Politics and the gas pump

A meaningless environmental provision leads to an ecological nightmare -- not to mention an extra charge when fueling up.

By Ken Silverstein

Published June 8, 2000 7:00PM (EDT)

During the past few months, a momentous if mostly discreet debate has been taking place in Washington, which will have enormous implications for air and water quality as well as for the price of gasoline. At issue is what type of fuel additive will be used in gasoline sold in the nation's most smog-afflicted regions: MTBE, which gained widespread use as a result of federal clean air legislation passed by Congress a decade ago, or ethanol, whose principal producer is agribusiness giant Archer Daniels Midland (ADM).

The debate heated up in March, when Carol Browner of the EPA announced plans to phase out the use of MTBE. The additive currently holds about 80 percent of the $4.5 billion market for so-called "reformulated gas," which is supposed to burn cleaner than normal gasoline. The EPA took action because MTBE (an acronym for methyl tertiary butyl ether) leaking from underground storage tanks has contaminated water supplies in 31 states. The problem is most acute in California. In some Southern California cities such as Santa Monica, 90 percent of the water supply is affected.

In April, water-well owners in 16 states filed a class-action lawsuit against some of the nation's biggest oil companies saying that they have long known that MTBE was an environmental menace.

Browner said that MTBE should be at least partly replaced with ethanol -- alcohol distilled from corn, or basically moonshine -- which she portrayed as a safer option to reduce air pollution.

If Browner's proposal is accepted, a phaseout of MTBE could begin as early as next year. If that happens, demand for ethanol, which is far more expensive than MTBE despite lavish government subsidies, will increase from about 1.3 million gallons this year to 3.2 billion gallons in 2004. Andrew Fairbanks, an energy industry analyst at Merrill Lynch, tells Salon that the cost to consumers will be an extra 3 to 5 cents per gallon at the pump.

Lawmakers from the Corn Belt, including powerful Sens. Tom Harkin, D-Iowa, and Tom Daschle, D-S.D., roundly applauded Browner's action. MTBE producers and refiners, including Lyondell Chemical, Valero and Texas Petrochemicals, were far less enthusiastic. So, too, were Republicans in Congress, who say the EPA is trying to help Vice President Al Gore's standing in Midwestern states where ethanol is largely produced. (They don't mention that George W. Bush, like Gore, is a big-time ethanol backer.)

So, what's the smart choice, MTBE or ethanol? Answer: Neither. The weight of scientific evidence shows that neither MTBE nor ethanol benefits air quality, and both inflict serious damage to the environment.

To understand this seeming paradox, we must travel back to mid-1990, during a cataclysmic political battle over reform of the Clear Air Act. With billions of dollars at stake in the form of subsidies, tax breaks and other assorted indirect costs and benefits, Big Oil, automakers, farmers, ethanol and environmentalists all deployed large armies of lobbyists and lawyers to influence the debate.

When it came to reformulated gas -- one of the most hotly debated questions in a bill nearly a foot thick -- each faction had a key congressional leader. Rep. Edward Madigan, a former secretary of agriculture from Illinois -- a major corn state and home to ADM, which processes 70 percent of the nation's ethanol -- was commander for the ethanol forces. Rep. Henry Waxman, D-Calif., was the general for the green lobby.

Texas Reps. Ralph Hall and Jack Fields led the way for oil companies, while Rep. John Dingell, D-Mich., never a big fan of air pollution control measures, ran point for the automakers.

The legislative process was akin to tribal warfare, with alliances forged and broken by the hour. As debate headed for a close, environmentalists, led by the Sierra Club, the Natural Resources Defense Council and the Environmental Defense Fund, were increasingly desperate. Their leaders had once hoped to mandate reformulated gas nationwide, but settled on a compromise that required it be available for sale in the nation's nine smoggiest cities -- representing 25 percent of the gasoline market -- by 1995. ARCO had invested heavily in developing gasoline made with MTBE, which it promoted as an environmentally correct fuel, and quietly sided with the green groups.

Most of the other oil companies were dead set against a reformulated fuel requirement. They argued that producing cleaner fuel would be hugely expensive for consumers and lead to only marginal improvements in air quality. "We're against government gasoline," read buttons produced by the American Petroleum Institute as part of its lobbying effort.

Big Oil, never wildly popular with the public, was still hurting from the fallout caused by the Exxon Valdez affair. The auto industry, which worked hand in glove with oil companies on many proposed amendments to the Clean Air Act, remained neutral on the reformulated fuel requirement. Dingell had already watered down a measure that would have required the Big Three to produce 1 million cars a year that ran on alternative fuel, and Detroit didn't want to appear to be virulently anti-environmental.

