr. Wood indicated they would contact us, should any of the results in
our immediate area show a detectable level.
On December 12, 2000, Culligan^' (a vendor for
residential, commercial, industrial water treatment products and
services) came to our house to perform the regular periodic service of
our well's neutralizer and test the hardness levels in our water, due
to an odd taste we were experiencing in our water. During this service
call, we were shocked to learn from Culligan( that our next door
neighbors at 3710 St. George Circle, also outside of the 2,500 foot
radius, were tested by ExxonMobil and had detectable levels of MTBE in
their drinking water. Culligan^' was aware of the MTBE
contamination present at my neighbor's home because in response to
confirming the MTBE contamination at my neighbor's home, they were
contracted by ExxonMobil to install a whole house carbon filter
treatment system at their residence in November/December 2000.
In response to learning that our immediate next-door neighbors
drinking water was contaminated with MTBE, on December 13, 2000, we
again contacted Mr. Barry Wood, Dana Cozza (Special Projects Manager in
Buckingham Township) and Sarah Pantelidou (the PA DEP Poole's Corner
Project Manager). Much to our dismay, Mr. Wood informed us that
ExxonMobil would not pay for our well water to be sampled because our
house was located outside of the pre-established 2,500 foot radius. In
the opinion of ExxonMobil, they were not responsible for any
contamination of the wells located in our immediate vicinity.
Subsequently, at our own expense, we decided to have our well
tested independently by a state-certified laboratory to put our minds
at ease, completely hoping we also had non-detect levels. The results
from the water samples collected from our home on December 18, 2000
indicated that our drinking water was contaminated with MTBE. In fact,
MTBE was present in our drinking water at a level 11.8 ppb, which is
more than two times higher than the acceptable level of MTBE in
drinking water in the state of California, but yet also slightly more
than half the acceptable level in Pennsylvania.
Upon receiving these test results on January 8, 2001, we
immediately contacted Mr. Barry Wood, Sarah Pantelidou, and Dana Cozza
to informed them of our test results. Mr. Wood informed us that he was
not sure which course of action Exxon would take on this matter and
told us that he would get back in touch with us with an answer. After
these conversations, we began to notify our neighbors of our situation,
so they would be aware and could take the appropriate precautions. We
were shocked to learn that some of our neighbors were not even aware of
the contamination at Poole's Corner, let alone the potential affect to
their house, including neighbors who moved into the neighborhood in
September 2000. At this time, we also sent information to Pennsylvania
State Senator Conti, Congressman Greenwood, Governor Ridge and
Pennsylvania State Representative McIllhinney, so they would be aware
of the situation and offer us guidance.
On January 12, 2001, Barry Wood informed us that ExxonMobil agreed
to repeat the sampling of our well and if MTBE was detected in our well
that ExxonMobil would pay to have a whole house carbon filtration
system installed at our house. On January 13, 2001, Geological Services
Corporation (GSC) on behalf of ExxonMobil sampled our potable water.
The results of this testing confirmed the MTBE contamination and
ExxonMobil subsequently had a treatment system installed at our
residence and put us on a bottled water delivery service. After the
installation of this water treatment system, GSC collected water
samples on January 31, 2001, which confirmed that at that time, the
carbon filter system that was installed is effectively removing MTBE
from our drinking water. However, ExxonMobil still does not claim
responsibility for the MTBE contamination in our well.
In a letter to the community of Buckingham Township from
ExxonMobil, dated June 6, 2001, ExxonMobil formally announced they do
not feel responsible for the contamination of wells located in our
immediate location. This determination was based on the Site
Characterization Report for the Exxon facility submitted to the PA DEP
on April 24, 2001. Neither ExxonMobil nor the PA DEP have offered
reasonable alternate potential sources of our contamination. Based on
these statements, ExxonMobil will no longer sample our well, or
maintain our treatment system. All maintenance and testing is our
complete responsibility. The cost of maintenance of the treatment
system and having our water tested has been estimated between $1,000
and $2,000 annually.
In speaking with the PA DEP, there is a lack of site
characterization data for our immediate area. Based on our previous
limited knowledge of hydrogeology, we feel there are no other
reasonable potential sources for the MTBE contamination in our potable
well other than the ExxonMobil sites, but we do not have the resources
necessary to complete the hydrogeologic studies of our area.
Since then we have learned that ExxonMobil and/or the PA DEP knew
about MTBE contamination in the Poole's Corner area as early as 1992.
PA DEP records indicate gasoline leaks at the site in 1990. In 1992,
apparently the first groundwater samples were collected from the site,
and four of the five site monitoring wells tested positive for MTBE
contamination. To our knowledge, neither ExxonMobil nor the PA DEP
informed Buckingham Township prior to 2000 of these results. Also to
our knowledge in response to these releases, none of the private wells
located in the immediate vicinity of the site, beyond the boundaries of
the actual gas stations, were tested between 1990 and 1999. In March
2000, ExxonMobil informed the PA DEP that there was a gasoline release
at Poole's Corner, and again Buckingham Township, and thus the
residents in the immediate area, were not notified of the situation.
Given the results of the first groundwater samples collected from
the site in 1992 indicated MTBE contamination, it is likely that the
now known to be contaminated wells in the Poole's Corner area have
probably been affected since that time. It has taken eight years for
the residents living in the immediate vicinity to be notified of the
situation, during which time, each family could have taken
precautionary measures to not be exposed to potential carcinogens. Also
important to note, even after formal submission of the Site
Characterization Plan, ExxonMobil has not determined how the
contamination occurred, so it is possible that other gas stations could
cause contamination of ground water and never know what happened or how
to prevent contamination in the future.

Mr. Greenwood. Thank you, Mr. Kahlenberg, and thank you for
coming to the hearing, and I know it has been postponed a few
times, and I appreciate you making it into your schedule. Mr.
Early, you are recognized for 5 minutes for your testimony,
sir. Thank you for being here.

TESTIMONY OF A. BLAKEMAN EARLY

Mr. Early. Thank you, Mr. Chairman. I am happy to be here
on behalf of the American Lung Association, and I appreciate
being invited to talk about how we can improve the reformulated
gasoline program.
The American Lung Association has long supported the
reformulated gasoline program as a cost effective way of
addressing ozone air pollution. It is one of the most important
tools available to communities to combat ozone air pollution
across the country, which is actually a growing problem, and
not one that we are really succeeding at defeating at this time
based on the new ozone standard that the EPA issued in the
summer of 1977.
The American Lung Association, having looked at the data
regarding MTBE threats to our Nation's service and ground water
supplies supports the concept of phasing MTBE out of not only
reformulated gasoline, but all gasoline.
This is driven by the potential public health threat of
MTBE in the water supply, and also the fact that MTBE and the
RFG program is causing a lot of public unhappiness with this
program.
We are losing public support for a program which we think
is very valuable, and phasing out MTBE is one way of increasing
public support for RFG, and we might see more communities
actually adopting RFG rather than trying to get out of the RFG
program if MTBE were taken out of the program.
But that has to be accompanied by an elimination of the
oxygen mandate in the reformulated gasoline program. That is
because if you ban MTBE and you maintain the oxygen standard in
reformulated gasoline, it is a practical ethanol mandate in all
reformulated gasoline.
The American Lung Association firmly believes that
mandating ethanol in summer time gasoline, whether it is
reformulated gasoline or conventional gasoline, will contribute
to increases in ozone smog, and we oppose a mandate of that
nature.
Quite simply the big problem with ethanol is that it
significantly increases the volatility of gasoline at levels
above 2 percent. Reducing gasoline volatility is one of the
most important things that our clean gasoline programs are
actually doing to help combat smog.
And that's because evaporation of gasoline from automobiles
as we have gotten more sophisticated tail pipe equipment on our
automobiles, is a bigger and bigger piece of the ozone problem,
in terms of the mobile source contribution.
Ethanol and gasoline also increases NOX
emissions from automobiles, and NOX, along with
VOCs, also contribute to the formation of smog.
The bottom line is that the reduction of carbon monoxide
tail pipes emissions, which ethanol does effectively, doesn't
offset the evaporation increases and the NOX
increases that ethanol also contributes to.
It is argued that in the reformulated gasoline program,
since there is a volatility requirement, that mandating ethanol
and RFG won't be a problem. This isn't true. Data submitted to
the California Air Resources Board shows that reformulated
gasoline with a volatility control, but with ethanol in it,
increases both the permeation of gasoline in automobiles.
That is the penetration of the gasoline through the soft
parts--the rubber hoses, and the valves and stuff--increases
that from 500 to 800 percent in conventional cars, and 15
percent in new cars that are specifically designed to prevent
evaporation.
So, once again even with a controlled fuel containing
ethanol, you are going to have evaporation problems. Second,
reformulated gasoline in many areas would have mandatory levels
of ethanol, and when consumers are driving around an RFG area,
be mixed with conventional gasoline that isn't controlled for
volatility.
And the combination of those two causes significant
increases in volatility. Basically, the bottom line is that the
volatility effect of ethanol is a very serious problem in all
gasoline, whether it is RFG or conventional gasoline. So it
shouldn't be mandated in gasoline.
An MTBE phaseout also has to be accompanied by anti-
backsliding provision for toxins. One of the things that has
been demonstrated very clearly is the RFG program has been very
effective at reducing toxic air polutions, and we believe that
taking MTBE out of RFG will potentially allow refiners to
increase the amount of toxins.
The oil industry has claimed that the current mobile
service air toxins rule that was issued by the Environmental
Protection Agency solves this problem. We don't believe that to
be true.
The data that I submitted in my testimony, there is a chart
that shows that refiners are obtaining about a 16 percent
higher amount of toxins reduction than the level of reduction
that you get under the mobile service air toxins rule.
Congress needs to make sure that we capture that additional
air toxins reduction for the benefit of the breathing public
and not allow that to disappear if we ban MTBE and reformulated
gasoline.
Finally, my testimony has a piece which I will just
summarize in a couple of sentences, which demonstrates that
even in a world where ethanol is not mandated in gasoline, if
we take MTBE out of reformulated gasoline and all conventional
gasoline, because refiners need octane, a very large amount of
ethanol will be used voluntarily by refiners.
We don't need to mandate ethanol. And it is about three
times what is actually being produced in the country today, in
terms of the amount of ethanol, that would be needed simply for
octane by refiners.
So there really isn't a need to mandate ethanol use, and
with that, I will conclude my testimony. Thanks very much.
[The prepared statement of A. Blakeman Early follows:]

Prepared Statement of A. Blakeman Early, Environmental Consultant,
American Lung Association

Mr. Chairman, my name is A. Blakeman Early. I am pleased to appear
today on behalf of the American Lung Association to discuss the use of
MTBE in Reformulated Gasoline (RFG). The American Lung Association has
long been a supporter of the use of RFG as an important tool that many
areas can and should use to reduce unhealthy levels of ozone.

