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    Northeast Faces Fuel Hike

    Fear new gas regulations will spur 40-cent hit.

    NEW YORK -- In New York, the price of a gallon of regular gas could surge by as much as 40 cents a gallon come Jan. 1, when New York and Connecticut enact bans on an additive linked to groundwater contamination, a new federal report warns.

    In New York, that would push the price of a gallon of regular to a whopping $2.27 a gallon, a 21-percent increase. The new figure would be a record for the area, according to statistics from the Automobile Club of New York.

    The U.S. Energy Information Administration's stark price forecast comes as the oil industry gears up to blend gasoline sold in the two states with the more expensive corn-based ethanol instead of MTBE, which has long been blamed for groundwater contamination.

    In 1990, the federal government began requiring gasoline producers to use the additive, which makes gas burn more cleanly. But later studies showed the water-soluble chemical, which has been linked to cancer, has seeped into ground water. MTBE-blended gasoline already has been banished in most of California and several other states.

    The 35-page government report states, "If the price impacts seen during major fuel transitions in California and Chicago/Milwaukee are any indication, price spikes as large as 30-40 cents a gallon could occur" as a result of the ban.

    Oil companies initially fought the move to get rid of MTBE but have made the investments necessary to move to ethanol.

    "It's kind of late in the game now," said Mike Doyle director of the New York State Petroleum Council.

    A spokesman for Gov. Pataki said he would not support a delay in putting the ban into effect.

    Congress is considering an energy bill that would phase out MTBE in all 50 states, but that measure is snagged over whether refiners should be shielded from lawsuits blaming them for groundwater contamination.

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