VANCOUVER, British Columbia - Canadian chemical producer Methanex Corp has not given up its fight for $970 million in damages over California's ban on the gasoline additive MTBE, its chief executive said yesterday. Methanex will file a new trade complaint arguing it was the victim of a backroom political deal between Gov. Gray Davis and agribusiness company Archer Daniels Midland Co. , which is the largest producer of the rival additive product ethanol.
A North American Free Trade Agreement arbitration panel in August rejected Methanex's first claim for damages, but said it could file a new complaint with more evidence to support its argument that its trade rights were violated. "We think we have a great case," chief executive Pierre Choquette told analysts in a conference call on the company's third quarter earnings.
California has decided to phase out the use of MTBE (methyl tertiary butyl ether), which is used to reduce auto air pollution, because of concerns the additive was contaminating drinking water supplies. Methanex, which supplies the base chemical methanol used by firms that make MTBE, argues the ban was not based on scientific evidence, and water pollution problems can be solved by fixing leaking underground tanks at gasoline stations. The California ban was a financial blow to Methanex because the state is the largest U.S. gasoline market, consuming 1 million barrels a day, and other states look to California in setting automobile environmental standards.
NAFTA prohibits unfair protection of domestic industries, and Methanex's original complaint alleged U.S. officials acted improperly to protect the U.S. ethanol industry, which competes against MTBE as a gasoline additive to reduce toxic emissions. Methanex amended its initial complaint by adding a claim that Davis and ADM officials held a secret meeting during the 1998 gubernatorial campaign at which the commodities giant made over $200,000 in contributions to Davis's campaign. Both Davis and ADM have denied any wrongdoing. U.S. trade official have also questioned how Methanex can claim damages since it does not directly make MTBE.
In March, Davis pushed back the MTBE ban by one year to 2004, citing concerns that a quick shift to ethanol could push gas prices higher. Despite the delay, four of the state's biggest oil refiners, Phillips Petroleum, BP, Exxon Mobil Corp. and Shell Oil Co., will switch from MTBE to ethanol as a gasoline additive by the end of this year.
Story by Allan Dowd
Story Date: 23/10/2002
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