CLEAN FUELS HELP REDUCE SMOG

As has been demonstrated in California, ``clean'' gasoline can be
an effective tool in reducing car and truck emissions that contribute
to smog. Based on separate cost effectiveness analyses conducted by
both the U.S. EPA and the State of California, when compared to all
available control options, reformulated gasoline (RFG) is a cost-
effective approach to reducing the pollutants that contribute to
smog.¹ Compared to conventional gasoline, RFG has also been
show to reduce toxic air emissions from vehicles by approximately 30
percent.²
---------------------------------------------------------------------------
\1\ U.S. Environmental Protection Agency, Regulatory Impact
Analysis, 59 FR 7716, Docket No. A-92-12, 1993
\2\ Report of the Blue Ribbon Panel on Oxygenates in Gasoline,
September 1999, pp. 28-29
---------------------------------------------------------------------------
THE AMERICAN LUNG ASSOCIATION SUPPORTS THE PHASE OUT OF MTBE IN ALL
GASOLINE

As a member of the Blue Ribbon Panel on Oxygenates in Gasoline, the
American Lung Association learned of the significant threat that MTBE
poses to the nation's water supplies. We also came to understand that
the continued use of MTBE in RFG would contribute to the undermining of
public support for the RFG program. Based on these two factors, we have
supported the Blue Ribbon Panel recommendation that MTBE be phased out
of all gasoline, not just RFG. We believe there is a broad consensus in
support of the MTBE phase out.

ELIMINATION OF THE OXYGEN MANDATE IN RFG MUST ACCOMPANY ANY MTBE BAN

If Congress were to ban MTBE and not eliminate the oxygen
requirement for federal RFG a de facto ethanol mandate would be
created. In essence, all RFG in the nation would be required to contain
a minimum of 5.7% by volume ethanol (2% by weight oxygen). The American
Lung Association firmly believes that mandating ethanol in summertime
gasoline will contribute to increases in smog regardless of whether the
fuel is RFG or conventional gasoline.
Quite simply the big problem with ethanol use in gasoline is that
it significantly increases volatility when mixed in gasoline at levels
above 2 percent by volume. Reducing gasoline volatility during hot
summer weather is one of the most important strategies for improving
summertime gasoline in order to reduce smog. That is because with the
advance of pollution equipment on automobiles, evaporation of gasoline
hydrocarbons contributes more to smog in most areas than do tailpipe
hydrocarbon emissions. The volatility increases that ethanol causes in
summertime can overwhelm any benefit it provides in reducing CO
tailpipe emissions, sulfur dilution or aromatics dilution. That is why
the ethanol industry only talks about the tailpipe emissions benefit
from ethanol in RFG. The ethanol industry often quotes a 1999 National
Research Council study of reformulated gasoline as finding that CO
reduction credit should be included for ethanol in EPA's complex model
for RFG because CO tailpipe emissions contribute to ozone formation.
But they fail to acknowledge what we believe to be a more important
finding. The NRC report stated, ``. . . the increase in the evaporative
emission from the ethanol-containing fuels was significantly larger
than the slight benefit obtained from the lowering of the CO exhaust
emissions using the ethanol-containing fuel.'' ³ The NRC
also acknowledged that ethanol increases NOX tailpipe
emissions relative to non-ethanol containing fuel. These NOX
emissions also contribute to greater ozone and particulate
formation.⁴ The bottom line: the reduction in CO tailpipe
emissions obtained by using ethanol in summertime gasoline do not
outweigh the increase in evaporation and the increases in
NOX tailpipe emissions from a smog contribution point of
view.
---------------------------------------------------------------------------
\3\ Ozone-forming Potential of Gasoline, May 1999, p. 158
\4\ California Environmental Protection Agency Air Resource Board,
Air Quality Impacts of the Use of Ethanol in California Reformulated
Gasoline, December 1999
---------------------------------------------------------------------------
Incidentally, the increases in evaporation do not just contribute
to ozone formation. Since the gasoline also contains toxic aromatics,
such as benzene, these will evaporate more readily along with the
ethanol. While ethanol may dilute the amount of benzene in a gallon of
gasoline, the amount of benzene that ends up in the ambient air due to
increased evaporation from the fuel may be greater than if the ethanol
were not added at all.
It is argued that if ethanol is mandated in RFG, air quality is
protected because refiners are required to limit the volatility by the
RVP limits of EPA's RFG regulations. Thus, the impact of ethanol on
volatility is not a factor. This is not true. First, while it is clear
refiners can off-set the volatility effect of ethanol by blending it
with super low volatility blend-stock, we do not know what potential
air quality benefits may be lost by changing other parameters of the
fuel to meet the RVP limit. For instance, a refiner might actually
increase aromatics because they need a sulfur-free component that is
low in volatility to help offset volatility increases from using
ethanol.
RFG with low RVP that contains ethanol will cause increases in
evaporation compared to non-ethanol containing RFG in two ways: through
increased permeation of ``soft parts'' in auto engines and also through
co-mingling with ethanol-free fuel.
EPA in its Tier 2 Final Rule identified permeation as a problem
that can increase evaporation of gasoline. Essentially, alcohol in
fuels promotes the passage of hydrocarbons through the ``soft
products'' in cars, such as plastic fuel tanks, hoses, and ``o'' ring
seals. As a result, all new cars subject to Tier 2 evaporative
emissions requirements have to demonstrate that they are using
materials that resist the permeability effect by testing them with fuel
containing 10% ethanol.⁵ But of course this does nothing to
protect the vehicles on the road today. Only vehicles being made since
approximately 1994 have been consistently using alcohol resistant soft
materials. How much will an ethanol-containing RFG meeting RVP limits
increase evaporation from vehicles on the road today? Probably a great
deal. The Toyota Motor Corporation presented test data to the
California Air Resources Board (CARB) that shows a high RVP fuel
increased evaporation from gaskets, plastic fuel tubes and plastic gas
tank material by 500, 1300, and 800 percent, respectively (See Tabs 1,
2, 3). Even if a fuel meeting RVP limits caused permeation at a half or
quarter of the rate of the non-complying fuel tested, this would have a
major adverse impact on vehicle evaporative emissions. Toyota has also
submitted additional data to CARB that shows new vehicles designed to
be ``alcohol resistant'' may allow increases of evaporative emissions
by 10 to 15% when using RFG with ethanol.
---------------------------------------------------------------------------
\5\ See Discussion at 64 Federal Register, 26084, May 13, 1999
---------------------------------------------------------------------------
Finally, I must note the impact that ethanol volatility can have
through a mechanism referred to as ``co-mingling''. Essentially when
two fuels with the same RVP, one ethanol free and one containing
ethanol, are mixed together the volatility of the entire mix is
substantially raised. In a circumstance where consumers purchase
ethanol-free fuel, use a portion and then purchase fuel with ethanol in
it, even if the ethanol blend is low RVP RFG, volatility can raise as
much as \8/10\ths of a pound RVP.⁶ In essence the adverse
volatility effect of ethanol is not limited to the absolute volume sold
in a given market area. It can be greatly magnified, depending how much
consumers switch back and forth in purchasing the two types of fuels.
Whenever the volume of ethanol in the gas tank exceeds 2 percent, the
volatility of the entire tank-full of gasoline will be increased. The
``co-mingling'' might occur between ethanol containing RFG and
conventional fuel among drivers who frequent the areas on the border
between non-RFG and RFG areas; among purchasers of ethanol-containing
and ethanol-free conventional gasoline in non-attainment areas for
ozone.
---------------------------------------------------------------------------
\6\ In-use Volatility Impact of Co-mingling Ethanol and Non-ethanol
Fuels, SAE 940765, February 1, 1994
---------------------------------------------------------------------------
Aside, from the adverse air quality impacts of mandating ethanol in
RFG, we believe that there may also be disruptions in RFG supply with
attendant price spikes that will undermine public support for RFG.
Although the ethanol industry is going to great pains to demonstrate it
can supply all the oxygen needed in RFG across the nation, the simple
fact remains that most ethanol is made in the mid-west and would be
used in RFG areas thousands of miles away. Because ethanol must be
separately transported and stored from RFG until it reaches wholesale
or retail outlets, an entirely new infrastructure will be required
under an de facto ethanol mandate. It is inevitable that this new
infrastructure will fail at times. Such failures will cause price
spikes and calls for the elimination of RFG or broad waivers. Areas
that have opted in to RFG may opt out of the RFG program. We may even
see a proliferation of more ``clean'' fuels that simply seek to avoid
the ethanol mandate as some areas have sought to avoid MTBE in RFG.
an mtbe phase out must include provisions to prevent ``backsliding'' in

TOXIC EMISSIONS REDUCTIONS FROM RFG

The Blue Ribbon Panel found that the use of MTBE helped refiners
achieve a greater reduction in air toxics from RFG than the minimum
required by law. Clearly MTBE, if nothing else, dilutes the toxic
components of gasoline. We want to be sure that refiners, in complying
with the MTBE phase-out, do not substitute toxic components that
degrade the air toxics emissions reductions currently achieved. The
American Lung Association supports Congress enacting an anti-
backsliding provision that locks in these air toxics reduction
benefits. Such a provision should be based on the average toxics
reduction performance achieved in 2000 and 2001 RFG.
The refining industry argues that the Mobile Source Air Toxics
(MSAT) rule issued by EPA under section 202(l) of the Clean Air Act
serves this purpose and new legislative requirements are not required.
We disagree. The MSAT rule uses outdated years to lock in past
performance. Refiners are held to their performance based on an average
of 1998, 1999, and 2000. However, in the RFG program Phase II of the
toxics program did not start until 2000. Phase II initiated additional
statutory reduction in air toxics reductions. Refiners outperformed
prior years in response to the Phase II mandate. The attached chart
demonstrates the difference achieved between 1998,1999 and 2000. On a
nationwide basis refiners produced Phase II RFG in 2000 that was 16
percent lower in air toxics than Phase I RFG produced in 1998 and 1999
(See Tab 4, 5). We have little reason to believe refiners achieved
lower air toxics reductions on average in 2001 than they did in 2000.
As a matter of public policy we urge Congress not to take a step
backwards by allowing Phase I years to be used as a measure of toxics
performance in an anti-backsliding regime.
Second, under the MSAT rule, if an existing refiner of RFG produces
additional volumes of RFG above its 1998-2000 levels, those volumes of
RFG need only meet the legal minimum for Phase II RFG of 21.5 %
reduction from baseline gasoline. We believe this element of the MSAT
rule has the potential of significantly degrading air toxics reductions
of RFG over time, as the MTBE phase out causes shifts in production
among refiners that are very difficult to predict, especially on a
regional basis. Any anti-backsliding provision must require that RFG
refiners must produce new RFG that meets on average the same average
toxic performance that old volumes of RFG must meet.

