Bush Permits ‘Gasohol’ in Nation’s 9 Smoggiest Cities : Environment: He also announces credit for countries that buy U.S. agricultural goods. Critics say the moves are attempts to get Farm Belt votes.

Ending a months-long stalemate, President Bush cleared the way Thursday for corn-based ethanol to be mixed with gasoline and used as fuel in the nation’s smoggiest cities.

The move, in effect, exempts ethanol from some restrictions imposed by the 1990 Clean Air Act--a law that attempts, among other things, to reduce air pollution nationwide by requiring the use of cleaner-burning fuels in nine major cities with the dirtiest air, among them, Los Angeles and San Diego.

The announcement in the White House Rose Garden was joyous news to Corn Belt farmers, whose crop is the basis for ethanol production. And it came within hours of other good news for a region rich in electoral votes: an announcement that the Administration will grant foreign countries $3.6 billion in credits and loan guarantees for the purchase of U.S. farm products.

Addressing Farm Belt Republicans, along with representatives of corn growers and the ethanol industry, Bush declared his decision to permit the use of “gasohol” as “good for farmers, good for rural America, good for the environment in our cities and good for American consumers and motorists.”

The Administration predicted that the decision would cause “almost an explosion in ethanol demand,” increasing its usage from 800 million gallons in 1991 to as much as 2 billion gallons by the turn of the century.

But beyond the White House grounds, the move--like the earlier credit and loan announcement by Agriculture Secretary Edward R. Madigan--was widely viewed as an election season effort to gain favor in the bitterly contested heartland.

Charles J. DiBona, president of the American Petroleum Institute, complained that the decision will further aid a “heavily subsidized ethanol industry” at the expense of the petroleum industry.

Environmentalists were similarly unenthusiastic.

“There is no good air quality reason for this initiative but we are thankful that, at least on the initial analysis, it does not have a major adverse effect,” said Blakeman Early, a Washington representative of the Sierra Club.

David Doniger, a lawyer for the Natural Resources Defense Council, agreed but asserted that the decision “assures that a few agribusiness giants like Archer-Daniels-Midland will reap tens of millions of dollars in windfall profits.”

Farm and industry interests have been pressuring to improve ethanol’s position ever since the Environmental Protection Agency issued regulations to implement the clean fuels requirement of the Clean Air Act.

At the outset ethanol was highly valued because it is an American-made, renewable commodity. But it ran afoul of environmentalists and regulators because it increases the volatility of gasoline, burns less cleanly when blended with gasoline and evaporates too readily, releasing chemicals that create ozone, a major component of air pollution.

The issue was booted to the White House this year, with the industry and its supporters pressuring for ethanol to be granted an exemption from the EPA regulations. EPA officials maintained that such a step would violate the 1990 Clean Air Act, a view eventually sustained by the Justice Department.

What the Administration produced Thursday was a compromise, which officials said was achieved over the last two weeks.

The White House granted ethanol an exemption, but said the reformulated gasoline with which it is blended must first have its volatility further reduced in the refining process.

Bush estimated that the further refining will cost consumers about one-third of a cent per gallon. Oil industry sources estimated the industry tab at as much as $250 million annually.

EPA officials said they expect to devise regulations for implementing the plan by next spring.

The cities affected, in addition to Los Angeles and San Diego, are Chicago, New York, Philadelphia, Hartford, Conn., Milwaukee, Houston and Baltimore.

In addition to the prospect of new corn markets for motor fuel, the Administration estimated that the farm product credits and loans announced by the Agriculture Department will generate 97,000 jobs and $9 billion worth of economic activity.

Sen. Patrick J. Leahy (D-Vt.), chairman of the Senate Agriculture Committee, charged that this announcement too was merely fodder for undecided voters in the nation’s breadbasket.