[Senate Hearing 106-953]
[From the U.S. Government Publishing Office]
S. Hrg. 106-953
CLEAN AIR ACT: ENVIRONMENTAL BENEFITS AND IMPACTS OF ETHANOL
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON CLEAN AIR, WETLANDS,
PRIVATE PROPERTY, AND NUCLEAR SAFETY
OF THE
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
JUNE 14, 2000
__________
Printed for the use of the Committee on Environment and Public Works
__________
U.S. GOVERNMENT PRINTING OFFICE
71-515 WASHINGTON : 2001
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
20402
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
ONE HUNDRED SIXTH CONGRESS
second session
BOB SMITH, New Hampshire, Chairman
JOHN W. WARNER, Virginia MAX BAUCUS, Montana
JAMES M. INHOFE, Oklahoma DANIEL PATRICK MOYNIHAN, New York
CRAIG THOMAS, Wyoming FRANK R. LAUTENBERG, New Jersey
CHRISTOPHER S. BOND, Missouri HARRY REID, Nevada
GEORGE V. VOINOVICH, Ohio BOB GRAHAM, Florida
MICHAEL D. CRAPO, Idaho JOSEPH I. LIEBERMAN, Connecticut
ROBERT F. BENNETT, Utah BARBARA BOXER, California
KAY BAILEY HUTCHISON, Texas RON WYDEN, Oregon
LINCOLN CHAFEE, Rhode Island
Dave Conover, Staff Director
Tom Sliter, Minority Staff Director
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Subcommittee on Clean Air, Wetlands, Private Property, and Nuclear
Safety
JAMES M. INHOFE, Oklahoma, Chairman
GEORGE V. VOINOVICH, Ohio BOB GRAHAM, Florida
ROBERT F. BENNETT, Utah JOSEPH I. LIEBERMAN, Connecticut
KAY BAILEY HUTCHISON, Texas BARBARA BOXER, California
C O N T E N T S
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Page
JUNE 14, 2000
OPENING STATEMENTS
Bennett, Hon. Robert F., U.S. Senator from the State of Utah..... 50
Bond, Hon. Christopher S., U.S. Senator from the State of
Missouri....................................................... 7
Boxer, Hon. Barbara, U.S. Senator from the State of California... 25
Article, Environmental Sciences and Technologies............. 155
Letter, biomass industry representatives..................... 116
Graham, Hon. Bob, U.S. Senator from the State of Florida......... 10
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma... 1
Chart, Causes of Fuel Price Spikes........................... 5
Recommendations, EPA Blue Ribbon Panel on Oxygenates......... 4
Lieberman, Hon. Joseph I., U.S. Senator from the State of
Connecticut.................................................... 10
Smith, Hon. Bob, U.S. Senator from the State of New Hampshire.... 50
Voinovich, Hon. George V., U.S. Senator from the State of Ohio... 28
WITNESSES
Durbin, Richard J., U.S. Senator from the State of Illinois...... 48
Prepared statement........................................... 50
Early, Blakeman, environmental consultant, American Lung
Association, Washington, DC.................................... 12
Prepared statement........................................... 51
Gatto, Stephen, president and chief executive officer, BC
International, Dedham, MA...................................... 21
Prepared statement........................................... 64
Graboski, Michael, director, Colorado Institute for Fuels and
High Altitude Engine Research, Department of Chemical
Engineering, Colorado School of Mines, Lakewood, CO............ 13
Prepared statement........................................... 68
Grassley, Hon. Charles, U.S. Senator from the State of Iowa...... 43
Prepared statement........................................... 71
Greenbaum, Dan, president, Health Effects Institute, Cambridge,
MA............................................................. 5
Prepared statement........................................... 74
Grumet, Jason S., executive director, Northeast States for
Coordinated Air Use Management, Boston, MA..................... 19
Articles:
American Lung Association............................ 84
American Petroleum Institute......................... 85
Des Moines Sunday Register........................... 91
Grand Island Independent............................. 94
Lincoln, NE newspaper................................ 90
Northeast & Mid-Atlantic States, Gasoline/MTBE Task
Force.............................................. 82
Northeast States for Coordinated Air Use Management
(NESCAUM).......................................... 82
Omaha World Herald................................... 92
Quad City Times...................................... 93
The Gazette.......................................... 94
Letters:
Daschle, Hon. Tom, U.S. Senator from the State of
South Dakota....................................... 85
King, Hon. Angus S., Jr., Governor of the State of
Maine.............................................. 89
NESCAUM.............................................. 86
Shaheen, Hon. Jeanne, Governor of the State of New
Hampshire.......................................... 88
Prepared statement........................................... 75
Harkin, Hon. Tom, U.S. Senator from the State of Iowa............ 46
Prepared statement........................................... 95
Huggins, Jack, vice president, Ethanol Operations, Williams
Energy Service, Pekin, IL...................................... 17
Prepared statement........................................... 96
Proctor, Gordon, Director, Ohio Department of Transportation,
Columbus, OH................................................... 24
Prepared statement........................................... 104
Slaughter, Bob, director, Public Policy, National Petrochemical &
Refiners Association, Washington, DC........................... 15
Prepared statement........................................... 107
ADDITIONAL MATERIAL
Articles:
Des Moines Sunday Register................................... 119
Des Moines Register.......................................... 168
Energy Journal............................................... 127
Environmental Science & Technology........................... 155
Quad City Times.............................................. 120
Letter, Representatives and Supporters of the Biomass Ethanol
Industry....................................................... 116
Statements:
American Road and Transportation Builders Association........ 168
Exxon Mobil Corporation...................................... 153
Fitzgerald, Hon. Peter G., U.S. Senator from the State of
Illinois, prepared statement............................... 63
Keller, Glen, Engine Manufacturers Association............... 103
Long, Russell, executive director, Bluewater Network......... 121
NATSO, Incorporation......................................... 114
Oxygenated Fuel Association.................................. 170
CLEAN AIR ACT: ENVIRONMENTAL BENEFITS AND IMPACTS OF ETHANOL
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U.S. Senate,
Committee on Environment and Public Works,
Subcommittee on Clean Air, Wetlands, Private Property, and
Nuclear Safety,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:28 a.m. in
room 406, Dirksen Senate Building, Hon. James M. Inhofe
(chairman of the subcommittee) presiding.
Present: Senators Inhofe, Bond, Voinovich, Lieberman,
Graham, and Boxer.
OPENING STATEMENT OF HON. JAMES M. INHOFE,
U.S. SENATOR FROM THE STATE OF OKLAHOMA
Senator Inhofe. Today's hearing will address the
environmental benefits and impacts of ethanol under the Clean
Air Act. This subcommittee will address MTBE. We addressed it
last fall in the other principal oxygenate, so today we will
turn our attention to ethanol.
In 1990, Congress made a mistake by mandating oxygenates in
gasoline. We ended up creating a water quality issue because of
the use of MTBE. I think it is important to note that, 3 years
before Congress acted, scientists at EPA identified the
potential problem, although the Agency failed to notify
Congress during the debate in 1990, the debate on the Clean Air
Act.
Today Congress is being asked to do the same thing, create
a new mandate, and I hope that we have learned our lessons from
the mistakes in the past, because the EPA certainly has not
learned from their mistakes. I say this because last week the
Administration issued a report called ``The Analysis of Policy
Scenarios for Reducing or eliminating MTBE.'' This report
clearly shows that the Administration would rather play games
and pander to constituent groups than enter into a serious
policy discussion about a real environmental problem.
This report comes 9 months after the Blue Ribbon Panel
recommendations and 3 months after the Administration announced
their legislative principles. This report is in response to
questions we asked the day the principles were released. This
is simple background information that the Administration should
have considered before issuing their principles. Because of
their delays, I think it will be very difficult to enact
legislation on this issue this late in the year, particularly
since, instead of a rifle shot approach to addressing the real
environmental issue, the Administration is advocating what is
essentially a broad-based rewriting of the fuel section of the
Clean Air Act.
I believe if we rewrite title two it should be done next
year during authorization. This year we should be concentrating
on fixing the MTBE issue.
We stated this repeatedly several times that we're going to
be very busy reauthorizing and we are going to do it in a much
shorter period of time than people thought, so those things
that we're doing prior to next year are going to be just the
relatively small things, and we want to have hearings that will
set the stage for the ultimate consideration in the next 2
years.
While I will not go into detail about all of the problems
with the report today, I will just list a few concerns.
They ``cherry pick'' from the recommendations of their own
Blue Ribbon Panel, implying that they have followed the
recommendations.
We have chart on up there. These are some of the
recommendations. If you pay attention to that last paragraph
that is highlighted, it says, ``In addition''--this is the Blue
Ribbon Panel--``in addition, the EPA and others should
accelerate ongoing research efforts into the inhalation and
ingestion of human effects, air emissions, transformation
byproducts, and environmental behavior of all oxygenates and
other components likely to increase in the absence of MTBE.''
When discussing benefits, they--and I'm referring to the
EPA--only discuss the benefits of reformulated gas, not the
benefits of oxygenates. The benefits of reformulated gas are
not an issue, but the benefits of oxygenates--in particular,
ethanol--are clearly an issue. They do not discuss any of the
environmental problems associated with ethanol, such as the
effect of benzene, the increased emissions of NOx,
the increased emission levels of aldehydes, the potential
health problems associated with ethanol.
They call their approach ``cost effective,'' even though
they admit that costs will almost double, and their costs are
extremely conservative.
When a product is mandated, creating a monopoly, the prices
do not remain constant. They rise, which is what will happen to
the price of ethanol.
Most importantly, they ignore every independent scientist
who has looked at the use of ethanol and called for more tests
and studies before it is mandated. Specifically, the EPA's own
Blue Ribbon Panel recommendations and the report to the
California Environmental Policy Council last December, which
was a comprehensive health and environmental assessment of
ethanol, both reports called for more studies on ethanol--those
reports, as well as the Blue Ribbon Panel.
On a final note, over the last few days the EPA has started
blaming the oil companies for the high cost of gasoline,
particularly the reformulated gas phase two in the midwest,
which uses ethanol. This is like the story of the small child
that doesn't regret eating the whole cake but awfully upset
that he has a stomach ache.
The EPA is not taking responsibility for its actions. The
EPA has forced numerous controls and mandates on gasoline
formulas, and it is proposing another one, ethanol; yet, it
wants to deny the real outcome of its policies to the
consumers, higher fuel prices.
We will be looking at the price of fuel issue more tomorrow
when the EPA testifies during our hearing on the sulfur diesel
regulations.
We have a number of witnesses today, and we have changed--
in deference and as a favor to you guys, we've changed panel
No. 2 with panel No. 1 so you can go first, because all of the
sudden we had a number of Senators who wanted to get in on
this, and so we felt that it would be better to let you folks
take care of your testimony and respond to questions of this
committee, and then we'll handle the Senators as panel No. 2,
and we'll have a number of Senators that will show up, most of
them, oddly enough, from corn States.
We have Mr. Dan Greenbaum, president, Health Effects
Institute; Mr. Blake Early, environmental consultant, American
Lung Association; Dr. Michael Graboski, director, Colorado
Institute of Fuels and High Altitude Engine Research; Mr. Bob
Slaughter, director, public policy, the National Petrochemical
& Refiners Association; Mr. Jack Huggins, vice president,
ethanol operations of Williams Energy Services; Mr. Jason
Grumet, executive director, Northeast States for Coordinated
Air Use Management from Boston; Mr. Stephen Gatto, president
and CEO, BC International; and Mr. Gordon Proctor, director,
Ohio Department of Transportation.
We are going to have in attendance several Members of the
Senate. I know that Senator Voinovich will be here, but not
until 10 because of a conflicting meeting that he has. So what
we're going to do is go ahead and begin. Because of the number
of witnesses that we have today, we're going to ask you to
follow the red/yellow/green light, like my granddaughter does,
and conclude your remarks in 5 minutes.
Now, your entire statement will be submitted for the
record, but if you could confine your opening remarks to 5
minutes it would be appreciated very much.
[The prepared statement of Senator Inhofe follows:]
STATEMENT OF HON. JIM INHOFE, U.S. SENATOR FROM THE STATE OF OKLAHOMA
Today's hearing will address the environmental benefits and impacts
of ethanol under the Clean Air Act. This Subcommittee addressed MTBE
last fall, the other principle oxygenate, so today we will turn our
attention to ethanol.
In 1990, Congress made a mistake by mandating oxygenates in
gasoline. We ended up creating a water quality issue because of the use
of MTBE. I think it is important to note that 3 years before Congress
acted, scientists at EPA identified the potential problem, although the
Agency failed to notify Congress during the debate in 1990.
Today, Congress is being asked to do the same thing, create a new
mandate. I hope Congress has learned from the mistake, because the EPA
certainly has not learned from their mistake. I say this because last
week the Administration issued a report called ``Analysis of Policy
Scenarios for Reducing or Eliminating MTBE.'' This report clearly shows
that the Administration would rather play games and pander to
constituent groups than enter into a serious policy discussion about a
real environmental problem.
This report comes 9 months after the Blue Ribbon Panel
recommendations and 3 months after the Administration announced their
legislative principles. This Report is in response to questions we
asked the day the principles were released. This is simple background
information that the Administration should have considered before
issuing their principles. Because of their delays, I think it will be
very difficult to enact legislation on this issue this late in the
year. Particularly since instead of a rifle-shot approach to addressing
a real environmental issue, the Administration is advocating what is
essentially a broad-based rewriting of the fuels section of the Clean
Air Act. I believe if we rewrite Title 2 is should be next year during
reauthorization, this year we should just concentrate on fixing the
MTBE issue.
While I will not go into detail about all of the problems with the
report today, I will just list a few key concerns.
1. They cherry pick from the recommendations of their own Blue
Ribbon Panel, implying that they have followed the recommendations. I
pulled out two additional recommendations that they ignored regarding
the need for additional research on ethanol before its use is expanded.
All together the panel recommended 14 steps. The Administration is only
following 3.
2. When discussing benefits, they only discuss the benefits of RFG,
not the benefits of oxygenates. The benefits of RFG are not an issue,
but the benefits of oxygenates, in particular ethanol are clearly an
issue.
3. They do not discuss any of the environmental problems associated
with ethanol, such as the effect on benzene, the increased emissions of
NOxX, the increased emissions levels of aldehydes, and
potential health problems associated with ethanol.
4. They call their approach cost-effective even though they admit
that the costs will almost double, and their costs are extremely
conservative. When a product is mandated, creating a monopoly, the
prices do not remain constant, they rise, which is what will happen to
the price of ethanol.
5. Most importantly, they ignore every independent scientist who
has looked at the use of ethanol and has called for more tests and
studies before it is mandated. Specifically the EPA's own Blue Ribbon
Panel recommendations and the Report to the California Environmental
Policy Council last December, which was a comprehensive health and
environmental assessment of ethanol. Both reports called for more
studies on ethanol.
On a final note, over the last few days the EPA has started blaming
the oil companies for the high cost of gasoline, particularly the RFG
phase 2 in the Midwest, which uses ethanol. This is like the story of
the small child that doesn't regret eating the whole cake, but is
awfully upset that he has a stomach ache. The EPA is not taking
responsibility for its actions. The EPA has forced numerous controls
and mandates on gasoline formulas, and it is proposing another one,
ethanol, yet it wants to deny the real outcome of its policies to the
consumers, higher fuel prices. We will be looking at the price of fuel
issue more tomorrow when the EPA testifies during our hearing on the
sulfur diesel regulations.
______
RECOMMENDATIONS FROM THE EPA'S BLUE RIBBON PANEL ON OXYGENATES IN
GASOLINE REPORT
6. Develop and implement an integrated field research program into
the groundwater behavior of gasoline and oxygenates, including:
a. Identifying and initiating research at a population of UST
release sites and nearby drinking water supplies including
sites with MTBE, sites with ethanol, and sites using no
oxygenate;
b. Conducting broader, comparative studies of levels of MTBE,
ethanol, benzene, and other gasoline compounds in drinking
water supplies in areas using primarily MTBE, areas using
primarily ethanol, and areas using no or lower levels of
oxygenate.
13. The other ethers (e.g. ETBE, TAME, and DIPE) have been less
widely used and less widely studied than MTBE. To the extent that they
have been studied, they appear to have similar, but not identical,
chemical and hydrogeologic characteristics. The Panel recommends
accelerated study of the health effects and groundwater characteristics
of these compounds before they are allowed to be placed in widespread
use.
In addition, EPA and others should accelerate ongoing research
efforts into the inhalation and ingestion health effects, air emission
transformation byproducts, and environmental behavior of all oxygenates
and other components likely to increase in the absence of MTBE. This
should include research on ethanol, alkylates, and aromatics, as well
as of gasoline compositions containing those components.
Senator Inhofe. We will start with Mr. Greenbaum, who is
first on our list.
STATEMENT OF DAN GREENBAUM, PRESIDENT, HEALTH EFFECTS
INSTITUTE, CAMBRIDGE, MA
Mr. Greenbaum. Thank you, Mr. Chairman.
It is a pleasure to be here today to speak to you about the
health effects of ethanol. I speak to you today, as you
mentioned, as the president of the Health Effects Institute,
which is an independent institute funded both by Government and
industry to provide impartial science on the health effects of
air pollution, and also as the former Chair of the Blue Ribbon
Panel----
Senator Inhofe. If you would suspend for just a moment, I
apologize. We have another one of our Members here.
Do you have an opening remark, Senator Bond, that you would
like to make prior to hearing the witnesses?
Senator Bond. Why don't we let this witness finish and then
I'll try to make my remarks brief.
Senator Inhofe. All right.
Senator Bond. I don't want to interrupt Mr. Greenbaum's
presentation.
Senator Inhofe. Mr. Greenbaum, I apologize. Go ahead.
Mr. Greenbaum. Thank you, Senator.
I am pleased to be here today.
In 1996 HEI published a comprehensive review of the health
effects of ethanol and MTBE. For the record, I have submitted
copies of our report, and I'll summarize our findings in my
brief comments today.
We, as a Nation, have substantial scientific evidence on
the health effects of ingesting ethanol. We know that at high
levels pregnant mothers ingesting ethanol can see their infants
suffer from fetal alcohol syndrome, and that consumption of
ethanol in the form of alcoholic beverages has been shown to
increase the risk of certain cancers, leading the national
toxicology program in its recent report on carcinogens to
designate alcoholic beverage consumption as a known human
carcinogen.
For all of these effects, there are not firmly defined
thresholds below which effects are not expected, although some
scientists have identified an apparent threshold for the fetal
effects of about one-half ounce of alcohol per day. That's
important, because, although we know much about these effects
of ethanol at high levels, it is likely that exposure of
citizens to ethanol while refilling their fuel tanks or through
ethanol-contaminated drinking water will be substantially below
levels at which effects have been seen.
In the case of inhalation, our estimate is that the dose of
ethanol delivered to the body would probably be below the level
of ethanol normally produced internally within the body.
The use of ethanol, however, also results in changes in the
exhaust and evaporative emissions from vehicles, especially
acetaldehyde and volatility. Acetaldehyde, which is designated
as reasonably anticipated to be a human carcinogen, would,
according to a recent California analysis, increase in the
atmosphere in 2003 in ethanol-used fuel when compared to the
use of fuel oxygenated with MTBE; however, there would be an
overall decrease in the acetaldehydes when compared to 1997
levels due to tightening California fuel requirements. These
results are reassuring, but similar analyses have not been
performed for the rest of the Nation.
At the same time, the addition of ethanol to gasoline can
result in an increase in the volatility of fuel and in the
potential for increased formation of ozone. The base fuel can
be reformulated to lower its inherent RVP to offset this
effect, although even with that there are some continuing
questions about the possible impacts of commingling ethanol-
blended fuels with non-ethanol fuels.
Beyond these effects, the use of ethanol as an oxygenate
provides the ability, as do other oxygenates, to replace more-
toxic substances such as benzene; however, the Blue Ribbon
Panel found that it is also possible to achieve these
improvements using non-oxygenated reformulated fuels.
One further key question is the potential for ethanol to
contaminate groundwater. Here, although we still have many
questions in general, two general conclusions can be drawn.
First, the high degradability of ethanol would suggest that the
chances of an ethanol spill or leak getting, to any significant
degree, into drinking water, itself, are small. At the same
time, the degradability of ethanol appears to retard the
degradation of other components, resulting in the likelihood
that plumes of these other substances and the risk of water
contamination would increase somewhat. Precise estimates of
this risk do not exist.
In conclusion, we know much about the significant health
effects of drinking ethanol, but should recognize that likely
exposure of the public to ethanol either through breathing or
ingestion would likely be low. At the same time, there are
continuing questions, and it is based on these questions that
the Blue Ribbon Panel recommended first that EPA and others
accelerate ongoing research efforts into the health effects,
air emissions, and environmental behavior of all oxygenates and
other components likely to increase in the absence of MTBE, and
second recommended that EPA, in conjunction with USGS and
others, move quickly to analyze and monitor both the use of
MTBE and ethanol and the levels of these substances in ground,
surface, and drinking water.
The decision to greatly increase any one component of the
fuel supply is a major one, with potential widespread
implications for exposure and public health. Although the
current information on ethanol and its effects is somewhat
reassuring, it is critical that accelerated efforts be made to
fill key information gaps before widespread increases in use of
any additive have been accomplished.
Thank you for the opportunity to submit this testimony. I
would be pleased to answer any questions.
Senator Inhofe. Thank you, Mr. Greenbaum.
Now, Senator Bond, if you would like to make your opening
statement----
Senator Bond. Thank you very much, Mr. Chairman.
Senator Inhofe. Before you came in, I mentioned that there
are, I think, four Senators now who will constitute panel No.
2, and you certainly are welcome to join that as well as this.
OPENING STATEMENT OF HON. CHRISTOPHER S. BOND,
U.S. SENATOR FROM THE STATE OF MISSOURI
Senator Bond. I wanted to come. I have some wonderful
remarks that I will submit for the record. I will trust that if
I promise to do that, I'm sure that everybody will read them
about the economic benefits of ethanol.
Senator Inhofe. Could I get an advanced copy of that?
Senator Bond. We want you to have that in hand.
I want to express my appreciation to the members of the
panel. I appreciated the testimony from Mr. Greenbaum and the
work of the Blue Ribbon Committee.
We don't recommend drinking ethanol. It is probably not a
good idea to drink gasoline, either. We do appreciate the
results of the Blue Ribbon study.
We are here because I think everybody agrees or should
agree that MTBE contamination in the water is a problem. It is
the second most commonly found chemical in the groundwater. For
those who continue to advocate MTBE, who say, ``Let's don't
phase it out completely,'' I suggest we go out to the States
and see what they are doing in response to their constituents
and their water contamination.
Eight States have taken action to limit or phaseout MTBE to
protect their water resources. Even in Missouri, where we think
we don't use MTBE, we have found some of it sneaked into our
State and contaminated water in school districts and other
places, and I hope that Congress will act to get rid of MTBE
and make sure that we do not further endanger our water supply
or, by making changes, endanger our air quality.
We do believe that ethanol is an environmentally friendly
alternative to MTBE that adds value to our farmers' products,
moves us away from the energy hostage situation.
Mr. Chairman, we all know that the Federal oxygen content
requirement was adopted in 1990 for several reasons. Congress
understood that oxygenates provide a source of clean octane,
displacing toxic compounds such as benzene and reducing ozone-
forming exhaust emissions of hydrocarbons and carbon monoxide,
and EPA has stated the program is equivalent to taking 16
million vehicles off the road each year. We have also
recognized the energy security importance of it.
I have read the studies that I will not try to explain to
you, because it is difficult enough for me to understand them,
but when you take a look at the potency-weighted toxicity,
ethanol and other products, you will see, I believe, the
studies confirmed that ethanol does provide significant
benefits in lowering the toxics in gasoline.
We have problems with the lack of an energy policy in this
Administration, and there are some who want to blame the
increase in energy prices on the changes that we've mandated in
gasoline. I think they are far more deeply rooted than that and
go to a failure to develop energy sources.
I think ethanol can and will continue to play an important
role in our environmental, economic, and energy security. The
ethanol, which contains approximately 35 percent oxygen,
enhances combustion, contributes to more-efficient burn of
gasoline, reducing carbon monoxide emissions, which is a
contributor to harmful ozone formation by as much as 30
percent.
The use of ethanol reduces emissions of all major
pollutants regulated by EPA, including ozone, carbon monoxide,
particulate matter, PM10, and nitrogen oxides.
I think it is an effective tool, as I mentioned, for
reducing air toxics, and it can significantly reduce greenhouse
gas emissions, and I know that you will hear from our
colleagues later on.
We do have new ethanol facilities coming on line in
Missouri. We are very proud of them. Not only do they provide
jobs and value for the economy, but they are making significant
contributions, and I will discuss all those further in the
statement I am submitting for the record, but I want to
emphasize that this is a safe, biodegradable fuel that does not
pose an environmental threat to water or soil. I was pleased
that the California Environmental Policy Council awarded it a
clean bill of health.
Mr. Chairman, I thank you for your time, and I appreciate
the indulgence of our witnesses.
[The prepared statement of Senator Bond follows:]
STATEMENT OF HON. CHRISTOPHER S. BOND, U.S. SENATOR FROM THE STATE
OF MISSOURI
Good morning Senator Inhofe, members of the subcommittee, and those
in attendance today. It is a pleasure to be here. My time that I can
stay at this hearing is short so I want to get straight to the point.
MTBE water contamination can be found throughout the country. I
have been told that today, MTBE contamination is the second most
commonly found chemical in groundwater. For those who continue to
advocate for MTBE I say forget what is happening here inside the
beltway, go out to the states and see what they are doing in response
to their constituents and the water contamination.
Eight states have taken action to limit or phase-out MTBE use in an
effort to protect their water resources, and legislation to ban MTBE
has been introduced in another 16 states. I do believe that Congress
should act to come up with a solution to the MTBE debacle that does not
sacrifice the air quality gains of the current program and does not
jeopardize our Nation's valuable water supplies.
I know that Missouri, and I believe this country, requires a
renewable, environmentally friendly alternative to MTBE that helps
create local jobs, which adds value to our farmer's product and which
moves us away from this energy hostage situation where our reliance on
foreign-produced oil makes our producers, consumers and economy subject
to the whims of international cartel autocrats. In my opinion, that
alternative is ethanol.
Mr. Chairman, we all know that the Federal oxygen content
requirement was adopted in 1990 for several reasons. First, those of us
in Congress understood that oxygenates provide a source of clean
octane--displacing toxic compounds such as benzene and reducing ozone-
forming exhaust emissions of hydrocarbons and carbon monoxide. EPA has
stated the program is equivalent to taking 16 million vehicles off the
road each year. Congress also recognized the energy security benefits
of substituting a certain percentage of imported petroleum with
domestically produced renewable fuel such as ethanol. Promoting
renewables that are domestically produced, such as ethanol, is a
critical element toward regaining our independence from foreign oil. It
is unfortunate that the Clinton administration has done nothing to
promote a sound energy policy for this country, and in my opinion came
to this debate late. Finally, the Congress hoped the Federal oxygen
requirement could provide new market opportunities for farmers by
stimulating new demand for ethanol. I believe these objectives remain
as valid today as they were in 1990.
I firmly believe that ethanol does play and will continue to play
in our Nation's environmental, economic and energy security. I know
that ethanol, an organic, non-toxic, biodegradable substance, is the
right thing to pursue in the case of the MTBE debate. Unfortunately,
some are trying to use the sins of MTBE as a reason to pull the plug
mid-stream on clean-burning ethanol.
Ethanol is widely marketed across the country to increase octane
and reduce emissions through its clean burning properties as an
oxygenate. Ethanol, which contains approximately 35 percent oxygen,
enhances combustion and therefore contributes to a more efficient burn
of gasoline, reducing carbon monoxide emissions, a contributor to
harmful ozone formation, by as much as 30 percent. The use of ethanol
reduces emissions of all the major pollutants regulated by the
Environmental Protection Agency (EPA), including ozone, carbon monoxide
(CO), particulate matter (PM10), and nitrogen oxides
(NOx). Ethanol is also an effective tool for reducing air
toxics. As a renewable fuel, ethanol can dramatically reduce greenhouse
gas emissions. It is clear to me and many others that ethanol is good
for the environment, both our water and our air. I believe that my
fellow colleagues Senators Grassley, Durbin, and Harkin will be able to
outline additional environmental benefits later in this hearing.
Let me touch briefly on another reason we enacted the oxygen
content requirement--the economy. Ethanol provides significant benefits
to the economy, particularly in farming communities across rural
America. Earlier this year, I participated in the first ethanol plant
grand-opening in Missouri. This facility is a 15 million gallon per
year facility located in Macon, Missouri and owned by farmers across
the state. The ethanol facility not only provides new jobs, but a
value-added market for their commodities. In light of today's record
low prices, value-added ethanol processing provides a much-needed
economic opportunity. According to a letter from Secretary Dan Glickman
of the United States Department of Agriculture which assumes an MTBE
phaseout and the oxygen content requirement staying in place, ``The
MTBE phase-out is projected to have a positive effect on U.S. trade,
with the average U.S. agricultural net export value increasing by over
$200 million per year. The U.S. import value of MTBE would decline by
$1.1 billion per year and almost $12 billion cumulatively from 2000-
2010. The agricultural export increase combined with the MTBE import
decrease would improve the U.S. balance of trade by $1.3 billion per
year.'' In addition, according to Secretary Glickman, ``The increase in
farm and ethanol production caused by replacing MTBE with ethanol is
projected to create 13,000 jobs across the economy by 2010. Over a
third of the new jobs, 4,300, would be created in the ethanol sector
itself. Another 6,400 jobs are created in the trade, transportation,
and service sectors. Farm sector jobs increase by 575. Jobs in other
industries, food processing, and energy sectors increase by 1,600.''
Mr. Chairman, colleagues, witnesses, and those in the audience--we know
a lot about ethanol. Ethanol is a safe, biodegradable fuel that does
not pose an environmental threat to water or soil, is good for air
quality, and has been awarded a ``clean bill of health'' by the
California Environmental Policy Council.
So, let us be very clear about the issue we are addressing. The
issue is MTBE contamination of our valuable water supplies, not
ethanol. Ethanol will allow us to address several important policy
objectives: clean air, clean water, balance of trade, economic
development, etc. Ethanol is the solution and I will work with other
Members of Congress to see that that notion prevails.
Senator Inhofe. Thank you. We have been joined by two of
our members of the committee. We had already started with Mr.
Greenbaum. He has given his testimony, and we are going to go
ahead and get the rest of them, but first we'd like to hear any
statements that the two of you have. We probably should start
with Senator Graham, ranking minority member of the committee.
OPENING STATEMENT OF HON. BOB GRAHAM,
U.S. SENATOR FROM THE STATE OF FLORIDA
Senator Graham. Thank you, Mr. Chairman. I will be very
brief.
I appreciate your holding the hearing on this issue. The
question of ethanol has become an issue, including in the
current Presidential elections, and this opportunity to get
some expert testimony on its environmental effects I think will
contribute to that debate.
With that, I am going to yield my time to my colleague and
to the experts.
Senator Inhofe. Senator Lieberman.
OPENING STATEMENT OF HON. JOSEPH I. LIEBERMAN,
U.S. SENATOR FROM THE STATE OF CONNECTICUT
Senator Lieberman. Thanks, Mr. Chairman. Thanks, Senator
Graham.
Mr. Chairman, I do have a statement I'd like to submit for
the record and just very briefly share the concern that has
been expressed here.
Obviously, we started to use MTBE as a way of cleaning up
the air, and it has had that effect, but it has also had a
surprising effect on water supplies, both wells and surface
waters, and the statistics were indicated by Senator Bond and
others. This is a real source of concern to us in the
Northeast.
We look to ethanol hopefully as a possible replacement that
will continue the positive effects on air quality that MTBE has
had, but reduce or eliminate the concerns about effect on water
quality.
I do think that we are coming to a point where Congress has
got to do something tangible and direct to reduce or eliminate
the use of MTBE in our gasoline supply.
In the northeast, we have two particular concerns about the
use of ethanol which I know will be addressed here today, and I
want to mention them briefly. The first is that ethanol is much
more volatile than MTBE. In our part of the country, summer
temperatures we fear will exacerbate this volatility,
increasing evaporation of ethanol and creating emissions that
may actually worsen our normal summertime smog and ozone
problems which are already significant.
The second concern about ethanol use is the lack of a
regional production and distribution infrastructure so that,
for the short-term future, anyway, we presume that ethanol
would have to be transported into our region, and that has
complexities attached to it, as well. So I hope that the
witnesses will address those two concerns as we move, perhaps
in this session of Congress, to a consensus approach on this
issue which reflects what science and fact tell us about MTBE
and also tries to develop the potential of ethanol as a
substitute.
I apologize, Mr. Chairman. I am going to stay a while, but
I've got a markup in another committee so I can't stay as long
as I'd like. I hope, which is against conventional thinking,
that the markup will go quickly and I will return soon to hear
the testimony.
Thank you very much.
Senator Inhofe. Thank you, Senator Lieberman.
[The prepared statement of Senator Lieberman follows:]
STATEMENT OF HON. JOSEPH LIEBERMAN, U.S. SENATOR FROM THE STATE
OF CONNECTICUT
Thank you, Chairman Inhofe, for holding this hearing to examine the
environmental benefits and impacts of using ethanol to replace MTBE in
gasoline. This is an extremely important matter in my home State of
Connecticut, as it is throughout the Northeast and across the country,
and it is one that we need to work quickly to address.
As most of us are aware, recent testing of drinking water sources
has revealed that a surprising number of wells across the country have
been contaminated by MTBE, a common gasoline additive. A study by EPA's
Blue Ribbon Panel on MTBE reported that between 5 and 10 percent of
community drinking water supplies have detectable levels of MTBE.
Private wells and surface waters have also been contaminated. The
United States Geological Survey reports that MTBE was the second most
commonly detected volatile organic compound in water from urban wells.
In Connecticut and the rest of the northeast, these problems are as bad
as they are anywhere. The reformulated gasoline that we use is mandated
to contain oxygenates, and that mandate has primarily been met by
adding MTBE. I am absolutely convinced that we, as a Congress, must do
something to reduce or eliminate the use of MTBE in our gasoline supply
because of the contamination of the Nation's drinking water supply that
MTBE has caused.
Despite its negative impacts on drinking water, MTBE has had some
positive effects on air quality. We are here today to hear testimony on
the potential environmental benefits and impacts of an MTBE replacement
that may afford similar air quality benefits: ethanol. I have a number
of concerns about replacing MTBE with ethanol. First, ethanol is much
more volatile than MTBE. In the Northeast, summer temperatures will
exacerbate this volatility, increasing evaporation of ethanol and
creating emissions that may worsen summertime smog and ozone problems,
which are already a significant concern for Connecticut and the
Northeast. My second concern about increasing the use of ethanol in the
Northeast is the lack of ethanol production and distribution
infrastructure in our region. Ethanol would have to be transported into
the region. Due to its affinity for water, ethanol cannot be piped into
the Northeast premixed with gasoline. At the moment, viable
alternatives to corn ethanol, such as biomass ethanol, are not in
widespread existence. I do not know whether the Northeast could cope
with a mandate to use much greater volumes of ethanol without facing
outrageous increases in gas prices because of small supply. Finally,
while the renewable nature of ethanol as a fuel source is desirable, I
know there are those that argue that the energy that goes into
producing ethanol the fossil fuels that are needed for harvesting,
producing, and transporting ethanol undercut the presumed environmental
benefits.
These are the very real concerns we in the Northeast have. I hope
we are able to use our time today productively, to learn more about the
benefits and the risks of using ethanol as a major feedstock in
gasoline. Thank you and I look forward to hearing from our witnesses.
Senator Inhofe. I'm sure the next witness will address some
of the things that you mentioned in your opening statement.
Mr. Early is here representing the American Lung
Association.
Mr. Early.
STATEMENT OF BLAKE EARLY, ENVIRONMENTAL CONSULTANT, AMERICAN
LUNG ASSOCIATION, WASHINGTON, DC
Mr. Early. Good morning, Mr. Chairman and members of the
committee. It is good to see you and I am happy to be here on
behalf of the American Lung Association to discuss the role of
ethanol under the Clean Air Act.
Data clearly indicates that ethanol in gasoline helps to
reduce tailpipe emissions of carbon monoxide, and this is
particularly important in areas that exceed the ambient air
quality standard for CO. This is a problem in the winter time,
and we have an oxy-fuel program that the Lung Association fully
supports that involves using ethanol in many portions of the
country to reduce carbon monoide tailpipe emissions to address
exceedences of the ambient air quality standard for CO.
The number of those areas is falling. It's one of the real
success stories of the Clean Air Act. That's due, in large
part, to better pollution controls on automobiles, but there is
no question that ethanol in the fuel helps achieve that, as
well.
Ethanol also provides a clean source of octane for fuel. It
doesn't have any aromatics in it, and it has moderately low
levels of sulfur. We believe that refiners are going to be
using a lot of ethanol as they replace MTBE in reformulated
gasoline and they replace or they lower sulfur in conventional
gasoline in accordance with EPA's new sulfur rules for
gasoline.
But the important thing to stress here is that the use of
ethanol does not guarantee the reductions of other pollutants
other than carbon monoxide.
Looking at my testimony in figure B-2--this is data
presented to the Blue Ribbon Panel, on which the Lung
Association served--you can see that the air toxics reductions
achieved in Chicago, where ethanol dominates the RFG program,
were among the least reductions in the Nation. It is pretty
clear that the use of ethanol doesn't necessarily guarantee you
reductions of air toxics. There are many factors that influence
that.
Looking further at the figures in my testimony labeled 15,
16, and 17, you look again at Chicago and the sulfur levels in
RFG. In 1996 and 1997 the sulfur levels in RFG using ethanol
were among the highest in the Nation. Then, in 1997, for
reasons that nobody really knows, the sulfur levels in RFG in
Chicago dropped 40 percent, from 500 parts per million to
approximately 300 parts per million. It is very clear that
ethanol was not the cause of that. This data illustrates the
point that the use of ethanol or the use of oxygenates doesn't
guarantee any particular reduction.
What we have learned is the best way to guarantee certain
performance from a fuel is to mandate that performance and
allow refiners to meet that any way they can. We believe that
that will involve using ethanol.
Now, the one problem with ethanol which Senator Lieberman
has already mentioned is its impact on volatility. The ethanol
industry is fond of talking about the tailpipe carbon monoxide
reductions, and they often quote the National Research Council
report from last year. They only quote part of the report.
The Council also recognized that evaporation from ethanol
was a serious problem, and I'm going to quote a sentence from
their report. The National Research Council said, ``The
increase in the evaporated emissions from the ethanol-
containing fuels was significantly larger than the slight
benefit obtained from the lowering of carbon monoxide exhaust
emissions using the ethanol-containing fuel.'' So you have
ethanol reducing CO tailpipe emissions but increasing
volatility. And, in fact, volatility is one of the biggest
problems in smog creation today. For new cars, volatility from
the car is 50 percent or more of total emissions from a car, so
you have to focus on both volatility and the evaporation of
hydrocarbons from the car, as well as the tailpipe.
Even low volatility RFG with ethanol can cause evaporation,
and that is because alcohol fuels, including ethanol, increase
the permeation of the fuel through the system of the car--the
hoses, the gaskets, the rubber portions and plastic portions of
the car. The ethanol fuel penetrates those more rapidly and
enhances it.
Last, ethanol gasoline, when mixed with a nonethanol
gasoline, increases the evaporative tendencies of the whole, so
when consumers go out and they purchase an ethanol-containing
fuel--doesn't matter whether it is RFG or conventional--and
then they purchase a non-ethanol-containing fuel, the
evaporative emissions go up.
I see my time is up. In conclusion, we don't think that
mandating ethanol is really a solution to cleaner gasoline. Set
performance standards, and those standards must include
offsetting the impact of ethanol on both RFG and conventional
gasoline when refiners choose to use it. That must be an
important element to the fixes that Congress adopts because
ethanol in conventional gasoline, since its use is going to
rise--and I cover that in my testimony--is going to worsen the
volatility of fuels throughout the country and not just RFG.
Thank you, Mr. Chairman.
Senator Inhofe. Thank you, Mr. Early.
Dr. Graboski.
STATEMENT OF MICHAEL GRABOSKI, DIRECTOR, COLORADO INSTITUTE FOR
FUELS AND HIGH ALTITUDE ENGINE RESEARCH, DEPARTMENT OF CHEMICAL
ENGINEERING, COLORADO SCHOOL OF MINES, LAKEWOOD, CO
Mr. Graboski. I'm Mike Graboski and I'm the director of the
Colorado Institute for Fuels and High Altitude Engine Research.
I am a Ph.D. chemical engineer and faculty member at the
Colorado School of Mines in Golden, CO. My research areas and
technology areas are involved in both gasoline and diesel fuels
and emissions from gasoline and diesel vehicles. I'm here today
on behalf of the National Corn Growers Association, but here to
talk to you about what I know about oxygenates and ethanol
fuels as an independent expert in this area.
I want to use my time briefly today to talk to you a little
bit about some analysis work that I have been doing. In my
analysis, I have been looking at the effects of removing
oxygenates from reformulated gasoline on emissions of ozone-
forming volatile compounds, the effects on carbon monoxide, the
effects on toxics air pollutants, and on particulate matter.
I would like you to refer to my written testimony for
several figures that I have provided you in terms of my
discussion.
The first thing I want to talk about is the effect of
oxygenates on toxics emissions, and I think it is important
that, since we are talking about the RFG program, in all cases
we are talking about gasolines that are complying gasolines, so
they all meet the performance standards set forth in the RFG
rules and they are all complying, which means that the
volatility issues really are not volatility issues because all
of these gasolines meet the volatility specifications under the
Clean Air Act.
Based upon 1998 EPA reformulated gasoline compliance
survey, I have attempted to estimate nationally how refiners
are going to produce phase II reformulated gasolines if they
had to use ethanol and if they are allowed to do this without
oxygen, and I have compared the resulting potency-weighted
toxic emissions to those from RFG-II-containing MTBE.
Because various air toxics pose different cancer risks,
potency weighting allows us to compare one toxic compound with
another, and using potency weightings we can add all the toxics
emissions together and compare the relative toxicity of one
fuel formulation with another.
Potency weighting uses benzene as the referencing, giving
it a value of one, and weighing all other compounds against
benzene. So, for example, if a compound is found to be twice as
toxic as benzene, it has a potency weighting of two.
In the handout that I provided you, figure one shows how
I'd expect refiners to produce RFG-II fuels if they were
allowed to not only meet the RFG-II spec but also satisfy the
1998 average toxic reduction of about 28.1 percent nationally
from RFG-I.
Based upon public statements from refiners, I would expect
new alkylate production and use to replace most of the lost
gasoline volume resulting from the removal of MTBE with
aromatics being used to balance the octane, and if ethanol is
used then ethanol would substitute for some of this alkylate.
Figure one that I provided you shows that oxygenated fuels
with ethanol provide a greater reduction in potency weighted
toxics compared to MTBE fuel, where benzene again is used as
the reference weight.
The non-oxygenated fuel in figure one has an increased
aromatic content, which is consistent with national gasoline
surveys and with the phase one data provided by EPA. And
increased aromatics are necessary to meet octane requirements.
In this case, the only way for the refiner to produce the
same benzene-equivalent potency-weighted toxics is if olefins
are also reduced, but there is no economic incentive to do
this. Therefore, we can reasonably expect refiners to increase
aromatics when oxygenates are remove from the gasoline pool and
if refiners make non-oxygenate RFG with the same mass toxics
reduction as oxygenated gasoline, there is going to be a
negative increase on public health because potency-weighted
toxics will increase.
I want to talk about removing oxygen from summer ozone and
the effect on particulates, and I will briefly summarize. I
looked at on-road and off-road emissions in Philadelphia,
Wilmington, and Trenton using EPA inventories and models, and
what I estimated is that, by removing oxygenates from RFG, one
will increase not only off-road emissions but on-road
emissions, and the net effect could be that as much as 35
percent of the additional ozone benefits attributable to RFG-II
compared to RFG-I could be lost because of the fact that
oxygenates reduce off-road emissions and we're not considering
this in our analysis.
Finally, I have been looking at the effect of oxygenates on
particulate matter, and what I have been able to determine is
that removing oxygenates from RFG is going to increase the
inventory of fine particulate matter in RFG areas. Some
analyses show that half of the fine particulate emissions come
from motor vehicles in those areas, and oxygenates might reduce
30 to 40 percent of the fine particulate emission from
vehicles.
So I would conclude that removing oxygenate from RFG is
likely to result in an increase in direct emissions of
particulate matter from tailpipes, and again this is an issue
that is not being considered.
So I would hope that in your deliberations, as time goes
on, that we look at these benefits of oxygenates, and any
legislative actions take them into account to make sure that
public health is protected.
Thank you.
Senator Inhofe. Thank you, Dr. Graboski.
Mr. Slaughter, it is nice to have you back before this
committee. You are recognized.
STATEMENT OF BOB SLAUGHTER, DIRECTOR, PUBLIC POLICY, NATIONAL
PETROCHEMICAL & REFINERS ASSOCIATION, WASHINGTON, DC
Mr. Slaughter. Thank you, Senator. Thanks, Mr. Chairman and
members of the subcommittee. As you know, I am representing the
National Petrochemical & Refiners Association. We basically
represent all U.S. refiners plus petrochemical manufacturers
who have similar processes. A lot has already been said about
the points I was going to make today.
I want to point out that NPRA is in substantial agreement
with Mr. Greenbaum and Mr. Early's testimony, and, just because
we don't all that often end up in complete accord with the
findings of an EPA panel and the American Lung Association, I
want to point that out. I think it is significant and ought to
be noted.
We do have substantial difficulties with mandates in fuels.
We think the RFG oxygen mandate has been problematic and
concerns have been raised. We think that mandates always raise
fuel costs, and therefore they are a burden on consumers.
People really don't like mandates. They prefer freedom of
choice.
As Mr. Early pointed out, performance standards allow
choices and spur innovations, and they are always preferable to
mandates, which tend to stifle new ideas and competition, and
they are very hard to get rid of, and they cost money.
A mandate for alternative fuels in the transportation
sector is really an ethanol mandate in disguise because
consumers, fuel providers, and auto manufacturers prefer liquid
fuels. Ethanol is the only viable alternative liquid fuel in
the future.
The oxygenate program in RFG, of course, has led to some
concerns about water quality, and, as I said before, NPRA is
largely in accord with the recommendations of the Blue Ribbon
Panel and urges Congress to act on them.
One of the problems, though, with mandates is that they are
hard to get rid of, and here you have a situation in which
people in California and the Northeast, where most of the MTBE
is used, seem to agree with the recommendations of the EPA
panel as to how to address this situation. But, unfortunately,
people who largely don't live in California or the Northeast
are blocking action on the recommendations because they want an
ethanol mandate to replace the current one.
I think every new mandate proposal has to be looked at in
this regard, because that's really what will be behind it.
It is not that NPRA is anti-ethanol, because many of our
members and maybe most of our members are blending ethanol and
selling it in their products. Ethanol use has really increased
in the past decade. DOE and the California Energy Commission
say that if MTBE is phased out, national usage of ethanol will
double just through increases in California and the Northeast,
alone. This happens without an ethanol mandate.
There have been several statements made this morning to the
effect--and I do think it is true--that ethanol usage is going
to increase in gasoline. It has a very bright future as a
blending component for gasoline in the foreseeable future and
in the near future without a mandate and the attendant problems
that a mandate causes.
I might point out, you know--Senator Lieberman,
unfortunately, has left, but he raised some questions about
ethanol usage in the Northeast, its practicality and its impact
on the environment. Some of the people who are pushing national
ethanol mandates--and I think this would also be the case in
California--are saying, ``Well, that's all right. We'll do a
credit trading program, and if you don't want to use it you can
pay not to use it.'' That doesn't really make a lot of sense to
us that you should have to pay to avoid use of a product which
is problematic in your particular area.
So I would urge people like Senator Lieberman, Senator
Boxer, and others in those areas that might have problems with
the volatility characteristics of ethanol, to take a close look
at this credit trading idea, because it really is a payment to
avoid usage of the product, and it will basically be a payment
to people who produce ethanol in other areas of the country for
part of the gasoline used in your area. I think it is a suspect
idea.
Ethanol has good characteristics and bad characteristics.
That has been pointed out today. It improves combustion, but it
does have some problems in air with volatility and in water.
This first chart shows the different gasolines that are
made in the central and east United States in the summer now.
You will see there are 10 of them--10 different types of
gasoline--this chart was provided to us by our member, CITGO--
that have to be provided in these areas.
If you put an ethanol mandate as an overlay on top of that,
you are going to force these people basically to ship special
blendstock into all of these areas to blend the ethanol at the
terminal. That means significantly more cost for that
blendstock, a shipment of ethanol by rail or truck, plus the
blending facilities needed at the terminal, which will have to
be passed on to consumers. That's tremendous increase in
complexity in an already very complex and almost inscrutable
system.
I just want to point out that refiners already have a full
plate. Mr. Chairman, I know you are very much aware of that.
These are the 12 programs that the refiners are going to have
to implement and comply with over the next 10 years. They are
extremely expensive. Diesel sulfur reductions and gasoline
sulfur reductions, alone, are going to cost roughly $15 billion
in the next 10 years. And an ethanol mandate is another product
specification change that will basically complicate all of
those compliance programs and cost additional money and
overburden a refining industry that already is showing some
signs of strain.
So we urge Members of the Subcommittee and Members of the
Senate to take a very close look at this mandate proposal. We
think it is very premature and will end up, again, being bad
policy for U.S. consumers and the fuel supply.
Thank you.
Senator Inhofe. Thank you, Mr. Slaughter.
Where would all these increased costs of these regulations
be passed on?
Mr. Slaughter. Consumers will bear them, Mr. Chairman.
Senator Inhofe. Thank you.
Mr. Huggins with Williams.
STATEMENT OF JACK HUGGINS, VICE PRESIDENT, ETHANOL OPERATIONS,
WILLIAMS ENERGY SERVICES, PEKIN, IL
Mr. Huggins. Good morning, Mr. Chairman and members of the
committee. I am very pleased to be here to discuss ethanol's
continued participation in the Federal reformulated gasoline
program, generally, and RFG oxygen content requirement,
specifically. I appreciate the opportunity to provide comments
on behalf of the domestic ethanol industry.
First, let me tell you something about my company. Williams
is a global energy and communications company headquartered in
Tulsa, OK. We have about 23,000 employees and operate about $25
billion in assets.
Through our various energy businesses, we own and operate
nearly 60,000 miles of natural gas and liquid pipelines located
throughout the United States.
Williams is a producer of natural gas, a large processor of
natural gas and natural gas liquids, and our energy marketing
and trading group is one of the largest in the country.
We own two refineries in the United States and operate a
refinery in Lithuania.
We transport, terminal and retail gasoline and other
petroleum products.
Our bioenergy group, of which I am a part, is the second-
largest producer of ethanol in the country, with plants in
Illinois, Nebraska, and, most recently, a new project announced
in Wisconsin.
Given our extensive involvement in both the petroleum
industry and the ethanol industry, we believe we have a unique
perspective on the issues being discussed today.
I think it is important to underscore that the reformulated
gasoline program, with its oxygen content requirement, has
worked quite effectively. Air quality has improved. Indeed,
about 75 million people are breathing cleaner air because of
RFG. EPA reports that RFG is reducing ozone-forming hydrocarbon
emissions by 41,000 tons annually and toxic pollutants such as
benzene by 24,000 tons annually. That's equivalent to taking 16
million vehicles off the road each year.
A study by the Northeast States for Coordinated Air Use
Management shows that today's RFG reduces the cancer risk from
gasoline by about 20 percent.
It is critically important to recognize that these benefits
are significantly greater than required by the Clean Air Act's
performance standards for hydrocarbons and toxics, at least in
part because of the Federal oxygen requirement.
In the midwest markets, where ethanol has been used
extensively, the air quality record is excellent and can serve
as a model for the rest of the country. In fact, the Chicago
branch of the American Lung Association fully supports this
program.
Air quality gains provided by RFG with oxygenates should
not be sacrificed as MTBE use is reduced. The RFG program
assures air quality benefits through the combined application
of emissions performance standards and an oxygen requirement.
As a result, the RFG program has provided toxic reductions in
excess of those required by the performance standards, alone.
The oxygen standard has also provided reductions in carbon
monoxide, for which there is no performance standard at all.
The real world emissions benefits of oxygen are especially
beneficial with higher-emitting vehicles and off-road and off-
cycle driving. The EPA should be instructed to compare the
potency weighted toxic effects of oxygenated and non-oxygenated
RFG.
It is critical that the carbon monoxide benefits of
oxygenates not be ignored. The oxy-fuel program works, and CO
has been dramatically reduced nationwide.
The primary concern with maintaining the oxygen standard
appears to be the industry's ability to supply the increased
demand for ethanol, but such concerns are unfounded.
It is important to understand that, because ethanol has
twice the oxygen content of MTBE, it will only take half as
much ethanol to satisfy the oxygenate requirements of RFG.
Currently, MTBE use in RFG is approximately 250,000 barrels per
day. That level of oxygen can be met by 128,000 barrels per day
of Ethanol. Current ethanol production is 100,000 barrels per
day.
A recent report prepared by AUS consultants for the
Governors' Ethanol Coalition demonstrates that the ethanol
industry can double production within 2 years, quicker than the
proposed 3-year MTBE phase-out. Information demonstrating
ethanol's ability to meet the expanded requirements is included
in the paper I have presented to this group.
The logistics of the expansion of ethanol markets can be
met by water movement, rail movement, and pipeline movement.
Williams has met with major refiners on both the East Coast and
West Coast, and we contemplate moving vessel loads of ethanol
to Los Angeles, to New York, and New Haven, and further
distribution by pipeline. There are also pipeline possibilities
from Chicago to the East Coast.
In conclusion, the domestic ethanol industry understands
that Congress is faced with a daunting challenge--how to
protect water supplies by reducing the use of MTBE without
sacrificing air quality or increasing fuel prices.
We see ethanol as a solution. Increasing ethanol use in
this program will allow MTBE to be phased out cost effectively
while protecting precious water resources and air quality.
Stimulating rural economies by increasing demand for grain
use in ethanol production will help farmers left behind by our
booming economy. Encouraging new ethanol production from
biomass feedstocks will provide additional environmental
benefits and take a positive step toward a sustainable energy
future and global climate change.
The bottom line is that we need to protect both air quality
and water quality, and with ethanol we can.
Senator Inhofe. Thank you very much, Mr. Huggins.
Mr. Grumet with the Northeast States for Coordinated Air
Use Management.
STATEMENT OF JASON S. GRUMET, EXECUTIVE DIRECTOR, NORTHEAST
STATES FOR COORDINATED AIR USE MANAGEMENT, BOSTON, MA
Mr. Grumet. Thank you, Mr. Chairman. Again, my name is
Jason Grumet, and I am with NSCAUM, the Northeast States for
Coordinated Air Use Management--not an easy one, Mr. Chairman.
For 30 years, however, with that acronym, the Northeast States
have been working together to try to promote consistent
policies to air pollution control, and on behalf of those
States I want to thank you for the opportunity to be here
today.
Mr. Chairman, in order to talk about where we are going,
I'd like to begin by talking about where we are, the status
quo, and the dire impacts on the Northeast's economy and
environment if Congress does not legislate to lift the oxygen
mandate this summer, and then I'd like to talk about the
different approaches that are under consideration today and the
different impacts those approaches would have for ethanol
policy and ethanol use.