ETHANOL USE IN GASOLINE AND RFG WILL GROW

Much discussion has been generated about mandating the use of
ethanol in conventional gasoline as a substitute for the demand the
ethanol industry expects from the RFG program maintaining a mandatory
oxygen requirement. Indeed, the American Lung Association endorsed S.
2962 introduced by Senator Robert Smith in the 106th Congress and
reported by the Senate Environment and Public Works Committee
containing such a mandate. It is clear that such an approach provides
one path for obtaining the necessary political support for phasing out
MTBE and eliminating the oxygen mandate in RFG. In the 107th Congress,
the Environment and Public Works Committee has reported S. 950 which
contains many of the elements the American Lung Association recommends
today but does not include an ethanol mandate. Senator Daschle has
introduced S. 670, which adopts an ethanol mandate similar to the
approach to S. 2962.
The American Lung Association believes there will be a large role
for ethanol in gasoline with or without any mandate for one simple
reason: octane. Assuming that MTBE is eliminated from gasoline, which
the ALA supports, refiners face a dramatic shortage in clean octane
even if every MTBE plant in the nation is converted to produce iso-
octane or alkylates, the most logical substitutes for MTBE. This is
because MTBE plants converted to produce iso-octane or alkylates lose
about 30% volume and produce a product that contains 15 percent less
octane per gallon. This octane shortage may be increased by EPA's Tier
2 low-sulfur gasoline standard that will be in full effect in 2006.
Refiners may lose modest amounts of octane in conventional gasoline, as
they treat it to reduce sulfur in order to meet the new 30 ppm sulfur
average requirement. As a result of these two impacts, a rough
calculation indicates that demand for ethanol needed to supply octane
in gasoline should increase to 3.8 billion gallons per year by 2006.
(See Tab 6) This is at least twice the baseline volume of ethanol
projected by the Department of Agriculture to be produced in
2006.⁷ Should Congress fail to lift the oxygen mandate for
RFG so that the entire octane currently provided by MTBE is replaced by
ethanol in order to simultaneously meet the oxygen requirement, the
demand for ethanol would reach 4.6 billion gallons per year in 2006.
Such an outcome would undoubtedly lead to shortages, price spikes, and
disruptions that could only lead to reductions in the air quality
benefits and loss of public support for the RFG program.
---------------------------------------------------------------------------
\7\ U.S. Department of Agriculture, Economic Analysis of Replacing
MTBE with Ethanol in the United States, March, 2000
---------------------------------------------------------------------------
Clearly, we will need large increases of ethanol in gasoline, as we
phase out MTBE. From an air quality perspective, it is best to set air
quality performance requirements for gasoline and allow refiners to use
ethanol when and where they need to while meeting such performance
requirements. Such performance requirements must take into account
evaporation effects from permeation and co-mingling from dramatically
increased use of ethanol in gasoline. Should Congress decide to mandate
ethanol in gasoline, we urge that additional air quality protections be
put in place that would encourage ethanol use in ways that benefit air
quality and not add to the air pollution burden.

Mr. Greenwood. Thank you, Mr. Early. Mr. Ports, thank you
for being with us, and I recognize you for 5 minutes for your
testimony.

TESTIMONY OF MICHAEL PORTS

Mr. Ports. Thank you, Mr. Chairman. My name is Mike Ports,
and I am President of Ports Petroleum Company, an independent
motor fuel marketer headquartered in Wooster, Ohio.
Ports Petroleum owns and operates 65 high volume retail
motor fuel outlets in 12 States, from Ohio to Nebraska, and
south to Mississippi, and east to Georgia. Thank you for
inviting me to testify today on issues relating to MTBE as an
additive in Federal reformulated gasoline.
I am representing the National Association of Convenience
Stores, NACS, and the Society of Independent Gasoline Marketers
of America, SIGMA. From an independent marketers point of view,
very little has changed on the issue of MTBE since NACS and
SIGMA last testified before this committee on this issue in
1999.
Two key developments have occurred over the past 2 years.
First, the Environmental Protection Agency has denied
California's petition to opt out of the Federal RFG oxygenate
mandate. Second, at least one lower Federal Court has upheld
the State's power to ban the use of MTBE in gasoline sold in a
State.
Perhaps more important than what has changed since 1999 is
what has not changed. First, Congress still has not repealed
the Federal RFG oxygenates mandate, and the oxygenate mandate
still exists, despite the fact that refiners do not need
oxygenates to manufacture and supply clean burning gasoline.
Second, the Federal oxygenate mandate continues to cause
States to create additional boutique formulations of gasoline,
either to avoid the use of MTBE or to promote the use of
ethanol. Boutique fuels continue to be a primary cause of a
substantial gasoline supply dislocation that occur whenever a
refinery goes off-line or a pipeline breaks.
Further, these fuels are at least in part responsible for
the severe wholesale and retail gasoline price volatility that
often accompanies these dislocations. Third, California and
other States still face a supply crisis if MTBE is banned from
use as a gasoline additive.
Fourth, manufacturers of MTBE and ethanol, and their
supporters, are still at a legislative stalemate. Neither side
of this debate has been able to muster the political support
and votes necessary to either ban the use of MTBE or mandate
the use of ethanol.
Fifth, the EPA and the States still have not effectively
enforced the 1998 underground storage tank upgrade mandate, a
mandate that properly administered in force would prevent many
of the MTBE releases that cause ground water contamination.
I would like to spend a couple of minutes on the subject of
enforcement of the 1998 mandate. It is a subject that Congress
can address today without delving into the other delicate and
politically volatile issues relating to fuels regulation, such
as an MTBE mandate or an oxygen mandate.
Late last year, Senator Smith and Chaffee asked the GAO to
conduct an evaluation of the Federal underground storage tank
program. We heard from GAO on a previous panel regarding this
evaluation.
NACS and SIGMA agree with GAO's conclusions about the lack
of consistent Federal and State enforcement of the underground
storage tank requirements. GAO estimated that nearly 3 years
after the 1998 deadline, only 89 percent of regulated tanks
have come into voluntary compliance.
GAO identified State and local agencies and very small
businesses as the primary owners and operators of tanks that
remain in non-compliance. In its report, GAO recommended steps
that Congress could take to provide additional underground
storage tank resources to EPA and the States.
NACS and SIGMA have supported and continue to support such
measures. This committee and the House of Representatives twice
previously has passed legislation that would have expanded the
allowable uses by the States of the leaking underground storage
tank fund.
This committee should take up this legislation again as
soon as possible. NACS and SIGMA, along with the Petroleum
Marketers Association of America, the National Association of
Truck Stop Operators, and the Oxygenated Fuels Association,
support underground storage tank amendments that address most
of GAO's recommendations.
Legislation to enact these recommendations should at the
least include the following four components. Remove
restrictions on the use of LUST trust fund monies by State
trust funds; authorize the use of LUST trust fund monies by the
State for LUST enforcement; authorize $200 million for use by
the States in addressing high priority releases, such as those
containing MTBE; and authorize the EPA to establish a national
LUST data base to track upgraded and closed LUST.
NACS and SIGMA urges this committee and this Congress to
consider and expeditiously pass this type of legislation. Such
legislation can and should move independently of legislation
addressing the oxygen mandate or MTBE.
An important consideration for this committee is that this
stand alone LUST legislation can be passed in the near future,
will assist EPA and the States to enforce the 1998 deadline,
and will stop additional leaks of gasoline and its components
from us.
Thank you for the opportunity to present NACS and SIGMA's
views. I would be happy to answer any questions raised by my
testimony.
[The prepared statement of Michael Ports follows:]

Prepared Statement of Michael Ports, President, Ports Petroleum
Company, Inc. on Behalf of National Association of Convenience Stores
and Society of Independent Gasoline Marketers of America

Good morning, Mr. Chairman. My name is Mike Ports. I am President
of Ports Petroleum Company, an independent motor fuels marketer
headquartered in Wooster, Ohio. Ports Petroleum owns and operates 65
high volume retail motor fuels outlets in 12 states from Ohio to
Nebraska, south to Mississippi, and east to Georgia.
Thank you for inviting me to testify today on issues relating to
MTBE as an additive in federal reformulated gasoline (``RFG''). I am
representing the National Association of Convenience Stores (``NACS'')
and the Society of Independent Gasoline Marketers of America
(``SIGMA'').
NACS is a national trade association of more than 2,300 companies
that operate over 104,000 convenience stores nationwide and employ 1.4
million individuals. Over 75 percent of NACS' member companies sell
motor fuels and the convenience store industry sold more than 115
billion gallons in 2000. SIGMA is an association of approximately 260
motor fuels marketers operating in all 50 states. SIGMA members supply
over 28,000 motor fuel outlets and sell over 48 billion gallons of
gasoline and diesel fuel annually--or approximately 30 percent of all
motor fuels sold in the nation last year.
This hearing has been titled as ``An Update'' on issues relating to
MTBE in federal RFG. In reality, at least from an independent
marketer's point of view, very little has changed since NACS and SIGMA
last testified before this Committee on this issue in 1999. Two key
developments have occurred over the past two years. First, the
Environmental Protection Agency (``EPA'') has denied California's
petition to opt-out of the federal RFG oxygenate mandate. This denial
has set up a potential gasoline supply crisis for California marketers
and consumers if the state's MTBE ban takes effect on schedule on
January 1, 2003. California has sued EPA over its waiver decision, and
there are reports that California is considering a delay in its 2003
MTBE ban to avoid a gasoline supply crisis.
Second, at least one lower federal court has upheld a state's power
to ban the use of MTBE in gasoline sold in a state. This legal question
remains unsettled. However, from an independent marketer's perspective,
the decision simply exacerbates the continued ``balkanization'' of the
nation's gasoline markets. If MTBE, or any fuel component, can be
banned on a state-by-state basis, then the problem of ``boutique''
fuels will only become worse.
Perhaps more important than what has changed since 1999 is what has
not changed. In fact, much has remained the same. First, Congress still
has not repealed the federal RFG oxygenate mandate. The oxygenate
mandate still exists, despite the fact that refiners do not need
oxygenates to manufacture and supply clean-burning gasoline and despite
the fact that there is no environmental protection rationale for the
oxygenate mandate.
Second, the federal oxygenate mandate continues to cause states to
create additional boutique formulations of gasoline, either to avoid
the use of MTBE or to promote the use of ethanol. These boutique fuels
continue to stress the nation's gasoline refining and distribution
systems. Boutique fuels continue to be a primary cause of the
substantial gasoline supply dislocations that occur whenever a refinery
goes off-line or a pipeline breaks. Further, these fuels are, at least
in part, responsible for the severe wholesale and retail gasoline price
volatility that often accompanies these dislocations.
Third, California, and other states, still face a supply crisis if
MTBE is banned from use as a gasoline additive. Ultimately, it will be
consumers who will pay at the gasoline pump if these supply crises
occur.
Fourth, manufacturers of MTBE and ethanol and their supporters are
still at a legislative stalemate. Neither side of this debate has been
able to muster the political support--and votes--necessary to either
ban the use of MTBE or mandate the use of ethanol. This situation is
not likely to change in the near future as many legislators are
reluctant to touch the so-called ``third rail'' of fuels policy.
Fifth, EPA and the states still have not effectively enforced the
1998 underground storage tank (``UST'') upgrade mandate--a mandate
that, if properly administered and enforced, would prevent many of the
MTBE releases that cause groundwater contamination. I will comment more
on this subject in just a minute.
Lastly, the positions of NACS and SIGMA on these public policy
issues have not changed since 1999. We continue to support the repeal
of the oxygenate mandate so that refiners and marketers can meet
emissions standards without the use of MTBE or ethanol. We continue to
support proposals to permit states to opt-out of the oxygenate mandate.
And, we continue to support a reduction in the number of boutique fuel
formulations across the nation--a reduction that will lead to increased
gasoline supply, increased gasoline fungibility, and decreased gasoline
price volatility.
We also continue to support even-handed and effective enforcement
of the 1998 UST upgrade mandate. I would like to spend a couple of
minutes on this subject--mainly because it is a subject that Congress
can address today, without delving into the other delicate and
politically volatile issues relating to fuels regulation, such as an
MTBE ban or the oxygenate mandate.
NACS and SIGMA have long been vocal advocates of UST enforcement.
Our motivation is simple: since 1988, our members have spent hundreds
of millions of dollars complying with the UST standards. Further, many
of our members, including so-called ``mom-and-pops,'' have closed
retail outlets as a means of compliance.
Late last year, Senators Robert Smith and Lincoln Chafee asked the
General Accounting Office (``GAO'') to conduct an evaluation of the
federal UST program. GAO's report, ``Improved Inspections and
Enforcement Would Better Ensure the Safety of Underground Storage
Tanks,'' was released on May 4, 2001. We heard from GAO on a previous
panel. NACS and SIGMA agree with GAO's conclusions in the report about
the lack of consistent federal and state enforcement of the UST
requirements.
GAO estimated that, nearly three years after the 1998 deadline,
only 89 percent of regulated tanks have come into voluntary compliance.
GAO identified state and local agencies and very small businesses as
the primary owners and operators of tanks that remain in non-
compliance. While it is true that EPA provided many of these UST owners
with a six-month extension of the 1998 deadline, it is now late 2001
and EPA has shown no indication of a willingness to enforce the UST
requirements against these and other non-complying tanks. Moreover,
because EPA is not pressing UST enforcement, states also generally have
ignored these non-complying tanks.
There is no justification for EPA or the states to distinguish
between private and publicly-owned tanks. A leak from the UST of the
local fire or highway department causes the same environmental harm as
a leak from a private UST.
In its report, GAO recommended steps that Congress could take to
provide additional UST resources to EPA and the states. NACS and SIGMA
have supported, and continue to support, such measures. This Committee,
and the House of Representatives, twice previously has passed
legislation that would have expanded the allowable uses by the states
of the Leaking Underground Storage Tank (``LUST'') Trust Fund monies.
This Committee should take up this legislation again as soon as
possible.
NACS and SIGMA--along with the Petroleum Marketers Association of
America, the National Association of Truck Stop Operators, and the
Oxygenated Fuels Association--support UST amendments that address most
of GAO's recommendations. Legislation to enact these recommendations
should at the least include the following four components:

