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MTBE “Compromise” Would Let Oil Companies Off the Hook, Leave Taxpayers With Much of Cleanup Tab

July 22, 2005

MTBE “Compromise” Would Let Oil Companies Off the Hook, Leave Taxpayers With Much of Cleanup Tab

Top 10 MTBE-Producing Oil Companies Make More in Profit in One Month Than Cost of Settlement, Public Citizen Analysis Reveals

WASHINGTON, D.C. – In one of the biggest taxpayer bailouts in recent years, today’s proposal by two members of the House energy conference committee to have producers of methyl tertiary-butyl ether (MTBE) pay only $4 billion of the estimated $25 billion to $85 billion in costs associated with cleaning up water contaminated by MTBE is inconsequential for the wealthy oil industry and would unfairly leave taxpayers with most of the cleanup bill, said Public Citizen.

Oil companies  which are the main MTBE producers are enjoying the biggest profits in today’s economy, meaning they are able to pay the bill without a taxpayer bailout. After-tax profits for 10 of the largest producers of MTBE in 2004 were $69.3 billion, or $1.3 billion a week, according to the companies’ own financial statements, which means the oil companies’ $4 billion cleanup allotment represents just three weeks of profits.   This does not include a longer list of probable companies that also will be tapped to pay for the cleanup, meaning the 10 largest companies would be paying less than $4 billion.

“While $4 billion sounds like a big number, it’s a drop in the bucket for an industry that earns this much in profit in less than a month,” said Wenonah Hauter, director of Public Citizen’s energy program. “Congress cannot let MTBE producers off the hook so easily.”

Proponents of the deal say that any settlement should not be “punitive” for MTBE producers because Congress required the fuel additive. In fact, MTBE was never mandated by Congress and evidence shows that oil companies were fully aware of the risks posed to water systems by MTBE before Congress required the use of oxygenate in fuel in the 1990 Clean Air Act Amendments. Among the 10 largest MTBE producers are Amerada Hess, ChevronTexaco, Citgo, ConocoPhillips, ExxonMobil, Lyondell, Shell, Sunoco, Unocal and Valero/Ultramar.

The plan calls for these oil companies to pay $500 million in the first year, then $325 million annually for the next 11 years. Federal and state taxpayers would then be stuck covering 65 percent of the $11.43 billion cleanup fund – an amount far less than the estimated $25-85 billion that   American Water Works Association estimates is needed to adequately clean up America’s MTBE-contaminated water.