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Posted on  

October 23, 2003

State's switch to ethanol fuels production

California's switch to ethanol as a gasoline additive is helping fuel a big boost in production beyond the traditional Midwest base, according to a new report by the California Energy Commission.

Ethanol is used as an oxygenate in California's gasoline supply, replacing Methyl-Butyl Tertiary Ether, or MTBE, which was found to pollute groundwater supplies and must be phased out by the end of the year.

With the phase-out of MTBE, California has become the largest ethanol market in the nation, according to "The 2003 Ethanol Supply Outlook For California Report," released Tuesday by the California Energy Commission. California's ethanol use is estimated to be between 760 million to 990 million gallons in 2004. The additive makes up between 5 percent and 6 percent of the state's gasoline supply.

"With New York and Connecticut both about to join California in banning MTBE, it is critical that we have sound in-depth analysis about the supply and the demand for ethanol, in California and in the nation," said California Energy Commissioner James Boyd. "California's report is the most complete assessment of the ethanol industry to date."

The latest report updates an Energy Commission survey of the ethanol industry that was conducted in 2001. The new, more detailed survey looks at current ethanol production, as well as future production from proposed facilities and from 16 plants currently under construction.

Since corn is the feedstock for almost all of the country's ethanol supply, production is concentrated in the corn-producing states of the Midwest. The report finds that an increasing number of states outside the Midwest are becoming ethanol producers as the industry rapidly expands to meet anticipated future demand. The nation's production capacity increased from 2.22 billion gallons per year in 2001 to 3.07 billion gallons in the year 2003 -- an increase of 38 percent.

The second part of the report examines the prospects for increasing ethanol production within California and lists 20 proposals under consideration.

"California has several small ethanol producers that together can supply up to 10 million gallons a year. Clearly there is a market here for additional in-state production," Boyd said. "If California can develop an ethanol industry that uses waste biomass -- rice straw, sugar cane residues, and other farm, forestry and municipal waste products -- instead of corn to produce the fuel, we can improve California's environment and create jobs in a new industry."

Today more than two-thirds of the ethanol used in California is delivered to the state by train. Rail upgrades are under way that will improve ethanol transport from the Midwest, allowing for more timely and direct distribution, the report said.

A third part of the report explores the international production of ethanol. Up to 10 percent of California's ethanol supply comes from foreign countries such as Brazil.

"While the ethanol picture looks promising for California in the short term, the Energy Commission continues to be concerned about the growing demand for gasoline in general," Boyd said. "As California's demand for gasoline grows, we become more and more dependent on imports. California already imports 10 percent of its gasoline supply. ... If demand continues to increase, we will need significant improvements to our port facilities and fuel terminals in order to keep pace with the need for additional out-of-state supplies."



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