Energy Measure Would Limit Liability of MTBE Producers

Times Staff Writer

A sweeping energy bill coming before Congress this week would not only limit the liability of manufacturers of a gasoline additive blamed for fouling water supplies from California to New Hampshire but would also give the companies up to $2 billion in federal aid, according to details of the Republican-drafted bill released Saturday.

Legal protection for makers of the fuel additive methyl tertiary-butyl ether, or MTBE, is emerging as one of the more contentious provisions in the energy legislation. The bill seeks to reduce dependence on foreign oil and prevent problems like the 2000-01 California electricity crisis and this summer's Northeast blackout.

The bill would provide between $16 billion and $20 billion in tax breaks to promote energy production and conservation, establish programs to modernize the nation's electric grid and mandate greater use of corn-based ethanol in gasoline.

It includes projects big and small: One provision would guarantee loans to spur construction of a pipeline to bring Alaskan natural gas to the Midwest; another would fund a study of energy production from ocean waves.

The measure faces its first test Monday before a House-Senate conference committee. The bill is expected to encounter criticism from some lawmakers there over a provision that would shield MTBE manufacturers from product liability lawsuits, retroactive to Sept. 5.

The legislation could undermine pending court cases, such as a suit filed recently by New Hampshire officials against oil and chemical companies in connection with contamination allegedly caused by MTBE. The suit alleges that various companies minimized or concealed known hazards associated with MTBE, misleading government agencies.

In another case, the Sacramento County district attorney and a group of water utilities filed suit Oct. 2 seeking compensation to clean up underground MTBE pollution.

MTBE, which will be banned from California gasoline by the end of the year, helps cut auto-emission pollution but is blamed for contaminating groundwater.

Whereas earlier versions of the bill provided so-called transition assistance of about $800 million to help MTBE manufacturers retool plants to make other gasoline products, the latest version of legislation increases that amount to up to $2 billion over 10 years.

The legal protections have been championed by House Majority Leader Tom DeLay (R-Texas), whose state is one of the main producers of the additive. Efforts to include the legal protections in the energy bill were prompted by lawsuits against the fuel additive's producers, including one in South Lake Tahoe last year that led to a $69-million settlement.

A Washington lawyer for MTBE manufacturers said the transition assistance serves the public interest because it would encourage makers of the fuel additive to accelerate production of different clean-fuel products.

"Foes of MTBE tell you that they would prefer for MTBE to leave the marketplace a lot faster than 2015," the date by which the substance must be phased out nationally, said lawyer Scott Segal. "To the extent that there is transition assistance money made available

Defending the retroactive date for liability protection, Segal said it is necessary to prevent a "rush to the courthouse, even with the most frivolous of claims." He said that anyone thinking of filing suit was given notice in April when the liability-limiting provision was included in a version of the bill passed by the House.

GOP aides said Sept. 5 was chosen as the cutoff date for liability protection because that was the day House-Senate negotiators formally met to write the final version of the energy bill.

Critics of the legal protections, including many water agencies, have said that it could shift an estimated $29 billion cost for cleaning up water supplies to taxpayers and water customers.

But it wasn't clear whether the provision would cost the bill's GOP authors the support of fellow Republicans who represent states where MTBE contamination has been a problem.

Ted McEnroe, a spokesman for Sen. Olympia J. Snowe (R-Maine), said the legal protections raise "serious concerns," but could not say whether that would be enough to keep Snowe from voting for the bill. Sens. John E. Sununu (R-N.H.) and Susan Collins (R-Maine) have also been critical of the MTBE liability protection.

And two Senate Democrats running for president -- Joe Lieberman of Connecticut and John F. Kerry of Massachusetts -- have criticized the legal protections, underscoring how the bill, a priority of President Bush, is emerging as an issue in the 2004 presidential campaign. Howard Dean has also been critical of blanket legal protections for the MTBE makers.

Industry officials have contended that Congress was responsible for promoting the use of MTBE by requiring cleaner-burning gasoline in the nation's smoggiest regions.

Supporters of the provision argue that the legislation would not prevent all MTBE-related lawsuits, such as for negligence or mishandling of MTBE, but would prevent plaintiffs from claiming that MTBE is a "defective" product.

The overall bill has been assailed by environmental, consumer and taxpayer groups that say it doesn't do enough to promote conservation and cleaner energy sources, such as solar and wind power.

The critics also say it would deepen the federal budget deficit by about $100 billion and weaken consumer protections in electricity markets.

A GOP aide said that the costs of the bill have yet to be calculated but added that its price tag should be measured against the economic impact of the Northeast blackout, the California electricity crisis and rising gasoline prices and home heating bills.

Republicans hope that the provision to double the amount of corn-based ethanol that would have to be added to the nation's gasoline supply -- to 5 billion gallons by 2012 -- will win the support of farm-belt Democrats for the bill.

But Sen. Byron L. Dorgan (D-N.D.) said this month that if Republicans believe they can exclude Democrats from the bill's drafting and "throw a bill to the House and the Senate and say, 'Vote on it,' and that the cherry on the sundae is ethanol ... they've been sadly misinformed."

A provision of the bill to give the federal government the power to override state decisions in the placement of power lines could draw opposition from Western Republicans protective of private property rights.

Among of the bill's touted provisions are federal-loan guarantees and some tax incentives to spur building of a $20-billion Alaska gas pipeline, which could tap into one of the largest natural-gas reserves in the country.

But ConocoPhillips failed to get the kind of tax credit that it has said is necessary to make the project viable in today's economic climate. The tax credit was opposed by the White House, which said it could distort gas markets and prove costly to the federal government.

"We don't want to be perceived as 'Congress gave you everything you asked for and you didn't build the pipeline,' " said Don Duncan, ConocoPhillips' Washington lobbyist. "That's not true."

But a congressional GOP aide said he thought the pipeline could still move forward even without the tax break sought by ConocoPhillips.

Other provisions in the bill would:

* Establish a production tax credit for nuclear power in an effort to revive the U.S. nuclear power industry;

* Streamline the approval process for drilling and mining on federal land;

* Establish rules for the electric grid, including fining utilities that overload transmission lines, and giving utilities incentives to invest in new lines;

* Authorize $3.4 billion a year in energy assistance for low-income households;

* Provide grants for generating energy from brush removal and tree thinning in fire-prone national forests; and

* Authorize $300 million for solar programs, including a goal of installing 20,000 roof-top systems in federal buildings by 2010.

Times staff writer Nick Anderson contributed to this report.

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