An international tribunal Tuesday sided with California's decision to ban the gasoline additive MTBE, rejecting a Canadian chemical manufacturer's $1 billion claim that the ban was illegal under the North American Free Trade Agreement.
The claim by Vancouver-based Methanex Corp. was a high-profile test of NAFTA's free-trade rules and whether a company must be compensated if a government action prevents it from selling a product across borders.
California officials hailed the ruling, saying it keeps companies from using NAFTA to undermine a state's environmental regulations.
"Today's decision is a resounding victory for the rights of Californians to keep their drinking water safe and clean," state Attorney General Bill Lockyer said in a prepared statement.
California began phasing out MTBE after traces of the chemical showed up in groundwater supplies around the state.
Methanex, which makes methanol, an ingredient used in MTBE, filed its claim in 1999. The claim was made against the U.S. government, not California, although the California MTBE ban was the target of the claim.
Environmentalists had long feared that corporations could use NAFTA to get around state and federal environmental regulations. Despite Tuesday's ruling, they weren't ready to celebrate.
"This claim was such an extreme claim" that the tribunal's decision doesn't eliminate the problems caused by free-trade treaties, said Martin Wagner, a lawyer with the Oakland-based group Earthjustice. The group filed a legal brief with the tribunal arguing against Methanex's claim.
Wagner said NAFTA and the just-signed Central American Free Trade Agreement continue to pose "a threat" to environmental laws in California and the United States.
Not only was Methanex's claim denied, the tribunal awarded the U.S. government $4 million in legal fees, Lockyer said.
Methanex officials couldn't be reached for comment.Sacramento Bee
