[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


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                            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

                               __________
                                                                   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

                              ----------                              


                       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

    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.

    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

    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.

 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.

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