Statement by U.S. Senator Dianne Feinstein
- On the decision by Governor Davis to Extend the MTBE Phase-out Date -
March 15, 2002

"It is critical that California's water supply be protected from contamination by the toxic gasoline additive MTBE. Unfortunately neither the Bush Administration nor Congress has provided the State the necessary waiver to permit its elimination without the risk of fuel shortages and price spikes.

The State has demonstrated that Federal Clean Air Act standards could be met without the year-round addition of oxygenates such as MTBE and ethanol. But while the Energy Bill now before the Senate includes at least 39 pages of provisions helping ethanol and MTBE producers, the legislation creates serious problems for California.

Governor Davis was right to order the phase out of MTBE by December 2002. MTBE is an animal carcinogen and a possible human carcinogen. It has contaminated the groundwater at more than 10,000 sites in California. Yet the Governor has little choice but to extend the phase-out.

A California Energy Commission report, released yesterday, demonstrates, gasoline prices could soar to $3 or more if MTBE is phased out without the waiver from the 2% oxygenate requirement. This could have a disastrous impact on California's economy.

In the wake of the Bush Administration's refusal to grant a waiver, we had hoped for legislative relief from Congress. However, the Energy Bill now before the Senate would replace the oxygenate requirement with an egregious new ethanol mandate that could leave California open to fuel price spikes, gasoline shortages and possible environmental contamination.

While the bill would give California a waiver from the MTBE requirement, it would also mandate that the State use three times the amount of ethanol it needs to meet Clean Air Standards by 2012 or pay into a ethanol credit exchange that would also drive up gasoline prices at the pump.

The bill, sponsored by Majority Leader Tom Daschle (D-S.D.), would mandate that California use 276 million gallons of ethanol in 2004 or pay for not using the ethanol. This mandate would increase to 600 million by 2012.

This mandate forces Californians to use additives we do not need to meet Clean Air Act standards, and it creates major problems for our State.

Senator Boxer and I plan to go to the Senate floor to try to amend the ethanol mandate. At the very least, California should have more time to establish the infrastructure needed to meet the ethanol requirements.

I am also concerned about potential price manipulation since the ethanol industry is very concentrated in a small number of firms. As the General Accounting Office pointed out last week, the Archer Daniels Midland Company has a 41 percent share of the ethanol market and the top eight firms combined have a 71 percent share of the market. This increases the possibility of an Enron-like situation in which California could be at the mercy of a giant, out of state corporation."

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