February 17, 2000

Doug Deitch
Ddeitch@pogonip.org

Dear Mr. Deitch:

Thank you for expressing your concern over the use of methyl tertiary-butylether (MTBE) as an additive to gasoline, and for urging its rapid phase-out.  I share your interest in this matter.

In 1998, University of California Davis conducted a conclusive study on the environmental risks associated with the use of MTBE in gasoline. Because the study provided evidence that MTBE poses unacceptable health risks, the California State Legislature recommended that the Air Resources Board adopt regulations requiring its phase-out. In accordance with this recommendation, the Air Resources Board implemented policies asserting that the phase-out must be complete by December 31, 2002.

California is currently in the process of seeking a waiver from federal regulations that must be obtained before the phase-out can proceed. State Air Resources Board officials are optimistic that this waiver will be acquired.

However, this is not the end of the problems associated with MTBE. Under rights created by the North American Free Trade Agreement (NAFTA), Methanex, a Canadian-based corporation that manufactures a precursor to MTBE, has filed a claim against the US Federal Government. This claim states that if California does not repeal its MTBE ban, Methanex must be compensated $970 million for lost business expectations. Governor Davis and the U.S. State Department are currently preparing to fight this suit in the binding resolution process set up under the NAFTA.

In sum, due to trade agreements entered into at the federal level, the Governor and the Legislature of California are presently unable to proceed with their desired policy of removing MTBE from California's gasoline without harming the legal rights of shareholders in a Canadian corporation.

I hope that you will follow this important case. It provides an example of the fundamental challenges the NAFTA and the World Trade Organization (WTO) trade agreements pose for the operation of democratic processes and the protection of important environmental and public health interests.

Thank you for your letter and for your attention to this serious issue.

Sincerely,

FRED KEELEY
Speaker pro Tem of the Assembly