The good news, Mr. Chairman, is that MTBE as a fuel
additive is going away, and I think we can thank Senator Boxer
and Governors Davis and Pataki and Roland and many others for
the advocacy to remove MTBE as a fuel additive.
The real debate right now is simply whether we proceed with
a severe curtailment of MTBE back to the historic pre-1990
levels with the possibility of banning the product altogether,
or whether we just ban the product right now. But within that
narrow band I think it is clear to us in the Northeast that
MTBE will no longer be a fuel additive in our region in any
quantity. That would be the good news, Mr. Chairman.
The bad news is that, if we keep the oxygen mandate in the
absence of MTBE, we have just, in fact, required a de facto
ethanol mandate and, in fact, it is an ethanol mandate of the
very worst kind, Mr. Chairman, because it is a summer time
ethanol mandate borne primarily on the Northeast colonies that
I represent, on the backs of California and Texas.
This would have profoundly negative impacts on our
environment and our economy in that these are the regions of
the country that have severe ozone problems, and, as we've
heard from a number of speakers, ethanol, in fact, undermines
our ability to attain the ozone standard. I think that is
evidenced by the fact that we have a waiver on one of the most
important environmental criteria in gasoline, that being the
volatility, in order to tolerate extended uses of ethanol.
Second, it is a mandate of the worst kind because it is a
mandate on the very fringes of the country where ethanol is not
produced. One only needs to pick up the newspaper to look at
the dramatic increases in price that have come in reformulated
gasoline in those States that use ethanol, and that's certainly
a problem that we care very deeply about. It's certainly a
problem that we don't want to exacerbate.
If we were to require summertime use of ethanol in
Philadelphia and Boston and Hartford and New York City, not
only would we have the same problems that are being faced in
Milwaukee and Chicago with regard to providing the low blend
stock base fuel with which you can blend the very volatile
ethanol, we would have the additional cost of transporting that
fuel to the Northeast. So, as I think you can see, from our
standpoint a summertime ethanol mandate would be an absolute
disaster.
With regard to who benefits from that, however, since
someone always benefits from someone else's misery, I would
argue that it is not the farmers who would benefit from
maintaining the oxygen mandate, but rather it is one or two
large, multinational agribusinesses, the only companies in this
country who have the infrastructure capacity to move hundreds
of millions of gallons of ethanol from where it is produced to
where it would be mandated to be used.
We simply cannot tolerate Congressional inaction in the
northeast and, frankly, we can't fathom legislative efforts
which would seek to take this de facto ethanol mandate and make
it an aspect of law. Legislative efforts to require maintenance
of the oxygen mandate we feel do not hold any promise to
provide the bipartisan and national consensus necessary to
address this problem.
Within and beneath the shadow of what we truly believe is a
looming disaster for the northeast, we are trying very ardently
to work and bring new collaborative efforts forward to try to
help you address this issue. I think most people are aware the
Northeast States several months ago joined with the American
Petroleum Institute, several refiners, the NPRA, and the Lung
Association to advance a set of principles that we believed
were the bedrock necessity to move forward on this legislative
effort, and I want to thank you, Mr. Chairman, for introducing
legislation very recently which I believe is very true to these
basic principles.
I'd also like to thank Senator Smith's staff for bringing
forth a discussion draft I think is true to those basic
principles, and the legislation brought forward by Senators
Lugar and Daschle, which I also think reflects the basic
principles that the Northeast States and the Lung Association
have argued as necessary to address lifting the mandate while
maintaining air quality.
We find ourselves where we expected we would be in this
moment in the debate, and that is having consensus about all
issues, generally, except one, and that being the treatment of
ethanol.
At the outset, I would suggest that, if it were possible to
advance legislation that took care of all the Northeast State's
interests, as your bill I believe does, and provided no
consideration of ethanol, that would be wonderful and we would
strongly endorse such an effort. However, if, by maintaining
our unyielding and entrenched adherence to our interests to the
exclusion of the interests of other regions of the country, we,
in fact, are collusive in encouraging legislative inaction, and
shame on us, because what we would have just done is ensured
the worst possible kind of mandate for the Northeast States.
So, again, the worst possible outcome for the Northeast
States is Congressional inaction. We firmly believe that
ethanol policy must transition from policies of market
protection to policies of product quality; however, we are not
willing to play a game of legislative chicken with the
northeast environment and economy on the line.
We, therefore, have made several supportive statements of a
properly designed renewable fuel standard or clean alternative
fuels program that would ensure that ethanol use is able to
continue, but also does so in a way that does it in the right
place and the right time.
Thank you, Mr. Chairman.
Senator Inhofe. Thank you, Mr. Grumet.
During question and answer time I will be asking each one
to respond to my legislation, so I appreciate that.
Mr. Gatto.
STATEMENT OF STEPHEN GATTO, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, BC INTERNATIONAL, DEDHAM, MA
Mr. Gatto. Thank you, Mr. Chairman. My name is Stephen
Gatto. I'm the president and CEO of BC International
Corporation, a company that is utilizing new technologies to
manufacture ethanol from cellulosic biomass wastes such as wood
waste, rice straw, and a variety of urban wastes and nonenergy-
intensive dedicated crops.
I am here today to address many of the issues raised
regarding the ethanol industry's ability to meet the demand and
infrastructure in all areas of the country, and biomass has a
unique opportunity to address that.
Before I begin, I'd like to thank Chairman Inhofe, Ranking
Member Senator Graham, and subcommittee members for providing
me with the opportunity to testify today. In particular, I'd
like to thank Senator Boxer for her support of the biomass
ethanol, in particular. And I'd also like to compliment the
subcommittee for the work it has been doing to address the MTBE
in gasoline and explore the ethanol alternative.
This is a very exciting period for the biomass ethanol
industry. BC International is currently involved in the
completion of a 23 million gallon ethanol facility located down
in Jennings, Louisiana. It is the first of a kind ethanol
facility to take biomass waste. In particular, we will be using
sugar cane residue as our feedstock. We expect that this plant
will be fully operational within less than 2 years, and we are
also developing plants in Gridley and Chester, California, that
will use rice straw and wood waste to produce ethanol. In
addition, we are exploring the opportunities of developing
plants in the Northeast.
Potential capacity for our initial facilities is expected
to be over 150 million gallons of ethanol per year; however,
the biomass ethanol industry's ability to grow exponentially
depends, in part, on the Nation's commitment to providing
renewable fuels with sustainable markets such as a market for
ethanol as a gasoline additive.
The tremendous advances made in the past decade enabling
the construction of these biomass facilities has been made
possible due to the research at the University of Florida. This
research led to the development of an organism that, for the
first time, allows you to take all of the things that we
typically throw away and pile up in landfills and use it
effectively and efficiently.
This research, along with the ongoing Department of Energy
and BC International research, will further increase the
efficiency of production and transportation of biomass ethanol,
and, in particular, we're talking about facilities that get
located where the demand is needed--in particular, building a
facility in the Northeast for Northeast use.
I am before you today to pledge my support for the
Renewable Fuels Act of 2000 introduced on May 4th by Senators
Daschle and Lugar. I firmly believe that the renewable fuel
standard contained in this bill--specifically, the provision
that credits cellulosic biomass ethanol with 1.5 times as much
value as starch-based ethanol for the purposes of compliance
with the standard--would help develop the meaningful domestic
renewable fuels industry across the country, not just in the
Midwest.
The use of ethanol, particularly biomass ethanol, provides
a win/win environmental and economic solution to the MTBE
problem. Ethanol use contributes to improved air quality and
does not pose the same dangers to our water resources as does
MTBE, proven by decades of ethanol use in the Midwest.
This is why gasoline suppliers in California and in the
Northeast such as Tosco and Getty feel confident displacing
most of their MTBE with ethanol.
Ethanol is also favorable because, unlike petroleum-based
alternatives, such as alkylates, ethanol means increased use if
indigenous renewable resources and reduced reliance on imported
oil.
Equally important, our technology enables us to turn
regional waste problems into economic growth opportunities in
rural communities.
To take a closer look at some of the projects that further
demonstrate the extensive benefits of ethanol, in Gridley,
California, in particular, BCI is planning to build a biomass
ethanol plant that will use agricultural waste from the rice
straw farms in Sacramento and areas north of the Sacramento
area. Use of rice straw waste will help reduce the need to burn
open field rice straw, to the tune of roughly 1.5 million tons
annually, resulting in significantly decreased local air
pollution.
Later this summer, BC International plans to begin
construction of a similar plant down in Jennings, Louisiana,
and it will use sugar cane waste as a feedstock, helping to
alleviate a major disposal problem now faced by many of the
sugar-growing communities, especially in Louisiana and Florida.
In the Northeast, and particularly in Maine, as long-term
contracts for electricity from biomass energy facilities expire
or are bought out, a number of sawmill facilities, which
currently provide feedstocks to these biomass electric
facilities, are faced with impending pressures and possible
closure. And, likewise, the sawmill operators face disposal
costs in the tens of millions of dollars if we cannot find an
alternative to disposing of this material. BC International is
currently exploring the development of facilities in the
Northeast to address this problem.
In addition, the potential impact of biomass ethanol on our
available fuel supply and economy is enormous. According to the
National Renewable Energy Lab study, an average of 2.45 billion
metric tons of cellulosic biomass could be available on an
annual basis for ethanol production in the United States. This
is enough biomass to produce over 270 billion gallons of
ethanol, approximately two times the level of current U.S.
gasoline supply.
Having said all this, the question arises: what will these
benefits cost gasoline customers? Simply stated, the use of
ethanol in gasoline does not and will not significantly impact
the price of gasoline. Results of the 1999 study completed by
the California Energy Commission shows that using ethanol would
cost approximately the same and potentially less over the long
term as replacing MTBE with alkylates. Long term, the creation
of a market for biomass ethanol will drive technology
advancements and result in further cost reductions.
With the introduction of Senators Daschle and Lugar's bill,
we are seeking to reduce the reliance on imported fuel by
growing a domestic and renewable fuels industry. The bill's
provision to support biomass ethanol ensures that a renewable
industry will continue to expand beyond the limited capacity of
the starch-based ethanol industry.
I firmly believe that this vision will make for a better,
more sustainable economy, cleaner air and water for our
children and our grandchildren.
For more details on any items that I've mentioned, please
refer to the full written text of my testimony.
I thank you again for the opportunity.
Senator Inhofe. Thank you, Mr. Gatto.
Last, we have Mr. Proctor, who is the director of
transportation in the State of Ohio.
STATEMENT OF GORDON PROCTOR, DIRECTOR, OHIO DEPARTMENT OF
TRANSPORTATION, COLUMBUS, OH
Mr. Proctor. Thank you, Chairman Inhofe, members of the
committee. I am Gordon Proctor, director of the Ohio Department
of Transportation. Thank you very much for this invitation to
testify, and I would especially like to thank Senator Voinovich
for helping make this possible.
The committee today is discussing the role of ethanol as a
motor fuel and a fuel additive. Coming from an agricultural
State, I understand the importance of ethanol's use to the
agricultural industry. I'm also aware of ethanol's role as a
fuel oxygenate and as a domestically produced energy source.
I'm not here to speak against ethanol or the strategy of
promoting its use.
As a State director of transportation, however, I would
point out to the committee an unintended consequence that has
befallen Ohio as a result of the increasing ethanol
consumption.
Under the funding formula adopted in the Transportation
Equity Act for the 21st Century, T-21, Ohio's Federal
appropriation is determined in large part by our contribution
to the highway trust fund. At the time of this enactment, this
was a welcome move for Ohio and one that Ohio supported.
However, there was a consequence that neither Ohio nor
apparently the appropriators anticipated. The consequence was
the dramatic increase in the use of ethanol caused by national
market forces. I am neither an ethanol nor petroleum expert,
but apparently, because of continued depressed corn prices and
because of the continued Federal tax reduction on ethanol, the
use of ethanol-blended gasoline in Ohio has soared from 19
percent to more than 40 percent of all gallons sold at the
pump. Because ethanol-blended fuel is taxed differently than
petroleum fuels, the increase in ethanol use has significantly
decreased the amount of revenue credited to Ohio in the highway
trust fund.
As you may know, there is a 5.4 cent per gallon Federal tax
break on each gallon of ethanol-blended gasoline, and, in
addition, $0.031 of the tax that is collected on ethanol is
credited to the general fund and not to the highway trust fund.
So, in other words, Ohio's contribution to the highway trust
fund is reduced by 8.5 cents for each gallon of ethanol-blended
fuel sold in Ohio. I expect ethanol use will continue to rise
and will continue to reduce Ohio's trust fund contributions.
The sums involved are substantial. For Ohio, these reduced
contributions to the highway trust fund reduced Ohio's Federal
highway funding by $185 million annually. To put that number in
perspective, it equals 21 percent of Ohio's total Federal
obligation ceiling, it equals two-thirds of our State's entire
new construction budget, and it equals what ODOT budgets for
routine bridge repair and replacement each year.
The situation appears to be unique to Ohio because we are
both a large consumer of ethanol and a donor State. For donee
States, other provisions in T-21 appear to mitigate the effect
of rising ethanol use, because those States' appropriations are
not tied directly to their highway trust fund contributions.
Let me emphasize, I am very appreciative of Congress'
efforts on behalf of T-21 and the unprecedented appropriation
it has provided.
Let me also emphasize that Ohio has received the minimum
appropriations guaranteed under the Act. I do not want to imply
otherwise.
What Ohio has not realized, however, is a commensurate
increase of growing highway trust fund dollars, because, while
consumption of fuel in Ohio has risen, our contributions to the
highway trust funds have been stunted by the way ethanol is
taxed.
The situation exacerbates Ohio's donor State status. We in
Ohio have the tenth-largest highway network, we have the fifth-
highest volume of traffic, we have the fourth-largest
interstate network, and we have the second-largest inventory of
bridges in the country. While our traffic and congestion has
risen, our Federal receipts have not risen commensurately
because of the unintended consequence of the ethanol issue.
I would ask for your consideration in two ways. First, I
would ask, in any future consideration of highway funding
formulas, that the use of ethanol be taken into account.
Although it is national policy to encourage ethanol use, the
cost of this policy is not spread uniformly.
Second, I would request, at the appropriate time and in the
appropriate legislation, that the $0.031 of the ethanol tax
that is credited to the general fund be redirected to the
highway trust fund. At least that effort would continue
directing the highway tax receipts into the highway trust fund,
where they would accrue to Ohio.
Mr. Chairman, thank you for this opportunity. I am grateful
for the committee's time and attention.
Senator Inhofe. Thank you, Mr. Proctor.
We want to hear opening statements from the two Senators
who just arrived. First, if it is all right, Senator Boxer, I
want to enter something into the record. I would like to enter
into the record an article about the economics of the ethanol
subsidy which appeared in the ``Energy Journal'' entitled,
``The Economics of Energy Market Transformation Programs,'' by
researchers from Princeton University and the University of
California. They looked at the cost/benefit ratio of ethanol
and compared it to other programs and found--and this is a
quote from the report--``a corn ethanol has not yielded
positive benefits to date, and it appears unlikely that it will
do so in the future.''
We would recognize Senator Boxer for any opening remarks
she might make up to 5 minutes.
OPENING STATEMENT OF HON. BARBARA BOXER,
U.S. SENATOR FROM THE STATE OF CALIFORNIA
Senator Boxer. Thank you very much, Mr. Chairman, for
holding this hearing. I understand that after this good panel
we are going to hear from Senators Harkin, Durbin, and
Grassley, and I'm----
Senator Inhofe. That's correct. Before you arrived, I
announced that we changed those panels around so that the
Senators will have the last panel.
Senator Boxer. Right. I'm very pleased about that. I have a
conflict that starts at 11, but I just wanted to thank you very
much for including them, as well, because I think they have a
lot of expertise in these areas.
I also was very pleased to hear from Stephen Gatto from BC
International and his plans concerning the opening of a biomass
ethanol plant in Gridley and Chester, California. As he
explained, the plant would use the agricultural waste from
rice, rice straw, and turn that straw into ethanol, and this
would solve a serious waste problem for Sacramento's rice
farmers, who have no way to dispose of the waste, and make a
great contribution, I think, to the transportation sector, to
clean air, and, frankly, clean water, which I'm going to talk
about in a moment.
I'd like to place into the record a letter written to me by
California Biomass Interests, which discusses their plans and
the way they see that this biomass can, in fact, help us with
the problems that we face.
Senator Inhofe. Without objection.
Senator Boxer. I am also very pleased to learn that this
hearing will be followed by a full committee markup--is it next
week on MTBE?
Senator Boxer. I'm very pleased about that. And I just want
to state at the start, I don't have any prejudices about, you
know, what we should put in the gasoline to help clean up the
air. I just know that we need to clean up the air, and I'm
going to be strong on that point. We shouldn't back down from
that goal.
And we also shouldn't trade clean air for poison water. I
mean, that's just not even something that makes any sense at
all. So what has motivated me from the beginning is not any
particular interest except what I would call the environmental
interest.
Now, clearly, we wouldn't be here today if we weren't
having a horrible problem with MTBE. I have been calling for
the elimination of MTBE for over 3 years, and I introduced
legislation to ban it. Frankly, it is poisoning the water
supply in California. It is as simple as I can state it.
I called on the EPA administrator for many years to ban it.
Finally, on March 21, 2000, she did propose to write a rule to
phaseout MTBE, and that was after I'd brought a resolution to
the Senate which was, fortunately, a victorious one, to
phaseout MTBE. So the Senate went on record as saying we should
get rid of MTBE, then the administrator, a year later, said,
``We're going to phase it out.'' As far as I am concerned, we
ought to move it even faster, and I want to explain why.
Since Santa Monica, CA, lost 71 percent of its drinking
water supply to MTBE contamination, we have found MTBE leaking
into groundwater at approximately 10,000 sites in California.
Drinking water wells in beautiful Lake Tahoe and Glenville have
been closed due to MTBE contamination. MTBE leaking from
underground tanks near drinking water wells in Cambria,
California, now threatens that small community's entire water
supply. And we all know by now that MTBE is not just a
California problem. Frankly, when I raised this issue 3 years
ago, we had just found MTBE in just a couple of States. I said,
``Let's learn from California's problems here. Let's get rid of
it.''
Well, we haven't done it, and so now we see MTBE as a
problem in Maine, where it is estimated that between 1,000 and
4,300 private wells may contain MTBE. MTBE is a problem for New
Hampshire. Our full committee chairman knows that--he has been
very helpful, by the way, working with me on this matter--where
MTBE has been detected in more than 100 public wells and water
supplies, and that's a small State, so that's a lot of
detection.
MTBE is such a severe problem in New York that New York
recently followed California's lead by banning MTBE. Suffolk
County, New York, for example, estimates that 80 percent of its
wells showed detectable levels of MTBE. In fact, a recent study
of 31 States found that approximately one-third of the drinking
water supplies in those States, 31 States, may already be
contaminated with MTBE.
I'd like to place that study, a particular study, in the
record. That shows the contamination in these 31 States--
without objection.
Senator Inhofe. Without objection.
Senator Boxer. Thank you.
As we move forward with legislation that would finally
phaseout MTBE, we do need to be sure that any replacement is
safe and reliable and is affordable. I look forward to learning
more about that as I study all of your comments. I was here for
many of them. And I want to compliment the Chair, because he
really has put together a panel that doesn't agree on much,
which is a healthy thing because we get to see all the
different views.
I'm about to finish my remarks, if I could have an
additional minute.
I am hopeful that replacing MTBE with ethanol will help
restore what I consider to be some sanity in our Nation's
energy policy. Because ethanol is a renewable resource made
from readily available feedstock like corn, increasing ethanol
use would help reduce dependence on foreign oil. I see it as a
win/win. I really do. And it would help our farmers by boosting
their low corn prices. And, as I mentioned before, ethanol can
be made from waste like rice, straw, wood trimmings, and trash,
as Mr. Gatto has explained.
So the greater use of ethanol can turn an environmental
problem, waste, into an environmental benefit, energy, and the
economic benefits for our farmers and clean air and getting rid
of a poison, which is clearly a poison and is drastically
harming our people--at least in California I can say that.
So, Mr. Chairman, again thank you for putting together this
panel that has a very broad range of views. I think it is good.
I know your views and mine aren't exactly the same on this, but
I can only say to you from the bottom of my heart, I don't have
any agenda other than making sure that the air is clean, the
water is clean, and we keep on moving forward, and people can
afford to get the gasoline.
You know, the question of whether it will add four cents or
six cents a gallon is an important issue, but I think the
overriding problem here is that we are poisoning our water, and
that costs a lot to fix, and you can't really measure the kind
of ill health effects you might have if we continued with MTBE,
so thank you very much for your time.
Senator Inhofe. Thank you, Senator Boxer.
Senator Voinovich, you are recognized for an opening
statement.
OPENING STATEMENT OF HON. GEORGE V. VOINOVICH,
U.S. SENATOR FROM THE STATE OF OHIO
Senator Voinovich. Thank you, Mr. Chairman.
I appreciate your conducting this hearing today on ethanol,
particularly as the full committee tries to address the issue
of MTBE contamination of groundwater and drinking water
systems. It is kind of an interesting time because we see this
high increase in the cost of gasoline and the debate going on
about whether oxygenates are really important or not important
and whether the use of ethanol is being exploited in some parts
of the country. There are lots of accusations and things just
rolling all over the country, so I think it is kind of a good
time to have all these folks in front of us today.
As you know, Mr. Chairman, I have been a strong supporter
of ethanol for its environmental benefits toward reducing
carbon monoxide, particulate matter, and toxins. In addition, I
believe its benefits to the agriculture community through the
use of corn, and when I was Governor I sent many letters to
Congress urging them to keep ethanol. And I do support the use
of ethanol to reduce this country's dependence on foreign oil.
Like MTBE, another oxygenate used in RFG, ethanol helps
lower emissions of volatile organic compounds, toxins, carbon
monoxide, and particulate matter, and, according to the EPA,
reformulated gasoline is responsible for 17 percent reductions
in VOC emissions and 30 percent reductions in toxic emissions.
Oxygenates such as ethanol also reduce the use of aromatics in
gasoline, many of which are known as potential human
carcinogens. Unlike MTBE, however, ethanol does not contaminate
groundwater and drinking water systems.
In addition, the production of ethanol is helping our
Nation's farmers. The Department of Agriculture estimates that
about 555 million bushels of corn are used to produce about 1.4
billion gallons of fuel, ethanol.
It is kind of interesting, Mr. Chairman, that last year or
this year we are trying to do something about the farm economy.
There is no question that the use of ethanol is having a
positive impact on that farm economy, and, quite frankly--and I
hate to say this--if they weren't benefiting from this way, I'm
sure some of them would be in here asking for some more help
from the Federal Government.
When you start looking at these things, there are many
aspects of it that you have to take into consideration.
I also believe that one of the important benefits of using
ethanol is that it is domestically produced. I don't believe
that ethanol is going to take the place of conventional
gasoline, but I do think it is important to reduce this
country's reliance on foreign oil, which is, at this stage of
the game, 55 percent, and, as the Department of Energy
predicts, by 2020 it will be up to 65 percent. We have a real
crisis in this country, and ethanol may be one of the things
that we can use, along with, perhaps, Mr. Chairman, subsidizing
marginal producers of oil in this country who have been out of
business because of the low cost per barrel.
There are a lot of things that we need to do, but this, I
think, is one of the things that should be on the smorgasbord
of this country's energy policy.
I also believe that we also have to take into
consideration--Gordon Proctor, I am glad that you are here
today. I want you to know, Mr. Chairman and Senator Boxer,
Gordon is one of the outstanding highway directors in the
United States of America, and brings to us a real interesting
perspective. Senator Boxer, I think you should be real
interested in it. It is that the more use of ethanol, the less
money goes into the highway trust fund. And today Ohio is
hurting because we are the biggest user of ethanol in the
country. I don't know how that has happened, but we are. As a
result of that, we are not getting the growth in that highway
trust fund.
If we are going to keep the oxygenate and if we are going
to be using ethanol, then we need to look at the highway trust
fund and maybe change one of the provisions that says that
$0.031 of that tax goes into the general fund, because if we
don't, places like California and Ohio and others that are
going to be using ethanol are going to be not getting their
fair share of that trust fund because it is going into the
general fund.
So I think that this is a wonderful hearing to have at this
time, and hopefully, as you're listening to the witnesses and
reading their testimony, we'll have a better idea of how we
ought to figure out what we ought to do in regard to this.
Thank you, Mr. Chairman.
Senator Inhofe. Thank you, Senator Voinovich.
[The prepared statement of Senator Voinovich follows:]
STATEMENT OF HON. GEORGE V. VOINOVICH, U.S. SENATOR FROM THE
STATE OF OHIO
Mr. Chairman, I appreciate you conducting this hearing today on
ethanol, particularly as the full committee tries to address the issue
of MTBE contamination in groundwater and drinking water systems.
I have been a strong supporter of the use of ethanol for its
environmental benefits toward reducing carbon monoxide, particulate
matter and toxics. In addition, I believe it benefits the agricultural
community through the use of corn. And, I support the use of ethanol as
a way to help reduce our dependence on foreign oil.
Mr. Chairman, I particularly want to welcome Gordon Proctor,
director of the Ohio Department of Transportation. Mr. Proctor was a
member of my transportation team when I was Governor of Ohio and was a
leader in quality management. Mr. Proctor also was instrumental in
implementing the TRAC system in Ohio for prioritizing transportation
projects. The TRAC system enables the state to recognize and fund those
projects that are the most needed. I was delighted that Governor Taft
elevated him to Director of ODOT. He is one of the most respected
transportation directors in this country. I look forward to his
testimony today on the effects of ethanol consumption on the Highway
Trust Fund.
Ethanol has been beneficial to the environment and the agricultural
community. It has been used successfully to improve air quality in
areas that use Reformulated Gasoline (RFG). It has also reduced carbon
monoxide emissions under the Oxygenated Fuels program in carbon
monoxide nonattainment areas.
Like MTBE, another oxygenate used in RFG, ethanol helps lower
emissions of volatile organic compounds (VOCs), toxics, carbon monoxide
and particulate matter. According to EPA, RFG is responsible for 17
percent reductions in VOC emissions and 30 percent reductions in toxic
emissions. Oxygenates, such as ethanol, also reduce the use of
aromatics in gasoline, many of which are known or potential human
carcinogens.
Unlike MTBE, however, ethanol does not contaminate groundwater and
drinking water systems.
In addition, the production of ethanol is helping our nation's
farmers. The U.S. Department of Agriculture estimates that about 555
million bushels of corn are used to produce about 1.4 billion gallons
of fuel ethanol.
I also believe one of the important benefits of using ethanol is
that it is domestically produced. While I do not believe that ethanol
will take the place of conventional gasoline, I believe it is important
to support its growth as a tool to help reduce this country's reliance
on foreign oil and gasoline imports. Today, our oil imports have risen
to about 55 percent.
However, as chairman of the Transportation and Infrastructure
Subcommittee, I believe we need to keep in mind the effects that any
increased ethanol use would have on the Highway Trust Fund.
Currently ethanol receives a Federal tax credit of 5.4 cents per
gallon of gasohol or 54 cents of pure ethanol. OMB currently estimates
that the annual revenue loss due to the 5.4-cent tax credit is $800
million. In addition, 3.1 cents of the tax that is collected on ethanol
is credited the general fund and not to the Highway Trust Fund.
I strongly believe that as we proceed forward with addressing MTBE,
if ethanol use is increased which I support then we need to ensure that
States do not lose Federal highway funding because of their use of
ethanol to help meet air quality standards.
Mr. Chairman, I look forward to today's testimony.
Senator Inhofe.We'll have a couple rounds of questions now.
I'd like to just ask for a brief answer from each member of
the panel. I know you all heard my opening statement, which
cited the Blue Ribbon Panel's call for more research and the
California Report's call for more research, and I realize that
some of you already stated today that more research is
necessary, but, just so we can get it on the record, I'd like
to go down the line and just ask if you believe that more
research should be conducted on ethanol before making these
decisions.
We'll start with Mr. Greenbaum. Just yes or no is fine.
Mr. Greenbaum. Mr. Chairman, I reminded the panel in my
testimony of the recommendations of the Blue Ribbon Panel
calling for additional research. I think it is important,
however, to not suggest that no action be taken on the mandate
and on the oxygenate issue and on getting rid of MTBE while we
wait for that, so we need to balance that. But clearly we need
to do more research on ethanol.
Senator Inhofe. Yes, sir.
Mr. Early.
Mr. Early. Mr. Chairman, we would support more research on
ethanol and all substitutes for MTBE, as Senator Boxer
suggested.
Senator Inhofe. Yes. Doctor?
Mr. Graboski. I agree. Yes.
Senator Inhofe. Mr. Slaughter.
Mr. Slaughter. We're in favor of pervasive research on what
would be going into a pervasive product. We're definitely in
favor of it.
Senator Inhofe. All right. Mr. Huggins.
Mr. Huggins. I think we have had thousands of years of
research on ethanol. Brazil uses ethanol in all of their fuel.
More research is nice, but I think we need to decide what we
want to learn from that research.
Senator Inhofe. OK.
Mr. Grumet. Certainly more research is always helpful, but
we face a choice of varying approaches to mandating ethanol,
and, in the face of the dire circumstances of those choices, I
don't think we have the luxury of sitting back and awaiting
that research before Congress acts.
Senator Inhofe. Yes.
Mr. Gatto. I think that a lot is known about ethanol. We
drink it when we drink wine. We drink it when we drink beer and
alcohol. To talk about the peculiarities of how it will behave
compared to gasoline, which we all know what the reactions
would be for whatever reason of human ingestion, or what have
you, of that product, we need to make sure that we're looking
at this in an apples and apples comparison.
I do believe that, to the extent that anything is going
into the gasoline supply, all things such as alkylates need to
be tested and looked at, as does gasoline, as a whole.
Senator Inhofe. All right.
Mr. Proctor.
Mr. Proctor. Mr. Chairman, I couldn't qualify or couldn't
be qualified to comment on the health effects of the research,
but, in terms of research into making it economical, to
integrate it into the infrastructure of the transportation
system, we would certainly be supportive of such research.
Senator Inhofe. All right.
During the opening statements, three of you--Mr. Early, Mr.
Slaughter, and Mr. Grumet--all referred to legislative
principles. I'd like to just briefly, in a one-sentence form on
each section, summarize the bill that I have introduced. I
think some of you are familiar with it, but I'll just go ahead
and read this.
Section one, Governors may waive out of oxygenate mandate;
the anti-backsliding program for toxics in reformulated gas
areas; development of additional standards for storage tanks;
administrator may ban oxygenates; MTBE is phased down to pre-
1990 levels; Governors may ban MTBE; MTBE producers are given
assistance with new permits; and regulations must assure
adequate fuel supply.
For the three of you who addressed legislative principles,
could you respond to the legislation that I am drafting.
Mr. Early.
Mr. Early. Well, Mr. Chairman, clearly your legislation
captures many of the principles and we think is a very good
starting point for legislation. It is, I think, important that
that legislation focuses on the most important issues that we
need to address as we move forward to phasing MTBE out of the
fuel supply.
Senator Inhofe. Thank you.
Mr. Slaughter.
Mr. Slaughter. Yes, Mr. Chairman, your legislation, as I
understand it, comports with NPRA's position on how to address
the problems with the oxygenation mandate.
Senator Inhofe. Thank you.
Mr. Grumet.
Mr. Grumet. Thank you, Mr. Chairman.
Mr. Chairman, I would agree. I think your legislation is an
excellent contribution to the discussion. I think it very
clearly reflects many of the principles that we have been
promoting.
I would make a couple of specific comments.
The legislation does not focus on impacts that could affect
the conventional gasoline supply, which is two-thirds of the
Nation's fuel supply, and that is an issue that has been of
more substantive discussion of late.
It also doesn't address the fact that the environmental
requirements for ethanol are less protective than the
environmental requirements for gasoline because of the RVP
waiver.
Finally, the legislation, like most legislation, is
dependent upon an intricate choreography of EPA rulemakings,
and I think we want to interact with your staff about whether
there are ways to back stop some of those obligations.
The last thing I would say, Mr. Chairman, is that I think
you would agree the Northeast States have a long history of
principled advocacy in the face of political impossibility.
However, I think that, in this case, that absolutism is
somewhat chastened by two factors. One is the dire impacts that
will face the Northeast environment and economy if legislation
does not move forward, and the second is the evolution of what
appears to us to be some very constructive compromise. I think
that the efforts in the full committee with Senator Smith to
look at ways to acknowledge the growth in ethanol that is going
to happen, as Mr. Early and Mr. Slaughter indicated, and find a
way to enable that ethanol to be sold in ways that are
consistent with environmental and economic principles and the
extent to which we can bring a broader suite of fuels into that
competition really holds promise.
We have learned that legislation requires the courage to
compromise, and I think we stand here with you.
Senator Inhofe. It is. I wish this were an easy solution,
but there isn't one out there, and so we're just looking to see
what will grab a consensus.
Senator Boxer.
Senator Boxer. I just had one question.
Mr. Chairman, I was interested to hear the principles of
your legislation, and I think that you have come a long way to
recognizing some of the things that we have been talking about
in terms of MTBE, but I just would like to state that when I
started this several years ago, when we started to see the
horrible problems from MTBE, I looked at the thought of, well,
going back to just how much we used at certain years and so on,
and then I thought, well, a poison is a poison is a poison, and
a little bit of poison isn't good and a lot of poison is worse.
So for me to stand up in front of my constituency and say,
``I did a lot for you. I took some of the poison out of the
water''--I would much prefer to stand up and say, ``I got rid
of the poison.''
I guess that's where I differ with you, Mr. Chairman.
Mr. Greenbaum, I have a question for you. I also think
research is good on everything that is a commonly used thing,
and clearly we are going to move to ethanol one way or the
other, but ethanol has been out there since, as I understand
it, the 1970's; is that correct? About 12 percent of the
gasoline supplies have it right now?
Mr. Greenbaum. Yes.
Senator Boxer. So the question I have is, we know what has
happened with MTBE. We know it has shut down water supplies.
People can't drink it. They won't touch it. It is ruining Lake
Tahoe. We know all these things. What stories do we have about
ethanol in the places where it is used? For example, in Ohio,
Senator Voinovich says--what is it, 40 percent of your fuel has
got ethanol in it?
Mr. Proctor. Yes.
Senator Boxer. What stories do we have? Did it ever poison
a well? Did it ever explode? Did it ever leak? What are the
problems? And what are these problems that you have seen that
causes you to believe we need more research?
I love more research, but what are the problems we have
that would cause to human health and the environment that you
think we need to look further at?
Mr. Greenbaum. First off, let me be clear that the Blue
Ribbon Panel's recommendations clearly called for action, and
action soon, because of the need to deal with----
Senator Boxer. Action to ban MTBE, phase it down?
Mr. Greenbaum. We called for the action to substantially
reduce it, and members of the panel called for phasing out the
use of MTBE, flexibility in blending the fuel--i.e., removing
the mandate so you could do it cost effectively around the
country--and tightened air quality standards. So we wanted
action.
Research, at the same time, needed to be done, because
while you're doing the phase-in of whatever takes the place,
you need to know what the effects are going to be.
Senator Boxer. That's not my question.
Mr. Greenbaum. So therefore----
Senator Boxer. I agree with the research, but----
Mr. Greenbaum.--I was not saying----
Senator Boxer.--I'm just asking you is there any--have we
ever had a public health problem such as we've had with MTBE
with ethanol? Have we ever had a leakage, a poisoning of the
water, shut down of drinking water?
Mr. Greenbaum. But let me be clear. I was getting to that,
and I did intend to answer that. We've never--what the panel
found is that we've never, in the areas where we have used it,
asked the question in the right way. The issue will not be
ethanol contaminating groundwater, itself, and contaminating
drinking water wells. The issue will be, if there is one, that
it might increase benzene and other things in gasoline getting
to wells where it has been used.
What we called for--and I reiterated it in my testimony--is
very clearly getting out there in the areas where we have been
using it and start monitoring and testing whether we have seen
an increase, for example, in benzene contaminations in the
areas of the country where it has been used compared to areas
where it wasn't used.
We have never done that. That isn't done. And you could do
that right now, even if you foresaw a 4- or 5-year time table
out there for increased use of it, but I think you need to--
that's the kind of information we called for getting.
Senator Boxer. I really appreciate that. So, in other
words, you want to see how it reacts with other compounds and
if it has a bad effect on that, but you don't know that it
does?
Mr. Greenbaum. It will be ethanol, itself, that will be
the----
Senator Boxer. It isn't the ethanol, itself; it's the
effect on other things that you want to look at.
How long would it take to study that?
Mr. Greenbaum. Well, I----
Senator Boxer. I think that's very important for us to
know.
Mr. Greenbaum. Yes. We called for immediately getting into
the data bases that we currently have. I think it is a matter
of 2 to 4 years of getting out there, getting the data, putting
it----
Senator Boxer. OK.
Mr. Greenbaum. We do not call for all of that research to
be done before any action is taken.
Senator Boxer. I totally understand. I totally get it.
Mr. Greenbaum. But we have said that it needed to move
forward, and it hasn't moved forward, and I think it is very
important that any action that Congress takes spur that
activity, as well as anything else that it chooses to do.
Senator Boxer. Thank you.
Thank you, Mr. Chairman.
Senator Inhofe. All right. We're going to be having three
Senators as the next panel, and I thought, since two of them,
Senator Harkin and Senator Grassley, are from Iowa, I'm going
to read excerpts of two editorials that appeared in a couple
Iowa newspapers--one, the Des Moines Register, and the other is
the Quad City Times. And I'm going to ask each one of you to
respond to these, so you may want to make a couple of notes as
I'm reading these editorials. I thought this would be a way to
set up the next panel.
From the Des Moines Register: ``An ethanol mandate would
deny Iowans a choice of fuels and short circuit the process of
ethanol establishing its own worth in the marketplace. The
justification is to marginally boost the price of corn. Cleaner
air is offered as a reason, too, but that's an afterthought. If
that were the goal, other measures would be far more
effective.'' I'm skipping around now. ``Let Iowans make their
own choices and let ethanol prove itself in the marketplace.''
Then, in the Quad City Times: ``Chuck Grassley and Tom
Harkin may have--'' this is a bipartisan statement here, by the
way--``Chuck Grassley and Tom Harkin may have the best of
intentions, but their proposal to boost ethanol use in Iowa is
seriously misguided. The Cato Institute estimates that every
dollar of profit now earned by ADM's ethanol operation is
costing taxpayers $30 in lost revenues.
``As for claims that ethanol helps the environment, the
National Academy of Science, the Congressional Budget Office,
the Department of Energy, and even the USDA have each reported
that ethanol, which is less efficient than gasoline, provides
no significant environmental benefit and may even add to air
pollution.
``There is an abundance of evidence that indicates ethanol
is not all that it is cracked up to be--not for consumers, not
for the environment, and not for farmers.''
They conclude, ``Ethanol might be worth some level of
Government support, but it never will be so valuable as to
justify scrapping our system of free enterprise.''
I know that's a lot I'm throwing at you there, but I'd just
like to get a comment. We'll start at the opposite end, Mr.
Proctor, and any comment you'd make about the two editorials
that appeared in Iowa.
Mr. Proctor. Mr. Chairman, I guess it does refer to
economic and tax policy tied into the use of ethanol and that
economic and tax policy is tied into our transportation funding
system, so, as there have been unintended consequences when
MTBE was mandated there were health consequences, there are
unintended financial consequences tied into the intervention
into the market. I guess we would just caution that Congress be
aware of what those tax implications are and be fully aware of
them.
I do not in any way, shape, or form want to imply that
health issues and highway funding issues are equal. They're
not. We understand the importance of the health issues. We're
just asking that Congress be aware that there are ripple
effects when there are going to be changes in the fuel
structure in the transportation sector in this country, and
those consequences may not be apparent until all the
calculations are done through the highway funding formulas.
Senator Inhofe. Yes, sir.
Mr. Gatto.
Mr. Gatto. I agree that there is an economic impact, and I
think it is important to point out, as I believe was noted by
the Congressional Budget Office, that about $6 of return to the
Treasury was a result of ethanol in this country for every $1
spent on the credit.
I think we need to keep this in perspective. There's a
battle----
Senator Inhofe. Excuse me. What was your comment about the
$30?
Mr. Gatto. I think that the Cato Institute's information
fails to look at all of the specifics in this particular arena.
Senator Inhofe. I see.
Mr. Gatto. Especially the CBO report that looks at the
impacts, positive impacts, especially of ethanol.
I think it is important to keep in mind that this is a
battle over market share, not necessarily what is best for the
environment or best for imported oil. Anything that we can do
today, looking at the high prices, especially in the Midwest,
to reduce our dependence on imported oil I think goes a long
way to addressing the public's concerns and issues as we go
forward into this century.
Senator Inhofe. Mr. Grumet.
Mr. Grumet. Thank you, Mr. Chairman.
As I mentioned in my prepared remarks, Mr. Chairman, we
firmly believe that it is time to make a transition from market
protection to product quality in designing the future of the
ethanol industry, because, of course, this leaves us with a
logical inconsistency that ethanol is so good that it can't
compete.
That said, Mr. Chairman, I think the headline, ``Let
Ethanol Prove Itself'' is worth reflecting upon. Ethanol has
proved a lot about itself. In fact, I think ethanol has
demonstrated that it maintains a full house of national
environmental benefits. Upon closer scrutiny, that full house
is three aces and a pair of twos--energy security and national
defense, ace in the hole. Ag policy is an ace. Climate change,
especially if we use biomass ethanol, is an ace. Urban air
quality is a pair of twos.
The problem that we have, Mr. Chairman, is that the ethanol
mandate suggests that we focus our ethanol policy on that pair
of twos. We believe ethanol is going to grow by leaps and
bounds without any further protection. That makes us wonder why
it is necessary to have further protection at the same time it
also makes us less resistant to a security blanket for ethanol
which would give the ethanol community the security it needs to
be part of a legislative solution.
Senator Inhofe. All right.
Mr. Huggins. First I'd like to talk about the pricing.
We've heard a lot about that. I happen to live in Illinois. I
live in Peoria. I'm 150 miles from Chicago that has been in all
the press. Chicago prices since April have risen 34 percent.
Peoria prices have risen 30 percent. We don't have RFG in
Peoria. We have conventional gasoline. In fact, if you go into
a gas station you can buy mid-grade with ethanol for $1.75. You
buy conventional unleaded for $1.79. Ethanol is not the problem
with the prices there. And, in fact, RFG is not the problem
with the prices there. There are other problems, and I wish I
could tell you what they were, but it is clearly not ethanol
and it is not RFG with ethanol.
Senator Inhofe. Good.
Mr. Huggins. Relative to the Des Moines Register, at that
time the State of Iowa was looking at passing a requirement
that all fuel sold in Iowa contain ethanol, a law similar to
Minnesota's, but Minnesota had a large part of the State
required oxygenate to satisfy the carbon monoxide problem they
have. Iowa doesn't have that problem, so it would have been a
mandate without any environmental reason.
I think what we are looking at with the Clean Air Act is
significantly different because, in fact, oxygenates have been
proven and RFG has been proven to help air quality
tremendously. I think if we are going to change that formula,
that's where we put the research. Is it like lead, where you
drop lead and increase aromatics? Is it like oxygenates, you
drop oxygenates and increase alkylates? Those are the fuels you
should suggest.
Ethanol has been blended in fuel in this country--well, the
Model T was designed to run on ethanol, so it has been around a
long time and it is in all the fuel in Brazil. So let's focus
the research on where it needs to be done.
And, relative to the cost of ethanol, we have got studies
that suggest that, in fact, ethanol is a gainer for the
Treasury. We talk about Government support and Government
interference in the market. My son was in Desert Storm. There
is massive Government interference in that market, because that
is the only reason we were there, so governments will interfere
with markets in a variety of ways.
Senator Inhofe. Mr. Slaughter.
Mr. Slaughter. Yes, Mr. Chairman. You know, the ethanol
subsidy program, which has cost billions of dollars over the
years it has been in effect, has always involved a shifting of
costs, and I think that's one of the things that was alluded to
in the articles that you read.
Interestingly enough, I believe I heard today that the
State of Ohio, which has very large usage of ethanol, is not
totally happy with the fact that they are paying for that
through the highway trust fund reduction that is affecting
their State, and what is being talked about with this national
scheme is that the cost will be distributed across the United
States and everyone will have to pay for the ethanol,
regardless of whether or not they use it. So I think the logic
of the two articles that you've read is fairly compelling.
Senator Inhofe. All right.
Mr. Graboski. I would disagree with the statement that
there are no environmental benefits to the use of ethanol that
came from at least one of these articles. You know, the Clean
Air Act addresses performance standards and it addresses
general standards, and all we've talked about today are
performance standards issues and not the things that benefit us
that result from the oxygen requirement and general standards.
Because of the general standards, we have less fine
particulate emission from motor vehicles, and fine particulate
emission is a substantial contributor to the PM2.5
inventory in cities, and we have reduced potency-weighted air
toxics, and we have reduced ozone because of carbon monoxide
benefits. So I think these things are real and they are not
weighted into the debate.
My interest is not necessarily trying to make a larger
market for ethanol, which, of course, is the interest of my
sponsor. My interest is in maintaining equal public health. And
so, as we go down the road, I mean, I really think we seriously
need to look at this, and when I addressed the issue of
research before that's what I was talking about--trying to
figure out what the public health impacts of any of these
replacement items are.
I'm also an author of USDA's study that looked at the
efficiency of the conversion of ethanol from corn, and the
statement in one of these articles that said that this is a
less-efficient process than gasoline is totally wrong and it
doesn't agree with our findings or the findings of the
Department of Energy.
Basically, from an energy point of view, you get about
three BTUs of ethanol out from every two BTUs total that you
put in, but that really doesn't tell the true story. In today's
ethanol business, a majority of the energy that goes into
making ethanol really is in a form of coal used in electric-
generating and heat-generating facilities to produce the
ethanol, and in terms of natural gas which goes into making
fertilizer to produce ethanol.
Really, when you look at ethanol, what you're doing is
using lesser-grade fossil fuels in solid and gaseous form and
you are converting those into a very, very useful liquid fuel,
and on that basis, when you look at all of the alternative fuel
type process that the Department of Energy and others have
looked at over the years, this really turns out to be the most
efficient way of converting our fossil resources into liquid
fuels.
Finally, we're talking about prices going up, and prices
are going up for gasoline primarily because crude prices are
going up, and those crude prices are not really within our
control. They are within the control of others. But I would
point out that removing 100,000 barrels a day of ethanol supply
from the gasoline chain, like removing several hundred thousand
barrels a day of MTBE supply also from the gasoline chain, is
not going to decrease gasoline prices, it is going to increase
gasoline prices.
Those would be my comments.
Senator Inhofe. Thank you, Doctor Graboski.
Mr. Early.
Mr. Early. Well, Mr. Chairman, the portions of those
editorials which confirm my testimony, obviously I agree with,
which is using ethanol does not guarantee you an air quality
result. Congress may choose to mandate ethanol in gasoline for
other reasons, either energy security or other reasons, but we
think it is very important that, if Congress chooses to do
that, that we ensure that the use of that ethanol--that there
are protections so that the use of that ethanol doesn't
increase air pollution instead of decreasing air pollution,
because that's the result we want when we're cleaning up fuels.
Thanks.
Senator Inhofe. Thank you.
Mr. Greenbaum.
Mr. Greenbaum. Just briefly, to speak to the comments and
the editorials from the perspective of the Blue Ribbon Panel,
we called specifically for flexibility, the ability to deal
with a reduction in the use of MTBE without dramatic new
mandates so that one could see the most cost-effective
solution.
We assumed that that would result in an increase in the use
of a number of other products, including ethanol, and not in
substantial increase in the use of those products. I think we
saw that mix of solutions defined by the marketplace dealing
with the complex issues of what you needed to blend fuels for
clean air in different parts of the country, what you needed
for cost effectiveness in terms of infrastructure, etc., in
different parts of the country would be the preferred way of
addressing this.
We did acknowledge, as well, as has been the case for
decades in Congress, that there are sets of interests aside
from the fundamental clean air and clean water issues that have
called for increased use of ethanol, and that those might need
to be considered in this process. We thought that there would
be some increase in use, even under any circumstances, if one
moved to get rid of the MTBE, kept tight air quality standards,
and removed the mandate.
Senator Inhofe. Thank you.
Mr. Grumet. Mr. Chairman, can I make one point about
gasoline prices? I would agree with everybody that there is a
feeding frenzy, with consumers at the bottom of the food chain,
but, lest we place all of the blame on OPEC, I think it is
worth noting that the spot price for ethanol sold by Archer
Daniels Midland has gone up $0.15 per gallon in this same time
period that we are concerned about.
Senator Inhofe. From what to what?
Mr. Grumet. I think it was about--this is without the
subsidy--I think about $1.45, closer to about $1.60.
Mr. Huggins. That's not correct.
Mr. Grumet. Well, it has been reported in some articles
which I can submit for the record.
Mr. Huggins. I compete in the marketplace daily. I can tell
you the spot price in the Midwest right now is about $1.35. In
the start of April it was about $1.20. There's your $0.15.
Mr. Grumet. OK. Well, the only point I would make, Mr.
Chairman, is that we are all in this together, and I think we
need to be cautious about creating any policies which would
give any one product, and particularly any one company,
monopolistic control over the Nation's gasoline.
Senator Inhofe. Mr. Grumet, since you are speaking now, you
made the comment during the course of this hearing that maybe
the Smith bill would be a good compromise. The question I would
ask you, which of your Northeastern States would agree with an
ethanol mandate?
Mr. Grumet. Mr. Chairman, as I would expect, you are
probably ahead in this debate than I am. I am only aware that
there is a Smith discussion piece. If he has introduced
legislation, I would commend that.
With regard to the clean alternative transportation fuel
program, I can only refer to the testimony that I submitted,
and provide some input on behalf of Governor Jeanne Shaheen,
who, when commenting upon the renewable fuel standard in the
Daschle bill, which does not provide the Northeast with the
flexibility that the Smith discussion piece I think is
imagining, indicated that a properly designed renewable fuels
requirement ``holds great promise and represents a wise
precedent for the Nation to establish.'' That was a comment by
Governor Shaheen in a letter that I have submitted into the
record.
More recently, Governor Shaheen expanded upon that
statement in a letter to Senator Daschle and Senator Lugar in a
letter of May 5 commending the introduction of the Renewable
Fuels Act of 2000.
Again, this is not a statement that Governor Shaheen, I
think, offers lightly. It, again, was in the shadow of what we
understand to be the results of Congressional inaction, which
would be the worst possible type of mandate--a mandate that, in
essence, provided monopolistic control for one company.
So I think we don't feel like we have the luxury of
entrenchment, and in that regard we commend Senator Smith for
taking what we know to be a courageous and uncomfortable
position, to support further requirements for the sale of
renewable and clean alternative fuels.
Senator Inhofe. We all thrive on discomfort around here.
[Laughter.]
Senator Inhofe. You've adequately answered the question and
I appreciate it. I wanted that clarification.
Mr. Early, I just have one last question to you. You
appeared before this committee in 1994, I guess it was, I
believe, didn't you? I thought you did. Anyway, I'm reading
from some testimony of a previous testimony. I'm quoting now.
It says, ``Potentially''----
Mr. Early. Senate Natural Resources Committee.
Senator Inhofe. Is that it? OK.
Mr. Early. I think so.
Senator Inhofe. I'm going to ask you if your opinion has
changed since this time. You said, ``Potentially increasing
global warming, increasing smog, increasing air toxics, and
increasing water pollution and damages to erodible and
sensitive habitat areas.'' I should have read the first part of
it. You describe ``increases in ethanol use as potentially
increasing global warming, increasing smog, increasing air
toxics, increasing water pollution, and damage to erodible and
sensitive habitat areas, all of this at the increased cost to
the reformulated gasoline consumer and a significant decrease
in highway trust fund revenues.''
Is that accurate? And would that still reflect your
opinion?
Mr. Early. It is clear that some improvements have been
made in ethanol production that changed the energy balance in a
positive way from 1994. I think it would also reduce the impact
on water pollution and erodible land. It's simply a function of
the fact that corn production rates have been improving and
ethanol production facilities have been reducing their energy
use.
But there are still important problems associated with
mandating ethanol in the fuel supply, some of which I cover in
that testimony, but the proportions have clearly changed and I
think that's something that is worth noting.
Senator Inhofe. All right. Thank you very much.
We have our second panel here. With the panel's indulgence,
I'd like to give Senator Voinovich his shot at this panel for 5
minutes and then we'll get to you. Is that all right?
Senator Voinovich, questions of the first panel?
Senator Voinovich. Yes. I'll try to make them brief.
Dr. Graboski, in your testimony you discussed the effects
oxygenates, particularly ethanol, have on particulate
emissions. You stated that removing oxygenates from gasoline is
likely to lead to an increase in fine particulate matter
emissions. Could you elaborate on that point briefly?
Mr. Graboski. Sure. When we talk about fine particulates,
we're talking about PM2.5 material, which is a
subset of the PM10, which is currently regulating--I
guess the PM2.5 regulation right now has stayed in
the courts, but I'm sure EPA will move forward.
PM2.5 emissions basically come from combustion
sources, whereas a lot of the PM10 material comes
from grinding up soils. When you look at PM2.5, a
number of studies tend to indicate that a major contributor to
the PM2.5 inventory are cars and trucks on the road,
light-duty cars and trucks on the road as well as diesel
trucks.
The light-duty cars and trucks on the road do respond to
oxygenates in the fuel, and a number of studies have shown that
between 30 and 60 percent, depending upon whether they are
normal-emitter or high-emitter cars, actually have the
particulate emissions reduced by 30 to 60 percent by putting 10
percent ethanol in gasoline.
So if you took oxygenates away, the fine particulate
inventory is going to go up, and it could go up by a
significant amount from the point of view of that fuel effect,
and maybe on the order of 5 percent from these combustion
sources anyway.
Senator Voinovich. If I can interrupt you, if we go to the
new standard that is being contested now in the courts,
certainly the contribution of oxygenates to that or ethanol
would be significant in terms of a community reaching their
attainment of that particular goal.
Mr. Graboski. Sure. But the issue is, in addition to the
fact that if you remove oxygen, particulate is going to go up
from the point of view of removing oxygen. It is also going to
go up from the point of view that the likely replacement for
much of the ethanol is going to be aromatics in the fuel, and
aromatics in the fuel will increase particulate two ways. One
is by increased particulate made from the aromatics directly
out of the tailpipe, and second is that in the summertime, in
the ozone-forming process, aromatic emissions from vehicles are
converted to ozone, but also quite substantial amount are
converted to additional fine particulate aerosols.
So going in the direction of removing oxygenates is going
to increase, in my mind, and fine particulate inventory is a
very, very costly issue in terms of future public health, and
that's a concern to me.
Senator Voinovich. And States reaching their ambient air
thing. And I'd like to make the point that I don't think people
are aware of the fact that automobiles do contribute to the
particulate matter, the general public.
Mr. Graboski. Yes. We all think they are diesels, and I'm a
diesel researcher and I know how bad diesels are, but the fact
of the matter is, you know, that 95 percent of the vehicles on
the road are cars and 5 percent of the vehicles on the road are
diesels, and so even though the amount emitted by cars is a lot
smaller, they have a very, very substantial impact on the
inventory.
Senator Voinovich. The last question I wanted to ask all of
the panelists is this: there is some allegation today that one
of the reasons why gasoline has gone up so much in the Midwest
is that the EPA has mandated the use of reformulated gasoline
and ethanol is the way they are achieving that, and that the
price has been jacked up very high to create public furor
against the use of the oxygenate because it is so expensive,
and therefore let's get rid of it so we don't need to deal with
the problem.
