Wisconsin faces major fight over plan to require ethanol in gas

Sep 25, 2005 02:00 AM

A major political fight is shaping up over a plan in the Legislature that would require all gas sold in Wisconsin to contain 10 % ethanol by July 2006, a mandate that supporters say will benefit farmers while reducing gasoline prices and dependence on foreign oil.
Democratic Gov. Jim Doyle and key Republicans in the Legislature say the state should join Minnesota, Montana and Hawaii in mandating such a requirement.
"I would just rather have the farmers of the Midwest making the profits instead of the sheiks of the Mideast," said Rep. Stephen Freese, R-Dodgeville, a sponsor of the measure.

But the push is running into intense opposition from an unlikely coalition of oil companies, the state's powerful business lobby and environmental groups usually at odds with both of them. Ethanol advocates say the mandate would reduce gas prices by about 5 cents per gallon while increasing the price of corn by 10 cents per bushel. Critics say the plan will have no effect on gas prices, but instead willlead to more smog.
Gas prices soared to more than $ 3 a gallon for the first time ever in Wisconsin after Hurricane Katrina disrupted the nation's oil supply before dropping to $ 2.72 per gallon earlier, according to the AAA.

The debate over ethanol may play out in other states as lawmakers look for ways to ease the pinch of rising gas prices. In Michigan, Democratic lawmakers proposed a similar plan in August.
In Wisconsin, a coalition of farm groups is mounting a major campaign to push the bill to approval in both chambers of the Legislature so that Doyle can sign the measure into law. They have hired former GOP state Sen. Bob Welch to lead their lobbying efforts, beginning with an informational hearing before an Assembly committee. Welch, who ran for US Senate last year as a free-market conservative, said the law is needed to stop oil companies from keeping ethanol away from consumers, a charge the companies vigorously deny.

The state Department of Natural Resources forcefully stepped into the debate earlier, warning in a report that such a mandate will "degrade air quality throughout the state." The increased use of ethanol would increase ozone levels on hot summer days, boosting emissions of nitrogen oxides by the equivalent of a large coal-fired power plant, the report warned.
Lobbyists for groups opposed to the plan have gleefully seized on the study, which predicted that manufacturers and electric utilities would face additional environmental regulation to offset the ethanol pollution.
"Legislators should read this report and then kill the ethanol mandate before it kills jobs in Wisconsin," said Scott Manley of Wisconsin Manufacturers and Commerce, the state's business lobby.

Supporters said the study was flawed, arguing ethanol would be a net plus for the environment because it reduces emissions of benzene and other toxic gases. Even Doyle dismissed the study produced by his administration.
"I think in the long run ethanol is going to be good for the economy of this state. It's going to be good for our fuel prices," he said. "And it's good for our environment."

But groups such as the Sierra Club oppose the bill, saying an ethanol mandate will lead to more pollution.
"How many times do you have (business lobbyists) and the Sierra Club agreeing on a bill?" asked Erin Roth, a top lobbyist for the petroleum industry. "That must tell you something right there. Maybe it's not in the best interest to move forward with it."

E-10, as the blend containing 10 % ethanol is known, is already on sale in the state, but accounted for 8.9 % of the gas used in Wisconsin in 2003, according to the DNR. E-10 is different than the cleaner-burning, more expensive reformulated gasoline that contains ethanol already sold in south-eastern Wisconsin due to high ozone levels. Areas of New York and California are also required to use similar gas to meet federal clean air requirements.
"We all know that there is ethanol blended into gasoline and that's good," said Caryl Terrell, director of the Wisconsin Sierra Club. "But this mandate would mean that some of the other substances that go into the blend that moderate the air pollution wouldn't be there."

Still, the mandate would be a boon to the state's ethanol industry, which has four plants in operation that produce 180 mm gallons of ethanol per year. One of the largest, Badger State Ethanol in Monroe, would consider doubling its production to 100 mm gallons of ethanol per year with the mandate, said Gary Kramer, general manager of the south-western Wisconsin plant. He said about half of the ethanol the plant produces is shipped out-of-state.
"If I don't have to ship my product clear to California to find a market for it, that would be a big benefit," Kramer said.

The plant pays farmers for bushels of corn and converts the corn starch into sugar, which is converted to ethanol. The plant sells the gas to oil companies, which blend it with regular gasoline to sell to consumers.
Companies say that the federal energy bill signed into law this summer requires refiners to double use of ethanol annually by 2012. They say a state mandate would take away their flexibility to use ethanol when it makes business sense to do so.

Kramer said ethanol makes sense as people worry about the security of the oil supply.
"I don't need a military carrier to guard my shipments," he said. "I don't need to worry about hurricanes blowing our plants away."

Source: Associated Press
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