California Marketers Face New Onslaught Of RFG Criticism

Despite test results from vehicle makers and others showing no link between reformulated gasoline and vehicle problems, media broadcasts in the San Francisco area, Chevron's headquarters, launched broadsides against the fuel, worrying drivers.

• California average retail gasoline prices [33766 bytes]
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That follows a bumpy introduction last year of the latest version of new fuel in the state-accompanied by a brief, widely criticized runup in prices.

After gasoline marketers had to grapple with widespread health concerns over the new fuel elsewhere in the U.S. last year, California gasoline marketers now must deal with a flare-up of the controversy in their state.

The California-spec Phase II RFG was required under rules imposed by the California Air Resources Board (CARB) in order for the state to meet its air quality goals.

New assaults

Despite data showing air quality benefits from California's RFG (see related story, p. 50)-and a host of studies unable to find ill effects on health or vehicle performance-the world's cleanest gasoline faces recurring assaults from critics.

On one front, a series of reports by local media there have periodically tried to convince drivers that they will harm their vehicles by using the fuel.

On another, the state's legislators have forged ahead with a measure that initially sought to ban use of the oxygenate methyl tertiary butyl ether (MTBE), a prime additive in most California RFG. The bill has been diluted in recent action and now requires more study be undertaken before a ban could be instituted.

On still another front, a San Diego attorney has organized a class-action lawsuit against marketers of California RFG, alleging that they gouge the state's consumers and fix RFG prices.

Ironically, these problems flared up well after RFG's debut in California and at a time controversy over federal RFG use had long dimmed.

Although California usually is a trendsetting state, it's been notably behind the curve in reaction to RFG. There was little consumer protest greeting the debut of California RFG last spring and summer, in contrast with the considerable controversy that greeted the debut of less-stringent federal RFG in several other cities (OGJ, Feb. 13, 1995, p. 17).

Much reaction to both fuels appears linked to media hype: Each time, the biggest rash of complaints followed radio talk shows where hosts had whipped drivers into a frenzy with unsubstantiated claims that pumping RFG could harm their health, engines, or both.

The controversy might have died down by now, had it not been for valid concerns about MTBE in groundwater, some believe.

Delayed reaction

Save for a brief supply crunch and resulting price spikes triggered by isolated refinery problems close to the introduction of Phase II, California RFG enjoyed a relatively calm debut in spring and early summer 1996.

An earlier, less-stringent Phase I RFG had been on the market for several years, with no notable consumer protests.

But last fall, concerns that had been building over MTBE in groundwater for roughly a year (OGJ, Apr. 17, 1995, p. 21)-combined with dozens of alarmist newscasts by San Francisco area television and radio stations-left CARB fighting to defend the fuel.

"We were flooded with calls," said CARB official Allan Hirsch, recalling the consumer furor that arose as the television and radio broadcasts stepped up their campaign.

"We had an 800 number capable of dealing with it. The stories were so off base that it really wasn't that hard to rebut what was being said."

One particularly alarming allegation was that RFG had increased the risk of car fires. One television station based its claims on information from local fire departments that there had been more car fires in June-July 1996 than the same month the previous year. However, had the station probed further, it would have found that the incidence of June-July auto fires was higher in 1992, 1993, and 1994 than in the same period of 1996.

The San Francisco Bay Area fire marshal challenged the station for not differentiating between fuel-related car fires and those from other sources, such as hot brakes and collisions. And two automakers came forward and said there appeared to be no difference between the number of California car fires and those in other states.

Still, the station has not let up its attack on RFG. After last fall's series of reports, the television station brought a fresh string of allegations against the fuel. It cited a verbal poll of auto mechanics, who indicated they had observed "more" damage to fuel systems in the last year, since RFG hit the market.

However, the allegations didn't go very far. By this time, a survey by Southern California's chapter of the American Automobile Association showed no link between RFG and mechanical or fuel system problems. Later, the head of an association representing 1,200 auto repair shops in the state said that the group's members had reported no fuel-related complaints since RFG's introduction.

