Union Tribune

March 9, 2002

Davis wary that legislation on ethanol could raise gas prices


WASHINGTON An agreement on motor fuel blends announced
by key senators and interest groups yesterday lacks a three-year
exception for California that Gov. Gray Davis says is necessary
to keep gasoline prices from rising in the state as it tries to end
use of a gas additive linked to water pollution.

Davis is facing a decision on whether to proceed with a planned
ban on the additive, MTBE, by the end of this year or to delay the ban until 2005. The Senate legislation could complicate his

It would phase out nationwide use of MTBE methyl tertiary
butyl ether over four years and end a federal fuel additive
requirement in areas with heavy air pollution, including Los
Angeles and San Diego. However, the legislation would create a
new requirement that would force gas suppliers to use at least 5
billion gallons of ethanol, a corn-based MTBE competitor backed
by farm state interests, by 2012.

The legislation would allow California to delay starting the
implementation of the ethanol requirement by a year, pushing it
to 2005. The ethanol and oil industries resisted a three-year
delay sought by Davis, sources said.

Davis is worried that the difficulty of getting enough ethanol to
meet California's needs will lead to fuel shortages and higher
prices for motorists at the gas pump. He wants to be able to ban MTBE without a firm federal requirement that ethanol be used.

"A three-year waiver . . . will give California the critically needed
flexibility to ensure that our infrastructure is in place to make
this transition without a catastrophic increase in gasoline
prices," Davis wrote to Sen. Barbara Boxer, D-Calif., recently.

The ethanol industry insists it can meet California's needs.

Boxer and Sen. Dianne Feinstein, D-Calif., had tried to get the
three-year exception into the legislation.

Both said they would continue pursuing the issue. But Feinstein
appeared glum about California's chances.

"The ethanol forces are arrayed against us," she said.

Jay Carson, a spokesman for Senate Majority Leader Tom
Daschle, D-S.D., said it was unlikely any changes would be made in the legislation, which is part of a broader energy bill the Senate is debating. Daschle, a key supporter of the ethanol
industry, was a prime architect of the legislation.

"I think it's a done deal," Carson said.

The legislation contains other provisions beneficial to California,
he added. It would allow the state to opt out of the broader fuel
additive mandate immediately, rather than have to wait one
year as have other states, Carson said. In addition, the phase-in of the ethanol requirement could be slowed if a federal study mandated by the legislation shows there are insufficient supplies of the additive, he said.

The fate of the legislation is far from certain. Lawmakers have
tried for several years to change federal fuel additive laws, only
to be stymied by regional differences and battles between
powerful interest groups.

This time, however, the legislation has the backing of a broad
coalition, including the ethanol and oil industries, which are
normally at odds on the issue.