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March 5, 2002

Ethanol industry pushes MTBE ban

By Frank Green
UNION-TRIBUNE STAFF WRITER

CORONADO – Ethanol industry executives meeting here last week put the full-court press on Gov. Gray Davis to stick with plans to ban an environmentally hazardous additive from the gas supply by the end of the year.

Replacing methyl tertiary butyl ether, or MTBE, with ethanol "is a win-win-win situation that's good for the economy, the environment and national security," Brooke Coleman, director of the Renewable Energy Action Project, told several hundred delegates at the Renewable Fuels Association gathering at Loews Coronado Bay Resort.

Coleman then exhorted them to call Gov. Davis directly to deliver the trade group's pro-ethanol message.

As he talked, the governor's Sacramento office phone number flashed on two large screens flanking him.

The RFA is a trade group comprised of about 200 members, many of them farmers, producers and suppliers based in the Midwest, where most of the corn-based gasoline additive is manufactured.

Annoyed by announcement

They have been miffed at Davis since his announcement last week that he would decide within 40 days whether to delay the ban on MTBE until 2005.

He also is seeking a two-year exemption from proposed federal rules that would require a 2 percent mix of the corn-based additive ethanol in all gasoline nationwide later this year.

State officials said yesterday that an extension of the ban would give refiners time to upgrade facilities and install new ethanol tanks at terminals, where the additive would be mixed with unblended gasoline.

They also questioned whether the logistics were in place to transport adequate supplies of ethanol from the Midwest.

The extension "would help avoid the shock of gas shortages and price spikes from the huge flood of ethanol that would hit all at once," said William L. Rukeyser, assistant secretary of the California Environmental Protection Agency.

Rukeyser estimated that California would need a steady supply of between 750 million to 900 million gallons of ethanol a year when MTBE is discontinued.

A study commissioned by the California Energy Commission has estimated that removing MTBE now would make the market increasingly vulnerable to supply disruptions such as refinery outages, and that prices could jump to as much as $4 a gallon.

But RFA officials said that the ethanol industry has added 1 billion gallons of annual production capacity in the last three years specifically to service the state.

In an address to the conference Thursday, RFA President Bob Dinneen referred to a U.S. Department of Energy report released last month that concluded that there are no transportation barriers to ultimately meeting market demand in the United States and California of 5 billion gallons a year.

"Yes, Gov. Davis, farmers in the Midwest do know the way to San Jose," Dinneen said.

Davis signed an order three years ago requiring that refiners remove MTBE from the state's fuel supply after studies concluded that the additive had polluted water supplies in the state and that it was potentially carcinogenic.

But eliminating the additive, which is used to boost the oxygen content of gasoline to curtail air pollution, would cut fuel supplies in the state by up to 10 percent – the amount of MTBE that would be removed from the specially formulated gas sold in California, according to the state study.

Meanwhile, a proposal was being worked out in the Senate calling for major changes in the nation's gasoline, a compromise plan that resolves long-standing differences between oil companies, farmers and environmentalists.

Plan's provisions

The tentative agreement would require a tripling of the amount of ethanol to be used in gasoline, ban MTBE in four years and scrap the requirement that gasoline contain at least 2 percent oxygenate in areas like California with heavy air pollution.

Still, some problems remain to be worked out, said several of the participants in the negotiations, speaking on condition of anonymity.

For one, the oil industry wants to make sure the ethanol requirement does not cause supply problems.

One proposal is to give refiners, who don't want to use ethanol, the ability to buy credits from other refiners who use more ethanol than they would be required to use.

And MTBE makers are trying to get the government to help them shift into another field, perhaps making another clean-air gasoline additive.




 

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