Still, Big Oil wields far more influence in Washington than do environmental groups. Hence, it appeared that the green crusade for clean fuel was dead in the water.

Until the environmentalists hit upon a brilliant strategy: If we can't beat the oil industry alone, why not round up support from other groups? The logical choice here was ADM and the ethanol lobby, for which the secret sauce of clean fuel was good old-fashioned oxygen. Ethanol, conveniently, contains plenty of oxygen. Employing it as a fuel additive would, ipso facto, greatly reduce air pollution.

So the greens proposed a deal. If ADM agreed to back the green call for reformulated gas and to line up vital support from the powerful farm lobby, the enviros would make sure that ethanol, not MTBE, was made the fuel additive of choice if the amendment were approved. "[Our side] was keenly aware that [an ethanol] requirement meant that we could pull votes that otherwise might be on the other side," recalls Blake Early, then with the Sierra Club and now at the American Lung Association.

Up to this point, ADM had expended little political capital on the reformulated fuel debate, especially because it seemed that MTBE would be the big winner if the amendment were passed. Farmers, who are exempt from most environmental laws and are not major air polluters, were also blasi. Their man Madigan left Washington a few days before the final vote was expected so he could attend his daughter's wedding in Illinois.

With the offer from the greens, though, ADM and the farm bloc became ardent champions of reformulated fuel. The alliance was sealed during a 4 a.m. phone call from Waxman in Washington to Madigan in Illinois. A former congressional staffer, who asked to remain anonymous, recalls the scene: "Waxman was in the room. His staff was there. It was put to Madigan, 'Is that [the ethanol requirement] something you've got to have?' And the answer was 'Yes.' To get his support, it had to be included."

On Capitol Hill, the word "ethanol" is immediately understood as code for ADM and corporate welfare. Hence, the amendment submitted by the company and the greens prudently omitted mention of ethanol, stating only that the new reformulated gas would be bolstered with virtuous amounts of oxygen.

One of the many ironies of the story is that most environmentalists believe ethanol is an ecological no-no. It reduces carbon dioxide emissions, but evaporates faster during summer months and can actually increase smog. Ethanol also reduces fuel mileage -- so consumers need to buy and burn more gasoline -- and can hamper engine performance. But for the embattled greens, who believed this was their best and perhaps final chance to win a commitment to cleaner-burning fuel, political support from the ethanol lobby and farm bloc was roughly equivalent to America entering World War II on Britain's side. Big Oil's troops beat a hasty retreat, and the reformulated gas requirement sailed through Congress. ADM was euphoric. It was estimated that the bill would bring about a doubling of demand for ethanol over five years and mean hundreds of millions of dollars annually to the company's bottom line.

Abandoned and left for dead by the greens, ARCO was not ready to concede defeat. Corporate officials swiftly noted that the reformulated gas amendment stated that "clean fuel" must be bolstered with oxygen, but it didn't specify that ethanol had to be the means to do so. MTBE also contains oxygen and would work just as well, in addition to being cheaper. Though they'd opposed reformulated gas from the get-go, other oil companies and refiners decided to make the best of a bad situation. Since MTBE is made with petroleum and natural gas, they sided with ARCO in lobbying against ethanol. The environmental consequences of MTBE were not then widely known, and Big Oil was soon touting it as "green" fuel. "We're not going to support something that environmentally is the wrong thing to do," Amoco's vice president of research, Allen Kozinski, said piously at about this time in explaining why his firm was opposed to ethanol.

In another twist, the green groups suddenly acknowledged that ethanol was an ecological hazard, ditched their marriage of convenience with ADM, and took up with Big Oil in promoting MTBE. Given a choice of oxygenates, most refiners quite naturally picked MTBE over ethanol, which is how it came to corner the clean gas market.

Over the intervening years, a whole series of political flip-flops have occurred on the question of MTBE vs. ethanol. Round one came in the waning days of the Bush administration, when ADM turned to the president for help. Bush, undoubtedly moved by ADM's donations to the GOP of more than $1 million in 1991 and 1992, signed a regulation that required ethanol be used to meet at least part of the oxygen requirement called for by the reformulated fuel amendment. But the company's victory was short-lived. Upon taking office in January 1993, Bill Clinton suspended the Bush regulation, which administration officials dismissed as a crude payoff to ADM by the outgoing president.