I'd like Mr. Slaughter, or maybe some others, to comment on
that. There are a lot of rumors floating around out there
today, and the air needs to be cleared.
Mr. Slaughter. Senator, as you know, across the Nation
areas that use RFG are using a new blend of RFG effective June
1. Chicago and Milwaukee are different from the rest of the RFG
cities in that they do blend ethanol to reach the oxygenate
requirement of reformulated gasoline. That does require a
special blend stock--there is a significant reduction in summer
RVP--and it is more expensive to handle that type of gasoline
within the context of the RFG program.
The refiners that I have talked to say that they are
experiencing even slightly more problems than they thought they
would in trying to incorporate ethanol into that RFG-II;
nevertheless, they are trying to do that.
Now, that being said--and that is a difficulty and it is a
source, undoubtedly, of some additional cost--there are other
factors involved here, too. RFG-II is, across the board, a more
difficult product to make. Also, there have been some
logistical problems in the Midwest involving pipeline outages
and the reduction of some pipeline capacities that contribute
to that factor.
So I certainly would not say that the fact that ethanol is
blended there would account for all of the impacts that people
are experiencing, but I think it is one part of it. And, as we
have said here today several times, ethanol does require
special handling.
Senator Voinovich. You would deny that there is an attempt
to jack up the price in order to--for example, I think Governor
Thompson from Wisconsin has said that he wants to get rid of
the oxygenate requirement and go back to the other gasoline
because of the high cost of reformulated gasoline.
Mr. Slaughter. Well, I know that a number of people are
looking into what is happening in the Midwest in terms of price
and supply, and this always happens when there is a disruption,
and the industry has generally found that it is due to normal
economic forces and the industry has not been guilty of any
kind of wrongdoing. I certainly believe this to be the case in
this instance, too.
But one thing is true: there are competent organizations
like the National Research Council that have questioned the
benefit of oxygenation in gasoline, contrary to Dr. Graboski. I
take some other issues with how he thinks oxygenates and
ethanol might be replaced. But there is some question about
that, but we think normal market forces are occurring in the
Midwest right now, but we do think that mandates add cost.
Senator Voinovich. Any other comments?
Mr. Gatto.
Mr. Gatto. Senator, I appreciate the opportunity to talk
about this. I think this is probably one of the most or the
largest misconception in the industry.
Let's put this in perspective. Mr. Grumet talked about a 15
percent increase in the price----
Mr. Grumet. Fifteen cents.
Mr. Gatto.--Fifteen-cent increase in the price of ethanol
over the course of the last months. In a 10-percent blend, that
is $0.015 per gallon of RFG. When you start looking at it in
context of the movement in prices in the Midwest, alone, we
don't even compare to the $0.40 or so increase that has
resulted. When you talk about the blend stocks impact, for
example, this was analyzed very carefully in California where
all of the different refiners sat around a room and talked with
the California Resources Board and the California EPA with
respect to the impact on the refiners to make the blend stock.
The outcome of that was roughly $0.01 to $0.03 just in terms of
some of the removals that would come as a result.
So what we're talking about here, in perspective, with
respect to what we believe would be an inflated price of $0.15
per gallon--we don't agree with that, but necessarily using it
would result in about a $0.015 per gallon increase, so I don't
believe it contributes in any way, shape, or form.
Senator Voinovich. Do you think then that somebody has
deliberately jacked up the price of this in order to send a
signal to discourage the use of ethanol?
Mr. Gatto. I think absolutely.
Senator Voinovich. You are convinced of that?
Mr. Gatto. Absolutely.
Mr. Huggins. Senator, if I could?
Senator Voinovich. Mr. Huggins?
Mr. Huggins. I think you were out when I made earlier
comments. I live in Illinois. In fact, I live in Peoria. The
price of gasoline in Chicago has gone up 34 percent since
April. The price of gasoline in Peoria has gone up 30 percent.
We don't use RFG in Peoria.
Senator Voinovich. I'm sorry?
Mr. Huggins. We don't use reformulated gasoline in Peoria.
In fact, a gallon of mid-range gasoline with ethanol blended in
it is $1.75 in Peoria. A gallon of conventional 87 octane is
$1.79. So it is clearly not just the RFG perception out there.
Illinois seems to be having a massive disruption, for some
reason, and I'm not sure what that reason is.
Mr. Early. Senator, I would just observe that, if you look
at the big picture, what has happened is creating a lot of
public discontent in the Midwest with the reformulated gasoline
program. As Dr. Greenbaum observed, you want to have
flexibility as we modify this program to provide air quality
benefits at a reasonable cost. This problem in the Midwest, the
Lung Association does not have expertise to say what the cause
is. But if you reduce the flexibility of the program, in
general, you are going to have more of these kinds of problems.
In the context of maintaining the oxygen requirement and
limiting MTBE so that it is an ethanol mandate, and you are
shipping two billion gallons of ethanol to the east and the
west coasts, there are going to be disruptions. There are going
to be problems. What we fear is that the entire RFG program is
at risk under those circumstances.
Senator Voinovich [assuming the chair]. I think that I'm
going to have to--I've just been informed that we've got a vote
at 11:30, and we have three Senators here, very important
Senators, and I noticed that they were interested in the
answers to your questions.
Senator Grassley, will you start out the statements?
STATEMENT OF HON. CHARLES GRASSLEY, U.S. SENATOR FROM THE STATE
OF IOWA
Senator Grassley. Good morning, Senator Voinovich and
Senator Inhofe. I appreciate the opportunity to be here to
discuss the benefits of using ethanol as an oxygenate in
reformulated gasoline.
As a Senator representing the No. 1 corn-producing State, I
am a firm believer in ethanol, and with good reason. Ethanol
not only helps our farmers by providing $4.5 billion per year
value added market for their commodities, but also it improves
our air quality and our energy security by reducing our
reliance upon OPEC.
With today's high gasoline prices and with economic
analysts' predictions of oil company profits exploding by 200
percent over last year's second quarter, it just makes sense
that we should be looking seriously at displacing some of our
imported oil with home-grown energies. And from reading the
press releases that--the Senator from Oklahoma is not here, but
we had a chance to read press releases that he posted on his
Senate website. I know that he shares my concern about
dependence upon foreign energy imports and that he would
support establishing a limit on these imports.
But let me share with you what I have learned from my past
legislative battles regarding limits on imports. Even though
oil companies have sought and obtained market mandates to
protect domestic production in the past, now that the majors
have moved major investment employees overseas, it doesn't seem
that they are any longer keen on limiting imports.
But today we are here to talk about ethanol. What is odd
about all the new national scrutiny of ethanol is that it is
being driven almost entirely by the fact that oil companies are
being told they can no longer use MTBE. MTBE is contaminating
our Nation's water supply. Ethanol is not hurting our water,
it's the MTBE. In fact, even though I am not a drinker, I know
that ethanol is little different than corn whiskey, so if
ethanol gets in the water, the worst that can happen is that
you might want to add ice, tonic, and soda. MTBE and ethanol
are adding to gasoline to meet the Clean Air Act's oxygenate
requirements for RFG.
For the most part, refiners have chosen to use MTBE, a
petroleum-derived chemical. Frankly, to put it more bluntly,
the oil industry did everything in its power, through the
regulatory and legal system, after the enactment of the Clean
Air Act in 1990 and during the enactment of that, that only
MTBE would be used. The oil industry worked for an MTBE
mandate, and it was very successful.
Moreover, had it not been for the insistence of officials
from the upper Midwest, no RFG-containing ethanol would have
been sold anywhere in America, not even in Chicago and
Milwaukee.
Now the Petroleum Institute has the gall to blame ethanol
for the high gasoline prices in these cities. The truth is that
ethanol that is delivered to Chicago and Milwaukee has a net
cost of $0.71 per gallon, which is $0.81 less than the price of
gasoline. This morning in Des Moines the wholesale price of
gasoline was $0.05 higher than the wholesale price of gas plus
ethanol.
So today MTBE is showing up in our water supplies across
the country, including in Iowa, where we don't even use RFG.
MTBE renders water undrinkable.
Now the oil companies would like us to eliminate the
oxygenate requirement and trust them to produce a cleaner-
burning gasoline without oxygenates. Trust the same folks that
brought us MTBE? Trust the folks who manipulated the courts and
regulatory process to make certain consumers had no option to
buy either MTBE or ethanol in reformulated gasoline? I don't
think so.
I am here today to tell you that there is a clean air and
clean water substitute for MTBE that is available this very
day, and that's ethanol, and it is made by American farmers,
not by OPEC, which is driving up our gasoline prices.
The use of RFG with oxygenates has significantly reduced
harmful smog-forming vehicle emissions. According to a report
of the California Air Resources Board Clean Fuels Development
Commission Technical Committee, oxygenates and RFG have reduced
air toxics by 28 percent. It has reduced carbon monoxide by 13
percent. Sulfur oxides have been reduced by 11 percent, and
particulate matter by 9 percent. Carbon monoxide reductions are
even greater--up to 25 percent reduction if you use 10 percent
ethanol blends. And the American Lung Association has pointed
out that carbon monoxide reduces the blood's ability to carry
oxygen, which is especially harmful to unborn babies, infants,
and people with heart disease. So why would we want to
eliminate then the oxygenate requirement?
The problem is MTBE in our water, not oxygenates in our
gasoline.
So, Mr. Chairman, replacing MTBE with ethanol in RFG would
protect our water supply from further damage, maintain air
quality gains of the Clean Air Act, reduce our energy imports,
and provide much-needed markets for American agriculture.
Replacing MTBE with ethanol means increased farm income.
According to the USDA, completely replacing MTBE with ethanol
by 2004 would provide a boost to American family farmers to the
tune of $1 billion per year, demand for corn would increase by
over 500 million bushels per year, and higher crop prices would
reduce the need for energy assistance payments and lower loan
program spending.
Replacing MTBE with ethanol improves our trade balance.
According to the USDA, the average U.S. agriculture net export
value would increase by over $200 million per year, while MTBE
imports would decrease. The overall impact would be to improve
the United States balance of trade by $1\3/10\ billion per
year.
Replacing MTBE with ethanol means American jobs. It would
create 13,000 new jobs across the country.
Mr. Chairman, it is very important that Congress proceed
cautiously and with serious deliberation. First, we should
demand that the Administration, meaning President Clinton,
offer us not merely a press conference articulating a vague
outline. We should demand that it present to us a specific
detailed legislative draft. There is no consensus among Members
of Congress at this point, and the Administration has a
responsibility to provide this leadership.
You know that--well, I'm not going to say anything more
political.
[Laughter.]
Senator Grassley. So insisting that the Administration
place its specific legislative proposals in our hands should be
a bare minimum starting point for Congress.
Second, we must not let ourselves be brainwashed into
thinking that the RFG oxygenate standard is the cause of the
MTBE water contamination. To do so will result in Congress
squandering its time and effort in pushing legislation that
will do little or nothing to protect Americans from MTBE.
What would eliminating the oxygenate standard do to protect
citizens from States like mine? It would do absolutely nothing,
because, you see, not a drop of reformulated gasoline is sold
in Iowa, not a drop; nevertheless, 29 percent of Iowa's water
supply tested were found to have serious MTBE levels.
So, Mr. Chairman, MTBE is not only used in RFG, it is used
all over the country as an octane enhancer, and I do not
believe for one moment that there is a safe level of MTBE.
Again, Iowa is a perfect example. For several years now, no
gasoline containing more than 1 percent MTBE could be sold in
Iowa without first posting warning labels. Let me tell you, no
warning labels have been posted, so no gasoline sold in Iowa
has contained more than 1 percent MTBE. Yet, you look at the
enormous damage even a minuscule amount of MTBE has brought to
Iowa's water supplies.
Whatever we do, we must protect States like Iowa from MTBE
water contamination. We should be encouraging States to ban
MTBE altogether and not encouraging them to gut one of the most
successful components of the Clean Air Act.
Third, Mr. Chairman, some argue that ethanol should not
replace MTBE as an oxygenate until there is a greater
understanding of the benefits and possible adverse impacts. I
say this argument is a red herring promoted by petroleum
companies who do not want to use a product like ethanol, which
they and OPEC don't control. Nevertheless, aside from the fact
that I believe ethanol has been thoroughly scrutinized and has
passed with flying colors, I would request that the Environment
Committee use the same cautious standard in addressing whether
or not to eliminate or allow waivers to the oxygenate
requirement.
How can we rush to eliminate a program which has been
proven so beneficial toward cleaning the air when one and only
one oxygenate has proved to contaminate our water?
So, Mr. Chairman, with ethanol we can have clean air and
clean water. We can help American agriculture and we can reduce
our dependence on OPEC. That is why I co-sponsored S. 2546,
legislation introduced by Kit Bond and Dick Durbin. This bill
would preserve the oxygen requirement and clean air gains that
we have made under the Clean Air Act while banning MTBE,
because that is the problem. It must be banned. We can't allow
it to continue to use even small amounts. We've seen firsthand
in Iowa--ethanol is clean air, clean water alternative to MTBE.
I would ask unanimous consent that a statement by Senator
Fitzgerald be placed in the record, as well.
Senator Voinovich. Without objection.
Senator Grassley. Thank you.
Senator Voinovich. The panel is adjourned. I know you have
enjoyed this testimony. We thank you very much for coming here
this morning.
Senators we have 12 minutes left for the vote. What would
you like to do? Go vote and come back, or would you rather----
Senator Harkin. No. I'd like to ask unanimous consent, Mr.
Chairman, that my full statement be made a part of the record,
and I'll just take a couple of minutes here.
STATEMENT OF HON. TOM HARKIN, U.S. SENATOR FROM THE STATE OF
IOWA
Senator Harkin. All I want to say is that you have to look
at the history of this. We first--the oil companies first
started putting lead into gasoline. Why did they put the lead
into gasoline? Octane enhancer. This went on for years and
years until finally we found out that lead was poisoning our
kids, poisoning the atmosphere, and so we told the oil
companies, ``You've got to take the lead out of gasoline.''
Well, they said, ``Well, we've got to have octane enhancers.''
And they came up with what they called the ``VOCs,'' the
volatile organic compounds--xylene, toluene and benzene--and
they put those in there and kept the octane up.
Well, guess then what we found? After a few years of this,
we found out they are highly carcinogenic, so we said to the
oil companies, ``Hey, you've got to do something about this.
You've got to get rid of that.''
At about the same time, around 1990, we had the Clean Air
Act. Senator Daschle and I offered an amendment on the Clean
Air Act in the Senate side for a mandate of oxygen requirement
of 3.1 percent, Mr. Chairman, 3.1 percent. It passed the
Senate, 3.1 percent. Then it went to Conference Committee. The
oil companies then started ganging up. The oil companies
realized that they had to replace the VOCs. They knew that they
had something to replace it as an octane enhancer that was
called ``methyltertiarybutylether,'' MTBE. But guess what? MTBE
couldn't reach the 3.1 oxygen requirement. So guess what they
did? They got in our Conference Committee and they knocked the
3.1 percent down to 2 percent. That's what we finally came out
with was a 2 percent oxygen requirement. MTBE could meet that.
It was made out of petroleum. Oil companies were happy.
Everybody walked out the door.
Well, now guess what we found out? MTBE is polluting our
water supplies. We had lead, we had VOCs, now we've got MTBE
polluting our water supplies.
All I'm saying, Mr. Chairman, now the oil companies are
saying, ``Get rid of the oxygen standard.'' They were happy
with 2 percent when they could use MTBE. Now they're saying,
``Get rid of this. Trust us. We'll come up with something else.
We've got alkylates. We're going to come up with some other
kind of witches' brew here that we're going to put into
gasoline that will keep the octane up and will keep our air
quality standards high.''
Fooled once, fooled twice, fooled three times. Are we going
to be fooled another time by the oil companies while we've got
something that will both enhance the octane and at the same
time clean up the air and won't pollute the water?
Now, if I had my 'druthers, we would have had a 3.1 percent
oxygen requirement, but we passed it in the Senate, but they
knocked it out in the Conference Committee and we had to pass
it 2 percent, and that's why we got MTBE.
So the oil companies have fooled us time and time and time
again. We shouldn't be fooled again.
There are benefits to the RFG program. It is cleaning up
the air. I have a bunch of charts. I'm just going to show one.
I know Dick Durbin wants to speak, too. This is just the first
chart I had here, which shows EPA estimates that the RFG
program is equivalent to taking 16 million vehicles off the
road annually. RFG will bring about an accumulated reduction of
over 400,000 tons of pollutants from 1995 to this year, a
tremendous benefit.
So why do away with that? I think we ought to keep it. We
ought to enhance it. We ought to make sure we keep this RFG
program, maintain it. As Senator Grassley said, eliminate MTBE.
Just ban it. Maintain the air quality benefits. Don't let the
oil companies say, ``We can meet the performance standards.''
That's what they want to do. They want to meet performance
standards, but we have to meet the air quality standards and
water quality standards at the same time, and to take into
account the benefits we get from the oxygen rule that reduces
fine particulate matter, carbon monoxide, toxic compounds that
we don't have right now, and those are the things that are not
being taken into account now and we have to take those into
account, aside from all of the other economic benefits that my
colleague from Iowa talked about.
Thank you, Mr. Chairman.
Senator Voinovich. Thank you.
Senator Durbin.
STATEMENT OF HON. RICHARD DURBIN, U.S. SENATOR FROM THE STATE
OF ILLINOIS
Senator Durbin. Thank you, Mr. Chairman. I will be very
brief and make my statement a part of the record, with the
permission of the committee.
My two colleagues from Iowa believe, as I do, that ethanol
is critically important. I think they've made a strong case,
both Senator Grassley from a policy viewpoint and Senator
Harkin from a historic viewpoint.
Let me just say that I thank Senator Grassley for his kind
words about the bill that I am co-sponsoring with Senator Bond.
I think this is the way out. It is a bill that will ban MTBE
and establish the oxygenate standard using ethanol. That's the
answer, as far as we are concerned, and it is a proven
response.
This Administration has been very strong in favor of
ethanol from day one. They now find themselves in a predicament
because of the deadly aspects of MTBE, and they have to act on
requests for waivers because Governors around the country are
definitely concerned about the environmental impact of
continuing to use this additive.
Let me just close by making one reference to a point that
you raised and the panel addressed partially.
When I flew in to O'Hare Sunday night and got on the
Kennedy Expressway to go downtown, I took a look at the gas
stations as I went by near the airport. Gas prices there are a
little higher than usual, because that's right on the
expressway--$2.29, $2.39, $2.49. And that is not unusual.
Throughout the city of Chicago and the Chicago land area,
gasoline is over $2 a gallon.
As we've gone to the oil companies and said, ``Explain this
to us,'' they cannot explain it. The oil companies have
overplayed their hand in the Midwest with gasoline prices. If
they are trying to protest this hearing and the policies in
Washington, it isn't going to work. There is no market
explanation for the run-up of gas prices in the Midwest. They
are using excuses.
The first excuse is ethanol has gone up in cost. Well, as
the gentleman here, Mr. Gatto, said earlier, you can't use that
as an explanation. That's $0.015 cents. ``Oh, no. It is costing
more to make the reformulated gas.'' Well, that's only $0.05 or
$0.06. How are you going to explain the $0.30, $0.40, or $0.50
increase in prices? When it comes to increase in oil prices,
these companies take the basic philosophy, ``Any excuse will
do.''
When the Persian Gulf war was announced over energy,
gasoline prices skyrocketed instantly, and it was an attempt to
price gouge and to take advantage of consumers and families and
businesses.
We are the last institution that can stand up for
consumers, can stand up for the environment, and do the right
thing.
As Senator Harkin has gone through the history here, the
oil companies have led us down the wrong path time and time and
time again, and now they are penalizing businesses and families
across America in a fit of pique. I think the U.S. Senate and
this committee should show some leadership. Eliminate MTBE and
make ethanol the oxygenate standard.
Senator Voinovich. Thank you, Senator Durbin.
I just would like to point out to my three colleagues that
we have the Director of the Department of Transportation of
Ohio here, and we use more ethanol than any other State. I
don't know why, but we do. As a result of that, our share of
the highway trust fund has gone down. We've got the minimum,
but we haven't grown, and it is because $0.031 of the tax on
ethanol does not go into the highway trust fund, and I would
think that it might be very good, you know, for those of us
that feel the way we do, that--I think it is about $400
million, so it's not a whole lot of money, but it would be very
good, if we are pushing this, that, in order to take care of
that problem, that we ought to direct that that $0.031 ought to
go into the trust fund rather than going in the general fund.
Just an editorial comment that I think we need to deal with.
If there are no further comments, this hearing is
adjourned.
[Whereupon, at 12:46 p.m., the subcommittee was adjourned,
to reconvene at the call of the Chair.]
[Additional statements submitted for the record follow:]
STATEMENT OF HON. RICHARD J. DURBIN, U.S. SENATOR FROM THE STATE
OF ILLINOIS
Mr. Chairman, I appreciate the opportunity to appear before the
Subcommittee and to speak about the positive effects of renewable
ethanol fuel and its benefits to our nation's environment.
I'm sure this will come as no surprise to my colleagues, but I'm a
strong supporter of ethanol. Illinois is the nation's largest ethanol
producer. One in every six rows of Illinois corn--280 million bushels--
goes to ethanol production. But, an expanded role for this renewable
fuel is more than a boost to industry, it's jobs to rural America, and
it's energy security. As we look for solutions to rising oil prices, we
must remember that ethanol is a viable alternative fuel--domestically
produced and environmentally friendly. In fact, every 23 gallons of
ethanol displaces a barrel of foreign oil.
In Illinois, we don't just talk about the importance of ethanol, we
practice what we preach. The Chicago reformulated gasoline (RFG) market
accounts for 400 million gallons of ethanol demand. It is the
foundation of the domestic ethanol industry today. The State enjoys a
very successful RFG program. Air quality has improved and refiners
support the program. The reason for this success is clear--Chicago's
RFG is ethanol-based. Last year, the Chicago chapter of the American
Lung Association released a report which lauded the Chicago RFG program
and concluded that ethanol RFG has reduced ground level ozone more than
any other pollution control strategy. Clearly, Illinois wants the
ethanol RFG program to be maintained.
In this 106th Congress, we have several ethanol-related issues
before us. Not in many years has the future of the Clean Air program
been so clearly on the legislative front-burner on Capitol Hill and at
the White House.
First, let me say that this Administration led by President Clinton
and Vice President Gore deserves high marks for their continuing
commitment to ethanol and to our environment.
This Spring's announcement that U.S. EPA will seek legislative
changes to the Clean Air Act to phase out and eventually ban MTBE is
good news. We all know the dangers of MTBE to our environment, our
water supply, and our communities. Although this additive has only been
widely used for about five years, it is now one of the most frequently
detected volatile organic chemicals in drinking water supplies across
the nation. In fact, MTBE contamination has affected a number of
Illinois communities, raising many public health concerns.
Last month, Senator Kit Bond, a Member of the full committee, and I
introduced legislation that would ban the gasoline additive MTBE and
promote the use of renewable ethanol fuel. The Clean Air and Water
Preservation Act of 2000 (S. 2546) addresses MTBE's serious problems by
banning it within three years and urging refiners to replace it with
ethanol. The bill also improves consumer protection by requiring
gasoline stations to label pumps that still sell MTBE. And the
Environmental Protection Agency is directed to assist States in getting
the chemical out of their groundwater.
Furthermore, the Clean Air and Water Preservation Act of 2000
includes strict anti-backsliding provisions to ensure we do not lose
the air quality benefits that we have already achieved. Protection from
toxic chemicals and environmentally sound emission levels will not be
compromised.
Specifically, this legislation upholds the air quality benefits of
the reformulated gasoline (RFG) program by maintaining the oxygenate
standard. Adding oxygen to our gasoline has helped clean the air in
many cities across the nation. With the use of ethanol, the Chicago RFG
program, as I mentioned, has proven highly successful in improving the
air quality in Illinois, Indiana and Wisconsin.
I commend the Clinton administration and Senators Tom Daschle (D-
SD) and Richard Lugar (R-IN) for their efforts aimed at solving the
problems associated with MTBE and opening a dialogue on renewable fuel
content standards. However, I strongly feel we need to maintain our
commitment to preserving the oxygenate standard, which has proven to be
integral to achieving the goals of the Clean Air Act.
The Clean Air and Water Preservation Act of 2000 will preserve what
is working in the Clean Air Act, protect our groundwater, and encourage
ethanol use. It is good for our environment and public health and a
boost for rural economies and I will work for its consideration as we
seek to address the MTBE problem.
Mr. Chairman, thank you again for holding this hearing and for
giving me the opportunity to speak this morning. I look forward to
working with you to continue to promote and expand the use of ethanol
in our nation's clean air strategy.
__________
STATEMENT OF HON. ROBERT F. BENNETT, U.S. SENATOR FROM THE STATE
OF UTAH
Mr. Chairman, thank you for holding this important hearing. As our
Committee has faced the challenge presented by changing the oxygen
standard, much has been made of the potential for ethanol to replace
MTBE. And yet, it is so important that we know exactly what we are
getting into before we run from what we know.
MTBE has served well as an additive producing substantial air
quality benefits while extending gasoline supplies at a reasonable
cost. In this time of escalating fuel prices, MTBE has played its part
in maintaining adequate supply.
Ethanol, by contrast, cannot be counted upon to moderate the price
of fuel. Even with its 54 cent per gallon tax credit, it is still too
expensive to compete in the marketplace. Furthermore, ethanol is not
helpful from an environmental perspective.
First, because ethanol is highly volatile, it cannot be counted
upon to be as effective in controlling emissions of ozone and its
precursors.
Second, because ethanol has a net negative energy balance, we
cannot expect its widespread use to either assist with energy security
or control greenhouse gases.
Third, because ethanol is highly soluble, it takes the most toxic
parts of gasoline, including cancer-causing benzene, and spreads it in
water.
Fourth, because ethanol has been listed as a carcinogen by the
World Health Organization, the State of California, and the National
Toxics Program, it may be of greater public health concern than MTBE.
Finally, because combustion of ethanol releases harmful aldehydes,
it is of little assistance in controlling air toxins.
On the whole, caution is in order. Mr. Chairman, your hearing is a
step in the right direction and I thank you for pursuing this issue.
__________
STATEMENT OF HON. BOB SMITH, U.S. SENATOR FROM THE STATE OF
NEW HAMPSHIRE
Good Morning. Thank you Senator Inhofe and thanks to all of the
witnesses for appearing before us here today.
Ethanol is one factor to be considered while solving the very
complicated MTBE problem. I am currently crafting MTBE legislation that
will attempt to balance the interests of all stakeholders. A discussion
draft is available and I hope to bring a bill before the committee in
the very near future.
According to the Department of Energy, the United States uses about
900 million gallons of ethanol in gasoline per year. There is no
question that ethanol plays an important role in America's fuel supply.
Ethanol, as a fuel additive, has many positive aspects. It reduces
carbon monoxide emissions and provides clean octane. With continuing
advancements in biomass ethanol production, it is becoming more cost
effective and energy efficient to make. As a renewable fuel source,
ethanol is an important part of a sustainable energy approach.
Although there are many positives, we should not treat ethanol as a
remedy for the MTBE problem. There is a serious problem with ethanol:
it makes gasoline evaporate more quickly which can increase smog in
certain areas of the country. While some gasoline suppliers voluntarily
use ethanol, it would be unwise for us to force it into America's
smoggiest areas, including New England.
Let's not create new air quality problems while trying to solve an
existing environmental dilemma. I look forward to the testimony of
today's witnesses.
__________
STATEMENT OF A. BLAKEMAN EARLY, ENVIRONMENTAL CONSULTANT TO THE
AMERICAN LUNG ASSOCIATION, ON BEHALF OF THE AMERICAN LUNG ASSOCIATION
Good morning Mr. Chairman and members of the committee. My name is
Blakeman Early. I am an environmental consultant appearing on behalf of
the American Lung Association. I was invited to discuss the benefits
and problems associated with the use of ethanol in gasoline under the
Clean Air Act. While the American Lung Association has been accused of
being anti-ethanol, we consider our position to be neither anti nor pro
ethanol. Our view is that ethanol should be used in gasoline when it
can help provide useful properties to reduce air pollution and it
should be discouraged from being used if the result is increased air
pollution.
ETHANOL IN GASOLINE HELPS REDUCE CARBON MONOXIDE (CO)
Ethanol's greatest attribute is its ability to provide oxygen to
the fuel which can reduce carbon monoxide. Therefore, the ALA supports
the use of ethanol in the wintertime oxy-fuel program to help reduce
unhealthy levels of carbon monoxide. The oxy-fuel program is mandatory
under the Clean Air Act for areas that are classified ``moderate'' non-
attainment for carbon monoxide. But as you know, the air pollution
effort against CO is being won and the number of these areas is
diminishing. This is due primarily to improvements in emissions control
equipment on new cars. Ethanol helps to reduce CO tailpipe emissions
from older vehicles.
ETHANOL PROVIDES CLEAN OCTANE
Ethanol is a good source of octane and contains no aromatics and
modest levels of sulfur. These three attributes make it useful as a
blending component in gasoline. As a result, refiners use ethanol to
help achieve limits on toxic aromatics and sulfur in the RFG program.
We anticipate refiners will also use ethanol to help meet sulfur limits
in EPA's recently promulgated Tier II sulfur limits for conventional
gasoline which begins in 2004.
While ethanol can help achieve limits to aromatics and sulfur, they
do not guarantee that result, which is in part why the ALA does not
support mandatory use of ethanol in RFG. Looking at Figure B2, taken
from the Blue Ribbon panel report, you can see that the RFG sold in
Chicago in 1998 achieved among the smallest reduction of air toxics,
despite the presence of 10 percent ethanol.\1\ Further, looking at the
attached Figures 15, 16, and 17 taken from an analysis of 1996-1998
gasoline quality, you can see that sulfur levels in RFG sold in Chicago
in 1996 and 1997 were among the highest in the Nation despite the use
of ethanol. However, in 1998 sulfur levels in Chicago dropped by 40
percent even though oxygen mandate was still being met with relatively
the same amounts of ethanol.\2\ Ethanol can help lower sulfur level but
does not guarantee it.
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\1\ Achieving Clean Air and Water, The Report of the Blue Ribbon
Panel on Oxygenates in Gasoline, September 1999, p. 43.
\2\ An Analysis of 1996-98 Gasoline Quality in the United States,
SAE 199-01-3584, October 1999.
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The findings above demonstrate why the ALA does not support
mandating ethanol to achieve any other outcome besides CO reductions in
the wintertime. The ALA and many environmental organizations supported
a 2 percent oxygen requirement for RFG in the Clean Air Act Amendments
of 1990 based on the assumption at the time such requirement would
guarantee reductions of VOCs, and toxics. We now know we were wrong.
Clearly, the best way to obtain reductions of specific pollutants from
gasoline is to mandate them--set performance standards--and let
refiners meet such requirements however they choose to.
ETHANOL INCREASES GASOLINE VOLATILITY
Now let me turn to the problems caused by mandating ethanol in
gasoline. Quite simply the big problem with ethanol use in gasoline is
that it significantly increases volatility when mixed in gasoline at
levels above 2 percent by volume. Reducing gasoline volatility during
hot summer weather is one of the most important strategies for
improving summertime gasoline in order to reduce smog. That is because
with the advance of pollution equipment on automobiles, evaporation of
gasoline hydrocarbons is now a greater contributor to smog in most
areas than the tailpipe hydrocarbon emissions. The volatility increases
that ethanol causes in summertime can overwhelm any benefit it provides
in reducing CO tailpipe emissions, sulfur dilution or aromatics
dilution. That is why the ethanol industry only talks about the
tailpipe emissions benefit from ethanol in RFG. The ethanol industry
often quotes last year's National Research Council study of
reformulated gasoline as finding that CO reduction credit should be
included for ethanol in EPA's complex model for RFG because CO tailpipe
emissions contribute to ozone formation. But they fail to acknowledge
what we believe to be a more important finding. The NRC report stated,
`` . . . the increase in the evaporative emission from the ethanol-
containing fuels was significantly larger than the slight benefit
obtained from the lowering of the CO exhaust emissions using the
ethanol-containing fuel.''\3\ The NRC also acknowledged that ethanol
increases NOx tailpipe emissions relative to non-ethanol
containing fuel. These NOx emissions also contribute to
greater ozone and particulate formation.\4\ The bottom line: the
reduction in CO tailpipe emissions obtained by using ethanol in
summertime gasoline are not worth the increase in evaporation and the
increases in NOx tailpipe emissions from a smog contribution
point of view. Incidentally, the increases in evaporation do not just
contribute to ozone formation. Since the gasoline also contains toxic
aromatics, such as benzene, these will evaporate more readily along
with the ethanol. While ethanol may dilute the amount of benzene in a
gallon of gasoline, the amount of benzene that ends up in the ambient
air due to increased evaporation from the fuel may be greater than if
the ethanol were not added at all.
---------------------------------------------------------------------------
\3\ Ozone-forming Potential of Reformulated Gasoline, May 1999, p.
158.
\4\ California Environmental Protection Agency Air Resources Board,
Air quality Impacts of the Use of Ethanol in California Reformulated
Gasoline, December 1999.
---------------------------------------------------------------------------
It is argued that if ethanol is mandated in RFG, air quality is
protected because refiners are required to limit the volatility by the
RVP limits of EPA's RFG regulations. Thus the impact of ethanol on
volatility is not a factor. This is not true. First, while it is clear
refiners can off-set the volatility effect of ethanol by blending it
with super low volatility blend-stock, we do not know what potential
air quality benefits may be lost by changing other parameters of the
fuel to meet the RVP limit. For instance, a refiner might actually
increase aromatics because they need a sulfur-free component that is
low in volatility to help off-set volatility increases from using
ethanol. For example, turning back to Table B2, if ethanol were
required in RFG sold in Rhode Island where MTBE has been used to
provide oxygen, the significant toxics reductions achieved might
decline to the same level achieved in Chicago as refiners increase
aromatics to help off-set the volatility effect of the ethanol.
LOW VOLATILITY RFG WITH ETHANOL CAN CAUSE INCREASED EVAPORATION OF FUEL
Even RFG with low RVP that contains ethanol may cause increases in
evaporation compared to non-ethanol containing RFG in two ways: through
increased permeation of ``soft parts'' in auto engines and also through
co-mingling with ethanol free fuel.
EPA in its Tier 2 Final Rule identified permeation as a problem
that can increase evaporation of gasoline. Essentially, alcohol in
fuels promote the passage of hydrocarbons through the ``soft products''
in cars, such as plastic fuel tanks, hoses, and ``o'' ring seals. As a
result, all new cars subject to Tier 2 evaporative emissions
requirements have to demonstrate that they are using materials that
resist the permeability effect by testing them with fuel containing 10
percent ethanol.\5\ But of course this does nothing to protect the
vehicles on the road today. Only vehicles being made since
approximately 1994 have been consistently using alcohol resistant soft
materials. How much will an ethanol-containing RFG meeting RVP limits
increase evaporation from vehicles on the road today? Probably a great
deal. The Toyota Corporation presented test data to the California Air
Resources Board that showed a high RVP fuel increased evaporation from
gaskets, plastic fuel tubes and plastic gas tank material by 500, 1300,
and 800 percent, respectively (See Tabs 1, 2, 3). Even if a fuel
meeting RVP limits caused permeation at a half or quarter of the rate
of the non-complying fuel tested, this would have a major adverse
impact on vehicle evaporative emissions. This concern is of special
relevance to a renewable fuel mandate that would apply in areas that
are in non-attainment for ozone where conventional gasoline is used. I
will discuss this in a moment.
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\5\ See discussion at 64 Federal Register, 26084, May 13, 1999.
---------------------------------------------------------------------------
ETHANOL FUEL CAN INCREASE VOLATILITY OF NON-ETHANOL FUELS
Finally, I must note the impact that ethanol volatility can have
through a mechanism referred to as ``co-mingling''. Essentially when
two fuels with the same RVP, one ethanol free and one containing
ethanol, are mixed together the volatility of the entire mix is
substantially raised. In a circumstance where consumers purchase
ethanol free fuel, use a portion and then purchase fuel with ethanol in
it, even if the ethanol blend is low RVP RFG, volatility can raise as
much as \8/10\th of a pound RVP.\6\ In essence the adverse
volatility effect of ethanol is not limited to the absolute volume sold
in a given market area. It can be greatly magnified, depending how much
consigners switch back and forth in purchasing the two types of fuels.
Whenever the volume of ethanol in the gas tank exceeds 2 percent, the
volatility of the entire tank-full of gasoline will be increased. The
``co-mingling'' might occur between ethanol containing RFG and
conventional fuel among drivers who frequent the areas on the border
between non-RFG and RFG areas; among purchasers of ethanol-containing
and ethanol-free conventional gasoline in non-attainment areas for
ozone; or even within an RFG area where there is ethanol-free and
ethanol containing RFG. The volatility increases that could be caused
by the permeation and co-mingling effects of ethanol in RFG, under some
conditions, could potentially offset the entire lower volatility
benefit of moving from Phase 1 RFG to Phase 2 RFG.
---------------------------------------------------------------------------
\6\ In-use Volatility Impact of Co-mingling Ethanol and Non-ethanol
Fuels, SAE 940765, February 1, 1994.
---------------------------------------------------------------------------
ETHANOL SHOULD NOT BE MANDATED IN SUMMERTIME GASOLINE USED IN
SMOGGY AREAS
All this leads the ALA to the conclusion that ethanol should not be
mandated for use in summertime gasoline--RFG or conventional--in areas
with smog problems. To the extent that refiners are allowed to use
ethanol in summertime on a widespread basis, we must develop ways of
calculating and off-setting the adverse effect from increased
evaporation that will occur either from permeation, co-mingling, or
both. For instance, California has lowered the RVP of its Phase 3
CalRFG by one tenth of a pound in an effort to offset the co-mingling
effect. California is studying the need to provide a greater off-set.
If ethanol is mandated through a renewable fuel standard such as is in
Senator Daschle's S. 2053, which will triple the amount of ethanol in
the National fuel supply, appropriate measures need to be taken to
protect areas with smog problems. Congress should eliminate the one
pound RVP waiver (Section 211 (h)(4)) currently available for
conventional gasoline containing 10 percent ethanol sold in the
summertime in areas that are non-attainment for ozone. The RVP waiver
for 10 percent ethanol fuel also should be eliminated from use in areas
designated as non-attainment under the 8-hour National Ambient Air
Quality Standard for ozone promulgated in July 1997. The waiver could
be retained for ethanol-containing gasoline sold in areas that do not
have smog problems. This also happens to be the region of the country
where much of the ethanol is currently produced. Given what I have
described today, refiners must at a minimum meet the same RVP limits
that apply to ethanol-free conventional gasoline so that higher
volatility ethanol-containing gasoline does not contribute to increased
smog in areas that already have unhealthy levels of smog. This, of
course, would not prevent the evaporative effects caused by co-mingling
that I described previously. It would encourage refiners to avoid
selling ethanol-containing gasoline in areas with smog problems during
the designated ozone season because meeting lower volatility limits
would increase refining costs. Of course, during the rest of the year
refiners would be free to sell ethanol-containing gasoline in these
areas, as no RVP limits apply.
Congress should also modernize the anti-dumping provisions for
conventional gasoline in Section 211 (k)(8) to prevent increases in
aromatics and other air pollution increasing constituents as they
modify RFG. The ALA suggests substituting 1999 for the current 1990
baseline as a simple means of up-dating this provision to protect
conventional gasoline.
ETHANOL INCREASES NOX AND PARTICULATES
Most test data show that ethanol in RFG increases NOx
tailpipe emissions. In California, the Air Resources Board asserts that
these NOx increases are converted in the atmosphere to
particulate pollution, thus making it more difficult to achieve the PM-
1C National Ambient Air Quality Standard.\7\ The ethanol industry
asserts that ethanol in RFG actually reduces particulate emissions
based on a test conducted by the Colorado Department of Health and
Environment. Since this test involved higher RVP wintertime fuel and
wintertime temperatures, the ALA sees it as supporting the use of
ethanol in wintertime oxyfuel, but not useful in judging the benefits
of ethanol in RFG. We believe that the NOx increases from
ethanol in RFG add to the body of evidence indicating mandatory ethanol
use in RFG may increase rather than decrease air pollution levels from
fuel.
---------------------------------------------------------------------------
\7\ Letter from Michael P. Kenney, Executive Officer, California
Air Resources Board to Robert Perciasepe, Assistant Administrator of
U.S. Environmental Protection Agency, February 7, 2000.
---------------------------------------------------------------------------
ETHANOL USE IN GASOLINE AND RFG WILL GROW
Much discussion has been generated about mandating the use of
ethanol in gasoline for air quality reasons, which the ALA opposes.
However, we do believe there will be a large role for ethanol in
gasoline without any mandate for one simple reason: octane. Assuming
that MTBE is either phased down or eliminated from gasoline, which the
ALA supports, refiners face a dramatic shortage in clean octane even if
every MTBE plant in the nation is converted to produce iso-octane or
alkylates, the most logical substitutes for MTBE. This is because MTBE
plants converted to produce iso-octane or alkylates lose about 30
percent volume and produce a product that contains 15 percent less
octane per gallon. This octane shortage is magnified by EPA's Tier 2
low-sulfur gasoline standard which will be in full effect in 2006.
Refiners will lose modest amounts of octane in conventional gasoline,
as they treat it to reduce sulfur in order to meet the new 30 ppm
sulfur average requirement. As a result of these two impacts, a rough
calculation indicates that demand for ethanol needed to supply octane
in gasoline should increase to 3.4 to 3.8 billion gallons per year by
2006, depending upon whether MTBE is totally eliminated from gasoline.
(See Tab 4 and Tab 5) This is at least twice the baseline volume of
ethanol projected by the Department of Agriculture to be produced in
2006.\8\ Should Congress fail to lift the oxygen mandate for RFG so
that all the octane currently provided by MTBE be replaced by ethanol
in order to simultaneously meet the oxygen requirement, the demand for
ethanol would reach 4.6 billion gallons per year in 2006. This would
appear to exceed the ability of the ethanol industry to supply ethanol,
based on a study conducted for the Governors' Ethanol Coalition.\9\
(See Tab 6) Such an outcome would undoubtedly lead to shortages, price
spikes, and disruptions which could only lead to reductions in the air
quality benefits provided by the RFG program.
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\8\ U.S. Department of Agriculture, Economic Analysis of Replacing
MTBE with Ethanol in the United States, March 2000.
\9\ John Urbanchuk, Ability of the U.S. Ethanol Industry to Replace
MTBE, March 20, 2000.
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Clearly, we will need large increases of ethanol in gasoline, as we
phase out MTBE. From an air quality perspective, it is best to set air
quality performance requirements for gasoline and allow refiners to use
ethanol when and where they need to while meeting performance
requirements, taking into account evaporation effects from permeation
and co-mingling. Should Congress decide to mandate ethanol in gasoline,
we urge that additional air quality protections be put in place that
would encourage ethanol use in ways that benefit air quality and not
add to the air pollution burden.
STATEMENT OF HON. PETER G. FITZGERALD, U.S. SENATOR FROM THE STATE
OF ILLINOIS
Good morning, Mr. Chairman. I want to thank you for this
opportunity to testify before your hearing to discuss the potential
effects of the widespread use of reformulated gasoline blended with
ethanol.
As a senator representing the number one ethanol producing state, I
have been, and will continue to be, a strong advocate of ethanol use.
Ethanol not only encourages our nation's rural economy by bolstering
the farm economy by approximately $4.5 billion per year in commodities,
but also encourages the reduction of greenhouse gases and particulate
emissions produced by automobiles.
Additionally, in my capacity as a member of the Senate Energy and
Natural Resources Committee, I have become increasingly aware of the
problems that our reliance on foreign oil has caused this country. I
believe this is a dependence that can be substantially alleviated by
increasing ethanol and biofuels research, production and use in energy
markets across the country.
Despite the many tangential subjects that the reformulated gasoline
debate has spawned this year in Congress, the reason we are here today
is to talk about ethanol. I find it curious that public scrutiny of
ethanol has been sparked almost entirely by congressional and
administrative attention to the need to eliminate methyl tertiary butyl
ether (MTBE) from commercial use.
The elimination of the use of MTBE in reformulated gasoline should
not mean the removal of the oxygenate requirement set forth under the
Clean Air Act of 1990 which requires reformulated gasoline to contain
two percent oxygen by weight. I believe it to be reasonable for our
nation to expect both clean air and clean water, without having to
eliminate the reformulated gasoline market or sacrifice our national
health.
According to a Department of Agriculture study entitled ``Economic
Analysis of Replacing MTBE with Ethanol in the United States,''
replacing MTBE with the corn-based oxygenate additive ethanol would
create approximately 13,000 new jobs in rural America and reduce farm
program costs and loan deficiency payments through an expanded value-
added market for grain. Furthermore, the Department of Agriculture has
concluded that within three years, ethanol can be used as a substitute
oxygenate for MTBE in nationwide markets without price increases or
supply disruptions.
Ethanol has proven to be a viable, environmentally friendlier
alternative to MTBE. The use of ethanol in reformulated gasoline
significantly reduces exhaust emissions of hydrocarbons and carbon
monoxide, reduces particulate emissions, reduces the occurrence of
aromatics in gasoline, and also reduces overall greenhouse gas
emissions. The Chicago reformulated gas program (RFG) has used ethanol
for years, and according to the American Lung Association, Chicago has
established one of the most successful RFG programs in the country.
Ethanol is vitally important to my home State, since Illinois is the
number one producer of ethanol in the Nation. Each year, 274 million
bushels of Illinois corn are used to produce about 678 million gallons
of ethanol. At a time when agricultural prices are at depression-era
lows, this increased demand is sorely needed.
Mr. Chairman, I believe that Congressional action is absolutely
necessary in the oil industry. Skyrocketing prices and widespread
pollution have taken an enormous toll on our country's well-being and
security. I am also very aware of the potential for Congress to act
rashly and pass serious mandates without proper deliberations.
As you are aware, I have proposed legislation (S. 2233) to phase
out MTBE use across the United States over the next three years, ensure
proper labeling of all fuel dispensaries containing MTBE-enriched
reformulated gasoline, provide grant awards for MTBE research, and
express the sense of the Senate that the Administrator of the
Environmental Protection Agency should provide assistance to
municipalities to test for MTBE in drinking water sources, as well as
provide remediation where appropriate. This bill represents an
important first step toward safer and healthier drinking water
throughout the nation.
Mr. Chairman, the oxygenate requirement is not the problem with our
gasoline, the problem is MTBE. Ethanol is not only in the best
interests of my State of Illinois, but also in the best interests of
our entire nation's environment, and our nation's energy security.
Again, thank you for allowing me time to share with the committee my
views on the benefits of ethanol in our nation's gasoline supply.
__________
STATEMENT OF STEPHEN GATTO, PRESIDENT AND CEO, BC
INTERNATIONAL CORPORATION
My name is Stephen Gatto. I am the President and CEO of BC
International Corporation, a company that is utilizing new technologies
to manufacture ethanol from cellulosic biomass wastes, such as wood
waste, crop residue, urban waste, and non-energy intensive dedicated
crops.
I would like to thank Chairman Inhofe, Ranking Minority Member
Senator Graham, and the Subcommittee on Clean Air, Wetlands, Private
Property and Nuclear Safety (Subcommittee) for providing me with this
opportunity to testify today. I would like to thank Senator Barbara
Boxer for the continued leadership she has shown on this issue. I would
also like to compliment the Subcommittee for the work that it has been
doing to address the use of MTBE in gasoline and explore ethanol as an
alternative.
This is a very exciting period for the biomass ethanol industry and
BC International. We are currently closing financing for a 23 million-
plus gallon commercial biomass ethanol manufacturing facility in
Jennings, Louisiana that will use sugar cane residue as a feedstock. I
expect our financing to close any day now, and for the plant to be
fully operational in less than 2 years. BC International also has
signed a letter of intent with the city of Gridley, California to
develop a second facility that will use rice straw and wood chips as
its feedstock. In addition, we are planning to develop a facility in
Chester, California that will utilize wood waste from a sawmill to
produce ethanol. We are also exploring the feasibility of developing
plants in the Northeast. The potential capacity of our initial projects
is over 150 million gallons of ethanol per year. We expect to double
our capacity within 6 months after each plant is constructed. However,
the biomass ethanol industry's ability to grow exponentially depends in
part on the nation's commitment to providing renewable fuels with
sustainable markets, such as the market for ethanol as a gasoline
additive.
It is through recent technological advances, developed in 1987 by
Dr. Lonnie Ingram, a microbiologist at the University of Florida's
Institute of Food and Agriculture Sciences, that today we are able to
efficiently and effectively produce ethanol from hemi-cellulose (mostly
5-carbon sugars), as well as cellulose (6-carbon sugars). The process
works by replacing the yeast-based fermentation process with a
genetically engineered bacterium that was awarded U.S. Patent 5,000,000
in a special Congressional ceremony.
The use of ethanol, particularly biomass ethanol, is a win-win
environmental and economic solution to the MTBE problem. Ethanol use
contributes to improved air quality and does not pose the same dangers
to our water resources as does MTBE, proven by decades of ethanol fuel
use in the Midwest. This is why gasoline suppliers in California and
the Northeast, such as Tosco and Getty, feel confident enough to
displace most of their MTBE with ethanol. For the same reasons, cities
such as Chicago and Denver have relied upon ethanol to improve local
air quality. Ethanol is also favorable because, unlike petroleum-based
alternatives, such as alkylates, ethanol means increased use of
renewable resources, and reduced reliance on imported oil and ensuing
gasoline price spikes. Equally important, our technology enables us to
turn regional waste problems, such as the air pollution caused from the
open-field burning of rice straw in California, into economic growth
opportunities for rural communities.
I would like to elaborate on some of the benefits of biomass
ethanol. But first, I would like to address a misconception about the
use of ethanol-blended gasoline--that ethanol use is bad for air
quality. This accusation is not supported by scientific community
consensus, and has in fact been disproved by many scientists.
Real life examples and research show that ethanol is not bad for
air quality, and that it in fact provides air quality benefits that are
consistent with and extend beyond the goals of Federal reformulated
gasoline. The California Air Resources Board (CARB) report, ``Air
Quality Impacts of the Use of Ethanol in California Reformulated
Gasoline,'' found that the use of ethanol in gasoline is entirely
consistent with the clean air goals of the Clean Air Act. The report
showed that the use of ethanol-blended gasoline (2.0 percent wt or 3.5
percent wt oxygen) in 2003 would provide for significant reductions in
every emission of concern relative to 1997 baseline levels, when MTBE
was the primary gasoline additive. In addition, the use of ethanol-
based gasoline (2.0 percent wt oxygen) compared with 2003 MTBE and 2003
non-oxygenated fuel would provide for: (1) similar CO and
NOx emissions; (2) reduced benzene, butadiene, and
formaldehyde emissions; and (3) only a slight increase in acetaldehyde
emissions, which unlike formaldehyde is non-carcinogenic. Also,
ethanol-blended gasoline in 2003 would result in the same average ozone
levels as 2003 MTBE and 2003 non-oxygenated fuel. In summary, the
report said the substitution of ethanol for MTBE in California's fuel
supply ``will not have any significant air quality impacts.'' In
addition, compared with conventional fuel, the use of biomass ethanol,
such as agricultural waste, can reduce greenhouse gas emissions,
specifically CO2, by 68 percent or more.\1\
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\1\ Argonne National Laboratory, Center for Transportation
Research, U.S. Department of Energy. ``Effects of Fuel Ethanol Use on
Fuel-Cycle Energy and Greenhouse Gas Emissions.'' Argonne, IL. January
1999.
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In addition, several projects demonstrate that the benefits of
ethanol extend beyond the air quality improvements that can be achieved
through its use in gasoline. In Gridley, California, BC International's
planned biomass ethanol plant will use agricultural waste from rice
straw farms in the Sacramento Valley as feedstock. The use of rice
straw waste will help reduce the need for the annual open-field burning
of more than 500,000 tons of rice straw waste, resulting in
significantly decreased local air pollution. Past comments by the
American Lung Association (ALA) reflect the seriousness of this
problem. According to Earl Withycombe, an air pollution engineer and a
Director of the Sacramento chapter of the ALA, ``We know that many
residents of this area point to rice straw burning as the cause of
significant health effects,'' including asthma. Jane Hagedorn,
Executive Director of the Sacramento chapter of the ALA, added, ``We
take very seriously that we must get alternatives on line so we can use
rice straw in commercially productive ways besides burning. The Lung
Association is very supportive and appreciative of the people who are
making this happen.'' This model can also be applied to other
problematic crop residues that are currently burned. Later this summer,
BC International plans to begin construction of a similar plant in
Jennings, Louisiana that will use sugar cane waste as feedstock,
helping to alleviate a waste disposal problem now faced by Gulf of
Mexico states.
Waste problems also pervade other parts of the nation. For
instance, in the Northeast, as long-term contracts for electricity from
biomass energy facilities expire or are bought out, a number of sawmill
waste facilities, which currently provide feedstock for biomass energy
facilities, face the possibility of closure. Sawmills currently receive
$7.1 million in revenue from wood sales to biomass energy plants. If
sawmill operators were forced to dispose of their waste in landfills,
potential annual costs between $46 million and $59 million per year
would result, according to biomass industry consultant Lloyd Irland. In
addition, the transport of biomass waste supports a number of jobs,
which would also disappear with plant closure. BC International is
currently exploring the development of facilities in the Northeast to
address this problem.
The disposal of municipal solid waste is another growing problem
across the country. Biomass ethanol provides a sustainable alternative
to the burning or landfill disposal of municipal solid waste, such as
urban yard waste, wood waste, and other paper waste. Arkenol is
developing a plant in Southern California to convert municipal solid
waste into ethanol. The Masada Resource Group is developing a facility
in New York that will both serve as a recycling center and produce
about 10 million gallons of ethanol per year.
I would also emphasize that there is more to biomass ethanol than
environmental benefits. Both corn starch ethanol and biomass ethanol
provide a positive net energy balance. This means that the amount of
energy contained in a gallon of ethanol is greater than the amount of
fossil fuel energy required to produce that gallon of ethanol.
Cellulosic biomass ethanol provides more than four units of energy for
every unit of fossil fuel energy used to produce it. Its 4.75 to 1
ratio is significantly higher than the 1.5 to 1 energy balance ratio
for starch-based ethanol.\2\ The large positive net energy balance for
biomass ethanol is due to the fact that relatively little fossil energy
is used in the creation of cellulosic biomass and in the biomass to
ethanol conversion process itself.
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\2\ Argonne National Laboratory, Center for Transportation
Research, U.S. Department of Energy. ``Effects of Fuel Ethanol Use on
Fuel-Cycle Energy and Greenhouse Gas Emissions.'' Argonne, IL. January
1999.
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The economic potential of the biomass ethanol industry is also
enormous. Without a doubt, the nation's corn ethanol industry will
serve as the initial foundation for the further development of a
domestic renewable fuels industry. However, starch-based crops, such as
corn and barley, represent only a fraction of the total resources that
can now be used to make ethanol. In addition, there is only a finite
amount of starch from crops available in the U.S. for ethanol
production, with estimates of maximum starch crop supply peaking at
about double today's ethanol capacity.
With your support, the biomass ethanol industry's potential
capacity can extend beyond the limits faced by the starch-based ethanol
industry. Realizing this potential would have a huge impact on our
nation's transportation fuels industry. According to the U.S.
