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    California faces higher gas prices if use of additive MTBE is ended, report says.

    LOS ANGELES -- Eliminating the controversial additive MTBE from California gasoline by the end of the year could produce a supply shortfall and price spikes, according to a report by Stillwater Associates for the California Commission. Phasing out MTBE by the end of the year, as scheduled, would lead to a shortfall of 55,000 to 100,000 barrels per day -- 5 percent to 10 percent of the state's gasoline supply.

    Stillwater, hired by the Energy Commission to study the MTBE phaseout, said California should delay the ban until November 2005 so the state can expand its refinery capacity and create a strategic fuel reserve. "The shortfall can not be met from refineries on the Gulf Coast for two primary reasons," according to the Energy Commission report. "First, they are unable to make the new CARB Phase 3 gasoline. Second, they may be curtailed in their ability to produce alkylates for export to California ."

    Alkylates are used in the blending procedure to make gasoline. CARB Phase 3 gasoline is the new, cleaner-burning fuel that would replace the California blend that contains MTBE. The strict regulations governing California gasoline makes it difficult to replace with imports. California Gov. Gray Davis in 1999 ordered MTBE to be phased out. The governor is expected to decide next month whether to push back the ban by three years.

    The 1990 Federal Clean Air Act requires the country's smoggiest areas to use a cleaner-burning blend of gasoline that includes an oxygenate, typically MTBE or ethanol. MTBE, which has an odor similar to that of turpentine, has been found in California groundwater and is suspected of causing cancer. Ethanol supplies, meanwhile, are low, and the product is difficult to transport. Substituting ethanol for MTBE would likely increase the price of gasoline, state energy officials say.

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