Gas Additive Rule Won’t Be Waived

The Bush administration plans to deny California’s request for exemption from a federal gas rule that state officials say would increase already-rising prices at the pumps, an Environmental Protection Agency official said Sunday night.

The decision, expected this week, would require the state to use a fuel additive, most likely ethanol, to help gasoline burn more cleanly.

That could cost California drivers as much as $450 million a year, said Roger Salazar, a spokesman for Gov. Gray Davis. It also could trigger fuel shortages.

The decision is likely to increase the friction between Davis and the White House, already at odds over electricity price controls. It also would complicate Davis’ efforts to phase out the gas additive MTBE (methyl tertiary butyl ether), which has polluted ground water.

The decision, for which the EPA official offered no explanation, comes after heavy lobbying by corn growers and farm state lawmakers who regard California as a huge new market for ethanol and, on the other side, by oil companies and California’s congressional delegation, which supported the waiver. The oil companies contend they can make gas that can meet anti-pollution standards without having to use ethanol.

“If, in fact, the Bush administration has turned down the request for a waiver, it is again showing a blind eye for California’s problems,” said Howard Gantman, a spokesman for Sen. Dianne Feinstein (D-Calif.).

“The state urgently needs the waiver. MTBE pollutes the ground water, and there is not enough ethanol available without a price increase at the pump.”

The Clean Air Act requires that gas sold in the nation’s smoggiest regions contain an “oxygenate” that makes it burn more cleanly. The requirement applies to 70% of the gas sold in California. Refiners have generally used MTBE, but Davis has ordered it to be phased out by Dec. 31, 2002, because it has contaminated ground water throughout the state. The only practical alternative to MTBE is ethanol.

The debate is expected to continue in Congress, where Feinstein is sponsoring a bill that would allow any state to get a waiver from the requirement if the state could demonstrate that it could meet the clean air standards without the additive.

Davis, in a conference call with reporters Sunday, said he had no comment until he is formally notified of the decision by the EPA.

But Sen. Joseph I. Lieberman (D-Conn.), who joined Davis in the conference call, said he was “concerned about it.”

Lieberman, who with the Democratic takeover of the Senate became chairman of the Governmental Affairs Committee, is planning hearings later this month on California’s energy crisis.

President Bush, during a visit to Iowa on Friday, expressed support for ethanol, produced in Midwest states with the help of federal subsidies. “I still strongly believe that ethanol is important, not only to reduce dependency on foreign sources of energy but secondly as a way to clean the air,” he said.

The decision was hailed by corn growers and ethanol makers, as experts say California’s huge gas market would need about 580 million gallons of ethanol a year--or about one-third of U.S. production--to meet federal requirements.

The ethanol industry dismisses concerns that requiring use of the product could increase gas costs or that there will not be enough ethanol to meet California’s demands.

But the California EPA estimates that transportation of ethanol to the state from the Midwest, whether by barge, which is the normal route, or by rail may add 3 to 5 cents a gallon at the pumps.

The Bush administration also has repeatedly rejected California’s request for price caps on electricity. Davis renewed that call Sunday, saying independent power companies amount to “an energy cartel” that needs to be more closely regulated by the federal government.

Saying no issue is more pressing, Lieberman said Sunday he intends to hold hearings into the energy crisis, and Davis plans to testify later this month.

Lieberman said he intends to call all five members of the Federal Energy Regulatory Commission to testify June 20, the same day Davis is scheduled to appear.

“It just seemed to me that nothing was more pressing than the availability and pricing of energy,” Lieberman said, explaining why he chose to focus on the crisis.

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Simon reported from Washington and Morain from Sacramento. Reuters contributed to this report.