The Environmental Protection Agency said Tuesday that in order to protect air quality, California must continue to use ethanol or gas additives.

Rejecting state arguments that using additives will only increase fuel costs, EPA Administrator Christie Whitman said “there is no clear evidence that a waiver will help California to reduce harmful levels of pollution.” And that without such clear evidence, the Clean Air Act prevents her from granting a waiver.

Farming interests and supporters in Congress have lobbied against the waiver that would release California from the federal oxygen mandate, as they hope California will serve as the key to expanding the ethanol industry. California would need about 580 million gallons of ethanol annually to replace its use of the current fuel additive MTBE. California has banned MTBE use starting in 2003 as it has been found to contaminate groundwater. Ethanol is the only additive that can be substituted for MTBE.

Despite concerns from California that there will not be enough ethanol to meet demand, the ethanol industry says it is ready. Currently, it produces about 2 billion gallons of ethanol annually. The industry estimates that number will reach 3.5 billion gallons by 2003.

Senate Democrats plan to hold a hearing on the EPA’s action soon, but it appears unlikely that the decision would be reversed due to the strong farm-state support in Congress for the ethanol industry.

Associated Press