FILL 'ER UP Californians will cruise on ethanol in 2003. UPPA/ZUMA PRESS PHOTO

California officials predict higher gasoline prices for the Golden State because of the decision and may challenge EPA in court. Meanwhile, midwestern corn-growing interests are cheering at the prospect of supplying corn-derived ethanol for California's big urban gasoline market.

Since 1990, the Clean Air Act has required that reformulated gasoline, sold in heavily polluted urban areas, contain 2% oxygen by weight to help reduce smog-related emissions. Throughout much of the U.S., refiners add methyl tert-butyl ether (MTBE) to boost the oxygen content of this cleaner burning fuel.

MTBE is increasingly found in drinking water. So to protect water supplies, California Gov. Gray Davis (D) ordered a phaseout of MTBE in gasoline sold in the state by 2003. Because refiners say they now can make cleaner burning gasoline without adding oxygenates, Davis asked for a Clean Air Act waiver.

EPA Administrator Christine Todd Whitman turned down Davis' request. "There is no clear evidence that a waiver will help California to reduce harmful levels of air pollutants," she says.

Without the waiver, refiners must continue to add an oxygenate to California's reformulated gasoline--and ethanol is the likely candidate to replace MTBE.

Davis says the move "means significantly higher gasoline prices at the pump and "does nothing to improve air quality."

Sen. Tom Harkin (D-Iowa), chairman of the Senate Agriculture Committee and a foe of the California request, predicts the ruling will mean the sale of 500 million additional gallons of ethanol per year.

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