US proposes preliminary deal on ethanol plan

Mar 01, 2002 01:00 AM

A proposal calling for major changes in the US' gasoline is being worked out in the Senate, a compromise plan that resolves long-standing differences between oil companies, farmers and environmentalists. The tentative agreement would require a tripling of the amount of ethanol to be used in gasoline, a boon to the farming industry, while it also would ban the additive, MTBE, which has been blamed for fouling lakes and streams in a number of states.
And it would end the requirement that gasoline in areas of serious air pollution contain a certain amount of oxygen, a rule the oil companies say is outdated because they can blend fuel to meet air quality requirements. While some details remained to be worked out, Senate negotiators -- and the unusual alliance of frequently feuding interest groups -- have reached general agreement on the plan, several participants in the discussions said.

The role of ethanol in gasoline and the future of MTBE, the fossil-fuel based additive that is under attack from New England to California for polluting waterways, has been the subject of intense political jockeying in Congress for years. But now, barring any unforeseen glitches, a proposal to address both issues is likely to attract broad bipartisan support when it is considered as part of a far-reaching Senate energy bill, congressional sources said.
When the government in 1995 required a minimum level of oxygen in gasoline to help the fuel burn more cleanly, most refiners turned to MTBE, although some -- largely in the Midwest -- used ethanol as an oxygenate. Farm-state lawmakers' attempts to increase the requirements for ethanol, mostly made from corn, repeatedly failed because of opposition from oil interests and the methanol industry.

Attempts to ban MTBE also has stalled, although the Environmental Protection Agency urged phasing out the additive nearly three years ago. Oil companies, fearing the growth of ethanol use, said they would not accept a ban unless the overall oxygenate requirement also was scrapped. But many environmentalists feared that an across-the-board lifting of the oxygen requirement would increase pollution.
The stalemate continued right up to last summer when attempts to include an MTBE ban and a provision for more ethanol use as part of a House energy bill never gained traction. Not so in the Senate, where Majority Leader Tom Daschle of South Dakota, a state with ethanol plants, demanded a provision boosting ethanol use from the current 1.7 bn gallons to 5 bn gallons over the next decade.

But that wouldn't fly unless the oil companies and environmentalists also got something. So the compromise also would ban MTBE in four years and scrap the requirement that gasoline contain at least 2 % oxygenate in areas with heavy air pollution -- about a third of all gasoline sold.
"Nobody's 100 % happy," said one of the participants in the negotiations, but all at once the feuding sides appear to be coming together. While Daschle's strong interest is ethanol, it is the MTBE ban that harnessed the support of two other influential senators, James Jeffords, I-Vt., and Bob Smith, R-N.H., the chairman and ranking Republican, respectively, on the Senate Environment Committee, whose states are clamouring for an end to the additive because it is polluting their water.

The Bush administration also has been eager to work out an agreement that would please two powerful constituencies, oil and agriculture. Still, some problems remain to be worked out, said several of the participants in the negotiations, speaking on condition of anonymity.
For one, the oil industry wants to make sure the ethanol requirement does not cause supply problems. One proposal is to give refiners, who don't want to use ethanol, the ability to buy credits from other refiners who use more ethanol than they would be required to use.
And MTBE makers are trying to get the government to help them shift into another field -- perhaps making another clean-air gasoline additive. After all, they argue, it is the government'soxygen requirement seven years ago that triggered their investments in MTBE.

Bill Becker, who represents state air quality control officials, said he is worried that wider use of ethanol will increase air pollution in some states where governors will find it hard to participate in a federal clean-fuel program. He said he's raised those concerns in the negotiations, but doesn't believe the issue will thwart an agreement. "There will definitely be increased pollution," he said.
But in a congressional game of horse trading, Becker has not been able to convince other environmentalists that this concern outweighs getting rid of MTBE and its pollution problems.

Source: AP Online
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