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The anti-oil revolution brewing in Omaha

You've heard of the Boston Tea Party -- the colonial protest against a British tea tax that helped build support for the American war for independence.

Then there's the Omaha Ethanol Party.

Standing before hundreds of members of the American Coalition for Ethanol at their annual conference in Omaha, Nebraska Wednesday, the group's vice president for marketing, Ron Lamberty almost defied the Environmental Protection Agency to arrest him.

"I have more than 10% ethanol in my non-flex fuel vehicle today," Lamberty announced. He asked if anyone else in the room does, and more than a dozen stood up.

For several years, members of ACE have been promoting blender pumps at gas stations as a way of selling more ethanol in the Midwest, where the fuel is abundant and cheaper than on the East and West Coasts. The pumps blend unleaded gasoline and E-85 (85% ethanol gasoline) to allow drivers to also choose E-10, E-20 and E-30, blends of gasoline with 10%, 20% and 30% ethanol.

ACE has paid for tests that show that some cars perform as well, or even slightly better, on E-20 and E-30, than on unleaded gas.

But so far, the Environmental Protection Agency has approved only E-10 for conventional vehicles. Where blender pumps have been installed, they warn motorists that higher levels can be used only in flexible fuel vehicles designed to burn up to 85% ethanol.

It's been a tough year psychologically for members of ACE, a group that represents mostly ethanol plants owned by farmers and local investors in the nation's heartland. Not only has ethanol been blamed for the disappearance of the Amazon rainforest and the high price of popcorn in movie theaters, it's "the cause of John Edwards' infidelity," joked Rick Tolman, CEO of the National Corn Growers Association, who also spoke to the group.

So it's not surprising that Lamberty could inspire some open rebellion against EPA rules at a meeting whose theme is "fueling revolution."

To the leaders of ACE, the bad press and Texas Governor Rick Perry's failed effort to get a government mandate for ethanol use cut in half are just evidence that the oil industry is fighting back against the small but growing share of the market taken by corn-based ethanol.

In 2007, "For the first time in 30 years, we imported less oil in the United States than in the previous year," Lamberty said. "It's no coincidence that the organized attacks against ethanol began to intensify last year."

And, as Brian Jennings, the Executive Vice President of ACE put it, "Big Oil is joined by the food companies who desperately want to cling to the cheap corn they feel they're entitled to."

Meanwhile, the ethanol industry continues to grow, in spite of corn prices so high earlier this summer that the opening of several large ethanol plants was delayed.

Jeff Broin, CEO of POET, one of the nation's largest ethanol producers, told Agriculture Online earlier Wednesday that he sees the next challenge for his industry to be the "blend wall." Sometime next year, the industry could hit a production level that would meet demand for E-10 in most of the country, Broin said.

Replacing 10% of the nation's annual use of about 140 billion gallons of gasoline would require 14 billion gallons. When plants currently under construction are completed, most observers of the industry expect capacity to stabilize at about 13 billion gallons, But not every place in the U.S. is likely to sell E-10, ACE's Jennings told Agriculture Online. So that 13 billion gallons of ethanol plant capacity may be the market for ethanol, unless federal regulators allow motorists to burn more than 10% ethanol. In Brazil, gasoline is sold with blends between about 20% and 25%.

In the U.S. higher consumption of ethanol has been promoted by auto makers and some in the ethanol industry through sales of E-85.

But that approach has drawbacks for gasoline retailers, Lamberty told ethanol plant representatives at a workshop earlier on Wednesday.

The cost of putting in a separate tank, pump and island for E-85 at a gas station can run from $30,000 to as much as $100,000. Today, only about three percent of the cars and trucks on the road are flexible fuel vehicles designed to burn E-85.

"You have three percent of your customers who have to pay for that pump," Lamberty said. For most gas stations, that's not going to pencil out.

But blender pumps can serve all of a gas station's customers and they typically cost $10,000 to $15,000, Lamberty said.

The need for blender pumps will become even greater if cellulosic ethanol becomes a reality and helps meet the 2007 energy bill's requirement to eventually put 36 billion gallons of ethanol into the nation's fuel supply.

ACE's Jennings later told Agriculture Online that widespread use of midlevel ethanol blends sold through blender pumps face two practical hurdles. The first is conducting more tests that will show EPA that higher levels of ethanol burning in conventional cars won’t create harmful emissions that would violate the Clean Air Act.

"E-20 is going to run in automobiles, we know that," Jennings said.

Also, legislation may be needed to ensure that tax breaks for gas stations putting in E-85 pumps would also apply to blender pumps. And there may be a need for laws or regulations that clarify how retailers could benefit from tax credits for blending ethanol, a benefit that now goes mainly to oil companies as an incentive to use the renewable fuel.

"Ethanol advocates need to recognize that there’s a cost to retailers" for installing blender pumps, Jennings said.

Before all that happens, though, don't be surprised to see ACE members, and other consumers, sneaking up to blender pumps in the night, and filling nonflexible cars with E-20 or E-30.

To the members of ACE, the blender pump is a key weapon in their battle for independence from imported oil.

As Jennings told the group Wednesday, "We simply cannot make the quantum leap from E-10 to E-85 without mid-level blends."

Jennings drew applause when he said, "We have fueled a revolution to make gasoline the alternative fuel."

You've heard of the Boston Tea Party -- the colonial protest against a British tea tax that helped build support for the American war for independence.

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