Summary of Testimony Before
Senate Environmental Quality Committee
Hearing on SB 521 (Mountjoy)
May 12, 1997Daniel Nix
Deputy Director
California Energy Commission
Energy Information Analysis Division
Summary of SB 521
Concerns have been raised over MTBE (methyl tertiary butyl ether) contamination of public drinking water supplies. MTBE is the principal oxygenate gasoline additive used in California to comply with federal and more stringent California clean fuel specifications. MTBE has been detected in groundwater supplies in several areas of the state. The groundwater contamination is believed (or known) to come from leaking underground storage tanks. MTBE has also been detected in surface water and is thought to come from recreational water craft refueling and/or incomplete fuel combustion.Senate Bill 521 as amended April 22, 1997, initially would have required the immediate cessation of use of MTBE in gasoline until January 1999 or the completion of a health risks study by the California Department of Health Services, the Water Resources Control Board, and the California Environmental Protection Agency. Use of MTBE as a gasoline additive could be restarted if those agencies jointly certified an absence of a health risk to the California Secretary of State.
SB 521 as proposed to be amended in the Senate Environmental Quality would allow continued use of MTBE until March 31, 1998, when a decision would be made regarding the presence and/or acceptability of a health risk.
The California Energy Commission's concern has focused on the impact on the state's gasoline supply if MTBE were to be suddenly phased out of use, and with the supply implications of reliance on other oxygenates.
Summary of Testimony
(Note: This is not a verbatim transcript.)Good afternoon Mr. Chairman and Senators.
My name is Daniel Nix. I am Deputy Director for Energy Information and Analysis at the California Energy Commission.
The California Energy Commission has not taken a position on whether MTBE should be removed from gasoline in order to protect the public health. We are, however, concerned that a sudden prohibition of use of MTBE coupled with continuation of the federal and state clean fuel specifications would have significant impact on the stateÕs gasoline supply. We ask that you consider these impacts in the timing and manner of phaseout of MTBE if that is the ultimate decision.
California refineries produce nearly all of the gasoline produced in the state. (Small amounts have come from refineries located in Norway, the Caribbean, the Gulf Coast, and the Pacific Northwest.) California gasoline production only slightly exceeds demand during the summer months when estimated demand of 920,000 to 930,000 barrels per day is met by sustainable gasoline production of 930,000 to 960,000 barrels per day. This is a margin of approximately three to five percent. Year around, excess gasoline production goes into inventory as insurance against unscheduled refinery outages and for scheduled refinery maintenance.
MTBE comprises 11 percent, by volume, of a gallon of gasoline. Consequently, an immediate cessation of use of MTBE would reduce gasoline supply by at least 11 percent. This is significant in light of the tightness of California's gasoline market.
A loss of 11 percent of supply would not allow California refineries to meet typical demand levels. However, an immediate prohibition against use of MTBE would cause a gasoline supply decrease of from 15 percent to 40 percent, or more. (This range is large, and might underestimate actual production decreases, because of the highly refinery-specific changes to processes that would be required without use of MTBE and the fact that certain portions of the refined product mix could not be used in gasoline and still comply with specifications.)
A sudden loss of gasoline supply of this magnitude would result in much higher fuel prices, shortages, and gasoline lines.
Replacement options such as ethanol, ETBE (ethyl tertiary butyl ether), or TAME (tertiary amyl methyl ether) would require from one to three years to implement. Even though ethanol, ETBE and TAME are technical replacements for MTBE, there are practical considerations.
First, a shift from MTBE to ETBE or TAME, all of which are ethers, may simply exchange an MTBE issue for a subsequent ETBE or TAME issue. The acceptability of ETBE and TAME from a public health perspective should be established before a decision is made to replace MTBE with one of those compounds.
Second, the short run availability of all three of the potential substitutes is limited. Ethanol used in the United States is primarily produced from corn. Current U.S. production would need to increase by 50 percent (from about 100,000 bbls per day to about 150,000 bbls per day) to supply California's 50,000 bbl/day need for ethanol as a gasoline additive. Current U.S. production of TAME is about 35,000 bbls per day. TAME production must increase to about 112,000 bbls per day to meet California's needs.
Third, refinery retrofits would be needed to switch from MTBE production to ETBE production in order to use the latter as a gasoline oxygenate, but this would meet only about 13 percent of California's needs. Additional ETBE production facilities must be constructed. Since ETBE uses ethanol as a primary feedstock, ethanol demand would rise by 34,000 bbls per day above current domestic production levels.
Fourth, some options would not result in the same volume of gasoline being produced. Use of ethanol, for example might result in a 5 percent to 20 percent reduction in gasoline volume because less ethanol is needed to supply the same oxygen content as MTBE. It is also likely that several smaller refineries may stop producing California-specification fuel, further reducing the state's gasoline supply.
For these reasons, careful consideration should be given to the timing and manner of removal of MTBE from gasoline if public health factors require that course of action.
The California Energy Commission is prepared to conduct an evaluation of gasoline supply options and to coordinate with other state agencies in an evaluation of the public health aspects of use of other gasoline oxygenates.
This concludes my remarks.