FocusUS consultant blasts $423m MTBE settlement

08 May 2008 23:21  [Source: ICIS news]

HOUSTON (ICIS news)--A proposed $423m (€275m) gasoline-additive settlement between refiners and US water providers is "a great miscarriage of justice," a consultant said on Thursday.

About a dozen refiners agreed to settle allegations that groundwater was contaminated by methyl tertiary butyl ether (MTBE), according to the law firms that represented the providers. The plaintiffs included 153 municipalities, public water agencies and private water companies in 17 states.

Six companies will continue fighting the suit, including ExxonMobil and LyondellBasell, the law firms said.

In agreeing to the settlement, refiners are being punished for obeying a law created by Congress, said Cal Hodges, president of A Second Opinion, a US energy consultancy.

Hodges made his comments in a written answer to queries from ICIS news.

Refiners started adding MTBE to gasoline in order to comply with a congressional mandate, which required the use of oxygenates that did not increase emissions of nitrogen oxides (NOx), Hodges said.

A 10% blend of ethanol increased NOx emissions, while a 15% blend of MTBE did not, he said. "The gasoline supply industry had no choice but to use MTBE," Hodges said.

MTBE has since been phased out of most parts of the US. Blenders now use ethanol, since federal regulations allow its use without a NOx penalty, Hodges wrote.

The settlement could discourage the US from adopting other oxygenates, since they would leave a signature in groundwater, he wrote.

Hodges' opinions differ from those of the law firms that represented the municipalities.

“This is an excellent settlement on behalf of our clients," according to a statement by Robert Gordon of the law firm Weitz & Luxenberg.

"The oil companies knew that MTBE would contaminate drinking water when they used it. The defendants who have settled have lived up to their responsibility by not only paying cash but by offering treatment of future contaminated wells for the next 30 years," he said.

Another law firm, Baron & Budd, said, "[The] landmark settlement marks a significant step toward protecting the long-term viability of drinking water resources across the US."

Under the terms of the settlement, the refiners will cover the costs of treating water wells contaminated with MTBE for the next 30 years, the law firms said.

The refiners agreeing to the settlement include ConocoPhillips, Shell, BP, Chevron, Marathon, Atlantic Richfield, Valero, Citgo, Hess, Flint Hills, El Paso Merchant Energy and Tesoro.

(Additional reporting by Steven McGinn)

($1 = €0.65)

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