The high-profile media campaign, however, prompted a rash of testing by automakers and parts manufacturers. Studies by General Motors, Ford, Holley Products Co., Nissan, and Harley-Davidson all showed no adverse effects on engines, fuel systems, or mechanical parts resulting from use of California RFG.

Still another area of criticism stemmed from an average 1-3% loss of fuel economy from cleaner-burning gasoline-something predicted long before the fuel was in use. Some motorists complained of much greater fuel economy losses around the time broadcasts were being aired.

According to the U.S. Environmental Protection Agency, the leading causes of fuel economy loss and average reductions are: air conditioning use in extreme heat and high use of defrosters, 21% each; overly hard acceleration 11.8%; and traffic congestion 10.6%. Cold weather and improper tire pressure are among the other prime culprits. Unless a motorist has ruled out all other factors causing reduced fuel economy, it's hard to link such losses to a change in gasoline, CARB said in a statement following the media broadcasts.

"It was a news story out here because RFG was never controversial before this," said Hirsch.

History of controversy

At least, RFG hadn't been particularly controversial in California.

However, the controversies now swirling around California's RFG are almost identical to those that dogged the debut of federal RFG in 1995, and oxygenated fuels the year before, when radio talk show hosts began fueling near-frenzies with speculation that oxygenated fuels would cause everything from respiratory problems to engine failures.

In at least one state, New Jersey, the MTBE-bashing campaign was found to be led by an individual being supported by ethanol producer Archer Daniels Midland Co.

Yet scores of scientific studies have failed to turn up significant evidence that MTBE or RFG overall have adverse effects on human health or auto performance.

Perhaps the most significant vehicle problem revealed to date is that rubber gaskets on older vehicles may leak with newer gasolines. However, this hasn't proven the case in actual use, claims Chevron, which issued a warning on gasoline pumps as a precaution, based on its own tests.

"It showed this potential in testing but we haven't seen any problems," a Chevron official said.

Chevron's warning was misconstrued in some media reports as a sign that even refiner/marketers didn't back the product.

As California's recent experience reinforced, making gasoline more healthy from an air-pollution standpoint hasn't exonerated it from suspicion on other grounds. The most recent onslaught has centered around the widely studied use of MTBE.

MTBE revisited

California's legislature has been mulling a bill that originally called for an outright ban on MTBE, starting Jan. 1, 1998.

At this writing, the bill had been altered to require yet another study on health and safety issues surrounding MTBE. The bill would now authorize California officials to bar MTBE use in the state if future findings warranted such a prohibition.

To date, more than 50 studies have shown no health risk from normal exposure levels to the oxygenate. The National Academy of Sciences (NAS) reviewed all available findings and concluded: "It does not appear that MTBE exposures resulting from the use of oxygenated fuels are likely to pose substantial health risk, NAS did recommend looking into possible problems that might arise from sustained, long-term exposure by refinery workers.

Similarly, studies on complaints of flu-like symptoms in various states showed no link to MTBE. Studies by Yale University and EPA in response to complaints in New Jersey and Alaska exposed people for 1 hr to MTBE levels approximating the highest they might experience refueling and found no ill-effects.

In Milwaukee-an area where complaints soared around the time of the fuel's introduction-a multi-agency federal-state task force investigated and said, "The study does not support the conclusion that exposure to reformulated gasoline is associated with widespread or serious, acute adverse health effect in Milwaukee." The National Centers for Disease Control and EPA were among the participants in this study.

Another flare-up in complaints arose after an Italian researcher found a link between cancer in laboratory rats given extremely high doses of MTBE. Reviewing these finding, EPA commented: "These experimental levels of MTBE are often 1,000 times or more greater than what humans might experience in their day to day environments.

Put another way, the Western States Petroleum Association noted, "A person would have to pump cleaner-burning gasoline 24 hr/day for 445 years to inhale the amount of MTBE that is found to cause cancer in laboratory rats."

