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New Law Won't Zap Ethanol

Posted on: Tuesday, 9 August 2005, 21:00 CDT

Aug. 9--The national energy bill signed Monday by President Bush removes a long-standing rule that forced ethanol into California's gasoline tanks and irked state officials to no end.

But it won't spell the demise of the controversial fuel additive in California.

Mike Scheible of the California Air Resources Board said the state's ethanol consumption, now tops in the nation, might drop by 20 percent.

Ethanol backers disagreed, saying the legislation could mean even more ethanol, not less, will get blended into California's gas. That's because the new law requires the nation's oil refiners to double the amount of ethanol they currently use by 2012, which virtually guarantees some ethanol consumption in California.

"It translates into more ethanol use in California," said Neil Koehler, chief executive of a company that's building a $52 million ethanol-production plant in Madera.

The new law erases a federal mandate, enforced by the U.S. Environmental Protection Agency, requiring the gas sold in most of the state to contain 5.7 percent ethanol.

California officials said the U.S. rule put refiners in a bind, limiting their ability to blend gas less expensively. Industry consultants said the rule was adding as much as a dime a gallon to the cost of California gas.

The EPA has said that ethanol cleans the air, but state officials contend that ethanol's chemical properties can actually worsen air quality during hot weather.

With gas prices in California averaging $2.64 a gallon, just a fraction of a penny below the all-time high, state officials were pleased with the end of the U.S. rule, which they have long believed was the result of lobbying by Midwestern agribusiness interests.

Gov. Arnold Schwarzenegger, reacting to Bush's bill-signing, said the removal of the ethanol requirement is one of "many victories for California" contained in the new law. He also praised the law's support for alternative energy sources.

State officials for years have been fighting the ethanol requirement, which applied to areas of the country with worse-than-usual air pollution. The EPA consistently turned back California's requests for an exemption, most recently on June 2.

The new law calls for nationwide use of ethanol to nearly double, to 7.5 billion gallons a year, by 2012.

"It locks in ethanol as an important piece of the national fuel supply," said Matt Schmitt of Calgren Renewable Fuels, a company building an ethanol plant in Pixley this fall. "What it means for California is a little trickier."

California is expected to consume 1 billion gallons of ethanol this year. Because the state is such a heavy ethanol user -- sopping up one-fourth of the nation's supply -- it's certain that the state will take up a big portion of the 7.5 billion gallons.

Currently, ethanol use is mainly confined to California, New York and a few Midwestern states. Under the new law, the ethanol use could spread to all 50 states.

Scheible, the Air Resources Board's deputy executive officer, said California uses about 11 percent of the nation's gasoline. If, under the new law, it uses 11 percent of the nation's ethanol, that would translate to about 825 million gallons a year -- or 20 percent below this year's consumption.

State officials say reduced ethanol use won't increase pollution because they say California refiners can meet federal clean-air standards without the additive.

In addition, the new law could give California refiners leeway as to when they want to use ethanol. The EPA had required its use year-round.

"Refiners will now have the flexibility ... of using ethanol when it makes economic sense," said Joe Sparano of the Western States Petroleum Association, which represents California refineries. "That could be more often or it could be less often."

Ethanol backers in California see the energy bill as a boon to their young industry. A group in Goshen is nearing completion on the first large-scale ethanol plant, while the Pixley and Madera plants are about to start construction.

"We should be pouring cement this week," said Koehler, chief executive of Pacific Ethanol Inc., the company behind the Madera plant.

The ethanol debate in California started when a 1990 federal law required that gasoline sold in highly polluted regions be blended with one of a family of additives called oxygenates. California picked an oxygenate known as MTBE but banned it after it was found to contaminate groundwater. MTBE was replaced with ethanol.

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Source: The Sacramento Bee

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