Senate Environment Committee Markup of MTBE Legislation

The Senate Environment Committee has scheduled a markup of RFG/MTBE
legislation for this coming Wednesday, July 26. The Committee staff has
released draft legislation from Chairman Bob Smith (R-NH) that will be the
vehicle for consideration (a summary is attached).

It is probable that the markup will not take place on Wednesday, and that the
Committee's reason for scheduling the markup is really to "smoke out"
potential amendments and positions of the affected industries. In
particular, there is a great deal of controversy surrounding the inclusion of
a "renewable fuels" (ethanol) mandate in the bill, so the Committee wants to
see how much opposition is raised by some of the parties. There is
currently no renewable fuel mandate in the draft Smith bill. On one side,
Governors of Midwest and Northeast states recently announced a "compromise"
agreement on renewable fuels mandate language, and will be exerting a great
deal of pressure to get this language included in the bill. On the other
side, Clean Air Subcommittee Chairman Jim Inhofe (R-OK) is very opposed to
ethanol language (as are refiners and MTBE producers) and could mount a
substantial challenge to such provisions. This could cause an ugly fight at
markup, so staff's reason for scheduling a markup is likely to find out in
advance how much pressure to expect from both sides.

Regardless of whether the markup occurs on Wednesday, we have prepared
amendments and are lobbying on the issue with the expectation that the bill
could be considered in September in the Environment Committee, or as a
possible rider to one of the appropriations bills moving quickly through
Congress.

I have attached a list of amendments that MTBE industry has produced that
will likely be offered on our behalf at the markup. Enron has led the
drafting of amendments related to stranded costs and other incentives for
MTBE producers, since the legislation would waive the RFG oxygen content
requirement and phase out use of MTBE. We are working with several Senators
on the Environment Committee that will offer these amendments and speak on
our behalf, including Senator Kay Bailey Hutchison (R-TX), Bob Bennett
(R-UT), and Craig Thomas (R-WY).

I will keep you updated on the progress of the legislation this week. Please
let me know if you have any questions.

Jeff Keeler
Director, Environmental Strategies
Enron
(202) 466-9157