Commentary

The Trial Lawyers’ Additive

Thie article originally appeared on Spectator.org on July 22, 2005.

Congress is wrangling over a federal energy bill filled with pork. But budget waste has garnered less attention than one of the bill’s most sensible provisions, limiting legal liability for producers of methyl tertiary butyl ether (MTBE). Government normally shouldn’t protect companies from lawsuits, but Washington is largely responsible for the problem — the focus of a number of lawsuits, including scores of consolidated cases being heard in New York.

MTBE began as a gasoline additive in 1979 to make gasoline burn more cleanly. Congress mandated use of oxygenates to reduce carbon dioxide emissions, intending to subsidize already heavily subsidized ethanol.

However, MTBE proved to be the superior product. It could be shipped via pipelines and emitted less pollution than ethanol. The Sierra Club called MTBE one of the ten most environmentally useful products.

Unfortunately, the additive can contaminate the water supply if it leaks from a pipeline or storage tank. The result is unpleasant, not dangerous.

Robert M. Hirsch of the U.S. Geological Survey explained: “MTBE is primarily an aesthetic (taste and odor) problem.” Thankfully, seepage is limited. Said Hirsch, “MTBE levels do not appear to be increasing over time and are almost always below levels of concern from aesthetic and public health standpoints.”

According to the EPA, MTBE has contaminated just 16 of nearly 4,000 public water systems, or .4 percent, requiring clean-up. (Traces of MTBE, requiring no action, have been detected in others.)

Notes Nathan Vardi of Forbes, “This would not, in other words, be the stuff of toxic tort litigation in any legal system but the American one.” But it is the American legal system. Thus, writes H. Sterling Burnett of the National Center for Policy Analysis, “trial lawyers [are] acting like sharks who smell blood in the water.”

Chemical and oil companies have gone to Congress in response, setting off a political firefight. Rich Henning, a spokesman for United Water, which supplies water in Connecticut and has filed a MTBE suit, complains that the firms “are trying to hide behind Congress rather than deal with the issue.”

Actually, the Congress and EPA recognized the potential problem when they mandated use of oxygenates and approved MTBE for use, respectively. Contamination occurs because pipelines and tanks leak, not because MTBE makers are careless. The Geological Survey’s Hirsch explained: “The few locations in our database with high concentrations of MTBE may be associated with leaking underground storage tanks.”

Indeed, leakage has dropped as tanks have improved. The EPA reports that new MTBE releases are down 60 percent from those between 1998 and 2000.

All of which means that the fault lies with those who own pipelines and tanks. And, reports the EPA, the responsible parties clean up about 95 percent of all spills.

But chemical and oil companies have deeper pockets than independent gas station owners. And today defendant negligence has increasingly little to do with negligence lawsuits. Enter the trial bar.

Just three law firms handle most MTBE cases and actively troll for new clients among states and cities. Some municipalities are suing simply because they fear that contamination might eventually occur.

Estimates of potential damage claims are enormous. Frederick Baron of the Dallas law firm Baron & Budd argues that “the liability of the oil companies is in the billions.”

But liability for what? A few years ago Santa Monica won a $200 million in 2003 MTBE settlement. Afterwards, it admitted that “there likely was very little public exposure” to the additive. Moreover, it was not “aware of” any health problems resulting from the contamination. But, then again, money, not health, always was the issue.

Ironically, the use of MTBE is being phased out. However, liability for past cases remains.

The legislation before Congress would simply protect the MTBE makers from product liability suits based on the claim that the additive is per se defective, rather than that product makers were negligent. Anyone responsible for leaky storage tanks or pipelines would remain liable under several theories, ranging from negligence to breach of contract to breach of warranty.

But a finding of fault would require a demonstration of fault. Which seems fair for anyone seeking millions or hundreds of millions of dollars in damages. The provision is no corporate bailout.

There are many bad provisions in the energy bill now before Congress, but restricting MTBE liability isn’t one of them. With the House and Senate looking for a compromise, legislators should resist the temptation to do the trial bar’s bidding by removing the provision.

Doug Bandow is a Senior Fellow at the Cato Institute. A graduate of Stanford Law School, he is a member of the California and D.C. bars.