Department of Energy's National Renewable Energy Laboratory, over the
long-term, an average of 2.45 billion metric tons of cellulosic biomass
could be available annually for ethanol production in the U.S. This
translates into enough biomass to produce over 270 billion gallons of
ethanol--approximately two times the level of current U.S. gasoline
consumption. Two studies have further quantified readily available
biomass resources in California and in the Northeast.
The California Energy Commission (CEC) found that California has
more than enough biomass resources in the near term both to meet local
demand for biomass ethanol as an alternative to MTBE and to become a
national leader in the renewable fuels industry. Near term production
potential is estimated at 2.5 billion gallons per year.\3\
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\3\ California Energy Commission. ``Evaluation of Biomass-to-
Ethanol Fuel Potential in California.'' December 1999.
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Conservative estimates by the Coalition of Northeast Governors
Policy Research Center (CONEG) find that there is enough readily
available biomass in the region to produce over 1.3 billion gallons of
ethanol each year.\4\ Similar to California, the Northeast region has
more than enough biomass ethanol potential to replace MTBE in gasoline.
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\4\ Donovan, CT, Lee Rybeck. (1994) . The Potential for Producing
Ethanol From Biomass In the Northeast: A Resource Survey. Northeast
Regional Biomass Program. CONEG Policy Research Center Washington, D.C.
---------------------------------------------------------------------------
For the Nation to achieve meaningful fuel independence, it will
need to encourage development of a cellulosic biomass ethanol industry.
For this reason, I would like to pledge my support for S. 2503, ``The
Renewable Fuels Act of 2000,'' introduced on May 4, 2000 by Senators
Daschle and Lugar. I firmly believe that the renewable fuels standard
(RFS) contained in S. 2503, specifically the provision that credits
cellulosic biomass ethanol with 1.5 times as much value as starch-based
ethanol for purposes of compliance with the standard, would help this
country develop a meaningful domestic renewable fuels industry.
The provision to support cellulosic biomass ethanol would help
provide developers and potential investors with the incentives and
confidence necessary to develop a domestic biomass ethanol industry.
Sound policies combined with continuing biomass ethanol technology
improvements, can provide the framework for transforming the Midwest-
based corn ethanol industry into a national renewable fuels industry
with key production centers where biomass resources are located. These
areas happen to be mostly on the periphery of the U.S., as opposed to
in the Midwest where ethanol is primarily produced and used today. In
turn, the biomass ethanol industry would provide jobs and economic
prosperity in rural communities.
In consideration of job creation, operating a single, 15-million
gallon per year biomass ethanol plant would create at least 28
permanent operational jobs, and an additional 63 to 100 feedstock-
related jobs. These jobs would be augmented by an additional 93 to 122
indirect jobs. The payroll for direct jobs related to plant operations
and feedstock supply is estimated to be more than $2.6 million
annually. Payroll for combined direct and indirect jobs is estimated to
be more than $4.8 million annually. Facility construction itself would
create an additional 88 jobs, with an estimated payroll of
$2,000,000.\5\ Once the biomass ethanol industry capacity grows to just
1 percent of the gasoline market, or about 1.5 billion gallons per
year, it would provide 26,000 jobs with an annual payroll of about $480
million in rural regions across the country. Consider the renewable
fuels standard to be an investment in our nation's economic and
environmental well-being and prosperity.
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\5\ California Energy Commission, Quincy Library Group, California
Institute of Food and Agricultural Research, Plumas Corporation, TSS
Consultants & National Renewable Energy Laboratory. ``Northeastern
California Ethanol Manufacturing Feasibility Study.''
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Having said all this, the question arises: What will these benefits
cost gasoline customers? Simply stated, the use of ethanol in gasoline
does not and will not significantly impact the price of gasoline. A
1999 study by the California Energy Commission compared the economic
costs of replacing MTBE with ethanol to the cost of replacing MTBE with
petroleum-based alkylates in California (which, like other states is
seeking to phaseout MTBE). The results showed that using ethanol would
cost approximately the same, and potentially less over the long-term,
as replacing MTBE with alkylates. Using ethanol to replace MTBE would
cost approximately 1.9 to 2.5 center per gallon, while the cost of
replacing MTBE with alkylates would cost up to 3.7 cents.\6\ In
addition, we would be using an indigenous renewable fuel versus
increasing our dependence of imported petroleum, which historically has
led to gasoline price spikes.
---------------------------------------------------------------------------
\6\ California Energy Commission. ``Supply and Cost of Alternatives
to MTBE in Gasoline.'' February 1999.
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In the Northeast, Getty is currently replacing MTBE with ethanol.
Getty cites environmental issues and customer satisfaction as reasons
for its commitment to use over 40 million gallons of ethanol each year.
Vince DeLaurentis, President and COO of Getty, forecasts that the cost
of replacing MTBE with ethanol-blended gasoline in the Northeast, and
specifically in Maine, would cost no more than 1.5 to 2.0 cents per
gallon more than using alkylates to replace MTBE. I should note that
Mr. DeLaurentis said that this figure assumes that ethanol-blended
gasoline would receive a waiver from the Reid Vapor Pressure
requirement that recognizes the reduced carbon monoxide emissions and
resulting decrease in ozone forming potential of ethanol-blended
gasoline. Consistent with his point, S. 2503 would require the U.S.
Environmental Protection Agency to consider the development of a carbon
monoxide credit program that would provide appropriate carbon monoxide
credits to offset possible emissions increases due to increased
volatility.\7\
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\7\ Conversation with Vince DeLaurentis, President and COO, Getty
Petroleum Marketing Company, May 2000.
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Moving forward, through the development of local renewable fuels
production centers across the country, we will see further reductions
in the cost of producing and transporting ethanol. BC International
recently announced the startup of its New Product and Process
Development Laboratory at the University of Florida's Sid Martin--
Biotechnology Lab. This Laboratory will serve as a critical component
in the continuing drive to improve technology for the wide-scale
production of ethanol from biomass. Due to technology advancements, the
National Renewable Energy Laboratory projects cost reductions for
biomass ethanol of about 50 cents per gallon by 2005, and about 60
cents per gallon by 2010.\8\ Biomass ethanol plants also produce a
variety of saleable co-products, which in the long term, will help to
reduce costs even further.
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\8\ NREL. ``Bioethanol Multi-Year Technical Plan, fiscal year 2000
and Beyond.'' July 6, 1999 draft, 21.
---------------------------------------------------------------------------
With the introduction of S. 2503, Senators Daschle and Lugar are
seeking to reduce reliance on imported fuel by growing a domestic
renewable fuels industry. The bill's provision to support biomass
ethanol ensures that the industry will continue to expand beyond the
limited capacity of the starch-based ethanol industry. The provision to
support cellulosic biomass ethanol would help biomass ethanol companies
secure the investments they need to establish local biomass ethanol
industries and bring the benefits of renewable fuels to the Nation as a
whole. I firmly believe that this vision will make for a better, more
sustainable economy and cleaner air and water for our children and our
grandchildren.
Thank you for the privilege and opportunity of speaking before the
Subcommittee.
__________
STATEMENT OF MICHAEL S. GRABOSKI, DIRECTOR, COLORADO INSTITUTE FOR
FUELS AND HIGH ALTITUDE ENGINE RESEARCH, COLORADO SCHOOL OF MINES
I am Dr. Michael S. Graboski, Director of the Colorado Institute
for Fuels and High Altitude Engine Research, a part of the Department
of Chemical Engineering at the Colorado School of Mines. I am here
today on behalf of the National Corn Grower's Association.
Mr. Chairman, I appreciate the honor of providing testimony to you
and your distinguished Subcommittee on the environmental benefits of
using oxygenates, particularly ethanol, under the Clean Air Act. In
addition to my testimony brief, I have provided the committee with
Technical Supporting Material that I would like included in the record.
I will use the brief time I have today to summarize the results of
my analysis. In my analysis I look at the effects of removing oxygen
from reformulated gasoline on emissions of ozone-forming volatile
organic compounds, carbon monoxide, toxic air pollutants, and
particulate matter. The following environmental and public health
benefits result from the use of oxygenates in comparison to gasoline
produced without oxygenates.
EFFECT OF OXYGENATES ON TOXIC EMISSIONS
Based upon the 1998 EPA Reformulated Gasoline (RFG) compliance
survey, I have estimated how refiners will produce phase 2 reformulated
gasolines (RFG2) with ethanol and without oxygen and compared the
resulting potency weighted toxic emissions to those from RFG2
containing MTBE. Because the various air toxics pose different cancer
risks, potency weighting allows us to compare one toxic compound with
another. Using these potency weightings, we can add all the toxic
emissions together and compare the relative toxicity of one fuel
formulation with another. Potency weighting uses benzene as the
reference giving it a value of 1 and weighing other compounds against
benzene. For example, if a compound has been shown to be twice as toxic
as benzene, its potency weighting is 2.
Figure 1 shows how I expect refiners to produce RFG2 fuels if they
were to also satisfy the 28.1 percent reduction in average mass toxic
emission from RFG1 surveyed in 1998. Based upon public statements by
refiners, I expect new alkylate production to replace most of the lost
gasoline volume resulting from the removal of MTBE with aromatics being
used to balance octane.
Figure 1 shows that oxygenated fuels with ethanol provide a greater
reduction in potency weighted toxic emissions compared to the MTBE fuel
where benzene is used as the reference weight. The non-oxygenated fuel
in figure 1 has increased aromatic content. Increased aromatics are
necessary to meet octane requirements. In this case, the only way for
the refiner to also produce the same benzene-equivalent potency
weighted toxic emissions is if olefins are reduced but there is no
economic incentive for such a reduction. Therefore, we can reasonably
expect refiners to increase aromatics when oxygenates are removed from
the gasoline pool.
If refiners make non-oxygenated RFG with the same mass toxics
reduction as oxygenated gasoline there will be a negative impact on
public health because potency weighted toxic emissions will increase.
These increases will be due to increases in aromatics that will be used
to meet octane and other performance requirements of the fuel when
oxygenates are removed.
IMPACT OF REMOVING OXYGEN ON SUMMER OZONE
I recently examined the impact of removing oxygen from RFG in a
typical RFG area, Philadelphia-Wilmington-Trenton using EPA inventories
and modeling tools. Removing oxygen will increase exhaust emissions of
carbon monoxide (CO) from light duty vehicles. In the case of off-road
engines, volatile organic compounds (VOC) and CO will both increase as
a result of removing oxygen.
Both VOC and CO has been proven to be ozone-forming agents. Figure
2 shows my estimate of how removing 2 percent oxygen from RFG will
impact the VOC and CO inventory. Figure 2 shows that ozone-forming
emissions may increase by almost 3 percent when oxygenates are removed
from RFG. Figure 3 relates the increases to the total combined VOC and
CO emissions benefit for the on-road fleet when RFG2 replaced RFG1 on
January 1, 2000.
The impact of removing oxygen from RFG2, either as ethanol or as
MTBE, is to lose as much as 35 percent of the additional ozone benefits
attributable to RFG2 compared to RFG1.
IMPACT OF OXYGEN ON FINE PARTICULATE EMISSIONS
I am also investigating the impact of oxygenates, especially
ethanol, on reducing fine particulate emissions, commonly called PM2.5.
I would like to share some of my preliminary observations. PM2.5 has
been identified as a public health hazard, and EPA is currently
attempting to regulate PM2.5. Fine particulate from light duty vehicles
is a major contributor to PM2.5 in metropolitan areas and will be so
for the foreseeable future. Studies show that ethanol reduces PM2.5
emissions and heavy carcinogenic aromatics emitted from cars and trucks
by 30 percent for clean, normal emitting cars, and 60 percent for
dirty, high emitting cars.
Scientists have also identified aromatics as significant
contributors to the formation of fine mists (aerosols) during the ozone
forming process. One recent analysis estimates that aromatics are
responsible for 20 percent to 30 percent of the yearly average PM2.5 in
the California South Coast Air Basin. Removing oxygenates, MTBE or
ethanol from gasoline, as we have already said, is likely to raise the
use of aromatics in gasoline and lead to more PM2.5 pollution.
Removing oxygen from RFG is likely to result in an increase in
direct emissions of particulate matter from automobile tailpipes, and
the subsequent formation PM2.5 in the atmosphere through a complex
series of chemical reactions, potentially harming public health.
I believe that the use of oxygen in gasoline has important
environmental and public health benefits that must be maintained in any
changes in the Clean Air Act. I hope that this discussion will be of
value to you in your legislative actions. Thank you for your attention.
I will now be happy to answer any questions you may have.
STATEMENT OF HON. CHARLES GRASSLEY, U.S. SENATOR FROM THE STATE OF IOWA
Good morning, Mr. Chairman. I want to thank you for this
opportunity to testify at your hearing to discuss the benefits of using
ethanol as an oxygenate in reformulated gasoline.
As a Senator representing the No. 1 corn producing state, I am a
firm believer in ethanol. And with good reason. Ethanol not only helps
our farmers by providing a $4.5 billion per year value-added market for
their commodities, but also it improves our air quality and our energy
security by reducing our reliance on OPEC.
With today's high gasoline prices, and with economic analyst
predictions that oil company profits will explode by 200 percent over
last year's second quarter, it just makes sense that we should be
looking seriously at displacing some of our imported oil with home-
grown energy.
And from reading your press releases posted on your Senate web
site, I know, Mr. Chairman, that you share my concerns about dependence
upon foreign energy imports, and that you support establishing a limit
on these imports.
But let me share with you what I have learned from my past
legislative battles regarding this subject. Even though oil companies
have sought and obtained market mandates to protect domestic production
in the past, now that the majors have moved their investments and
employees overseas, they are no longer so keen on limiting imports.
But, today, we are here to talk about ethanol. What is odd about
all the new national scrutiny of ethanol is that it is being driven
almost entirely by the fact that oil companies are being told they no
longer can use MTBE.
MTBE is contaminating our Nation's water supply. Ethanol is not
hurting our water, it's MTBE. In fact, even though I am not a drinker,
I know that ethanol is little different than corn whiskey. So, if
ethanol get's in the water, the worse that could happen is you might
have to decide whether you want to add some ice, tonic or soda.
MTBE and ethanol are added to gasoline to meet the Clean Air Act's
oxygenate requirement for reformulated gasoline (RFG). For the most
part, refiners have chosen to use MTBE, a petroleum-derived chemical.
Frankly to put it more bluntly, the oil industry did everything in its
power through the regulatory and legal system to guarantee that ONLY
MTBE would be used. The oil industry worked for an MTBE mandate, and it
was successful.
Moreover, had it not been for the insistence of officials from the
upper Midwest, no RFG containing ethanol would have been sold anywhere
in America--not even in Chicago and Milwaukee.
And now, the American Petroleum Institute has the gall to blame
ethanol for the high gasoline prices in these cities. The truth is that
ethanol delivered to Chicago/Milwaukee has a net cost of 71 cents per
gallon, which is 81 cents less than the price of gasoline!
So, today MTBE is shown in our water supplies across the country,
including in Iowa where we don't use RFG. MTBE renders water
undrinkable.
Now the oil companies would like us to eliminate the oxygenate
requirement and trust them to produce a cleaner-burning gasoline
without oxygenates.
Trust the same folks that brought us MTBE?
Trust the folks who manipulated the courts and regulatory process
to make certain consumers had no option to buy either MTBE or ethanol
in reformulated gasoline?
I say no.
I am here today to tell you there is a clean air and clean water
substitute for MTBE that is available this very day--ethanol--and it's
made by American farmers, not by OPEC, which is driving up our gasoline
prices.
The use of RFG with oxygenates has significantly reduced harmful
smog-forming vehicle emissions.
According to a report by the California Air Resources Board's Clean
Fuels Development Coalition Technical Committee, oxygenates in RFG have
reduced air toxics by 28 percent. It has reduced carbon monoxide by 13
percent. Sulfur oxides have been reduced by 11 percent and particulate
matter by 9 percent.
Carbon monoxide reductions are even greater--up to 25 percent
reduction--if you use 10 percent ethanol blends. And the American Lung
Association has pointed out that carbon monoxide reduces the blood's
ability to carry oxygen which is especially harmful to unborn babies,
infants and people with heart disease.
So why would we want to eliminate the oxygen requirement?
The problem is MTBE in our water, not oxygenates in our gasoline.
Mr. Chairman, replacing MTBE with ethanol in RFG would protect our
water supply from further damage, maintain the air quality gains of the
Clean Air Act, reduce our energy imports and provide a much-needed
market for American agriculture.
Replacing MTBE with ethanol means increased farm income. According
to the U.S. Department of Agriculture (USDA), completely replacing MTBE
with ethanol by 2004 would provide a boost to America's family farmers
to the tune of $1 billion per year. Demand for corn would increase by
over 500 million bushels per year. Higher crop prices would reduce the
need for emergency assistance payments and lower loan program spending.
Replacing MTBE with ethanol improves our trade balance. According
to USDA, the average U.S. agricultural net export value would increase
by over $200 million per year, while MTBE imports would decrease. The
overall impact would be to improve the U.S. balance of trade by $1.3
billion per year.
Replacing MTBE with ethanol means American jobs. USDA estimates
that 13,000 new jobs across the economy would be created by 2010. While
over a third would be in the ethanol industry itself, another 6,400
jobs are created in the trade, transportation and service sectors. Farm
sector jobs also increase, as do jobs in the food processing and energy
industries.
Mr. Chairman, it is very important that Congress proceed cautiously
and with serious deliberation.
First, we should demand that the Clinton administration offer us
not merely a press conference articulating a vague outline. We should
demand that it present to us a specific, detailed legislative draft.
There is no consensus among Members of Congress at this point, and the
administration is ducking its responsibility by refusing to provide
leadership. You know the games they play: as Congress attempts to
resolve this problem, the administration will stick its finger in the
wind of public opinion and take pot shots at everything we try to do.
So, insisting that the administration place its specific
legislative proposal in our hands should be the bare minimum starting
point for Congress.
Second, we must not let ourselves be brainwashed into thinking that
the RFG oxygenate standard is the cause of MTBE water contamination. To
do so will result in Congress squandering its time and efforts in
pushing legislation that will do little or nothing to protect Americans
from MTBE.
What would eliminating the oxygenate standard do to protect
citizens from states like Iowa? Absolutely nothing!
You see, not a drop of reformulated gasoline is sold in Iowa. Not a
drop!
Nevertheless, 29 percent of Iowa's water supplies tested were found
to have serious levels of MTBE!
Mr. Chairman, MTBE is not only used in RFG, it is used all over the
country as an octane enhancer. And do not believe for one moment that
there is a safe level of MTBE.
Again, Iowa is a perfect example. For several years now, no
gasoline containing more than 1 percent MTBE could be sold in Iowa
without first posting warning labels. Let me tell you, no warning
labels have been posted so no gasoline sold in Iowa has contained more
than 1 percent MTBE.
Yet look at the enormous damage even a minuscule amount of MTBE has
brought to Iowa's water supplies!
Whatever we do, we must protect states like Iowa from MTBE water
contamination. We should be encouraging states to ban MTBE altogether,
and not encouraging them to gut one of the most successful components
of the Clean Air Act.
And third, Mr. Chairman, some argue that ethanol should not replace
MTBE as an oxygenate until there is a greater understanding of its
benefits and possible adverse impacts. I say this argument is a red
herring promoted by petroleum companies who do not want to use a
product like ethanol which they and OPEC don't control.
Nevertheless, and aside from the fact that I believe ethanol has
been thoroughly scrutinized and has passed with flying colors, I would
request that the Environment Committee use this same cautious standard
in addressing whether or not to eliminate or allow waivers to the
oxygenate requirement.
How can we rush to eliminate a program which has been proven so
beneficial toward cleaning the air, when one, and only one, oxygenate
has proven to contaminate our water?
Mr. Chairman, with ethanol, we can have clean air and clean water.
We can help American agriculture and we can reduce our dependence on
OPEC. That is why I am a co-sponsor of S. 2546, legislation introduced
by my colleagues Kit Bond and Dick Durbin. This bill would preserve the
oxygen requirement and the clean air gains we've made under the Clean
Air Act, while banning MTBE. MTBE is the problem. It must be banned. We
can't allow it to continue to be used even in small amounts. We've seen
that first-hand in Iowa. Ethanol is the clean air, clean water
alternative to MTBE.
Thank you.
Mr. Chairman, Senator Fitzgerald has asked me to request that the
record be left open so that he may submit testimony later today.
__________
STATEMENT OF DANIEL S. GREENBAUM, PRESIDENT, HEALTH EFFECTS INSTITUTE
Mr. Chairman, and members of the Committee, it is a pleasure to
appear before you today to speak on the health consequences of using
ethanol in gasoline. I speak today as both the President of the Health
Effects Institute--an independent scientific institute funded by both
government and industry to provide impartial science on the health
effects of air pollution--and as the former Chair of the Blue Ribbon
Panel on Oxygenates in Gasoline, which provided its recommendations for
the Nation's use of oxygenates late last year.
In 1996, at the request of the White House Office of Science and
Technology Policy, the U.S. EPA, and the Centers for Disease Control,
HEI published a comprehensive review of the health effects of both
ethanol and MTBE. For the record I am submitting here today copies of
our report--I will summarize our findings in the brief time allotted.
In assessing the health effects of using ethanol in gasoline, we
must look both at the effects of likely increased exposure to ethanol
itself, and to the range of other substances which are emitted from
motor vehicles and whose emissions will be affected by the use of
ethanol, including, the air toxics acetaldehyde and peroxyacetyl
nitrate (PAN), the air pollutants carbon monoxide and ozone, and other
substances.
We have substantial scientific evidence on the health effects of
ingesting ethanol. Pregnant mothers ingesting relatively high volumes
can see their infants suffer from Fetal Alcohol Syndrome; lower levels
of maternal alcohol consumption result in Fetal Alcohol Effects.
Consumption of ethanol in the form of alcoholic beverages has been
shown to increase the risks of certain cancers, leading the National
Toxicology Program, in its recent Report on Carcinogens, Ninth Edition
(May 2000), to designate alcoholic beverage consumption as a ``known
human carcinogen.'' For all of these effects, there are not firmly
defined thresholds below which effects are not expected, although some
investigators have identified an apparent threshold for the fetal
effects of about one-half ounce of alcohol per day.
Although we know much about these effects of ethanol at high
levels, it is likely that exposure of citizens to ethanol through
either inhalation while refilling their fuel tanks, or through
ingestion of ethanol-contaminated drinking water, will be substantially
below levels at which effects have been seen. In the case of
inhalation, HEI's estimate, based on limited exposure testing done to
date, is that the dose of ethanol delivered to the body would be below
the level of ethanol normally produced internally within the body.
The use of ethanol also results in changes in the exhaust and
evaporative emissions from vehicles, in particular an increase in
emissions of acetaldehyde and the chemical PAN, a decrease in emissions
of carbon monoxide, and the potential for an increase in volatility of
the fuel. While we have information on all of these, I will focus today
on two key issues--acetaldehyde and volatility.
Acetaldehyde, which is designated as ``reasonably
anticipated to be a human carcinogen'' by the National
Toxicology Program, would, according to a recent analysis by
the California Air Resources Board (February 2000), increase in
the atmosphere in 2003 when compared to the use of fuel
oxygenated with MTBE. However, there would be an overall
decrease in acetaldehydes when compared to 1997 levels due to
tightening California fuel requirements. While these results
are reassuring, similar analyses have not been performed for
the rest of the Nation where federal RFG is in effect.
The addition of ethanol to gasoline can result in an
increase in the volatility of the fuel, and in the potential
for increased formation of ozone. The base fuel can be
reformulated to lower its inherent RVP so as to offset this
effect, although there are some continuing questions about the
possible impacts of commingling ethanol-blended fuels with non-
ethanol fuels.
PAN, which is an eye irritant, has been declining in
the atmosphere, but is likely to continue at levels which could
have significant effects with the use of both ethanol and MTBE.
There have been benefits from the use of ethanol and
MTBE for the reduction of carbon monoxide emissions.
Beyond these effects, the use of ethanol as an oxygenate in RFG
provides the ability, as do other oxygenates, to replace more toxic
octane-providing substances (such as benzene) with cleaner octane.
However, the Blue Ribbon Panel identified that it is also possible to
achieve these improvements using non-oxygenated reformulated fuels.
One further key question is the potential for ethanol to
contaminate groundwater. Both the Blue Ribbon Panel, and more recently
the Lawrence Livermore Laboratory, examined this issue. Although there
are still many questions about these potential effects, two general
conclusions can be drawn:
First, the high biodegradability of ethanol would
suggest that the chances of an ethanol spill or leak finding
its way to any significant degree into drinking water is small;
at the same time, the degradability of ethanol appears
to retard the degradation of other components (e.g. benzene)
resulting in the likelihood that plumes of these other
substances, and the risk of water contamination, would increase
somewhat. Precise estimates of the size of this risk do not
exist.
In conclusion, we know much about the significant health effects of
drinking ethanol, but should recognize that the likely exposure of the
public to ethanol either through breathing or ingestion would be low.
At the same time, there are continuing questions about the threshold
below which we would not see such effects, and about the potential for
ethanol in gasoline to increase the risk of water contamination from
other components of the fuel. Based on these questions, the Blue Ribbon
Panel recommended:
EPA and others should accelerate ongoing research efforts into
the inhalation and ingestion health effects, air emission
transformation byproducts, and environmental behavior of all
oxygenates and other components likely to increase in the
absence of MTBE. This should include research on ethanol,
alkylates, and aromatics, as well as of gasoline compositions
containing those components. (Recommendation 13)
EPA, in conjunction with USGS, the Departments of Agriculture
and Energy, industry, and water suppliers, should move quickly
to:
Conduct short-term modeling analyses and other
research based on existing data to estimate current and likely
future threats of contamination;
Establish routine systems to collect and publish, at
least annually, all available monitoring data on:
--use of MTBE, other ethers, and ethanol,
--levels of MTBE, ethanol, and petroleum hydrocarbons
found in ground, surface and drinking water,
--trends in detections and levels of MTBE, Ethanol, and
petroleum hydrocarbons in ground and drinking water;
Identify and begin to collect additional data
necessary to adequately assist the current and potential future
state of contamination. (Recommendation 14)
In closing, the decision to greatly increase any one component of
the fuel supply is a major one, with potential widespread implications
for exposure and public health. Although the current information on
ethanol and its effects is somewhat reassuring, it is critical that
accelerated efforts be made to fill key information gaps before
widespread increases in use of any additive have been accomplished.
Thank you for the opportunity to submit this testimony. I would be
pleased to answer any questions.
__________
STATEMENT OF JASON S. GRUMET, EXECUTIVE DIRECTOR OF THE NORTHEAST
STATES FOR COORDINATED AIR USE MANAGEMENT (NESCAUM)
Thank you Mr. Chairman. My name is Jason Grumet and I am the
Executive Director of the Northeast States for Coordinated Air Use
Management (NESCAUM). NESCAUM is an association of State air pollution
control agencies representing Connecticut, Maine, Massachusetts, New
Hampshire, New Jersey, New York, Rhode Island and Vermont. The
Association provides technical assistance and policy guidance to our
member states on regional air pollution issues of concern to the
Northeast. We appreciate this opportunity to address the Environment &
Public Works Committee regarding the use of ethanol as a fuel additive.
Our region has much at stake in the debate over RFG, MTBE and
ethanol. Seven of our eight states have or are participating in the
Federal RFG program. The use of RFG in the Northeast has provided
substantial reductions in smog forming emissions and has dramatically
reduced emissions of benzene and other known human carcinogens found in
vehicle exhaust. However, substantial evidence has emerged to suggest
that the unique characteristics of MTBE pose an unacceptable risk to
our region's potable water supply. Groundwater testing conducted
throughout the Northeast has detected low levels of MTBE in roughly 15
percent of the drinking water tested. Nearly 1 percent of samples
contained MTBE at or near State drinking water standards. MTBE's
unpleasant taste and odor at higher concentrations and the frequency of
MTBE detections poses a disproportionate and unacceptable threat to our
region's drinking water.
The challenge facing us all is to mitigate the environmental and
economic harm caused by MTBE contamination without sacrificing the
environmental and public health benefits provided by RFG. Adding to
this substantive challenge, is the need to address diverse regional
interests in promoting a secure and growing market for ethanol and the
opportunity to direct much needed support to a broad array of
environmentally beneficial transportation fuels and advanced propulsion
technologies. Of course, all this must be accomplished without
exacerbating already skyrocketing gasoline prices.
Unfortunately, the law as currently written prevents both the U.S.
Environmental Protection Agency (EPA) and the states from effectively
addressing this challenge. The good news is that a diverse group of
interests have come together to promote a set of legislative principles
that will protect our air and water quality, ensure substantial growth
in ethanol usage, and provide refiners with the flexibility needed to
prevent gasoline price spikes or supply shortages. I would like to
submit to the record copies of the legislative framework the Northeast
states introduced in January of this year and subsequent statements
endorsing this framework submitted by the American Lung Association,
the Natural Resources Defense Council and the American Petroleum
Institute. Since that time, the unprecedented coalition of interests
supporting these legislative principles has grown to include several
neighboring Mid-Atlantic states and the independent oil refiners Sun
Oil Company and TOSCO.
Allow me to first review the legislative approach supported by our
unique alliance. I will then directly address how this approach and
other scenarios will affect the demand for renewable and
environmentally beneficial transportation fuels.
REVIEW OF LEGISLATIVE FRAMEWORK
I. Repeal or waive the 2 percent oxygen mandate for RFG in the Clean
Air Act
It is simply not possible to protect air quality, water quality and
ensure gasoline price stability unless the oxygen mandate is lifted or,
at a minimum, modified to require EPA to waive this requirement upon
State request. Unless the oxygen requirement is lifted or waived, a
substantial reduction in MTBE use creates a de facto summertime ethanol
mandate. Ethanol usage is far preferable to MTBE from a groundwater
perspective and promotion of ethanol can further a host of energy,
agricultural, and environmental goals. However, we do not believe that
an ethanol mandate in the summertime reformulated gasoline program
represents sound environmental or economic policy for the Northeast.
Due to its high volatility and the resulting increase in evaporative
emissions, the use of ethanol during the summer ozone season may
actually exacerbate urban and regional smog problems, absent further
statutory or regulatory protections.
The growing outcry over skyrocketing gasoline prices demands that
any legislative solution to the MTBE problem be mindful of effects on
fuel price and supply. The economic impact of mandating the use of
ethanol in the Northeast, California and the Gulf Coast is simply
unknown. Setting aside the wisdom of coupling mandates with subsidies,
serious questions remain about the cost and environmental impacts of
transporting and distributing billions gallons of ethanol to regions of
the country where it is not produced. There is no question that it is
possible to dramatically increase ethanol production. Similarly there
is no question that it is possible to ship massive quantities of
ethanol to the Northeast by barge, rail and truck. The question is at
what cost. While our region embraces the goal of increasing renewable
fuels nationally and sees great promise in the development of a biomass
ethanol industry in the Northeast, we are convinced that there are
policy approaches to achieve these legitimate ends that are far
preferable to mandating the use of ethanol in summertime RFG.
We are surprised and disappointed by legislative efforts to
maintain the oxygen mandate and ban MTBE. These efforts seek short-term
economic enrichment for one region of the country at the economic and
environmental expense of all others. Simply stated, this approach holds
no promise to build the consensus necessary to craft effective national
legislation. We hope that this Committee will reject such shortsighted
efforts to perpetuate the oxygen mandate and instead work toward
building a national ethanol market that emphasizes product quality over
market protection.
II. Severely curtail or eliminate MTBE use as a fuel additive
We propose a three step approach to reduce, and if necessary,
eliminate MTBE from the fuel supply. This approach requires a reduction
in MTBE use to historic levels and empowers both EPA and the states to
further regulate MTBE while minimizing the potential for a patchwork of
varying State requirements that could result in increased fuel prices.
(a) Compel EPA to regulate or eliminate MTBE use as a fuel additive
if necessary to protect public health, welfare or the environment from
air or water pollution.--Neither EPA nor the states, with the notable
exception of California, have clear authority under Federal law to
prevent MTBE from harming drinking water supplies or the environment.
EPA's recent efforts to explore existing authority under the Toxic
Substances Control Act (TSCA) as a ``safety net'' in the absence of
Congressional action does little to allay our concern over the
inadequacy of existing Agency authority. Even a cursory review of the
TSCA provisions suggests that its application to the question at hand
will be arduous, inelegant and tangled in years of litigation. The
Northeast states share EPA's frustration over the inadequacy of our
mutual authority. Our inability to address public concern over MTBE
contamination is eroding public confidence in the commitment and
competence of all levels of government and exaggerates public anxiety
over the risks posed by MTBE. While EPA's strained interpretation of
TSCA is understandable against this public backdrop, only Congressional
action that both authorizes and obligates EPA to reduce MTBE to
whatever levels are necessary to protect public health, welfare or the
natural environment will provide the protection the public demands and
deserves. While our states and alliance partners do not believe that
the currently available data supports a statutory ban of MTBE, we agree
that EPA must be required to eliminate MTBE as a fuel additive if the
Agency concludes through rulemaking that such action is necessary to
protect public health, welfare or the environment.
(b) Compel EPA to reduce MTBE usage in all gasoline to historic
(Pre-1990) levels.--At minimum, within 1 year from enactment of
legislation, EPA must be required to complete a rulemaking that limits
MTBE usage in all gasoline to the levels in use prior to the Clean Air
Act Amendments of 1990. Data on MTBE contamination prior to the
adoption of the oxygen requirements in 1990, suggest that this severe
curtailment of MTBE use coupled with the tremendous improvements in
underground storage tanks that has occurred since 1990 will effectively
mitigate the risks posed by MTBE contamination. However, I must stress
that if EPA determines that even this severe curtailment of MTBE usage
is not adequate to protect public health, welfare or the environment,
the Agency is obligated to further reduce or eliminate MTBE in gasoline
all together.
(c) Authorize states to regulate MTBE beyond EPA requirements.--If
EPA fails to act in a timely manner or fails to effectively mitigate
the harms posed by MTBE, states must be empowered to further regulate
MTBE sold within their borders. In order to balance the need for
measured State authority against the desire for maximum consistency in
fuel specifications, we propose to adhere to the State petition process
found in the current clean air statute. As in current law, State
ability to implement independent fuel requirements would remain
predicated upon EPA granting a State petition demonstrating the need
for such action. Unlike current law which limits the grounds for State
petitions to a demonstration that the action is necessary to attain a
National Ambient Air Quality Standard (NAAQS), State MTBE petitions
would be required to demonstrate that further regulation of MTBE is
necessary to protect public health, welfare or the environment.
III. Enhance the RFG performance standards to reflect the stricter of
real world RFG Phase 1 performance or the existing RFG Phase 2
requirements for VOC, NOx and toxic emissions
The RFG program has produced dramatic air quality improvements.
Reductions in airborne tonics have substantially surpassed the
performance standards of both Phase 1 RFG and the more stringent Phase
2 requirements that take effect this year. We believe that a
substantial portion of these benefits has been provided by the high
volume of oxygenates currently mandated in RFG. As we seek to provide
refiners with the flexibility to reduce the use of MTBE, it is
necessary to ensure that this flexibility does not result in higher
polluting gasoline. For toxic emissions, this approach will require EPA
to substantially enhance the RFG toxic performance standard over that
currently required in the Phase 2 program. To date, the Northeast and
Gulf Coast have achieved far greater air toxic reductions than the
Midwest under the RFG program. Hence, we believe that setting enhanced
air toxic requirements on a regional basis is the most accurate and
equitable approach to ensuring that there is no loss of toxic emission
benefits once the oxygen mandate is lifted or waived. This approach
ensures that the environmental gains achieved across the country will
be protected while acknowledging the circumstances that have resulted
in the disparate toxic reductions provided by the RFG program to date.
This approach is also consistent with the EPA's historic application of
different regional RVP requirements in ``northern'' and ``southern''
grade gasoline. Our proposed approach would only apply in those states
that opt to waive the oxygen requirement. We fully expect that several
states will opt to maintain the oxygen requirement as a further
incentive for ethanol use. In these states, there is no risk of air
quality ``backsliding'' resulting from a reduction in oxygenate use and
hence these enhanced regional toxic standards would not apply.
(a) Maintaining VOC and NOx Benefits.--The Phase 2
standards that take effect this year are more protective than the
actual VOC and NOx reductions achieved under the RFG program
to date. Hence, the phase 2 standards would remain in force. By
combining the actual toxic emissions performance of Phase 1 RFG with
the more protective Phase 2 standards for VOC and NOx, we
believe we can equitably and effectively maintain the full air quality
benefits provided by the RFG program.
(b) Maintaining Carbon Monoxide Benefits.--While the carbon
monoxide (CO) reductions provided by oxygenates have and will continue
to diminish as newer technology vehicles enter the national fleet,
oxygenates continue to provide important benefits in the few areas of
the country that exceed the CO NAAQS. We do not propose any changes to
the statutory requirements for oxygenate use affecting CO nonattainment
areas. Recent evidence indicates that CO reductions also play a
relatively minor but measurable role in ozone reduction. The Northeast
states support recognition of these modest and decreasing benefits so
long as we count them only once. Since EPA is currently seeking to
account for these benefits in a regulation that would provide ethanol
blends with a further relaxation of RVP requirements, we do not believe
that it is necessary or credible to take account of these same benefits
a second time in legislation.
(c) PM Emissions.--Advocates of the oxygen mandate have suggested
that a comprehensive anti-backsliding approach must also include
provisions to maintain reductions in particulate matter attributable to
oxygenate use. While an ardent advocate of the need to reduce both
direct PM emissions and PM emission precursors, NESCAUM does not
believe there is adequate scientific evidence to justify addition of a
new PM reduction obligation at this time. We urge EPA and academia to
conduct the research necessary to build a general scientific consensus
around the impact of oxygenates on PM emissions. However, we cannot
delay efforts to enhance the environmental performance requirements for
toxic emissions while we await the result of future studies. The
inadequacy of our understanding of the relationship between oxygenates
and PM is evident by the fact that there is currently no requirement
for PM reductions in the RFG program. Unlike in the case of VOC,
NOx and tonics, where there are existing performance
requirements and intricate regulatory compliance regimes already in
place, we believe it is premature to include PM reductions in the
discussion of air quality backsliding.
IV. Promote consistency in fuel specifications through the timely
implementation of effective Federal requirements
The Northeast states understand and support the need to provide
refiners and fuel suppliers with a consistent and coordinated set of
regulatory requirements. The most effective means of achieving this
consistency is to authorize and require timely action of the part of
EPA. Our states are committed to working with other regions and EPA to
develop a Federal regulation that meets our collective needs.
V. Provide adequate lead time for the petroleum infrastructure to
adjust in order to ensure adequate fuel supply and price
stability
At present, the gasoline system in the Northeast and much of the
Nation is dependent upon the presence of high volumes of MTBE. As much
as we need immediate action to address MTBE contamination and
reinvigorate the RFG program, we recognize that a severe curtailment in
MTBE use cannot be completed overnight. Depending on the ultimate
extent of required reductions, our states anticipate that 2 to 4 years
will be necessary to complete the phase down or elimination of MTBE in
the Northeast. We are committed to working with our partners in the
Federal Government and the refining industry to ensure that fuel
quality, supply and price are protected as we reduce our current
dependence on MTBE.
IMPACT ON RENEWABLE FUEL USE
As stated earlier, implementation of legislation based on these
principles will result in a substantial increase in ethanol use over
the coming decade. The severe curtailment and/or elimination of MTBE as
a fuel additive coupled with maintenance of the mass toxic benefits
achieved in Phase I RFG will force refiners to substantially increase
their current use of ethanol. Key among the market factors leading to
this increased demand is the need to replace the loss of octane in the
fuel supply without increasing air toxic emissions. While experts vary
on the exact magnitude of growth in ethanol demand, every analysis we
have seen agrees that the competitive future for ethanol is very
bright. The Exhibit 1 illustrates our best assessment of the growth in
ethanol as a fuel additive if states are given the authority to lift
the oxygen mandate and MTBE is phased down to pre 1990 levels. If MTBE
is further reduced or eliminated, the growth of ethanol will be even
greater. This projection reflects analysis conducted by NESCAUM, API
and ALA using data generated by the USDOE, the USDA, and two leading
consulting firms, MathPro and Downstream Alternatives. The more
conservative estimate, assumes that the ethanol needed to satisfy PADD
1 and PADD 3 demand is met by pulling existing ethanol out of the
Midwest markets, leaving national ethanol demand outside of California
unchanged. It adds to this static 49-state assumption, the growth that
would occur in the California market provided by MathPro's analysis
conducted for the California Energy Commission.\1\ The MathPro study
indicates that 40 to 60 percent of California gasoline would be blended
with ethanol at 2.7 weight percent resulting in nearly one billion
gallons of new ethanol demand annually. The assumption that all ethanol
demand outside of California will be satisfied by shifting ethanol out
of Midwest markets is an unreasonably conservative projection of the
impact of our legislative approach. First, it assumes no additional
policies are adopted by Midwest states to promote or require ethanol
use and second it assumes that Midwest states opt to waive the oxygen
standard. The alternative scenario that projects ethanol use more than
doubling over the next decade was derived by combining the same MathPro
analysis for California with the DOE estimate for ethanol growth in the
Northeast\2\. As you can see, this analysis projects that ethanol use
will fully double by 2004 growing from 1.5 to over 3 billion gallons
per year.
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\1\ Analysis of California Phase 3 RFG Standards, Submitted to the
California Energy Commission by MathPro Inc., Subcontract No. LB60 100,
December 7, 1999.
\2\ Estimating Refining Impacts of Revised Oxygenate Requirements
for Gasoline, Oak Ridge National Laboratory, Studies for the U.S. DOE
Office of Policy May-August 1999.
In order to promote a truly secure future for ETOH, it is time to
shift our collective emphasis away from efforts at further market
protection and toward to a rejuvenated focus on product quality. While
mandates provide a level of absolute security that is never possible in
a free market, this security comes at a considerable cost to the
ethanol industry. Mandates undermine the public's confidence in the
quality of ethanol as a motor fuel. As we have heard from a diverse
number of government and private sector experts today, ethanol presents
a host of compelling domestic economic and environmental benefits. The
imposition of a sales quota, contradicts these expert sentiments by
embracing the intuitive contradiction that ethanol is so good for the
country that it cannot compete. I firmly believe that the renewable
fuels market will never achieve its full market potential so long as
that market is understood to depend on political power and not product
quality. Moreover, markets that appear contingent upon politics will
constantly face the insecurity of political change. Product quality
will forever remain the only true security in a democratic Nation with
a free market economy.
As an advocate of a set of policies that are projected to more than
double ethanol use within 4 years of enactment, I proudly embrace the
label of ethanol advocate. At the same time, I recognize that ethanol
like all products presents benefits and liabilities. Regardless of
whether ethanol use flourishes under a free market or national sales
quota, there are a host of economic and environmental considerations
that must be accounted for as ethanol use expands.
Key Environmental Considerations from expanded ethanol use
Air Quality
Without further statutory or regulatory protections, the widespread
use of gasoline containing ethanol will increase evaporative emissions
of VOCs due to it high volatility characteristics. The obvious first
step to address this problem is to remove the 1 lb. RVP waiver for
conventional gasoline containing ethanol. Increased evaporative
emissions have a deleterious impact on ambient levels of ozone and
increase emissions of toxic pollutants such as benzene. Also of concern
is the so-called ``co-mingling'' effect. When ethanol blends mix with
non-ethanol blends they increase the volatility of the entire volume of
fuel. Consequently, even if the ethanol fuel itself complies with RVP
limits, its presence in a diverse fuels market will have consequences
whenever a vehicle that has recently been fueled with an ethanol blend
is re-fueled with an ethanol free gasoline.
The combustion of ethanol-blended gasoline results in a 50 to 70
percent increase in acetaldehyde emissions compared to MTBE blends.
Ambient levels of this pollutant currently exceed health-based
standards by a substantial amount in many areas in the Northeast.
Increased ethanol use is also likely to cause some increase in
NOx emissions in the Northeast. There are direct and
indirect components to this anticipated NOx increase. Some
engines have been shown to directly emit increased levels of
NOx when burning fuel containing ethanol. In addition, the
fact that ethanol blends cannot be shipped through gasoline pipelines
will create indirect but potentially substantial increases in
NOx and particulate emissions from the diesel truck, rail
and barges used to move hundreds of millions of gallons of product from
Midwest production facilities to markets in the Northeast.
Groundwater
There is broad agreement that the potential groundwater impacts of
gasoline blended with ethanol are far less significant than those
associated with MTBE blends. Nevertheless, the presence of ethanol in
gasoline raises some concern with regard to groundwater contamination.
In short, there is evidence to suggest that the microbes that
biodegrade benzene, toluene and other volatile organic compounds are
preferentially attracted to ethanol. The good news is that ethanol is
quickly biodegraded when present in groundwater. The bad news is that
the bacteria fails to degrade benzene and the other VOCs present in
gasoline plumes until the ethanol is consumed. Hence, BTEX compounds
are predicted to persist longer in groundwater when gasoline mixtures
containing ethanol are leaked or spilled. Evidence presented to the
Blue Ribbon Panel suggests that this effect, while not insubstantial,
pales in comparison to the groundwater threat posed by MTBE.
Key Economic Considerations from Expanded Ethanol use
Transportation and Distribution
As stated above, gasoline blends with ethanol cannot be transported
via existing pipelines due to ethanol's affinity for water.
Consequently, unless dedicated ethanol pipeline capacity emerges, the
widespread use of ethanol in the Northeast will require transporting
hundreds of millions of gallons of ethanol by rail, truck or barge. New
storage tank capacity and blending facilities will also be needed in
our region to accommodate increased demand. While there are broad
differences of opinion about the magnitude of this logistical
challenge, it is imprudent to support a market mandate that would
require the Northeast to use disproportionate amounts of ethanol
compared to the rest of the Nation until these logistical impediments
and their associated economic and environmental impacts are better
understood.
Gasoline Cost Impacts
Detailed studies by the U.S. Department of Energy and the
California Energy Commission suggest that any major shift from MTBE to
ethanol should be phased in over 3 to 4 years to avoid dramatic price
spikes or fuel shortages.
The Northeast states do not support a waiver of the Reid vapor
pressure (RVP) requirements to accommodate the increased volatility of
gasoline blended with ethanol. In order to meet the existing volatility
requirements, the base gasoline into which both conventional and
reformulated gasoline must be more severely refined. While opinions
differ on the costs of this additional refining, they will not be
insubstantial when incurred across the national fuel market.
Ethanol Subsidies
The fact that ethanol receives a 54 cent per gallon subsidy--in the
form of a partial exemption from the Federal fuel excise tax and an
income tax credit--has important one implications for the Highway Trust
Fund in the Northeast. Currently, this subsidy reduces the nation's
Highway Trust Fund by approximately $870 million dollars annually. A
doubling or tripling of ethanol use in gasoline will have the effect of
further reducing highway revenue by a substantial amount. While we are
not seeking to address the validity of the ethanol subsidy if market
conditions are allowed to determine future ethanol growth, an
evaluation of ethanol tax policy is surely warranted if we impose a
national ethanol sales mandate.
Renewable Fuels Standard
Many, though not all, of these concerns are mitigated if ethanol is
used at the right time and in the right places. Not surprisingly,
approaches that enable the market to determine how and where ethanol is
used go long way toward encouraging the most economical and
environmentally beneficial uses of ethanol. To the contrary, the
constraints of a de facto summertime ethanol mandate in RFG legislative
efforts to reinforce this outcome provide the worst possible
environmental and economic scenario for a growing ethanol industry.
Under this nonsensical approach, the national interest in promoting
renewable fuels is imposed on regions of the country farthest away for
the source of ethanol production at the one time of the year when
ethanol's volatility leads to considerable public health concerns.
Compared against this looming disaster in national policy, our
region has previously expressed interest in the concept of a Renewable
Fuels Standard (RFS) approach. While we maintain a principled
apprehension about the imposition of an overarching sales quota for the
reasons stated above, the RFS takes a strong step toward free market
principles by enabling economic and environmental considerations to
influence when and where ethanol is sold. Moreover, an RFS legitimately
emphasizes the national security, agricultural, and global
environmental benefits that are furthered by an increased use in
ethanol. The logic of these interests provides a far more compelling
rational than the pretense that ethanol is necessary to protect urban
air quality. Efforts to perpetuate the oxygen mandate must justify this
position on the basis of ethanol's ability to improve summertime urban
air quality which is on one of the weakest rationales for growth in
ethanol use.
In July of last year, Senator Daschle wrote to NESCAUM and the
region's Governors seeking to explain his support for replacing the
oxygen mandate with a 2.1 percent RFS and seeking Northeast State
input. I would like to submit to the record copies of my response as
well as the responses from Governor Shaheen from New Hampshire and
Governor King from Maine. While all three responses expressed
apprehension regarding many of the issues outlined above, each letter
expressed the belief that the flexibility provided by a properly
designed RFS would better respond to our stated concerns about ethanol
than Congressional inaction. Key to the proper design of an RFS, is the
ability of refiners to avail themselves of market-based approaches to
meet their ethanol sales quota. By enabling refiners to average
internally and with other fuel suppliers to meet their annual renewable
content minimums, we believe that ethanol will be used where it is
cost-effective to do so. We simply don't know whether it will be cost
effective to transport and distribute ethanol produced in the Midwest
throughout the Northeast market. Unlike the oxygen mandate that would
force refiners to sell a disproportionate amount of ethanol volume in
Northeast regardless of economic considerations, a properly designed
RFS enables refiners to sell ethanol where it makes economic sense.
From both an environmental and economic standpoint, a properly
designed RFS must also enable refiners to use ethanol if and when it
makes sense to do so. The version of the RFS that was provided for our
review last year allowed refiners to comply on an annual average basis.
This flexibility is critical to ensure that ethanol is only used
sparingly in cities that suffer from summertime ozone nonattainment. I
am concerned that the more recent incarnations of the RFS seek to
impose a quarterly averaging regime. Requiring one-quarter of our
national ethanol use to occur during the summer months is unsound
environmentally and will lead to increased fuel prices since refiners
will be required to reduce to overall volatility of their blendstock to
accommodate ethanol within allowable RVP limits. While I recognize that
small ethanol producers do not presently maintain the tank capacity to
store ethanol produced during the summer season, expanding this tank
capacity seems far preferable than forcing the sale of ethanol in the
summer months.
Of course the most important feature of a properly designed RFS is
the magnitude of sales requirement itself. When Governor Shaheen stated
that, ``a renewables fuel requirement--accompanied by elimination of
the Federal oxygenate mandate--holds great promise and represents a
wise precedent for the Nation to establish,\3\ she was evaluating a 2.1
percent RFS that was understood to represent a doubling of ethanol
production over the next 10 years. We now understand Senator Daschle's
approach to contemplate more than tripling ethanol use in this same
time period. This contemplated increase from a statutory doubling to a
tripling of ethanol under an RFS will greatly increase opposition to
the RFS in our region.
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\3\ Letter for Governor Jeanne Shaheen to Senator Tom Daschle,
September 16, 1999
---------------------------------------------------------------------------
While it is awkward to offer suggestions on how to design a sales
quota that on balance we deem unnecessary, one thing that I have
learned from this debate is that those who can't imagine creative
compromises are quickly left behind. If we are going consider adoption
of policies that encourage ethanol use, these policies should be
optimized to encourage entrepreneurial innovation and growth among
small businesses and farmers and seek to remedy market barriers and the
failure of financial markets effectively internalize the full social
costs and benefits of different actions. Toward this end, we wish to
applaud Senator Daschle and Senator Lugar's recognition of the additive
environmental and potential economic attributes of biomass ethanol in
fashioning a differential credit for biomass in their current RFS
proposal.
Obviously, the opportunity to cure ``market failures'' through
quotas and mandates can be quite seductive. Hence, before I abandon
this creative flourish, I also suggest that RFS supporters consider
broadening the universe of fuels that could count toward RFS compliance
to include fuels that enable extremely low emission performance. The
Northeast states have long advocated for policies that reward advanced
transportation technologies like electric and hybrid electric vehicles,
compressed natural gas in urban bus fleets and ultimately fuel cell
technologies. These technologies promote many of the same national
security and fuel diversification goals that we understand form the
substantive foundation of the RFS. Moreover, those technologies that
rely on electric drive trains achieve far greater reductions in air
pollution emissions than internal combustion engines regardless of the
volume percentage of renewable fuels. We as a Nation have failed
woefully to achieve the laudable Energy Policy Act goal of diminishing
our reliance on petroleum transportation fuels by 10 percent this year.
If we are truly committed to decreasing our reliance on foreign
petroleum, it seems worth contemplating a flexible national approach
that will inspire the ingenuity and creativity that our Nation has to
offer.
CONCLUSION
In conclusion, let me stress that the preferred approach of the
Northeast states is to: (1) lift the oxygen mandate; (2) severely
curtail and if necessary eliminate MTBE; (3) maintain the VOC,
NOx, and toxic emission benefits, and (4) allow ethanol to
grow on the basis of its legitimate and considerable attributes. I am
pleased to learn that many of the strongest traditional advocates of a
growing ethanol industry recognize that it is possible to support
ethanol while opposing ethanol mandates. I would like to submit a set
of six editorials from newspapers in Nebraska and Iowa commenting on
State efforts to mandate the use of ethanol over the last year. The
headlines demonstrate that our interest in promoting ethanol on the
basis of product quality is shared by many of our Midwest neighbors:
From the Des Moines Sunday Register, September 19, 1999--
``Let ethanol prove itself: Iowa farmers need help, but coercion at the
gas pump is wrong.''
From the Quad City Times, September 19, 1999, ``Ethanol-
only proposal doesn't help consumers.''
From the Omaha World Herald, March 9, 2000--``More
Alcohol, Less Choice''
Obviously, we are troubled that having failed to impose ethanol
mandates in their own states, several prominent Midwest officials now
seek Congressional action to impose ethanol mandates on the Northeast.
Still, I remain optimistic that by emphasizing market principles in the
effort to promote the use of renewable and clean fuels we can fashion a
workable solution to the legislative challenges that lie ahead. Thank
you for the opportunity to appear before the Committee. I welcome the
opportunity to respond to any questions you may have.
______
Northeast & Mid-Atlantic States, Gasoline/MTBE Task Force,
Boston, MA.
Principles for Effective Federal Legislation Regarding Reformulated
Gasoline and MTBE
OBJECTIVES
Maximize the air quality and public health benefits of
reformulated gasoline.
Reduce the volume concentrations of MTBE in the gasoline
supply to protect water resources.
Promote a regionally consistent reformulated gasoline
program.
Minimize impact of fuel quality changes on regional
refiners and on gasoline supply and price.
Ensure that alternatives to MTBE do not pose new threats
to public health or environmental quality.
PRINCIPLES FOR EFFECTIVE FEDERAL LEGISLATION
Repeal or waive the 2 percent oxygen mandate for RFG.
Clarify State and Federal authority to regulate, and/or
eliminate, MTBE or other oxygenates if necessary to protect public
health or the environment.
Phase-down and cap MTBE content in all gasoline.
Impose the stricter standard of Phase 1 RFG performance or
Phase 2 requirements for VOC, NOx and toxic emissions.
Promote consistency in fuel specifications through the
timely implementation of effective Federal requirements.
Provide adequate lead time for the petroleum
infrastructure to adjust in order to ensure adequate fuel supply and
price stability.
______
Northeast States for Coordinated Air Use Management
(NESCAUM),
Boston, MA.
