In this region, we produce and distribute more of the clean-burning reformulated gasoline required by the Clean Air Act than any other company. Consequently, we've learned firsthand about the benefits and burdens of the existing RFG Program.
My company is both a manufacturer and consumer of MTBE. We have used the chemical since the early 1980s for its high-octane properties in our gasoline. After the 1990 Clean Air Act Amendments were enacted, we, in partnership with others, invested nearly a quarter of a billion dollars to build a second plant - a world scale MTBE plant to supply our newly created additional needs for the oxygenate. Consequently, we know about all there is to know about the useof this additive in gasoline.
We are also a major supplier of conventional gasoline in the mid-America Region of the U.S. - Gasoline supplied from our Toledo, Ohio refinery system. Here we do not use MTBE, but rather we are a major buyer and blender of ethanol in gasoline. Therefore, we have extensive firsthand knowledge of both the benefits and limitations of ethanol in motor fuels.
Finally, through my membership on the EPA'S Blue Ribbon Panel on oxygenates, I have been totally immersed over the past several months in the debate over the future of MTBE and ethanol in the RFG Program.
I offer this introduction so you will understand why I am very pleased to be given the opportunity to share my experiences and opinions with this committee.
Dr. Greenbaum has given an excellent summary of the deliberations and the recommendations of the Blue Ribbon Panel, and I'd like to salute Dan for his extraordinary accomplishment in moving a very diverse, fourteen member committee through a thicket of prickly issues to a remarkable consensus. Dan helped us develop an excellent database and a set of recommendations that I wholeheartedly endorse.
As you know, we are now embarking on the implementation of those recommendations - some of which require legislative action. Public concern about MTBE in drinking water is clearly the triggering event for the call for action. Putting aside the complex question of MTBE as a hazard to human health, it clearly should not be getting into drinking water. But regardless of how much money is spent on tank replacement and inventory control, gasoline handled by 190 million drivers will inevitably be spilled, and we now know how persistent a contaminant in water MTBE can be.
California - as it so often does - has led the way in defining the process for the elimination of this environmental problem. As you know, last March Governor Davis announced a 4-year program designed to eliminate MTBE from gasoline and yet preserve the air quality goals of the State. Critical to the achievement of that program is relief from the existing 2% oxygen mandate. I support Governor Davis' initiative for dealing quickly with a complex and often emotional problem.
But one needs to remember that MTBE is principally used on both the west and east coasts of the United States. In fact more MTBE is used in the 11 east coast states comprising the Ozone Transport Region than in California (130,000 vs 100,000 barrels per day). I can assure you that the citizens of Boston and Philadelphia are just as adamant about protecting their drinking water as the folks in Sacramento and Santa Monica. Consequently my plea to you today is to help us solve the equally serious problem of MTBE in the northeast -- and to do that we need a regional solution.
I know and understand that California's efforts are better coordinated than the group of east coast states on this subject. But, if the current proposed legislation deals only with California, I can assure you that several of the northeastern states are poised to enact their own local solutions. The result will be a patchwork quilt of local initiatives or regulations. This will be a nightmare for companies attempting to reliably supply low cost, high quality gasoline to consumers in the 11 state region.
Before the EPA Panel published its findings and recommendations, several northeast states initiated their own legislative solution. We asked them to wait, and give us a chance to solve the problem collectively rather than individually. That is why I'm here today. I have no interest in doing anything that would delay or disrupt the Bilbray proposal. But we on the east coast need to use that same legislative momentum to deal with the equally thorny problem in our region.
The bottom line is we can solve the problem in the northeast in a manner similar to California only if we are also given relief from the 2% oxygenate mandate. If you will do that, we will be able to continue to supply RFG to those areas requiring it, in an economic manner, in reliable quantities, with the same air quality benefits; that reformulated gasoline will contain substantially reduced volumes of MTBE (the Panel called for "substantial reduction" not the elimination of MTBE).
I will tell you quite honestly, that even with all our experience in blending ethanol in gasoline in mid-America, I don't know how to accomplish in a real world, practical manner the same result in the northeast RFG system. Ethanol in RFG is successfully blended in the Chicago area, because it is a relatively small proportion of the supply from the manufacturers in that region. In my opinion, if the 2% mandate remains, and we are forced to directly substitute ethanol for MTBE in the large RFG volume area of the northeast, we will have a disaster scenario for both the supplier and the consumer.
My reasoning for saying that is as follows: there are two very practical problems associated with ethanol as a blending component in east and west coast reformulated gasolines. The first problem is the difficulty of adequate supply and economic transportation of ethanol from its point of manufacture (primarily the midwest) to where it would be needed for blending (the east and west coasts). Because of its affinity for water, ethanol cannot be transported in common carrier pipelines and would have to be transported by rail or truck to both coasts. Let me repeat here exactly what I told the Blue Ribbon Panel this spring: Given enough time and money, an enterprising ethanol industry can expand production and create new logistics systems to address the problem. But the added cost will be immense and unnecessary.
Solving the logistics problem will still not address ethanol's second, and most critical, defect -- it's high vapor pressure when blended into gasoline. The one thing we have learned in the past 10 years is that the most crucial characteristic of a successful RFG Program is vapor pressure or "Volatile Organic Compound (VOC)" control. Higher vapor pressure means increased VOC emissions which leads to more ozone pollution. The next generation of RFG - Beginning January 1, 2000 - has even more stringent restrictions on vapor pressure than current RFG. Consequently, blending ethanol into future RFG would severely compound the environmental and supply problems. It is my view that ethanol cannot be practically used on the east or west coast in the summertime period because of the low vapor pressure requirement and the high percentage of RFG that must be produced in those regions.
The solution? Legislation is needed to solve the oxygenate problem where it exists -- in California, and in the ozone transport region of the east coast. That is where 75% of all the RFG in the country is used, and where almost 90% of the MTBE is present in gasoline. That is also where water quality complaints from consumers have been most vocal. We need your help to fix what's broken. I ask you to give these two regions three things:
-- The authority to regulate the use of oxygenates when water quality impacts are substantiated.
-- A waiver of the 2% oxygenate mandate for RFG.
-- The requirement that no current clean air benefits be compromised as a result of these changes to the Federal fuel program.
Congressman Jim Greenwood of Pennsylvania is attempting to advance this precise solution in the House Commerce Committee. Prompt, parallel action in your committee can help avoid the transportation fuel crisis that I see on the horizon, and I urge you to move quickly.
I appreciate the opportunity to share these thoughts with you, and I look forward to any questions you may have.