b u s i n e s s

Producers Brace For MTBE Phaseout California's ban of the gasoline additive will eliminate nearly 25% of global demand Paige Marie Morse C&EN Houston

W hen California Gov. Gray Davis announced the phaseout of methyl tert-butyl ether (MTBE)

in his state last month, citing risk to groundwater, producers of the gasoline additive were not surprised. Since its in­troduction, the use of MTBE in gasoline has been controversial. Consumers have complained about the odor even as regulatory agencies touted its contribu­tion in improving air quality in several major cities. The topic is also very politi­cal, with elected officials avoiding any moves that might create supply issues or raise gasoline prices and, thus, taint their careers.

1998, forcing several producers to cut back production.

"This will not be a good year for the MTBE industry," warns K. Dexter Mil­ler, vice president for MTBE at the con­sulting group DeWitt & Co., Houston. "The question now is: How much will the market contract—not grow—in the next few years?"

The total worldwide consumption of MTBE in 1998 was 6.6 billion gal, ac­cording to DeWitt. That volume rose 3.6% from 1997, led by the growing de­mand for cleaner fuels in the U.S., which consumes 65% of the total. The U.S. produces nearly half the global vol­ume, 3.1 billion gal, but it must import an additional 1.2 billion gal each year to meet domestic demand.

Nearly 95% of MTBE is used in refor­mulated gasoline, which is required for cities with high ozone and smog condi­tions under the Clean Air Act Amend­ments of 1990. The additive makes up 11% of the volume of these formulations. The remaining 5% of MTBE is blended into gasoline at varying levels to achieve high octane values—MTBE has an oc­tane value of 110—or to facilitate combus­tion in regions that exceed acceptable carbon monoxide levels for air quality.

Three different commercial routes are used to produce MTBE. About 40% of the total output is made at refineries, using a mixed C4 stream called raffinate as an isobutylene feedstock. Refineries gener­ally blend their MTBE with gasoline be­fore it is distributed to service stations.

Chemical companies produce the re­maining MTBE, using either butane or isobutane as the raw material. Several companies, including Houston-based Lyondell Chemical, use a coproduct route that also produces propylene ox­ide. Lyondell is the largest U.S. MTBE producer and the largest global produc­er of propylene oxide. It depends on its MTBE/propylene oxide units for its propylene oxide network and cannot af­ford to shut or slow those units if the de­mand for MTBE falls significantly.

Lyondell was prepared for a possible phaseout, says Jacqueline M. Wilson, di­rector of public affairs. "We are working on alternatives that would enable us to convert tert-butanol, a coproduct of our propylene oxide production, into other economically useful products."

Huntsman Corp. produces MTBE through two different routes. It operates an MTBE/propylene oxide unit in Port Neches, Texas, and uses a mixed C4 stream, from its butadiene units and other companies in the area, to manu­facture a less pure grade of the product.

Texas Petrochemicals uses the bu­tane dehydrogenation route for most of its MTBE production. Waycaster says the company is actively working with re­finers to develop alternatives. He would not identify the products they are work­ing on except to say they were "similar products [made] in similar processes."

Butane dehydrogenation is the only Όη-purpose' commercial route to MTBE MTBE/propylene oxide

CH3

H3C—CHCH3 + 0 2 • Isobutane

ÇH3

H2C = CHCH*

-Ha C H 3 C H 2 C r i 2 C H 3

Raffinate

Mixed C4 refinery stream

- • H 3 C—C—— CH2

HoC — G H C r M

+ CH3OH

+ CH3OH

2 6 APRIL 12,1999 C&EN

Butane dehydrogenation Propylene oxide

Methyl ferf-butyl ether (MTBE)

H3C CH2

ÇH3

• C

CH3

H3C OH

CH3

C-

-H2O + CH3OH

ÇH3

H3C •CB Ο C

CH3

CH3

CH3

OOH

1

-c H3C

Caught in the middle of this battle are the producers. When MTBE emerged in the late 1980s as the preferred oxygenate additive in reformulated gasoline, pro­ducers responded quickly to the rapid de­mand growth and made large invest­ments in production facilities. A ban in California means the loss of a 1.5 billion-gal market, which represents nearly 25% of the world's annual demand.

Producers' concern about the loss of their single largest market is compound­ed by the uncertainty of what will replace MTBE. Several different — chemicals have been discussed, r but performance and toxicity test­ing on possible replacements has " been limited and supply concerns ^ abound.

"I am not sure that most folks on the street understand how complicated [finding an MTBE replacement] can be," says Bill W. Waycaster, president and chief executive officer at Texas Petrochemicals Corp., Houston, the third largest U.S. MTBE pro­ducer. 'This could create a major problem of how we make gaso­line for the general public."

This latest crisis came as pro­ducers were already reeling from a 40% drop in prices during

Lyondell is the largest North American MTBE maker

Millions of gal per year

Lyondell Chemical Huntsman Texas Petrochemicals Valero Exxon-Mobil Alberta Envirofuels Equistar Chemical Other8

NORTH AMERICAN TOTAL

Capacity

460 420 385 385 380 295 275

1,800

4,400

a Largely refineries that use mixed C4 stream as feedstock. Source: Schroder & Co., New York City

Spot prices for MTBE have been very low in recent months, and profit­ability eroded throughout 1998, despite a decline in most feedstock prices. Pro­ducers using butane dehydrogenation have been particularly hard hit, Miller says, and several units have slowed pro­duction since the start of the year.

