The rush of American oil companies phasing out MTBE, in conjunction with a tight ethanol market and rising gas prices, generated fierce debate on how to provide clean fuel without overburdening American consumers.

Oil companies hope to complete the voluntary phaseout of MTBE by May 6, which is when the Energy Policy Act of 2005 goes into effect. The energy bill eliminated the requirement for oil companies to include a 2 percent oxygenate in reformulated gasoline (RFG). MTBE, previously America's most highly used oxygenate, has been identified as a source of groundwater contamination. Congress did not include a liability protection clause in the legislation. Therefore, oil companies perceive an increased risk of liability lawsuits if using MTBE when not required to do so, according to a February report from the U.S. Energy Information Administration (EIA).

Despite the elimination of the oxygenate requirement, most refiners depend on an oxygenate to supply clean-burning fuel. Ethanol is therefore expected to fill the void. The ethanol industry has boomed from this demand boost, as well as that created by the renewable fuel standard—both products of the energy bill.

This high demand was exhibited in high gas prices. In late March, as average gas prices rose to $2.40 per gallon, a debate ensued about whether the gasoline price spike was directly related to the rapid phaseout of MTBE and introduction of ethanol in larger quantities.

The EIA report identified ethanol supply and transport as the "largest challenge" to the MTBE phaseout, stating the U.S. production capacity "is not adequate to replace the MTBE lost at this time," the report said. "As a result, gasoline suppliers will likely remove some ethanol from conventional gasoline in the Midwest and increase ethanol imports from places like Brazil."

Imported ethanol is often more expensive because it is subject to an ad valorem tariff of 2.5 percent and a second duty of 54 cents per gallon. High U.S. ethanol prices, caused in part by inadequate supply, prompted demands that the tariffs be temporarily withdrawn to ease the burden on American gas consumers.

Renewable Fuels Association President and CEO Bob Dinneen responded that removing the tariff while an existing 51-cent tax break on ethanol remains in effect would in fact subsidize Brazilian ethanol. "America's tariff structure has never been a barrier to ethanol imports, and history bears out that fact," said Dinneen in a letter to the Washington Post.

U.S. ethanol production will likely be able to meet demand within a year as plants under construction come on line. Currently, approximately 2 billion gallons of ethanol capacity construction and expansion are underway.