Iowa Public Television

 

Ethanol could get boost from demise of MTBE

posted on March 24, 2000


ANOTHER BOOST TO FARM COUNTRY CAME THIS WEEK IN THE FORM OF A WHITE HOUSE INITIATIVE. THE DECISION, ACCORDING TO A STUDY COMMISSIONED BY THE 24-STATE GOVERNORS' ETHANOL COALITION, COULD MEAN 13-THOUSAND NEW JOBS IN THE U.S. AGRICULTURAL SECTOR, 14 ADDITIONAL CENTS TO THE PRICE OF A BUSHEL OF CORN, AND 2 TO FIVE CENTS OFF THE PRICE OF GASOLINE AT THE PUMP.

THE STUDY BUTTRESSES THE CLAIM THE ETHANOL INDUSTRY CAN BOOST PRODUCTION TO 3.5 BILLION GALLONS BY 2004. THAT'S THE ADMINISTRATION'S TARGET DATE FOR A PHASE OUT OF A PETROLEUM DERIVATIVE CURRENTLY FOUND IN 85 PERCENT OF THE NATION'S GASOLINE.

IT'S THE END OF M-T-B-E.

THE PETROLEUM BASED FUEL ADDITIVE WAS ORIGINALLY SEEN AS BENEFICIAL BECAUSE IT REDUCES FUEL EMISSIONS AND BOOSTS OCTANE LEVELS. BUT WORRIES ABOUT THE OXYGENATE AROSE WHEN GROUNDWATER IN CALIFORNIA WAS FOUND TO BE CONTAMINATED BY M-T-B-E. A STUDY REVEALED 21 PERCENT OF ALL WELLS IN AREAS THAT USE M-T-B-E HAD BEEN CONTAMINATED BY THE PETROLEUM PRODUCT.

THIS WEEK, THE U-S ENVIRONMENTAL PROTECTION AGENCY AND THE DEPARTMENT OF AGRICULTURE FOLLOWED THE LEAD OF CALIFORNIA AND ANNOUNCED PLANS TO DRASTICALLY REDUCE M-T-B-E IN THE NATION'S FUEL SUPPLY, IF NOT OUTRIGHT ELIMINATE THE PRODUCT.

THE LATEST DEVELOPMENTS ARE A SETBACK FOR THE PETROLEUM COMPANIES WHICH STILL HAVE SIGNIFICANT CAPITAL INVESTED IN M-T-B-E PRODUCTION. BUT PETROLEUM'S PAIN MAY BE ETHANOL'S GAIN. PRODUCERS OF THE CORN BASED FUEL ARE HOPING TO CAPITALIZE BY RUSHING IN AS M-T-B-E IS PHASED OUT. WITH M-T-B-E OUT OF THE WAY, NEW MARKETS WOULD OPEN UP TO ETHANOL AND LIKELY BOOST CORN PRICES. CALIFORNIA AND THE NORTHEAST ACCOUNT FOR 73 PERCENT OF THE OXYGENATED FUELS MARKET.

CURRENT LAW REQUIRES OZONE AND SMOG LADEN CITIES TO USE OXYGENATED FUEL. AN E-P-A AND U-S-D-A PUSH IS UNDERWAY TO REPLACE THAT LAW WITH A NEW REQUIREMENT TO USE RENEWABLE FUELS IN ALL GASOLINE. THE NEW REQUIREMENT COULD FURTHER BENEFIT CORN PRODUCERS.

BUT THE RENEWABLE FUELS REQUIREMENT IS MEETING RESISTANCE FROM THE PETROLEUM INDUSTRY. IT CLAIMS CLEAN FUELS CAN BE PRODUCED WITHOUT OXYGENATES AND THAT RENEWABLE FUELS WILL ONLY ADD TO THE RISING PRICE OF GASOLINE.

ALSO, CALIFORNIA IS ASKING FOR A WAIVER FROM THE OXYGENATED FUEL REQUIREMENT. IF THE WAIVER IS GRANTED TO CALIFORNIA, NORTHEAST STATES ARE LIKELY TO RAIN ON THE ETHANOL PARADE AS WELL BY ASKING FOR THE SAME TREATMENT.

ON ANOTHER FRONT SOME CONGRESSIONAL REPUBLICANS HOPE TO MAKE POLITICAL HAY OF THE RISE IN GASOLINE PRICES. OBLIVIOUS TO THE MARKET AXIOM: "THE CURE FOR HIGH PRICES IS HIGH PRICES", SENATE MAJORITY LEADER TRENT LOTT IS PITCHING THE NOTION OF A TEMPORARY REPEAL OF THE ENTIRE 18.4 CENTS-A-GALLON FEDERAL TAX ON GASOLINE IF PRICES EXCEED TWO DOLLARS A GALLON AT THE PUMP.

UNLIKE INCOME TAXES, REVENUE FROM THE GASOLINE TAX IS DEPOSITED DIRECTLY INTO THE HIGHWAY TRUST FUND. IT IS THE QUINTESSENTIAL USER FEE. THE LOTT PROPOSAL WOULD REPLACE THE LOST REVENUE WITH MONEY FROM THE BUDGET SURPLUS. BUT THE IDEA HAS RECEIVED A COOL RECEPTION FROM THE REPUBLICAN CONTROLLED HOUSE TRANSPORTATION COMMITTEE WHOSE MEMBERS THINK HIGHWAYS SHOULD BE FINANCED BY THOSE WHO USE THEM.

Tags: agriculture biofuels ethanol news renewable fuels