In the first-ever legal challenge to a U.S. environmental measure mounted under the North American Free Trade Agreement, a Canadian company is contesting California’s ban on the gasoline additive MTBE. The state began phasing out the chemical compound because of its apparent threat to water quality and human health, but the Methanex Corp., the world’s largest producer of methanol (one of the key ingredients in MTBE) claims the ban is protectionist, hurts foreign manufacturers, and benefits Archer-Daniels-Midland Co. ADM, a U.S. company, produces a competing additive, ethanol, that makes gasoline burn more cleanly — and, as it happens, the company donated a chunk of money to the gubernatorial campaign of California Gov. Gray Davis (D). Methanex is seeking almost $970 million in compensation. Environmentalists and other activists call the case a classic example of globalization gone awry, and fear that if the company is successful, other governments will be reluctant to restrict MTBE use.

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