The U.S. ethanol industry will be able to pull up any slack in California's oxygenated gas requirements if California Gov. Gray Davis calls for a phase-down of MTBE use in the state in a decision expected to be made today.

Eric Vaughn, president, Renewable Fuels Association, says the ethanol supply is not an issue, despite suggestions that limited supplies exist to meet California's oxygenate demand.

"A phase-out of MTBE could easily be met with a combination of increased ethanol use in federal reformulated gasoline and expanded production of non-oxygenated gasoline," he says.

The most likely scenario, he adds, would be to replace MTBE with ethanol first in northern California and in southern California beginning next September.  That would eliminate the need for significant refinery modifications in the near term.

In the longer germ, he says, refiners could phase-in the use of ethanol in the summer months through refinery modifications allowing for the production of appropriate blend stocks.