As expected, President Bush has granted ethanol a I psi waiver from the Clean Air Act's requirements for gasoline.
The action, which could double U.S. ethanol sales to 1.5 million gal/year by 1997, is widely seen as a political move to gain support in the November elections from grain-growing states.
The administration estimated the action will cost refiners $25 million/year and increase gasoline prices by 0.3 cents/gal in the markets involved.
Bush said, "Clean burning ethanol can help reduce pollution. It is domestically produced. It is renewable. And this waiver will allow ethanol to participate in both the summer and winter programs required under the Clean Air Act."
INDUSTRY OBJECTS
American Petroleum Institute Pres. Charles DiBona said, "This politically motivated decision further rewards the highly subsidized ethanol industry, whose profits are at a 2 year high, and hurts oil industry workers, whose numbers has declined by 450,000 over the last 10 years. It does absolutely nothing to improve air quality."
DiBona said the action will increase refiners' costs in producing gasoline and raise fuel prices for consumers. He predicted the waiver will cost the U.S. more than $250 million/year--10 times the administration's estimate.
"This is a mandate on the oil industry to spend millions of dollars more to make a base fuel that will offset the polluting effects of ethanol, which will be blended with it, but still produce a final product able to meet CAA standards," DiBona said.
"We believe the action is of doubtful legality under the provisions of the 1990 CAA amendments. It certainly violates the regulatory negotiation agreement reached by the Environmental Protection Agency with the petroleum industry, environmental groups, state and local air quality regulators, and other organizations, including the ethanol industry.
"This deal raises extremely serious enforcement concerns and will require a complete reevaluation of the elements of the compliance enforcement program outlined in the reg-neg agreement."
Earlier, API, the Natural Resources Defense Council, and others complained that an ethanol waiver would violate the reg-neg pact, which the administration and the ethanol industry had endorsed (OGJ, Sept. 14, p. 33).
The National Corn Growers Association said its studies show 10% ethanol blended fuels performed almost identical to methanol based fuel additives in terms of ozone reduction.
It said the change will increase corn demand, "and the jobs and income that will result from an expanded ethanol industry will flow throughout the rural economy."
WHAT IT DOES
The 1 psi waiver will be issued for northern cities that are required to participate in the reformulated gasoline program or choose to do so. Gasoline blended with ethanol will be limited to 30% of the market in northern cities.
In southern cities that elect to participate, states may choose between an ethanol waiver or the previously planned reformulated gasoline program.
The administration said any increase in smog forming emissions that result from increased ethanol in the gasoline pool will be offset by a requirement that the volatility of all gasoline in those cities be reduced 0.3 psi to 7.8 psi. Under current rules, 7.8 psi Rvp gasoline is sold in southern cities in the summer months.
States may choose to apply the waiver to a greater percentage of the market if it is offset by compensating Rvp reductions in gasoline.
In other cities that opt in to the reformulated gasoline program with ethanol, the waiver will apply to 20% of the market and volatility of gasoline will be cut to 7 psi from 7.2.
California is expected to require marketing of 7 psi reformulated gasoline beginning in 1996.
The administration said it will support legislation to make the benefits of the blender tax credit nontaxable for ethyl tertiary butyl ether (ETBE) and other ethers derived from ethanol. The aim is to help ethanol compete better with other oxygenates in the long term.
The administration also said it will ensure that 39 cities will participate in the winter oxygenated fuels program this year and limit the ability of states to discourage ethanol use by capping the level of oxygenates.
EPA is to issue a proposed reformulated gasoline rule by November to provide refiners the option of using the complex model, which will give marketers a range of options for meeting CAA pollution reduction requirements. The final rule will be published in March 1993.
The complex model will allow reductions in sulfur, olefins, T90, and other chemicals that result from ethanol use to be considered in judging the potential of ethanol to reduce smog.
The final rule also will contain toxics and nitrogen oxide standards that are oxygenated neutral.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
