RFA Outlines Ethanol's Capacity to Meet Demand

June 25, 2001

Appearing before the Senate Energy and Natural Resources Committee, Renewable Fuels Association (RFA) Vice President Bob Dinneen last week outlined the ethanol industry's ability to meet California's oxygenate demand when the state bans the use of MTBE in 2003.

"The ethanol industry is ready to meet California's oxygenate demand in 2003," said Dinneen. "In addition to the over 2 billion gallons of current production capacity, 34 existing ethanol plants are undergoing expansion and eleven new plants are under construction. As a result, the ethanol industry expects to have an additional 300 million gallons of production capacity on line by the end of this year alone. The denial of the California waiver will allow many proposed ethanol plants to move forward as well."

Dinneen also sought to allay concerns about the industry's ability to transport the necessary 600 million gallons of ethanol to California. "Given that it takes only half as much ethanol compared to MTBE to meet the oxygen standard, ethanol storage and transportation are non-issues," said Dinneen. "California currently imports over 90% of their MTBE. And because there are no pipelines providing petroleum products to the state, all the MTBE is delivered by water. Ethanol will be shipped in the same manner, but also by rail. Only moving half as much product will reduce overall transportation costs and provide logistical flexibility the MTBE industry never had."

The use of oxygenates in California's federal reformulated gasoline (RFG) was upheld last week by the Environmental Protection Agency. That decision upholding the clean air benefits of ethanol undermines attempts to eliminate the oxygenate standard in an effort to reduce the number of boutique fuels. "The Administration is to be commended for deciding this issue on the basis of the law and science, and not bending to the political pressure of California and the petroleum industry that sought a waiver," said Dinneen.

Dinneen also noted the fundamental problem with gasoline markets is a chronic lack of refining capacity. "No new refineries have been built in 25 years," said Dinneen. "During the same time, 56 bio-refineries were built and more are on the way. Blending ethanol reduces the demand for crude oil and increases gasoline supply for a given refining capacity. In the near term, ethanol supply is important as the nation attempts to address these soaring gasoline prices.

"In the long term, as the United States develops a more responsible and proactive energy policy, ethanol offers the promise of a stable, renewable, domestic energy supply. To greatly increase the supply of ethanol, there needs to be some market certainty."