EPA nears fateful ruling on ethanol

April 18, 1994|By Christian Science Monitor

The Environmental Protection Agency will make a decision soon that will ripen or wither the ethanol industry indefinitely.

"The stakes here are considerable," says John Urbanchuk, vice president of AUS Consultants in suburban Philadelphia.

Under the Clean Air Act Amendments of 1990, a new formula of gasoline containing more oxygen must be sold in the nine smoggiest cities in the United States, beginning in January. These are Los Angeles, New York, Houston, Baltimore, Chicago, Milwaukee, Philadelphia, San Diego and Hartford, Conn.

Other cities that exceed the federal ozone standard may opt in. If they all do, then reformulated gasoline would account for 55 percent of national consumption. Enough cities have joined already to ensure that one in three drivers will buy reformulated gasoline.

Refiners must add an oxygenate to turn their usual brew into reformulated gasoline. Some of the choices are methanol, made from natural gas; MTBE, a methanol derivative; ethanol, made from corn; and ETBE, an ethanol derivative.

Oil companies say they want to be free to choose the most economical additive for each market and for each season. But the EPA has proposed a rule that would mandate a 30 percent share of the oxygenate market for renewable fuels, meaning ethanol and ETBE.

In announcing the proposed mandate in December, EPA Administrator Carol M. Browner said it would bring jobs and investment to farmers and reduce U.S. dependence on oil imports, while protecting the environment. Agriculture Secretary Mike Espy said the proposal demonstrates President Clinton's "strong commitment to support" ethanol and ETBE.

The EPA will decide this summer whether to modify the rule or adopt it as is, says spokeswoman Martha Casey. Among the markets for corn, only the ethanol industry will increase its demand this year -- despite the higher price that resulted from last year's flood-diminished harvest, agriculture officials say.

Ethanol-related demand was pegged at 544 million bushels, nearly 9 percent of the 1994 harvest, by AUS Consultants. If the mandate is adopted, the ethanol market will rise to 700 million bushels by 2000, according to AUS.

But if not, ethanol will "lose considerable market share," Mr. Urbanchuk says.

Plenty of folks would like the mandate dropped. Charles DiBona, president of the American Petroleum Institute, calls the ethanol mandate a "special-interest giveaway."

The Environmental Defense Fund (EDF) argues that any savings of fossil fuels from using ethanol are canceled out by the fuel consumed to grow and process corn into ethanol. Last month, 51 U.S. senators and 113 representatives urged Ms. Browner to kill the mandate.

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