The smallest and oldest family owned bourbon distillery in the country is about to become the first to manufacture alcohol for gasohol.

The A. Smith Bowman Distillery in Fairfax County, more well-known for its Virginia Gentleman Bourbon, decided last week to produce ethanol for gasohol, making it the first such producer in the Washington area.

Earlier last week, the Amoco Oil Co. announced that it would begin marketing gasohol in certain test areas in the Midwest this week. The first test market will be Ottumwa, Iowa, about 75 miles southeast of Des Moines, according to an Amoco spokesman. Other Midwest cities have not been announced. No east coast marketing is planned, the spokesman said.

In another development, Budget Rent-a-Car of Washington said last week that it will begin using gasohol immediately in its rental autos. The fuel now is used in rental cars at National Airport and its use soon will expand to downtown Washington and Dulles Airport. According to Budget Vice President Morton Snyder, the company decided to use gasohol because of the extra gas available for rental cars.

Bowman distillers plans to begin production in about four to five months, the time it takes to purchase proper machinery, according to Vice President John B. Adams Jr.

The company is not trying to determine what the costs will be of producing about 2,200 gallons of ethanol a day, which will become about 22,000 gallons of gasohol a day, Adams said.

Gasohol, which has been concentrated mainly in the Midwest, contains 90 percent unleaded gasoline and 10 percent ethanol. Recent Environmental Protection Agency and Department of Energy tests have confirmed earlier findings that using gasohol decreases tailpipe exhaust emissions of hydrocarbons slightly and carbon monoxide emissions significantly. The tests also show slight increases in nitrogen oxide emissions and substantial increases in evaporative hydrocarbon emissions, however.

It is also suggested that the production of gasohol uses more energy than is saved by its use.

Nevertheless the Department of Energy is "very positive on it," according to Lloyd Costley, an Energy Department lawyer. Secretary James Schlesinger is expected to announce the results of a gasohol study by the department the week of July 9, Costley said.

Costley also sees the gasohol movement as an opportunity for a revival of the country's slumping spirits industry.

"The alcohol industry in this country has been very depresed" because of increased competition from imported alcoholic beverages, Costley said.

One Midwest company, which previously made alcohol for pharmaceutical and beverage companies has stopped that production and only makes alcohol for gasohol. It produces 150,000 gallons a day and hopes to increase that to 400,000 gallons by 1981, Costley said.

"Now a Philadelphia company is beginning to crank up again," Costley said.

The price of gasohol at the pump would be between unleaded regular and unleaded premium gasoline, Costley said. The only gasohol distributor in the Washington area is Fannon Petroleum Services Inc. It began making gasohol from midwestern alcohol and its own gasoline a year ago and is mainly a wholesale distributor.