Remove restrictions on the use of LUST Trust Fund monies by
state UST funds, permitting clean-up resources to be deployed
faster and minimizing clean-up costs and environmental harm
from tank leaks;
Authorize the use of LUST Trust Fund monies by the states for
UST enforcement;
Authorize $200 million for use by the states in addressing
high-priority releases, such as those containing MTBE; and,
Authorize EPA to establish a national UST database to track
upgraded and closed USTs.
NACS and SIGMA urge this Committee, and this Congress, to consider
and expeditiously pass this type of legislation. Such legislation can
and should move independently of legislation addressing the oxygenate
mandate or MTBE. An important consideration for this Committee is that
this stand-alone UST legislation can be passed in the near future, will
assist EPA and the states to enforce the 1998 deadline, and will stop
additional leaks of gasoline and its components from USTs.
Thank you for the opportunity to present NACS' and SIGMA's views. I
would be happy to answer any questions raised by my testimony.

Mr. Greenwood. Thank you, Mr. Ports. I appreciate your
testimony. Mr. Murphy, thank you for being with us, and you are
recognized for 5 minutes for your testimony.

TESTIMONY OF EDWARD H. MURPHY

Mr. Murphy. Thank you, Mr. Chairman. My name is Edward
Murphy, and I manage Downstream Activities for the American
Petroleum Institute, the trade association representing over
400 companies involved in all aspects of the natural gas and
oil industry.
My responsibilities include oversight of issues important
to the refining and marketing sector of the industry and this
certainly includes MTBE. MTBE has been widely used in gasoline
for 20 years, first in limited quantities to enhance octane as
lead was removed, and more recently in far greater quantities
to add oxygen to cleaner burning fuels as required by the
reformulated gasoline and oxygenated gasoline provisions of the
Clean Air Act.
API opposed the oxygen mandate, stressing that it wasn't
necessary and urged at that time setting a single performance
standard to meet the environmental requirements of the law.
But our advice was not heeded. As you know, in recent years
testing of ground water, lakes and water supplies, has detected
generally low concentrations of MTBE in several States, which
in many cases has been traced to underground storage tanks.
While in nearly all cases the concentrations found have
been well below the levels EPA has determined to be a public
health concern, taste and odor concerns have required the
installation of filters and reliance on other sources of water
supply.
This is unacceptable to this industry and needs to be
corrected. New EPA underground storage tank regulations have
been implemented that have led to the upgrade and replacement
of hundreds of thousands of tanks. But this is an area where
EPA enforcement efforts, better EPA, and stronger EPA
enforcement efforts are called for.
EPA has estimated that 15 percent of underground storage
tanks do not comply with the requirements. API member companies
feel strongly that any location that is not in compliance
should not be in operation.
Further, API has been a strong supporter of State laws and
regulations that prohibit deliveries into tanks that are not in
compliance. As a result of the increased detections of MTBE in
water, the EPA convened a special blue ribbon panel of experts
from industry, government, and academia, to analyze the issue
and make recommendations.
Quoting from that blue ribbon panel, ``The great majority
of MTBE detections to date have been well below levels of
public health concern.'' However, the presence of MTBE has in
the blue ribbon panel's view ``raised consumer tastes and odor
concerns that have caused water suppliers to stop using some
water supplies and to incur costs of treatment and
remediation.''
Against this background, the blue ribbon panel recommended
that the Federal reformulated gasoline oxygen mandate be
repealed, that the use of MTBE be substantially reduced, and
that EPA and State authority to regulate MTBE and other
oxygenates be clarified.
The panel further recommended that all of these changes be
made without sacrificing the air quality benefits of the RFG
program. API strongly supports the blue ribbon panel's
recommendations and implored Congress to implement them. In
particular, Mr. Chairman, we commend you on your bill, H.R. 20,
which is consistent with the panel's recommendations.
We believe that the simple and most effective solution to
the MTBE problem is to repeal the RFG oxygenate mandate. It
will enhance the environment, increase gasoline supplies, and
reduce price volatility. It is urgently needed.
I know that the committee is interested in industry's views
regarding MTBE replacement. How will the volume and octane
losses be made up if the use of MTBE is restricted. The short
answer is that with adequate lead time, and a major objective
of reducing MTBE use, refiners can and will make the
investments to replace a roughly 300,000 barrels a day of MTBE
presently added to gasoline.
And I have in my statement some examples of how those
volumes would be made up, but let me summarize that, Mr.
Chairman, by saying that relative to the other problems faced
by the U.S. refining industry, in terms of reducing the sulfur
content of diesel fuel, and the sulfur content of gasoline
fuel, making up roughly 300,000 barrels a day of MTBE volumes,
when we are producing gasoline at 8,300,000 barrels a day over
a 4-year period is a virtual walk in the park.
It can be done, and we would certainly never recommend that
that be phased down without a firm conviction on our part that
consumers will continue to be supplied with adequate gasoline.
We heard from the DOE just a few minutes ago that they
forecasted some sort short--if the problems with this reduction
was made in the short term, and he didn't define what short
term was.
Short term I guess is usually in the realm of 1 year, and
frankly if the reductions in MTBE use are phrased in over a 1-
year period, we would agree with them. Over a 4-year period, we
can and will make up those volumes.
The industry has established a strong track record over
many decades of meeting consumer needs when faced with changing
conditions, provided that it has adequate lead time and a
climate favorable to refinery investment.
We commend you for recognizing the need to provide the
industry with lead in time in H.R. 20. In closing, let me
reiterate that APR member companies are committed to addressing
the MTBE issue, and are anxious to fulfill their obligation to
ensure that consumers have a ready access to readily available
and affordable supplies of environmentally acceptable gasoline.
We stand ready to work with this subcommittee and others in
Congress to address concerns about MTBE in a practical and
effective way. Once again, the first step must be the repeal of
the Federal oxygenate mandate. Thank you.
[The prepared statement of Edward H. Murphy follows:]

Prepared Statement of Edward H. Murphy on Behalf of the American
Petroleum Institute

Mr. Chairman, my name is Edward Murphy and I manage downstream
activities for the American Petroleum Institute, a trade association
representing 400 companies involved in all aspects of the U.S. oil and
natural gas industry. My responsibilities include oversight of issues
important to the refining and marketing sectors of the industry. These
include fuels issues, such as MTBE.
MTBE has been widely used in gasoline for more than 20 years--
first, in limited quantities to enhance octane as lead was removed and,
more recently, in far greater quantities to add oxygen to cleaner
burning fuels, as required by the reformulated gasoline and oxygenated
gasoline provisions of the Clean Air Act Amendments of 1990. API
opposed the oxygen mandate, stressing that it wasn't necessary and
urged setting a simple performance standard instead, but our advice
wasn't taken.
As you know, in recent years, testing of groundwater, lakes and
water supplies has detected generally low concentrations of MTBE in
several states, which, in many cases, has been traced to underground
storage tanks. While, in nearly all cases, the concentrations found
have been well below the levels EPA determined to pose public health
concern, taste and odor concerns have required the installation of
filters and reliance on other sources of water supply. This is
unacceptable and needs to be corrected.
New EPA underground tank regulations have been implemented that
have led to the upgrade and replacement of hundreds of thousands of
tanks. API member companies have replaced and upgraded all of their
underground storage tanks--some 60,000 tanks--at a cost of $1.2
billion. In addition, API has supported rigorous enforcement of EPA
underground tank regulations to ensure that the hundreds of thousands
of tanks operated by non-API companies are also upgraded.
This is an area where stronger EPA enforcement efforts are called
for; EPA recently estimated that about 15 percent of underground tanks
do not comply with the requirements. API's member companies feel
strongly that any location that is not in compliance should not be in
operation. Further, API has been a strong supporter of state laws and
regulations that prohibit deliveries into tanks that are not in
compliance.
As a result of the increased detections of MTBE in water, EPA
convened a special Blue Ribbon Panel of experts from industry,
government and academia to analyze the issue and make recommendations.
According to the Blue Ribbon Panel, ``the great majority of [MTBE]
detections to date have been well below levels of public health concern
. . .'' However, the presence of MTBE has, in the Blue Ribbon Panel's
view, ``raised consumer taste and odor concerns that have caused water
suppliers to stop using some water supplies and to incur costs of
treatment and remediation.''
Against this background, the Blue Ribbon Panel recommended that the
federal reformulated gasoline (RFG) oxygen mandate be repealed, that
the use of MTBE be substantially reduced, and that EPA and state
authority to regulate MTBE and other oxygenates be clarified. The Panel
further recommended that all of these changes be made without
sacrificing the air quality benefits of the RFG program. API strongly
supports the Blue Ribbon Panel's recommendations, and implored Congress
to implement them. In particular, we commend you on your bill, H.R. 20,
which is consistent with the Panel's recommendations.
The October 15 issue of Octane Week quotes Tom White of the U.S.
Department of Energy's Office of Policy as describing the current state
of the MTBE issue as ``the worst regulatory/legislative mess seen in a
dozen years.'' We believe the simplest and most effective solution is
repeal of the RFG oxygen mandate. It will enhance the environment,
increase gasoline supplies, and reduce price volatility. It is urgently
needed.
I know that the Subcommittee is interested in the industry's views
regarding MTBE replacement--how will the volume and octane losses be
made up if the use of MTBE is restricted. The short answer is that,
with adequate lead time and a major objective of reducing MTBE use,
refiners can and will make the investments to replace the roughly 300
MB/D of MTBE presently added to gasoline. Some of the ways in which
this will be accomplished are:

