Imagine this: The U.S. Secretary of Energy declares support of a program that would raise prices of oil products and take money from the U.S. Treasury in order to raise the incomes of oil producers. Sound funny? It should. It will never happen.
Now consider this: Agriculture Sec. Mike Espy, declaring support of the Environmental Protection Agency's proposal last month to require ethanol in gasoline, said, "One of my top priorities is improving farm income, and this initiative will do just that."
If farmers' incomes can be a national priority, why can't oil producers' incomes be one, too? Just a thought.
REDISTRIBUTING WEALTH
A larger point is that the EPA is putting political interests above the energy, environmental, and economic issues created by requirements for reformulated gasoline. Those issues are extremely complicated and involve important national concerns. Now EPA wants to turn their source, the Clean Air Act amendments of 1990, into a vehicle for the redistribution of wealth favoring, it must be added, pet constituencies.
EPA seeks comments on a requirement that 30% of the oxygenates in reformulated gasoline which must be sold in areas with chronic ozone pollution beginning in 1995 come from renewable sources. That means ethanol or its derivative, ethyl tertiary butyl ether (ETBE). Why the mandate? In the part of the press material best summarizing its rationale, EPA says this: "Expanding the use of renewable fuels can help clean up the air, cut dependence on foreign oil, create investment and jobs in America, reduce primary energy use by 20% or more as compared to nonrenewable oxygenates, and lower emissions of harmful greenhouse gases." And, of course, it will improve farm income, including profits of Archer Daniels Midland Co., the politically influential agricultural giant that accounts for most of the ethanol produced in the U.S.
EPA's promises about ethanol and ETBE in gasoline are wishful. As the agency notes, ethanol raises gasoline volatility and increases summertime ozone pollution, hardly a way to "help clean up the air." And production of ethanol and ETBE can be seen as reducing energy use only if certain processes, such as growing corn, are ignored.
To resolve ethanol's ozone disadvantage, EPA would require that ETBE, which doesn't raise gasoline volatility, replace ethanol during summer. That sounds simple enough. But it will further push up the already stratospheric costs refiners face in meeting federal mandates for oxygenated and reformulated fuels. Ultimately, of course, consumers will pay the bill.
PAYING TWICE
In fact, they will pay twice: once as consumers forced to buy something other than the most efficient fuel and again as taxpayers. Ethanol and ETBE wouldn't exist as gasoline additives without generous federal and state tax credits. They are commercially inferior to other substances with comparable oxygen contents and octane values. Increasing their use will reduce government revenues, which should be no small concern to a government with budget problems. Yet EPA's proposal for renewable oxygenates doesn't mention the ethanol tax subsidy.
It's easy to dismiss as political salesmanship the EPA's stretched claims about ethanol's environmental and conservation benefits. The same goes for facile claims that forced use of noncommercial fuels would raise investment and create jobs. But silence on ethanol's tax subsidies is inexcusable deceit. EPA's initiative should be viewed with great suspicion until someone in government decrees that farm income will come from feeding the nation, not feeding off it.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