Northeast States Announce Unified MTBE Strategy
(Contact: Cindy Drucker)
Call for Immediate Congressional Action
January 19, 2000 (Boston, MA)--The Northeast States for Coordinated
Air Use Management (NESCAUM) representing the eight states of New York,
New Jersey, Massachusetts, New Hampshire, Vermont, Rhode Island,
Connecticut and Maine today urged Congress to enact effective Federal
legislation regarding reformulated gasoline and MTBE. In launching a
call for Federal action, the Northeast states set forth six core
principles that will protect the region's air and water quality while
maintaining an adequate fuel supply and price stability.
The unified principles were developed by the Northeast Regional
Fuels Task Force, consisting of State air and water officials. The
Northeast Regional Fuels Task Force was formed to implement the
recommendations included in a comprehensive RFG/MTBE study conducted by
NESCAUM last summer at the request of the Northeast Governors.
Under Federal law passed in 1990, Congress required reformulated
gasoline to contain oxygenates such as MTBE or ethanol. Only
Congressional action to lift the oxygen mandate can provide an adequate
solution to concerns over current levels of MTBE use. Absent changes in
Federal law, states are effectively prohibited from addressing this
significant public concern.
The Northeast states' principles for changes to the current
reformulated gasoline program include:
1. Repeal the 2 percent oxygen mandate for reformulated gasoline
(RFG) in the Clean Air Act.
2. Phase-down and cap MTBE content in all gasoline.
3. Clarify State and Federal authority to regulate, and/or
eliminate, MTBE or other oxygenates if necessary to protect public
health or the environment.
4. Maintain the toxic emission reduction benefits achieved to date
by the Federal RFG program.
5. Promote consistency in fuel specifications through the timely
implementation of effective Federal requirements.
6. Provide adequate lead-time for the petroleum infrastructure to
adjust in order to ensure adequate fuel supply and price stability.
Jason Grumet, Executive Director of NESCAUM stated, ``The Federal
oxygenate mandate is outdated and inappropriate national policy. These
unified principles call on Congress to grant states and industry the
flexibility to preserve clean air benefits while balancing other
environmental resource concerns.''
Connecticut DEP Commissioner Arthur Rocque, Jr. stated, ``The
challenge facing the Northeast states and the Nation is to identify a
program that effectively mitigates the environmental risks posed by
MTBE while maintaining the public health benefits of the current RFG
program. We simply can no longer accept Federal mandates that are
barriers to that goal.''
Under present Federal law, gasoline sold in states must contain a 2
percent oxygenate. Robert Varney, DES Commissioner of New Hampshire
remarked, ``In calling for a repeal of the current oxygenate mandate,
we are seeking the authority to design consistent regulations that
respond to our region's environmental and economic needs.''
Steve Majkut, Air Director of Rhode Island, stated, ``We need to
make sure that we are not throwing the baby out with the bath water. We
must maintain the air quality benefits of MTBE while we allow
sufficient time for the refining and distribution systems to develop an
adequate supply of alternatives. We simply cannot afford a short-term
quick fix that sacrifices the clean air benefits in the process.''
NESCAUM also commended two recent legislative initiatives that are
consistent with the principles announced today. Grumet added,
``Legislative measures, such as those proposed by Congressman Greenwood
(R-PA) and Senators Feinstein (D-CA), Inhofe (R-OK) and Smith (R-NH)
provide a sound foundation for legislation this session. We commend
their efforts to date and urge others to join in fashioning a necessary
solution.'' Grumet also credited early initiatives by Congressmen
Pallone (D-NJ), Franks (R-NJ) and Bilbray (R-CA) for raising the MTBE
issue to the legislative forefront.
Editors' Note: Copies of NESCAUM's RFG/MTBE report may be obtained
through the Internet at www.NESCAUM.org or by calling (617) 367-8540.
______
American Lung Association,
Washington, DC.
(Contact: Diane Maple, ALA)
ALA, NRDC Call on Congress To Enact Clean Fuel Fix To Protect
Water Supplies
Washington, DC, February 1, 2000.--With Congress back in session
and public concern mounting over the water pollution and health threats
posed by methyl tertiary butyl ether (MTBE), a widely used fuel
additive, the American Lung Association and the Natural Resources
Defense Council are calling for action by Congress and the
Environmental Protection Agency to ``fix'' the problem while
maintaining the air quality benefits of the nation's reformulated
gasoline program.
``Six months ago, an expert panel recommended these changes. It's
time for Congress to put clean air and clean water at the top of its
agenda,'' said John R. Garrison, CEO of the American Lung Association
(ALA). ``Congress should adopt the necessary changes in time for the
summer smog season.''
The 1990 Clean Air Act Amendments require the ``reformulation'' of
gasoline to reduce vehicle emissions. Reformulated gasoline (RFG) is
currently required in nine major U.S. metropolitan areas with the worst
ozone pollution problems and many other areas have voluntarily chosen
to use RFG. MTBE or other oxygenates are required to be included in the
reformulated fuel. Recent health concerns focus on gasoline leaking
into public water supplies.
``While there have been huge pollution reductions in smog and
cancer-causing air toxics from the switch to reformulated gasoline,
Congress can no longer ignore the harm being done by gasoline and MTBE
leaking into drinking water supplies,'' said Janet Hathaway, Senior
Attorney with the Natural Resources Defense Council (NRDC). ``Oil
refiners have the ability to produce gasoline that achieves just as
much air pollution reduction without oxygenates such as MTBE. but the
law currently mandates their use. Congress should act immediately to
repeal the mandate.''
Congress would have to amend the Federal Clean Air Act before RFG
without oxygen could be sold in states other than California.
It is also critical that Congress prohibit oil companies from
producing a fuel that is less effective at reducing smog and toxic air
pollutants than the RFG sold today when they remove oxygenates. We do
not need to take a step backward in combating air pollution in order to
protect groundwater,'' said the Lung Association's Garrison.
The American Lung Association and NRDC plan to meet with Sen. Bob
Smith (R-NH), newly named chairman of the Senate Environment and Public
Works Committee, to support his leadership in the push for rapid
legislation. Smith has already announced that holding hearings on the
oxygen requirement in RFG is a top legislative priority. ``Given the
MTBE contamination from RFG already found in New Hampshire, Chairman
Smith is the logical choice to lead this effort,'' said the NRDC's
Hathaway.
The two groups also are asking the EPA to grant a request from
California to exempt RFG sold in the State from the Clean Air Act's
mandatory oxygen requirement. ``California is the only State where,
under the law, EPA could grant a waiver tomorrow to allow gasoline sold
in the State to contain little or no MTBE. For the sake of clean air
and water, they should do it,'' said Hathaway.
American Lung Association and NRDC representatives served on an
expert panel, called the Blue Ribbon Panel on Oxygenates in Gasoline,
appointed by EPA to explore the MTBE problem. Both organizations have
endorsed changes in the RFG program that were recently adopted by the
Northeast States for Coordinated Air Use Management (NESCAUM), which
represents the eight Northeast states that currently participate in the
RFG program.
The NESCAUM principles are as follows:
Repeal the 2 percent oxygen mandate for RFG in the Clean
Air Act.
Phase-down and cap MTBE content in all gasoline.
Clarify State and Federal authority to regulate, and/or
eliminate, MTBE or other oxygenates if necessary to protect public
health or the environment.
Maintain the toxic emissions reductions benefits achieved
to date by the RFG program.
Promote consistency in fuel specifications through the
timely implementation of effective Federal requirements.
Provide adequate lead time for the petroleum
infrastructure to insure adequate fuel supply and price stability.
__________
American Petroleum Institute
API Supportive of MTBE Recommendations
(Contacts: Susan L. Hahn and Chris Kelly)
WASHINGTON, January 20.--The American Petroleum Institute issued
the following statement today in support of the recommendations just
released by the Northeast States for Coordinated Air Use Management
(NESCAUM) on MTBE (methyl tertiary butyl ether), a gasoline oxygenate
additive:
``The U.S. oil and natural gas industry supports clean air and
clean water for all Americans. The recommendations released today by
NESCAUM on MTBE provide a useful focus for resolving the problems
resulting from the requirement to include oxygenates in Federal
reformulated gasoline (RFG).
``NESCAUM proposes a multi-component strategy that calls primarily
upon the Federal Government to resolve the MTBE issue in a way that
addresses air and water quality issues while preventing gasoline supply
and market disruptions. This solution would be better than a patchwork
of State fuel regulations.
``API supports NESCAUM's call for the repeal of the oxygen content
mandate for Federal reformulated gasoline. API also supports NESCAUM's
recommendations that any phase down of MTBE use occur on a time
schedule that allows refiners and markets to make an orderly
transition. Repeal of the Federal oxygenate mandate and adequate time
for any phase down of MTBE are critical steps to avoid disruption of
the supply and distribution chain of gasoline to consumers.
``API looks forward to continuing to work with NESCAUM, EPA and
Congress to resolve these difficult issues.''
______
U.S. Senate,
Washington, DC, July 28, 1999.
Jason Grumet,
Executive Director,
Northeast States for Coordinated Air Use Management (NESCAUM),
Boston, MA
Dear Jason: For more than 20 years, I have believed that a healthy
domestic ethanol industry can contribute to a variety of national
policy objectives. Most obviously, it enhances farm income and
strengthens our rural economy. But it also improves air quality,
reduces oil imports and lowers net budget outlays.
The creation of the Reformulated Gasoline (RFG) program as part of
the 1990 Clean Air Act Amendments established a minimum oxygen standard
that has significantly increased demand for ethanol and other
oxygenates. The benefits of this program for the Nation have been
impressive. Since taking effect in 1995, the RFG program has exceeded
the emissions reduction goals set by Congress, reduced oil imports by
over 250,000 barrels per day and increased substantially demand for
agricultural and other domestic raw materials.
The presence of MTBE in water supplies in California and elsewhere
now poses a serious threat to the RFG program. Questions have been
raised about the continued utility of the oxygen requirement, and the
suggestion has been made that refiners be granted additional
flexibility in making clean-burning RFG.
In recent months, Senators Feinstein and Boxer have been working
with me to explore alternatives to the RFG oxygen requirement that
would provide the necessary flexibility for California and other states
to address their MTBE water contamination problem, while providing a
solid future for ethanol. This process, which is on going, has produced
a proposal that addresses the legitimate concerns that have been raised
about MTBE without sacrificing the many proven benefits of oxygenates
in cleaner burning gasoline.
In return for allowing states to waive the oxygen requirement, this
proposal would establish a renewable fuels standard, applicable to all
gasoline sold in the United States that would more than double ethanol
production over the next 10 years. In addition, it would empower EPA
and the states to regulate MTBE and other fuel components.
As you know, the debate over the future of the oxygen standard is
approaching a critical juncture. The Blue Ribbon Panel established
earlier this year by EPA Administrator Carol Browner has recommended
ways to provide additional flexibility to the RFG program. While
acknowledging the value of domestic renewable fuels like ethanol in our
nation's fuel supply, the panel recommended repeal of the RFG oxygen
requirement.
The attached draft proposal is the product of months of
consultation with experts in both the public and private sectors and
draws upon the deliberations of EPA's Blue Ribbon Panel as well as
valuable input from many of my colleagues in the Congress. Again, it
was developed in response to concern about MTBE water contamination and
is designed to provide states with the flexibility they need to deal
with this problem without sacrificing the many benefits ethanol and
other oxygenates provide.
I recognize you are extremely busy. However, I value your input,
and things are moving very quickly here in Washington on this issue.
Consequently, I would appreciate it if you would review these materials
and let me know your reaction to the proposal as soon as possible.
Should you have any questions about any of this, please feel free to
call my Legislative Director, Eric Washburn, at 202/224-2321.
Thank you in advance for your consideration. I look forward to
working with you.
Sincerely,
Tom Daschle,
U.S. Senate.
__________
Northeast States for Coordinated Air Use,
Boston, MA, September 3, 1999.
Dear Senator Daschle: On behalf of NESCAUM's eight member states, I
welcome this opportunity to share our thoughts on your legislative
proposal to amend the Federal reformulated gasoline (RFG) requirements
found in the Clean Air Act.
As you know, the Northeast region is one of the largest consumers
of RFG and MTBE in the nation. Despite achieving substantial pollution
reductions over the past decade, many Northeast states remain in
nonattainment of the Federal ozone standard. Moreover, all states in
our region and most in the Nation exceed public health thresholds for a
host of toxic air contaminants emitted by gasoline powered motor
vehicles. While the Northeast region clearly needs the air pollution
benefits of RFG, growing concerns about the presence of MTBE in
groundwater have caused many to question the merits of the RFG program.
The lack of flexibility under present law to reduce oxygen content and
limit MTBE volumes has left Maine no option but to abandon the RFG
program altogether.
The Northeast states strongly desire the flexibility and clear
authority to maintain the substantial air quality benefits of the RFG
program while limiting the use of MTBE. Toward this end, NESCAUM
appreciates your effort to build the consensus necessary enable a
narrow amendment to the 1990 Clean Air Act. We believe that it would be
counterproductive to initiate a comprehensive revision of the Clean Air
Act at this time. Therefore, we welcome the opportunity to bring our
region's political diversity to the challenge of developing the
bipartisan consensus necessary for legislative success.
Before providing detailed comments on the draft legislation, I
would like to share the principal conclusions reached during our
recently completed study on RFG and MTBE in the Northeast.
RFG has provided substantial public health benefits to
millions of Northeast State residents. These public health benefits
substantially outweigh public health risks from the increased use of
MTBE in the Northeast. However, the persistence and mobility of MTBE in
groundwater has convinced us that a reduction in MTBE use is necessary
to protect water resources.
In the Northeast, the only immediately available replacement for
the volume and octane provided by MTBE are highly toxic compounds.
Several of these compounds, unlike MTBE, are known human carcinogens.
Moreover, present ambient levels of a number of these toxic gasoline
constituents (benzene, 1,3 butadiene, acetaldehyde) exceed air quality
health based thresholds throughout our region and most of the nation.
The unusual tension between MTBE's benefit to public health and risk to
environmental quality requires prudence as we seek to diminish MTBE
use.
Over the next several years, ethanol and alkylate provide
opportunities to replace MTBE without posing unacceptable increases in
air toxics as long as anti-backsliding provisions are enacted. In the
Northeast, questions about ethanol supply and distribution networks and
concerns about increased fuel volatility need to be better understood
before we encourage policies that require the use of ethanol in our
region. At present, little is known about the environmental fate and
transport of alkylate and its combustion products. Rigorous testing of
alkylate, including a thorough public health analysis, is needed before
we substantially increase the volume of this compound in Northeast
gasoline.
The northeast states are committed to charting a pathway that
effectively mitigates the unacceptable risk MTBE poses to our water
resources while maintaining the full air quality and public health
benefits of the RFG program. We know that you share these goals and
look forward to working with you and your staff in the coming months.
The following discussion summarizes our thoughts regarding key
legislative provisions. Detailed comments and suggested revisions are
attached.
State Flexibility and Authority to Regulate Oxygenates.--We
strongly endorse your effort to provide states with the measured
authority necessary to fulfill our obligation to protect the
environment and our natural resources from MTBE contamination. In order
to cost-effectively reduce MTBE use in our region, states must be given
relief from the 2 percent oxygen mandate. Our preference is to have the
oxygen mandate lifted outright. However, we believe that a streamlined,
state-based waiver process designed to avoid bureaucratic delay and
limit litigation may provide an acceptable alternative for the
Northeast. We recognize the value of consistent national and regional
fuel standards. Given the opportunity, the Northeast states will work
with the U.S. EPA as a region to provide consistent regulation of
gasoline additives.
Anti-backsliding Provisions to Protect Air Quality.--We strongly
support your commitment to maintain the air quality benefits presently
achieved by the RFG program. At present, RFG in the northeast is
providing 75 percent greater air toxic reductions than required under
law. Lifting or waiving the oxygen requirement will enable, and in some
cases encourage, refiners to increase the volume of high toxicity
gasoline blending components in RFG at a considerable cost to public
health. At a minimum, future clean-burning gasoline must maintain the
actual benefits of the RFG program we are achieving today.
Conventional gasoline in the Northeast produces 13 percent less
toxic air pollutants than before the advent of RFG. Changes in the RFG
program may significantly affect the quality of the conventional
gasoline pool. Maintaining the last decade's improvement in
conventional fuel quality must also be a goal of anti-backsliding
provisions. A continuing concern about conventional gasoline quality
may be exacerbated by a transition from MTBE to ethanol. The statutory
one pound Reid vapor pressure waiver for gasoline containing at least
10 percent ethanol will increase hydrocarbon emissions if ethanol use
in conventional gasoline increases during the summer months.
Preservation of current air quality benefits will require either the
elimination of this waiver, or other measures to offset the expected
hydrocarbon increases. We offer specific suggestions that address these
issues in the attached legislative analysis.
Renewable Fuels Requirement.--We understand from your letter and
your history of support for renewable fuels and ethanol that your
willingness to play a leadership role in lifting the oxygen standard is
linked to ``providing a solid future for ethanol.'' As you are aware,
at present there is no ethanol produced and hardly any ethanol used in
our region. Understandably, our lack of ethanol production and
distribution infrastructure and longstanding concerns about ethanol
volatility create apprehension about legislative outcomes that would
force the wide-scale use of ethanol in the northeast.
While we have several questions about the proposed renewable fuels
requirement, we recognize that the flexibility provided in your
legislation may better respond to our stated concerns about ethanol
than Congressional inaction. Under the 2 percent oxygen mandate, RFG
states' efforts to regulate or ultimately eliminate MTBE will
necessitate the use of ethanol during the height of our ozone season.
Moreover, market barriers and cost considerations will have no effect
on the volume of ethanol required under the current scenario.
By comparison, the national average renewable standard proposed in
your legislation gives us some comfort that ethanol would only enter
the northeast market if supply and distribution concerns can be
overcome at a reasonable costs. We appreciate that the scaled back
renewable standard volumes and 10 year phase-in period are designed to
ensure a gradual transition for gasoline refiners and states. These
features in combination with the annual averaging provision have the
potential to alleviate a majority of the Northeast concerns. If fuel
suppliers are able to avail themselves of market-based opportunities to
average internally and with other fuel suppliers to meet the annual
renewable content minimums, then we believe that ethanol will be used
where it is cost-effective to do so. If averaging among fuel suppliers
is not envisioned in your legislation, then we fear that ethanol could
be required to be used in our region during summer months contrary to
sound economic and environmental policy.
Our region maintains considerable interest in pursuing the
development of bio-mass ethanol production due to its significant
positive climate change, waste management and energy security
attributes. If this industry develops during the timeframes
contemplated in your legislation, we are certain to overcome many of
the supply and distribution hurdles that have hindered the development
of a Northeast ethanol market to date.
From an air quality standpoint, we remain principally concerned
about ethanol co-mingling and resulting increases in evaporative
emissions. While evaporative emissions are a concern throughout the
year, we are principally focused on avoiding volatility increases
during the 5-month Northeast ozone season. We wish to further explore
whether the averaging provisions contained in your proposal enable our
states to ensure that any ethanol that enters the region is sold
outside of the summer ozone season. Last, we believe that ethanol has
significant potential to reduce air pollution, particularly greenhouse
gas emissions. The logic of amending the Clean Air Act to contain a
renewable fuels requirement would be enhanced if the nexus between the
use of ethanol and air quality was made explicit. We would be happy to
work with your staff to explore options for setting minimum thresholds
for full fuel cycle GHG reductions or other approaches that demonstrate
the necessary linkage between ethanol and clean air.
We appreciate your consideration of these initial thoughts and the
more detailed comments that are attached.
Sincerely,
Jason Grumet,
Executive Director.
__________
State of New Hampshire,
Office of the Governor,
Concord, NH, September 16, 1999.
Hon. Tom Daschle,
U.S. Senate,
Washington, DC.
Re: Proposed Amendments to the Federal Reformulated Gasoline Program
Dear Senator Daschle: Thank you for your letter of August 13, 1999
and its accompanying recommendations for changes to the Federal
Reformulated Gasoline (RFG) program. Your letter notes that the air
quality benefits of RFG in reducing emissions of ozone precursors and
numerous toxic compounds have been substantial, exceeding expectations
for the program since its inception in 1995. As you know, however, the
gasoline additive methyl tertiary-butyl ether (MTBE), which is used
extensively in the Northeast to meet the Federal oxygenate mandate
associated with RFG, has been found to present a significant threat to
the quality of our groundwater and surface water resources.
Concern about the use of MTBE in the Northeast's regional gasoline
supply prompted me, in November 1998, as Chair of the New England
Governors' Conference, to ask the Northeast States for Coordinated Air
Use Management (NESCAUM) to study the use and effectiveness of MTBE as
a component of gasoline and the viability of possible alternatives,
including ethanol. Soon after, the U.S. Environmental Protection Agency
launched a Blue Ribbon Panel to undertake a similar assessment. The
conclusions of both of these efforts recommend reducing the use of MTBE
in RFG dramatically, ensuring that the actual air quality benefits
currently provided by RFG are retained, and providing States with clear
authority and greater flexibility to regulate oxygenates and other
gasoline constituents. I applaud you and Senator Feinstein for crafting
a proposal that represents significant progress toward achieving these
outcomes. In particular, I think the concept of a renewable fuel
requirement--accompanied by elimination of the Federal oxygenate
mandate--holds great promise and represents a wise precedent for the
Nation to establish.
Your letter thoroughly reviews the advantages of renewable fuels,
from both environmental and economic perspectives. While the economic
advantages for the agricultural Midwest are clear, I am concerned that
a renewable fuels mandate could have a significant financial impact on
consumers in the Northeast who may--at least initailly--find themselves
subsidizing renewable fuel credits. Implementation of such a
requirement over an appropriate time period, as your proposal prudently
contemplates, is this essential. I believe that other important
implementation issues, such as evaporative emissions, averaging
provisions, and shoulder season co-mingling, can also be successfully
addressed. I know that these and other issues have been carefully
considered by NESCAUM, so your effort to reach out to NESCAUM to review
and revise this proposal should assist materially in developing a
solution that is satisfactory to all.
I must also mention two additional personal concerns regarding our
joint efforts to find a national solution to the MTBE problem. First,
we must have a truly national solution. I have recently become aware
that some in Congress would like to undertake a single-state solution,
leaving other states--including those in the Northeast--to suffer
continued contamination of their water supplies. This is simply
unacceptable.
Second, we in New Hampshire appear to have a greater sense of
urgency of the need to reduce the threat of MTBE contamination than
many jurisdictions. Legislation passed this spring, for example,
authorized the State to limit MTBE concentrations in gasoline and
directed the New Hampshire Department of Environmental Services to seek
from EPA an immediate, temporary waiver from the reformulated gasoline
program. As you can see, if the oxygenate problem is not solved
promptly, the entire RFG program--and its significant air quality
belefits--could be jeopardized. As a result, New Hampshire supports
moving as expeditiously as possible to determine and implement a
national solution, including an aggressive schedule for reducing and/or
phasing out MTBE as a gasoline additive.
I congratulate you and Senator Feinstein for your efforts to
balance environmental quality, economic well being, and energy supply
and sufficiently in shaping a national resolution to these complex fuel
issues. We appreciate your interest in helping all States retain the
demonstrated public health benefits of cleaner burning gasolines and
minimize the environmental threats posed by the continued usage of
MTBE. Please let me know of any way that I can help to ensure the
prompt passage of this important legislation to preserve clean, healthy
air and protect our precious water resources.
Very truly yours,
Jeanne Shaheen.
__________
State of Maine, Office of the Governor,
Augusta, MA, September 28, 1999.
Hon. Thomas Daschle,
U.S. Senate,
Washington, DC.
Dear Senator Daschle: Thank you for sharing your legislative
proposal to amend the Reformulated Gasoline (RFG) oxygen standard in
the 1990 Clean Air Act Amendments. Let me first say that I am very
encouraged that a Federal solution may emerge within the next year to
help Maine and other states combat the problem of MTBE contamination in
groundwater. After reviewing your proposal, I believe it can help
establish the proper foundation upon which each State or region can
achieve its respective goals.
While the RFG program has provided significant air pollution
benefits, there is clear evidence that the use of MTBE in this fuel has
contributed to widespread groundwater contamination. I cannot, in good
faith, advocate the increased use of MTBE to reduce air pollution,
while increasing the contamination of groundwater. Maine, for example,
relies on groundwater for the majority of its drinking water, and
therefore, widespread contamination of our groundwater with MTBE is
simply unacceptable. For these reasons, and the lack of flexibility
under Federal law to reduce the oxygen content and limit MTBE, Maine
has abandoned the RFG program in its entirety. The recent Environmental
Protection Agency (EPA)--sponsored Blue Ribbon Panel and the Northeast
States for Coordinated Air Use Management (NESCAUM) studies have
confirmed Maine's analysis of MTBE and my belief that the Clean Air
Act's oxygen standard poses a very real threat to groundwater and
public health.
As you know, the path forward is a difficult one, not only for
Maine, but also for the rest of the country. Gasoline powered vehicles
represent one of the most significant sources of air pollution in terms
of ozone forming pollutants and air toxics. Thus reformulation of
gasoline is an appropriate means of achieving our environmental goals
and protecting public health, as long as this fuel does not have
unintended negative environmental consequences.
In light of these considerations, Maine's immediate goals are to:
(1) eliminate the RFG oxygen level mandate in the Clean
Air Act;
(2) reduce or eliminate the use of MTBE in gasoline; and,
(3) assist with the development of a regional or seasonal
fuel that achieves the original air quality goals of the RFG program
without the increased use of MTBE.
It appears that your proposal and our goals are consistent on a
number of points. I particularly support the following aspects of your
bill:
the gradual reduction of MTBE to pre-RFG levels;
the ability of states to further regulate or phase-out
MTBE;
the ability of states to regulate MTBE and to opt-out of
the oxygen requirement (I would prefer the oxygen mandate to be removed
from the Clean Air Act); and,
the maintenance of air quality benefits that have been
provided by the RFG program.
While I understand your concern that the elimination of the
oxygenated requirement has the potential of reducing the amount of
ethanol used as a motor vehicle fuel, it will be difficult to increase
the use of ethanol in Maine or the Northeast. Inadequate supplies and
distribution infrastructure interfere with the use of ethanol in the
Northeast, and causes considerable apprehension over the renewable
fuels requirement of your proposal. I understand there is recognition
of these problems in your bill, since there are provisions of a
national average renewable fuel standard and a 10-year phase in period
for the renewable fuels requirement. I also have concerns that an
ethanol-blended fuel will not be as useful to resolve our particular
air quality problems during the summer. Nonetheless, I am sensitive to
the needs of farmers everywhere, and I certainly am willing to discuss
how our mutual interests can be met.
I appreciate your leadership on this important issue, and I look
forward to continuing our dialog as Congress considers this matter. As
a first step, I have asked Jim Brooks, Director of Maine's Bureau of
Air Quality, to contact your staff to discuss our respective goals.
Sincerely,
Angus S. King, Jr.,
Governor.
__________
[From a Lincoln, NE newspaper]
Mandatory Ethanol is Going Too Far
Nebraskans can be proud that their State is one of the Nation's
leading ethanol producers.
It's a clean-burning fuel additive made from a renewable resource--
primarily corn--that has helped reduce air pollution in smog-ridden
cities. It has helped reduce the Nation's dependence on imported oil.
It's clearly superior to the next best alternative, MTBE, a
suspected carcinogen that comes in the form of a slippery molecule that
quickly contaminates groundwater. By comparison ethanol is no more
dangerous than old-fashion corn liquor.
Those are all good reasons to support ethanol and for the Federal
subsidy for ethanol to continue.
Gov. Mike Johannna wants to go one step further. He wants to make
the use of ethanol mandatory in Nebraska.
Thats going too far. Even though there are powerful arguments and
favor of ethanol, the use of government to restrict consumer choice and
to favor a particular product in the marketplace should be taken only
under special conditions.
For example, the argument is often made that soy products are more
healthier than meat. They are low in unsaturated fat. People with high
cholesterol are sometime encouraged by doctors to each soy burgers
rather than hamburgers.
Do those fact justify legislation restricting Nebraskans to eating
only soy burgers? Do those facts justify eliminating steaks and porks
chops from the diets of Nebraskans who may not suffer from cholesterol
problems?
The power of government to restrict competition should be used
lightly, if at all.
A better approach to coping with the danger of MTBE might be to
simply ban the unsafe product, an option being considered by the U.S.
Environmental Protection Agency.
Already MTBE has fouled water supplies across the Nation. It has
even made its way to Nebraska, even though there is no reason for the
substance to be in gasoline used here. It has been detected at 18 sites
in the State and may be found at more. A probable explanation for the
presence of MTBE in Nebraska is that once MTBE is blending into
gasoline, it can end up anywhere. It is often mixed at the refinery and
shipped by pipeline. Gasoline can be purchased on the open market.
Sometimes it may make economic and logistical sense to slip MTBE
gasoline to Nebraska. And so some of it ends up in some of the States
groundwater.
As the EPA considers a ban on MTBE ethanol supporters should push
hard for ethanol at the safest and most--proven additive to help reduce
carbon monoxide in cities where levels of lethal gas exceed Federal
standards.
No communities in Nebraska, however, have carbon monoxide levels
that trigger the requirement that oxygenates such as ethanol or MTBE be
added fuel. Until such evidence can be presented, there is insufficient
reason to take away the choice that Nebraska motorists now have to pump
ethanol, regular or premium.
In the meantime, if the Governor wants to try a mandate, we have a
modest proposal: Let him serve only soy products at the Governor's
Mansion. The reaction of guests to the delectable, but limited, menu
might be instructive.
__________
[From the Des Moines (IA) Sunday Register, September 19, 1999]
The Register's Editorials
Let Ethanol Prove Itself
(Iowa Farmers Need Help, but Coercion at the Gas Pump is Wrong)
The price of corn is low, and Iowa farmers are hard hit.
So here's the deal: Let's prohibit the sale of wheat bread. From
now on, only corn bread should be allowed on Iowa grocery shelves. It
might help boost the price of corn.
Hog farmers are struggling, too. Why not ban the sale of other
meats so that Iowans can eat nothing but pork?
No?
Well, how about requiring that most gasoline sold in Iowa be
blended with corn-based ethanol?
That's an idea that has the backing of the governor and State
agriculture secretary as well as Iowa's two U.S. Senators.
But that doesn't make it right.
Ethanol is good for Iowa. It creates an additional market for corn.
It is an alternative fuel from a renewable resource. Iowa politicians
are right to promote ethanol and to provide a tax break until the
industry can stand on its own feet. they are right to fight the oil
lobby in its efforts to rob ethanol of its market and take away its
subsidy.
Promotion is one thing. Coercion is another. An ethanol mandate
would deny Iowans a choice of fuels and short circuit the process of
ethanol establishing its own worth in the marketplace. Except in places
where smog problems dictate the use of an oxygenated fuel, what's the
rationale for mandating ethanol?
The justification is to marginally boost the price of corn. Cleaner
air is offered as a reason, too, but that's an afterthought. If that
were the goal, other measures would be far more effective: outlawing
SUVs, for instance, or quadrupling the gasoline tax.
Promotion is one thing, coercion is another.
Ethanol is not recommended for some small engines on lawn mowers,
snowblowers, boats, auxiliary generators and the like. Then, too, lots
of Iowans drive older vehicles or use older equipment with components
that may not have been engineered to use ethanol, as newer vehicles
are. Why put these people through a hassle to find the non-ethanol fuel
their equipment requires?
One convenience store chain used to advertise free repair for any
engine damaged by the use of its gasoline. If the State insists on
mandating the use of ethanol, perhaps it should make the same offer.
Better yet, let Iowans make their own choices, and let ethanol prove
itself in the marketplace.
__________
[From the Omaha (NE) World Herald, March 9, 2000]
Editorial Page
More Alcohol, Less Choice
(By John Gottschalk, Publisher; Lawrence D. King, Executive Editor;
Francis L. Partsch, Editorial pages Editor; and Deanna J. Sands,
Managing Editor)
Motorists will have fewer choices at the gas pump if the Nebraska
Legislature and Gov. Mike Johanns continue a course down which they
have started.
The issue is grain alcohol, or ethanol, which, when mixed with
gasoline, produces a fuel that has captured about 25 percent of the
Nebraska market. However, this consumer acceptance in Nebraska has been
bolstered by State and Federal tax exemptions designed to make alcohol-
blended fuel competitive with straight gasoline. Now the Nebraska
Legislature is considering eliminating the competition altogether.
Support is building for a proposed State law to require most general-
purpose automotive fuel sold in the state to contain ethanol.
As a general principle, government should not take sides in such
matters unless a strong case can be made that intervention serves a
major public purpose. In this instance, the arguments for eliminating
competition haven't been persuasive.
One argument is that the financial health of corn growers and
ethanol producers in Nebraska would benefit, boosting the economy of
the State generally. The statement is indisputably true, but as an
argument it breaks down. The power of the Legislature is not
appropriately used to eliminate competition for Nebraska-produced
products. If Nebraska applies a similar protectionist philosophy to
beef, pork and corn, lovers of grilled tuna, among others, might be
permanently out of luck. Rice Krispies might disappear from the
shelves. Crab legs? Forget it.
Another argument is environmental. Governor Johanns in a conference
call with newspaper editors on Tuesday, said he was supporting the
legislation because it's time the State set an environmental standards
for fuel content.
Perhaps it is time, but that's an argument that could do with a
good bit more scientific underpinning than has been evident so far,
Johanns said ordinary gasoline contains many chemicals that could when
burned, be harmful. Of particular concern, he said is MTBE, an additive
used in some parts of the country to enhance octane while reducing
carbon monoxide. At seven Nebraska locations, Johanns said, MTBE has
been found in underground water.
MTBE has been linked to tumors in laboratory animals and seeps
readily into water supplies. In Iowa, MTBE has been found in 29 percent
of the State's monitored test wells.
However, petroleum industry spokesmen said they don't know how the
additive ended up in the Midlands, where it isn't commonly added to
gasoline supplies. One theory is that traces of MTBE exist in some
refinery equipment, from where it passes into gasoline supplies that
seep into the water from leaky underground tanks.
Ethanol also enhances octane while reducing carbon monoxide. But if
no one know precisely how MTBE has been making its way into Midlands
water supplies, how can anyone make a credible claim that mandatory
ethanol usage will prevent future contamination? What's to say the MTBE
contamination won't continue to occur just as it has been occurring?
To say that the proposal could benefit from scientific validation
should not be interpreted as hostility to the ethanol industry. There's
much to be said for ethanol-blended fuels. The ethanol industry has
been good for Nebraska corn growers. It has provided jobs in Nebraska
communities. We hope the product has a bright future and continues to
own consumer acceptance, as surely it has been doing in recent weeks,
with rising petroleum prices making the ethanol blends more price-
competitive.
Certainly if scientific analysts showed that a State law governing
the content of motor fuel could appreciably prevent the contamination
of the water supply, it might constitute justification for the State to
do away with consumers' choice. As a general philosophy, however,
government should be cautious about eliminating competition. The freer
the marketplace to reflect the collective decisions of consumers, the
greater the probability that it will provide the jobs and taxable
incomes on which the government is so dependent.
__________
[From the Quad City Times, September 19, 1999]
Editorials
A New Subsidy: More Fuel on the Fire
(By John M. Humenik, Editor)
ethanol-only proposal doesn't help consumers
Chuck Grassley and Tom Harkin may have the best of intentions, but
their proposal to boost ethanol use in Iowa is seriously misguided.
The two U.S. Senators have signed a petition asking Iowa Secretary
of Agriculture Petty Judge to require that Iowa service stations sell
only ethanol-blended gasoline. Ethanol, as most Iowans know, is a fuel
derived from a mixture of gasoline and corn-based alcohol.
Harkin and Grassley, of course, are longtime supporters of ethanol.
They know that its use is good for Iowa corn farmers and that it
reduces the nation's reliance on foreign oil.
But that's only half the story. Federal subsidies of ethanol now
cost American taxpayers more than $770 million a year in lost revenue--
largely because of ethanol's exemption from Federal fuel taxes. The
Congressional Research Service says that figure could reach $1 billion
by next year.
And mind you, that subsidy isn't putting more money in the pockets
of farmers. The real beneficiaries of the ethanol subsidy are
conglomerates like Archer Daniels Midland Corp. that convert the corn
into ethanol. The Cato Institute estimates that every dollar of profit
now earned by ADM's ethanol operation is costing taxpayers $30 in lost
revenue. That's because in addition to the federally subsidized
production of ethanol, ADM also has received millions of dollars worth
of free corn from American farmers, courtesy of the Department of
Agriculture.
Are farmers the co-beneficiaries of the ethanol subsidy? Yes--but
not to the extent that some would argue. Subsidized ethanol production
does guarantee corn farmers a higher price for their product, but that
penalizes hog farmers and cattlemen since more than half the Nation's
corn crop is used domestically for feed grain.
As for claims that ethanol helps the environment, the National
Academy of Science, the Congressional Budget Office, the Department of
Energy and even the USDA have each reported that ethanol, which is less
efficient than gasoline, provides no significant environmental benefit
and may even add to air pollution--which is why ethanol use was
restricted in the EPA-proposed rules first issued in conjunction with
the Clean Air Act of 1992.
None of this is to suggest that Grassley and Harkins are wrong to
support the subsidization of ethanol at a more reasonable level--only
that there is an abundance of evidence that indicates ethanol is not
all that it's cracked up to be. Not for consumers, not for the
environment and not for farmers. With research and continued
refinements, it might someday become an economically viable alternative
to gasoline--but until that day, it would be ludicrous to argue that
Iowa's gas stations be required to sell only ethanol.
Such an agreement would infringe on the rights of thousands of Iowa
businessmen and put service stations in border communities such as the
Quad Cities at a competitive disadvantage with gas stations in
neighboring States. It also would take government subsidization of
ethanol to a whole new level, essentially forcing Iowans to buy a
product that already is costing them money through lost tax revenues.
The game is rigged as it is. With their million-dollar subsidies,
ethanol producers are playing against their competition with loaded
dice and marked cards they're still losing--to the extent that
lawmakers are proposing the outright elimination of the competition--
that's a sure sign that ethanol is not a product that consumers are
ready to embrace.
Ethanol might be worth some level of government support, but it
never will be so valuable as to justify scrapping our system of free
enterprise.
__________
[From Gazette newspaper]
Gazette Editorials
Noble Motives: Still, Ethanol Idea is Bad
Its almost impossible in Iowa these days of heightened political
activity not to run into a politican--already in office or seeking
office--who isn't sympathetic to the plight of American agriculture.
Even more than sympathetic, they're typically eager to offer their
version of the answers to this economic slump.
Short of the government writing a check to every hog farmer who's
lost $20 or $30 on every animal marketed at some point in the last
year, or guaranteeing farmers will be paid at least what it costs to
produce corn and soybeans, instant relief for what ails agriculture is
hardly probable.
That doesn't stop politicians from trying. We would be disappointed
if they did give up.
Part of the problem is public policy. Part is global turmoil. Part
is the fault of farmers who produce more than the market needs.
Which brings up the situation brought to our attention over the
weekend. Sen. Charles Grassley's top aid, Ken Cunningham, has started
the ball rolling toward possible implementation of a regulation
mandating that all gasoline sold in Iowa be an ethanol blend. Even
though lawmakers failed to consider such a mandate earlier this year,
Cunningham says the Code of Iowa already empowers the secretary of
agriculture to take such action.
Since an ethanol mandate on fuel sold in Iowa would give the price
of corn a modest but desirable boost, the motivation for such an effort
cannot be challenged.
If it is determined the law actually provides such authority, look
for the push to implement its provisions to be intense.
The sense from this corner, as noted recently, is that a policy of
government-mandated consumption is bought with difficulty. It is to be
avoided under every circumstance. Sure, all of us--at least those of
use whose own roots aren't too far removed from the roll--truly can say
we feel the pain of Iowa farmers and probably shouldn't object if
enhanced ethanol sales jacked up corn prices a notch.
But are we ready for government to tell us which cost food entry to
penalized? Or which automobiles we must buy? It's bad enough that the
people we elect to public office take the money they collect from us
and spend it--something--on projects some may find offensive. But let's
not tolerate their being so invasive into our lives as to tell us what
has to go into the gas tanks of our cars and pickups. Or on our tables.
And if it's determined that some past legislature managed to pull a
fast one on Iowans by giving such discretion to the agriculture
secretary, the next legislature should want no time in taking it away.
Public policy decisions should always be open to the full scrutiny
of the people, not slipped in through the back door.
__________
[From The Grand Island Independent]
Editorial Board
(By Robert L. Krecklow, Editor and Publisher; Bill Brennan, Executive
Editor, George Ayonb, Editorial Page Editor; Jeff Funk, Managing
Editor; and Jim Paddis, News Editor)
[Volume 130, Number 243]
Ethanol backers need to gain willing users
Supporters of ethanol need to come to grips with a couple of major
hurdles before their fuel will ever become successful.
First, they need to determine that an ethanol-blended fuel is not a
problem in cars and then convince the skeptics. Too many mechanics are
whispering that some vehicles don't run very well on it.
Second, they need a statewide commitment to use the product if they
expect others to use it. However, a state law forcing Nebraskans to use
an ethanol blend is not the right way to show commitment.
An ethanol-blended fuel is good for the environment end makes good
sense, especially when oil has reached $35 a barrel for U.S. importers
and gasoline has reached $1.50 a gallon for consumers. At these prices,
ethanol is cost effective and extends the supply of a non-renewable
fossil fuel.
Ethanol also makes perfect sense as a replacement for the MTBE
additive, which was mandated in States with pollution problems. MTBE
has been successful in reducing air pollution but has become a health
hazard in groundwater.
Even so, the makers of ethanol have a major marketing initiative on
their hands. They have to win American acceptance of their product.
they have to eliminate concerns, real or imaginary, over the use of
ethanol in cars.
They need to convince American automobile makers to build cards
that offer optimum performance with ethanol blends. They also need to
convince major American oil companies that the 10 percent ethanol
additive will help manage the supply of crude oil.
Yet it would be a mistake to force Nebraskans to use an ethanol
blend. The legislative measure on the floor would force Nebraskans to
pay higher prices for gasoline and limit selection. this tactic simply
will make motorists resent ethanol.
It is more important for the supporters of ethanol to gain a
willing acceptance of their product. It may be harder to market
consumption than to legislate it but the long-term.
__________
STATEMENT OF HON. TOM HARKIN, U.S. SENATOR FROM THE STATE OF IOWA
Good morning, Mr. Chairman and other members of the Subcommittee. I
very much appreciate this opportunity to appear before you to discuss
the environmental benefits of ethanol and its role in the reformulated
gasoline program (RFG). As we work to address the crisis caused by use
of the toxic additive MTBE in gasoline, it is critically important that
everyone knows the facts about the advantages of ethanol the safe and
renewable alternative to MTBE.
Before getting into the specifics of ethanol, I want to talk
briefly about the Clean Air Act Amendments of 1990 and the reformulated
gasoline program. When we adopted the RFG program in 1990 the primary
reason was of course air quality, but we also had in mind additional
objectives through the use of oxygenates, such as enhanced energy
security and environmental and economic benefits from using
domestically produced renewable fuels like ethanol.
The air quality improvements from the RFG program, including its
oxygen content requirement, are impressive. RFG is currently used in 17
States and the District of Columbia and accounts for about 30 percent
of all gasoline sold in the United States. The RFG program has reduced
emissions of ozone-forming volatile organic compounds, toxic compounds,
carbon monoxide and oxides of nitrogen. EPA estimates that the reduced
emissions from the RFG program are equivalent to taking 16 million
vehicles off the road annually. And as you can see from this chart, RFG
will bring about a cumulative reduction of well over 400,000 tons of
pollutants from 1995 through this year.
(Chart #1: Reductions of Pollutants from RFG)
Well, that is the air quality side of the story. Unfortunately, we
all know about the water quality side of the story. The oil companies
chose overwhelmingly to use MTBE as the oxygen additive in RFG.
Currently, about 85 percent of RFG contains MTBE and only about 11
percent of RFG is made with ethanol. And now we have very extensive
water quality problems from MTBE contamination. Frankly, I believe we
could have avoided a lot of these problems if the we had been able to
keep the higher level of oxygen in the RFG amendment that we started
with back in 1990. That would have led to much more ethanol use, and
less MTBE use. But we ended up with the 2 oxygen level in the law,
widespread use of MTBE and consequent water quality problems.
Now we must move to solve the water quality problems caused by
MTBE. However, in doing so, I hope that we will not miss the obvious
lessons of the MTBE fiasco. We must avoid taking steps to protect water
that will take us backwards with respect to air quality and the use of
renewable fuels like ethanol.
There is another very important lesson from the MTBE crisis, and
that has to do with how much trust we are willing to place in the hands
of the oil companies. Remember, it is the same oil companies that
brought us the MTBE debacle that are now calling for Congress to do
away with the oxygen content requirement in RFG. Leave it up to us,
they say. Give us the flexibility, they say, we will produce clean
gasoline without the minimum oxygen content requirement.
Well, I am not about to stand by and allow the oil companies to
fool us once again, and I hope this Congress will not let them do it.
Despite what the oil companies say, the oxygen content in RFG does
have value in improving air quality. The Clean Air Act has both formula
requirements and performance requirements for RFG. The oxygen content
requirement is in the formula requirements. The performance
requirements include reducing volatile organic compound and toxic
emissions. The oil companies will say that if they meet the performance
standards then they should not have to put oxygen into RFG.
That approach ignores the value of oxygen in RFG that goes beyond
what is reflected in the performance standards. Adding oxygen to RFG
reduces emissions of ozone-forming carbon monoxide, toxic compounds and
fine particulate matter. Oxygen helps to boost octane and replaces
aromatic compounds in gasoline that deteriorate air quality. In
combination, the performance standards plus the formula requirements--
including oxygen content--have led to greater improvements in air
quality than would be the case if we just relied on performance
standards alone.
In other words, there are inherent benefits to using oxygen in
gasoline that are not reflected in the RFG performance standards. We
will be giving up these air quality benefits if we eliminate the oxygen
requirement and rely on the current performance standards alone. In
addition, if we take oxygen out of RFG, we can fully expect the oil
companies to start adding back in the aromatic compounds and other junk
in order to maintain octane in the gasoline.
As I say, ethanol is the safe oxygen alternative to MTBE. Now, some
are saying that ethanol cannot supply the RFG markets at acceptable
prices. Analysis done by the Department of Agriculture refutes this
claim. USDA concluded that ethanol can replace MTBE by 2004 without
price spikes or supply shortages. Work by the Department of Energy also
contradicts the suggestion that use of ethanol would substantially
increase gasoline prices. The best evidence about gasoline prices is
what is happening in the market right now. Ethanol is in fact less
expensive in the market than gasoline. And a study looking at prices in
California, found that ethanol blends would cost $0.03 per gallon less
than MTBE blends if California were to switch to ethanol-blended RFG.
Chart #2 on Gasoline and Ethanol Prices
Another important element of this debate is the need to promote
much greater use of renewable fuels in our country. Renewable sources
are only 3 percent of U.S. energy supplies. In the gasoline market only
about 1.2 percent is renewable ethanol. Our reliance on foreign
petroleum is growing dramatically. We are now far more reliant on
foreign petroleum than we were back in the 1970s when disruptions in
oil supplies caused tremendous shocks to our economy.
(Chart #3: U.S. Dependence on Foreign Oil)
In conclusion, I firmly believe that the oxygen content requirement
continues to have real value in improving air quality. I also believe
that any legislation regarding the RFG program should incorporate some
key principles: (1) eliminating MTBE; (2) fully maintaining and
preferably increasing the air quality benefits delivered by the RFG
program, including its oxygen content requirement; (3) fully accounting
for the environmental benefits of ethanol as an oxygen additive to
gasoline, especially with respect to reducing emissions of carbon
monoxide, toxic compounds and fine particulate matter and their
precursors; and (4) fully maintaining and preferably increasing the
opportunities for ethanol and renewable fuels in comparison to the
current RFG program.
Mr. Chairman, again I appreciate the opportunity to appear before
your Subcommittee.
__________
STATEMENT OF JACK HUGGINS, VICE PRESIDENT, WILLIAMS BIO-ENERGY, THE
WILLIAMS COMPANIES
Good morning Mr. Chairman and Members of the Committee. I am very
pleased to be here to discuss ethanol's continued participation in the
federal reformulated gasoline program (RFG) generally, and the RFG
oxygen content requirement specifically. I appreciate the opportunity
to provide comments on behalf of the domestic ethanol industry.
First, let me tell you something about my company. Williams is a
global energy and communications company headquartered in Tulsa,
Oklahoma. We have about 23,000 employees and operate about $25 billion
in assets. Through our various energy businesses, we own and operate
nearly 60,000 miles of natural gas and liquid pipelines located
throughout the United States. Williams is a producer of natural gas, a
large processor of natural gas and natural gas liquids, and our energy
marketing and trading group is one of the largest in the country. We
own two refineries in the United States and operate a refinery in
Lithuania. We transport, terminal and retail gasoline and other
petroleum products. Our bio-energy group, of which I am part, is the
second largest producer of ethanol in the country, with plants in
Illinois, Nebraska and most recently, a new project announced in
Wisconsin. Given our extensive involvement in both the petroleum
industry and the ethanol industry, I believe we have a unique
perspective on the issues being discussed today.
SUMMARY
We believe the RFG program has successfully improved air quality in
those regions of the country where it is in place. In the Midwest
markets, where ethanol has been used extensively, the air quality
record is excellent. On the other hand, many Americans are well aware
of MTBE groundwater contamination issues in other RFG areas. Many
suggest the solution to this groundwater problem is opening the Clean
Air Act to remove the oxygen requirement.
Williams does not believe this type of legislation is necessary.
Ethanol production can be expanded to replace MTBE. Ethanol can be
transported and distributed efficiently to California and other RFG
markets. To the extent refiners need flexibility, EPA could modify the
program to require that the oxygen requirement apply on an average
basis, rather than a per gallon basis. This would allow refiners to
make significant quantities of fuel without oxygen.
If Congress chooses to legislate in this area, then the clean air
benefits achieved by including oxygen in gasoline should be preserved.
This should be the overriding factor that drives policy. Williams does
not advocate using the legislative process to favor one fuel over
another, but if ethanol does provide a better overall environmental
solution than MTBE, we should not hesitate to use ethanol.
BACKGROUND
Before turning to the RFG program, I would like to provide some
perspective as to why ethanol is so critically important to the
nation's economic, energy and environmental policies. One need only
look at today's headlines to appreciate the need for increased
production and use of fuel ethanol. The Energy Department reports oil
prices are at the highest levels since the Gulf War, and gasoline
prices are expected to top $1.60/gallon this summer. Blending ethanol
with gasoline provides an economically competitive source of octane,
helping to constrain gasoline prices. As the Congress considers
policies to moderate gasoline prices and assure fuel supplies,
providing increased market opportunities for domestically produced
renewable energy, such as ethanol, should be a top priority. In fact,
the farm income and energy security benefits of ethanol were principle
factors leading to congressional approval of the RFG program and the
oxygen content requirement in the Clean Air Act Amendments of 1990.
Today's headlines merely reinforce the efficacy of that decision.
At the same time, overall conditions in the farm economy in 2000
are expected to be similar to last year and the nation facing record
oil prices due to OPEC production cutbacks, ethanol production and use
will play a pivotal role in providing value-added processing for grain
while helping to constrain gasoline prices and promote competition. At
a recent USDA Agricultural Outlook Forum, USDA Chief Economist Keith
Collins stated that the price for corn this year is ``expected to
average only $1.90 a bushel, slightly below the 1998 crop.'' With total
supplies predicted to be near 1999 levels and little change in ending
stocks, Collins noted that ``corn prices are expected to show only
modest improvement next season.'' Collins also predicted that in light
of weak markets, substantial government payments will be made under
current programs in 2000. The use of corn for ethanol production not
only adds to the price of a bushel of corn, it also helps to reduce
government payments.
THE REFORMULATED GASOLINE PROGRAM
I think it is important to underscore that the RFG program, with
its oxygen content requirement, has worked quite effectively. Air
quality has improved. Indeed, about 75 million people are breathing
cleaner air because of RFG. EPA reports that RFG is reducing ozone-
forming hydrocarbon emissions by 41,000 tons and toxic pollutants such
as benzene by 24,000 tons annually. That's the equivalent of taking 16
million vehicles off the road each year. A study by the Northeast
States for Coordinated Air Use Management (NESCAUM) shows that today's
RFG reduces the cancer risk from gasoline by about 20 percent. It is
critically important to recognize that these benefits are significantly
greater than required by the Clean Air Act's performance standards for
hydrocarbons and toxics, at least in part because of the federal oxygen
requirement.
As a consequence of the growing concerns regarding MTBE water
contamination, many have advocated amending the Clean Air Act. The
domestic ethanol industry has opposed efforts which seek only to
eliminate the federal RFG oxygen requirement or address the issue for
particular states or regions. However, if Congress chooses to act in
this area, the ethanol industry does not want to hinder legislative
efforts to address this serious public health and environmental issue.
We want to be part of the solution, not part of the problem. Toward
that end, we have developed the following principles, which we believe
should guide congressional action on this issue.
Develop a national solution;
Address the cause of the problem;
Protect the environment; and
Provide the necessary time and ``flexibility'' to
allow refiners to make a rational transition to increased
ethanol utilization.
Develop a national solution
State-specific actions will create a patchwork of fuel regulations
resulting in increased consumer costs.
State specific programs increase logistics costs and reduce
flexiblitity.
Address the cause of the problem
Congress should determine what controls on MTBE are necessary to
protect water supplies.
Simply eliminating the RFG oxygen requirement will not assure that
MTBE use is reduced and will undermine the ``real world'' environmental
benefits of the current RFG program with oxygen.
Protect the environment
The air quality gains provided by RFG with oxygenates should not be
sacrificed as MTBE use is reduced, i.e., the toxic and carbon monoxide
emissions benefits of oxygen should be preserved.
The RFG program assures air quality benefits through the combined
application of emissions performance standards and an oxygen
requirement. As a result, the RFG program has provided toxic reductions
in excess of those required by the performance standards alone. The
oxygen standard has also provided reductions in carbon monoxide for
which there is no performance standard at all.
EPA should conduct a rigorous analysis of the ``real world''
emissions benefits of oxygen, including the impact on higher emitting
vehicles, off-road and off-cycle driving (areas where the impact of
oxygen is more critical) to assure there is no backsliding from these
effects. EPA should also compare the potency-weighted toxic affects of
oxygenated and non-oxygenated RFG. Finally, it is critical that the
carbon monoxide (CO) benefits of oxygenates not be ignored. The oxyfuel
program worked and CO has been dramatically reduced nationwide. Several
CO non-attainment areas have been reclassified into attainment based in
part on maintenance plans which include the oxygen content benefits of
RFG. If the RFG oxygen requirement is repealed, the CO attainment
status of these areas will be jeopardized. In addition, the National
Academy of Sciences concluded last year that as much as 20 percent of
the ozone coming from automobiles was attributable to carbon monoxide.
EPA should assess this beneficial impact and either (1) incorporate a
CO performance standard into the program or (2) promulgate a CO offset
so that refiners can balance CO reductions with VOC increases.
Provide flexibility to refiners
Refiners and gasoline marketers should be given flexibility in
meeting the challenge of removing MTBE.
Some claim the only way to eliminate MTBE without increasing
consumer gasoline costs is to eliminate the oxygen standard itself.