Significantly increased use of ethanol as a gasoline additive.
Studies have shown an increase in ethanol use of roughly 78 MB/
D associated with an MTBE phase-out and elimination of the
federal RFG oxygen mandate.
Use of iso-octene and iso-octane from converted MTBE plants.
Between 60 and 80 percent of existing MTBE capacity may be
converted to iso-octene and iso-octane capacity. This
conversion process could restore roughly 50 percent of the lost
volume incurred if MTBE use were phased out, i.e., roughly 150
MB/D. Thus, roughly 75 percent of the volume loss associated
with an MTBE phase-out can be recovered through conversion of
MTBE feedstock to other gasoline blendstocks and increased
ethanol blending.
An increase in alkylate production will likely contribute at
the margin to restore lost volume.
Additional gasoline volumes from refinery capacity expansion
and efficiency improvement projects that would normally be
undertaken to meet growing demand will also replace some of the
volume lost from an MTBE phase down. This is likely to replace
a substantial portion of the lost volume if MTBE is phased
down. Crucial to all volume recovery steps are sufficient lead
time and reasonable permitting requirements.
There is no doubt that the U.S. oil and natural gas industry will
be challenged to replace the lost volume if the use of MTBE is
restricted. However, the industry has established a solid track record
over many decades of meeting consumer needs when faced with changing
conditions--provided it has adequate lead time and a climate favorable
to refinery investment. We commend you for recognizing the need to
provide the industry with sufficient lead-time in H.R. 20.
In closing, let me reiterate that API member companies are
committed to addressing the MTBE issue and are anxious to fulfill their
obligation to ensure that consumers have ready access to readily
available and affordable supplies of environmentally acceptable
gasoline. We stand ready to work with this Subcommittee and others in
the Congress to address concerns about MTBE in a practical, effective
way. Once again, the first step must be repeal of the federal oxygen
mandate. Thank you.

Mr. Greenwood. Thank you for your testimony, Mr. Murphy.
The Chair would ask for unanimous consent that the testimony of
Daniel Greenbaum, President of Health Effects Institute that
was prepared for this hearing--he was not able to participate--
will be added to the record.
[The prepared statement of Daniel S. Greenbaum follows.]

Prepared Statement of Daniel S. Greenbaum, President, Health Effects
Institute

Mr. Chairman, and Members of the Committee, it is a pleasure to
appear before you today to speak on the development of cleaner fuels
and the role and challenges of using MTBE in those fuels. I speak today
as both the President of the Health Effects Institute--an independent
scientific institute funded by both government and industry to provide
impartial science on the health effects of air pollution--and as the
former Chair of the Blue Ribbon Panel on Oxygenates in Gasoline. In the
wake of the detection of the additive MTBE (Methyl Tertiary Butyl
Ether) in drinking water supplies in Maine, California, and elsewhere,
the Blue Ribbon Panel was convened to investigate the facts of the
situation and recommend actions to achieve both clean air and clean
water. The Panel consisted of experts on air and water quality, as well
as representatives of the oil, ethanol, and MTBE industry, and the
environmental community.
I am hear today to speak of both the good news from the last decade
about reformulated fuel and clean air, and about the challenges that
lie ahead.
First, the good news. The Clean Air Act Amendments of 1990, passed
by Congress and signed into law by President Bush, required the
introduction of new, cleaner-burning fuels--so-called Reformulated
Gasoline or RFG--in all areas of the country facing serious ozone
problems. That fuel, containing by law at least 2% by weight of
oxygenates, was introduced in 1995, and resulted in a clear and
measurable air quality benefit. Among other pollutants that were
reduced, levels of benzene in ambient air--a known human carcinogen--
were reduced almost immediately by 39% (EPA, 2000), and overall
reductions in air toxics exceeded expectations. At the same time,
because of adequate lead time for refiners to plan for and implement
these fuels, they were introduced into some of the largest markets in
the U.S. with little or no impact on cost or supply of fuel.
Also, although these fuels needed oxygenates to replace octane when
RFG was first introduced in the 1990s, the Blue Ribbon Panel found that
today's refinery technology has been improved to enable the production
of these clean fuels in a variety of ways--with oxygenates such as
ethers and ethanol, but also without oxygenates altogether. This offers
the opportunity to take a much more market-based approach to providing
clean fuels--continuing the strong clean air performance standards, but
giving the market much more flexibility to choose, based on efficiency
and cost, the best way to ensure a low cost, abundant fuel supply.
(Blue Ribbon Panel, 1999)
This good news does not come, however, without its challenges.
First and foremost, there is the challenge of MTBE. MTBE has shown
itself to be a cost-effective and clean fuel-blending component.
Research by HEI has shown MTBE to have relatively low potential for
health effects (HEI, 1996, 2001). However, its relatively rapid
transport through groundwater, and its distinctive odor and taste, have
caused a number of drinking water wells to be shut down (BRP, 1999). As
a result, the Blue Ribbon Panel recommended strongly a substantial
reduction in its use. A number of states--California, Connecticut and
New York--have gone further and legislated bans on its use, to take
effect in 2003 and 2004.
Second, this pressure to reduce use of MTBE--which makes up 11% by
volume of RFG--comes at a time when refiners are beginning to gear up
to produce even cleaner-burning fuel for Tier 2 RFG. The Blue Ribbon
Panel clearly saw the opportunity for a portion of the MTBE demand to
be met by increased use of ethanol. But there is no such thing as a
perfect fuel additive: although ethanol has fewer direct health
effects, there are still questions about its effects and use, and
although the other components of the refining stream likely have lower
groundwater risk, they may have other consequences. Given that at this
stage in clean fuel development refiners need maximum flexibility and a
range of alternative ways to make clean fuels, the Panel concluded it
was neither appropriate nor necessary to maintain the strict oxygenate
content rules of the 1990 Clean Air Act Amendments, and recommended
that either the oxygenate mandate be removed or that EPA be granted
enhanced authority to waive these requirements. (BRP, 1999)
Third, the Panel wanted to ensure that the air quality advances
achieved by RFG would continue, even while refiners had greater
flexibility on what to blend. Along with the recommendation to allow
the removal of the oxygenate mandate, the Panel strongly recommended
the maintenance and enhancement of the air quality performance
standards for RFG to ensure continued benefits.
So in conclusion, where do these opportunities and challenges leave
us today?
We have two paths we can follow for clean fuels: to continue clean-
burning fuels with legislatively-mandated fuel additive requirements,
and risk potential market dislocations and increases in price; or to
keep the strong clean air performance requirements for these fuels, but
to free the market to make them in the most cost-effective way
possible, with a minimum of specific fuel additive requirements.
In the view of the Blue Ribbon Panel, this market-driven path is
clearly preferable. It will result in continued clean air benefits, but
also in a substantial increase in the use of ethanol without risking
the higher prices and market shortages that could result from continued
fuel additive mandates. With this path, we have the chance to see clean
air improvements, and stable fuel markets, well into the 21st century.
Thank you for the opportunity to present these comments.

References

Blue Ribbon Panel on Oxygenates in Gasoline, Achieving Clean Air
and Clean Water, September, 1999, Washington, D.C.; available at http:/
/www.epa.gov/OMSWWW/consumer/fuels/oxypanel/blueribb.htm
Health Effects Institute, The Potential Health Effects of
Oxygenates Added to Gasoline: A Review of the Current Literature, April
1996, Boston, Massachusetts
Health Effects Institute, Metabolism of Ether Oxygenates Added to
Gasoline, Health Effects Institute Research Report Number 102, May
2001, Boston, Massachusetts
U.S. Environmental Protection Agency, Latest Findings on National
Air Quality: 1999 Status and Trends, August, 2000, Washington, D.C.;
available at www.epa.gov/airtrends

Mr. Greenwood. As well as a document entitled,
``Supplemental Data from GAO's Review of the Underground
Storage Tank Program.''
[The information follows.]

SUPPLEMENTAL DATA FROM GAO'S REVIEW OF THE UNDERGROUND STORAGE TANK
PROGRAM

In response to a congressional request, we reviewed the
Environmental Protection Agency's (EPA) program to regulate underground
tanks used to store fuel and other substances. The program was designed
to help ensure that the tanks remain safe and do not leak their
contents, which contain hazardous substances that can contaminate soil
and groundwater and pose health risks. Because the states primarily
implement the provisions of the program, we conducted a survey of all
50 states and the District of Columbia to determine whether tanks
comply with program requirements, how EPA and the states are inspecting
and enforcing the requirements, and whether upgraded tanks still leak.
We issued a report on the results of our work on May 4, 2001 entitled,
Environmental Protection: Improved Inspections and Enforcement Would
Better Ensure the Safety of Underground Storage Tanks (GAO-01-464). The
following tables provide additional data on our survey results that
supplement our report. The tables provide a listing of:

the types of enforcement tools used in each state to ensure
tanks comply with program requirements, including the ability
to issue field citations, levy fines, and prohibit suppliers
from delivering fuel to stations with problem tanks;
those states that indicated they need additional enforcement
authority and resources;
those states that indicated some of their tanks continue to
leak even after federallyrequired leak prevention equipment had
been installed;
the frequency of tank inspections in each state and the three
EPA regions that have the largest number of tanks to monitor
(EPA, rather than the states, is responsible for a small number
of tanks primarily located on Indian lands); and
the number of tanks, the number of inspection staff, and the
frequency of inspections for each state.

