Senators Daschle and Lugar Introduce Legislation To Grow Demand for Ethanol

Autoparts Report,  June 2, 2000  

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Legislation introduced by Senator Tom Daschle (D-SD) and Richard Lugar (R-IN) is designed to boost demand for ethanol. This bi-partisan effort is expected to open up considerable new markets for ethanol while protecting the environmental gains brought about by the reformulated gasoline (RFG) program.

Under S. 2503, AThe Renewable Fuels Act of 2000", states will have the authority to regulate Methyl Tertiary Butyl Ether (MTBE) and to opt-out of the RFG oxygen content requirement.

To meet this requirement, states must show compliance with controls on underground storage tank leakage, anti-backsliding protection and credits for carbon monoxide that protects the ethanol market in Chicago and Milwaukee.

"The most exciting part of this legislation is the requirement that a certain level of all gasoline sold in the United States be renewable. This holds the potential for an increase in the yearly demand for ethanol from around 1.8 billion gallons today to over 5.4 billion gallons by the year 2010. This growth in demand will increase corn utilization for ethanol from 600 million bushels today to over 2 billion bushels by 2010," said Gary Goldberg, Chief Executive Officer of the American Corn Growers Association (ACGA).

Congress and the Administration are under increased pressure by California and other states to end the oxygen requirement altogether and ban the total use of MTBE. Many believe either EPA or Congressional action is near, making the waiving of the oxygen requirement inevitable.

Knowledgeable people within the ethanol community believe it would be impossible to sustain the oxygen requirement, initiate a nationwide ban on MTBE, and maintain the 5.4-cent federal excise tax exemption. These actions would lead to efforts to end the exemption if a perceived ethanol mandate were in effect.

"The single most important element to growing the demand for ethanol is to maintain the excise tax exemption. This allows ethanol to be cost-competitive with gasoline, encouraging it's continued growth," said Goldberg. "It is unfortunate that efforts by the ACGA two years ago to make the exemption permanent were ignored by certain other ethanol advocates."

The ACGA has been critical of past efforts to grow one segment of the oxygenated fuels industry at the expense of another. These moves have now led to the likelihood that the oxygen requirement will be waived altogether. With empty promises of a growing ethanol market in California and an arrogance that ethanol can achieve Congressional support for a mandate, the whole industry is in a state of confusion.

The legislation by Senators Daschle and Lugar is targeted at protecting ethanol's future, protecting the environmental gains achieved through the use of oxygenated fuels, and bringing some semblance of order to the oxygenated fuels industry. Other industry officials are also lining up behind S. 2503. Jason Grumet, Executive Director, Northeast States for Coordinated Air Use Management (NESCAUM) states that if options center on an ethanol only approach, NESCAUM would "pursue all available options to avoid a summertime ethanol mandate," and "we believe that a properly designed renewable fuels standard is far preferable to maintaining the oxygen mandate."

"Under S. 2503, smaller farmer-owned ethanol production facilities will be able to compete with the larger plants on a level playing field. This will assure that much of the new production to meet the growing demand will benefit farmers directly. After all, corn growers must see the advantages to increased ethanol demand through higher corn prices and a direct stake in ethanol production," added Goldberg.

COPYRIGHT 2000 Ron DeMarines
COPYRIGHT 2008 Gale, Cengage Learning