This is an excerpt from EERE Network News, a weekly electronic newsletter.

March 20, 2002

California Governor Davis Extends MTBE Phase-Out to 2003

California Governor Gray Davis dealt a blow to the U.S. ethanol fuels industry last week by extending the deadline for the phase-out of MTBE in the state to the end of 2003. Back in 1999, concerns about groundwater pollution led Governor Davis to order the phase-out of the use of MTBE as a gasoline additive in California by the end of this year. MTBE is an oxygenate, and is used to reduce ozone emissions. California sought a waiver from the oxygenate requirements, but the U.S. Environmental Protection Agency denied that waiver in June 2001. Since the only other gasoline oxygenate is ethanol, the MTBE phase-out will create a large market for ethanol in California. Delaying the phase-out will slow some of the rapid growth that the ethanol industry had expected.

The governor's decision followed a report released last week that predicted gasoline supply shortages in Southern California if the phase-out proceeded as planned. Ironically, the expected supply problems are due to problems with gasoline supply and imports to the state, rather than ethanol supply concerns. The report, commissioned by the California Energy Commission (CEC), assumes that the ethanol supply is available, but predicts problems because fewer additives and more gasoline would be used in ethanol fuel blends. See the CEC MTBE Web page, which includes links to the Governor's announcement and the report.

For its part, the ethanol industry claims it was ready to meet the anticipated demand and is asking California refiners to voluntarily shift from MTBE to ethanol blends. See the Renewable Fuels Association (RFA) press release.

The RFA claims are also backed by a recent report from the U.S. General Accounting Office (GAO). That report says that ethanol capacity will be sufficient to meet the nation's needs, but expresses concern that the industry is concentrated in the Midwest and warns that bans of MTBE in other states could lead to capacity problems. See the GAO report. (PDF 686 KB) Download Acrobat Reader