London-based BP p.c. said it plans to phase out MTBE by the end of the year.
"We considered all of the factors within our control and determined that we could transition from MTBE to ethanol early," said Bob Malone, BP's regional president in Los Angeles.
BP brands Arco and ampm gasoline on the West Coast. Malone said the company has a 20 percent market share, with approximately 1,200 Arco stations in California.
Gov. Gray Davis, D-Calif., earlier this year had postponed a state-ordered phase-out of MTBE until the end of 2004. Davis said he feared there would not be enough ethanol available to replace it without causing a spike in gasoline prices.
MTBE stands for methyl tertiary-butyl ether. It is part of a group termed "oxygenates" which, when mixed gasoline, cause the fuel to be burned more efficiently in engines resulting in less air pollution.
But MTBE is a suspected carcinogen and has been found to have contaminated drinking water across California after leaking for gasoline storage tanks.
BP's controversial announcement is the first public comment by a refiner to eliminate the use of MTBE as originally scheduled.
"BP's announcement ... is welcome news for consumers anxious about further MTBE water contamination," said Bob Dinneen, president of the lobbying group Renewable Fuels Association.
Dinneen said he hoped other oil companies that sell gasoline in California would follow BP's lead.
In Washington, the Oxygenated Fuels Association predicted that a limited supply of ethanol would amount to 50 percent to 100 percent price increases for California drivers.
"It's no surprise that oil companies like BP are once again putting profits ahead of people despite the fact that Gov. Davis, the California EPA and CEC say that California drivers will be gauged at the pump," the trade association said in a statement. "This is not environmental leadership, it is the first step in a profit parade for oil companies."