California oxygenated fuel waiver to be debated this session
Category: General By Cinthia Murphy BridgeNews CHICAGO (B)--With a new U.S. president in office, many corn growers breathed a sigh of relief Jan. 22 on hopes that a highly contested waiver seeking to grant California the right to reduce the required oxygen level in its gasoline might be denied under the new administration. But everyone knows that revisiting the issue could pose a threat, keeping ethanol on the front line. The Environmental Protection Agency has been asked to grant an exception from the federal reformulated gasoline oxygen requirement to California because of pollution problems with methyl tertiary butyl ether (MTBE), one of two oxygen-adding additives approved for use. Although MTBE fights air pollution, it is a critical source of water pollution. An EPA proposal draft would allow California to reduce the required oxygen level in its gasoline to 1.0% from 2.0%. Although MTBE and ethanol--a corn-based fuel--are two different things, they are both oxygenated components that fulfill the fuel regulation. The California issue had become a political struggle between California lawmakers on the one hand and Midwestern congressmen on the other. For their part, U.S. corn growers aggressively lobbied to their Congressmen and senators to deny the waiver. Corn growers and ethanol producers have feared that while the California waiver might have little if no direct impact on ethanol consumption--since MTBE prevails in the region--other ethanol-using states might want to follow suit. The groups also have worried about potential long-term effects of changing the regulations. But that was in the President Clinton era. Monte Shaw, spokesman for the Renewable Fuels Association in Washington, D.C., said hopes are high that newly elected President George W. Bush would honor campaign vows to support the ethanol industry and to increase domestic energy sources such as renewable fuels. "Bush has a very strong record in ethanol," Shaw said. If campaign promises turn to deeds, Bush's background in the petroleum industry would have no weight on the California waiver, and the outcome of the heated argument could be favorable for ethanol producers. According to Shaw, although Clinton did not act on the waiver, the request is still pending review. The Bush administration is now expected to take time to clear the pipelines and think the issue through before taking a stand on it, he said. "We viewed (Clinton's decision not to grant the waiver) as a victory. We are heaving a sigh of relief. But we know that this is an ongoing issue," he said. National Corn Growers Association President Lee Klein argued this month the California waiver was not motivated by any legitimate concern related to the air quality effects of oxygenates. Instead, he said it was prompted by a desire to accelerate the removal of MTBE in gasoline. Klein argued the way to accomplish such a goal was to replace MTBE with ethanol and that current ethanol supplies would be enough to meet California's needs. John McClelland, director of energy analysis with the NCGA in Washington, said there has been no technical justification to support a request to change the oxygenate requirement. The trade-off for removing the water pollutant MTBE without replacing it with ethanol would in fact have a detrimental impact on the environment; it would increase air pollution levels, he said. It also could have a negative economic impact. When it comes to the bottom line, lowering the California oxygenate requirement instead of replacing MTBE means that 11% of the state's gas pool would be withdrawn without replacement. In times of already-tight crude oil supplies across the country, the economic impact could be higher gas prices in the state, he said. However, a 2000 study by the California Energy Commission indicated that if ethanol were blended into California gasoline, gas prices at the pump would increase by 6 to 7 cents per gallon, a cost to motorists of $870 million to $1 billion per year. In 2000, U.S. ethanol production totaled slightly more than 1.6 billion gallons, and early projections have 2001 output pegged at anywhere from 1.7 billion to "a whole lot more," Shaw said. "We've seen steady annual growth, and there are no signs that the trend will not continue," he said. California's ethanol demand would total roughly 550 million gallons a year if the state were to eliminate the use of MTBE completely and not change the oxygenate requirement, but switch to ethanol instead. According to Shaw, ethanol producers would be able to meet a sudden surge in demand because the United States has an annual production capacity of 1.9 billion gallons. Some 300 million gallons in production potential currently sit idle, he said. Moreover, several new ethanol-producing plants are under construction across the country. "Third, we have at any given time anywhere from 200 million to 400 million gallons of ethanol in storage," Shaw said. According to him, if California were to boost ethanol demand, the state's needs would be covered. Midwest ethanol producers have already been working to increase ethanol shipments to California in order to replace the MTBE component. Much of the ethanol production capacity in the United States is in Iowa, Illinois, Nebraska and other Corn Belt states. Many states have already issued statewide bans on MTBE use, and the government is said to be considering a nationwide ban on the component. The United States consumes some 3.5 billion gallons of MTBE yearly to fulfill regulatory fuel specifications, Shaw said. Since ethanol has about twice as much oxygen per volume as compared with MTBE, in order to replace MTBE completely, ethanol production would have to rise by some 2 billion gallons a year. "We would have to produce about 3.2 billion to 3.6 billion gallons of ethanol a year in order to maintain existing markets and to take over MTBE demand. That is a level that we can reach in two to three years if we make a firm commitment," Shaw said. Analysts said high corn supplies could enable bigger ethanol production. In 2000, ethanol output represented roughly 7% of total corn supplies in the United States. In 2001, that level is expected to near 8%. With 2000-01 U.S. corn carryout already forecast at an eight-year high, pumping up ethanol production with cheap grain could be an economically attractive option. Recent government programs put in place to encourage bigger ethanol and bio-diesel production also could push the trend forward. Last September, the U.S. Department of Agriculture's Commodity Credit Corp. implemented a $400 million, three-year program providing incentives to farmers to increase bio-energy production, such as ethanol. Steve Spence Subscribe to the Renewable Energy Newsletter: http://www.webconx.com/subscribe.htm Renewable Energy Pages - http://www.webconx.com Palm Pilot Pages - http://www.webconx.com/palm X10 Home Automation - http://www.webconx.com/x10 [EMAIL PROTECTED] (212) 894-3704 x3154 - voicemail/fax We do not inherit the earth from our ancestors, we borrow it from our children. -- [Non-text portions of this message have been removed] ------------------------ Yahoo! Groups Sponsor ---------------------~-~> eGroups is now Yahoo! Groups Click here for more details http://click.egroups.com/1/11231/0/_/837408/_/982465120/ ---------------------------------------------------------------------_-> Biofuel at Journey to Forever: http://journeytoforever.org/biofuel.html To unsubscribe, send an email to: [EMAIL PROTECTED]
