The nation's fledgling ethanol industry is readying for expanded production following the Environmental Protection Agency's June 12 denial of California's request for a waiver from the federal government's reformulated gasoline (RFG) oxygen requirement.

U.S. grain producer associations, which fought the waiver request, have commended EPA's action.

“After more than two years of uncertainty on this issue, NCGA applauds the Bush administration for reaching the correct decision on the waiver,” said National Corn Growers Association President-elect Tim Hume, a grower from Walsh, Colo.

The administration's decision to deny the waiver is being hailed as a milestone victory for the ethanol industry and for grain producers. NCGA says the “technical arguments” it has provided to the EPA during the last 18 months validates NCGA's analysis, which determined that adding ethanol to California's gasoline would improve air quality and protect water resources.

Demand for ethanol in California will be approximately 580 million gallons annually. About 230 million bushels of corn will be used to produce the ethanol needed by California motorists. That amount of corn grind will boost corn prices by 10 to 15 cents per bushel, increasing the value of the nation's corn crop by as much as $1 billion, according to NCGA's figures.

Hume said: “The administration's denial of the waiver sends a clear message: The oxygen requirement is working and is necessary for clean air. Corn growers have received the green light they have been waiting for, and are ready to make the investments needed to expand ethanol production.”

Corn, generally considered the primary source for ethanol production, would be the obvious beneficiary of the denial of waiver, but other grain groups see benefits for other grains. Officials of the Lubbock, Texas-based National Sorghum Producers Association (NSPA) see a boon to that crop.

“With no less than eight proposed ethanol plants under various stages of development in the sorghum belt, this industry (ethanol production) holds tremendous promise to become the single-largest user of grain sorghum in the United States if they can be assured a reliable supply of grain,” says James Vorderstrasse, NGSP vice president for domestic marketing and a producer from Hebron, Neb.

NCGA, which has been most visible in the advocacy of ethanol and in opposition to the California waiver request, says EPA's decision is based largely on information and analyses provided by the producer group.

An NCGA release says the group supplied EPA with the factual data — in the form of a technical analysis — to help secure a favorable decision.

“Specifically,” said Hume, “NCGA's data demonstrated that adding ethanol to California's gasoline would improve air quality and protect water resources.”

EPA, in fact, said its decision was based on California's failure to disprove evidence of improved air and water quality as the result of using gasoline blended with oxygenates, including ethanol.

“After an extensive analysis,” an EPA announcement said, “the agency concluded that there is significant uncertainty over the change in emissions that would result from a waiver. California has not clearly demonstrated what the impact on smog would be from a waiver of the oxygen mandate.”

NCGA says ethanol production for this year is on schedule to exceed 2 billion gallons. With 600 million gallons of ethanol obligated for clean fuels programs, NCGA says there is plenty of ethanol available to meet the needs of California motorists.

Grain producer groups say the denial of waiver will impact ethanol production and use beyond California. Uncertainty surrounding California's two-year-old request for waiver, they say, has dissuaded growers from investing in new ethanol plants and increasing capacity at existing facilities. Much of the nation's ethanol production is in grower cooperative plants.

NCGA says ethanol production capacity is expected to increase significantly, because the uncertainty surrounding the waiver has been removed.

“EPA's decision — coupled with congressional initiatives to incorporate a renewable fuels standard in emerging energy policy — will enable ethanol producers to help meet national energy security goals, facilitate environmental stewardship and promote economic development for rural communities,” NCGA's Hume said.

The National Grain Sorghum Producers said the waiver denial enhances potential profitability for grain sorghum producers, preserves an important ethanol market, and helps the environment.

“This is a win-win decision for producers and the environment,” says Leo Bindel, NGSP president and a producer from Sabetha, Kan.

He said granting the waiver would have destroyed an opportunity to expand a market for American grain at a time when the country is suffering from both low commodity prices and an energy shortage.

Last year, 13 percent of the U.S. grain sorghum crop was used for ethanol production, and the figure is forecast to increase this year, Tim Lust, NGSP executive director in Lubbock, said.

“Basis levels around ethanol plants are higher by 10 to 15 cents per bushel, and the competition helps increase the prices that sorghum producers receive for their grain,” Lust said.

The ethanol industry in Nebraska, Kansas and New Mexico has increased usage to a projected 15 percent of production for the 2000-01 marketing year.

The Clean Air Act requires that fuel contain oxygen from the additives methyl butyl ether (MTBE) or ethanol to reduce emissions of ozone, a major component of smog.

After abandoning petroleum-MTBE as an additive, California officials sought a waiver from Clean Air rules that would allow them to ignore the requirement rather than seek use of ethanol made from grain sorghum or corn. As a result of EPA's denial of this request, ethanol now becomes the alternative oxygenate for California and other states that have abandoned MTBE.


e-mail: ben_pryor@intertec.com

Growers: ‘Clean air’ on prices

By Ben Pryor Farm Press Editorial Staff

The National Corn Growers Association (NCGA), which for 18 months battled for cleaner air in California (and more corn sales), now wants to “clean the air” of a few misunderstandings. It's not ethanol that's driving up the price of gas at the pumps, NCGA leaders say. It's a shortage of petroleum.

The Environmental Protection Agency on June 12 denied California's request for a waiver on federal Clean Air Act requirements for oxygenates in motor fuel. The waiver would have eliminated both grain-based ethanol and methyl tertiary butyl ether (MTBE), which is derived from natural gas, as a fuel additive in the nation's largest state.

Following EPA's denial of the California waiver, many ethanol opponents renewed the claim that the action would drive California gas prices higher. NCGA says nothing could be further from the truth.

“It is unfathomable that California refiners are going to suffer price discrimination at the hands of ethanol producers,” said John McClelland, NCGA director of energy and analysis. “Prices of ethanol in California will reflect Midwest prices plus transportation.

“Ethanol production is more cost-efficient and price-competitive than ever,” said McClelland, who holds a Ph.D. in economics. “The average production cost is in the range of 95 cents to $1.10 per gallon.”

Blame the short supplies of oil on OPEC. Short supplies of natural gas have driven up MTBE prices, resulting in higher gas prices to consumers, McClelland says. “Ethanol historically follows the price of gasoline closer than the price of corn because ethanol is sold into the fuel market where it competes with other fuel components. However, ethanol competes with gasoline and gasoline components. This competition tends to moderate gasoline prices in areas where ethanol is used. That means savings for consumers.”