by
Mark Drajem and Christopher Donville
Methanex Corp., the world's largest
supplier of methanol, argued to a trade tribunal that it deserves
$970 million from the U.S. in compensation for a 1999 California
ban of the gasoline additive it makes.
The Vancouver-based company made its argument in an open
hearing at the World Bank in Washington, capping a five-year legal
campaign against California's ban of methyl tertiary butyl ether,
which is made from methanol and boosts gasoline octane.
``We recognize that this case presents some thorny political
issues,'' Christopher Dugan, Methanex's lawyer, said in his
opening statement to the Nafta panel today. ``We would like the
case to be decided on its merits alone.''
The hearing is the first public proceeding under North
American Free Trade Agreement rules that were meant to secure the
rights of foreign investors. The award of $970 million, which the
U.S. Treasury would be forced to pay, would be the largest in the
decade of Nafta. Methanex is opposed by the U.S. government and
environmental organizations that say this case could set off a
flood of new cases that target federal or state regulations.
At issue is whether ``the U.S. can be held accountable in the
same way it's held countless other countries accountable under
similar investment treaties,'' said Todd Weiler, a trade law
specialist and an adjunct professor at American University in
Washington.
U.S. State Department lawyers will argue their defense
tomorrow, and the proceedings are scheduled to continue for eight
days. In its written filings the U.S. government contends
California was protecting its citizens when it moved in 1999 to
phase out the petrochemical after traces of the additive were
found in the state's drinking water.
Shares of Methanex rose 8 Canadian cents to C$16.90 as of
1:57 p.m. in Toronto Stock Exchange trading.
`Notorious' Case
Massachusetts Senator John Kerry, the Democratic presidential
candidate, led a legislative effort two years ago to weaken the
investment provisions that are negotiated into trade agreements,
and singled out the Methanex complaint as the ``most notorious.''
``Expensive litigation -- and the mere threat of litigation -
- is having a chilling effect on the ability of state and local
governments to promulgate public health and safety laws,'' Kerry
said in the Senate on May 21, 2002. The Methanex ``case
demonstrates exactly why we need to protect legitimate public
health and welfare laws.''
Methanex today argued that California discriminated against
it when it outlawed the gasoline additive. The company said the
state's ban was deliberately crafted to benefit producers of
ethanol, a corn-based alternative to MTBE.
The company said its business of selling methanol to
petroleum refiners in California has been effectively expropriated
by the state.
As a result of the ban ``methanol producers do not receive
the market access as U.S. ethanol producers get,'' Dugan said.
``Local interests try to use environmental regulations as a way to
disguise local favoritism.''
Protecting Resources
California, New York, Connecticut and 14 other U.S. states
have banned MTBE from fuel supplies to protect water resources,
and Congress is considering a similar ban. The chemical persists
longer and spreads farther in subterranean acquifers than other
gasoline ingredients.
Methanex contends California could have taken steps other
than a ban to avoid MTBE contamination, including stricter
regulation of underground gasoline storage tanks and measures to
limit pollution from two-stroke engines such as those used on jet
skis. Opponents of these provisions see it differently.
At stake ``is the ability of a state or national government
to protect the public's interest without having to pay companies
that are threatening that harm,'' said Martin Wagner, an attorney
with Earthjustice, an environmental law group.Bloomberg:
