The legal battle described in this article will help determine who and how the is to be governed. NATIONAL POST (Toronto) September 5, 2000 $1B Methanol battle fires up this week Methanex Corp. in face-off with U.S. government: Canadian firm claims California violated NAFTA when it banned fuel additive Peter Morton Financial Post WASHINGTON - A US$1-billion battle between a giant Canadian methanol producer and the world's most powerful government is finally about to begin. The two sides will face off before a special panel this week in preliminary arguments over Vancouver-based Methanex Corp.'s US$970-million claim against the U.S. government over a March, 1999, California order to phase-out a controversial gasoline additive. The case is being closely watched around the globe. Methanex, the world's largest methanol producer, is claiming the California government illegally violated a key provision of NAFTA when it moved to ban methyl tertiary butyl ether, commonly known as MTBE, because of what its says are unproven concerns about its effect on the environment. MTBE is made from methanol, a by-product of natural gas, which is made by Methanex, primarily at plants in New Zealand and Chile. MTBE has been in use since the 1970s to reduce exhaust emissions. The California government banned the additive because it was appearing in 10,000 groundwater wells in the state and suspect of causing health problems. Methanex launched a formal complaint under the controversial Chapter 11 of NAFTA, which was intended to protect foreign corporations from illegal expropriation of their property or investments because of state actions. Chapter 11 has been used successfully against both the Canadian and Mexican governments by companies unhappy about changes in laws that effectively put them out of business. The most recent case was when a NAFTA panel ruled against Mexico last week, ordering it to pay US$16.7-million to the U.S. insulation company Metalclad Corp., which was prevented from building a toxic waste plant. All three governments are looking at ways of redesigning the Chapter to try to eliminate these lawsuits, although none are willing to re-open the NAFTA agreement. The Methanex dispute goes back to 1996 when the U.S. government ordered that pollution-reducing additives such as MTBE must be used in regions where smog is especially bad, including southern California. California's 22.5 million cars had been burning gasoline with 11% of MTBE. But a series of studies in California shortly after appeared to link MTBE to cancer. Gray Davis, Governor of California, went ahead with his plan to ban the additive by 2002, mainly because some 30% of California's 34 million residents rely on wells, not all of which are affected. Traces of MTBE, which the U.S. government calls "a toxic chemical that is highly soluble in water" and difficult to clean up, has been found in about 10,000 wells. Gasoline, on the other hand, is bio-degradable. In documents filed before the panel, the U.S. government argues that "Methanex's claim does not remotely resemble the type of grievance" under the investor-state Chapter 11 of NAFTA and Methanex suggestion that state governments should have to pay compensation to corporations when they enact health and environment laws "is absurd." "If accepted by the tribunal, no NAFTA [country] could carry out its most fundamental government functions unless it was prepared to pay for each and every economic impact," it said in its defence claim. Methanex's share price dropped sharply when the California ban was announced, going as low as US$3 9/16. Since then, its price has risen to about US$6. It trades on the Toronto Stock Exchange and Nasdaq. Methanex countered in its defence that there is nothing wrong with MTBE and most of the traces of the additive found in wells have come from leaking underground storage tanks or from inefficient two-stroke engines used in some types of watercraft. "There is not a shred of clinical or epidemiological evidence to support the notion that MTBE has caused or will case any human cancer," it said. It said its US$970-million claim is not based on its share price but on the loss of profits because of a slump in methanol sales in the state. The case, which is expected to drag well into next year, is being closely watched not only because of the size of the claim but because other states are moving to ban MTBE. Alaska, Connecticut, Maine and New York are making similar moves to phase out MTBE. pmorton@nationalpost.com Copyright © Southam Inc. All rights reserved. http://www.nationalpost.com/ ............................................................... As the article said: "The case is being closely watched around the globe" because it will help set the pattern for all future "trade" agreements that will govern how governments govern. ............................................. Bob Olsen, Toronto bobolsen@interlog.com ............................................. ---------------------------- ftaa-l ----------------------------- resisting the FTAA and capitalist globalization mobilizing for Quebec City, April 2001 creating alternatives ----- to unsubscribe from this list, send a message to: with the following text only: unsubscribe ---------------------------- ftaa-l -----------------------------