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May 6, 1999

Thank you, Mr. Chairman and Members of the Subcommittee, for the invitation to appear here today. I am pleased to have this opportunity to share with the Subcommittee the environmental benefits of the reformulated gasoline or RFG program, and to address issues raised by H.R. 11, introduced by Congressman Bilbray. H.R. 11, if enacted, would potentially exempt gasoline used in several California cities from the federal RFG requirements, including the 2.0% oxygen Clean Air Act (Act) requirement.

An understanding of the history of the federal RFG program is important in order to put H.R. 11 in perspective. As you know, the Clean Air Act Amendments of 1990 put in place a number of programs to achieve cleaner motor vehicles, and cleaner fuels. By and large, these programs have been highly successful. Only after extensive deliberations did Congress strike the balance between vehicle and fuel emissions control programs. The RFG requirements also emerged from combining several Congressional goals, including air quality improvement, enhanced energy security by extending the gasoline supply through the use of oxygenates, and encouraging the use of renewable energy sources.

The federal reformulated gasoline program introduced cleaner gasoline in January 1995 primarily to help reduce ozone levels. Unhealthful ozone levels are still of significant concern in this country, with over 30 areas still in nonattainment of the current 1-hour ozone standard, and more expected to exceed the new, 8-hour ozone standard.

Ozone has been linked to a number of health effects concerns. Repeated exposures to ozone can make people more susceptible to respiratory infection, result in lung inflammation, and aggravate pre-existing respiratory diseases such as asthma. Other health effects attributed to ozone exposures include significant decreases in lung function and increased respiratory symptoms such as chest pain and coughing.

RFG is a cost-effective way to reduce ozone precursors such as volatile organic compounds (VOCs) and oxides of nitrogen (NOx), when compared to other air quality measures. The Clean Air Act Amendments of 1990 required that RFG contain 2.0 percent minimum oxygen content by weight. The first phase of the RFG program, from 1995 through 1999, requires average reductions of ozone-forming volatile organic compounds and toxics of 17% each, and NOx by 1.5%. In the year 2000, the second phase of the RFG program will achieve even greater average benefits: a 27% reduction in VOCs, 22% reduction in toxics, and 7% reduction in oxides of nitrogen emissions that also contribute to the formation of urban smog. This is equivalent to taking more than 16 million vehicles off the road. RFG provides these reductions at a cost of less than five cents per gallon.

The federal RFG program is required in ten metropolitan areas which have the most serious ozone pollution levels. Three of these metropolitan areas are in California. This includes Sacramento, Los Angeles, and San Diego. Although not required to participate, some areas in the Northeast, in Kentucky, Texas and Missouri that have poor air quality have elected to join, or "opt-in" to the RFG program as a cost-effective measure to help combat their pollution problems. At this time, approximately 30% of this country's gasoline consumption is cleaner-burning reformulated gasoline.

We are often asked about the "real-world" benefits of RFG. Since 1995, RFG, on average, has exceeded expectations for VOC, NOx and toxic reductions. Most notably, overall toxics reductions are about twice that required, with about a 30% reduction versus a 17% requirement. It is estimated that about two-thirds of the additional air toxic reduction is a result of the use of oxygenates.

Ambient monitoring data from the first year of the RFG program also showed strong signs that RFG is working. RFG areas showed significant decreases in vehicle-related VOC concentrations. One of the air toxics controlled by RFG is benzene, a known human carcinogen. The benzene level at air monitors showed the most dramatic declines with a median reduction of 38% from the previous year.

Because of the severe air pollution that occurs in parts of California, and the leadership California has shown in addressing air pollution, the Clean Air Act provides the state with unique authority to establish its own clean fuels programs. Using that authority, California introduced its current formula of reformulated gasoline in 1996. Although reformulated gasoline sold throughout California must comply with the strict state requirements, all gasoline sold in three metropolitan areas (LA, San Diego and Sacramento) must also comply with the federal RFG requirements. In order to alleviate the burden on California refiners to meet overlapping requirements, EPA has provided them flexibility in a number of areas, including reporting and fuel survey requirements, and sampling and testing techniques.

Neither the Clean Air Act nor EPA requires the use of MTBE in RFG. The statute and EPA's regulations only specify the oxygen content as a performance standard, they do not specify what oxygenate to use. Both ethanol and MTBE are used successfully in the current RFG program, with fuel providers choosing to use MTBE in about 76 percent of the RFG.