Indeed, some see the two as synonymous. At a time when gasoline prices
across the country are soaring, Congress must consider the economic
implications of reducing MTBE use. MTBE currently represents about 3
percent of the nation's transportation fuel supply. If it is eliminated
without providing for a replacement of that supply, gasoline prices
will clearly rise. Indeed, this fact has been established by both the
Department of Energy and the California Energy Commission, which
concluded a non-oxygenated fuel scenario in California (with no ethanol
used) was the most expensive option available to the state in
addressing MTBE. If MTBE volume is to be reduced, replacing that volume
with safe alternatives, such as ethanol, is both environmentally and
economically sound.
The U.S. Department of Agriculture has completed a comprehensive
analysis demonstrating that ethanol can effectively replace MTBE by
2004 without price spikes or supply shortages. The Department's
analysis shows that total ethanol production capacity will have to
increase roughly 50 percent, to approximately 3 billion gallons by
2004, in order to supply the oxygenate demands of RFG while maintaining
the existing ethanol octane markets in conventional gasoline.
USDA also analyzed the transportation affects of increased ethanol
RFG. The Department concluded that ethanol would be shipped by barge or
rail cost-competitively, and that there would be ``no transportation
impediment to the use of ethanol as a replacement for MTBE.'' As a
company heavily involved in the transportation of liquid fuels, we are
planning to ship ethanol to California and have been working with
refiners in the state to demonstrate how ethanol could be distributed
to the refineries. Based on our experience, the logistics of supplying
ethanol to the market should not be a barrier to its use.
The Ethanol Solution
The primary concern with maintaining the oxygen standard appears to
be the industry's ability to supply the increased demand for ethanol.
But such concerns are unfounded. It is important to understand that
because ethanol has twice the oxygen content of MTBE, it will only take
half as much ethanol to satisfy the oxygen requirements of RFG. Current
MTBE use in RFG is approximately 257 bb/d (thousand barrels per day).
That level of oxygen can be met by only 128 bb/d of ethanol. Current
ethanol production is 100 bb/d.
A recent report prepared by AUS Consultants, Inc. for the
Governors' Ethanol Coalition demonstrates that the ethanol industry can
double production within two years, quicker than the proposed three-
year MTBE phase out. According to the report, ``Ability of the U.S.
Ethanol Industry to Replace MTBE'':
Replacing MTBE with ethanol would increase the demand
for ethanol to nearly 3.2 billion gallons per year by 2004;
The ethanol industry can increase production capacity
from 1.5 billion gallons to 3.5 billion gallons per year by
2004--more than exceeding the greater demand;
The increased capacity would come from increased
utilization of existing plants, expansion of existing
facilities, new plants currently under construction, and
proposed facilities currently in various stages of development;
Using ethanol to replace MTBE will prevent an
oxygenate supply shortage that could result in increased
gasoline prices;
Expanding ethanol capacity will result in $1.9 billion
in new investment;
Construction activity and increased commodity demand
will add $11.7 billion to real GDP by 2004 and increase
household income by $2.5 billion; and
Switching to ethanol will create more than 47,800 new
jobs throughout the country.
Ability of the Ethanol Industry To Replace MTBE (Millions of Gallons per Year)
----------------------------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004
----------------------------------------------------------------------------------------------------------------
Ethanol demand 1,343 1,781 2,231 2,693 3,168
--------------------------------------------------------
Current production..................................... 1,533 1,533 1,533 1,533 1,533
Increased use.......................................... 0 180 180 180 180
Expanded plants........................................ 0 420 839 1,049 1,049
Cap'y under construction............................... 0 60 121 121 121
Cap'y under development................................ 0 0 0 333 598
--------------------------------------------------------
Total supply......................................... 1,533 2,193 2,673 3,216 3,481
--------------------------------------------------------
Surplus.............................................. 190 412 444 523 313
----------------------------------------------------------------------------------------------------------------
It is important to understand that ethanol production facilities
are largely modular. Expansions can be done very quickly by simply
adding new equipment to existing production streams. New production
from green fields is also now done quite efficiently. Since 1990, most
new ethanol production has been by farmer-owned cooperatives. These
highly efficient dry mill plants typically go from drawing board to
production within two years, at an approximate cost of $1.00--$1.50 per
gallon of capacity. The next generation of ethanol production
facilities will also include production from cellulose and biomass
feedstocks. Recently, a new ethanol production plant in Jennings,
Louisiana was awarded a $120 billion bond and is expected to begin
construction this spring. When completed, this plant will produce
ethanol from rice hulls and bagasse. Three other plants are currently
planned in California that will produce ethanol from rice straw.
Another facility is planned in upstate New York producing ethanol from
municipal waste. Already, ethanol is being produced from wood and paper
waste by Georgia Pacific in Washington state, and production from
forest residue is not far behind. None of this will happen, however,
without the assurance of increased market opportunities for ethanol in
RFG. If the oxygenate requirement itself is repealed, there will be
little increased ethanol production in the coming years. On the other
hand, maintaining the oxygen requirement as MTBE use is phased out will
stimulate tremendous new economic development across the country.
Ethanol Production Capacity March 2000
----------------------------------------------------------------------------------------------------------------
Primary Capacity
Company City State Feedstock (MGY)
----------------------------------------------------------------------------------------------------------------
A.E. Staley............................... Louden....................... TN Corn 45.0
Ag Power, Inc............................. Commerce City................ CA .............. 2.0
AGP....................................... Hastings..................... NE Corn 45.0
Agri-Energy............................... Luverne...................... MN Corn 18.0
AI-Corn................................... Claremont.................... MN Corn 18.0
Alchem.................................... Grafton...................... ND Wheat 12.0
Archer, Daniels Midland................... Decatur...................... IL Corn 750.0
Cedar Rapids................. IA Corn ...........
Peoria....................... IL Corn ...........
Clinton...................... IA Corn ...........
Broin Assoc............................... Scotland..................... SD Corn 8.0
Cargill................................... EddyVille.................... IA Corn 70.0
Blair........................ NE Corn 35.0
Cent MN Ethanol Coop...................... Little Falls................. MN Corn 18.0
Chief Ethanol............................. Hastings..................... NE Corn 62.0
Chippawa Valley........................... Benson....................... MN Corn 20.0
Corn Plus................................. Winnebago.................... MN Corn 17.5
DENCO..................................... Morris....................... MN Corn 15.0
Eco Products of Plover.................... Plover....................... WI .............. 4.0
ESE Alcohol............................... Leoti........................ KS Corn 1.1
Ethanol 2000.............................. Bingham Lake................. MN Corn 15.0
Exol Albert............................... Lea.......................... MN Corn 18.0
Farm Tech USA............................. Spring Green................. WI Corn 0.5
Georgia Pacific........................... Bellingham................... WA Waste 3.5
Golden Cheese of CA....................... Corona....................... CA Cheese/Whey 2.8
Grain Processing Corp..................... Muscatine.................... IA Corn 10.0
Heartland Corn Prods...................... Winthrop..................... MN Corn 17.0
Heartland Grain Fuels..................... Aberdeen..................... SD Corn 8.0
Huron........................ SD Other 12.0
High Plains............................... Portales..................... NM Corn 14.0
Colwich...................... KS Corn 20.0
York......................... NE Corn 40.0
J.R. Simplot.............................. Heyburn...................... ID Potato Waste 3.0
Caldwell..................... ID Potato Waste 4.0
Jonton Alcohol............................ Edinburg..................... TX .............. 1.2
Kraft..................................... Melrose...................... MN Cheese/Whey 3.0
Manildra Energy........................... Hamburg...................... IA Corn 7.0
Midwest Grain............................. Atchinson.................... KS Corn 8.0
Pekin........................ IL Corn 100.0
Minnesota Clean Fuels..................... Dundas....................... MN .............. 1.5
MMI/ETOH.................................. Golden....................... CO .............. 1.5
MN Corn Processors........................ Marshall..................... MN Corn 32.0
Columbus..................... NE Corn 90.0
MN Energy................................. Buffalo Lake................. MN Corn 12.0
New Energy Co of IN....................... South Bend................... IN Corn 88.0
Pabst Brewing............................. Olympia...................... WA Bev Waste 0.7
Parallel Products......................... Rancho Cucamonga............. CA Food Waste 2.0
Louisville................... KY Corn 10.0
Permeate Prods............................ Hopkinton.................... IA .............. 1.5
Pro-Corn.................................. Preston...................... MN Corn 19.0
Reeve Agri-Energy......................... Garden City.................. KS Corn 10.5
Stroh's Brewery........................... Winston-Salem................ NC Bev Waste 1.0
Sunrise Energy............................ Blairstown................... IA Corn 5.0
Vienna Correctional....................... Vienna....................... IL Corn 0.5
Williams Energy........................... Aurora....................... NE Corn 30.0
Pekin........................ IL Corn 100.0
Wyoming Ethanol........................... Torrington................... WY Corn 5.0
Total................................... ............................. ........ .............. 1,837.8
----------------------------------------------------------------------------------------------------------------
Source: Bryan and Bryan, Inc.
Ethanol Production Under Construction March 2000
----------------------------------------------------------------------------------------------------------------
Capacity
Company City State MGY Feedstock
----------------------------------------------------------------------------------------------------------------
Golden Triangle.............................. Craig........................... MO 14.0 Corn
Adkins Energy................................ Lena............................ IL 30.0 Corn
BC International............................. Jennings........................ LA 20.0 Bagasse/
rice hulls
Nebraska Nutrients........................... Sutherland...................... NE 15.0 Corn
Dakota Ethanol............................... Wentworth....................... SD 40.0 Corn
NE Missouri Grain Proc....................... Macon........................... MO 15.0 Corn
Total...................................... ................................ ........ 134.0 ...........
----------------------------------------------------------------------------------------------------------------
Source: Bryan and Bryan, Inc.
Ethanol Plants Under Development March 2000
----------------------------------------------------------------------------------------------------------------
Capacity
City State (MGY) Feedstock
----------------------------------------------------------------------------------------------------------------
Undisclosed................................... CO.............................. 20.0 Corn
Central Iowa.................................. IA.............................. 15.0 Corn
NW Iowa....................................... IA.............................. 40.0 Corn
L. Cascade.................................... IL.............................. 100.0 Corn
Pratte........................................ KS.............................. 15.0 Corn/milo
Undisclosed................................... KS.............................. 40.0 Corn
Undisclosed................................... KY.............................. 20.0 Corn
Central State................................. MI.............................. 40.0 Corn
St. Paul...................................... MN.............................. 30.0 Corn
SE Missouri................................... MO.............................. 30.0 Corn
Great Falls................................... MT.............................. 75.0 Wheat/Barley
Neely......................................... NE.............................. 15.0 Corn
Central State................................. NJ.............................. 10.0 Corn
Clatskanie, OR................................ OR.............................. 80.0 Corn/wheat
Milbank....................................... SD.............................. 40.0 Corn
Platte........................................ SD.............................. 15.0 Corn
Rosholt....................................... SD.............................. 15.0 Corn
Undisclosed................................... TX.............................. 30.0 Corn
Moses Lake.................................... WA.............................. 40.0 Corn/Barley
Lacrosse...................................... WI.............................. 20.0 Corn
----------------------------------------------------------------------------------------------------------------
Subtotal.................................... ................................ 690.0 .................
----------------------------------------------------------------------------------------------------------------
Biomass Conversion
----------------------------------------------------------------------------------------------------------------
SE Region..................................... AK.............................. 8.0 Wood Waste
NE Region..................................... CA.............................. 15.0 Forest Residues
Gridley....................................... CA.............................. 20.0 Rice Straw
Mission Viejo................................. CA.............................. 8.0 Rice straw
Chester....................................... CA.............................. 20.0 Forest Residues
Onslow County................................. NC.............................. 60.0 Sweet potatoes
Greene County................................. NC.............................. 60.0 Sweet potatoes
Martin County................................. NC.............................. 60.0 Sweet potatoes
Middletown.................................... NY.............................. 10.0 MSW
Central Region................................ OR.............................. 30.0 Wood Waste
Philadelphia.................................. PA.............................. 15.0 MSW
Black Hills................................... WY.............................. 12.0 Forest Residues
----------------------------------------------------------------------------------------------------------------
Subtotal.................................... ................................ 318.0 .................
----------------------------------------------------------------------------------------------------------------
Total new capacity.......................... ................................ 1,008.0 .................
----------------------------------------------------------------------------------------------------------------
Ethanol RFG will provide a tremendous economic stimulus to rural
America by creating value-added demand for 500 million bushels of
grain.
LEGISLATION
As testament to the growing congressional interest in resolving
MTBE groundwater issues, numerous bills have been introduced to phase-
down or eliminate MTBE, while preserving a role for ethanol in this
important program. The Renewable Fuels Association, the industry's
trade organization, strongly supports legislation such as S. 2546 and
S. 2233, which address MTBE water contamination directly, without
undermining the existing air benefits of oxygenated RFG. S. 2546,
introduced by Senators Kit Bond (R-MO) and Dick Durbin (D-IL), is
particularly effective because it deals comprehensively with a number
of issues important to this committee, including anti-backsliding from
real-world air quality benefits, the highway trust fund, and MTBE
remediation costs.
Another approach to resolving the MTBE issue consistent with the
findings of the Blue Ribbon Panel is phasing out the use of MTBE while
phasing in a renewable energy requirement. This approach has been
incorporated in legislation introduced by Democratic Leader Tom Daschle
(D-SD) and cosponsored by Senator Dick Lugar (R-IN). The Renewable
Fuels Association supports this bill also, but would encourage the
committee to craft this bill so that ethanol is used where it will
provide the most environmental benefit.
As I indicated at the beginning of my testimony, Williams believes
the primary responsibility for government in this area is to make sure
that Americans have clean air and that means, among other things,
setting emission standards for vehicles and the gasoline that fuels
vehicles. These standards should be set on the basis of science.
Inevitably, any standards will influence the recipe for gasoline and
therefore the mix of additives used to make gasoline. However, so long
as compliance with the standards is practical for refiners, then we
should not sacrifice clean air. We believe the oxygenate standard is a
useful proxy for limits of gasoline components that have negative
health effects. If Congress chooses to repeal the oxygenate
requirement, then equivalent emission standards will need to be
substituted in its place.
CONCLUSION
The domestic ethanol industry understands that the Congress is
faced with a daunting challenge, i.e, how to protect water supplies by
reducing the use of MTBE without sacrificing air quality or increasing
fuel prices. We see ethanol as a solution. Increasing ethanol use in
this program will allow MTBE to be phased out cost-effectively while
protecting precious water resources and air quality. Stimulating rural
economies by increasing the demand for grain used in ethanol production
will help farmers left behind by our booming economy. Encouraging new
ethanol production from biomass feedstocks will provide additional
environmental benefits and take a positive step toward a sustainable
energy future and global climate change. The bottom line is that we
need to protect both air quality and water quality. With ethanol, we
can.
Thank you.
__________
STATEMENT OF GLENN KELLER, ENGINE MANUFACTURERS ASSOCIATION
Good Morning. My name is Glenn Keller and I am the Executive
Director of the Engine Manufacturers Association. The Association,
headquartered in Chicago, Illinois, represents the worldwide
manufacturers of internal combustion engines used in all applications
except passenger cars and aircraft. Among EMA's members are the
principal manufacturers of truck and bus engines covered by EPA's
proposed 2007 rulemaking imposing additional regulatory controls on
heavy-duty engines while limiting the sulfur content of diesel fuel
used in these engines.
The diesel-fueled engine is the backbone of our nation's
transportation system, from delivering produce to our local groceries
to powering our mass transit systems in our nation's cities and towns.
The diesel engine can be as clean, if not cleaner, than any other power
source. It is capable of meeting emission standards significantly below
today's levels. And particulate emissions from today's engines have
already been reduced by over 90 percent. We recognize that more, much
more in fact, can and should be done--and we are poised to meet that
challenge by the end of this decade.
The key to achieving these future stringent emissions reductions is
to reduce the sulfur content of diesel fuel. As the Environmental
Protection Agency acknowledged in its proposed rule, future emissions
reductions require a systems approach involving the engine,
aftertreatment and fuel. Fuel quality, one leg of this three-legged
emissions reduction strategy, enables the technologies necessary to
make the other two stand.
Without removing essentially all the sulfur from diesel fuel,
advanced NOx aftertreatment devices will not be feasible;
advanced PM aftertreatment will be poisoned; and engines will be
exposed to excessive wear, increased maintenance costs, and impaired
durability. I cannot emphasize enough the critical importance of ultra-
low sulfur fuel: it enables substantial NOx emission
reductions; it provides direct PM emission reductions for every
vehicle; and it provides benefits not just from new engines, but from
the entire fleet of diesel-fueled vehicles.
Improved diesel fuel also has a role in responding to concerns over
potential health effects. Ultra-low sulfur fuel lowers the total mass
of particulate from the entire fleet and enables the use of known
aftertreatment technologies, such as oxidation catalysts, which can
reduce the organic fraction of PM emissions. A rule that calls for
ultra-low sulfur fuel also enables the application of catalyst-based
technologies to reduce NOx that, in turn, will reduce the
secondary formation of fine particles of concern in our urban air.
We applaud EPA for recognizing the critical role of fuel sulfur. We
strongly support the need for a uniform, nationwide low sulfur fuel
standard with a hard cap on maximum sulfur content. Regional
differences in sulfur content will not allow the systems approach
necessary to meet EPA's very stringent NOx and PM emission
levels. Further, a hard cap on sulfur is critical. Averages simply will
not work. They are difficult and impractical to enforce. Moreover, the
engine and aftertreatment legs of the stool must be assured of never
being exposed to high sulfur fuel.
In our view, a 15 ppm sulfur limit does not go far enough. Our
cooperative testing programs have indicated the extreme sensitivity of
aftertreatment devices to sulfur poisoning. Therefore, EMA advocates an
even lower limit of 5 ppm sulfur in diesel fuel to ensure we are
delivering the maximum performance of these devices for the useful life
of the truck engine, which is up to 435,000 miles. And, diesel fuel
improvements shouldn't only be limited to trucks and buses. Non-road
fuels also must be similarly improved.
We are aware of the various arguments raised by the oil industry
against improving fuel quality. They don't want to reduce sulfur to
even 15 ppm, let alone to lower levels. Nationwide ultra-low sulfur
fuel can--no, must--be achieved, and it can be done cost effectively.
In a joint project with the American Petroleum Institute and the
National Petroleum Refineries Association, the Engine Manufacturers
Association contracted with MathPro, a renowned refining consultant, to
estimate the cost of producing ultra-low sulfur fuel. MathPro concluded
that the typical refining cost to produce a 5 ppm maximum sulfur fuel
was from 5\1/2\ to 9 cents per gallon for the most severe sulfur
scenario which modeled a 2 ppm average across the entire diesel pool.
Mr. Chairman, we ask that the entire MathPro Study be included with
this statement in the hearing record.
So today we are enthusiastic and hopeful about the bright future
for diesel engines and our industry's ability to produce reliable,
durable, fuel efficient, high performing diesel engines that also are
as clean or cleaner than any other power source. There are issues that
will require a great deal of work by manufacturers and the Agency. But
it is no longer a question of ``if''. With nationwide ultra-low sulfur
diesel fuel and sufficient development time, tremendous emissions
reductions can be achieved.
I would be pleased to respond to any questions the Subcommittee
might have.
__________
STATEMENT OF GORDON PROCTOR, DIRECTOR, OHIO DEPARTMENT OF
TRANSPORTATION
Chairman Inhofe, members of the committee, I am Gordon Proctor,
Director of the Ohio Department of Transportation. Thank you very much
for this invitation to testify before the committee. I would especially
like to thank Senator Voinovich for helping to provide me this
opportunity to address an issue that is of particular importance to
Ohio.
The committee today is discussing the role of ethanol as a motor
fuel and a fuel additive. Coming from an agricultural state, I
understand the importance of ethanol's use to the agricultural
industry. I also am aware of ethanol's role as a fuel oxygenate, and as
a domestically produced energy source. I am not here to speak against
ethanol or the strategy of promoting its use.
As a State director of transportation, I would point out to the
committee an unintended consequence that has befallen Ohio as a result
of increasing ethanol consumption. Under the funding formula adopted in
the Transportation Equity Act for the 21st Century, TEA-21, Ohio's
Federal appropriation is determined in large part by our contribution
to the Highway Trust Fund. At the time of enactment, this was a welcome
move for Ohio, and one that Ohio supported. However, there was a
consequence that neither Ohio, nor apparently the appropriators,
anticipated.
This consequence was the dramatic increase in the use of ethanol
caused by national market forces. I am neither an ethanol nor petroleum
expert, but apparently because of continued depressed corn prices and
because of the continued Federal tax reduction on ethanol, the use of
ethanol-blended gasoline in Ohio has soared from 19 percent to more
than 40 percent of all gallons of gasoline sold at the pump. Because
ethanol-blended fuel is taxed differently from petroleum fuels, the
increase in ethanol use has significantly decreased the amount of
revenue credited to Ohio in the Highway Trust Fund. As you know, there
is a 5. 4 cent per gallon Federal tax break on each gallon of ethanol-
blended gasoline sold. In addition, 3.1 cents of the tax that is
collected on ethanol is credited to general revenue funds and not to
the Highway Trust Fund. In other words, Ohio's contribution to the
Highway Trust Fund is reduced by 8.5 cents for each gallon of ethanol-
blended fuel sold in Ohio. I expect ethanol use will continue to
increase and will continue to reduce Ohio's trust fund contributions.
The sums involved are substantial. For Ohio, these reduced
contributions to the Highway Trust Fund reduce Ohio's Federal highway
funding by $185 million annually. To put that number in perspective, it
equals 21 percent of Ohio's total Federal obligation ceiling, it equals
two-thirds of our state's entire new construction budget and it equals
the amount ODOT budgets for routine bridge repair and replacement for
an entire year.
The situation appears to be unique to Ohio because we are both a
large consumer of ethanol and a donor state. For donee states, other
provisions in TEA-21 appear to mitigate the effect of rising ethanol
use because those states' appropriations are not tied directly to their
Highway Trust Fund contributions.
Please let me emphasize. I am very appreciative of Congress's
efforts on behalf of TEA-21 and the unprecedented appropriations the
Act has provided. Let me also emphasize, that Ohio has received the
minimum appropriations guaranteed by the Act. I do not want to imply
otherwise. What Ohio has not realized, however, is a commensurate
increase of growing Highway Trust Fund dollars because while fuel
consumption in Ohio has risen, our contributions to the Highway Trust
Fund have been stunted by the way ethanol is taxed.
This situation exacerbates Ohio's donor State status. We in Ohio
have the tenth largest highway network, the fifth highest volume of
traffic, the fourth largest interstate highway network and the second
largest inventory of bridges in the country. While our traffic and
congestion have risen, our Federal receipts have not risen
commensurately because of the unintended consequence of the ethanol
issue.
I would ask for your consideration in two ways. First, I would ask,
in any future consideration of highway funding formulas, that the use
of ethanol be taken into account. Although it is national policy to
encourage ethanol use, the cost of this policy is not spread uniformly
across the states. Second, I would request, at the appropriate time and
in the appropriate legislation, that the 3.1 cents of the ethanol tax
that is credited to the general fund be redirected to the Highway Trust
Fund. At least, that effort would continue directing transportation tax
receipts into the Highway Trust Fund where they would accrue to Ohio.
Mr. Chairman, thank you again for this opportunity. I am grateful
for the committee's time and its attention. I would be happy to answer
any questions the committee may have.
Gasohol/Tax Subsidy.--Total Cost to Ohio FY 1982 Thru 1999
--------------------------------------------------------------------------------------------------------------------------------------------------------
Federal Total Cost
Gasoline Gasohol Percent of State Ohio's Cost Federal Federal Cost [In [In
Fiscal Year Billion Billion Total Gasohol Million Gasohol General Millions of Millions of
Gallon Gallon Subsidy Dollars Subsidy Fund Dollars] Dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
82................................ 4.492 0.016 0.4 $0.035 $0.6 $0.090 ........... $1.4 $2.0
83................................ 4.095 0.375 8.4 0.035 13.1 0.090 ........... 33.8 46.9
84................................ 4.077 0.428 9.5 0.035 15.0 0.050 ........... 21.4 36.4
85................................ 3.922 0.576 12.8 0.030 17.3 0.060 ........... 34.6 51.8
86................................ 3.789 0.776 17.0 0.025 19.4 0.060 ........... 46.6 66.0
87................................ 3.869 0.882 18.6 0.025 22.1 0.060 ........... 52.9 75.0
88................................ 3.884 0.912 19.0 0.025 22.8 0.060 ........... 54.7 77.5
89................................ 3.799 0.924 19.6 0.020 18.5 0.060 ........... 55.4 73.9
90................................ 3.750 0.980 20.7 0.020 19.6 0.060 ........... 58.8 78.4
91................................ 3.534 1.091 23.6 0.015 16.4 0.054 0.006 65.5 81.8
92................................ 3.482 1.097 24.0 0.015 16.5 0.054 0.006 65.8 82.3
93................................ 3.119 1.497 32.4 0.015 22.5 0.054 0.006 89.8 112.3
94................................ 2.905 1.812 38.4 0.010 18.1 0.054 0.006 109.7 126.0
95................................ 2.930 1.828 38.4 0.010 18.3 0.054 0.006 109.7 128.0
96................................ 3.090 1.741 36.0 0.010 17.4 0.054 0.031 148.0 165.4
97................................ 4.096 0.766 15.8 0.010 7.7 0.054 0.031 65.1 72.8
98................................ 2.981 1.974 39.8 0.000 0.0 0.054 0.031 167.8 167.8
99................................ 2.870 2.177 43.1 0.000 0.0 0.054 0.031 185.0 185.0
---------------------------------------------------------------------------------------------------------------------
Total Accumulated Subsidy....... ........... ........... ............ ........... $265.0 ........... ........... $1,365.0 $1,630.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gasohol was not taxed by the Federal Government from January 1979 to April 1983 as a result of the Energy Tax Act of 1978. Prior to 1979, gasohol was
taxed at the same rate as gasoline.
Federal Subsidy is the difference between the Federal Tax on Gasoline and the Federal Tax on Gasohol.
Federal General Fund is the difference between the Federal Gasoline tax distributed to the general Fund and the Federal Gasohol tax distributed to the
General Fund.
Statement of Bob Slaughter, National Petrochemical and
Refiners Association
Good morning, Mr. Chairman and members of the Committee. My name is
Bob Slaughter. I am General Counsel of the National Petrochemical and
Refiners Association. NPRA is a trade association which represents
virtually all U.S. refiners and petrochemical companies who have
processes similar to refiners. We appreciate this opportunity to appear
before the Subcommittee to discuss the environmental effects of ethanol
under the Clean Air Act and the general question of whether ethanol
should be mandated.
NPRA opposes fuel mandates. Mandates eliminate competition and thus
are likely to result in increased costs to consumers. They inevitably
foster market protections and monopolies and often result in
unanticipated side effects, such as supply curtailments and higher
prices. Once in place, they are then difficult to reverse. Mandating a
product signals to consumers and industry that a product is uneconomic
and ``can't make it on its own'' without special patronage. This is
often harmful to the product's reputation and adversely impacts its
long-term commercial acceptability and market performance. Basically,
people don't like mandates. Americans value freedom of choice. Our
economy reflects that characteristic, and it has served us well. In
contrast, it is a foregone conclusion that gasoline subject to an
ethanol mandate will be more expensive than it would be in the absence
of a mandate.
We have witnessed positive results with public policies which rely
on market forces, for example, the acid rain program, but by most
accounts our experiment with fuel mandates for RFG oxygenates and
alternative fuels has had unsatisfactory results. Given widespread
dissatisfaction with the current oxygenate mandate, proponents of
continued interference with market forces in fuel policies bear a heavy
burden of persuasion. We do not believe that the advocates of a new
ethanol mandate under the Clean Air Act have come anywhere close to
making their case.
Ethanol has a bright future as a gasoline blendstock. Why risk the
negative consequences of a mandate? If MTBE use is constrained, ethanol
is one way refiners can provide reliable supplies of gasoline while
meeting consumers' demands for fuel performance. Studies by the U.S.
Department of Energy and the California Energy Commission predict
significant ethanol growth in the Northeast and California,
respectively, under an MTBE phase-out without a mandate. Northeast
ethanol demand is estimated to exceed 550 million gallons per year if
there is withdrawal of MTBE from the market while ethanol demand in
California is estimated to reach 828 million gallons. The total annual
ethanol demand increase for these two regions would be almost 1.4
billion gallons--or just slightly less than a doubling of today's 1.5
billion gallon usage.
In addition, the ongoing reduction of sulfur in gasoline will lead
to a significant increase in ethanol use. Many refiners will give
serious consideration to ethanol as a means of replacing octane lost
when sulfur is reduced. Absent a mandate, the projected increase in
ethanol use will take place where it makes the most economic sense to
use it. Much will depend on the price of ethanol in response to such an
increase in demand. However, with total U.S. demand for ethanol in 2006
estimated possibly to double today's figure, it is clear that there
should be substantial growth in ethanol use even if some demand erodes
as prices rise.
The impact of an extensive, national ethanol mandate on the
environment is unknown. The EPA Blue Ribbon Panel pointed out
``Although ethanol is likely to biodegrade rapidly in groundwater,
because ethanol is infinitely soluble in water, much more ethanol will
be dissolved into water than MTBE.'' While the environmental track
record--with respect to groundwater contamination--of using ethanol in
gasoline has been good, a recent ethanol leak in the Lake Tahoe area
has received considerable press and public attention. This is an
indication that the environmental consequences of mandated use of this
highly soluble chemical are of concern. It seems wise to proceed with a
measure of caution in an area in which the public may feel that it has
been recently ill-served (i.e. by the oxygenate mandate).
Air quality impacts are possible. A recent study presented by
Toyota to CARB has shown that if ethanol blended at 10 percent replaces
MTBE blended at 11 percent (by volume), tailpipe NOx
emissions increase significantly. Also, in non-RFG regions, ethanol
benefits from an EPA waiver which allows it to be blended at a higher
volatility level, thus increasing evaporative emissions. Further, if
ethanol blended gasoline is mixed with gasoline not containing ethanol,
the ethanol causes an increase in the volatility and the evaporative
emissions of the mixture. Thus, an ethanol mandate could have
significant adverse impact in areas where increased ozone (smog)
producing emissions are of concern.
With regard to effects on water, experience to date with ethanol
blends has been relatively benign. We do know that microbes
preferentially degrade ethanol present in a spill, which will retard
the rate of degradation of other components.
Given the concerns expressed about MTBE, we should be cautious
about new programs that would significantly increase usage of ethanol
in gasoline beyond traditional volumes. The EPA Blue Ribbon Panel
recommended extensive testing of gasoline constituents before widely
extending their use, based upon experience with the current oxygenate
mandate.
If left to the workings of the free market, ethanol has positive
attributes that will promote its use. The Blue Ribbon Panel described
ethanol as ``An effective fuel-blending component, made from domestic
grain and potentially from recycled biomass, that provides high octane,
carbon monoxide emission benefits, and which appears to contribute to
reduction of the use of aromatics with related toxics and other air
quality benefits; can be blended to maintain low fuel volatility . . .
''
Reliance upon a government mandate, however, could focus attention
on ethanol's problematic characteristics instead. The Blue Ribbon Panel
goes on to say ``[ethanol] . . . could raise the possibility of
increased ozone precursor emissions as a result of commingling in gas
tanks if ethanol is not present in a majority of fuels; [ethanol] is
produced currently primarily in the Midwest, requiring enhancement of
infrastructure to meet broader demand; because of high
biodegradability, [ethanol] may retard biodegradation and increase
movement of benzene and other hydrocarbons around leaking tanks.''
An ethanol mandate will make it harder for refiners to provide
cleaner fuels to consumers at acceptable prices. An ethanol mandate
will hinder refiners' ability to optimize the quality and volume of
cleaner-burning gasoline. This will increase refining costs, impacting
both gasoline supplies and price. According to the California Energy
Commission, the costs of substituting ethanol-blended gasoline in that
state could increase refining costs by up to 7 cents per gallon.
Without a mandate, refining costs are significantly reduced, because
refiners have the flexibility to economically blend gasoline in a cost-
effective way that meets octane requirements while maintaining emission
performance benefits.
Distribution of ethanol blends confronts refiners, other fuel
suppliers and, ultimately, consumers with special economic burdens
which a national mandate would increase. Adding more ethanol to
gasoline is not just a matter of investment in new ethanol production
facilities. Ethanol is added to gasoline at terminals, not at the
refinery. Therefore, investment is necessary at terminals not currently
using ethanol for equipment to receive ethanol by rail or truck (about
$300,000 per terminal) to store ethanol in a tank ($450,000 for a new
tank) at the terminal and to install blending equipment ($450,000 per
terminal). In addition to environmental permitting requirements, these
are sizable investment requirements for terminal operators and they
should not be forced by a legislative mandate. The National Petroleum
Council estimates that if ethanol blends are required at all RFG
terminals outside of the Midwest, the terminal capital investment
requirements would total $185 million. Total investment expenses would
be higher if conventional gasoline terminals in the Southeast,
Southwest and West also have to be converted for ethanol blending.
In addition, ethanol presents special logistical problems. Since
alcohols like ethanol tend to adhere to water and thus separate out of
an oxygenated gasoline blend, it is difficult to transport ethanol
blends by pipeline. Instead, a special gasoline blendstock is made for
ethanol fuels (both to ease transport and to compensate for the
increase in evaporative emissions associated with ethanol's higher
volatility.) The ethanol itself is shipped separately by railroad,
truck or ship, and the finished gasoline is blended (using special
equipment) at storage terminals near the area where it will be sold to
consumers. As EIA indicates in discussing ethanol logistics and costs,
``Shipments to the West Coast and elsewhere via rail have been
estimated to cost an extra 14.6 to 18.7 cents a gallon for
transportation.''
Ethanol is already heavily subsidized by taxpayers. Ethanol has
received a large federal tax subsidy since 1978. Currently, this
incentive is $0.54 per gallon of ethanol. The incentive is financed
through diversion of moneys that would otherwise go into the Highway
Trust Fund. At current ethanol usage rates, the Highway Trust Fund
loses about $1 billion per year in revenues because of the reduced tax
rate and diversion of some receipts to the General Fund. The only way
to avoid this situation is to fund new ethanol incentives out of
general revenues, which would have the negative result of assessing
every taxpayer to benefit fuel ethanol. As it is, many, if not most, of
those who benefit from the ethanol incentives also rely on other
agricultural assistance programs for corn. As the Administration states
in its most recent policy analysis: ``Corn producers currently receive
more in direct farm support payments than producers of any other
commodity.''
Proposals for a national ethanol mandate seek to make energy
consumers and highway users pay even more for agriculture subsidies.
Consumers already pay for corn and ethanol subsidies that are funded
out of the general treasury or Highway Trust Fund. But advocates of a
national ethanol mandate are proposing to take an even bigger bite out
of their pocketbooks. According to the Administration, ``. . . the
potential trust fund impacts (of a national mandate), ranging between
more than $0.5 billion and a little under $1 billion per year, would be
on the order of 1 to 2 percent of the total fund.'' This means that as
much as $2 billion total of revenues that would otherwise go to the
Highway Trust Fund would be diverted to ethanol.
According to EIA modeling, ``adding a 2 percent renewable fuels
standard is projected to increase gasoline prices in the 5 cents per
gallon range in 2005.'' As a rule of thumb, a one cent increase in
gasoline prices nationwide amounts to, in the aggregate, a $1 billion
additional cost to consumers. Thus, the renewable mandate will cost
gasoline consumers $5 billion more in 2005 than an alternative policy
option of phasing-down MTBE usage without a mandate.
The Administration's latest paper on the renewables mandate is
clear in assessing the likely beneficiaries: ``With 2.5 per cent of the
nation's gasoline consisting of ethanol by 2010 . . . The price of corn
would be 15 cents per bushel more in 2010 than in the absence of the
standard and average 11 cents per bushel more during 2002-2010 . . .
U.S. farm income would increase by $1.4 billion in 2010, and would
average $750 million more per year during 2002-2010.''
Ethanol credit trading pursuant to a national mandate could create
regional winners and losers. Many refineries do not produce RFG, do not
blend MTBE in conventional gasoline, or do not make blendstock for
ethanol blending to produce gasohol. Implementation of a national
renewable mandate with averaging, banking and trading could reduce
investment requirements at refineries and terminals outside of the
Midwest. However, a national renewable fuel mandate would segment the
oil industry into winners (those in the Midwest who can offset ethanol
expenses by selling excess ``credits'' and losers (others who would
have to purchase ``credits''). Consumers who purchase gasoline would
benefit or be disadvantaged depending on which category their supplier
fits into. Most of the winners would be located in the Midwest, with
losers disproportionately located in the Northeast and West.
An ethanol mandate will make it harder for refiners to comply with
priority environmental programs. Refiners are concerned with the
possibility of supply disruptions as product quality specifications are
changed. A renewable mandate is the same as a product specification
change for refineries that do not currently use ethanol. Congress
should not impose a renewable mandate burden on these facilities that
already face significant new investment requirements for reducing
sulfur in gasoline and diesel fuel. The industry is committed to
current implementation of RFG 2 as it is to reducing sulfur in gasoline
and diesel. The imposition of additional, wholly arbitrary requirements
such as a nationwide ethanol mandate will further stress refiners and
the refining system. This means that some of the programs may not
achieve the projected environmental benefits.
``Truth in labeling'' is needed to clarify, rather than confuse
policy options. The intent and import of the national ethanol mandate
policy option would be clearer to consumers/constituents if terms and
statements made by its proponents, especially the Administration, were
more reflective of the likely result. NPRA makes the following
observations:
1. The ``renewable fuels standard'' is a national ethanol mandate
and should be recognized as such. The only renewable transportation
fuel likely to be used in the foreseeable future as a gasoline
blendstock is ethanol. The ``standard'' requires its use, and is
indistinguishable in intent or effect from a ``mandate.'' Also, there
is no such thing as a ``flexible mandate'' which was EPA's initial
euphemism for this program. Like ``living death'' or ``wakeful sleep''
the words ``flexible mandate'' are a contradiction in terms and hence
oxymoronic. Policymakers who advocate basing a significant portion of
America's gasoline supply on mandatory use of an already heavily
subsidized product provided by an extremely concentrated industry
should say so.
2. The only likely beneficiary of the national ethanol mandate is
corn-based ethanol. Proponents of the national ethanol mandate are
claiming that it will provide significant benefits for ethanol from
biomass other than corn. The proponents allege that imminent
``technological breakthroughs'' will enable non-corn-derived biomass
ethanol to reap significant benefits from the mandate. It would be
imprudent to rely on a significant portion of gasoline supply upon such
a speculative source. But the much greater likelihood is that corn
ethanol will be positioned to take all of the market for ethanol in the
foreseeable future, and that cellulosic biomass will fill only the
tiniest increment of any ethanol actually supplied. Once corn ethanol
has occupied the additional market created by the national mandate it
is hard to imagine that its producers will step aside and surrender any
significant portion of that market to competing suppliers of ethanol
from cellulose. The Administration's emphasis upon the positive impact
of the national mandate on corn prices in its recent paper gives away
the real intent behind this national mandate.
3. The existing ethanol subsidy is unlikely to be repealed.
Opponents of the subsidy have been trying for two decades to eliminate
it. The result is usually extension of the subsidy far into the future,
and often an increase in the subsidy itself. This means that revenues
intended for the Highway Trust Fund will continue to be diverted. The
only alternative is to take these funds from general revenues, which
has other serious drawbacks. Analyses suggesting that reduction or
elimination of the subsidy is a real possibility are misleading unless
they indicate that the likelihood of this happening is very remote.
CONCLUSIONS
Federal policymakers should reject the call for a national ethanol
mandate. Congress and the Administration should learn from, rather than
repeat, the mistakes of the past. The ethanol lobby has been trying to
mandate ethanol throughout the national gasoline supply for more than
ten years. The oxygen mandate that has led to current water quality
concerns was supported by large agribusiness in order to guarantee an
ethanol market for them. Enacting another mandate to replace the
problematic current one could have much greater negative consequences,
including higher gasoline costs, tighter and less reliable fuel
supplies, the potential for increased smog-creating emissions and a
potential to create a consumer backlash. Refineries and ethanol
producers can work together better to provide America's future
transportation fuels in the absence of a national ethanol mandate. That
will really clear the air.
Congress and EPA should follow the recommendations of the EPA's
Blue Ribbon Panel. They should help refiners serve the real energy and
environmental needs of the nation by repealing the federal oxygen
mandate, and by reducing MTBE levels while maintaining air quality
benefits. And they should provide enough time for the transition to
allow refiners to continue providing adequate supplies of gasoline and
other petroleum products to consumers without undue cost increases.
I look forward to responding to your questions.
STATEMENT OF NATSO, INCORPORATION
INTRODUCTION
NATSO Inc., the trade association representing America's travel
plaza and truckstop industry, thanks the Clean Air, Wetlands, Private
Property and Nuclear Safety Subcommittee for the opportunity to comment
on the Environmental Protection Agency's (EPA) Notice of Proposed
Rulemaking concerning Heavy Duty Engine Standards and Control
Requirements on the Sulfur Content of Highway Diesel Fuel.
As the primary retailer of on-road diesel fuel, the truckstop
industry is a vital link in the transportation of goods and services
throughout our country. The vast majority of our nation's products are
delivered by diesel powered vehicles; everything from the clothes we
wear to the food we eat. Our nation's travel plazas and truckstops are
a critical link in the movement of these goods, providing the fuel
needed to keep these trucks, and our economy, running smoothly.
While the travel plaza and truckstop industry supports efforts to
improve our nation's air quality, NATSO has serious concerns with EPA's
proposed rule and the effect it will have on our nation's energy supply
and delivery system. These concerns and objections center on two
aspects of EPA's proposal: The first being EPA's continued
consideration of a ``phase-in'' approach to the introduction of this
reduced sulfur diesel fuel: the second being the extreme level of
sulfur reduction being proposed.
EPA'S PROPOSED RULE
In an effort to improve air quality, EPA has proposed sharp
reductions in emissions from heavy-duty truck engines in 2007, through
the use of advanced catalytic emission control devices which will
require a reduced sulfur diesel fuel to operate.
EPA has proposed that the sulfur content of all highway diesel fuel
sold to consumers be reduced from its current level of 500 parts per
million to 15 parts per million beginning June 1, 2006. This being the
case, EPA's proposal continues to consider, and requests additional
comment on, various phase-in schemes that would gradually introduce the
new ultra-low sulfur diesel fuel into the market over time, temporarily
resulting in two separate grades of highway diesel.
NATSO'S CONCERNS/OBJECTIONS
NATSO is strongly opposed to phase-in schemes which would result in
the temporary manufacture, delivery, sale, and use of two separate
grades of highway diesel, and continues to urge EPA to adopt a ``single
fuel'' approach which would switch to the new ultra-low sulfur fuel at
one time. thereby maintaining a single grade of highway diesel, and
preserving the integrity of our nation's diesel fueling infrastructure.
The entire diesel fuel delivery system, from refinery to retail, is
currently handling a single grade of highway diesel fuel. The presence
of two different grades could have a disastrous effect on our energy
delivery system; including reductions in the supply of diesel, spot
outages, price spikes, tremendous cost increases, and fuel cross-
contamination.
Because the travel plaza and truckstop industry is configured to
carry a single grade of highway diesel, the introduction of a second
separate grade would force the truckstop industry to make tremendous
capital investment to carry both products at retail. Significant
capital expenditures would need to be made to ensure that these
separate grades of diesel are properly segregated to prevent their
cross-contamination, and to avert misfueling at the pump. Moreover, the
costs associated with upgrading a truckstop to provide both grades of
highway diesel would prove to be an unrecoverable expense as the use of
these two diesel fuels would be temporary.
The enormous expense required to re-configure a truckstop, over
$100,000 per location in many cases, would result from the need to
purchase additional storage tanks to segregate the second grade of
diesel; the need to tear up concrete for additional tank installation
and the requisite re-piping and re-manifolding of tank lines; the
purchase of new pumps and monitors, as well as additional compliance
expenses which would result from the presence of two highway diesel
fuels; not to mention the increased cost to acquire product.
These costs would be extremely prohibitive, unrecoverable due to
the temporary use of two fuels in the market, and would need to be
borne by an industry which largely consists of small independent owner/
operators who are still recovering financially from the 1998
underground storage tank upgrades. The introduction of a second grade
of highway diesel could therefore force many truckstop operators out of
business, and have the additional effect of further reducing diesel
fuel supply.
It is important to note that the entire distribution chain for
diesel would face increased costs and expense under a phase-in, further
exacerbating the truckstop industry's ability to easily acquire and
sell diesel at the retail level. Refineries, pipelines, bulk plants,
distributors, and marketers have all stated their concerns with, and
opposition to, phase-ins which would result in two grades of highway
diesel.
The presence of two grades of highway diesel under these phase-in
scenarios would also seriously call into question the viability and
success of this entire proposal, thereby resulting in no gain for air
quality or the environment.
The distillate market is very tight, with little or no additional
supply. Adding an additional grade of highway diesel will further
stretch this supply to dangerous levels, and could result in overall
supply shortages of diesel fuel. Likewise, the increased costs
associated with producing, distributing, and selling two grades of fuel
may prompt some to stop distributing or carrying diesel altogether,
further reducing supply and availability. Furthermore, two grades of
highway diesel will also lead to a much higher price for the new ultra-
low sulfur fuel than if that fuel was the only highway diesel in the
market, as would be the case if the entire diesel fuel pool was
switched at one time with no phase-in.
As a result of these serious market-oriented questions concerning
the supply and price of the ultra-low sulfur diesel under a phase-in
approach, it is quite likely that many fleets and independent drivers
would decline to purchase the more expensive 2007 model year vehicles
with the emission control devices. These vehicles would also require a
much more expensive fuel under a phase-in. These fleet operators and
independent drivers may prefer to make their purchases earlier, such as
buying more vehicles in the 2005 or 2006 model year, and/or rebuilding
current vehicle engines, in an effort to wait and avoid entering what
would be a very uncertain market.
Accordingly, under a phase-in and the market uncertainty which it
would produce; even if some ultra-low sulfur diesel supply is somehow
guaranteed, there is no guarantee that sufficient demand will exist for
either the ``cleaner'' 2007 model year vehicles, or the ultra-low
sulfur fuel needed to power them. This fact calls into serious question
the ability of this proposed rule to succeed under a phase-in, and
consequently, whether or not any significant environmental benefits
would be achieved.
Compounding these serious issues surrounding EPA's consideration of
a phase-in for the introduction of the ultra-low sulfur fuel are the
extreme cuts EPA has proposed in the level of sulfur in highway diesel.
EPA is proposing a 97 percent reduction in the sulfur content of on-
road diesel. The travel plaza and truckstop industry has serious
concerns that this deep cut will have the effect of reducing the
overall supply of diesel, and lead to spot outages and severe price
spikes. Furthermore, it does not appear that EPA has provided any
compelling technical justification for a cut of this magnitude.
The petroleum industry however, has stated its support for a 90
percent reduction in sulfur levels, which would reduce the sulfur
content of highway diesel from 500 parts per million to just 50 parts
per million. Such a reduction would apparently allow for virtually the
same environmental benefits to be achieved, while at the same time
ensuring that our nation's energy supply and delivery system is not put
at risk.
CONCLUSION
NATSO would like to reiterate the travel plaza and truckstop
industry's support for efforts to improve air quality, without placing
our nation's energy supply and delivery system in jeopardy. In order
for this proposed rulemaking to achieve those very important goals, it
must not damage our nation's diesel fuel supply, distribution, or
retail infrastructures.
The phase-in schemes being contemplated in this proposed rule by
EPA would place the entire diesel fuel delivery system at risk by
placing excessively costly and burdensome requirements on refiners,
pipelines, distributors and retailers. This entire system is currently
configured to handle a single grade of highway diesel, not two.
The travel plaza and truckstop industry, a critical link in the
movement of goods and services throughout our nation, would be hurt
tremendously by these phase-in schemes, and urges EPA to reject their
further consideration in favor of the single fuel approach which would
switch the entire highway diesel fuel pool over to the ultra-low sulfur
diesel at one time, thereby maintaining a single grade of on-road
diesel, and preserving the integrity of our nation's diesel fueling
infrastructure.
NATSO again thanks the Subcommittee for holding this important
hearing, and for the opportunity to comment on EPA's Notice of Proposed
Rulemaking concerning Heavy Duty Engine Standards and Control
Requirements on the Sulfur Content of Highway Diesel Fuel.
__________
April 6, 2000.
Hon. Barbara Boxer,
U.S. Senate,
Washington, DC.
Dear Senator Boxer: As representatives and supporters of the
biomass ethanol industry in the United States, we would like to express
our gratitude for your support of this important new industry. We
appreciate that you have advocated through legislation a solution for
the MTBE groundwater contamination problem in California. However, we
do not believe that the banning of MTBE will by itself ensure that
biomass ethanol will be used in the U.S. We are very pleased that this
Administration has recently announced that it will support increased
use of renewable fuels to aid in the replacement of MTBE in gasoline.
We are writing to underscore our belief in the need for biomass ethanol
incentives and their importance both to California and the nation.
As you know, MTBE has now been detected in groundwater and drinking
water nationwide. The seriousness of this problem has provoked
widespread debate about the national oxygenate standard and renewable
fuels incentives. The outcome of this debate promises to have
significant impacts on the nation's domestic ethanol industry,
particularly the U.S.'s nascent biomass ethanol industry.
Because of its newness and to ensure that the full benefits of
biomass ethanol are realized, specific incentives are needed for
biomass ethanol. The incentives will provide prospective ethanol
producers and investors with the certainty required to expand
production capacity on an expedited timeline.
We would like to assure you that there is ample biomass ethanol
capacity now planned to meet the expected future ethanol demand in
California. Biomass ethanol will use waste as its feedstock, i.e.,
agricultural and wood residues, and the non-recyclable cellulose
component of municipal solid waste. The world's first two biomass
ethanol plants will be located in Louisiana and New York, using
sugarcane bagasse and municipal solid waste, respectively. They are
expected to begin producing ethanol in early 2002. Two additional
biomass ethanol production facilities in California are slated for
production in late 2002 and 2003, one located in Gridley/Oroville,
using rice straw and wood waste as feedstock, the other in Chester,
using wood waste. Another biomass ethanol plant in southern California
using municipal solid waste is slated for production in the next
several years.
All of these plants are expected to expand their capacity soon
after completion of the initial biomass ethanol plant. This capacity,
coupled with other bioethanol plants in the planning stages, is more
than adequate to sustain the growth needed for future California
ethanol demand.
Biomass ethanol plants will be very energy efficient as well as
cost-effective due to breakthrough technologies. According to Argonne
National Laboratory, they will produce approximately 4 units of energy
for every 1 unit used to produce biomass ethanol. In addition, biomass
ethanol will expand value-added markets for rural communities.
It is apparent to us that without renewable fuels incentives, oil
companies will rely mostly on petroleum-derived alternatives such as
alkylates, and even worse, increased aromatics. This would result in
increased gasoline prices, reliance on imported oil, and pollution,
particularly carcinogenic toxic emissions.
We believe now is the time to develop a truly national renewable
fuels industry, acting as an insurance policy against future gasoline
price spikes in the U.S. due to our over-dependency on foreign oil,
while abating MTBE groundwater contamination. We are grateful for your
committed and continued leadership on this issue. Please let us know
how we may further assist your efforts.
Sincerely,
Megan S. Smith, Co-Director
American Bioenergy Association
Washington, DC
J.R. Miller, Chief Operating Officer
Arkenol, Inc.
Mission Viejo, CA
Stephen J. Gatto, President and Chief Executive Officer
BCI Gridley, LLC
Gridley, CA
Russell Long, Executive Director
Bluewater Network
San Francisco, CA
California Farm Bureau Federation
Sacramento, CA
Robert Herkert, Manager of Environmental Affairs
California Rice Commission
Sacramento, CA
Thomas Sanford, Mayor Pro-tem
City of Gridley
Gridley, CA
Jack Sivertson, Vice President
Collins Pine Company
Chester, CA
Michael J. Greene
Community Development Services, Inc.
Sacramento, CA
Carol Werner, Executive Director
Environmental and Energy Study Institute
Washington, DC
Jack Huttner, Vice President
Genencor International
Palo Alto, CA
George Craig, President
HFTA
Oakland, CA
Daryl Harms, Chief Executive Officer
MASADA
Birmingham, AL
Paul Wood, Director of Wood Projects
Ogden Power Pacific, Inc.
Redding, CA
Neil Koehler, Founder
Parallel Products
Rancho Cucamonga, CA
Eric Vaughn, CEO/President
Renewable Fuels Association
Washington, DC
Betty Riley, President
Sierra Economic Development District
Auburn, CA
Loyd Forrest
TSS Consultants
Rancho Cordova, CA
------
Company Descriptions of Senator Boxer Letter
American Bioenergy Association.--ABA is a national trade
organization representing the U.S. biomass industry in areas of biomass
conversion to ethanol, electricity and chemicals. In helping to carry
out the goals of the biomass industry, ABA works closely with
environmental groups, and State/local and Federal governments in
advancing the environmentally friendly use of biomass in the U.S. and
abroad.
Arkenol.--Arkenol is a technology and project development company
based in Mission Viejo, CA, whose focus is the construction and
operation of biorefineries to produce a variety of biobased chemicals
and transportation fuels from their patented technology. Arkenol has a
bioethanol pilot plant in S. California, where they are also planning
on building a commercial scale bioethanol plant using the cellulose
wastestream from municipal solid waste.
BCI Gridley, LLC.--BC International Corporation is a company
commercializing its proprietary and patented technologies to produce
ethanol and other specialty chemicals from biomass. The company has
signed a letter of intent with the city of Gridley, CA, to develop a
facility using rice straw and wood chips as its feedstock, providing a
creative solution to the region's rice waste disposal problem. Working
with Ogden Power Pacific, BCI is planning on co-locating a bioethanol
plant at Ogden's Oroville biomass power plant site, increasing the
efficiency of both plants.
Bluewater Network.--Based in San Francisco, Bluewater Network is a
national environmental organization focused on protecting public
waters, lands, and ecosystems. Bluewater has taken the lead on an MTBE/
Clean Fuels Campaign aimed at ridding the Nation of MTBE use, while
promoting cleaner alternatives such as biomass ethanol.
California Farm Bureau Federation.--The California Farm Bureau is
California's largest farm organization. It is a voluntary, non-
governmental, non-partisan organization of farm and ranch families
seeking solutions to the problems that affect their lives, both
socially and economically.
California Rice Commission.--The CRC is a private, non-profit
``business league'' representing all rice producers in the State of
California, including the Rice Straw Cooperative of Butte County. This
cooperative, which is an equity partner of the Gridley bioethanol
project, organized itself to provide rice straw feedstock to the
Gridley project. The CRC's mission is to encourage the profitable
production and marketing of California rice, ensuring that the industry
is accurately and fairly represented.
Collins Pine Company.--This is a family-owned forest products
company with a strong commitment to sustainable forestry, winning
President Clinton's 1996 ``Sustainable Development'' award. Also,
Collins' CEO, Jim Quinn, won the Green Cross Millennium for Corporate
Environmental Leadership Award from President Gorbachev. They foster
strong partnerships with visionary companies, scientists, and
environmentalists who are willing to work to achieve a sustainable
society. In 1998, BCI and Collins Pine Company agreed to begin
development of a biomass ethanol and co-generated electricity project
in Chester, CA, using wood residues.
Community Development Services, Inc.--CDS is a for-profit public
interest research and advocacy-consulting group located in Sacramento,
CA, which works principally on land-use and rural development issues.
