Ethanol, ANWR issues remain high profile Senate priorities this month

Maureen Lorenzetti
Washington Editor

WASHINGTON, DC, Mar. 18 --Fuel ethanol's role in federal clean fuel programs and a proposal to lease a portion of the coastal plain of the Arctic National Wildlife Refuge are expected to dominate the next phase of the Senate energy policy debate, according to lawmakers, industry officials, and policy analysts.
But the ultimate fate of those two controversial issues could change depending on what gasoline prices do this spring and summer, industry officials said. If prices rise dramatically above historic seasonal norms, ANWR chances could brighten, while ethanol mandate proposals could fade.
Budget issues and campaign finance reform the week of Mar. 18 are expected to move discussion of a comprehensive energy bill off the Senate floor temporarily. Congress then takes a spring break, from Mar. 25- Apr. 5. But during that time momentum may build for Congress to agree on energy policy sooner than later if national gasoline prices continue rising.

Higher gasoline prices
According to Mar. 11 data from the Energy Information Administration, the national average of retail gasoline prices rose 8 cents/gal last week with prices slightly higher in the Midwest and the West Coast. Higher energy costs in those two politically strategic
regions 2 years ago largely spurred interest by the White House and Congress to update energy laws.
A bill passed by the Republican-led House last August includes an ANWR leasing provision but does not substantially address how to update the Environmental Protection Agency's outdated reformulated gasoline program. Lawmakers in the Democratic-controlled Senate meanwhile say they are optimistic the Senate will pass its own sweeping energy measure this spring.
The Senate bill is not expected to contain ANWR although supporters of leasing in the 1002 area of northeast Alaska insist the battle isn't over.
ANWR leasing supporter Sen. John Breaux (D-La.) predicted there were between 50 and 60 votes for his cause, although he declined to be more specific. And labor interests who were instrumental in winning an ANWR leasing vote in the House also cautioned it was premature to assume the ANWR debate was finished.
"Everyone said we couldn't do it in the House and we did it," James P. Hoffa, General President of the International Brotherhood of Teamsters said, adding that "we'll be holding members accountable" when elections happen in November. He suggested his efforts in the Senate have not been as successful because of parliamentary rules that allow "the tyranny of a few" to stall a vote.

Not enough votes
But higher fuel prices could help Breaux and other lawmakers get the 60 votes they need to ensure ANWR can be considered as part of a Senate bill. Right now however, ANWR supporters admit they don't have the votes. Privately White House officials have also signaled they are willing to accept an energy bill without ANWR in it, according to industry officials. Recent studies by EIA, the Congressional Research Service, and Democratic lawmakers haven't helped leasing supporters with their cause either.
A recent EIA report estimated that ANWR production in 2020 may only reduce oil imports 2% for example. And Senate Democratic leaders argued that the 735,000 job estimate the Teamsters used in the House to justify drilling was outdated and used unrealistic assumptions about field reserves and world oil market conditions. They said an independent analysis by various government and private economists show the possible job benefit of ANWR exploration may in fact only represent 65,000 jobs by 2020.

ANWR proponents countered that expanding domestic oil production makes good public policy even if the exact amount of jobs created through ANWR drilling may be in doubt.
"Even if those numbers are off by one-third it doesn't mean that across the spectrum it will bring about thousands of jobs," said Hoffa.

Ethanol, MTBE
The Senate bill will likely retool RFG to make it easier for states to ban methyl tertiary butyl ether from gasoline if they choose. But a controversial provision designed to triple the amount of fuel ethanol in the gasoline pool may come under increasing fire if opponents of the measure are successful in convincing the public the ethanol mandate will boost prices.
The Senate bill now has a provision blessed by major oil companies and ethanol interests streamlining clean fuel guidelines. The bill also repeals a federal oxygenate mandate for reformulated gasoline (RFG) 270 days after the bill becomes law. It also requires that, beginning in 2004, that at least 2.3 billion gal/year of renewable fuel be used nationwide. By 2010 the requirement expands to 5 billion gal/year, but the provision is written broadly, with no requirement that renewables be included in each gallon of gasoline and without restrictions on where renewables can be used. The provision also bans refiners from blending MTBE into gasoline within four years.
Not everyone approves of the RFG provision, although even opponents of the deal expect most of it to become law, either as part of the pending energy bill or attached to other legislation. Nevertheless some state officials, terminal operators, and refiners continue to warn the plan makes the gasoline supply too dependent on the fuel ethanol industry, which now only produces 1.7 billion gal/year of the oxygenate. And MTBE producers argue even if ethanol supplies are plentiful, West Coast refiners do not have enough clean fuel blend stock capacity to meet an ethanol mandate after 2006.
Recent federal and California studies also suggest the proposal, designed to triple demand for renewable transportation fuels, may boost gasoline and diesel prices to a level both consumers and politicians may find unacceptable.

Unfinished RFG business; Mtbe deadline extended
Congress may still address related proposals on RFG specific to the Northeast and California, two areas where ethanol supplies could be limited. Last week
Sen. Chuck Grassley (R-Iowa) introduced an amendment to remove California's special oxygen standard "opt out" from the RFG portion of the bill.
The Senate proposal now allows California to eliminate the RFG oxygen standard as soon as the bill becomes law in deference to state concerns over groundwater contamination from MTBE. But many states, including more than a dozen other jurisdictions that want to ban the oxygenate, must wait at least 270 days while EPA revamps RFG rules. Grassley's amendment makes California wait like the other 49 states to remove the oxygen standard.
But in light of California Gov. California Gray Davis (D) decision to delay his own state's MTBE ban by a year, the amendment may not be seriously considered, industry officials said. Refiners now have until January 1, 2004 to get rid of MTBE although ethanol supporters are urging California refiners to end the use of MTBE voluntarily by the end of this year. California refiners told the state last month it could meet the earlier deadline. However, some state officials warned the governor that to ban MTBE by 2003 would mean policy makers were risking dramatically higher fuel prices next year.

Other economic issue
The specter of higher gasoline prices in California and elsewhere is just one indication that economic issues continue to play a large part of the ongoing energy debate, even though there are signs the economy is improving. Industry officials point to the recent defeat over stricter automobile fuel efficiency standards in the Democratic-controlled Senate as strong evidence that measures that are seen as inconvenient or costly will not pass, no matter what the public policy benefit is.