Air Board Relaxes New Diesel Rule : Environment: State-mandated use of cleaner fuel had been blamed for surge in prices, shortages. Farmers and off-road users will be exempt for 120 days.

The state’s clean air regulators, hoping to reverse a big surge in diesel fuel prices that incurred the wrath of truckers and farmers, have temporarily eased a new rule that many blamed for the price run-up.

The California Air Resources Board agreed late Friday to a 120-day exemption for farmers and other off-road users of diesel fuel from a requirement that they use a cleaner, newly formulated fuel.

That will lower demand for the new fuel by an estimated 35%-40%. It has been in such short supply since the requirement took effect Oct. 1 that prices leaped as much as 30 cents a gallon in some areas, especially Northern California.

While refiners increase production to build healthy inventories of the new product, farmers and construction firms--but not truckers or other highway users--will be allowed to use the type of diesel fuel used in most of the country.

Truckers and farmers also contend that the fuel is causing engine damage, and the air board agreed to investigate those claims. A spokesman for the California Truckers Assn. said the state is using truckers as “laboratory rats.”

At a 12-hour hearing Friday, state energy experts told the board that supplies of the new product are growing more plentiful as refinery output climbs and that prices are beginning to ease.

But the air board, which along with the oil industry has been the target of bitter criticism, clearly hoped to defuse the situation quickly and show responsiveness to problems faced by the business community.

Oil refiners, who have invested tens of millions of dollars in equipment to produce the cleaner diesel product required by the state, strongly opposed any delays in mandating use of the new fuel.

The market disruption was a rocky start for the board’s timetable of introducing cleaner motor vehicle fuels to the California market. The process continues with a requirement for reformulated gasoline in 1996, so-called “zero-emission” cars in 1998 and further steps beyond 2000.

Gov. Pete Wilson named a task force Friday to review the causes of the shortages and their impact on the state’s economy. The task force is made up of representatives from seven state agencies, headed by Public Utilities Commission President Daniel Fessler.

The price spike was blamed on several factors in addition to the extra cost to refiners of producing the newly formulated diesel fuel, estimated at six cents a gallon. These include the new federal fuel tax of 4.3 cents a gallon and tight supplies, caused by problems at three California refineries in September and by hoarding of the old fuel by diesel customers anticipating a price run-up.

Jananne Sharpless, air board chairwoman, said the oil industry has “a responsibility to stabilize the market and bring diesel fuel prices down.”

Fuels for diesel engines emit sooty particles that are a well-documented health hazard. New state and federal restrictions took effect Oct. 1, lowering the sulfur content of diesel fuels.

California mandated the additional step of limiting aromatic hydrocarbons, creating a new category of fuel dubbed “CARB diesel.” The price surge sent many long-haul trucks--able to travel 1,500 miles on a tankful--to neighboring states to refuel.