Environmental and Energy Study Institute.--The Environmental and
Energy Study Institute (EESI) is a non-profit organization dedicated to
promoting environmentally sustainable societies. EESI carries out
policymaker education and analysis projects in the areas of energy
efficiency and renewable energy, transportation, sustainable
communities, water quality and conservation, global climate change,
fiscal policy and military base cleanup.
Genencor International.--A worldwide industrial biotechnology
company, Genencor develops and manufactures a variety of novel enzymes,
biochemicals and specialty chemicals, all focused around industry
sustainability. Most significant to the bioethanol industry is their
work in producing cost affordable cellulase enzymes, which are needed
to bring down the cost of bioethanol in the future. Their technology
center is located in Palo Alto, CA.
HFTA.--HFTA, representing their ``hydrolysis fermentation
technology'', is located in Oakland, CA. HFTA has patented a
technology, which converts cellulosic biomass into ethanol, and is
working closely with DOE's National Renewable Energy Laboratory on
analyzing this promising process for future use in a bioethanol
industry.
Masada Resource Group.--Masada is a competitive and environmentally
responsible provider of waste disposal services to address today's
environmental issues. Through the development of its patented process,
Masada and its affiliates are in the business of processing and
converting municipal solid waste, sewage sludge and waste water into
fuel ethanol and industrial by-products. They are about to begin
construction on a facility in Middletown, New York which will produce
ethanol using components of municipal solid waste as its feedstock.
Ogden Power Pacific, Inc.--Ogden Power is a leading developer,
owner, and operator of independent power facilities internationally and
provides related infrastructure services. The company is divided into
four key business lines including: independent power, waste-to-energy,
water treatment, and environmental services. Ogden Waste to Energy,
Inc. designs, builds, owns and operates 28 waste-to-energy facilities.
Each of its 28 operating projects represents Ogden's commitment to the
future to help solve the solid waste and energy challenges faced by
communities. Pacific Oroville Power, Inc., is working with DOE on a
feasibility study for the biomass ethanol plant in Chester, CA.
Parallel Products.--Parallel Products is currently California's
only ethanol producer, owning a 6 million gal/year plant in Southern
California. Parallel Products has been producing ethanol from waste
products for the last 15 years.
Renewable Fuels Association.--RFA is a national trade association
representing the U.S. ethanol industry. Membership includes ethanol
producers, marketers and blenders, equipment manufacturers, engineering
and design companies, agri-business organizations, and members of
consumer and environmental groups.
Sierra Economic Development Committee.--SEDD is a regional non-
profit company that facilitates business and economic development in
the California counties of El Dorado, Placer, Nevada and Sierra. SEDD's
vision is a thriving economy that values the natural environment. They
are interested in pursuing the possibility of building a biomass
ethanol plant in their area.
TSS Consultants.--Providing consulting services to biomass project
developers, owners, operators, investment banks and public agencies,
TSS develops new biomass facilities as well as evaluation of existing
biomass facilities, including conversion of biomass to power, ethanol
and chemicals, specifically on environmental permitting, forestry
consulting, biomass market assessments, regulatory agency negotiations
and project feasibility studies.
__________
[From the Des Moines (IA) Sunday Register, September 19, 1999]
The Register's Editorials
LET ETHANOL PROVE ITSELF
Iowa farmers need help, but coercion at the gas pump is wrong.
The price of corn is low, and Iowa farmers are hard hit.
So here's the deal: Let's prohibit the sale of wheat bread. From
now on, only corn bread should be allowed on Iowa grocery shelves. It
might help boost the price of corn.
Hog farmers are struggling, too. Why not ban the sale of other
meats so that Iowans can eat nothing but pork?
No?
Well, how about requiring that most gasoline sold in Iowa be
blended with corn-based ethanol?
That's an idea that has the backing of the governor and state
agriculture secretary as well as Iowa's two U.S. senators.
But that doesn't make it right.
Ethanol is good for Iowa. It creates an additional market for corn.
It is an alternative fuel from a renewable resource. Iowa politicians
are right to promote ethanol and to provide a tax break until the
industry can stand on its own feet. They are right to fight the oil
lobby in its efforts to rob ethanol of its market and take away its
subsidy.
Promotion is one thing. Coercion is another.
An ethanol mandate would deny Iowans a choice of fuels and short-
circuit the process of ethanol establishing its own worth in the
marketplace. Except in places where smog problems dictate the use of an
oxygenated fuel, what's the rationale for mandating ethanol?
The justification is to marginally boost the price of corn. Cleaner
air is offered as a reason, too, but that's an afterthought. If that
were the goal, other measures would be far more effective: outlawing
SUVs, for instance, or quadrupling the gasoline tax.
Ethanol is not recommended for some small engines on lawn mowers,
snowblowers. boats, auxiliary generators and the like. Then, too, lots
of Iowans drive older vehicles or use older equipment with components
that may not have been engineered to use ethanol, as newer vehicles
are: Why put these people through a hassle to find the non-ethanol fuel
their equipment requires?
One convenience-store chain used to advertise free repair for any
engine damaged by the use of its gasoline. If the State insists on
mandating the use of ethanol, perhaps it should make the same offer.
Better yet, let Iowans make their own choices, and let ethanol prove
itself in the marketplace.
______
[From the Quad City Times, September 19, 1999]
Editorials
A New Subsidy: More Fuel on the Fire
ETHANOL-ONLY PROPOSAL DOESN'T HELP CONSUMERS
Chuck Grassley and Tom Harkin may have the best of intentions, but
their proposal to boost ethanol use in Iowa is seriously misguided.
The two U.S. senators have signed a petition asking Iowa Secretary
of Agriculture Patty Judge to require that Iowa service stations sell
only ethanol-blended gasoline. Ethanol, as most Iowans know, is a fuel
derived from a mixture of gasoline and corn-based alcohol.
Harkin and Grassley, of course, are longtime supporters of ethanol.
They know that its use is good for Iowa corn farmers and that it
reduces the nation's reliance on foreign oil.
But that's only half the story. Federal subsidies of ethanol now
cost American taxpayers more than $770 million a year in lost revenue--
largely because of ethanol's exemption from federal fuel taxes. The
Congressional Research Service says that figure could reach $1 billion
by next year.
And mind you, that subsidy isn't putting more money in the pockets
of farmers. The real beneficiaries of the ethanol subsidy are
conglomerates like Archer Daniels Midland Corp. that convert the corn
into ethanol. The Cato Institute estimates that every dollar of profit
now earned by ADM's ethanol operation is costing taxpayers $30 in lost
revenue. That's because in addition to the federally subsidized
production of ethanol, ADM also has received millions of dollars worth
of free corn from American farmers, courtesy of the Department of
Agriculture.
Are farmers the co-beneficiaries of the ethanol subsidy? Yes--but
not to the extent that some would argue. Subsidized ethanol production
does guarantee corn farmers a higher price for their product, but that
penalizes hog farmers and cattlemen since more than half the nation's
corn crop is used domestically for feed grain.
As for claims that ethanol helps the environment, the National
Academy of Science, the Congressional Budget Office, the Department of
Energy and even the USDA have each reported that ethanol, which is less
efficient than gasoline, provides no significant environmental benefit
and may even add to air pollution--which is why ethanol use was
restricted in the EPA-proposed rules first issued in conjunction with
the Clean Air Act of 1992.
None of this is to suggest that Grassley and Harkin are wrong to
support the subsidization of ethanol at a more reasonable level--only
that there is an abundance of evidence that indicates ethanol is not
all that it's cracked up to be. Not for consumers, not for the
environment and not for farmers. With research and continued
refinements, it might someday become an economically viable alternative
to gasoline--but until that day, it would be ludicrous to argue that
Iowa's gas stations be required to sell only ethanol.
Such an arrangement would infringe on the rights of thousands of
Iowa businessmen and put service stations in border communities such as
the Quad Cities at a competitive disadvantage with gas stations in
neighboring States. It also would take government subsidization of
ethanol to a whole new level, essentially forcing Iowans to buy a
product that already is costing them money through lost tax revenues.
The game is rigged as it is. With their million-dollar subsidies,
ethanol producers are playing against their competition with loaded
dice and marked cards. If they're still losing--to the extent that
lawmakers are proposing the outright elimination of the corpetition--
that's a sure sign that ethanol is not a product that consumers are
ready to embrace.
Ethanol might be worth some level of government support, but it
level will be so valuable as to justify scrapping our system of free
enterprise.
__________
STATEMENT OF RUSSELL LONG, PH.D., EXECUTIVE DIRECTOR, BLUEWATER NETWORK
It is an honor for me to present comments to you today as you
evaluate the role of ethanol fuels. Bluewater Network believes now is
the time to definitively address the problem of water pollution by MTBE
and other ether-based fuel oxygenates. It is also a time of opportunity
in terms of increasing our use of clean, renewable fuels. Americans can
have both clean air and clean water--without promoting one at the
expense of the other. We believe the best way to accomplish this is to
take immediate action to ban MTBE and other ether-based oxygenates, and
to prevent backsliding on air quality and promote use of renewable
fuels by simply retaining the oxygen requirement in reformulated
gasoline. Alternatively, it's possible air and water quality could be
protected through implementation of a good renewable fuels standard and
substitution of performance standards for the oxygen requirement--as
long as they are crafted in a way that protects the real-world benefits
of oxygenated reformulated gasoline. However, I should note that
Bluewater Network is extremely skeptical that non-oxygenated fuels will
be able to match the real-world environmental benefits of oxygenated
fuels.
Over the last 10 years, it has become clear that oxygenated
gasoline has afforded significant air quality benefits. However, the
program is now in jeopardy because of a nationwide water quality
problem from the use of the oxygenate called methyl tertiary butyl
ether (MTBE). MTBE's use has led to serious contamination of U.S. water
supplies ever since its introduction. In some cases this contamination
is severe. For example, all of the water in Glendale, California is
contaminated with MTBE at such high levels that it has virtually
destroyed a community. The town has become practically deserted, and
the State has to truck in clean water every week to the remaining
residents. Once MTBE gets into water supplies, it is extremely
difficult and expensive to clean up. In Santa Monica, California,
alone, cleanup costs for MTBE-contaminated water are projected in the
100 million-dollar range. National cleanup costs are projected to be
much higher and may take decades to accomplish.
Other ether-based fuel oxygenates such as ethyl tertiary butyl
ether (ETBE), tertiary amyl methyl ether (TAME) and diisopropyl ether
(DIPE) are of equal concern. These chemicals have physical
characteristics very similar to MTBE, and are essentially unstudied. We
do know, however, that they have similar systemic toxicity in animals
and may be carcinogenic.
In essence, the use of WTBE and other ether-based oxygenates has
traded water quality for air quality. Banning MTBE and other ether-
based oxygenates is the logical next step in rectifying this problem.
However, such a ban does not necessitate lifting the oxygen content
requirement of the Clean Air Act Amendments of 1990. In fact, we
believe the most effective strategy to protect the existing real world
benefits of reformulated gasoline is to maintain the oxygen
requirement. Without the use of oxygen in gasoline, there will be an
immediate reduction in gasoline volume from the loss of those
oxygenates, resulting in increased demand for petroleum fuels and other
octane enhancers to make up the difference. Consequently, refiners will
increase aromatic and alkylate levels in gasoline, which will lead to
increased hydrocarbon and toxics emissions such as benzene, and
potential increases in use of the highly toxic hydrofluoric acid for
alkylate production. Loss of oxygen's benefits will also lead to
quantified backsliding on carbon monoxide and particulate matter
emissions.
In the event that you consider eliminating the Clean Air Act's
oxygen requirement, Bluewater Network would support such a change only
if a renewable fuels standard is established with specific provisions
that maintain the existing, real-world air quality benefits of the
oxygen requirement in reformulated gasoline. For example, it would be
crucial to enact an aromatic cap, and ensure that there is no increase
in emissions of carbon monoxide, particulate matter, hydrocarbons, or
toxics. However, as I said before, we believe the positive impact of
oxygenates is so significant that it will not be possible to achieve
equivalent environmental protection without their use. Additionally, we
would want to see incentives for ethanol produced from biomass and
organic crops.
I would now like to give you more detailed background on each of
the issues I've raised.
WATER QUALITY IMPACTS OF MTBE
First, I'd like to talk about some of the problems with MTBE, and
its impact to our nation's water quality.
As you know, the Clean Air Act of 1990 required the addition of
oxygenates to reformulated gasoline to reduce the production of toxic
by-products of fuel burning. Unfortunately, the oil industry has chosen
to use MTBE over other oxygenates such as ethanol in over 85 percent of
reformulated gasoline.
The physical properties of MTBE make it extremely easy for the
substance to pass from gasoline to air and from gasoline to water.
Additionally, MTBE does not naturally degrade in water. As a result, it
travels through and contaminates water faster than all other components
of gasoline. Evidence shows that even state-of-the-art underground
storage tanks have leaked MTBE.
The EPA has classified MTBE as a ``possible'' human carcinogen. It
is on the EPA's ``contaminant candidate list,'' as well as EPA's
Drinking Water Priority List for future regulation. Few studies have
been conducted regarding human ingestion of MTBE in drinking water.
However, the confirmed major human metabolites of MTBE are tertiary
butyl-alcohol (TBA) and formaldehyde, ``probable'' human carcinogens,
and confirmed immune system suppressants.
In 1999, UC-Davis warned that to protect all drinking water
consumers from cancer risk, MTBE concentrations should not exceed 5
ppb. However, no technology is currently available to prevent such low
levels of MTBE contamination. Stricter control of automobile emissions,
underground storage tanks and two-stroke engines cannot prevent this
level of contamination.
Over 40 percent of the U.S. population currently live in areas
where MTBE is used. At current rates of MTBE market expansion, this
figure could grow to 80 percent within a few years. A recent article in
the American Chemical Society's Environmental Science and Technology
estimated that 35 percent of community supply wells in 31 States could
already be contaminated with MTBE (based on their proximity to leaking
underground storage tanks).
EPA's Toxics Release Inventory (TRI) for 1996 indicates that the
total annual industrial release of MTBE in the United States was 3.4
million pounds (3.1 million pounds into the air; only 100,000 pounds to
surface water). However, this does not even account for two-stroke
engine emissions. The Bluewater Network estimates that two-strokes
account for more than eight million pounds of MTBE annually--this
figure exceeds the EPA total for all sources combined, and increases
the annual MTBE release into surface (and drinking) water exponentially
A single personal watercraft can dump up to 6 gallons of raw fuel
into the water in 2 hours. At this rate, a single jet ski releases one-
tenth of a gallon (a soda can) of MTBE into the water in two hours.
This amount of MTBE can contaminate 13 million gallons of drinking
water, the amount consumed daily by a population of 90,000. Evidence
suggests that MTBE is finding its way from marine recreation vehicles
into water reservoirs. The Association of California Water Agencies
reports that 14 out of 15 reservoirs studied that permit motorized
recreation contained significant levels of MTBE. On the other hand,
none of the eight reservoirs tested that prohibited motorized
recreation contained significant levels of the compound. Further
studies in Donner Lake, Lake Tahoe, and San Pablo Reservoir have
clearly linked two-stroke marine engine emissions to MTBE levels in
excess of primary health standards.
Unfortunately, MTBE appears to be reaching human populations.
Various State Centers for Disease Control and Prevention report MTBE
levels in human blood where MTBE is used in fuel, ranging from less
than 0.05 ppb to 37 ppb in residents tested.
However, what concerns Bluewater Network most is that the
contamination appears to be growing exponentially, and the fact that no
drinking water plant in the United States is currently designed to
treat drinking water for MTBE. Traditional methods used for other
hydrocarbon contamination are simply not effective. Even so, many
States are only beginning to realize the extent of their MTBE problem.
By the time individual States know that they have problem, quantify the
impact of MTBE on their water supplies and economy, and push an
exemption request through intensive opposition from the oil industry,
it will be too late and very costly. This makes a national ban
essential.
As I mentioned before, because other ether-based fuel oxygenates
such as ethyl tertiary butyl ether (ETBE), tertiary amyl methyl ether
(TAME) and diisopropyl ether (DIPE) maybe of just as much concern, any
ban of MTBE should include these other ether-based oxygenates as well.
AIR QUALITY IMPACTS OF NON-OXYGENATED GASOLINE
Now I'd like to turn to the air quality impacts of losing the
oxygen requirement without substitution of a renewable fuels standard
with good anti-backsliding language to ensure maintenance of air
quality in reformulated gasoline areas.
Aromatics
First of all, if the oxygen requirement is removed or waived,
refiners will need to replace the octane benefits provided by
oxygenates. One way is to dramatically increase aromatics--a dangerous
component of gasoline. Currently, there is no national cap on
aromatics, despite the fact that the dangers of increased aromatics are
well documented and far reaching. Their increased use will directly
cause higher emission of all of the primary air pollutants emitted by
vehicles in the U.S. across the board, including increases in ozone and
toxic emissions.
It is natural to assume that refiners might use ethanol to comply
with any tougher performance standards that are implemented to replace
the oxygen requirement (a legislative option some have promoted).
However, history shows that refiners choose instead to increase
aromatics, in order to consolidate inherent competitive advantages
created through increased oil production.
Alkylates
In addition to aromatics, alkylate use may be increased for octane
benefits. For instance, California has a cap on aromatics, so refiners
will probably choose alkylale octane enhancers. We have reason to
expect that some refiners producing for other States' reformulated
gasoline areas will also increase their use of alkylates.
Increased alkylate use could jeopardize public health. Dr. David
Rice, who let the 14 member team at Lawrence Livermore Labs that
concluded there was NOT a significant water quality problem with
ethanol, raised a serious concern about increasing alkylates.
Presenting before the California Air Resources Board in January 2000,
Dr. Rice indicated that because there are no public health studies on
the increased use of alkylates, increasing their use could threaten
public health. Bluewater Network contends that a doubling or more of
alkylates in gasoline--about which we know almost nothing--is eerily
similar to the MTBE mistake made years ago.
In addition to potential increased air pollution risk from the use
of alkylates in gasoline, chemicals used to produce alkylates could
themselves put public health at risk. At the current time, a
significant portion of the nation's refineries use hydrofluoric acid in
their alkylation process. Accidental releases of hydrofluoric acid
vapor--which is highly toxic and even lethal--could seriously endanger
communities near refineries.
If alkylates double in gasoline as predicted, Bluewater Network is
concerned about increased transportation and use of this extremely
hazardous acid. Bluewater Network believes that hydrofluoric acid
alkylation is the most likely and technically feasible process to
produce alkylates for gasoline sold in California. The rest of the
nation could more easily use alkylates produced with sulfuric acid
instead of hydrofluoric acid, but with significant existing capacity
set up for hydrofluoric acid, it is likely that increased alkylate
demand will lead to increased utilization of this process. Bluewater
Network urgently believes further study of potential changes in
refinery alkylate production is necessary before committing to
legislation or regulatory action that will increase the use of non-
oxygenated fuels.
Carbon monoxide
Another air quality concern for us is carbon monoxide. Although
oxygenated reformulated gasoline was not specifically designed to
reduce carbon monoxide pollution, this is one of its real world
benefits. Bluewater Network's analysis demonstrates that without oxygen
in reformulated gas, severe carbon monoxide backsliding will occur. The
Appendix of the California Air Resource Board's new fuel regulation
demonstrates that Phases 3 RFG will cause an increase of 250-590 tons
per day of carbon monoxide emissions in California. These are very
significant numbers, and will cause serious air quality problems in
California in future years. Similar backsliding can be expected
elsewhere in the Nation.
In addition, USEPA Federal Ozone Workshops conclude that the
current method of estimating ozone seriously underestimates carbon
monoxide's role as an ozone precursor. For this reason, EPA sent a
Notice of Proposed Rulemaking to OMB in February 2000, requesting the
addition of a carbon monoxide credit to ethanol for reducing ozone--
something Bluewater has been requesting of EPA for over a year.
When the effects of high emitters, off-cycle driving, and off-road
engines are included--engines that produce the majority of total
vehicular emissions--it's clear that oxygenates have tremendous
beneficial impacts. However, many regulators, and even the National
Research Council acknowledge that their studies have neglected to
include an analysis of all of these categories. As a result, we believe
that moving to non-oxygenated reformulated gasoline will cause severe
increases in carbon monoxide, and therefore, future air modeling,
legislation and regulations must take carbon monoxide into account.
Particulate Matter
Particulate matter is also of concern to us. One of the California
Air Resources Board's (CARB) major arguments for a waiver from the
oxygen standards was based on obtaining particulate matter reductions
to meet Federal standards. In other words, CARB argued that oxygenates
actually harm their ability to reduce particulate matter. Bluewater
Networks takes issue with this assumption.
A study conducted by the Colorado Department of Public Health and
Environment showed that gasoline containing a 10 percent ethanol
oxygenate significantly reduces emissions of primary particulate
matter. In fact, Colorado currently has a 15 percent particulate matter
emissions credit for 10 percent ethanol fuel blends, due to evidence of
significant reductions in particulate matter emissions for on-road and
off-road engines with this fuel.
According to CARB's own data, off-road vehicles account for 80
percent of particulate matter emissions from gasoline engines in
California, yet inexplicably, they are not even included in CARB's
final analysis. Unlike the State of Colorado which provides significant
particulate matter credits for off-road vehicles, GARB conveniently
discarded the whole category to arrive at its unusual conclusion that
oxygenates increase particulate matter. Bluewater Network contends that
if the oxygenate waiver California asked EPA is granted, particulate
matter will increase in California, not decrease, as a result of this
very serious oversight. We do not want to see elimination or waiver of
the oxygenate requirement, which would allow other States to go down
this dangerous path.
Hydrocarbons
Hydrocarbons are yet another concern. The proposed regulations for
California's Phase 3 reformulated gasoline offer a projected 0.1
percent reduction in hydrocarbon emissions in comparison to Phase 2.
Although such a reduction promises to maintain the existing benefits of
Phase 2 on paper, Bluewater Network believes that it is extremely
unlikely that refiners will produce fuels in the real world which
maintain this hydrocarbon emissions reduction. The regulation itself
does not ensure that refiners will produce fuels clean enough to
maintain this projected emissions reduction.
As I said before, in the event that you consider eliminating or
allowing State-by-state waivers of the Clean Air Act's oxygen
requirement, Bluewater Network would support such a change only if a
renewable fuels standard is established with provisions that maintain
the existing, real-world air quality benefits of the oxygen
requirement. It would be crucial to enact protections such as an
aromatic cap, and ensure that there is no increase in emissions of
carbon monoxide, particulate matter, hydrocarbons, or toxics. A ban on
additional hydrofluoric acid alkylation capacity is also essential.
Global Warming Benefits of Renewable Fuels
Now I'd like to address the issue of global warming. Most major
research labs and universities currently studying ethanol agree that
corn ethanol probably reduces global warming impacts. The most recent
work done by Argonne National Labs, the Department of Energy, the
Department of Agriculture, and the Institute for Local Self-Reliance
have shown net reductions in global warming gases from corn ethanol
ranging from approximate 15 to 25 percent. Argonne National Labs
informed Bluewater Network recently that in their opinion, even
obtaining just two or three percent reductions in greenhouse gases from
corn ethanol ``is significant'' and should not be discounted in the
climate change debate.
Biomass ethanol represents an even more valuable industry with
which to combat global warming. In addition, it actually utilizes waste
from other sources, Such as municipal waste, forest thinnings from fire
prevention programs, and rice straw which is otherwise burned--causing
its own air quality problems.
For these reasons, we believe that substituting MTBE with ethanol,
with additional incentives for biomass, could have significant benefits
for reducing global warming impacts. We see several ways the
environmentally beneficial biomass product could be supported. One is
ensuring geographical and temporal disbursement of ethanol demand--
because these two factors help biomass more successfully compete with
corn ethanol in areas where corn is not grown, such as California,
Texas, and New York. Another is including a biomass credit, on the
order of 1.5 to 1.0, in any renewable fuels standard.
Environmental and Economic Issues Related to Increased Ethanol Use
I'd like now to address some environmental and economic issues
related to the increased use of ethanol in reformulated gasoline areas.
Bluewater Network recognizes the need for a thorough study of the
environmental and economic issues surrounding increased use of
renewable fuels as an oxygenate replacement. This study should examine
the pros and cons of renewable fuels production and use, as well as the
pros and cons of alternative fuel scenarios, such as the increased use
and production of petroleum or other octane and oxygen additives if we
move to non-oxygenated fuel. Even so, we believe that the currently
available data indicate that ethanol will be an environmentally and
economically positive choice.
Fuel Prices
Recent data suggest that ethanol could completely replace MTBE
within three years, and that gas prices at the pump would not rise
significantly. In California, where very little ethanol is produced,
the California Energy Commission predicts virtually no cost increases
with ethanol over the long term. Short-term prices may experience mild
rises. Fortunately, compared to the oil industry, the ethanol industry
is far more diversified; therefore, Bluewater Network believes the
renewable fuels industry may be less disposed to price gouging behavior
than the oil industry. Coupled with the general increase in the numbers
of fuel providers that ethanol will bring, consumers may experience
greater price stability than ever before. To the extent that renewable
fuels replace gasoline, further insulation from OPEC price shocks will
also contribute to greater stability.
In the California Air Resources Board's request for a waiver of the
oxygenate requirement, Director Kenny projected a one to two cent per
gallon price increase with ethanol. Recent data suggest the opposite:
on a per gallon basis, MTBE is more expensive than ethanol by as much
as 40 cents per gallon. If this trend continues, replacing MTBE with
ethanol or gasoline should lower prices, not raise them over the long
term. Even if ethanol use were to raise prices by the one to two cents
projected by CARB, this is insignificant in a market where prices can
jump 40 cents in a week, which happened recently in California.
On the other end of this price debate, Bluewater Network has
significant concern that the oil industry will begin price gouging when
they lose ten percent of their production volume by removing MTBE. For
example, when California experienced refinery fires in 1999 that
reduced production by only five to ten percent, prices rose $0.50 per
gallon across northern California. Today's gas prices reflect similar
dynamics.
Supply
Another concern about ethanol's use as an oxygenate is supply. I'd
like to address this. According to a study prepared for the 24-member
Governor's Ethanol Coalition in March 2000, the U.S. ethanol industry
is capable of expanding production to meet the demand for oxygenates
that would result from a withdrawal of MTBE from the marketplace and
continuation of the oxygen requirement. They estimate that if MTBE were
phased out by 2004, ethanol demand would reach 3.2 billion gallons. By
that time, the ethanol industry could produce 3.5 billion gallons. This
increased capacity would come from improvements in production
efficiency leading to increased utilization of existing plant;
expansion of existing operating facilities; new construction in place,
and from proposed facilities currently in various stages of
development.
Air Quality Concerns
Some people have raised concerns about increases in acetaldehyde (a
carcinogen) and peroxyacetyl nitrate (a mutagen) with use of ethanol in
fuel. The California Air Resources Board has looked into this in
detail, and their Urban Airshed Modeling results show no increase in
emissions of these chemicals in ethanol-blended fuels versus both MTBE
and non-oxygenated fuels. The workshops concluded that aromatics and
other gasoline components are more responsible for acetaldehyde and
peroxyacetyl nitrate emissions than is ethanol. Furthermore, which
overall toxics are considered, ethanol-oxygenated fuels come out way
ahead of non-oxygenated fuels.
Transportation
I'd like to address one further concern raised regarding the use of
ethanol as an oxygenate: transportation, and particularly the alleged
difficulty of moving ethanol in pipelines. Bluewater Network believes
that this is a non-issue. Before 1992, California used significant
amounts of ethanol and the ``pipeline issue'' was never a concern
raised by oil companies using this product. Brazil has been using
ethanol for thirty years and has never had a significant problem with
transportation, as they pipeline the majority of the substance around
the country. Piping ethanol is easily accomplished if the pipes in the
line are relatively clear. If ethanol demand and supply increase, it is
likely the industry will develop some pipeline capacity. In the
meantime, from our data, it appears as though the oil companies will
have the option to use a combination of ships, barges and trucks to
transport ethanol. In addition, Argonne National Labs has assured
Bluewater Network that the energy costs of transporting ethanol by
truck or rail will be insignificant.
We support the idea of a life-cycle transportation study of all
reasonably expected fuel scenarios. For example, life-cycle
transportation impacts of ethanol should be studied and compared to the
life-cycle transportation impacts of increased use of oil and other
octane enhancers. To determine if environmental impacts will increase,
these results should also be compared to the current transportation
impacts of MTBE use.
ENVIRONMENTAL AND ECONOMIC COSTS OF OIL DEPENDENCE
Finally, no discussion of eliminating the oxygen requirement
without substituting a good renewable fuels package should leave out
the environmental and economic costs of oil dependence. In addition to
significant backsliding on global warming and fuel cycle emissions,
Bluewater Network is concerned that such a scenario would effectively
result in increased oil dependence and cause economic and environmental
problems.
First, reducing or removing oxygenates from reformulated gasoline
will guarantee that the oil industry's control of each tank of
reformulated gasoline will increase from 90 to 100 percent. Drilling
for oil causes many different types environmental problems, from oil
spills to loss of habitat to displacement of local people. Around the
world--in the Amazon, Indonesia, Malaysia and other places--pursuit of
oil is killing rainforests and the tribal people who live there. In
South America, the U'wa, the Huarari, and hundreds of other tribes are
being displaced from lands they've owned from time immemorial, their
water polluted, their wetlands destroyed, their hunting grounds ruined,
their native ways lost. From Nigeria to Columbia, the story is the
same. These indigenous people deserve better from America. And now
because of America's insatiable demand for oil, the oil industry wants
to open the Alaska National Wildlife Refuge for drilling.
Second, the oil shipped from these areas to the U.S. travels in an
aging world tanker fleet--a fleet that is responsible for 14 percent of
all global nitrogen emissions, and 16 percent of all sulfur emissions
from petroleum. Carnegie Mellon University concluded in 1999 that the
world shipping fleet is actually changing global climate as a result of
its staggering emissions over oceans.
Those same tankers--the vast majority, single hull vessels--also
cause incredible damage from oil spills. Coastlines are threatened by
major spills such as the Erika, a tanker that has shut down the fishing
industry in parts of France, and which caused countless millions of
dollars in damage to the environment and lost incomes and livelihoods
for traditional fishermen and businesses dependent on tourism.
On the other hand, maintaining the oxygen requirement or eventually
passing a good renewable fuels standard will: decrease reliance on
foreign oil producers and the oil industry as a whole; diversify energy
sources; cushion the U.S. against OPEC price shocks; increase national
security; and decrease military reliance on protecting foreign oil
supplies, the costs related to these activities. Ensuring use of
renewable fuels will also help to reduce current subsidies to the farm
industry and help independent farmers by increasing demand for their
products.
CONCLUSION
In summary, the evidence is dear that MTBE is causing inexcusable
damage to our nation's water supplies. This fuel additive is simply too
dangerous for continued use. We urge you to protect our water by taking
immediate action to ban MTBE and other ether-based oxygenates. At the
same time, we urge you to prevent backsliding on air quality and
promote use of renewable fuels through retention of the oxygen
requirement. Alternatively--but only as a second choice due to our
concerns that it is not technically realistic to achieve the same
environmental protection with non-oxygenated fuels--we would support an
MTBE ban coupled with implementation of a strong renewable fuels
standard and performance standards for reformulated gasoline that
preserve the real-world benefits of oxygen.
STATEMENT OF EXXON MOBIL CORPORATION
Chairman Inhofe, Members of the Committee, Exxon Mobil Corporation
is pleased to have the opportunity to present a statement on the use of
ethanol in gasoline, particularly with regards to the environmental
impacts of its expanded use. We are also pleased to offer our thoughts
on the uncertainty in the industry caused by the recent Unocal patent
rulings.
ETHANOL AND THE ENVIRONMENT
Recently, the EPA announced that it favored legislation that would
repeal the Clean Air Act oxygenate requirement for reformulated
gasoline and would rapidly phase down MTBE use. However, EPA also wants
to permanently mandate use of another oxygenate additive, ethanol. EPA
and other ethanol supporters would like the Federal Government to
require that the American consumer use their product in all gasoline in
order to support their vision of an expanding future market. We are
opposed to mandates, which distort energy markets, decrease efficiency
and ultimately raise costs to consumers. Substituting one unnecessary
and costly government mandate for another is not a policy in the best
interests of anyone, especially since the need for such a mandate no
longer exists.
The use of ethanol as a gasoline additive is not at issue. Indeed,
we have used ethanol to fulfill the oxygenate mandate and as an octane
extender for a number of years in the Midwest where the proximity of
ethanol production and various subsidies make ethanol the economic
oxygenate of choice. While ethanol has long been used as a gasoline
additive and will likely enjoy even greater use even without a mandate,
there are a number of questions and concerns that need to be addressed
before considering measures that would mandate its broader use.
A Federal oxygenate mandate is not needed to achieve our
environmental goals. If the oxygenate mandate were eliminated, clean
air progress would continue at the same rate because oxygenates are not
needed to produce reformulated gasoline. Therefore, we believe
requiring the use of ethanol in gasoline is not necessary. Today's
clean-burning fuels and vehicles can meet stringent emission standards
without adding oxygenates. Hence, ethanol's role should be determined
by whether it is an economic gasoline extender or not.
Beyond the mandate issue, though, the broader use of ethanol raises
environmental questions that need to be addressed. There are still
unanswered questions about its long-term health effects, which requires
more research be conducted. In addition, any proposal to broaden the
use of ethanol should first include a thorough evaluation of the
environmental consequences of a requirement to use large amounts of
ethanol in gasoline.
Air quality impacts are of particular concern. According to a
recent California Air Resources Board (CARB) report,\1\ tailpipe
NOx emissions increase significantly at higher oxygen
concentrations typical of ethanol blends. Also, ethanol's impact on
gasoline volatility and its tendency to increase ``permeation'' (when
fuel components move through fuel-system components such as hoses and
gaskets into the atmosphere) will create greater evaporative
hydrocarbon emissions from the existing car fleet. Hence, if ethanol is
mandated, areas where increased ozone (smog) producing emissions are of
concern could be significantly impacted.
---------------------------------------------------------------------------
\1\ California Air Resources Board Staff Report, Initial Statement
of Reasons Proposed for California Phase 3 Gasoline Regulations,
Chapter I, p.4, October 22, 1999.
---------------------------------------------------------------------------
A 1999 EPA-funded study by the National Research Council (Ozone-
Forming Potential of Reformulated Gasoline) supports CARB's findings.
The NRC study found that ``ethanol blends result in more pollutants
evaporating from vehicle gas tanks . . .'' and ``also increase the
overall potential of emissions to form ozone.'' According to a recent
study performed by Toyota Motor Company, this increase occurs because
ethanol raises gasoline vapor pressure and because it ``permeates''
through the rubber/plastic components of vehicle fuel systems. Because
of this elevation in the evaporation rate of gasoline, VOC (volatile
organic compound) emissions increase, contributing to ozone formation.
The Toyota report, presented at a recent CARB workshop, further
highlights the potential impact of ethanol on air quality. After
testing nine late-model, low-emission vehicles, it was determined that
replacing an 11 percent MTBE blend with a 10 percent ethanol blend
results in both increased evaporative losses and increased exhaust
emissions. This presents a new challenge to areas of the country
seeking to reach attainment with ambient air quality standards.
The report further indicates that non-tailpipe emissions from fuel
evaporation also increase when fuels contain ethanol vs. MTBE. Two
sources are the culprits here--higher fuel volatility and increased
permeation.
Although the impact of ethanol on fuel volatility can be reduced by
ensuring that ethanol blends have the same Reid Vapor Pressure (RVP) as
non-ethanol fuels, the Toyota data indicates that ethanol blends could
have higher evaporative emissions even with equivalent RVP. This is due
to volatility characteristics at the high fuel tank temperatures (120F)
that can occur during driving. Additionally, requiring refiners to make
a lower RVP ``base'' gasoline increases the manufacturing cost of
gasoline and reduces the energy efficiency of the manufacturing
process.
There are water concerns as well. EPA's Blue Ribbon Panel on
Oxygenates warns that ``(a)lthough ethanol is likely to biodegrade
rapidly in groundwater, because ethanol is infinitely soluble in water,
much more ethanol will be dissolved into water than MTBE.'' Gasoline
containing no oxygenates is more stable in the case of a spill, whereas
ethanol moves faster, dragging gasoline along with it in a spill
situation. While the environmental track record--with respect to
groundwater contamination--of using ethanol in gasoline appears good,
the environmental consequences of large mandated use of this highly
water-soluble chemical should be studied further.
Finally, the International Agency for Research in Cancer (IARC)
classifies ethanol as a known human carcinogen.
MIDWEST ETHANOL USE
The Midwest is the only major market where ethanol is the primary
oxygenate of choice used in RFG. As a result, the area has become
isolated in terms of supply, since RFG that does not utilize ethanol
cannot be transported to the region or commingled with ethanol-blended
RFG. RFG blended with ethanol is more difficult to produce because the
base gasoline must be further refined to offset the increased
volatility of ethanol. This further processing of RFG reduces the
available supply. Mandating expanded use of ethanol could increase both
the difficulty and cost of producing RFG in other parts of the country
as well.
THE UNOCAL PATENT
A recent decision by the U.S. Court of Appeals for the Federal
Circuit has potentially significant implications for the California and
Federal RFG programs because it will likely impose additional costs on
the manufacture and importation of fuels. The decision could also
impact supplies of RFG as refiners and importers individually evaluate
whether to continue to participate in the RFG programs--they must
decide whether to pay patent royalties or incur the costs of developing
formulations that are outside the scope of the patent.
Because of this uncertainty, concerns have also been expressed that
importers and blenders, in particular, may choose to supply less RFG to
the market to avoid potentially infringing on the patent. This means
that the amount of flexibility the refineries have to make a quality
product is diminished. This lack of industry flexibility, particularly
when using ethanol, has a negative impact on the local volumes
available to the market, again tightening gasoline supplies.
CONCLUSION
Given adequate lead-time, refiners can manufacture blends of
cleaner-burning gasoline that achieve the same air quality improvements
without the current oxygen mandate. Exxon Mobil agrees with the
findings of the recent study conducted by the EPA's Blue Ribbon Panel
on Oxygenates. This independent panel of experts recommended that
Congress act to remove the current Clean Air Act requirement that 2
percent of RFG, by weight, consist of oxygen. This can be done with no
loss of current air quality benefits while allowing a substantial
reduction in the use of MTBE.
We strongly encourage Congress to learn from the MTBE experience.
Substituting one unnecessary and costly government mandate that had
unforeseen environmental consequences for another that could have
unforeseen environmental consequences, while also increasing already
large subsidy payments, is not a policy in the best interests of the
American public. Ethanol is and will continue to be a useful additive
in transportation fuels in some areas, but it should compete on price
and performance. Congress should eliminate the oxygen mandate
altogether and allow refiners to begin reducing MTBE usage while
continuing to meet emission requirements using performance-based
standards.
__________
[From Environmental Science & Technology, May 1, 2000]
MTBE.--To What Extent Will Past Releases Contaminate Community Water
Supply Wells?
An Improved Understanding of the Factors That Affect the Magnitude of
the Problem Is Needed
(By Richard Johnson, James Pankow, David Bender, Curtis Price, and John
Zogorski)
The increasing frequency of detection of the widely used gasoline
additive methyl tert-butyl ether (MTBE) in both ground and surface
waters is receiving much attention from the media, environmental
scientists, State environmental agencies, and federal agencies. At the
national level, the September 15, 1999, Report of the Blue Ribbon Panel
on Oxygenates in Gasoline (1) states that between 5 and 10 percent of
community drinking water supplies in high MTBE use areas show at least
detectable concentrations of MTBE, and about 1 percent of those system
are characterized by levels of this compound that are above 20
g/L. In Maine, a desire to determine the extent of MTBE
contamination led to a 1998 study (2) that revealed that this compound
is found at levels above 0.1 g/L in 16 percent of 951 randomly
selected household wells and in 16 percent of the 793 community water
systems tested in that State (37 wells were not tested). The study also
suggested that between 1400 and 5200 household wells may have levels
above 35 g/L, although no community water supplies were found
to be above that concentration. For comparison, Maryland, New
Hampshire, New York, and California have set MTBE remediation ``action
levels'' at or below 20 g/L, and EPA has set its advisory
level for taste and odor at 20-40 g/L (3).
In California, concern regarding MTBE reached statewide levels in
1996 when seven wells supplying 50 percent of the water for the city of
Santa Monica were removed from service because of MTBE at
concentrations as high as 600 g/L. For the city's Charnock
well field, an initial review of known and suspected petroleum spill
sites identified about 10 potential sources that lay within 1 km of the
well field, lay above the hydrologic unit accessed by the well field,
and were created after MTBE use began in the State (4). At the time
that contamination of the wells was discovered, pumping of the Charnock
well field was at 5 million gallons/day (mgd). This aggressive pumping
was approximately twice the total natural flow of water moving into the
aquifer. Despite the presence of a protective aquitard in the system,
the pumping had dewatered a significant portion of the upper aquifer,
caused water to flow toward the well field from all directions, and had
greatly increased the likelihood that the community water supply (CWS)
wells in Santa Monica would in fact become contaminated by one or more
persistent organic pollutants such as MTBE.
Besides leaking underground fuel tanks (LUFTs) and leaking
pipelines, other sources of MTBE in groundwater include tank
overfilling and faculty construction as gas stations, spillage from
vehicle accidents, and homeowner releases. In Maine, it is possible
that many of the cases of domestic well contamination by MTBE were
caused by homeowner releases (2). For the Santa Monica wells, the scale
of contamination found there seems consistent only with large releases
(e.g., LUFTs).
UNPRECEDENTED GROWTH IN USE
Use of MTBE as a gasoline additive began in the United States in
the late 1970s when it was introduced as a means of maintaining
adequate octane ratings during the phaseout of alkl lead additives.
MTBE use expanded dramatically in the mid-1990s with the implementation
of the Clean Air Act Amendments of 1990, which mandated efforts to
reduce carbon monoxide emissions, as well as ozone levels in urban air.
For carbon monoxide, MTBE was selected by some gasoline producers as a
means of producing ``oxygenated fuel'' (oxyfuel) that allowed the more
complete combustion of gasoline hydrocarbons. For ozone, MTBE has been
used to produce ``reformulated gasoline'' (RFG), which is low in the
potent human carcinogen benzene and other aromatic compounds; use of
RFG lowers the emissions of unburned aromatic compounds and therefore
the formation of ozone in urban air. Alternative oxygen-containing
compounds for the formulations of oxyfuel RFG include ethanol, ETBE,
TAME, and DIPE (see box above); usage of the last three has been
relatively small. Currently, 19 areas in 13 States are involved in the
oxyfuel program, with MTBE used in 3 percent of all oxyfuel at levels
of 10-15 percent by volume. A total of 29 areas in 18 States are
involved in the RFG program, with MTBE used in 85 percent of all RFG at
levels of 11-15 percent by volume (5).
The growth in the use of MTBE has been unprecedented. In 1970, MTBE
was the 39th-highest produced organic chemical in the United States. By
1988, it had become fourth-highest (see Figure 1, (6-11)), with an
aggregate production of about 60 million metric tons over that period.
And, the production of MTBE is exceeded only by that for the monomers
used to make polyethylene, polypropylene, and polyvinyl chloride. In
1998, more than 10.5 mgd of MTBE were used in the United States, with
4.2 mgd used in California alone (12). There production numbers are far
larger than those of the chlorinated solvent compounds, a group widely
recognized as having caused extensive contamination of groundwater in
urban and nonurban areas. Thus, regardless of what happens to MTBE use
in the future (e.g., both Maine and California have stated that they
intend to stop using MTBE, and the Blue Ribbon Panel and Oxygenates in
Gasoline (1) has call for a substantial and rapid reduction in MTBE use
in RFG areas), it is likely that significant amount of this compound
are already present in the subsurface.
Terms
MTBE.................................... methyl tert-butyl ether
ETBE.................................... ethyl tert-butyl ether
DIPE.................................... di-isopropyl ether
TAME.................................... tert-amyl methyl ether
RFG..................................... reformulated gasoline
oxyfuel................................. oxygenated fuel
BTEX.................................... benzene, toluene, ethylbenzene, and xylenes
CWS ``wells''........................... community water supply well
CWS..................................... one or more CWS pumping wells that draw from the same portion of
an aquifer
LUFT.................................... leaking underground fuel tank
LUST.................................... leaking underground storage tank
UST..................................... underground storage tank
PCE..................................... perchloroethylene (also called tetrachloroethene)
TCE..................................... trichloroethylene (also called trichloroethene)
mgd..................................... millions of gallons per day
UFT..................................... underground fuel tank
. . . AND MTBE IS VERY SOLUBLE
Gasoline hydrocarbons are nonpolar compounds composed only of
hydrogen and carbon. Of these, the compounds with the lowest drinking-
water concentration limits are members of the BTEX group (benzene,
toluene, ethylbenzene, and the xylenes). However, the relatively low
water solubilities from gasoline mixtures of the BTEX group (see Table
1), combined with their high in situ biodegradabilities, greatly limit
their migration from LUFT sites. These limitations have allowed
``natural attenuation'' processes to mitigate subsurface contamination
at many sites where conventional gasoline has been released. The extent
of contamination by BTEX compounds at most LUFT sites is typically less
than 100 m (12), and benzene has been detected only rarely in the
community water systems of California (1) and across the nation in
groundwater samples collected as part of the National Water-Quality
Assessment Program of the U.S. Geological Survey (14).
MTBE is a relatively nonpolar either that blends easily with
gasoline hydrocarbons. If MTBE behaved like the gasoline hydrocarbons
in all respects, the scale of its use would not be itself be a reason
for concern. After all, the current numbers for gasoline production in
the United States are about 40 times larger than those for MTBE, and
385,000 known releases of gasoline have already occurred at LUFT sites.
Unfortunately, MTBE is very soluble in water and is therefore very
mobile in groundwater systems. And the absence of any carbon branches
more one carbon long on the MTBE molecule make MTBE very resistant to
biodegradation. Thus, like the chlorinated solvent compounds TCE and
PCE, MTBE has been found to persist in groundwater, and cases of MTBE
plumes extending kilometer-scale distances in the subsurface have now
been documented (e.g., Port Hueneme, CA; East Patchoque, NY; Spring
Creek, WI; and Vandenberg AFB, CA).
Some MTBE plumes have originated from very small spills, as from
the gasoline in the tank of a single over-turned auto. Then gallons of
a gasoline that is 11 percent by volume MTBE will contain 3 kg of MTBE.
If such an amount were to reach the water table (either by direct see
page of the gasoline or as assisted by infiltration of precipitation),
subsequent dissolution and transport could lead to the contamination of
millions of liters of water at the tens of g/L level. The
potential for rapid and extensive transport of MTBE through the
subsurface is especially large when spills reach fractured rock where
porosities may only be a few percent. For example, a spill resulting
from a single automobile accident in Standish, ME, led to MTBE
transport through more than 0.7 km of fractured rock and to the
contamination of more than 20 domestic wells (15).
TABLE 1--WATER SOLUBILITIES OF HYDROCARBON COMPOUNDS
The relatively low water solubilities from gasoline mixtures of the
BTEX group (benzene, toluene, ethylbenzene, and xylenes) combine with
their high in situ biodegradabilities, greatly limit their migration
from LUFT sites. This situation differs greatly for alkyl ether
compounds.
Compound Solubility
Solubility (mg/L) at 20C
Aromatic gasoline hydrocarbons from conventional gasoline a
Benzene 18
Toluene 25
Ethylbenzene 3
xylenes (total 20
Chlorinated solvent compounds Solubility (mg/L) at 20C
from the pure compound
tichloroethylene (TCT) 1440
perchloroethylene (PCE) 240
Solubility (mg/L) at 20C
Alkyl ether compounds
from RFG b from Oxyfuel c
methyl tert-butyl ether (MTBE) 4700 6300
ethyl tert-butyl ether (ETBE 1300 1750
tert-amyl methyl ether (TAME) 1400 1850
di-isopropyl ether (DIPE) 1200 1600
a Assumes release of a conventional gasoline containing 1 percent benzene, 5 percent toluene, 1.5 percent
ethylbenzene, and 10 percent total xylenes.
b Assumes release of reformulated (RFG) gasoline containing 2.0 percent by weight oxygen, which would correspond
to 11.1 percent MTBE, 12.9 percent ETBE, 12.4 percent TAME, or 12.9 percent DIPE (all by volume).
c Assumes release of oxygenated gasoline containing 2.7 percent by weight oxygen, which would correspond to 15.0
percent MTBE, 17.5 percent ETBE, 16.8 percent TAME, or 17.4 percent DIPE (all by volume)
BLUE RIBBON PANEL ON OXYGENATES IN GASOLINE
Appointed by EPA Administrator Carol M. Browner in November 1998,
the Blue Ribbon Panel was asked to ``investigate the air quality
benefits and water quality concerns associated with oxygenates in
gasoline and to provide independent advice and recommendations on ways
to maintain air quality while protecting water quality''. The panel was
composed of experts from the Public health and scientific communities,
automotive fuels industry, water utilities, and local and state
governments.
250,000 LUFT RELEASES OF MTBE
Because MTBE has been used so widely (as an octane enhancer, as a
component of RFG, and/or as a component of oxyfuel), most underground
gasoline tanks in use after 1979 in the United States probably
contained this compound at some point in time. For example, in Kansas,
where neither RFG nor oxyfuel use was required, MTBE has been found at
88 percent of 818 leaking underground storage tanks (LUSTs) (16). In
California, MTBE was found at 75 percent of 9000 LUFT sites (17).
Therefore, of the approximately 385,000 confirmed LUFT releases of
gasoline nationwide (18), perhaps some 250,000 of these spills involved
MTBE . And, recent evidence from California suggests that spills and
leaks continue to occur, even at upgraded UFT facilities (1).
Therefore, because approximately 90 million people in the United States
obtain a portion of their drinking water from CWS wells, EPA has been
advised to work with its State and local water supply partners to
. . . coordinate the Source Water Assessment program in each
State with federal and State Underground Storage Tank Programs
using geographic information . . . systems to determine the
location of drinking water sources and to identify UST sites
within source protection zones.
Blue Ribbon Panel on
Oxygenates in Gasoline (1)
Thus, specific information is greatly needed regarding the real
density and distribution of UST sites and other significant sources in
the areas surrounding CWS wells and also the hydrogeological and
pumping information for these wells.
Once this information is in hand, vulnerability assessments based
on common sense, as well as detailed hydrogeological modeling can be
carried out to determine what steps, if any, are needed to ensure the
protection of a given CWS well. While these data are being gathered, it
will be very useful to identify the factors that will determine the
likelihood that individual CWS wells will be adversely affected by
local sources. It will also be important to estimate the number of CWS
wells nationwide that ultimately may be affected by MTBE, as well as by
other persistent organic compounds. There three scales to this problem:
a temporal scale, a site-dependent local scale, and a national scale.
Each will be considered here.
TEMPORAL SCALE FOR CWS WELLS
Subsurface contamination has the potential to threaten local CWS
wells for tens to hundreds of years. This is because LUST sources can
persist for decades and because it can take tens to hundreds of years
for groundwater to flow from source areas to a CWS well. The actual
time frame that MTBE from a given source has the potential to appear in
a CWS well at problematic concentrations will depend on the size of the
source, the concentration leaving the source, and how attenuation
mechanisms act to reduce the concentration as the contaminant moves
from the source toward the well. Experience indicates that most large
LUFT-MTBE sources have lifetimes of greater than 10 years, and that the
concentrations of MTBE in groundwater leaving such sources are
frequently a few hundreds of milligrams per liter. Some States have
established maximum allowed concentration values of a few tens of
micrograms per liter (or less) for MTBE in drinking water. This
suggests that an overall reduction factor on the order of 10,000 may be
necessary to bring groundwater concentrations coming from CWS wells
down to the maximum allowed values.
Three primary mechanisms can reduce the concentration of MTBE as it
moves toward and into a CWS well: dilution, dispersion, and degradation
plume is drawn into a CWS well. In the example involving a 1-mgd well
(see sidebar at right), the well dilution factor is 10,000, then an
additional in situ reduction factor of about 40 would be required to
reduce the concentration in the CWS to an acceptable level. (Note that
in this analysis, the overall reduction factor = in situ reduction
factor x well dilution factor.)
The magnitude of the in situ reduction factor for a nonsorbing
contaminant such as MTBE will be determined by the dispersion and
degradation that occurs as the contaminant moves in the subsurface.
Although dispersion can play an important role in determining the shape
of a groundwater plume, when an MTBE source lies within the ``capture
zone'' of a well, dispersion will, in general, not be strong enough to
remove much MTBE from the flow paths leading to the well (see sidebar
at right). Thus, in most cases, degradation followed by dilution at the
well will control the MTBE concentrations found in CWS wells.
If degradation occurs as a first-order process (i.e., the passage
of each degradation half-life (t\1/2\) brings a factor of 2
concentration reduction), a 40-fold concentration reduction will
require between five and six half-lives. For BTEX compounds released
from LUFT sources, degradation in groundwater is relatively fast, with
a typical half-life of two to three months. In contrast, based on a
limited number of field data (e.g., (19,20)), it has been noted that
[in] studies to date, in situ biodegradation of MTBE has been
minimal or limited at best, which is significantly less (by at
least one order of magnitude) when compared to benzene.
Blue Ribbon Panel on Oxygenates in Gasoline (1) Thus, it is
appropriate to assume that the degradation half-life for MTBE
in plumes from LUFT sources is at least two years. As a
required degration time, td, of five to six half-
lives will probably correspond to at least 10 years (see
sidebar on previous page). Significant numbers of MTBE releases
may therefore continue to reveal themselves as problematic
sources of contamination for the nation until at least 2010.
MECHANISMS THAT CAN REDUCE THE CONCENTRATION OF MTBE ARRIVING AT A
CWS WELL
Dilution by mixing in a CWS well
Dilution by mixing the uncontaminated water in a community supply
well can be calculated by comparing the groundwater flow rate through
the source zone (assumed to be in the capture zone for the well) with
the pumping rate for the well. For example, the dimensions for a LUFT
source zone might be 30 m wide x 5 m thick. If the groundwater velocity
is 0.3 m/day and the porosity is 0.33, the volume of water flowing
through the source will be 15 m3/day. For a community supply
well pumping at 4000 m3/day (1 mgd), this would result in a
dilution factor of about 250, regardless of the distance between the
source zone and the well.
Dispersion
Dispersion can occur both perpendicular (``transverse'') to
groundwater flow and in the direction of the flow (``longitudinal'').
Neither means of dispersion will provide much net reduction in the flux
of MTBE as it moves toward a CWS well. Studies of chlorinated solvent
plumes in capture zones indicate that transverse dispersion is rarely
strong enough to move significant contamination outside the capture
zone of a pumping well. This means that transverse dispersion cannot,
by itself, help much to reduce the concentration of MTBE in the water
produced by a CWS well. For longitudinal dispersion, because MTBE
sources are persistent and MTBE is relatively long-lived in
groundwater, once such a plume becomes established and longitudinal
concentration gradients dissipate, the amount of concentration
reduction at the well head that can occur by longitudinal dispersion
will be small.
Degradation
Degradation of MTBE by subsurface microorganisms is generally slow.
Abiotic degradation is negligible. Field studies of MTBE spills can be
used to compute apparent first-order rates of decay and corresponding
half-lives, t\1/2\, (in years) for biodegradation. Data
obtained from actual spills indicate that MTBE has a half-life in most
natural groundwater systems of at least two years, although significant
uncertainty exists with these numbers.
Required Degradation Time, td
The required degradation time is defined here as the time required
for the flux of contaminants from a source to be reduced by degradation
to the point at which they no longer pose a threat to the CWS well. It
is a function of source size and strength, groundwater flow rate, and
pumping rate, as well as the in situ biodegradation rate. As discussed
in the text, a value of 10 years has been assumed for the analysis
presented here.
