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Energy bill would nearly double ethanol output

Posted on: Monday, 25 July 2005, 14:49 CDT

By Tom Doggett and Chris Baltimore

WASHINGTON (Reuters) - To stretch America's gasoline supplies, a draft U.S. energy bill would almost double production of the motor fuel additive ethanol to 7.5 billion gallons a year by 2012.

The federal ethanol requirement is expected to be approved on Monday evening, when Senate and House negotiators meet to finalize additional terms of a broad energy bill.

The ethanol compromise is larger than the 5 billion gallons approved by the U.S. House, but smaller than the 8 billion gallons called for by the Senate.

Ethanol, derived mostly from corn, is a popular political cause in farm country, where it is regarded as a homegrown answer to oil imports and a boon to farm income.

It is usually blended directly into gasoline in a mix of 10 percent ethanol and 90 percent gasoline, which makes motor fuel burn more cleanly to meet federal air pollution requirements.

Ethanol is more difficult for oil companies to transport because it evaporates more quickly than conventional gasoline, requiring refiners to remove more smog-forming emissions.

On Sunday, the bill negotiators dropped a proposal for legal protection for oil refiners that make a rival fuel additive -- methyl tertiary butyl ether or MTBE.

MTBE is added to make fuel burn cleaner, but has polluted groundwater in many states. It makes water taste and smell like turpentine and is a possible carcinogen.

Rep. Joe Barton, Texas Republican, proposed creating an $11.4 billion fund to clean up MTBE contamination in return for shielding refiners such as Exxon Mobil Corp. from lawsuits. But the plan was roundly criticized by the oil industry, municipal water officials and key U.S. senators.

According to lobbyists, Barton may offer another plan that would require MTBE liability lawsuits to be reviewed by federal courts, setting a higher bar for such lawsuits to proceed.

The negotiating session on Monday night was expected to consider several important amendments to the bill.

House lawmakers must decide whether to accept a Senate proposal that 10 percent of U.S. electricity must be generated by renewable sources such as solar and wind power by 2020.

Yet to be finalized is a multibillion-dollar package of energy tax breaks and subsidies. The House tax package totals $8 billion while the Senate's is $14 billion. Both are higher than the $6.7 billion sought by the Bush administration.

White House spokesman Scott McClellan reiterated on Monday that the administration "doesn't think we need to be providing tax credits to oil companies when the price of oil is above $50 a barrel."

Bush spoke with leaders of the conference committee on Sunday, and urged them to approve a final energy package this week so it can be sent to him to sign into law by Aug. 1.

Source: REUTERS

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