With a new administration, ADM adjusted its strategy. During Clinton's first two years in office, the company gave the Democratic Party about $400,000. Eight days later, the EPA issued a regulation -- remarkably similar to the one promulgated a few years before by George Bush -- that required "renewable oxygenates" be used in 30 percent of reformulated gasoline. (Here again, code is being employed. Ethanol is made from corn and is considered renewable, while MTBE is not.)

The American Petroleum Institute and the National Petroleum Refiners Association took the issue to court, where they scored an important victory. In a 1995 ruling, a federal appeals panel decreed that the EPA could not require that ethanol be used in reformulated gas because the sole purpose of the Clean Air Act amendment was to reduce air pollution, not to mandate how that goal be achieved. In the latest chapter of the saga, Browner in March cited the growing evidence of danger posed by MTBE in calling for its phase-out and a simultaneous boost in ethanol use.

As should by now be obvious, the past decade's debate in Washington on the complex question of reformulated gas has never had anything to do with scientific evidence or real facts. The anonymous congressional staffer cited above confesses: "I had no idea [in 1990] exactly what the impact of putting oxygen in fuel would have on emission levels. These things were so technical and had such impact on how business would be done that staffers were without the expertise. The process should have taken five years instead of one month if we were going to do it in a thoughtful way, but you have to strike when the iron is hot."

And this leads to the greatest irony of all. Oxygen, whether in ethanol or MTBE, does not produce a cleaner-burning fuel. An oil industry study completed in 1995 states that the difference in pollution emissions between gasoline with oxygen and gasoline without is "not statistically significant." Dave Foster, a professor at the Engine Research Center at the University of Wisconsin at Madison, says that oxygen made a minor contribution to reducing tailpipe emissions 10 years ago, but its relative impact has fallen greatly over time.

Several congressional staffers I spoke with say the greens knew from the start that oxygen played no role in reducing emissions, but wanted a reformulated fuel measure passed at any cost. Early denies that, but admits that "since 1990 we've learned a lot more and it's clear that oxygen is not one of the most important things you can do with fuel. It's not fair to say it does nothing."

The only people who currently say that oxygenates are significantly beneficial to air quality are flacks for ethanol and MTBE. Monte Shaw, a spokesman at the Renewable Fuels Association, an ethanol lobbying group, lambastes MTBE as an environmental menace while arguing that ethanol is a virtual wonder drug. "It's grain alcohol," he says. "If you spill it into water, all you need is ice and tonic, and you're OK." (Shaw admits to stealing this line from Sen. Charles Grassley, R-Iowa.)

The folks at the Oxygenated Fuels Association, a wholly owned subsidiary of the MTBE lobby, say it's just the reverse. "Ethanol has proven that it cannot compete with MTBE on price, supply or effectiveness," reads a statement the group put out in response to Browner's March announcement. "By removing MTBE from the gasoline pool, EPA is asking Americans to pay more than they already are for gasoline and to breathe dirty air."

Despite all the cynical posturing and horse-trading surrounding the issue, passage of the reformulated fuel amendment has dramatically reduced toxic emissions. But that's got nothing to do with the gratuitous and expensive oxygenate requirement included in the Clean Air Act amendment. Rather it's because gasoline refiners were required by the amendment to reduce toxic emissions and, since oxygen didn't do the job, they had to find something that did.

The solutions they found -- which involve adjusting the aromatics, sulfur content and vapor pressure of gasoline -- have been so successful that toxic emissions from tailpipes have today fallen to levels well below what is called for in the 1990 reformulated gas amendment.

Unfortunately, the oxygenate requirement makes it harder and more expensive for refiners to reduce toxic emissions. What Browner calls for now will prolong the problem by requiring refiners to substitute needless MTBE with needless ethanol. Where California Gov. Gray Davis has already ordered a phaseout of MTBE, two California lawmakers -- Democratic Sen. Dianne Feinstein and Republican Rep. Brian Bilbray -- have proposed another solution. They have introduced a bill that would eliminate the oxygen mandate entirely, but require refiners to continue meeting the lowered emission standards through other methods. A number of environmental groups and most big oil companies are supporting the measure as well.

The perfect epigram for the story comes from an energy industry analyst who has consulted for all parties involved in the reformulated-gas dispute. "Politics is fine when it's practiced by people with knowledge, but not when it's practiced by ignoramuses," he says. "In this case, policy was made by scientific ignoramuses."

This story was based on research originally developed by Jay Gourley of the Natural Resources News Service.

Ken Silverstein

Ken Silverstein is a contributing editor at Harper’s magazine and an Open Society fellow. Research support for this article was provided by The Investigative Fund at The Nation Institute.

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