Oxygenated Fuels Association: 'Big Ethanol's' Latest Bid To Capture California Reformulated Gasoline Market Runs Out of Gas; Problems Associated With Increased Ethanol Use Begin to Be Understood

    WASHINGTON, Jan. 31 According to a recent Reuters news
article, a major California refiner has put its plans to switch from MTBE to
ethanol on hold citing concerns over ethanol.  According to Reuters, Tosco
Corporation, which operates 1,600 Union 76 and Circle K retail outlets in
California, decided not to pursue its planned phase out of MTBE because of
well-established problems with blending ethanol into gasoline in the summer
months.
    Tosco's decision comes as numerous questions concerning ethanol's cost,
availability, reliability, effect on the environment and impact on the
California gasoline pool are increasingly beginning to be raised.  "The
bottom-line is that any new gasoline blending component should be thoroughly
studied and these unresolved questions should receive concrete answers before
any drastic changes are made," said Tom Adams, President of the Oxygenated
Fuels Association (OFA).
    Yet, despite these unanswered questions and Tosco's recent actions, Eric
Vaughn of the Renewable Fuels Association (RFA) (a Washington, D.C.-based
lobbying organization funded by large corporate ethanol interests) continues
to push for a rapid integration of ethanol -- a chemical listed as a known
human carcinogen by the federal government -- and insists, "(t)he switch from
MTBE to ethanol has begun and is going smoothly."
    "Ethanol's shortcomings relative to MTBE really boil down to
effectiveness, cost and supply," said Adams.  "Clearly, California is the
nation's largest gasoline market and, despite claims by RFA to the contrary,
there doesn't appear to be enough ethanol available to satisfy that market."
    As an example, Adams cites a January 10, 2001 article in the Omaha World-
Herald that reports that supplies of ethanol actually ran out in Iowa over the
holidays.  According to the article, this is "essentially akin to Saudi Arabia
running out of oil."  Adams also noted that the majority of today's ethanol
supplies are essentially produced by one company, thus placing California in
the precarious position of depending on one source for a steady supply of
ethanol to the state.
    MTBE has been the workhorse of California's cleaner-burning gasoline
program.  And, because of its lower volatility relative to ethanol, MTBE can
be used in both the summer and winter months to help reduce auto emissions.
Ethanol, on the other hand, evaporates more readily thus actually contributing
to smog formation during the summer months.  "California could be facing a
roller coaster ride with regard to the price and availability of gasoline
should ethanol be forced into use, not to mention backsliding with regard to
California's air quality gains," Adams said.  "We urge California to carefully
examine the true impact of ethanol on the state before decisions about the
future of MTBE are written in stone," cautioned Adams.
    Close examination of the questions surrounding ethanol are doubly
important given new evidence demonstrating that charges linking MTBE to
widespread water contamination are overstated and that actual detections of
MTBE in groundwater are in decline.  This is primarily the result of the great
strides California has achieved in the enforcement of regulations relating to
leaking underground gasoline storage tanks.  Further, at a recent meeting of
the European Commission Working Group on the Classification and Labeling of
Dangerous Substances, it was decided that the vast amount of scientific data
available on MTBE did not indicate a possible carcinogenic hazard to humans
and therefore the group declined to classify MTBE as such.
    Some observers see a parallel between California's current electricity
woes and the potential for a similar crisis to occur on the gasoline front
should MTBE be forced from the marketplace.  "Can California afford to
eliminate a gasoline blending component that represents 4% of the state's
gasoline pool on an annual average and 9% of the gasoline pool during the
summer driving season?" asks Adams.  Adams points out that relying on only the
promise of an adequate supply of ethanol has the potential to cause price
spikes at the pump as supply falls short of gasoline demand.  "To add insult
to injury, Californians could end up paying more at the pump in return for
dirtier air," he added.  Adams points to a January 30, 2001 editorial in the
Contra Costa Times forecasting a 6 to 7 cent per gallon increase should
ethanol replace MTBE.
    Other concerns over ethanol abound.  Unlike MTBE, ethanol cannot be
shipped via pipeline making what ethanol that is available to California
difficult to transport long distances.  "The infrastructure just isn't there,"
says Adams.  He notes that a product that is ostensibly used to help reduce
auto emissions would likely result in an overall increase in truck traffic on
the highways in order to move ethanol to blending terminals.
    In addition, ethanol receives a 53 cents a gallon taxpayer subsidy.  In
the case of one ethanol giant, according to author James Bovard in a Cato
Institute Policy Analysis paper, "every $1 of profits earned by its ethanol
operation costs taxpayers $30."  Remarkably, this subsidy adds millions of
dollars to the bottom-line of a handful of giant corporate ethanol interests
who control the lion's share of the existing ethanol market.
    "RFA takes great pains to avoid discussing this taxpayer hand-out," said
Adams.  "In all the rhetoric surrounding claims that ethanol is a viable
alternative to MTBE, rarely does the existence of this 'economic crutch' come
up."
    In addition to propping up the ethanol market, the subsidy also takes a
huge bite out of the federal Highway Trust Fund, a fact cited by ethanol
critics such as the American Road and Transportation Builders Association and
the Boilermakers union.  "These groups know firsthand that ethanol's windfall
comes at the expense of needed repairs and construction for our nation's
transportation infrastructure," Adams added.
    "Clearly, in California's rush to eliminate MTBE, key facts concerning
ethanol as an 'alternative' are in danger of being overlooked," Adams
stressed.  "The key question remains -- if California is moving away from MTBE
what, exactly, is the state moving toward?  Can Californians really afford not
to know?"