WATCHING GOVERNMENT METHANOL/ETHANOL COMPROMISE

The Clinton administration has decided on a compromise to resolve the controversial issue of requiring corn-based ethanol in U.S. reformulated gasoline (RFG).

The Environmental Protection Agency will not require ethanol to be in the 1995 formula for RFG, which must be used to lower vehicle emissions and smog in nine Urban areas.

Many other cities and states are expected to "opt into" the RFG program, which is required for the New York, Los Angeles, Baltimore, Chicago, Hartford, Houston, Milwaukee, Philadelphia, and San Diego areas.

BACK TO REG-NEG FORMULA

EPA is reversing President Bush's fiat, issued during his reelection campaign, giving ethanol a 1 psi waiver from the Clean Air Act's RFG requirements (OGJ, Oct. 12, 1992, p. 36).

The oil industry soundly criticized that order, and EPA now will return basically to the RFG formula set by a regulatory- negotiating (reg-neg) panel of industry, environmental, and governmental representatives in 1991.

The RFG rule will require an average 22% reduction in volatile organic compounds and a 29% cut in toxic emissions. It also mandates a nitrogen oxide reduction of 5.5%/gal, or 6.8% if refiners average it over fuels, in 2000.

Urvan Sternfels, National Petroleum Refiners Association president, said EPA wanted a much deeper nitrogen oxide reduction, but industry argued any cut was against the spirit of the reg-neg agreement.

"We pushed very hard to eliminate the nitrogen oxide reduction," Sternfels said. "I think we were successful in carving some of this off."

Under the Clinton administration's compromise, EPA is proposing a separate rule requiring that 30% of the compounds used to add oxygen to RFG come from renewable sources such as ethanol. A Jan. 14 hearing is scheduled on the proposal.

The mandate for a 30% average would ensure ethanol use in winter months and ethyl tertiary butyl ether use in the summer to lower gasoline volatility.

That approach would hurt the methanol industry and the increasing use of methyl tertiary butyl ether in gasoline.

The administration said the 30% mandate could increase ethanol use as much as 60%, giving farmers a 25 million bu/year market for corn. It also will help Archer Daniels Midland Co., the nation's largest ethanol producer.

EPA said the order will brine, jobs and investment to farmers and reduce U.S. dependence on imported oil.

ETHANOL ADVANTAGE

Sternfels said U.S. refiners will strongly oppose "what appears to be a very blatant political attempt to give the ethanol industry an advantage, through government fiat, which they don't have in the marketplace under their own merit."

He said the rule would be very costly for refiners and add logistical difficulties, too. "We already have a lot of problems with the RFG rule's requirement for segregating different types of gasoline, and this adds another layer to that regulatory quagmire."