Uncertainty Around the Phase-Out of MTBE Gives Producers Time to Evaluate Options

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The following is an advisory by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). MTBE (Methyl Tertiary-Butyl Ether) producers across the US and Canada have been preparing for the elimination or reduction of MTBE as a fuel oxygenate for several years. The potential extension of California's year-end deadline could buy some additional time for gasoline producers to evaluate technologies capable of producing suitable substitutes or securing agreements for Ethanol feedstocks.

MTBE production increased tremendously in the late 80's and early 90's as legislation prompted its use in RFG (Re-Formulated Gasoline) programs and by the mid 90's MTBE approached oversupply. Under growing pressure from environmentalists with concerns of MTBE contaminating water supplies in several Western states, demand somewhat leveled off in the late 90's and new capacity has rarely been seen since. In March of 1999, Governor Gray Davis issued an executive order establishing a self-imposed deadline of December 31, 2002 to eliminate MTBE's use in all gasoline produced in the State of California. Failed attempts to convince the EPA to waive the oxygenate requirements for RFG fuels combined with limited suitable substitutes might create the need to delay the current deadline and open the door for producers to continue production in the near future. Producers as far away as Canada and the Rocky Mountains stand to gain greatly should the deadline be delayed.

Although a phase-out of MTBE across the country any time soon is very unlikely, several US and Canadian MTBE producers are investing in studies to identify potential replacements that could be produced with retrofits of the existing units currently in operation. Overseas markets could hold some potential for domestic producer's as there is no indicator to suggest that overseas markets will not continue to grow. In fact, the European Union has determined that there needs to be tighter control over the handling and storage of MTBE and that it does not present a health danger. Europe is expected to include MTBE as a key player in its future development plans for cleaner burning fuels.