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Posted on  

August 2, 2001

Calif. Eyes Ethanol From Brazil

State officials in California are looking at the possibility of getting ethanol from Brazil, fearful that prices for the product in the Midwest may be too high.

``It seems like good business sense to look at all our supply options,'' said Pat Perez, manager of the fuels office of the California Energy Commission. ``The more suppliers you have, the more competitive the market.''

The notion of importing ethanol from Brazil perplexes the Renewable Fuels Association, which represents the U.S. ethanol industry.

``What they're doing is discouraging an industry in their own state, and it just doesn't make sense,'' said Bob Dinneen, RFA president.

Congress has given U.S. ethanol a tax break to encourage domestic production, he said.

``It's inconceivable to me that Brazilian ethanol would ever be less expensive ... `` Dinneen said.

California has set a 2003 deadline to phase out use of MTBE, a petroleum-based fuel oxygenate - an oxygenate makes gasoline burn cleaner to reduce air pollution - found to be contaminating the state's ground water.

The state sought a waiver from federal clean air rules so it would not be forced to replace MTBE with ethanol, but the exemption was denied by the Bush administration.

Once MTBE is phased out, Perez said, California's demand for ethanol will jump to as much as 950 million gallons a year.

He said Brazil is the world's largest supplier of ethanol, and California officials hope having more than one supplier would help keep prices down.

``It's just, basically, at the discussion stage,'' Perez said. ``No commitments with Brazil.''

``Our preference would be that the domestic market would be able to supply our demand for ethanol,'' said Winston Hickox, secretary for the California Environmental Protection Agency. ``But if there's a problem, we feel that it's prudent to be thinking of other options.''

One option is right in California's back yard - the state ought to be building its own ethanol plants, Dinneen said.

``They could produce 500 million gallons of ethanol from feedstocks right there - feedstocks like rice straw, which is a waste product right now,'' he said.

``That's an agenda that good for consumers and air quality and good for energy policy,'' Dinneen said.

California's ethanol demand in 2003 is expected to be 600 million gallons, he said. Right now, he said, the U.S. ethanol industry has a total capacity of 2 billion gallons, and it's growing all the time.

While California officials have voiced fears that Midwest ethanol producers will raise prices, or that there will be supply or transportation problems, Dinneen said they are unfounded.

``There is a fear, and it's a fear based on ignorance,'' he said.

Most of the Midwest producers, Dinneen said, are farmer-owned cooperatives, such as Sunrise Energy in Blairstown. By contrast, 90 percent of the MTBE used in California comes from Saudi Arabia, he said.

As for transportation worries, ``we get ethanol to Alaska in January. If we're able to get it to Alaska, we can probably get it to California,'' he said.

``California doesn't have much trouble getting their strawberries, their avocados, their lettuce, to the Midwest in the winter months,'' he added.

Hickox said the possibility of importing foreign ethanol is not meant to slight Midwest producers. Ethanol imports would create competition that would keep supply up and prices down, he said.

``Our only concern is the availability of that commodity and what it will do to pricing,'' he said.

Lucy Norton, marketing director for the Iowa Corn Growers Association, said there is plenty of ethanol available.

``It is needless for California to be looking outside of this country,'' she said. ``Looking at Brazil is really doing a disservice to California consumers.''
 

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