Methanex alleges contributions swayed MTBE ban
VANCOUVER, British Columbia, March 8 (Reuters) - Methanol producer Methanex Corp. -- STOCK;(MX.TO);CAN:TOR:;MX--, which is seeking nearly $1 billion in damages for California's ban on the gasoline additive MTBE, charged on Thursday the ban was the result of political contributions to Gov. Gray Davis.
The Canadian company said the contributions by U.S. agricultural giant Archer Daniels Midland Co. --STOCK;(ADM.N);USA::;ADM-- in the 1998 gubernatorial campaign were not illegal under U.S. law, but violated Methanex's rights as a foreign company under the North American Free Trade Agreement.
Methanex, in an amended version of a NAFTA complaint it filed last year against the U.S. federal government, said Davis and ADM officials held a secret meeting during the 1998 campaign at ADM's Illinois headquarters and the company made over $200,000 in contributions to Davis's campaign.
"It is fair to conclude that ADM promoted the ban on MTBE at its secret meeting, it is fair to conclude that the meeting led to ADM's massive campaign contributions immediately thereafter and it is fair to conclude that the MTBE measures were, at least in part, the result of the governor's political debt to ADM," Methanex said in its complaint.
NAFTA prohibits unfair protection of domestic industries, and Methanex is alleging U.S. officials acted improperly to protect the U.S. ethanol industry, which competes against methanol-based MTBE as a gasoline additive that reduces toxic emissions.
Methanex said ADM and California lawmakers improperly targeted MTBE as a product made from "foreign" methanol and pushed ethanol as a domestic alternative.
Although MTBE (methyl tertiary butyl ether) is used to reduce air pollution, in 1999 Davis ordered its use banned by 2003 amid a public outcry that the additive was contaminating drinking water supplies.
Methanex, which supplies methanol to the companies that make MTBE, argues the ban was not based on scientific evidence and the water pollution could be solved by fixing leaking underground storage tanks at gas stations.
The California ban was a financial blow to Methanex because the state is the largest automobile market in the United States and because other states look to California in setting environmental standards.
Davis spokesman Steve Maviglio called the charges "absolutely ludicrous," and said the governor's decision was based on a study by the University of California at Berkeley, not political contributions.
"The company has a faulty product that pollutes California's environment. Since they don't have science on their side they've resorted to political attacks," Maviglio told Reuters.
An ADM spokesman was unavailable for comment on Thursday.
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