The California decision to phase out MTBE by the end of 2002 (C&EN, April 5, page 9) stems from increasing reports about MTBE contamination in the state's groundwater. Most of this MTBE is thought to come from leaking pipelines and underground storage tanks used at local gasoline service stations.

The Environmental Protection Agen­cy has a program to repair or replace these tanks, but compliance has proved difficult to enforce.

MTBE is merely the "messenger" for these leaking tanks, Miller says. With its high solubility in water, MTBE is easily extracted by groundwater and then carried into water supplies, where it is readily detected.

MTBE is easily detected. The chemi­cal has a strong odor and taste that are easily noticed by consumers when drinking and using water in their homes. In response to complaints from the public, the California Department of Health Services established a "second­ary drinking water limit" for odor and taste of 5 ppb MTBE on Jan. 7. The pri­mary drinking water limit, above which MTBE could cause adverse health ef­fects, has been tentatively set at 13 ppb, with a final determination expected later this year.

As is common with environmental legislation, the levels in California are well below those now set by EPA. The 1997 Drinking Water Advisory states

that levels at or below 20 to 40 ppb are acceptable to avoid odor or taste prob­lems. The advisory also states that these levels are "about 20,000 to 100,000 times lower than the range of exposure levels in which cancer or noncancer effects were observed in rodent tests."

Even under California's stringent defi­nitions, the toxicity of MTBE has not been well established. In December 1998, two separate review boards that oversee that state's demanding Proposi­tion 65 determined that current studies do not show that MTBE is a carcinogen or a developmental or reproductive toxin.

EPA convened a blue-ribbon panel in January to review its position on use of MTBE in gasoline. Members of the pan­el include industry and government rep­resentatives and scientists. The panel's report is due by July 1 and will assist EPA Administrator Carol M. Browner in her decision on MTBE use.

A key issue for Browner will be de­termining whether the 1990 Clean Air Act Amendments' requirement that re­formulated gasoline must have 2% oxy­gen content will remain in effect. Relax­ing this mandate means that refiners could use a different hydrocarbon mix­ture to achieve the air-quality standards, with or without the use of oxygenates. Gov. Davis has requested that this re­quirement be waived, a view supported by many in the petrochemical industry.

"If you are going to ban or phase out MTBE, you must eliminate the oxygen­ate mandate," asserts Robert H. Camp­bell, chairman and CEO of Sunoco and a member of the EPA panel. Campbell is also chairman of the National Petro­chemical & Refiners Association, which has not taken a position on the MTBE ban, but instead is cautioning regulators against an immediate ban of the prod­uct. A phaseout must be done "over a suffi­cient period of time [to ensure] it is con­structive for the industry," Campbell says. 'The refining industry has evolved over the past 10 years to the point that MTBE is a substantial blend stock component of gasoline. It is impossible to ban it outright."

With the oxygenate requirement in place, ethanol appears to be the only possible alternative for reformulated gasoline. Associations for corn growers and other agricultural groups eagerly support its use in fuels. "We are pre­pared to step in immediately to supply California with more than 500 million gal of safe, renewable ethanol," said Eric Vaughn, president of the Renew­

able Fuels Association, in a statement released after California's decision.

Although availability has been cited as one concern about ethanol—which producers refute—other issues have also been voiced.

'There are many problems associated with the use of ethanol in gasoline," Campbell says. He points to the higher vapor pressure of the chemical, which will require the removal of some clean-burning hydrocarbons that have high va­por pressures to achieve the vapor-pres­sure requirements. Also, refineries can­not make ethanol-blended gasolines in their facilities because the mixtures pick up moisture in handling, requiring that ethanol be handled at distribution sites.

The potential price impact of a new ad­ditive was addressed in a study recently completed by the California Energy Com­mission. In its February report, the com­mission estimates that prices would rise more than 6 cents per gal if ethanol were to replace MTBE in gasoline by 2002. De­laying the replacement to 2005 would lead to an increase of about 2 cents per gal.

Also, according to the model used for the study, gasoline blends with 10% eth­anol would require a cleaner gasoline blend stock than those currently made in refineries, requiring the state to im­port more than half its gasoline to main­tain the same air quality.

The commission also considered other additives—ethyl tert-butyl ether, ieri-butanol, and tert-amyl methyl ether—although it acknowledged that current production of these chemicals cannot meet California's needs. A price increase of 2 cents or less is expected if one of these products, or mixtures, is to be used in gasoline.

MTBE's future is far from clear. 'The big question is to what degree the rest of the country will follow California," DeWitt's Miller says. Maine banned MTBE last year, and serious discus­sions are continuing in the other north­eastern states and Texas.

The Oxygenated Fuels Association, which represents the major MTBE pro­ducers, has outlined four key criteria for any MTBE replacement: maintain air quality, ensure adequate supply, no gas­oline price increases, and no human health risk from the alternative. Al­though these requirements seem rea­sonable, achieving them in a single product, or even a mixture, is a very de­manding task. And there is no guaran­tee that MTBE producers will have a role in producing that replacement.^

APRIL 12,1999 C&EN 27