Banning the use of the additive MTBE from California's state supplies by end of this year could cause a supply shortfall and price hikes, the California Energy Commission said. MTBE is scheduled to be phased out by year's, but it would lead to a shortfall of 55,000 to 100,000 barrels a day, 5 to 10 percent of the state's gasoline supply. California Gov. Gray Davis announced on March 15, 2002 a one-year delay on banning the pollutant MTBE from the state's gasoline supplies, explaining that he wants to avoid price hikes and shortages as the state moves to use ethanol as a substitute. The research firm hired by the commission to analyze the phase-out of MTBE said that California should delay the ban until November 2005 to give the state the chance to increase its refinery capacity and produce a stragegic fuel reserve. The announcement was met with sharp criticism from municipal water officials and environmentalists who noted that a study directed by the state continues to find MTBE, a possible carcinogen, leaking into ground water. The ban, which Davis called for in 1999, was originally intended to take effect at the end of this year. MTBE, or methyl tertiary butyl ether, has been widely detected in drinking water wells across the state after leaking from underground gas tanks.

Originally posted on Fleet Financials