LOCAL SCALE: SOURCES NEAR CWS WELLS
For any specific CWS well, if the hydrogeologic conditions and the
locations of contaminant sources near the well are known is sufficient
detail, then the movement of contaminants to the well can be assessed
using numerical modeling. Although the data exist to do this in certain
specific locations, this information is not available for most CWS
wells. Therefore, to begin to understand the scale of the threat to CWS
wells posed by MTBE sources, an approach is needed that can provide a
general measure of the likelihood of contamination at wells when the
specific locations of sources relative to the wells are not known.
One approach is to assume that MTBE sources are randomly
distributed around CWS wells and use numerical modeling to calculate
the likelihood that contaminated water will reach CWS wells under
specific sets of conditions. If it is further assumed that MTBE sources
occur only near the water table, then the first step in this approach
will be to determine the size of the area from which groundwater at the
water table is capable of reaching the well before the required
degradation time, td, needed to achieve the in situ
reduction factor can elapse. If, as has been assumed here,
td is 10 years, then the 10-years capture zone area (see
Figure 2) can be determined through a straightforward application of
groundwater flow modeling techniques.
The second step is to determine the real density of significant
sources in the vicinity of the well. The third step is to multiply that
density by the 10-year capture zone area for that well to obtain the
number of sources, ns, that will, on average contaminate the
well water at a concentration above tolerable levels. It should be
noted that ns is a probabilistic parameter and is not the
number of sources that will impact that specific well. (For example,
this analysis cannot determine if a specific well with ns =
0.5 will be impacted by zero, one, two, or more sources. However, a
group CWS wells all with ns = 0.5 will, on average, be
impacted by 0.5 sources per well.)
Three simple, yet instructive, hydrogeological examples will be
examined here: a ``base'' case, consisting of a CWS well in a slightly
stratified aquifer; an aquitard case, in which a continuous low
permeability layer lies above the inlet to the well and helps protect
the well; and an infiltration case, in which the infiltration of
precipitation contributes to the downward movement of contaminated
groundwater. To better generalize these cases, it is useful to express
the magnitude of the pumping rate as a fraction of the rate at which
groundwater would flow naturally through some relevant width of the
aquifer (e.g., 1 km) in the vicinity of the well. This fraction is a
measure of the intensity of the pumping, and as a result, it will be
referred to here as the pumping stress factor (see Figure 3 for
definitions).
When the pumping stress factor is low, even an MTBE plume flowing
directly toward a well can pass over it without being drawn down to the
well inlet (see Figure 3a). The 10-year capture zone area will
therefore remain zero until some minimum pumping rate is reached, at
which point water from sources at the water table will begin to be
drawn into the well inlet (see Figure 3b).
In the base case, the well begins to capture water table sources
when the pumping stress factor reaches 0.4 (see Figure 4). As the
pumping stress factor increases to 1.0, the 10-year capture zone area
rises to 0.9 km2.
When an aquitard is present, significant protection of a CWS well
can be afforded. For the aquitard case considered here, the pumping
stress factor must rise to about 1.3 before contaminated water at the
water table begins to be captured by the well. In contrast, when the
based case is modified to include infiltration, the 10-year capture
some area becomes nonzero when the stress factor is only about 0.2.
As a discussed above, the Santa Monica's Charnock well field,
initial modeling by Brown and colleagues (4) indicates that at the time
that MTBE contamination was discovered, the pumping rate corresponded
to about twice the total natural flow through that 2-km-wide aquifer,
and as a result, 100 percent of the water in the aquifer within 1 km of
the wells was moving toward the well field. Because for such conditions
the pumping street factor would have been about 4, it would be of
considerable interest to model the Charnock case to determine how many
of the local LUFT-MTBE sources were inside the 10-year capture zone
area.
NATIONAL SCALE OF THE PROBLEM FOR CWS WELLS
To understand the issue of MTBE and CWS wells at the national
scale, it would be useful to apply an approach such as the one just
described to a number of sites to develop a histogram plot that
presents the number of CWS wells as a function of the number of
sources, ns, that will, on average, impact those wells. That
is, how many of the nation's CWS wells have low nsvalues,
and how many have large ns, values and are therefore at
risk? As has been noted, the data required to prepare this plot are not
currently available. However, two existing geographic information
system databases can be useful in a first step toward that goal. This
first is the Starview database (21), which has latitude and longitude
information for many of the nation's LUST sites (most of which are LUFT
sites). It is important to note that this database is known to have
significant uncertainties in the locations of individual LUSTs.
However, data from Happel and colleagues (17) indicate that the average
distances between CWS wells and LUSTs are not biased, so the
calculation of LUST densities based on those data is not expected to
have significant errors. The second database, the EPS Safe Drinking
Water Information System (SDWIS) (22), has CWS well location
information for 31 States. (Several large States, including California
and Texas, did not have location data available. This sites from the 31
States were filtered to remove multiple wells at the same location,
resulting in a total of 26,000 CWS wells.)
Overlaying these two databases allows the determination of a
histogram plot of the number of CWS wells versus the number of LUSTs
within 1 km of the CWS wells (see Figure 5a). Although it is likely
that not every one of the LUSTs in the Starview database has created a
significant source at the water table, this type of plot is useful in
developing an understanding of how many CWS wells may be at risk of
contamination.
When the distribution (see Figure 5a) is integrated to obtain the
cumulative frequency distribution (see Figure 5b), we can see that
approximately 35 percent of the CWS wells in the database are
characterized by one or more LUST sites within a 1-km radius of the
well. This corresponds to about 9,000 CWS wells for the existing
version of the 31-state SDWIS database.
Of course, not all LUSTs are LUFTs, not all LUFT sites will be
contaminated with MTBE, and not all LUFT MTBE sites will be significant
sources of MTBE. However, more than 90 percent of all LUSTs and LUFTs,
perhaps 65 percent of all LUFTs are associated with MTBE contamination,
and a large percentage of all LUFT MTBE sources is likely to have
caused significant contamination by MTBE. Therefore, although the
figure of 9,000 CWS wells in the 31 States is undoubtedly an overtime
of the number of wells in those States with at least one significant
LUFT-derived MTBE site, the number 9,000 is so large that the actual
number may well be worrisome.
As noted previously, information on pumping rates, well
characteristics, local aquifer yield, and other important well/aquifer
data is not available in a database for all the nation's CWS wells, or
even for a random subset of those wells. Thus, the lack of this
information currently prevents determination of the 10-year capture
zone areas for CWS wells and ultimately production of a figure in which
the cumulative frequency of CWS wells versus ns is plotted.
A conceptual version of that plot, with no numerical labels on the x
axis, is given in Figure 6.
NEXT STEPS
Although the large number of MTBE-LUSTs in the immediate vicinities
of CWS wells may represent a significant threat to drinking water over
at least the next decade, the data to determine the magnitude of that
threat are simply not available at the present time. To address this
issue, information is needed at all three of the scales discussed
above. To improve our understanding of the temporal scale of the MTBE
problem, a better data set of in situ MTBE biodegradation rates is
needed. At the local scale, water providers need to better understand
the stress that pumping is putting on their groundwater supplies.
Finally, at the national scale, examination of this issue will require
two new national databases, one for LUFTs and other sources, and one
for CWS wells. As has been suggested by EPS's Blue Ribbon Panel on
Oxygenates in Gasoline (1), the LUST database should focus on sites
that actually represent threats to CWS wells. In addition to basic site
location data, it should include information on the magnitude of each
release and the available data on groundwater concentrations (i.e.,
source strength). The CWS database should contain hydrogeologic and
pumping rate data for all CWS wells of interest to the nation. These
databases will allow improved estimates of the number of CWS wells that
may be affected by significant concentrations of MTBE over the next 10
years. And, quite independent of the MTBE issue, the databases will
help identify aquifer and CWS systems that are being pumped at rates
that carry unacceptable risks of contamination by persistent chemicals
in general.
REFERENCES
(1) Blue Ribbon Panel on Oxygenates in Gasoline. Achieving Clean
Air and Clean Water: The Report of the Blue Ribbon Panel on Oxygenates
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Washington, DC, 1999.
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__________
Des Moines Register,
March 25, 2000.
The Register's Editorials
THE MTBE ALTERNATIVE
Banning the additive was a good move. Substituting ethanol is the
logical next step.
Once upon a time there were a handful of motor vehicles on
America's dirt trails, gradually replacing horses. They stank somewhat,
but then so did the horses. By 1950 there were millions and millions of
the gas guzzlers, and gas was cheap and nobody much bothered to ask
what all the exhaust was doing to the air. Today there are more than
200 millions cars and trucks in use in this country. They get better
mileage than most of the 1950's vehicles, but their exhaust is a major
contributor to everything from smog to global warming.
Ethanol, made from corn, is also an oxygenator but not a poison.
It's also not a finite resource like MTBE.
The Clean Air Act required that in some areas, oxygenators be added
to gas to burn it more completely, cutting back on pollutants. Gasoline
was mixed with the oxygenator MTBE, which Big Oil supplied along with
the gas.
Now we've learned that MTBE, which is a poison, is getting into
water supplies--even in Iowa, where it's not used--but particularly in
California, whose smog problem means use of lots of MTBE. Iowa's
Congressmen Greg Ganske and Jim Leach were among the first to call for
outlawing MTBE nationwide, pointing out that ethanol, made from corn,
is also an oxygenator but not a poison.
It's also not a finite resource like MTBE, meaning its use doesn't
reduce the world's fuel reserves.
Now the Clinton administration wants to ban MTBE, which is
laudable, but also wants to drop the oxygenation mandate from the Clean
Air Act and require a quota of renewable fuel use nationwide. Ethanol
boosters want the oxygenation rule to stay, which with the MTBE ban
would virtually assure a huge new market for ethanol.
Leaving one major question: Can the Corn Belt produce enough
ethanol to take up the slack if MTBE is banned?
Yes, says Eric Vaughn, President of the Renewable Fuels Association
of Washington, D.C.
``I can assure Carol Browner [head of the U.S. Environmental
Protection Agency] that the ethanol industry can meet the California
demand for a gasoline oxygen additive today, and the entire nation's
needs within three years,'' Vaughn said.
California would need 550 million gallons yearly. There are now 200
million gallons in storage, and ethanol plants have the unused capacity
to produce another 300 million gallons. Further, four plants able to
produce another 85 million gallons are under construction, and
financing is being sought for anther 18 plants with a 440-million-
gallon annual capacity, according to RFA.
That's a lot of corn. That's a huge market boost. That's why corn-
state politicians are keeping a close watch.
It made sense to have an oxygenate requirement before the hazards
of MTBE were recognized, it still makes sense after MTBE is outlawed.
Ethanol is the alternative.
__________
STATEMENT OF THE AMERICAN ROAD AND TRANSPORTATION BUILDERS ASSOCIATION
INTRODUCTION
Chairman Inhofe, thank you and the other subcommittee members for
offering this opportunity for public comment on the use of ethanol as a
motor fuel. The American Road and Transportation Builders Association
(ARTBA) appreciates the opportunity to provide our thoughts on this
important matter.
ARTBA, founded in 1902, is the only national association that
exclusively represents the collective interests of all sectors of the
U.S. transportation construction industry before the White House,
Congress and federal agencies. The U.S. transportation construction
industry ARTBA represents generates more than $175 billion in U.S.
economic activity annually and provides employment for more than 2.2
million Americans.
Over the past decade, the association has also become the
industry's primary advocate in environmental issues. I am also pleased
to tell you that this year ARTBA has initiated a national awards
program to recognize firms in our industry that make outstanding
contributions to environmental quality and mitigation efforts.
UNFAIR ETHANOL TAX POLICY
Mr. Chairman, as you are well aware, federal investment in state
highway and bridge improvement programs is financed through the
collection of user fees levied on motorists--most notably, the federal
motor fuels excises. The concept behind the Highway Trust Fund and the
imposition of a federal tax on motor fuels is simple: those who drive
should contribute to the development and upkeep of the nation's road
and bridge system in a manner commensurate with their use of the
system. The more motor fuel you use, the more you contribute--through
motor fuel excises--to the Highway Trust Fund.
A car operating on gasohol causes as much wear and tear on our
roadways and bridges as does a car operating on gasoline. But the
gasohol/ethanol user is not now paying his or her fair share to the
Highway Trust Fund.
The motorist using gasoline contributes 18.3 cents per gallon to
the Highway Trust Fund through the federal gas tax--15.44 cents per
gallon to the trust fund's Highway Account and 2.86 cents per gallon to
the fund's Mass Transit Account. (An additional 0.1 cents per gallon is
contributed to the Leaking Underground Storage Tank Trust Fund.)
The motorist using gasohol (with 10 percent ethanol), however, is
only contributing 9.8 cents per gallon to the Highway Trust Fund
through federal excises--6.94 cents per gallon to the trust fund's
Highway Account and 2.86 cents per gallon to the Mass Transit Account.
WHY IS A FEDERAL MOTOR FUELS USE EXCISE CONTRIBUTING TO THE GENERAL
FUND
It is also worth noting that 3.1 cents of the federal per gallon
excise on 10 percent gasohol and 2.5 cents of the tax on less than 10
percent gasohol is deposited in the federal General Fund. Consequently,
not only are ethanol fuels not paying their fair share to improve the
nation's roadways and bridges, but also ethanol' s current tax status
returns the favor to the federal government by providing over $400
million per year to the federal General Fund. During these times of
projected federal budget surpluses as far as the eye can see, there is
no justification for a portion of a federally imposed highway user fee
to be dedicated to the federal General Fund.
ETHANOL TAX TREATMENT SHORTCHANGES HIGHWAY PROGRAM
BY $1 BILLION ANNUALLY
The computations below in Table 1, based on 1998 ethanol use data
reported in the Federal Highway Administration's ``1998 Highway
Statistics Report,'' show federal tax policy toward ethanol supported
motor fuels costs the nation's highway and mass transit improvement
programs nearly $ 1.1 billion per year! To put that number in
perspective, that is approximately two-and-a-half times Oklahoma's
apportioned federal highway funds for FY 2000. It is roughly the
equivalent of federal investment in Florida's state highway program
this year.
Table 1
10 percent gasohol usage: 10,487,912,000 gallons
5.4 cents per gallon subsidy: $566,347,248
3.1 cents per gallon to the general fund: $325.125.272
Highway Trust Fund shortage: 891,472,520
Less than 3,490,851,000 gallonsage:
3.1 cents per gallon subsidy: $108,216,381
2.5 cents per gallon to the general fund: $87,271.275
Highway Trust Fund shortage: $195.487.656
Total Highway Trust Fund shortage: $1,086,960,176
The federal tax treatment of ethanol use in motor fuels amounts to
a huge division of revenue from state highway programs. By reducing the
overall income to the Highway Trust Fund, the potential annual highway
funding apportionment to all States is cut. TEA-21 protects States that
sell a high volume of gasohol from even further cuts in their state
highway apportionment through what amounts to a ``hold harmless''
provision. If that is not retained in the reauthorization of TEA-21,
these States could suffer additional large losses of federal highway
funds because their total contribution to the Highway Trust Fund will
be retarded.
This highway robbery is occurring at the same time the U.S.
Department of Transportation reports 58.7 percent of the nation's road
miles are in need of repair and 29.6 percent of the nation's bridges
are structurally deficient or functionally obsolete. The same report
finds available highway and bridge investment from all levels of
government falls short of the amount necessary to improve these
conditions by $45.3 billion each year.
Given these staggering needs, we suggest federal tax subsidies for
ethanol is poor public policy. If promotion of ethanol use in motor
vehicles is intended to provide federal support to agricultural
interests, it should be financed, like all other discretionary
agriculture programs, through the General Fund.
U.S. GAO REPORT ON ETHANOL
A 1997 U.S. General Accounting Office (GAO) report (GAO/GGD-97-41)
requested by House Ways and Means Committee Chairman Bill Archer (R-
Texas) thoroughly refuted many of the asserted air quality and energy
benefits of ethanol use. While we will not summarize the GAO report in
these comments, we would like to highlight some of its section headings
to provide an idea of the reports conclusions.
``Tax incentives for ethanol fuel are likely to have had
little effect on environmental quality.''
``Little effect likely where gasoline containing
oxygenates is not required.''
``No significant effect is likely on global environmental
quality.''
``Tax incentives for ethanol fuel are unlikely to have
significantly affected U.S. energy independence or energy security.''
The GAO report demonstrates some of the commonly alleged benefits
of ethanol environmental improvements and reduced reliance on fossil
fuels are unclear at best. The report does, however, state the ethanol
subsidy does result in positive benefits for some members of the
agriculture industry.
As this committee considers the future of ethanol and potential
substitutes for methyl tertiary butyl ether (MTBE), we strongly urge
you to review the 1997 GAO report or initiate some other neutral review
of the alleged benefits of ethanol fuel use.
TRANSPORTATION SECTOR AIR QUALITY IMPROVEMENTS
U.S. Environmental Protection Agency (EPA) data clearly show the
nation's air is much cleaner today than it was in 1970 when the
original Clean Air Act was adopted. The transportation sector has been
at the forefront of this success story.
Despite a 125 percent increase in motor vehicle travel in the U.S.
since 1970, there has been a significant reduction in every
transportation-related criteria emission. Lead emissions have been
eliminated. Motor vehicle emissions of the precursors of ground-level
ozone, volatile organic compounds (VOC) and carbon monoxide (CO), have
been reduced 58 and 40 percent, respectively. Motor vehicle particulate
matter (PM10) emissions are down 38 percent. And oxides of
nitrogen (NOx) emissions have also been reduced.
These improvements will get even better well in the future as ever
cleaner vehicles replace older, dirtier ones. The proposed Tier 2 motor
vehicle emissions standards and gasoline sulfur control requirements--
both of which ARTBA supports--will also have major, positive impacts on
air quality without reducing the mobility of the American public.
According to the U.S. Environmental Protection Agency (EPA), these
developments alone could reduce NOx emissions by nearly
800,000 tons per year by 2007 and 1.2 million tons by 2010. By 2020,
EPA projects NOx reductions double that amount-despite
increased auto usage.
Mr. Chairman, thank you for the opportunity to present these
comments and we would be pleased to respond to any questions from the
subcommittee.
__________
STATEMENT OF THE OXYGENATED FUELS ASSOCIATION
INTRODUCTION
There is understandable concern over increases in the price of
gasoline. On June 12, 2000, EPA Assistant Administrator for Air, Bob
Perciasepe, announced that, ``[t]he Clinton administration is very
concerned with the price increases of late, and we will continue our
discussions with the oil industry until prices at the pump begin to
decline to normal levels.'' Despite this great concern, the
Administration and some in Congress and in several States have recently
considered proposals to ban or limit the use of MTBE. Unfortunately,
little attention has been paid to the effects that removing MTBE from
the national gasoline supply would have on gasoline price and supply as
well as on human health and the environment, including the negative
consequence of two of the potential substitutes for MTBE, ethanol and
aromatics. The Oxygenated Fuels Association applauds the Committee's
leadership in convening the hearing on the Environmental Impacts of
Expanded Ethanol Use and is pleased to offer the following comments for
the record.
We are concerned that, in view of the current legislative impetus
to act, action to expand ethanol use in U.S. motor fuels may be
undertaken prematurely, i.e., before a thorough assessment of any
potential adverse environmental and economic impacts can be completed.
The overall evidence clearly suggests that the expanded use of ethanol
will create:
1. Overall Increased Health Risk: widespread chronic exposure to
ethanol vapors is an unknown health risk which requires further study;
2. Air Quality Risk: air quality improvements will be offset due to
increases in air toxic and evaporative emissions;
3. Water Quality Risk: hazardous aromatics are more likely to reach
water resources from a tank leaking gasoline containing ethanol than
gasoline without ethanol;
4. Economic Impact: gasoline cost and supply due to distribution
and blending characteristics particular to ethanol; and
5. Gasoline Supply: switching from MTBE to ethanol will
significantly reduce RFG supplies and, ultimately, increase prices for
the consumer.
For these reasons, OFA supports the U.S. Environmental Protection
Agency (EPA) proposal to launch a study under Section 6 of the Toxic
Substances Control Act (TSCA) to address the key questions about MTBE
and its replacements, i.e., determining whether the benefits of
continued MTBE use outweigh potential risks, considering the benefits
and risks of available alternatives such as ethanol, improving gasoline
handling practices, and improving the underground tank cleanup and
integrity program.
While this hearing provides an excellent forum to frame the issue,
OFA believes that the TSCA process is an appropriate mechanism to
resolve this complex issue of expanded ethanol use, in contrast to the
currently considered legislation. We believe the expanded use of
ethanol would be a serious public policy error from both an
environmental and an economic perspective. Certainly Congress should be
wary of mandating the expansion of a heavily subsidized substance such
as ethanol in a field devoid of competition, especially in an industry
with a single company so overwhelmingly in control over the market.
Perhaps more importantly for the purposes of this Subcommittee,
Congress should be wary of the risk of premature action resulting in a
net environmental and economic harms versus the hard-earned air quality
gains of the current reformulated gasoline program.
The purpose of these comments is to identify the known adverse
environmental and economic impacts of expanded ethanol use, and to
highlight the areas where additional study is required to ensure that
the risk of environmental backsliding is eliminated. While Congress may
not be inclined to conduct an exhaustive, full-scale cost-benefit
analysis of the risk of expanded ethanol use to health and the
environment, at a minimum it is important to engage in a balancing
analysis comparing the wide range of risks, benefits, and costs of
expanded ethanol use.
Health Risk and Benefit Evaluations
Any decision to expand reliance on ethanol to meet the nation's RFG
needs must begin with a thorough examination of its health risks and
benefits. The health risks of ethanol, as the primary active ingredient
in alcoholic beverages, are well established and recognized, including
known human carcinogenic effects, reproductive effects, and fetal
effects. In fact, beverage-grade ethanol has been listed repeatedly as
a human carcinogen by the National Institute for Environmental Health
Sciences, the International Agency for Research on Cancer, the
California Proposition 65 Committee, and the National Toxics Program.
Fuel-grade ethanol is currently blended in about 10 percent of the
RFG production, primarily in the Midwest region of the country where
refinery economics, transportation logistics, and individual State
mandates favor its use. Despite this substantial usage and in contrast
to MTBE, we simply don't have the inhalation information we need on
potential exposures, health risks and public health impacts of vehicle
emissions resulting from increased ethanol blending in gasoline. The
exposure and impacts of ethanol blending in gasoline, although not very
well understood, are casually dismissed by ethanol proponents. Before
we can assess the health risk associated with ethanol blending in
gasoline, we must obtain and evaluate inhalation toxicological data for
ethanol exposures, especially for high risk populations such as
recovering alcoholics and sensitive populations such as pregnant women
and children.
The analysis must begin with an assessment and quantification of
the air quality and other environmental effects of widespread ethanol
blending in gasoline. The comprehensive impact of changes to fuel
quality parameters and impacts on emissions as a result of increased
ethanol blending is unavoidable given ethanol's high vapor-pressure
characteristic. Both evaporative and exhaust emissions impacts should
be fully evaluated to quantify the risks to public health and then
compared to the health benefits of current reformulated gasoline
formulations. Ethanol blended gasolines are known to increase the
emissions of formaldehyde, acetaldehyde, and peroxyacyl nitrates (PAN),
which are hazardous air pollutants. The impacts to respiratory function
and other health endpoints of emissions profile changes due to
increased ethanol blending should be quantified and compared to current
MTBE-blended RFG.
The use of ethanol blends in certain RFG markets affords us the
opportunity to evaluate and compare quantitatively the performance of
ethanol-based RFG to MTBE-blended RFG and to assess the comparative
health benefits for both formulations. Furthermore, common sense should
dictate that such a comparison should be performed before the nation
commits to widescale expansion of ethanol use. We simply must
understand the health consequences of ethanol-blended gasoline exposure
to sensitive populations (e.g., young children, recovering alcoholics,
pregnant women, etc.) before proceeding with development of legislative
and/or regulatory options for ethanol.
EPA's Blue Ribbon Panel on Oxygenates in Gasoline concluded that
current ``RFG provides considerable air quality improvements and
benefits for millions of US citizens.'' The blending of MTBE to achieve
the oxygen requirement for RFG is the single most significant
modification taken by refiners to produce cleaner-burning fuel. The use
of MTBE to maintain fuel quality and achieve emissions goals resulted
in nearly 90 percent of RFG production with MTBE blending. Demonstrated
emissions benefits from RFG have achieved as much as a 50 percent
reduction in ambient benzene levels (depending on area), as much as a
33 percent reduction in volatile organic compounds (VOCs are precursors
to ozone formation), and average air toxics reductions of 32 percent
during Phase I of the RFG program. Even greater reductions are
anticipated for the Phase II program that began at the start of 2000.
In California, where overlapping federal and State fuel quality
programs achieve some of the most significant emissions reductions, the
State's Air Resources Board estimates that annual reductions in cancer
risks due to toxic air emissions are between 40 percent and 50 percent.
These improvements translate to morbidity and mortality
improvements for the current RFG program that should serve as the
standard for future formulations relying on ethanol.
Furthermore, we should look beyond the narrow definition of
benefits attributable to the ``oxygen'' content provided by ethanol or
MTBE in gasoline to evaluate the impacts of blending a specific
oxygenate in gasoline. The impact on other key gasoline blending
quality characteristics (such as low sulfur, T50 and
T90 and lack of olefins and aromatics) must be factored in
as we compare and quantify emissions effects on primary air pollutants
and air toxics for ethanol blended gasoline. The reductions in
morbidity and mortality from both the direct inhalation exposures and
the vehicle emissions exhaust for current MTBE-blended RFG should be
compared to the risks from exposures and emissions from ethanol-blended
formulations. OFA believes that, without appropriate antibacksliding
controls, the deterioration in real world air quality associated with
expanded ethanol use will be significant.
Another concern related to the increased use of ethanol is
increased acetaldehyde emissions. Acetaldehyde, classified by the EPA
as a probable carcinogen, is a common byproduct of ethanol combustion
(for comparison, EPA has not classified MTBE as a carcinogen).
According to EPA's 1990 emissions inventory, on-road vehicles were the
second largest source of acetaldehyde emissions, contributing 28,200
tons per year, or 20.48 percent of all acetaldehyde emissions. Small
non-road vehicles and equipment, such as lawn mowers and leaf blowers,
were the largest single source of acetaldehyde emissions, contributing
35,300 tons per year, or 25.69 percent of all acetaldehyde emissions.
The EPA reference concentration for acetaldehyde inhalation is
0.009 mg/m\3\, with an endpoint of olfactory epithelium degeneration.
By way of comparison, the RFC for MTBE is 3.0 mg/m\3\, based on a
concern for potential eye, liver, and kidney damage. These results
suggest that acetaldehyde may be 300 times more toxic than MTBE.
The EPA Blue Ribbon Panel reported that ``[v]ehicle exhaust
emissions data have shown that acetaldehyde . . . emissions can
increase by as much as 100 percent with the use of 2.0 wt percent
ethanol oxygenated gasoline.'' Likewise, NESCAUM concluded that
replacing MTBE fuel additive with ethanol additives would increase
acetaldehyde emissions by 50 percent to 70 percent. Acetaldehyde and
PAN are significant air toxics, and must be controlled as the EPA has
recently indicated in its urban air toxics initiative. In areas of high
ethanol usage (such as Brazil), ambient levels of acetaldehyde have
been detected at many times the reference dose for human health
impacts. This is not speculation; it is a real human health question
that must be resolved prior to substantial increases in ethanol use.
To date, we are aware of only a single study that compared actual,
tailpipe emissions of automobiles burning fuel with ethanol and MTBE.
That study reported a 159 percent increase in acetaldehyde emissions
for vehicles burning gasoline with ethanol, as compared to a similarly
situated MTBE-based fuel; all other air pollutants were comparable.\1\
This study has been cited favorably in several other recent studies.\2\
The President's National Science & Technology Council reported modeling
projections that were consistent with this data in that the modeling
projected acetaldehyde increases on the order of 40 percent per weight
oxygen.
---------------------------------------------------------------------------
\1\ Reuter et al. 1992.
\2\ Health Effects Institute 1996, p. 122; Koshland et al. 1998, p.
30; National Science & Tech. Council 1997, p. 1-11.
---------------------------------------------------------------------------
Water Quality Impacts
The revision of current RFG requirements to enhance the use of
ethanol is likely to also result in increased gasoline aromatics
content as refiners struggle to meet gasoline volume and octane
requirements without MTBE and, at least in the early stages, with
limited quantities of available ethanol. When MTBE is used, it replaces
aromatics in gasoline to meet octane requirements. Blending 11 volume
percent MTBE (2.0 wt. percent oxygen) contributes about 2.6 octane
numbers to today's gasoline, which the marketplace shows will generally
reduce the aromatic content of the gasoline by 6 to 8 volume percent.
This reduction is considerably more than explained by a simple 11
percent dilution, and is equal to about a 25 percent reduction in total
aromatics content in gasoline. Without MTBE, aromatic levels in
gasoline will increase, because all of the non-aromatic alternatives
combined provide little more than half the octane contribution of MTBE.
Ethanol at 5.7 volume percent will only provide 1.5 octane numbers to
today's gasoline pool. Other non-aromatic hydrocarbons such as
alkylates are a very inefficient means of adding octane, and 5 volume-
percent alkylate supplies only 0.3 of an octane number, which falls far
short of filling the octane gap between blending with ethanol versus
blending with MTBE.
As a result, the relative amount of aromatics released to the
environment in future gasoline releases (under enhanced ethanol use)
would be significantly higher than it is in current gasoline. This
includes aromatics with higher health risks associated with them, such
as benzene and ethylbenzene. In RFG areas where oxygen is still
required, because of their significant cost advantage, aromatics will
be used to make up much of the octane and volume gap when using 5.7
volume-percent ethanol to meet the oxygen standard. Although there is a
toxics performance standard for RFG, current actual performance using
MTBE far exceeds the standard, thus allowing more aromatics to be used.
Gasoline aromatic levels can increase by up to 20 percent, adding
another 5 percent to the gasoline pool.
The perceived benefit of reduced groundwater risk when using
ethanol in lieu of MTBE needs to be carefully reexamined. Certainly
ethanol's high biodegradability compared to other gasoline components
commonly found in ground water is highly touted. However, this
degradability also contributes to the increased spread of aromatics
from a gasoline release, because the microorganisms' preference for
ethanol delays the degradation of the aromatics. The study presented to
the Blue Ribbon Panel suggested that using ethanol can extend BTEX
plumes by up to 40 percent. This potentially increases the volumes of
water contaminated by BTEX by up to 270 percent. Thus a
biodegradability preference for ethanol, combined with up to 20 percent
higher mass of aromatics in a gasoline release, will contribute to a
wider dispersion of aromatics in groundwater and a potential increase
of exposure to aromatics in drinking water. The potential health risk
increase for increased exposure to aromatics in drinking water has not
been factored in any risk-benefit analysis of substituting/expanding
ethanol use to date.
Finally, despite the frequent mention of the need to better assess
the possible risk of increased ethanol use in gasoline to humans and
water supplies, there is seldom mention of the environmental risks to
animals, aquatic life, or other fauna or flora. Given the essentially
infinite solubility of ethanol in water, it is surprising that these
aspects of the ethanol risk assessment are hardly raised.
In short, the preconceived view seems to be that any groundwater
threat associated with ethanol is substantially lower than the
perceived ``unacceptable'' threat posed by MTBE. Despite the urgency to
address the perceived MTBE ``problem,'' Committee members should not be
willing to forego a complete fate and transport examination of the
implications of expanded ethanol use. Any legislative action considered
should not only be commensurate to the threat at hand, but also protect
against the danger of precipitating market conditions that will
ultimately expose the nation to increased, and potentially more potent,
environmental risk.
Air Quality Impacts
The statutory purpose behind the use of any oxygenate is to
maintain and improve air quality. It is not to enhance markets for any
one additive. However, converting from MTBE to ethanol would have an
adverse impact on air quality, due to the direct and indirect impacts
that fuel changes would have on primary criteria pollutants (ozone
(including precursors), particulates,etc.). Unlike aromatics, MTBE has
a favorably low distillation temperature that enhances cold engine
performance. In addition, MTBE does not have many of the drawbacks of
alcohols, such as water solubility and high blending vapor pressure.
These favorable blending characteristics of MTBE-blended fuels improve
gasoline combustion and reduce emissions from both on-road and off-road
vehicle engines. Therefore, using MTBE in gasoline enhances gasoline
octane while reducing many of the pollutants that degrade air quality.
Widespread replacement of MTBE with ethanol in gasoline would clearly
increase the risk of air quality degradation, particularly in the
absence of additional, specific fuel quality controls.
RFG regulations use both a recipe and a performance standard to
achieve targeted emissions reductions of both toxics and ozone. To
quantify performance targets, EPA chose to use Federal Test Procedure
(FTP) emissions changes that occur with changes in fuel quality. In
addition to the targeted emissions (toxics and ozone precursor VOCs and
NOx), gasoline-burning engines produce other pollutants such
as CO, particulate matter (PM), and precursors to secondary organic
aerosols (PM), the levels of which are reduced by the use of MTBE in
gasoline. An oxygen standard was included in the RFG ``recipe,'' thus
requiring the use of oxygenates in RFG. Although some believe it is
only the oxygen that provides emission reductions, it is actually the
cleaner-burning octane that provides key additional, and substantial,
emissions reductions from MTBE use. Furthermore, when that oxygen is
provided by MTBE (as it is in the overwhelming majority of today's
reformulated fuels), the level of toxics, PM, and cold-start VOC
emissions reductions is maximized, even in new-technology vehicles that
otherwise minimize the effect of the oxygen on the fuel.
Maximum toxics reduction is achieved when using RFG (at 2 weight
percent oxygen content) blended with MTBE, as indicated by EPA's
complex model. The oxygenate dilution impact would be reduced when
blending ethanol at the same gasoline oxygen content. In addition,
smaller toxics reductions would be achieved with ethanol blended
gasoline due to the higher expected gasoline aromatics content of the
ethanol-blended fuel. Maximum aromatics reduction is realized with
current RFG because the 11 volume percent MTBE it typically contains
provides more octane than would be obtained when using 5.7 volume
percent ethanol. Large aromatics reductions with MTBE have been
demonstrated in many clean fuel programs, e.g., in various winter
oxygenate programs from 1988 to 1994, as well as in the simple-model
years of the RFG program (1995 through 1997) which had no requirement
to reduce or cap total aromatics. Without MTBE, gasoline aromatic
content will increase and thus increase toxic emissions.
In addition to toxics control, the second primary goal of the
current RFG program is control of summer peak ozone levels. When adding
2 wt. percent oxygen, MTBE-blended gasoline provides the maximum
reduction in VOCs and CO, because MTBE not only provides oxygen but
also maximizes reductions in aromatics and distillation temperatures,
which combine to give the greatest reduction in exhaust VOCs and CO
emissions. By comparison, ethanol does not offer good blending
properties in gasoline; in other words, ethanol tends to generate more
volatility in hydrocarbon mixtures than is reflected in its boiling
temperature. As a result, mixing (``commingling'') an ethanol blend
with a non-ethanol blend in vehicle tanks will generate an increase in
RVP that is higher than RVP in unmixed gasolines. This RVP increase is
known to increase evaporative VOC emissions from the vehicle fleet. For
a detailed discussion on the evaporative impacts of ethanol commingling
in the marketplace, please reference the recently completed study by
Sierra Research entitled ``Potential Evaporative Emission Impacts
Associated with the Introduction of Ethanol-Gasoline Blends in
California.'' (provided in Appendix A).
Due to ethanol's high water solubility and higher volatility
properties, ethanol must be blended at the gasoline truck rack to avoid
intermixing and water contact in gasoline distribution pipelines and
terminal tanks. Thus, ethanol must be delivered to distribution
terminals by trucks, further causing increased traffic and pollution in
neighborhoods with the highest traffic pollution. For a detailed
discussion on the impacts of expanded ethanol use on the refined
product distribution system, please reference the recently completed
study by the Monitor Company entitled ``Unstudied Risks . . . Economic
Assessment of Conversion from MTBE to Ethanol in California.''
Due to ethanol's high RVP, blending ethanol in summer RFG requires
that a like amount of volatile hydrocarbon, e.g., pentanes, be removed
from the gasoline so the RVP specifications can be met. Unlike MTBE,
ethanol use during the summer thus provides little or no expansion of
gasoline production for the refiner. This lack of gasoline expansion
requires the refiner to process more crude oil and generate even
greater stationary source emissions. Most of the refineries that
produce RFG are located in the air basins of some badly polluted
cities, such as Houston, Los Angeles, San Francisco, and Philadelphia.
Furthermore, MTBE has the lowest atmospheric reactivity of the VOCs
and oxygenates found in evaporative emissions. Work by CARB and others
show that lowering the atmospheric reactivity of VOC emissions is also
important in reducing peak ozone pollution.
CARB has determined that an additional benefit of reformulated
gasolines is a reduction in the build-up of combustion chamber deposits
(CCDs) in vehicle engines. CARB documented that emission studies show
that the decrease in CCD build-up results in even lower NOx
emissions and other emissions beyond the reductions predicted by FTP-
based prediction models. These additional NOx reductions
total about 7 percent. The key gasoline property changes that reduce
CCD build-up are lower aromatic content and lower distillation
temperatures. Both of these fuel parameters would be adversely impacted
by converting from MTBE to ethanol.
While the 1990 Clean Air Act Amendments targeted only VOCs and
NOx as ozone precursors, since 1990, summertime CO emissions
have been identified as a significant contributor to peak ozone levels.
Key gasoline property changes that reduce CO emissions are (1) lowering
aromatics and (2) adding oxygen. Using MTBE instead of ethanol in RFG
will lead to the greatest CO reduction, because MTBE provides the
largest aromatic reduction at 2 wt. percent oxygen.
Although reductions in PM were not specifically targeted in the RFG
regulations, a number of studies by EPA and others show that oxygenated
gasolines reduce vehicle PM emissions by 30 percent or more. Some
studies show that gasoline engines produce a large share of the
carbonaceous portion of the PM inventory. Other studies show that
unburned aromatics from exhaust emissions are precursors of the
secondary organic aerosols that contribute to this carbonaceous PM
inventory. To the extent that MTBE's replacement with ethanol results
in lower gasoline dilution, PM in tailpipe emissions will increase as
gasoline aromatics content rises allowing more unburned aromatics in
vehicle and small engine exhaust emissions.
Besides PM reduction from vehicle tailpipes, other studies show
that the unburned aromatics in exhaust VOCs are a significant source of
precursors of secondary organic aerosols that can make up a large share
of the PM inventory. The key to reducing unburned aromatics from
vehicle and off-road engine exhaust is minimizing both the aromatic
content and the distillation temperatures of gasoline. This is better
accomplished by using 11 volume percent MTBE than 5.7 volume percent
ethanol as the source of the oxygen in RFG. Thus, carbonaceous PM
inventories will likely increase when MTBE is replaced by ethanol in
gasoline.
As described above, there are a number of emission increases
associated with the use of ethanol that will degrade air quality. This
loss in air quality must be factored into any cost-benefit analysis
associated with the contemplated expansion of fuel ethanol use.
Economic Impacts
Although the economic aspects of expanded ethanol use are not the
primary focus of this Subcommittee's review, it is important that the
economic repercussions of mandated increased reliance on fuel ethanol
be defined. These include ethanol's energy content, tax subsidy, impact
on other sectors of the economy, and socioeconomic distributional
effects associated with the income transfer that ethanol growth
entails.
For example, use of ethanol over other oxygenates, such as MTBE,
reduces RFG supplies by up to 11 percent. This ``lost'' volume further
shortens already tight gasoline supplies and, ultimately, leads to
increased prices for consumers. As a result of using ethanol as part of
the RFG program, the Chicago and Milwaukee areas are witnessing
gasoline prices surge above $2.00 per gallon. Other areas of the
country using RFG with MTBE are not seeing the same price spikes.
While ethanol proponents tout the ethanol's energy content as
``renewable,'' it is unclear that expanded ethanol use makes good
``energy sense'' when comparing the energy needed to plant, harvest,
and process corn (or other ethanol feedstocks) for ethanol production
versus the energy released when ethanol is used in automotive
applications. Several existing reports suggest that the amount of
energy released when ethanol is consumed may actually be less than that
required to produce it, depending on the particulars of ethanol
feedstock and production. While a gallon of ethanol produces 76,000
BTU, the overall energy-to-produce estimates range from 75,000 to
95,000 BTU. Since fossil energy is typically consumed to produce
ethanol, it is imperative that the Subcommittee investigate the sources
of the incremental ethanol production and the relative energy balance
associated with each.
Clearly the need to reduce the perceived risk that MTBE poses must
be balanced against the potential for increased reliance on increased
foreign fossil energy and the associated impact on the nation's energy
security. The ``renewable fuel'' concept typically advanced in support
of ethanol remains counterintuitive in that, in addition to the
petroleum needed to grow corn and distill ethanol, more conventional
gasoline is required as a percentage of reformulated gasoline when it
is blended with ethanol than when it is produced with MTBE.
The U.S. General Accounting Office (GAO), in a March 6, 1997 report
titled ``Tax Policy: Effects of the Alcohol Fuels Tax Incentive,''
suggests that the existing tax incentives for ethanol's use (discussed
in more detail later in this section) do not significantly reduce
petroleum imports and, consequently, do not appreciably contribute to
U.S. energy independence. According to the same report, oil consumption
and not oil imports create vulnerability to oil price shocks, and the
usefulness of alternatives such as ethanol during times of crisis
depends largely on whether their production can be rapidly expanded.
Currently, ethanol accounts for approximately 1 percent of the U.S.
motor vehicle fuel consumption and is thus of little consequence in
dampening oil price shock.
Even at such increased estimated ethanol consumption levels, there
would be no significant positive impact on the nation's energy security
outlook. More importantly, OFA believes that we should focus on the
relative change in the Nation's energy security posture resulting from
the replacement of MTBE by ethanol, rather than on the absolute impact
of increasing the contribution of domestic ethanol as a percentage of
the overall energy usage. It should be recalled that all MTBE reduction
and elimination scenarios are projected to yield a more fragile
marketplace in terms of overall supply and demand balance, while
restricting what has heretofore served as one of the market's most
useful pressure relief mechanisms in times of short supply.
Lastly, Congress' selection of an appropriate MTBE risk mitigation
strategy should factor in the overall domestic economic impact of
enhancing the use of higher priced oil substitutes. The U.S. economy
derives substantial benefits from free access to the international oil
markets. Low oil prices fuel economic growth, employment, and
productivity. High energy prices act as a drag on economic expansion
and fuel inflationary pressures. The U.S. cannot now, or in the
foreseeable future, meet its petroleum needs except through imports.
Federally mandated alternatives to oil imports decrease economic
efficiency and hamper free trade without contributing to U.S. energy
security.\3\
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\3\ Vito Stagliano, Resources for the Future, ``The Impact of a
Proposed EPA Rule Mandating Renewable Oxygenates for RFG: Questionable
Energy Security, Environmental & Economic Benefits'' (1994).
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OFA believes that the economic evaluation of ethanol must extend
beyond the narrow confines of motor fuel impacts. While the obvious
intent of tax incentives (such as the one enjoyed by ethanol) is to
increase farm income, it is reasonable to expect that price increases
that benefit farmers may adversely impact consumers of some food
products. Roughly 60 percent of all corn produced in the U.S. is used
domestically for feed grain. Increased corn prices lead to increases in
livestock feed price causing overhead costs to increase for many
farmers. ``The primary effect of ethanol subsidies on agricultural
markets is to allow corn farmers to charge hog farmers and cattlemen
higher prices.'' \4\
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\4\ James Bovard, Fellow, Cato Institute, ``ADM: A Case in
Corporate Welfare, Policy Analysis No. 241,'' September 26, 1995.
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Ultimately, these higher costs mean that consumers pay higher beef,
pork and poultry prices at the supermarket. If EPA's action raises the
price of corn by a mere 5 percent, the price impact on consumers would
exceed one billion dollars. Furthermore, to the extent that subsidies
are used to produce incremental quantities of industrial or beverage
ethanol, the economic impacts are decidedly unintended. That ``fits the
historical pattern of farm policy: intentionally sacrificing relatively
unsubsidized farmers to subsidized farmers and making all farm profits
and losses increasingly a question of political pull. The higher the
price of feed grain, the higher the cost of meet production. Thus
consumers get hit from all directions.'' \5\
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\5\ Id.
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A 1986 USDA study concluded that increased production of ethanol
would cost consumers and taxpayers roughly $4 for each $1 of extra farm
income. The report stated that ``increases in consumer food
expenditures caused by additional ethanol production far exceed the
increases in farm income.'' The report concluded that consumers would
be better off if they exclusively used fossil-derived gasoline for
automotive purposes and paid a direct cash subsidy to farmers equal to
the net farm income increase expected by expanded ethanol use. At a
minimum, the food price impacts of a policy decision to expand fuel
ethanol use must be understood and weighed along with the anticipated
adverse gasoline price impacts.
The ethanol industry has remained economically uncompetitive long
after the typical economic argument of an infant industry requiring
subsidies and trade protection in order to survive. In 1986, the U.S.
Department of Agriculture estimated the average cost of producing
ethanol at $1.60 a gallon, which was more than double the then-
wholesale gasoline price of approximately 60 cents. Even after the
substantial 54 cent per gallon tax incentive, ethanol remains
economically uncompetitive. Thus, MTBE reduction strategies relying
upon expanded ethanol use will increase consumer cost simply by virtue
of the fact that such strategies will replace a more affordable and
more effective pollution-fighting alternative.
Cost-to-produce impacts of gasoline blended with ethanol were
outlined earlier as part of the economic impacts of potential
strategies to reduce MTBE. Taking into consideration the terms of a
legislative mandate for ethanol use (new or existing under the CAA's
oxygen requirement), the equivalent environmental performance criteria
used, and the location of new ethanol markets vis-a-vis the traditional
Midwestern ethanol production base, expanded ethanol use could raise
gasoline production costs by more than 7 cents per gallon. This is at
equilibrium before the impact of a tighter supply and demand balance is
factored in. Short-term price impacts associated with fuel supply
shortfall could easily amplify the cost-to-produce impact by a factor
of two or three.
In the longer term, the economic impact of having Congress steer
the marketplace toward increased reliance on a single alternative may
have the exact opposite impact on energy pricing than that desired. In
view of the existing track record of government interference in this
area yielding less than optimal results, we should carefully examine
the longer-term implications of its MTBE risk mitigation action on
energy pricing to ensure that it does not yield a clear market
``winner'' at the cost of controlling consumer choice and preventing
competition in the marketplace. In addition to preserving other
alternative fuels that may exist as options, Congress should carefully
evaluate the impacts on other industries ready to compete for a segment
of the motor fuel segment on a level playing field.
Increasing ethanol's share of the nation's gasoline market as part
of any MTBE risk mitigation strategy will have the effect of
transferring income from Gulf Coast natural gas and MTBE producers to
Midwestern corn and ethanol producers. While federal obligations to
support farm prices will be reduced, the income transfer is highly
inefficient and would not principally benefit farmers of corn. Previous
studies have found that 70 percent of ethanol's production cost is
associated with post harvest costs. Moreover, public policy aimed at
income transfer should aim to keep waste or dead weight losses minimal
in relation to total income transferred. Deadweight losses in ethanol-
for-MTBE substitution scenarios are defined in terms of the cost
difference to produce the two substances. Since MTBE can be produced
for roughly 60 percent of ethanol's equivalent cost, it is estimated
that every dollar spent on ethanol delivers 30 cents of income to
farmers while adding $1.40 in dead weight loss to consumers.\6\
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\6\ David Montgomery, Charles River Associates, as quoted by Vito
Stagliano in ``The Impact of a Proposed EPA Rule Mandating Renewable
Oxygenates for RFG: Questionable Energy Security, Environmental &
Economic Benefits,'' (1994).
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Furthermore, growing ethanol use will transfer income from
Northeastern and Californian consumers of reformulated gasoline to
Midwestern corn and ethanol producers, given the location of the vast
majority of the nation's areas that violate summertime ambient ozone
standards. The socioeconomic distributional effects of any proposed
ethanol growth strategy would be inequitable as well. The higher,
federally mandated cost of RFG would affect low income consumers
disproportionately because they devote a higher percentage of their
disposal income to energy costs than do higher-income consumers.\7\
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\7\ Vito Stagliano, Resources for the Future, ``The Impact of a
Proposed EPA Rule Mandating Renewable Oxygenates for RFG: Questionable
Energy Security, Environmental & Economic Benefits,'' (1994).
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In view of ethanol's prohibitive cost to produce, a huge subsidy is
required to make its price competitive in the marketplace. The U.S.
Department of Agriculture estimates that the cost of corn will rise and
the revenue from coproducts will fall as corn ethanol production
increases over current levels. In the 1990 Amendments to the Tax Reform
Act of 1984, federal excise taxes on gasoline were set at 14.3 cents/
gallon, but fuels containing 10 percent alcohol received an exemption
of 5.4 cents/gallon. In the Energy Policy Act of 1992, the excise tax
exemption was extended to include gasoline containing less than 10
percent ethanol. The statute (and previous laws) were interpreted to
include a tax credit for producers of ETBE.
The value of this exemption translates to the current federal $0.54
per gallon tax credit given to the corn ethanol industry. In 1997, the
GAO estimated that the ethanol subsidy has cost the federal government
more than $7 billion since 1979. The current annual figure is
approximately $770 million based on an annual ethanol use of about 1.3
billion gallons. This figure could triple as annual ethanol production
grows to over three million gallons in several out-year ethanol growth
scenarios as part of replacing MTBE. In addition, seventeen states
offer fuel tax exemptions or producer subsidies for fuel ethanol
ranging from $0.10 to $0.40 per gallon.
The projected growth in the tax subsidy needed for ethanol in MTBE
replacement scenarios is in addition to the $1.9 billion that the
Governors Ethanol Coalition recently estimated would be needed to
finance the ``necessary'' expansion in ethanol capacity. In this
context, it is noted that the $400 million in loans authorized by
Congress in 1978 to finance ethanol plant construction resulted in
funding for 18 plants. By 1992, the Federal government had received
full repayment for only one of these.
Given the large differential in cost-to-produce between ethanol and
gasoline, it is obvious that the fuel ethanol industry wouldn't exist
today without the massive subsidy it receives. OFA believes that the
risk posed by MTBE does not justify the full economic burden of the
corresponding expansion in ethanol use. Once fully developed, these
economic impacts should be added to the incremental production costs
for the replacement gasoline as part of the overall assessment of
curtailing MTBE's use in the Nation's gasoline pool.
The reduction in motor-fuels excise tax revenues due to ethanol-
blended gasoline reduces funds that would otherwise have been earmarked
for the Highway Trust Fund. These funds are used to maintain and
improve the nation's bridges and roads. The potential increase in
ethanol subsidies will have a substantial adverse impact on the
nation's millions of miles of roads and highways, as well as serious
economic ramifications for specific industries involved in road
building and maintenance. The International Brotherhood of Boilermakers
has estimated that 39,000 jobs are lost as a result of foregone road
project work for each $1 billion the Trust Fund loses.\8\
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\8\ Ande Abbott, Director of Legislative Affairs, International
Brotherhood of Boilermakers, in Congressional Record August 3, 1994, at
S10453.
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A policy decision to require substantial growth in fuel ethanol use
must recognize that, even under conservative assumptions, there is
insufficient ethanol supply at present to meet the nation's
reformulated gasoline needs. California's minimum supply requirement
alone would add 350 million gallons of ethanol to the shortfall, even
if it is assumed that ethanol is blended at the minimum 2.0 weight
percent oxygen content specified in the CAA. In view of the structure
of the federal tax subsidy for ethanol blending, California's demand
could easily approach 500 million gallons. Demand projections for MTBE
replacement in the Northeast exceed those for California by
approximately 15-20 percent. Given that today's overall ethanol
production is at 1.3-1.4 billion gallons, and that this volume is
currently dedicated to markets near ethanol's Midwestern production
base, growth and redistribution of available ethanol production among
competing geographic markets remains a major economic uncertainty as
steps are considered to mitigate MTBE risk.
Alternative scenarios where California and the Northeast enter the
ethanol market must be explored and the associated ethanol price
increases must be projected for each demand scenario. The incremental
ethanol volume, timetable, and cost for expanded ethanol production
from both conventional sources (i.e., corn) and new alternative
feedstocks (i.e., biomass) should be clearly defined. Key benefits
associated with such scenarios should include potential GDP growth
associated with increased demand for corn and other grain, potential
positive impact on farm subsidies, and generation of new jobs
associated with ethanol industry expansion. In addition to the
incremental refining costs associated with converting to ethanol-
blended reformulated gasoline (outlined earlier), key costs to be
examined in this analysis should include the impact of potential
ethanol supply shortfalls on ethanol and gasoline prices as well as
logistical costs associated with transporting ethanol and retrofitting
the gasoline distribution system to accommodate ethanol-blended fuels.
Recent analyses by the Monitor Company examining the overall impact
of California's anticipated conversion to ethanol following that
State's ban on MTBE after
1/1/2003 indicate that significant price increases will be likely in
order to facilitate supply demand balancing in the three years
following the MTBE phase-out. Although there is potential for
redirection of ethanol from other markets/uses, redirection will
necessitate price increases. Furthermore, while it is possible that new
ethanol plants will be built, it is not clear whether timely capacity
additions will be realized. At a minimum, to attract ethanol barrels to
California (and the Northeast) where they will likely be required to
produce reformulated gasoline, prices will need to rise sufficiently to
overcome local State incentives in today's ethanol home markets.
Insufficient ethanol supply will ultimately result in pressure on
overall reformulated gasoline inventories, reducing them in the case of
California from a 6-7 month reserve to a 1-2 month reserve.
Because of its high affinity for water, ethanol cannot be
transported by pipeline, except through dedicated systems. As a result,
it cannot be blended into gasoline at the refinery and must be blended
at the terminals prior to shipment to retail stations. Given the nature
of the nation's pipelines through which fungible multiple products are
transported, ethanol is projected to move by truck or rail to the
distribution terminals. This substantially increases the delivered cost
since truck, rail, and marine transport are substantially more
expensive than pipeline transport. Price increases associated with
additional market demand will be compounded by the cost of transporting
ethanol to these areas by truck or rail.
Large scale distribution terminal facility upgrades will also be
required for any gasoline market converting to ethanol. These may
include upgrades to a terminal's rail facilities to handle the
increased traffic or the addition of new rail connection for terminals
that were not previously equipped to receive railcars. Additional tank
facilities will be needed for ethanol storage at the terminals and
modification/expansion of terminal loading and unloading facilities are
likely. Finally additional blending controls and instrumentation may be
needed at the terminals as well filtration equipment to both the
terminals and retail stations to dewater ethanol and ethanol-blended
gasoline. The Monitor Company's estimate of total cost associated with
such modifications for California was $60 million.
In addition significant costs will be added in distribution and
retrofitting terminals to enable widespread ethanol blending. In
California's case, the Monitor study identified interstate costs (in
marine and rail facilities required to move ethanol from the Midwest)
and intrastate costs (inrail and truck distribution facilities from in-
state marine terminals and intermodal transfer facilities) amounting to
$28 million. These capital facility recovery costs will be incurred in
addition to the more than 10 cents a gallon of ethanol in
transportation cost to marine and rail operators to deliver ethanol to
the State.
We appreciate the opportunity to submit these comments and look
forward to working with Members of the Committee on this important
issue.