On the drinking water issue, WSPA noted that a person would have to drink 40,000 gal/

day of wa ter with 70 ppb concentration of MTBE-EPA's proposed health advisory level-for the rest of his life to ingest the amount linked with cancer in lab rats.

In May 1997, the Journal of Toxicology and Applied Pharmacology reported findings of a portion of a long-term study, being conducted by the Chemical Industry Institute of Toxicology, which found that the link between extremely high MTBE doses and rodent kidney tumors was not relevant to humans.

MTBE and water

CARB's Hirsch believes that continuing concerns over MTBE may have been spurred by investigations into groundwater contamination in certain locations, notably around Santa Monica.

Nobody disputes the potential seriousness of MTBE contamination in water, but tests to date have shown the problem to be limited to very few sites.

"This is the one legitimate issue involving MTBE," Hirsch said. "That is why this issue has continued to remain alive in the state legislature."

California is now monitoring more than 1,600 sources of drinking water for MTBE contamination; so far, levels significant enough to affect drinking water supplies were shown only at Santa Monica sites. "Data indicate that Santa Monica is the exception, not the rule," Hirsch said.

Statewide, of 1,663 drinking water wells tested by the state, only 8 have exceeded either the federal advisory level of 70 ppb or the state level of 35 ppb; 7 of these wells were owned by the city of Santa Monica.

But the federal level is well above the more effective test of contamination most humans would discern. Taste and smell will distinguish MTBE in water well below the proposed federal benchmark, sources say.

Nationally, 2,499 wells have been tested, and only 2 were found to have MTBE concentrations above the proposed EPA standard.

A number of steps have been taken to stem the problem. For example, California has a program requiring replacement of older underground storage tanks by 1998; an estimated 91% have already met the deadline. Also, Lawrence Livermore Laboratory is about halfway finished with an 18-month study examining how MTBE reacts with water that it hopes will shed light on how contamination develops, as well as effective remedies.

California is also examining the extent to which MTBE may contaminate surface water. Of 23 reservoirs tested, only two samples-both from Lake Shasta in northern California-tested near the EPA 70 ppb benchmark. The samples were in an area heavily used for boating and marine refueling, and marine spills are believed to be one source of contamination.

"With these efforts in place, we feel that MTBE use is justifiable," Hirsch said. "We're trying to inform the California public that MTBE is not new. It's been in use since 1979. It's been very heavily studied. Gasoline is 40% less toxic now than gasoline 2-3 years ago. That usually comes as a surprise to people who have been told that MTBE is a brand new, highly toxic gasoline additive."

Unless future studies turn up information that counters everything found to date, it seems likely that health and mechanical concerns surrounding MTBE eventually will dissipate completely. But it seems that once one issue dies down, another arises.

Price complaints

Last year, a San Diego attorney filed a lawsuit alleging that California's retail gasoline market is now an oligopoly, because smaller refiners shut down when unable to meet the high cost of making reformulated gasoline. (The nine large refiners still in the game invested an estimated $4 billion in RFG refinery modifications.) The lawsuit was recently upgraded to a class-action suit by a San Diego judge.

As a result of oligopoly conditions, attorney Timothy Cohelan claims, oil companies selling RFG have the ability to "fix" prices. They don't do so overtly, Cohelan theorizes, but by tracking wholesale prices on electronic tracking services and raising prices in nearly identical increments. He also alleges that California refiner/marketers attempted to restrict supply. And Cohelan protests the common practice of companies selling one another supplies if one is short in the market, claiming the latter is intended to protect market share.

In fact, supplies of California RFG have been better than forecast before the fuel came to market. Some industry consultants predicted that the technological demands of producing California RFG would so challenge the system that periodic shortages would dog the market. It hasn't happened. CARB did much to stem this possibility by monitoring refiners' progress on building supplies long before the fuel entered the market (OGJ, Dec. 11, 1995, p. 21). This was done to avoid a repeat of the embarrassing shortages that accompanied the introduction of low-sulfur diesel in California in 1994.