Table 1: Types of Enforcement Tools
------------------------------------------------------------------------
Prohibit Issue Field
State/EPA Region Deliveries Issue Fines Citations
------------------------------------------------------------------------
District of Columbia.......... X X X
Minnesota..................... X X X
Montana....................... X X X
North Carolina................ X X X
Oklahoma...................... X X X
South Carolina................ X X X
Vermont....................... X X X
Washington.................... X X X
Arkansas...................... X X
Califomia..................... X X
Georgia....................... X X
Illinois...................... X X
Iowa.......................... X X
Kansas........................ X X
Louisiana..................... X X
Massachusetts................. X X
Michigan...................... X X
Nevada........................ X X
Oregon........................ X X
Texas......................... X X
Utah.......................... X X
West Virginia................. X X
Colorado...................... X X
Connecticut................... X X
Delaware...................... X X
Hawaii........................ X X
Missouri...................... X X
New Hampshire................. X X
New Jersey.................... X X
New Mexico.................... X X
North Dakota.................. X X
Ohio.......................... X X
South Dakota.................. X X
Alaska........................ X
Wisconsin..................... X
Alabama....................... X
Arizona....................... X
Florida....................... X
Indiana....................... X
Kentucky...................... X
Maryland...................... X
Mississippi................... X
Pennsylvania.................. X
Rhode Island.................. X
Tennessee..................... X
Virginia...................... X
Wyoming....................... X
Idaho.........................
Maine.........................
Nebraska......................
New York......................
EPA Region 8.................. X X
EPA Region 9.................. X X
EPA Region 10................. X X
------------------------------------------------------------------------

Table 2: Reported Needs
------------------------------------------------------------------------
Needs
Additional Needs
State/EPA Region Enforcement Additional
Authority Resources
------------------------------------------------------------------------
Alabama............................... X
Alaska................................ X X
Arizona............................... X X
Arkansas.............................. X X
California............................ X X
Colorado.............................. X X
Connecticut........................... X X
Delaware.............................. X X
District of Columbia.................. X X
Florida............................... X X
Georgia............................... X X
Hawaii................................
Idaho................................. X X
Illinois.............................. X X
Indiana............................... X
Iowa.................................. X X
Kansas................................ X X
Kentucky.............................. X
Louisiana............................. X
Maine................................. X X
Maryland.............................. X
Massachusetts......................... X
Michigan.............................. X X
Minnesota............................. X
Mississippi........................... X
Missouri.............................. X X
Montana............................... X
Nebraska.............................. X
Nevada................................
New Hampshire......................... X
New Jersey............................ X X
New Mexico............................ X X
New York.............................. X
North Carolina........................ X
North Dakota..........................
Ohio.................................. X X
Oklahoma..............................
Oregon................................ X X
Pennsylvania.......................... X X
Rhode Island.......................... X X
South Carolina........................ X
South Dakota.......................... X X
Tennessee............................. X X
Texas.................................
Utah.................................. X
Vermont............................... X
Virginia.............................. X
Washington............................ X
West Virginia......................... X X
Wisconsin............................. X
Wyoming............................... X X
EPA Region 8.......................... X X
EPA Region 9.......................... X X
EPA Region 10......................... X X
------------------------------------------------------------------------

Table 3: Leaks From Upgraded Tanks
------------------------------------------------------------------------
Tanks Seldom
State/EPA Region Some Tanks or Never Don't know
Leak Leak
------------------------------------------------------------------------
Alabama....................... X
Alaska........................ X
Arizona....................... X
Arkansas...................... X
California.................... X
Colorado...................... X
Connecticut................... X
Delaware...................... X
District of Columbia.......... X
Florida....................... X
Georgia....................... X
Hawaii........................ X
Idaho......................... X
Illinois...................... X
Indiana....................... X
Iowa.......................... X
Kansas........................ X
Kentucky...................... X
Louisiana..................... X
Maine......................... X
Maryland...................... X
Massachusetts................. X
Michigan...................... X
Minnesota..................... X
Mississippi................... X
Missouri...................... X
Montana....................... X
Nebraska...................... X
Nevada........................ X
New Hampshire................. X
New Jersey.................... X
New Mexico.................... X
New York...................... X
North Carolina................ X
North Dakota.................. X
Ohio.......................... X
Oklahoma...................... X
Oregon........................ X
Pennsylvania.................. X
Rhode Island.................. X
South Carolina................ X
South Dakota.................. X
Tennessee..................... X
Texas......................... X
Utah.......................... X
Vermont....................... X
Virginia...................... X
Washington.................... X
West Virginia................. X
Wisconsin..................... X
Wyoming....................... X
EPA Region 8.................. X
EPA Region 9.................. X
EPA Region 10................. X
------------------------------------------------------------------------

Table 4: Inspection Frequencies
----------------------------------------------------------------------------------------------------------------
Every 2 or 3 4 Years or No Regular
State/EPA Region Every Year Years Longer Basis
----------------------------------------------------------------------------------------------------------------
Alabama................................................. X
Alaska.................................................. X
Arizona................................................. X
Arkansas................................................ X
California.............................................. X
Colorado................................................ X
Connecticut............................................. X
Delaware................................................ X
District of Columbia.................................... X
Florida................................................. X
Georgia................................................. X
Hawaii.................................................. X
Idaho................................................... X
Illinois................................................ X
Indiana................................................. X
Iowa.................................................... X
Kansas.................................................. X
Kentucky................................................ X
Louisiana............................................... X
Maine................................................... X
Maryland................................................ X
Massachusetts........................................... X
Michigan................................................ X
Minnesota............................................... X
Mississippi............................................. X
Missouri................................................ X
Montana................................................. X
Nebraska................................................ X
Nevada.................................................. X
New Hampshire........................................... X
New Jersey.............................................. X
New Mexico.............................................. X
New York................................................ X
North Carolina.......................................... X
North Dakota............................................ X
Ohio.................................................... X
Oklahoma................................................ X
Oregon.................................................. X
Pennsylvania............................................ X
Rhode Island............................................ X
South Carolina.......................................... X
South Dakota............................................ X
Tennessee............................................... X
Texas................................................... X
Utah.................................................... X
Vermont................................................. X
Virginia................................................ X
Washington.............................................. X
West Virginia........................................... X
Wisconsin............................................... X
Wyoming................................................. X
EPA Region 8............................................ X
EPA Region 9............................................ X
EPA Region 10........................................... X
----------------------------------------------------------------------------------------------------------------

Table 5: Inspection Workload and Staff Resources
------------------------------------------------------------------------
Number of Number of Inspection
State Tanks FTE's Frequency
------------------------------------------------------------------------
Alabama...................... 18,567 11.001 2 or 3 years
Alaska....................... 1,122 ........... 2 or 3 years
Arizona...................... 8,191 5.00 4 or more years
Arkansas..................... 9,941 10.00 4 or more year
California................... 50,000 40.00 Every year
Colorado..................... 7,990 12.00 Every year
Connecticut.................. 13,831 3.25 4 or more years
Delaware..................... 1,744 6.25 No regular
basis
District of Columbia......... 754 7.00 No regular
basis
Florida...................... 32,320 169.00 Every year
Georgia...................... 27,944 16.50 No regular
basis
Hawaii....................... 2,184 2.50 2 or 3 years
Idaho........................ 3,479 ........... No regular
basis
Illinois..................... 27,317 23.00 2 or 3 years
Indiana...................... 7,974 6.00 2 or 3 years
Iowa......................... 8,499 5.00 No regular
basis
Kansas....................... 7,830 7.15 No regular
basis
Kentucky..................... 14,843 10.00 No regular
basis
Louisiana.................... 16,100 9.00 4 or more years
Maine........................ 3,709 1.50 No regular
basis
Maryland..................... 8,784 6.00 No regular
basis
Massachusetts................ 12,122 3.00 4 or more years
Michigan..................... 23,500 21.00 2 or 3 years
Minnesota.................... 14,000 5.50 No regular
basis
Mississippi.................. 9,533 5.00 4 or more years
Missouri..................... 11,039 14.00 2 or 3 years
Montana...................... 3,619 ........... 2 or 3 years
Nebraska..................... 7,133 11.00 2 or 3 years
Nevada....................... 3,533 2.75 2 or 3 years
New Hampshire................ 3,067 2.00 No regular
basis
New Jersey................... 17,971 5.50 No regular
basis
New Mexico................... 3,852 9.00 Every year
New York..................... 32,928 8.70 No regular
basis
North Carolina............... 31,000 13.00 4 or more years
North Dakota................. 2,407 5.00 No regular
basis
Ohio......................... 29,037 5.00 No regular
basis
Oklahoma..................... 10,634 21.00 Every year
Oregon....................... 7,370 2.00 No regular
basis
Pennsylvania................. 29,542 ........... 4 or more years
Rhode Island................. 1,788 Unknown No regular
basis
South Carolina............... 12,727 12.00 2 or 3 years
South Dakota................. 3,089 1.00 2 or 3 years
Tennessee.................... 17,167 6.00 4 or more years
Texas........................ 54,674 23.00 No regular
basis
Utah......................... 4,193 6.00 2 or 3 years
Vermont...................... 2,442 3.00 No regular
basis
Virginia..................... 32,267 18.00 4 or more years
Washington................... 11,450 7.00 No regular
basis
West Virginia................ 6,629 6.75 No regular
basis
Wisconsin.................... 16,544 34.00 Every year
Wyoming...................... 2,071 1.00 No regular
basis

------------------------------------------------------------------------
Note: Private contractors perform inspections in AK, MT and PA. EPA
performs inspections in ID.

