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OFFICE OF THE GOVERNOR
PR02:139
FOR IMMEDIATE RELEASE
03/15/2002
GOVERNOR DAVIS ALLOWS MORE TIME FOR ETHANOL SOLUTION
REDONDO BEACH - Governor Gray Davis today issued an
Executive Order that will allow California refineries up to
12 additional months for the transition from MTBE (methyl
tertiary butyl ether) to ethanol in gasoline to prevent
gasoline prices to reach $3 per gallon at the pump.
"If I could snap my fingers and make MTBE go away tomorrow,
I would. But we've seen this movie before and I am not going
to allow Californians to be held hostage by another
out-of-state energy cartel," Gov. Davis said. "After two
years of delay, California's request for a waiver from the
strict oxygenate requirement was denied by the federal
government. Senator Daschle, who I spoke to last night, has
a bill to fix the problem and it's heading in the right
direction. But there's a chance that it might not become law
and so it is my duty to take action to protect Californians
from paying $3 per gallon at the pump. And that's exactly
what I'm doing."
"I am working with Senators Feinstein and Boxer to make sure
California has the flexibility we need to protect our state
from severe gas shortages and price spikes. In California
and throughout the nation, gas prices are already increasing
due to market forces beyond our control. I will not allow
Californians to be exposed to additional price increases due
to shortages that can be avoided."
"The federal legislation to create a national renewable
fuels standard is important to California. We will watch
developments very carefully as we decide how to proceed with
the transition to ethanol -- including, if necessary, a
review of this executive order next year."
The new timeline for the MTBE phaseout gives the Congress
time to harmonize its new ethanol mandate with California's
actual ethanol usage in 2004 and beyond.
Last summer the U.S. Environmental Protection Agency denied
California's request for a waiver of the federal oxygenate
mandate despite the fact that the EPA's own scientific panel
declared the mandate ineffective (see The Report of the
Blue Ribbon Panel on Oxygenates in Gasoline at
http://www.epa.gov/otaq/consumer/fuels/oxypanel/blueribb.htm).
California has also demonstrated that it can meet Clean Air
Act standards without the oxygenate requirement.
Because of the EPA decision, California would need to import
between 750 and 900 million gallons of ethanol each year as
soon as it bans MTBE under current federal law. The
California Energy Commission and independent consultants
have questioned whether the necessary quantity of ethanol
could be efficiently transported to and distributed within
California by 2003.
In February an independent study commissioned by the
California Energy Commission warned that price spikes
of up to 100 percent are likely if MTBE is phased without
an adequate supply of ethanol available and ready for
distribution. In 1999, California experienced a supply
reduction of similar magnitude due to fires at TOSCO and
Chevron refineries, and the price of gasoline doubled. The
independent study also said that phasing out MTBE next year
could result in a five to 10 percent gas shortage.
Ethanol is one of two oxygenate additives that can be mixed
into gasoline. The other is MTBE. Oxygenates are required in
most California gasoline under the 1990 version of the
Federal Clean Air Act.
Under the newly announced timeline, the MTBE phaseout will
be accomplished no later than December 31, 2003. Individual
refineries have may continue to make the transition to
ethanol earlier than December 2003 if they determine it is
feasible and will not risk supply shortages or price spikes.
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