Industry and government sources said Feb. 25 that California Gov. Gray Davis (D) is "likely" to delay a proposed ban on the fuel oxygenate methyl tertiary butyl ether based on the recent results of a study commissioned by the California Energy Commission.
The CEC study recommended a delay of the ban until November 2005; however, Davis is said to be considering a plan to delay the MTBE moratorium for a year at the most. Davis mid-February said he plans to make a "final" decision on the ban within 40 days.
A 1999 executive order directs industry to stop selling gasoline that contains MTBE by Dec. 31, 2001, because of concerns that the additive contaminates groundwater. MTBE producers and some oil companies say a ban on MTBE will mean higher prices and possible fuel shortages.
Study findings
The CEC study, conducted by Stillwater Associates, said that, assuming federal clean fuel rules still require an oxygenate mandate of 2 wt %, there could be a gasoline supply shortfall of 5-10% in the state if California insists on replacing MTBE with ethanol.
"Industry studies and recent experience in the California market indicates that a 5-10% shortfall translates into price levels 50-100% higher than normal, i.e., prices will move in the range of $2-3/gal when crude oil pricing and refinery operations would normally have resulted in pricing around $1.50/gal," the Feb. 18 report said. "ellipseIt is likely that price spikes can reach $4/gal."
Stillwater told state officials that the California gasoline market is becoming increasingly "insular" because of the state's geographic isolation, unique fuel specifications, logistical constraints, and commercial barriers.
Lingering controversy
Davis wants the federal government to let refiners make clean reformulated gasoline without adding oxygenates, but the US Environmental Protection Agency so far has refused to waive the requirement.
Pending energy legislation in the US Congress may address the issue by replacing the oxygenate standard with a "renewable fuels standard" designed to increase nationwide demand for ethanol from the current 2 billion gal/year to 5 billion gal/year by 2012.
That proposal is, however, very controversial, as are many parts of pending energy legislation. The House passed a bill in August that does not address clean fuel issues very much; the pending Senate bill, due to be debated through March, may propose regional RFG specifications that give refiners more flexibility to make clean fuels designed to reduce smog.
But for the next month at least, lobbyists say it is unclear what a final bill may look like-or if one can pass both houses of Congress that the White House will also accept. Along with the renewable fuel standard, the Senate bill calls for dramatically higher fuel efficiency standards for cars and trucks. Equally controversial is a House plan to lease a portion of the coastal plain of the Arctic National Wildlife Refuge in northeastern Alaska.
RFA: no delay needed
Ethanol supporters, meanwhile, say there is no reason to delay the MTBE ban or wait to see if federal energy legislation that addresses the issue gets passed.
"There is no reason for Gov. Davis to cast out the petroleum and ethanol industries to wonder in a desert of uncertainty for 40 days while he decides whether to reverse his decision to ban MTBE," said Bob Dinneen, president of the Renewable Fuels Association. RFA cited a January 2002 US Department of Energy report authored by the clean fuel consulting company Downstream Alternatives Inc., which concluded that no transportation infrastructure barriers exist to meeting a nationwide (including California) 5 billion gal/year ethanol market.
RFA added that every California refiner says it will complete the necessary modifications to produce Phase III California RFG by yearend-including using ethanol where needed.
