The American Petroleum Institute said that it has made "a new commitment" with fuel ethanol interests over how policy-makers should update US clean fuel rules.
"In working together, it is vitally important we recognize each other's needs. You need growth in the ethanol market and certainty about its future. We need a phase-down of [methyl tertiary butyl ether] and elimination of the federal oxygenate mandate. We both must satisfy the needs of our customers," API Pres. Red Cavaney told members of the Renewable Fuels Association at an industry conference in San Diego, Calif., Feb. 28.
Renewables agreements
API and RFA agreed that there should be no restrictions on where renewables can be used, that there be no requirement that renewables be included in each gallon of gasoline, and that refiners be able to trade, bank, and average commitments for using renewables.
API said the two groups also agreed that any renewables obligation be determined and measured on the basis of total US gasoline use.
"This reflects the fact that we are dealing with a national renewables program and that the economics are such as to effectively make it an ethanol program," Cavaney said, referring to a pending Senate Democrat energy proposal that seeks to double ethanol use this decade.
A pending energy proposal introduced by Senate Majority Leader Tom Daschle (D-SD) and Senate Energy and Natural Resources Chairman Jeff Bingaman (D-NM) includes an RFG provision that allows states to eliminate the 2 wt % oxygen mandate refiners now must follow in urban areas that violate US ground-level ozone levels (OGJ Online, Feb. 11, 2002).
Daschle instead wants a "renewable fuels standard" that would require fuel suppliers to boost the level of ethanol and biodiesel supply capacity to 5 billion gal/year by 2012 from today's 1.8 billion gal/year level.
Other issues
In addition, API said the two groups agreed on the need to continue the 1 psi Reid vapor pressure waiver for conventional gasoline blended with ethanol.
"This would provide greater flexibility and ease of use for ethanol. Moreover, we agreed on the need to repeal the federal oxygenate mandate for reformulated gasoline," Cavaney said. "Given a flexible renewables program, it doesn't make sense to maintain the rigidity of the current system by continuing the federal oxygenate mandate. To do so would likely compound problems already being experienced in dealing with the 'boutique fuel' problem."
API further agreed with ethanol interests that if Congress chooses to mandate the use of renewables, it is also appropriate for Congress to provide both industries with protection against lawsuits that might later be initiated against its members for the use of fuels and fuel additives that Congress required.
API added that it also believes there should be no federal requirement for changing the American Society for Testing & Materials standard for the Drivability Index.
In addition, the two parties agreed that the number of fuels should be reduced to address the problem of what industry calls "boutique fuels."
Under federal Clean Air Act requirements, states have created 15 distinct gasoline formulas according to regionally specific standards, each with three grades and variations under each grade for summer and winter, Cavaney said. Boutique fuels are fuels required in specific areas and not often usable elsewhere.
"Compounding the difficulty of matching specific refinery output with a special-fuel area, the transportation infrastructure-typically pipelines-must also handle heating oil, diesel fuel, jet fuel, and other products. One large pipeline owned by Atlanta-based Colonial Pipeline Co. delivers 90 different liquid fuel products-half of which exist solely to satisfy state regulatory requirements. As little as 2 decades ago, Colonial delivered just six different products," Cavaney said.
What happens next?
What happens next remains unclear, according to lobbyists and lawmakers. The Senate is expected to start debating an energy bill next week, but congressional leaders have said there is only about a 50% chance Congress can agree on a final bill. Daschle's RFG proposal may have won consensus by major oil companies and ethanol interests, but environmental groups are unhappy with the proposal, and more negotiations are expected on the clean fuels issue, knowledgeable sources said.
However, the deal between the two interest groups may help give California Gov. Gray Davis (D) the political cover he needs to delay the state's own ban on MTBE, due to begin this December, industry sources suggested.
Other controversial issues the Senate is expected to address include a proposed amendment to allow leasing of a portion of the Arctic National Wildlife Refuge and a plan to dramatically boost automotive fuel efficiency standards.
"By the way, as long as you are in the mood, we could sure use your help on the energy bill," Cavaney said. "Please ask your Senators to support the ANWR amendment…Please."
