Elimination of Additive From Gas Is Ordered

In an effort to protect the water that Californians drink and the air they breathe, the state Air Resources Board on Thursday ordered gasoline sold in the state to undergo a $1-billion reformulation to eliminate a harmful additive.

The standards, which the board adopted unanimously, are designed to resolve a daunting environmental dilemma created in the mid-1990s by a previous state effort to reformulate gas, which improved air quality but led to widespread contamination of water supplies.

To consumers, the biggest impact of the new standards is likely to come at the gas pump. Californians paid extra for gasoline when the clean-fuel additive MTBE was put in--about 5 to 8 cents per gallon. Now they will pay even more to have it taken out.

Implementing an executive order issued by Gov. Gray Davis earlier this year, the air board Thursday set a Dec. 31, 2003, deadline to remove MTBE from all California gasoline. Oil companies in most areas of the state plan to substitute a more expensive octane booster--ethanol, derived largely from corn.

To avoid any increase in smog-forming pollution when MTBE is removed, the air board also required oil companies to alter other key parts of their gasoline formulas.

The new gasoline will cost, on average, an extra 4 to 7 cents per gallon for oil companies to produce in 2003, the air board estimates. In coming years, the increase will decline slightly to 2 to 6 cents per gallon, the board estimates.

Oil companies endorsed the ban on MTBE, but most complained that the other reformulation standards could lead to excessive costs, reduce gasoline production in California and result in a need to import gasoline from other states. But environmentalists lambasted the state agency, saying that it conceded too much to the industry and approved changes that could increase air pollution.

For 10 hours Thursday, the air board debated how to ensure that when MTBE is banned to clean up California’s water, its air quality doesn’t suffer in exchange.

“This is a very, very complex issue,” said board Chairman Alan Lloyd, adding that the new fuel standards were established “under an incredibly compressed time frame in order to meet the governor’s order” to eliminate all MTBE within three years.

Air quality experts have long been concerned that ethanol produces dirtier vehicle exhaust than MTBE. When ethanol replaces MTBE, it changes other factors in gasoline, especially volatility and boiling points, which would worsen smog by increasing the hydrocarbons and nitrogen oxides emitted by vehicles. As a result, the air board Thursday set new limits on those factors and reduced the allowable sulfur content.

Producing the new gasoline will be a costly process, since most oil companies have to retool their California refineries. Also, ethanol costs about twice as much as MTBE.

Tosco, the second-largest producer of gasoline in California, took the unusual step Thursday of disagreeing with other industry members, announcing that it “unconditionally supports” the air board’s requirements. Duane Bordvick, a Tosco vice president, said “we want gasoline to be the fuel of the future” and the way to guarantee that, he said, is to protect California’s air quality and stave off the need for alternative fuels for cars.

Chevron, Shell, Arco and other companies expressed concerns about effects on their operations. Ed Manning, speaking for the Western States Petroleum Assn., said the change would lead to less gasoline produced in California, which could increase the state’s vulnerability to shortages at the pumps. He said the rules go too far in trying to ensure that air quality does not worsen when MTBE is removed, and the extra air quality benefits are coming “at the expense of volume.”

The oil companies, however, failed to win their desired concessions from the board members, who were unconvinced that gas shortages might occur.

“What you have before you is a proposal that tries to balance [gasoline] supplies with air quality benefits,” Michael Kenny, executive officer of the air agency, told the board.

Air board officials reported that they believe the new gasoline will not worsen smog, increase toxic air pollutants or harm public health. Instead, they expect it will result in a modest decrease in smog-forming gases. But they acknowledged some uncertainties because of the complex chemistry involved and their inability to predict exactly what formulas oil companies will choose to use. Their findings were reviewed and confirmed by four University of California atmospheric scientists.

Environmentalists, however, say the air board’s rules do not ensure compliance with the provisions of the governor’s MTBE order, which requires no backsliding in air pollution.

In fact, Brooke Coleman of the San Francisco-based environmental group Bluewater Network said some gasoline formulations could slightly increase carbon monoxide and hydrocarbon emissions from cars.

“Warts and all, this [regulation] does remove MTBE, but what we’re all debating here is whether there’s adequate improvement” in air quality, said Janet Hathaway of the Natural Resources Defense Council.

One smog problem could occur when refiners blend gasoline containing ethanol with gas that has no oxygenates, because the amount of fumes that evaporate from vehicles could increase. The air board was uneasy about the uncertainties but approved the regulations and asked for a report back in six months on such issues as the impacts of exhaust to see if problems develop.

Additive Leaked From Underground Tanks

Emerging a few years ago, the problems with MTBE contaminating water supplies came as a major surprise to environmental regulators.

MTBE (methyl tertiary butyl ether) has been an ingredient of gasoline since the late 1970s, when it replaced lead as an octane booster. But it wasn’t added in large volumes until 1996 as part of a mandate to produce cleaner-burning gasoline. An oxygenate, MTBE is used to reduce carbon monoxide in car exhaust.

The MTBE leaked from underground gas tanks and quickly spread to underground water supplies in some areas. Because MTBE has been linked to cancer in animal studies and has a strong, offensive taste, wells in some California cities have been shut down, especially in Santa Monica and South Lake Tahoe.

Some oil companies already are phasing out MTBE and plan to eliminate it before the 2002 deadline.

The air board predicts $1 billion in capital costs for California refineries plus $360 million in extra costs annually. That comes on top of the $4.5-billion cost of producing the original reformulated gas in 1996. In return, though, air quality officials say cleaner gasoline has done more to reduce smog than any other recent regulations.

Because of the new standards, imports of gasoline from other states are expected to increase in California due to the high costs of converting the state’s refineries to ethanol.

Ethanol has to be shipped to California, which raises the cost to companies and could increase truck and rail traffic too.

Rosario Marin, mayor of Huntington Park, told the board that she fears that the increase in trucks carrying ethanol could worsen the health threat from diesel exhaust in her city. Huntington Park’s air already has been found to contain some of the Los Angeles region’s highest levels of toxic compounds because of trucks traveling on freeways.

Currently, even the nation’s entire supply of ethanol could not meet California’s demand if all refiners switch to ethanol. Ethanol is produced largely from corn in the Midwest, although state officials hope that California companies will turn rice straw and other waste products, known as biomass, into ethanol.

The California Energy Commission, which reviewed the impact of the standards, concluded that the cost of the new gasoline could be less than a penny a gallon if ethanol supplies increase.

Some oil companies hope to cut the cost of the new fuel by selling supplies that have no ethanol in areas outside the Los Angeles Basin that lack serious pollution problems. However, they would first need the federal Environmental Protection Agency to grant California a waiver of the Clean Air Act’s oxygen requirements designed to reduce carbon monoxide. Davis and California lawmakers have lobbied for a waiver, but the issue has proved controversial nationally because some lawmakers in farm states want to protect farmers who sell corn used to make ethanol.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Paying More at the Pump

Here is the yearly average cost of a gallon of regular unleaded gasoline in California for each year since 1968:

*

Source: California Energy Commision, Sacramento

Researched by TRACY THOMAS / Los Angeles Times