Question:
Which is where ethanol comes in: it's currently a more expensive oxygenate than MTBE, but it is an oxygenate that would not significantly contaminate drinking water.

Answer: And that all said, MTBE would not be the drinking water contaminate problem that it is if leaking underground storage tanks - which is the primary route by which MTBE and other toxic gasoline constituents find their way into drinking water supplies - were also adequately regulated.

Moreover in the bigger picture environmental regulations regulate many, many other toxic (carcinogenic and otherwise) drinking water contaminants in addition to those from gasoline. Notable regulated drinking water contaminants include: chromium-6 (often from electroplating factories, leather tanneries and textile manufacturing facilities; this is the drinking water contaminant of Erin Brockovich fame), perchlorate (used in solid propellant for rockets, missiles, and fireworks), and 1,2,3-trichloropropane (a paint solvent), as well as a multitude of agricultural pesticides.

Are environmental regulations perfect? No - MTBE is a good example of where environmental protection regulations were not strong enough (both with regards to the Clean Air Act Ammendements and leaking underground storage tanks), and there are many, many other examples. However on balance environmental regulations do make a positive impact: your observation jeff elsewhere in this thread that "here in the west the water is cleaner, the skies are bluer, the toxic dumping is less" is proof of this fact.