April 19, 2005 in Business

Political support grows for ethanol

Associated Press
 

WASHINGTON — Corn-based ethanol is being pumped into more gas tanks every year, and farm-state senators and a majority of governors want an even greater flow. They say an energy bill Republicans are pushing through the House this week does not go far enough to replace foreign oil with homegrown ethanol.

The legislation would require refiners to use 5 billion gallons of corn-based ethanol a year by 2012, about 20 percent more than the industry expects to produce this year.

But governors from 30 states, in a recent letter to President Bush and members of Congress, urged lawmakers to boost the requirement to 8 billion gallons a year and provide tax breaks and other federal help to spur production from non-corn sources including grasses, wood chips and even garbage.

Rising oil imports are a major risk to the nation’s energy, economic and environmental security, the governors wrote, adding that expansion of ethanol would be “the safest and cheapest way to mitigate these risks.”

Transportation accounts for more than half of the U.S. thirst for oil, about 56 percent of which comes from imports, a percentage that is expected to be well over 60 by 2012.

Bills were introduced in the Senate and House last week calling for the requirement of 8 billion gallons. An attempt is expected to be made to change the energy bill to reflect the higher number when it comes up for House debate on Wednesday, although prospects of doing so is uncertain.

Almost all of ethanol now produced comes from corn. A federal mandate for refiners to more than double its use over the next seven years would be a major boon to farmers. While non-corn ethanol from various biomass sources is widely talked about, a practical and cost-effective process for doing so is still years away.

A coalition representing farmers, petroleum and environmental interests generally agree agreed on language that would require refiners to use more ethanol as a gasoline additive, replacing a petroleum-based oxygenate, MTBE, which is being phased out because it has been found to contaminate drinking water.

New York, Connecticut and California banned MTBE in early 2004, resulting in a surge in ethanol demand and production. Ethanol production more than doubled during the last five years with dozens of new plants being built. About 4 billion gallons of ethanol are expected to be produced this year, compared to 1.5 billion gallons annually a decade ago, according to the industry.

“We’ve proven we can grow rapidly. We’ve proven we can supply the market,” says Monte Shaw, a spokesman for the Renewable Fuels Association, which represents ethanol producers. The group has vowed to push Congress to adopt “the most aggressive” ethanol proposal possible in energy legislation.

A requirement for 8 billion gallons a year has more than 20 sponsors in the Senate and about the same number in the House.

While ethanol has widespread support among both Republicans and Democrats in Congress as well as at the White House, the corn-based fuel also has its detractors, among them lawmakers from California and the Northeast. They have argued a mandate to use ethanol isn’t needed because refiners can produce gasoline that meets clean-air requirements without it or MTBE. They fear requiring ethanol, which is largely produced in the Midwest, will add to fuel costs where it is not widely produced.

“It’s nothing more than a giveaway … nothing more than a welfare program” for farmers, Rep. Eliot Engel, D-N.Y., said as he tried to strip the ethanol mandate of 5 billion gallons from the House energy bill in committee last week. His effort was easily defeated.

Increasing the requirement beyond 5 billion gallons a year may be just as difficult.

The higher number is opposed by both Majority Leader Tom DeLay and Rep. Joe Barton, both of Texas. Barton will manage the energy legislation on the House floor, beginning Wednesday. The oil industry also has vowed to vehemently oppose any requirement beyond what’s already in the bill.

“It will drive up costs, have minimal affect on petroleum imports, and force ethanol into areas where it is uneconomical to be used,” Ed Murphy, director of refining and marketing at the American Petroleum Institute, said in an interview.

Ethanol’s traditional farm-state supporters, however, have been joined by a number of national security advocates who see the domestically produced fuel as a way to curtail the reliance on oil imports. Former CIA Director James Woolsey, for example, has been a big booster of developing ethanol from non-corn sources.

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