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Bush proposes easing ethanol blending requirements

Buried in President Bush's speech on energy prices Tuesday is a proposal to allow gasoline blenders to avoid using ethanol this summer to meet clean air requirements.

Bush made that announcement in Washington at a meeting of the Renewable Fuels Association, a trade group representing the ethanol industry. The reaction was mixed.

"There's been some rumblings. Let's just say that. People were scratching their heads and asking, 'Did the President really say that," Brian Jennings, executive director of the American Coalition for Ethanol, told Agriculture Online.

This spring ethanol is replacing MTBE as an octane booster in metropolitan fuel markets in Texas and the Northeast. Spot shortages have been reported and blamed for driving up fuel costs.

According to a White House transcript, Bush told the audience of ethanol supporters, "Now, as you well know, this year we're going -- undergoing a rapid transition in the primary ingredient in reformulated gas -- from MTBE to ethanol. And I appreciate the role the ethanol producers are playing to meet this challenge. You're playing a vital role.

"Yet state and local officials in some parts of our country worry about supply disruption for the short term. They worry about the sudden change from MTBE to ethanol -- the ethanol producers won't be able to meet the demand. And that's causing the price of gasoline to go up some amount in their jurisdictions.

"And some have contacted us to determine whether or not they can ask the EPA to waive local fuel requirements on a temporary basis. And I think it makes sense that they should be allowed to."

Jennings said later that he things the industry is doing a good job of moving ethanol into new markets and that he doubts a waiver would do much to lower fuel prices for consumers.

"If you say don't use ethanol, you're reducing the fuel supply, which would exacerbate problems at the pump," he told Agriculture Online. "It's a disappointment and I think it would be a step backwards for the policy of this country."

In a statement released earlier this month, Renewable Fuels Association President Bob Dinneen said that Department of Energy estimates placed more than three-fourths of the blame for rising gasoline prices on global oil supplies and "just a few pennies" on any shortages of ethanol.

"Were it not for the tremendous growth of the U.S. ethanol industry and the availability of ethanol, refiners' decisions to eliminate MTBE this spring would send gas prices through the roof," Dinneen said. "Compared to other octane enhancers, ethanol remains the most viable and economic choice."

Other reaction to Bush's announcement was also mixed.

Senator Tim Johnson (D-SD) said Wednesday that it's not true that ethanol is to blame for high fuel prices. Blaming ethanol, he said, "is a smokescreen by big oil to take attention away from their record profits."

But Johnson didn't criticize the President's move to allow temporary waivers from Clean Air Act requirements for fuel. Nor does he think it would hurt the ethanol industry. "The waiver is going to be temporary," he said. "I remain bullish on the ethanol industry."

Senator Tom Harkin (D-IA) disagreed with the wisdom of allowing waivers.

"Someone's giving him [the President] bad information," Harkin said. "The truth is it's adding to the oil supply."

Some areas have reported difficulty getting enough ethanol to replace MTBE. Transportation may have more to do with that.

Fred Bosselman, Jr., of Grand Island, Nebraska, is an owner of the regional Bosselman truck stop chain as well as a smaller chain of convenience stores that sell gasoline and, in some locations, E-85 (85% ethanol and 15% gasoline).

For his own E-85 business, Bosselman buys from local Nebraska ethanol plants. He also had gotten into the business of hauling ethanol by truck from plants in the Midwest to metropolitan markets like Denver and Dallas.

Bosselman says trucking ethanol to Dallas and Houston isn't very cost efficient, but right now there isn't any other way to get the fuel to gasoline terminals where ethanol is blended.

"Those terminals in Houston and Dallas don't have rail service yet," Bosselman said. It may be the end of the year before gasoline blenders can have ethanol shipped by rail. The cost of trucking from the Midwest to Dallas might add 30 cents a gallon to the cost of the ethanol, and rail transportation might be half of that, he said.

The shift from using MTBE to ethanol in gasoline blends has been too fast for the fuel industry to keep up, he said. "I think it was a little drastic change. I don't think the industry was ready."

Buried in President Bush's speech on energy prices Tuesday is a proposal to allow gasoline blenders to avoid using ethanol this summer to meet clean air requirements.

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