Senate Bill to Boost Ethanol Use in Gasoline Gains

A measure that would require a nationwide increase in the use of ethanol in gasoline gained momentum in the Senate on Friday, despite warnings it could lead to gasoline price spikes and supply shortages in California.

The measure, expected to be included in a comprehensive energy bill before the Senate, is one of the few issues in a contentious debate on energy policy that has brought together Democratic and Republican lawmakers. That is due in part to the support for ethanol, a form of alcohol made from corn and other crops, in the politically important Corn Belt.

California officials, however, are worried that the ethanol requirement would lead to a second energy crisis in the state because of logistical hurdles in bringing hundreds of millions of gallons of ethanol from the Midwest to California.

Feinstein Sees Spike in Prices

Sen. Dianne Feinstein (D-Calif.) warned that it could subject the state to price volatility in the ethanol market in the same way it was forced to buy electricity at sky-high prices last year.

The ethanol industry has said it would have enough ethanol to meet California’s demands. And oil industry officials said they foresee no significant problems for California and other states in meeting the mandate.

A bipartisan group of senators announced agreement Friday on the measure, which calls for tripling the use of renewable fuels, such as ethanol, in gasoline to 5 billion gallons by 2012. The provision also would phase out over four years the use of methyl tertiary butyl ether, or MTBE, which makes fuel burn cleaner but has been found to contaminate ground water. About 1.7 billion gallons of ethanol are now used in gasoline, mostly in the Midwest, to help fuel burn cleaner.

Endorsed by the Bush administration and Senate Majority Leader Tom Daschle (D-S.D.), the measure is virtually assured of Senate passage. Whether it becomes law is uncertain because of sharp differences between the Republican-controlled House and the Democratic-run Senate on other aspects of the energy bill.

Differences Center on Fuel Economy, Drilling

Democrats want tougher fuel-economy standards for sport-utility vehicles and other cars and trucks, which Republicans generally oppose. Republicans are pushing for more drilling in the Arctic National Wildlife Refuge, which Democrats generally oppose.

Those differences could lead to a stalemate that kills the entire bill.

The ethanol measure would change a key 1990 amendment to the federal Clean Air Act requiring gasoline sold in the nation’s smoggiest regions to contain an “oxygenate.” Refiners have generally used MTBE.

In California, Gov. Gray Davis in 1999 ordered that MTBE be phased out by Dec. 31, 2002. With other states also moving to end the use of MTBE, farm-state lawmakers saw an opportunity to promote ethanol as a substitute.

Davis, supported by oil companies, has contended that California can produce gasoline that meets clean-air standards without using MTBE or ethanol. He tried to get a waiver from the Bush administration from having to use either, but the Environmental Protection Agency rejected the request last June.

A spokesman for the governor said Friday that Davis is concerned about the problems involved in bringing ethanol into California and storing large quantities of it. The fuel additive cannot be shipped by pipeline. It must be sent by ship, rail or truck from its Midwest producers. Ethanol also requires its own storage tanks.

Ethanol advocates said the measure proposed for the Senate bill includes protections from price spikes and supply shortages. For instance, it would allow the EPA administrator to reduce the ethanol mandate if price and supply problems arise.

Feinstein called the proposal objectionable because California does not need large quantities of ethanol to meet clean-air standards. “We will be forced to use a huge amount of ethanol that we don’t really need,” she said.

Phil Schiliro, chief of staff for Rep. Henry A. Waxman (D-Los Angeles), agreed with that assessment and added: “So if this is an economic assistance program for the Midwest, call it an economic assistance program. And then if that’s what it is, provide economic assistance to California if gas prices are going to go up as a result.”

Senators endorsing the ethanol mandate said it would reduce U.S. dependence on foreign oil by 500 million barrels over the next decade, do it in an environmentally friendly way and boost U.S. farm income.

Despite the show of unity on ethanol, Energy Secretary Spencer Abraham put in a pitch for President Bush’s call for more domestic energy production.

“While we were glad to see the Senate moving forward in this area, it’s important to emphasize that the use of renewable fuels is only one part of a national energy policy,” he said. “A national energy policy must be balanced and must include energy efficiency, energy conservation and energy production.”

In its first week of debate on the energy legislation, the Senate mainly dealt with provisions that enjoyed bipartisan support.

These included a pipeline safety measure approved Friday that calls for better training of inspectors and raises penalties for safety violations.

But the debate is expected to heat up considerably next week when lawmakers take up a proposal to raise fuel-economy standards to 36 miles per gallon by 2015, the biggest increase since the fuel-economy bill was signed into law by President Ford.

The tougher standards are opposed by the Bush administration, the auto industry and lawmakers from vehicle-producing states.

Additionally, both sides in the dispute on oil drilling in the Arctic refuge are threatening to filibuster over the issue--a tactic that could doom efforts to pass the first comprehensive energy legislation in a decade.