Canadian Firm Fights California Ban on Chemical

Article excerpt

SACRAMENTO, Calif. - No state has seen more of its drinking water rendered useless by pollution from the gasoline additive MTBE than California. But a pending state ban on the chemical is now threatened by the North American Free Trade Agreement.

Canada's leading maker of the malodorous and possibly carcinogenic MTBE is using NAFTA to question the legal authority of any American state to make environmental regulations when those rules interfere with international trade.

The claim by Vancouver-based Methanex Corp. to a NAFTA arbitration panel seeks $970 million in damages from the federal government. It challenges an executive order by California Gov. Gray Davis - since ratified on a bipartisan vote by state legislators - compelling refiners to remove MTBE (methyl tertiary butyl ether) from gasoline in the state effective Dec. 31, 2002. Methanex filed its revised lawsuit last month directly to a NAFTA tribunal made up of representatives of the United States, Canada and Mexico. If the tribunal - whose proceedings can be held in private - rules in favor of the company, the federal government would be liable for the payment, but in turn could sue California to recover whatever it must pay. No date has been set for a hearing on the lawsuit.

"We believe the ban of MTBE was politically motivated and has no scientific

merit," said Pierre Choquette, Methanex president and chief executive. His claim charges the California ban was ordered after Archer Daniels Midland Corp., America's largest producer of ethanol, "misled and improperly influenced" Mr. Davis.

Ethanol, a corn product, is the substitute most likely to replace MTBE in gasoline. The governor's office denies he ever had any contact with Archer Daniels Midland on this issue.

Mr. Choquette does not dispute findings that MTBE has contaminated lakes and drinking water supplies in all parts of America. But he argues this happened not because the additive is toxic, as a study by University of California-Davis found in 1998, but because of leaks in gasoline storage tanks.

California legislators fear that if Methanex wins its claim, states no longer will be able to regulate their own environments. Many state rules, including California smog controls, are tougher than federal standards.

"As presently administered, the NAFTA agreement diminishes the sovereignty of states and shifts decision-making power from elected officials to unelected international trade officials," complained a bipartisan group of 14 legislators in a letter to U.S. Trade Representative Robert Zoellick.

"We think many democratically enacted laws may be subject to challenge under NAFTA, and to a lesser extent under the World Trade Organization agreement," said California state Sen. …