Methyl Tertiary-Butyl Ether (MTBE):Conditions Affecting the ...

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‘ Prices varied greatly throughout 1994-98, depending on input costs, supply, and use. U.S. prices for MTBE rose substantially during 1994, largely because of an independent increase in methanol prices, but also because they were supported by strong MTBE demand. During 1997-98, however, they declined by 23 percent because of a number of factors, most notably the 37 percent decline in the price of crude petroleum. Transportation Costs ‘ Practically all of the MTBE both produced and consumed domestically is transported between U.S. coasts by ships; 3 imported MTBE is transported similarly to either coast. U.S. shippers generally pay higher freight rates on a per-mile basis than foreign shippers. U.S. producers must use U.S.-flag Jones Act 4 vessels for cargo shipped between U.S. ports. U.S. industry representatives have indicated that they believe the Jones Act makes it less profitable for them to compete in the U.S. west coast market (the destination for most imported Arabian Gulf MTBE). Moreover, total shipping costs for U.S. MTBE shipped from the gulf coast to the west coast are higher than costs for MTBE shipped to the east coast because of the distance involved. Government Policies ‘ The majority of respondents to the Commission’s questionnaire, as well as industry officials interviewed, cited U.S. and Saudi Arabian government policies as having the greatest effect on both the current and future competitive conditions in the global market; policies specifically cited by industry representatives were the CAAA, the Jones Act, and the ethanol tax credit, and Saudi Arabian feedstock pricing policies. Other factors considered by the respondents to have a significant impact on current and future competitiveness were U.S. imports of MTBE and health/environmental concerns. ‘ Widespread use of MTBE as an oxygenate in gasoline largely resulted from new airquality standards mandated by amendments enacted in 1990 to the Clean Air Act. The Clean Air Act, initially enacted in 1963 and significantly amended in 1990 by the CAAA, addresses air quality, defines certain pollutants, and sets air-quality standards. The Clean Air Act is administered principally by the Environmental Protection Agency (EPA) in conjunction with the States. The CAAA represented a major amendment of the Clean Air Act, and imposed considerable new standards on motor vehicle emissions designed to meet air quality objectives. The CAAA’s goals with respect to motor vehicle emissions included: (1) the removal of lead from gasoline; (2) the reduction of carbon monoxide emissions from the burning of gasoline by cars and light trucks; and (3) the reduction of 3 USITC fieldwork in the United States; telephone interviews with industry sources, Aug. 18, 1999. Barges are generally used when the distance to be shipped is short (i.e., in the local area). 4 Section 27 of the Merchant Marine Act of 1920, commonly referred to as the Jones Act, prohibits merchandise from being transported by water between U.S. ports “in any other vessel than a vessel built in and documented under the laws of the United States and owned by persons who are citizens of the United States.” ix
volatile organic compound emissions and toxic air pollutants from the burning of gasoline. ‘ The Clean Air Act also permits a State to receive a waiver from the Federal fuel requirements if the State adopts its own standards that are at least as strict as the Federal standards. California received such a waiver in 1994 and established its own emission standards, introducing CARB Phase 2 RFG in 1996. This waiver affords California the authority to control or prohibit the use of any fuel additive. ‘ Two late-breaking events may presage a major change in government policy in the United States concerning MTBE: (1) the issuance of an executive order on March 25, 1999, by the Governor of California requiring the phaseout of MTBE in California by the end of the year 2002, largely because of concerns about ground water contamination; and (2) the July 1999 report of the EPA’s “Blue Ribbon Panel on Oxygenates in Gasoline” recommending the reduced use of MTBE in the United States, with efforts to curtail use to begin immediately. Health and Environmental Concerns ‘ MTBE was discovered in California drinking wells in the mid-1990s. The contamination reportedly occurred as a result of the migration of MTBE from leaking underground gasoline storage tanks to nearby ground water. In 1997, the City of Santa Monica, CA, closed over half of its public drinking wells owing to contamination by MTBE. That same year, MTBE was found in several California lakes and reservoirs, where the chemical was said to be leaking from two-stroke engines on motorboats and jet skis. In addition to California, MTBE has been detected in the public water systems of at least 10 east coast States. ‘ In November 1998, the EPA assembled a panel of outside experts, the Blue Ribbon Panel on Oxygenates in Gasoline, to review the health concerns associated with MTBE contamination of water and evaluate the efficacy of available oxygenates in maintaining clean-air standards in the United States. On July 27, 1999, the Panel presented its recommendations on domestic oxygenate use to EPA. In its recommendations, the Panel requested that EPA work with Congress and individual States to implement a four-part reform package, which would “simultaneously maintain air quality benefits while enhancing water quality protection and assuring a stable fuel supply at reasonable cost.” Among other things, the Panel recommended that use of MTBE in the United States be reduced “substantially” and that Congress act to remove the current Clean Air Act requirement –i.e., that 2 percent of RFG, by weight, consist of oxygen. ‘ Companies are already researching possible options as to alternative products or alternative uses for existing equipment. Some options reportedly under consideration include the production of alternative blending components such as isooctane or, in some cases, the production of altogether different products. One industry source suggested that if MTBE were to be banned, refiners would add more aromatic blending components, often considered undesirable and currently reduced in volume and effect by the use of MTBE, to offset any octane reduction. Substitute Products x