Mr. Greenwood. Without objection, those two documents will
be added into the official record of this hearing, and the
Chair recognizes himself for 5 minutes. Mr. Murphy, are you
familiar with H.R. 20, my legislation?
Mr. Murphy. I am roughly familiar, yes, sir.
Mr. Greenwood. Based on your testimony, it would seem to me
that what we have here is the tail wagging the dog. We have got
an MTBE tail that wants to wag the dog, and we have got an
ethanol tail that wants to wag the dog. But the dog is
represented by your institute, and what you are saying is that
if you let us formulate gasoline we can meet air quality
standards, and as long as we are not overly prescribed by this
oxygenate requirement. Is that a fair characterization of your
testimony?
Mr. Murphy. That is a fair characterization. So, tell us
what the performance objectives are or want to be.
Mr. Greenwood. Do you have any difficulty with my
legislation of H.R. 20?
Mr. Murphy. No, sir.
Mr. Greenwood. Do you support it?
Mr. Murphy. We support it.
Mr. Greenwood. Thank you. Ms. Chamberlain, Mr. Adams and
Mr. Ports make the case that what we ought to do in
Pennsylvania and around the country is just stop tanks from
leaking. If we can stop the tanks from leaking, then people
like Mr. Kahlenberg won't have to have stinky water. Does that
make sense to you? Would that solve the problem?
Ms. Chamberlain. I think that the progress that has been
made since the 1998 upgrade, we will probably be able to see
less releases. I know that we have taken a look at the
situation, and over the last 5 years we have had about a
thousand to 1,200 releases per year.
We now have as of this year about 330 to date. I think it
is the best that we can do, even with the upgrades, and there
are still going to be releases, and I think we have to take it
into consideration. There has been an improvement, but the
releases will always be there.
Mr. Greenwood. Okay. Mr. Kahlenberg, has anyone been able
to tell you what the long-range future for you and your
neighbors, and of course as you and I know, you are just one
neighborhood in our county alone. There have been dozens of
neighborhoods affected by water contaminated with MTBE.
Is anyone telling you what the long-range--what you can
expect in the long-range? Are you going to have to have this
filtering system on your home forever?
Mr. Kahlenberg. That is my understanding. At this point in
time, we are going to keep maintaining our system, our input,
still at the levels that we saw originally.
Mr. Greenwood. And who covers the cost of that?
Mr. Kahlenberg. I do at this point.
Mr. Greenwood. And can you tell us what those costs are
like?
Mr. Kahlenberg. To have one sample analyzed by the lab
costs about $150.
Mr. Greenwood. And how about the maintenance of the
filtration system?
Mr. Kahlenberg. It varies depending on how well my
filtration system performs, which to replace one of my tanks
would be--I have not had to do that luckily yet, but about
$500.
Mr. Greenwood. Ms. Chamberlain, Mr. Dinneen says he has the
answer. Let them build some ethanol facilities in Pennsylvania,
and replace the MTBE with ethanol. Does that solve the problem
for us in Pennsylvania?
Ms. Chamberlain. Well, I am not sure that we have a plant
imminent in Pennsylvania, but I do think that ethanol could be
good as an alternative fuel. I think the main thing that we
have stressed in our testimony today is we want to make sure
that we are not sacrificing air quality and water quality, as
well as our supplies. So I think it is important, and I think
Congress is well aware that we have to take it all into
consideration.
Mr. Greenwood. Mr. Murphy, what is wrong with Mr. Dinneen's
suggestion? He says just leave the oxygenate requirements and
we will build ethanol facilities all over the country, and be
able to put our tail into your dog?
Mr. Murphy. I am sure that if the use of ethanol is
mandated that will occur, but we don't need ethanol to meet the
performance requirements. We use ethanol, and we will be using
more ethanol as Mr. Early correctly stated.
We need flexibility in providing consumers with the most
affordable and readily available supplies of gasoline. We can't
produce and meet those performance standards without the use of
oxygenates, or with the use of ethanol.
Mr. Greenwood. Mr. Dinneen, do you have a response to that?
Mr. Dinneen. Yes, Mr. Chairman. First of all, I want to
thank you for being characterized as the tail on the dog. We
are usually characterized as the flea on the tail on the dog.
So I think there is progress being made here already.
I actually agree with some of what Mr. Murphy has said. I
think the refiners can indeed produce a gasoline that meets the
performance standards of the Act. But you have got to remember
the performance standards alone do not capture all of the
environmental benefits that occur as a result of reformulated
gasoline with oxygen.
The benefits of oxygen are really in high emitters, off-
road vehicles, reducing particulate matter, reducing carbon
monoxide, all things for which there are no performance
requirements.
Can they meet the strict performance requirements in the
Act? Yes, they can. Will it capture all of the environment
benefits that this program has seen with oxygen? I think Mr.
Holmstead indicated earlier that there is a question as to
whether or not that can occur.
Mr. Greenwood. My time has expired. The Chair recognizes
the ranking member, Mr. Deutsch, for 5 minutes.
Mr. Deutsch. Thank you, Mr. Chairman. I have two statements
that I would like to submit for the record, one from the
chairman, or the ranking democrat of the full committee, and so
without objection, we can submit that.
Thank you. Mr. Dinneen, in EPA's boutique fuels report, the
EPA analyzed a number of different fuel scenarios. These
included requiring a single clean burning gasoline nationally,
and allowing States to choose from a menu of 2 or 3 types of
fuels. In the options analyzed by the EPA, are there any that
your organization favors?
Mr. Dinneen. Congressman, I apologize, but I am not all
that familiar with the EPA report. It was just released last
week. I will tell you, however, that we do support the
legislation that Congressman Rush has introduced with
Congressman Blunt as a means of making the gasoline
distribution system more fungible, while ensuring that the air
quality benefits of oxygenates are maintained.
Mr. Deutsch. Would anyone else--Mr. Adams, or Mr. Murphy,
would you like to respond to that?
Mr. Murphy. Again, that report just came out, and the
report made some objections which there is some suggestions on,
in terms of tank turnovers, and things which would be helpful,
but frankly they avoided the basic problem and the basic cause
of the boutique fuels problem, which as I stated in the
oxygenate mandate in the Clean Air Act.
Mr. Deutsch. Mr. Adams.
Mr. Adams. Basically, the report itself is as Jeff
Holmstead said is a staff paper, and it is in the preliminary
stages, and here is much more work to be done on it. We find
that there are some parts that are missing, and some parts that
are not complete, but he said there would be more work done on
it. So we have problems with it.
Mr. Deutsch. Ms. Chamberlain, you stated that you support
phasing out MTBE and allowing States to waive the oxygenate
requirement. Won't these actions tend to increase, rather than
decrease, the number of boutique fuels?
You have stated regional performance standards can help to
minimize the number of fuels. Is there any assurance that under
such a system that we would actually end up with fewer fuels
than today?
Ms. Chamberlain. It is possible that that would be the case
and I think the EPA staff report and its white paper is talking
about a number of options out there as far as providing a
number of fuels and different options so that it could be
possible.
Mr. Deutsch. Did anyone else want to respond? Yes, Mr.
Early.
Mr. Early. Well, I think it is very clear that if you have
a good fuel that doesn't have MTBE in it, and doesn't have an
ethanol mandate in it, States won't be motivated to come up
with their own formula.
If you have a Federal fuel along the lines of what we have
endorsed, and then States aren't motivated to come up with
their own boutique fuel because they have a fuel that doesn't
threaten their water, and it doesn't threaten their air quality
because of volatility from mandatory ethanol requirements. So
they have no motivation to come up with their own formula.
Mr. Deutsch. Mr. Murphy.
Mr. Murphy. I agree with Mr. Early. If we did not have the
oxygenate mandate in the Clean Air Act, it would be relatively
easy to reduce the number of fuels from roughly 15 at the
moment to about 5 or 6.
And those that mix in those 5 or 6 fuels would be
environmentally superior, would have cleaner overall
environmental impacts than the existing mix of fuels, and would
substantially increase the fungibility of the gasoline system,
and increase our capabilities to supply gasoline in a readily
affordable and available fashion.
Mr. Deutsch. Thank you. I yield back.
Mr. Greenwood. The gentleman yields back. The Chair
recognizes Mr. Barton for 5 minutes.
Mr. Barton. Thank you, and I appreciate the courtesy of the
subcommittee for allowing me to participate. I am not a member
of the subcommittee, although I am a past Chairman of this
subcommittee, and a current subcommittee chairman of the
authorizing subcommittee that has got jurisdiction over the
Clean Air Act.
I assume that we all agree that the oxygenate fuel
requirement has cleaned the air. Is there anybody that
disagrees with that? I see nobody is doing anything but looking
stoic.
Mr. Murphy. Again, I think as Mr. Holmstead pointed out, I
think the RFG program has resulted in a substantial improvement
in air quality.
Mr. Barton. Okay.
Mr. Murphy. So how much of that is due to the oxygenate
requirement I think is questionable historically, and at the
moment I think, or according to the blue ribbon panel, is in
fact fairly minor.
Mr. Barton. Well, we have heard no testimony, and I am an
engineer by training, and I have seen no data that suggests
that it has not been a success, and that the oxygenate
requirement has been a large part of that success.
Mr. Dinneen. Congressman, excuse me if I might. One way to
determine the relative merits of the oxygenate content versus
low RFG gasolines is to look at air quality data comparing some
of the gasoline in Atlanta, or Pittsburgh, where low RFG fuels,
but it doesn't have an oxygenate requirement.
And by and large that data suggests unequivocally that you
have a much cleaner air quality benefit from the RFG with the
oxygen content than simply low RFG gasolines.
Mr. Barton. Well, I don't want to belabor this because I
have a point that I want to make, and I think you all know what
my point is. I think MTBE works. I think it is cost effective.
I think there are alternatives to it. Ethanol is an
alternative, and the reformulated gasoline is an alternative.
But we ought to do what is quaintly called cost benefit
analysis, and I have yet to see a cost benefit analysis that
says that the ethanol alternative, or the RFG alternative, is
as cost effective.
You are going to pay more to get the same air quality, and
I have also yet to see any analysis that shows that you can get
as much air quality improvement that you get with MTBE. You can
meet the minimum standards under the Act with RFG or ethanol
blends, no question.
But if you want to get the maximum air quality benefit, the
thing that works right now is MTBE. So where I come down is I
think of where Mr. Ports was, is that we ought to enforce the
leaking underground storage tank.
We ought to go ahead and put the money in, and make that
happen. I think we have got around a billion dollars in the
fund. We put out a little paltry amount every year and let the
States take it, and do what they want to.
And they don't do it, and they use it for administrative
purposes. They don't go out and enforce the law. They just kind
of piddle around. So we put in a Capps amendment in the energy
bill.
Congresswoman Capps is I would say a moderate progressive
democrat from California, and who said that we ought to
actually take some of that money and give it to the States, and
tell them to enforce the law, and that is now pending before
the Senate.
So in the absence of a more cost effective alternative that
is where I am; is that I want to spend the money to enforce the
LUST tank law, and I will look at alternatives. If we can come
up with a cost effective alternative, whether it is ethanol
based or some of these other additives that API has been
working on, that's fine.
But I am going to insist that as we do that that we get the
same air quality benefit, and not just the minimum required by
law. But MTBE in some cases is twice as effective, in terms of
the cleanup, and that is something that is not mentioned very
often. Now, Mr. Early, you have been very patient as I have
demigoded this.
Mr. Early. I agree with your analysis in part, but the
problem is that there is not any question that MTBE is cost
effective, but the question is cost effective for whom, because
from the Lung Association standpoint, we want more than just
the mandatory RFG areas to be using clean fuels.
And if we continue to have MTBE in reformulated gasoline,
communities are not going to opt into the program. They are not
going to involve the communities that are non-mandatory
communities, because of the water contamination problem. That
is what is driving our concern.
So you are correct from a purely cost effectiveness
standpoint, but we also know that clean fuels are a very cost
effective way of combating the ozone, and we want to
proliferate those fuels throughout the country where it makes
sense.
As you understand probably better than I do, communities
have a tool chest of clean air cleanup options that they can
choose, and reformulate gasoline has been demonstrated to be
one of the most cost effective ones, and we want communities to
continue to do that.
Mr. Barton. My time has expired, and I am not even on the
subcommittee, and so I am here at the courtesy of both the
minority and majority. I just want to say that we are very
open, at least I am, to a solution.
But I want it to be more than a minimal solution, and I
want to look at costs, and I want to look at benefits, and I
want to look at long term, and there is just a lot of issues
here.
But I understand Mr. Kahlenberg's--if I am saying that
correctly--all he knows is that he has got bad water, and his
wife doesn't like it, and his neighbors doesn't like it, and
the government ought to do something about it. And I agree with
that. Thank you, Mr. Chairman, for allowing me to participate.
Mr. Bass [presiding]. Thank you very much, Mr. Barton. I
will recognize myself for 5 minutes. Mr. Kahlenberg you do have
a problems. There are a lot of constituents in my State of New
Hampshire that have the same problem.
Mr. Adams, if I recall, you are a proponent of MTBE. What
do you have to say to Mr. Kahlenberg? What are his options and
what are the options of the--literally in my district of
thousands of individuals without municipal water, and with
contaminated wells, looking for a solution to a problem that
they had no part in creating.
Mr. Adams. I am very sympathetic to his situation. I was in
charge of enforcement at one time at EPA, and I am aware that
there is not the strong enforcement of the LUST program that
there should be at present. That's No. 1.
I am also on the Clean Water Foundation and care very much,
Mr. Kahlenberg, about your issue. As to what you can do at
present, I do not have any specific ideas of the area or what
New Hampshire has with regard to the rules or compensation, or
that type activity.
All I can do is just in general hope that we get to the
situation where we do have a sound leaking underground storage
tank program that will protect you in the future.
Mr. Bass. To continue the line of questioning here. The
underground storage tanks are definitely an issue. However, I
believe that MTBE is stable enough so that if you just pour it
on the ground, or if you spill at the gas stations, and somehow
it doesn't flash off, you have the same problem.
And if a gas station isn't located next to a river--and in
my home town they are all next to a river--then you can get the
MTBE into the water supply that sinks down, and it basically
sits there.
And we have an issue of clean air. We have to clean up the
air, but we are creating for ourselves a tremendous long term
problem with this substance that is seeping into the ground
that will contaminate wells essentially indefinitely.
And what is worse in my home State is we are in a non-
attainment area, but we can't get into attainment because the
source of the pollution doesn't come from New Hampshire, even
if we dropped the emissions to zero. It comes from the midwest.
So I was wondering if anybody on that panel can give me
some advice as to what I tell my constituents on what are their
options. Does anybody want to take a stab at it? Mr. Murphy?
Mr. Murphy. I think the option--unfortunately, the option
that New Hampshire has chosen is going to exacerbate the
boutique fuels problems. Of course, as you know, the government
has requested to waive out of the RFG program because of the
MTBE contamination.
And then to create a boutique fuel, which of course would
be unique to New Hampshire. And we are concerned about that,
because that leaves open the possibility of supply
interruptions, and price volatility, and adverse consumer
impacts.
But the answer quite honestly as I said in my testimony is
amazingly simple, and that is to repeal the oxygenate mandate
in the Clean Air Act so that we can supply the clean gasoline
that the New Hampshire consumers have a right to use, and a
right to have access to, without MTBE in it.
Mr. Bass. Well, set me straight here. If you repeal the
oxygenate mandate, you said that it would reduce the number of
boutique fuels, and you would still meet the Clean Air
requirements. And how do you meet those requirements?
Mr. Murphy. You meet the requirements by producing the fuel
that in fact meets the standards for RFG without the use of
oxygenates. That can be and that is done, and that is something
that we can do.
We will have to make up the volumes as I said over roughly
a 4-year period, but we can provide gasoline which meets the
environmental demands of the New Hampshire consumers. We can do
that without the use of MTBE.
Mr. Bass. Do you agree with that, Mr. Adams? Do you agree
with Mr. Murphy on that point? It seems to be a reasonable
solution.
Mr. Adams. Certainly not, Mr. Chairman, at the moment.
Basically, I think that there has been a report that has been
put out--and which I will get for you--with regard to the fact
that if something is spilled literally on the ground that you
end up with a hundred percent of evaporation rate, and most
gasoline stations themselves say if it is on the ground, or
concrete, as required by law in most instances. But there is a
full report on spills which I will get to you, and submit to
the committee.
Mr. Bass. Thank you.
Mr. Murphy. If I can interrupt.
Mr. Bass. Yes, go ahead.
Mr. Murphy. As you know, when the State of Maine, when this
problem first came to the surface as a result of an automobile
accident, where the tank on the automobile was pierced and
roughly 10 gallons, I think, spilled as a result, and
contaminated water supplies for quite a few in the area.
So unfortunately even with the--and we certainly as I said
strongly support enforcement of the underground storage tank
laws, but even if that takes places, we are still going to have
a problem with obtaining gasoline. So we do need to have MTBE
taken out.
Mr. Bass. Okay. Thank you. And one last thing. Mr. Dinneen,
can you--as I recall it, Mr. Early is no fan of ethanol, right,
the use of ethanol. I am just trying to remember which one of
you said what.
Mr. Dinneen. I am shocked.
Mr. Bass. Can you rebut the points briefly that Mr. Early
brought up with respect to the use of ethanol as a motor fuel,
versus other uses?
Mr. Dinneen. Well, not briefly, Congressman. In my written
testimony, a lot of it gets to some of the issues that Mr.
Early was raising. I will take one just for example. It
mentioned co-mingling.
The State of California looked at the co-mingling of
ethanol blends with conventional gasoline extensively in its
review of ethanol as an alternative to MTBE in anticipation of
the MTBE phaseout that will take place next year, and it
concluded that co-mingling was simply just not much of a
problem.
The co-mingling issue arises because if you blend ethanol
gasoline with non-ethanol blended gasoline in a vehicle tank,
it will increase the evaporative emissions from the co-mingled
blend.
But it involves a lot of assumptions about when you refuel,
what your buying habits are, and for most people that I think
are like me, you get to that gas station when you are on E and
you are running on fumes, and you roll on in.
And in those situations, there simply is not a co-mingling
problem. And it assumes that you are going to have half the
tank filled with MTBE gasoline, and then drive into a
containment area where you will have ethanol blended gasoline
and fill it with a half-a-tank, and those situations are just
going to be extremely rare.
But there are a number of other issues that were raised,
like permeation and stuff like that, and I would be glad to
provide the committee with a great deal of information on,
because the permeation issue quite frankly is more of an issue
of aromatics and not ethanol.
And ethanol is going to reduce aromatic content. It is one
of the significant environmental benefits that we have. I think
Mr. Early has pointed out some issues, and he has not
necessarily looked at all of the issues with regard to high
emitters, off-road engines, carbon monoxide a particular
matter, and aromatic content.
And I think if you were to do a comprehensive review of all
of these that you get a much better sense. But Mr. Early and I
can probably debate this for quite some time over drinks, and I
would be glad to buy and do that, and we can even do it with
the committee, and have a good old time.
Mr. Bass. Mr. Early. Well, a brief rebuttal, Mr. Early, and
then Mr. Adams.
Mr. Early. I am just really surprised that Mr. Dinneen
brings up California, because the EPA did not agree with
California's analysis, and turned down California's waiver
request because they felt that the co-mingling was a problem,
and the only way to solve the problem in California was to
require ethanol in a hundred percent of the fuel.
And which perfectly illustrates my point that this co-
mingling issue, even the EPA agrees is a real issue.
Mr. Bass. Mr. Adams.
Mr. Adams. I want to reemphasize that reading from the
testimony of Linda Fisher on the Senate side, she said that
under the new scenarios analyzed earlier this year by EPA, co-
mingling would result increased in VOC emissions.
And depending upon the level of the increase associated
with co-mingling, the total emissions of VOC associated may
increase or decrease, resulting in an uncertain impact on the
ozone. That was the definitive statement from EPA at the time.
Mr. Bass. I am going to use the chairman's prerogative to
ask one more question. Ms. Chamberlain, can you give us some
idea as to how a typical MTBE contaminated well is remediated?
How long does it take and what is the process?
Ms. Chamberlain. I think that really does just depend upon
the leak itself. It depends upon whether it is a small one and
you are dealing with an individual tank, or whether it happens
to be a larger release that affected Bucks County.
As I mentioned in my testimony, we have had a number of
spills, even though they have been ones that have affected a
number of wells themselves. And in some of the cleanups, we
have been spending, oh, $5 to $6 million to clean up a spill
from a particular facility.
So it does depend upon its size. For an average tank, we
just recently had our underground storage tank indemnification
fund meet, and with the actuarial analysis, and the average
cost for the typical spill of one tank at a gas station runs
about $125,000 and it can be readily addressed.
Mr. Bass. Is Mr. Kahlenberg's tank going to be--well, is
his well going to be fixed or not?
Ms. Chamberlain. Well, as I was saying, that happens to
relate to an area where just one spill affected quite a large
area, and we do have a multi-million dollar cleanup under way
in order to address the situation.
Mr. Bass. Okay. Thank you very much, Mr. Chairman.
Mr. Greenwood. Okay. I have one final question, and I will
address it to Mr. Dinneen. Your statement notes that the EPA
white paper concluded that there would be no additional costs
in imposing a renewable fuels requirement in lieu of an
oxygenate mandate.
I would note that the level of this requirement contained
in the white paper was 2.4 percent of gasoline consumption. Do
you agree that this is the proper level for any renewable fuels
requirement, and if not, why not?
Mr. Dinneen. I believe that the domestic ethanol industry
could support a much higher renewable content requirement than
that given the dramatic growth that you have seen in this
industry over the past couple of years.
As the industry develops, you are going to see new feed
stocks, new technologies, and we will expand into cellulose,
and I think the potential for ethanol production is--I won't
say limitless, but certainly far greater than that. I think
that is a very reasonable and conservative estimate on EPA's
part.
Mr. Greenwood. Okay. I would like to thank each of the
panelists for your testimony and for your forbearance with our
schedule today. You have been here for most of the day and I
appreciate it. The hearing is now adjourned.
[Whereupon, at 4:55 p.m., the subcommittee was adjourned.]
[Additional materal submitted for the record follows:]

