Davis ordered the 12-month deadline extension to give California more time to prepare for the statewide introduction of ethanol and avoid a possible surge in prices at the pump to as high as $3 per gallon.
"My job is to protect the interests of the entire state," Davis told reporters following his announcement during an appearance in the Los Angeles area. "I'm not going to let California be put through the wringer again."
Davis ordered the phase-out of MTBE in 1999 because of health concerns about the petrochemical that can contaminate ground water if it seeps out of leaky gas station storage tanks. He said he chose to delay the phase-out because uncertain ethanol supplies, which are controlled largely by companies in the Midwest, could send gasoline prices soaring in much the same way surging prices for electricity sold by private energy companies jolted the voters last winter.
"We've already fought back the electricity demons, and there is no point in having to go fight another energy catastrophe," he added.
Davis' executive order also places California in line with legislation by Sen. Tom Daschle, D-S.D., that would move a nationwide MTBE phase-out up to 2004 and then gradually increase the amount of ethanol need to blend with gasoline.
Ethanol and MTBE are both known as oxygenates and help gasoline burn cleaner. The federal Clean Air Act requires reformulated gasoline to contain 2 percent oxygenates, and California's efforts to obtain a waiver from the oxygenate requirement has been rebuffed by the Environmental Protection Agency.
California currently uses ethanol in a relatively small amount of gasoline sold in the Bay Area while MTBE is used in the rest of the state. Davis told the audience in a sun-drenched Redondo Beach parking lot that California RFG is made to state standards that are in fact stricter that the Clean Air Act and would meet federal emissions requirements without the use of either oxygenates.
The ethanol industry reacted with outrage Friday and urged the oil industry to forge ahead with plans to boost their ethanol requirements, which analysts have pegged at about 900 million gallons annually.
"Governor Davis' about-face on the MTBE phase-out schedule is completely unjustified and places political expediency ahead of safe drinking water," said Bob Dinneen, president of the Renewable Fuels Association in Washington.
The Association of California Water Authorities stated that they understood Davis' concerns about the economy, however the organization was worried about allowing MTBE to remain in the market at a time when there was little money available to clean up MTBE spills.
"MTBE contamination will result in millions of dollars in water treatment, cleanup and replacement water costs," the group said in a release. "These costs will continue to mount as long as MTBE remains in gasoline and is allowed to find its way into water sources.
Winston Hickox, head of the California Environmental Protection Agency, assured reporters on a conference call late Friday that delaying the elimination of MTBE would probably not lead to significant new groundwater contamination because of a crash program launched in 1999 to find and repair leaky tanks.
Hickox said California would not be able to use non-oxygenated gasoline legally in the event ethanol is in short supply.
"We could have gasoline in the (storage) tanks ready to be blended and we have no ethanol to blend with it," Hickox said. "Suddenly, you can't sell the base gasoline and the price goes through the ceiling."
The oil industry has preferred MTBE because ethanol is more difficult to blend and ship. But the state's refiners indicated were ready to make the switch in time for the old deadline of Jan. 1, 2003. One refiner, Phillips, already has made the switch, but Davis, who is running for re-election this year, said he was not prepared to expose the state to gasoline shortages in the event they are wrong.
"The oil industry would definitely prefer to proceed. They think they can administratively solve the problem. I believe they are acting in good faith, but I believe they are in error," Davis said.
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