Page 1 and 2: Methyl Tertiary-Butyl Ether (MTBE):
Page 3 and 4: ITC READER SATISFACTION SURVEY Meth
Page 5 and 6: U.S. International Trade Commission
Page 8 and 9: TABLE OF CONTENTS iii Page Abstract
Page 10: Tables-Continued TABLE OF CONTENTS-
Page 13: accounts for about 30 percent of U.
Page 17 and 18: gases in Saudi Arabia regardless of
Page 19 and 20: Register (64 F.R. 5312) of February
Page 21 and 22: eportedly purchased imported MTBE d
Page 23 and 24: Table 1-1. The four main sources of
Page 25 and 26: Table 2-1 MTBE production levels of
Page 27 and 28: Saudi Arabia, 13 Venezuela, the UAE
Page 29 and 30: The third group of countries, the m
Page 31 and 32: (1) in refineries using either thei
Page 33 and 34: production capacity is fairly recen
Page 35 and 36: Table 3-2 31 (...continued) In the
Page 37 and 38: Table 3-3 The cost of producing MTB
Page 39 and 40: accounted for approximately 94 perc
Page 41 and 42: exploring their options regarding a
Page 43 and 44: Table 3-7 U.S. MTBE import-to-consu
Page 45 and 46: Table 3-10 Average monthly and annu
Page 47 and 48: Table 3-12 Components of LDP unit v
Page 49 and 50: Transportation Costs Practically al
Page 51 and 52: Source: Compiled by the Commission
Page 53 and 54: the section describes health and en
Page 55 and 56: volume, 90 and contain no lead or h
Page 57 and 58: that opted in to the program, 112 m
Page 59 and 60: appendixes H and J). In addition, t
Page 61 and 62: prohibit the use of jet skis and, i
Page 63 and 64: produce disruptions in the fuel sup
Page 65 and 66:
According to one source, the “vol
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level almost reached the record hig
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Europe consider ethanol to be too c
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TAME is produced in about five to s
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our continued economic growth.” 4
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with $5.5 billion in 1996. 17 As of
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Port in Madinat Al-Jubail. 35 Both
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Alujain was to have held about 30 p
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(presented in descending order). 59
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Using minimum estimated operating r
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The cost of producing MTBE from n-b
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Table 4-3 Butane dehydrogenation pr
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consumed domestically “as fuel an
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price would be determined by deduct
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Government Policies This section pr
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e available to all sectors in the K
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intent of the investment condition
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that “this is only a limited cush
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In another argument, several source
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Opinions within the industry differ
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4-34
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Appendix C Witness List
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Appendix D Glossary
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Gulf Cooperation Council (GCC)-the
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D-4
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MTBE Production Processes STEAM CRA
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Figure E-2 is not available in the
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dehydrated to form isobutylene) or
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Appendix F U.S. Production and Cons
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Table F-1 U.S. methanol producers,
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Table F-3 U.S. methanol production,
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increased during this period; Canad
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another 3 to 5 percent is reportedl
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2 percent. This growth rate was in
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Table F-6 Annual production of liqu
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Table F-7 U.S. annual production, t
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Appendix G U.S. Tariff Treatment an
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Appendix H Chronology of Events Rel
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Year MTBE-related incidents, academ
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Chronology of Events Related to the
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Appendix J Legislation and Other Ac
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Jersey introduced legislation that
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