Supplemental Data From the General Accounting Office Review of the
Underground Storage Tank Program

In response to a congressional request, GAO reviewed the
Environmental Protection Agency's (EPA) program to regulate underground
tanks used to store fuel and other substances. The program was designed
to help ensure that the tanks remain safe and do not leak their
contents, which contain hazardous substances that can contaminate soil
and groundwater and pose health risks. One of these substances--methyl
tertiary butyl ether (MTBE), a fuel additive and potential carcinogen--
is particularly troublesome in that it migrates quickly through soil
into the groundwater and even small amounts can render the groundwater
undrinkable.
Because the states primarily implement the provisions of the
underground storage tank program, GAO conducted a survey of all 50
states and the District of Columbia to determine whether tanks comply
with program requirements, how EPA and the states are inspecting and
enforcing the requirements, and whether upgraded tanks still leak. GAO
issued a report on the results of this work on May 4, 2001 entitled,
Environmental Protection: Improved Inspections and Enforcement Would
Better Ensure the Safety of Underground Storage Tanks (GAO-01-464) as
well as testified before the Subcommittee on Oversight and
Investigations, Committee on Energy and Commerce on November 1, 2001.
During that hearing, Congressman Gene Green (D-TX) asked GAO to provide
some additional information for the hearing record. The following table
summarizes this additional information, namely survey data for the 13
states that, as of November 14, 2001, have partially or totally banned
the use of MTBE in motor fuels sold in their jurisdictions. The table
shows the rate at which tanks in each state comply with the equipment,
as well as operation and maintenance, requirements of the program, and
the frequency at which each state inspects its tanks for compliance.

Table 1
States Enacting Complete or Partial Bans of MTBE
----------------------------------------------------------------------------------------------------------------
Reported Level of Compliance
With
Number of ---------------------------------- Reported
State Tanks Operation and Frequency of
Equipment Maintenance Inspections
Requirements Requirements
----------------------------------------------------------------------------------------------------------------
Arizona........................................ 8,191 91% to 100% 21% to 70% 4 years or longer
California..................................... 50,000 81% to 90% 21% to 70% 1 year
Colorado....................................... 7,990 91% to 100% 91% to 100% 1 year
Connecticut.................................... 13,831 91% to 100% 21% to 70% 4 years or longer
Illinois....................................... 27,317 91% to 100% 71% to 90% 2 to 3 years
Iowa........................................... 8,499 91% to 100% 71% to 90% No regular basis
Kansas......................................... 7,830 91% to 100% 71% to 90% No regular basis
Michigan....................................... 23,500 91% to 100% 71% to 90% 2 to 3 years
Minnesota...................................... 14,000 91% to 100% 21% to 70% No regular basis
Nebraska....................................... 7,133 61% to 80% 21% to 70% 2 to 3 years
New York....................................... 32,928 61% to 80% 21% to 70% No regular basis
South Dakota................................... 3,089 91% to 100% 91% to 100% 2 to 3 years
Washington..................................... 11,450 91% to 100% 21% to 70% No regular basis
----------------------------------------------------------------------------------------------------------------
Source: State responses to GAO's survey of tank program managers.