Energy Bill Debate Confirms Trial Lawyer Influence

Published May 1, 2004

Among the most divisive issues in the current session of Congress is the energy bill, which failed last November in the face of a Democratic filibuster backed by a handful of Republican fiscal conservatives.

Although GOP opponents worried about unnecessary spending, Democrats targeted one of the legislation’s few worthwhile provisions: limiting legal liability for producers of methyl tertiary butyl ether (MTBE).

Senate Minority Leader Tom Daschle (D-South Dakota), who lobbied for increased subsidies for already heavily subsidized ethanol producers, offered to deliver the necessary Democratic votes for passage if the MTBE protection were removed.

MTBE is a fuel additive used for gasoline. Its sales took off after 1990, when Congress mandated the use of oxygenates in gasoline to reduce smog. At the time, legislators thought they were providing yet another preference for ethanol, one of the most economically pampered interests in Washington. But MTBE proved to be the superior product.

Dangers May Be Overstated

Unfortunately, gasoline containing MTBE has leaked from some defective underground storage tanks, contaminating local water supplies and raising public health concerns–which some observers say are overblown.

Two years ago Robert Hirsch, associate director for water at the U.S. Geological Survey, told Congress: “MTBE is primarily an aesthetic (taste and odor) problem.”

He added, “Our studies also suggest that MTBE levels do not appear to be increasing over time and are almost always below levels of concern from aesthetic and public health standpoints.”

Trial attorneys nevertheless have flocked to the issue. Some firms now specialize in MTBE litigation and are soliciting states and municipalities as clients. Damage claims eventually could run in the hundreds of millions of dollars or more.

Some plaintiffs use demagoguery to try defendants through the media. After hiring Fred Baron, president of the Association of Trial Lawyers of America, to manage its MTBE litigation, Santa Monica, California, tried to pose as a helpless victim:

“Santa Monica is a small city, which needs to take on corporate giants with unimaginable financial resources and political power,” claimed a news release issued by the city in June 2000, when it filed suit against 18 oil industry companies.

After the city won a large settlement last year, it acknowledged “there likely was very little public exposure” to MTBE because Santa Monica closed its wells shortly after discovering the contamination. Moreover, Santa Monica said it was not “aware of” any health problems facing its residents.

Finding Fault

The real issue is not the appropriateness of recompense, but who should pay. If someone was at fault, he or she should be held liable.

However, plaintiffs prefer to find a deep pocket rather than a guilty defendant. So they are suing the MTBE makers under product liability laws, contending the additive is defective. Product liability lawsuits do not require proof of negligence. If a product is ruled defective, liability is automatically established.

But MTBE as MTBE is not the problem. The cause of contamination is almost always faulty storage.

The U.S. Geological Survey found MTBE “typically is present at very low concentrations in shallow ground water within areas where MTBE is used,” reported Hirsch.

He added: “The few locations in our database with high concentrations of MTBE may be associated with leaking underground storage tanks.” The Environmental Protection Agency’s water surveys have found the MTBE problem to be decreasing as tanks have been upgraded.

Thus, Congress had good reason to approve MTBE immunity for product liability.

Contrary to claims by the trial bar, the measure would in no way prevent wronged parties from suing companies responsible for leaky storage tanks. But litigants would have to demonstrate fault. That hardly seems unreasonable when they are seeking multimillion-dollar awards.

Uncertain Political Fate

Today the MTBE provision is tied to the fate of the larger, budget-busting energy bill. Its future remains uncertain, as the bill’s core provisions look worse the more attention they receive.

In any case, the MTBE protection should not be sacrificed in an attempt to win votes. It would be better to add the few beneficial initiatives, such as the MTBE measure, as amendments to other bills.

Those legislators seeking to flood the nation’s courts with MTBE litigation are doing the trial bar’s bidding while proclaiming their commitment to the public interest.

Liability reform remains essential, both to protect legal justice and encourage economic growth. Best would be to pass systematic changes to ensure that evidence of harm and fault precede any guilty verdict.

But until Congress proves willing to confront the trial attorneys head-on, more limited fixes like the MTBE provision are a necessary second-best approach.

Doug Bandow is a senior fellow at the Cato Institute. His email address is [email protected]. This article was published in the February 3, 2004 issue of Investor’s Business Daily.