MTBE, Oxygenates, and Motor Gasoline
October 1, 1999
Introduction
The blending of methyl tertiary butyl ether (MTBE) into motor gasoline has increased dramatically since it was first produced 20 years ago. MTBE usage grew in the early 1980's in response to octane demand resulting initially from the phaseout of lead from gasoline and later from rising demand for premium gasoline. The oxygenated gasoline program stimulated an increase in MTBE production between 1990 and 1994. MTBE demand increased from 83,000 in 1990 to 161,000 barrels per day in 1994. The reformulated gasoline (RFG) program provided a further boost to oxygenate blending. The MTBE contained in motor gasoline increased to 269,000 barrels per day by 1997.
Unfortunately, because of leaking underground storage tanks or spills and because MTBE is soluble in water and does not biodegrade easily, there have been increasing detections of MTBE in ground waters and reservoirs.
Because of the occurrence of MTBE in water supplies, the EPA formed the Blue Ribbon Panel On Oxygenates in Gasoline. In September 1999, the Panel issued its final report that included the following recommendations on MTBE use:
- "Reduce the use of MTBE substantially (with some members supporting its complete phase-out), and action by Congress to clarify federal and state authority to regulate and/or eliminate the use of gasoline additives that threaten drinking water supplies."
- "The current Clean Air Act requirement to require 2 percent oxygen, by weight, in RFG must be removed in order to provide flexibility to blend adequate fuel supplies in a costeffective manner while quickly reducing usage of MTBE and maintaining air quality benefits."
In December 1999, the California Air Resources Board approved the California Phase 3 gasoline regulation, which prohibits the formulation of gasoline with MTBE after December 31, 2002. Governor Davis has also asked the U.S. EPA to waive the reformulated gasoline oxygen requirement. A decision from the U.S. EPA is pending.
This Short-Term Energy Outlook (March 2000) assumes no change in the current EPA regulations regarding the blending of MTBE into gasoline or the required properties of reformulated gasoline. Because this short-term forecast extends only through December 2001, no impact from the California ban on MTBE is included.
The purpose of this analysis is to identify the issues related to the recommendations of the EPA's Blue Ribbon Panel and how they may impact our forecasts.