Like federal RFG, California's Cleaner Burning Gas substantially reduces harmful emissions from motor vehicles. When oxygenate is added to RFG in California, in both federal and California RFG areas, almost all of it is MTBE. Oxygenates help to reduce emissions of ozone precursors and air toxics by diluting or displacing gasoline components such as benzene, olefins, aromatics, and sulfur and by altering the distillation index. Oxygenates also help to reduce carbon monoxide by improving the fuel combustion process. In addition, since oxygenates increase octane, refiners have chosen to add them to gasoline since the late-1970's. And because oxygenates comprise up to 11% of the volume of reformulated gasoline, they can extend the gasoline supply through displacement of some gasoline components. This reduces our reliance on foreign petroleum imports -- a fact as important today as it was in the 1970s.

Despite the air quality aspects of oxygenates in RFG, there is growing concern about contamination of drinking water by MTBE in Santa Monica, several other areas in California, as well as in Maine and other states. As a result, Governor Davis has recently taken action to phase out MTBE use in California by the end of the year 2002. EPA is also concerned about the detection of MTBE in drinking water in California and other states. For the most part, levels detected in drinking water have been quite low. For instance, the California Department of Health Services requires public drinking water systems to monitor for MTBE. As of April, 1999, 3.8% of California's drinking water systems sampled have detected MTBE. Most of those detections are below the state's secondary standard (or taste and odor action level) of 5 parts per billion.

The U.S. Geological Survey (USGS) has reported that about 3 percent of groundwater wells in RFG program areas have detections of MTBE at or above 5 parts per billion. MTBE detections at high concentrations in groundwater, such as those experienced in Santa Monica, result primarily from leaking underground fuel storage tanks, and possibly from spills from distribution facilities. These leaks are unacceptable regardless of whether or not MTBE is present in the gasoline. However, the presence of MTBE at these leak sites suggests the need for improved early warning systems for underground storage tank leaks. The Agency's underground storage tank (UST) program is expected to substantially reduce future leaks of all fuels and additives, including MTBE, from underground fuel storage tanks. All USTs were required to be upgraded, closed, or replaced to meet these requirements by December 1998. Over 80% of the regulated tanks have complied with this requirement and EPA is continuing to work with the states to ensure further progress.

In response to health and water contamination concerns associated with the use of oxygenates in gasoline, the Administrator established a blue-ribbon panel of leading experts from public health and scientific communities, water utilities, environmental groups, industry, and local and state government, including California, to assess issues posed by the use of oxygenates in gasoline in California and the rest of the nation. The Administrator requested recommendations from the panel by July 1999. This panel is currently grappling with a number of complex issues. This includes an assessment of alternatives to the use of MTBE to ensure that the air quality benefits that RFG currently provides are continued, and the additional benefits of the second phase of the program are not endangered.

There is concern about the availability and viability of potential substitutes such as ethanol, or alkylates, that could help to provide the dilution and octane benefits currently obtained with MTBE. Refiners are using about 260 thousand barrels per day of MTBE in RFG, as compared to about 25 thousand barrels per day of ethanol. If substitutes can be made available, what time frame would be needed? Are there potential environmental consequences of substitutes that need to be considered? What are the potential impacts to water quality if these substitutes are accidently released to the environment? What will the public ultimately have to pay for such alternatives? These are just a few of the many questions the panel is considering as it begins to develop options.

Options being considered by the panel include the following: maintain the status quo and continue current efforts to protect water sources; enhance existing water protection programs; increase flexibility on the use of oxygenates with no new constraints on the use of MTBE; increase flexibility while also phasing out the use of MTBE; or maintain the oxygen mandate but phase out MTBE. We are impressed with the high caliber of individuals that are serving on the panel, and are looking forward to hearing the panel's recommendations regarding steps that should be taken to ensure continued improvement in both air and water quality.

Mr. Chairman, I want to assure you that we are committed to working with the state of California to continue to look at options, including potential actions that could be taken within the state to align fuel distribution with state and federal RFG requirements. At the same time EPA is carefully assessing our statutory authority to determine what, if any, options we have to address Governor Davis' recent request for flexibility on the oxygen mandate. The waiver request submitted by the Governor is the first one EPA has received. Since this is the first case, there is no precedent for an administrative response to such a request. We are therefore looking closely at the Governor's request, and assessing both our authority and the evidence presented by the state.

Again, I want to emphasize that the blue ribbon panel is in the process of conducting a robust evaluation of issues posed by the use of oxygenates, nationwide. The panel has painstakingly taken the time to hear from a wide variety of stakeholders in this matter, including an open meeting in Sacramento, California. From that input, the panel has now begun to formulate a number of options for consideration. Once we have the panel's recommendations, it is important that we work with states, and coordinate with Congress over the next three to four months. During that time frame, we will not only have the benefit of the panel's advice, but we will have a better understanding of our authority to respond to Governor Davis' request for flexibility on the oxygen mandate. We will then be in a better position to coordinate with Congress to ensure that air quality benefits are preserved, while continuing to protect the nation's water quality.

This concludes my prepared statement. I would be happy to answer any questions that you may have.


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