Except for a few brief occasions where there have been unexpected refinery outages, supply of California RFG has generally comfortably exceeded demand, notes Gordon Shremp, an analyst with the California Energy Commission.

In fact, better-than-expected supplies of RFG may have contributed to Unocal's decision to sell its downstream assets to Tosco Corp. last year (OGJ, Dec. 11, 1995), according to spokesman Barry Lane.

Unocal CEO Roger Beach has joked that last year's poor margins showed that "engineers did their jobs too well," in terms of getting plenty of product out of each barrel of crude, Lane said.

However, margins were probably squeezed more by the rise in crude prices after RFG came into the market.

California refiners, whose production costs average about 10¢/gal more than the rest of the U.S., were particularly hard-hit (OGJ, July 1, 1996, p. 27).

While recurring claims of health and performance problems pose an irritant to California's marketers and regulators alike, the threat of class-action suits doesn't seem to have the companies particularly worried.

"We fully expect to prevail," said Chevron official Fred Gorell, in comments echoed by other majors. "We expect the result of the lawsuit is that the marketplace sets the prices and nothing else."

RFG seen responsible for cleaner Southern California air

DESPITE CONTINUED EFFORTS BY critics to find health problems with reformulated gasoline (RFG), California's unusually far-reaching fuel specifications appear to have made a measurable dent in the state's air pollution levels.

Smoggy Southern California had the cleanest year on record in 1996, when Phase 2 RFG came into use. The region experienced only seven "stage one" health alerts for air pollution last year, the first time in decades health alerts dropped into the single digits.

Smog alerts have been on a downward trend since the early 1980s (see chart), because of a variety of stringent pollution control measures, but regulators and refiners alike believe RFG was responsible for last year's sharp drop in health alerts.

California RFG goes much further than its federal counterpart in ridding pollutants from gasoline.

For instance, it requires steep reductions in benzene, olefins, and aromatics; sharply cuts sulfur; sets lower vapor pressure limits; and sets a cap on a gasoline's sensitivity of distillation at higher temperatures (OGJ, Dec. 11, 1995; p. 22.)

According to the California Air Resources Board, requiring extremely low-emissions gasoline has the same effect as taking 3.5 million vehicles off the roads, thus removing 3 million lb/day of pollutants. Viewed another way, cleaner-burning gasoline has enabled the state to meet about 25% of its federally required clean air implementation requirements, because vehicles account for roughly half of all air emissions.

The Ozone Transport Assessment Group (OTAG), a panel appointed by the U.S. Environmental Protection Agency to examine ways to reduce air pollution from ozone that migrates from one area to another, last year began weighing the effect of a nationwide reformulated gasoline that approaches California's in severity (OGJ, Jan. 6, 1997, p. 18). However, the group's modeling indicated that even much cleaner gasoline would not make a significant enough dent on migrating ozone-at least not as significant as first cleaning up emissions from coal-burning utilities.

In its final report, due this summer, OTAG is expected to approve a panel recommendation favoring the use of a federal RFG standard but not mandating its use in any additional areas. This may avert the erstwhile predictions that California's RFG would become a blueprint for other parts of the nation with pressing air pollution problems.

A severely reformulated gasoline has greater effect in California than it might elsewhere for good reason.

California attacked virtually every source of pollution it could before the rest of the U.S.: Stationary sources, including utilities, have some of the most stringent control measures in the U.S.; ridesharing programs are mandatory for larger companies around Los Angeles; there are regulations for paints and coatings sold in the state; and there are many other requirements for onboard vehicle pollution controls.

As a result, requiring much cleaner motor fuels was one of few feasible, short-term measures left for meeting federal air pollution guidelines.

Copyright 1997 Oil & Gas Journal. All Rights Reserved.