E-mail this article to
yourself or a friend.
Enter address:


US Senate votes in favor of renewable auto fuels mandate

(Wednesday, June 4, 2003 -- CropChoice news) --DowJones:The U.S. Senate on Tuesday showed anticipated support for a proposal that would nearly double by 2012 the market for corn-derived ethanol as an additive in the U.S. gasoline market.

Lawmakers voted against measures to scale back an energy-bill amendment proposed by Senate Majority Leader Bill Frist, R-Tenn., and Minority Leader Tom Daschle, D-S.D. The amendment would phase in by 2012 a requirement refiners use 5 billion gallons annually of renewable components such as ethanol in their gasoline.

Five billion gallons is about 3.6% of the current U.S. gasoline market, which would likely grow before the program takes full effect. From 2013 on, the volume of the mandate would change to maintain its percentage market share in 2012.

The proposal, which the Senate approved in a similar form last year, has faced fierce resistance from lawmakers from California, New York and some other states who worry it will cause price spikes and play into the hands of ethanol-market giant Archer Daniels Midland (ADM). But the plan has support from the White House, farmers and most of the oil industry.

The Senate rejected two proposals from Sen. Dianne Feinstein, D-Calif., one that would have let federal regulators suspend the renewable fuels mandate to avoid environmental or economic damage, and another that would have imposed the mandate only on states whose governors say they want it.

Feinstein said the program is "flawed and potentially dangerous public policy," citing gasoline supply shortages in recent years and ADM's dominant 46% market share of U.S. ethanol production capacity. She was joined by free-market advocates such as Sen. John Sununu, R-N.H., who said the proposed mandate and an existing tax credit for ethanol production amount to excessive government support.

But advocates of the mandate say it will help limit oil imports and support farmers, and that it provides flexibility by letting refiners sell and buy credits for the standard and by letting states seek waivers for their refineries in the event of emergencies.

A report released Tuesday by the National Corn Growers Association projects the renewable fuels mandate would reduce the retail price of conventional regular gasoline 5% from 2002 levels, amounting to annual savings of $3.3 billion. The report says higher grain prices associated with the mandate would also reduce price-triggered government aid to farmers by more than $1 billion annually.

The renewable fuels mandate has gained wide support partly because it is combined with a rewriting of the Clean Air Act that would remove a requirement for oxygenate additives in cleaner-burning reformulated gasoline, which accounts for about a third of the U.S. gasoline market.

Refiners say clean air goals can be met without the oxygenate-additive mandate, and many others want the requirement repealed out of concern about groundwater contamination by the most common oxygenate, methyl tertiary butyl ether, or MTBE.

The Frist-Daschle amendment would phase out use of petroleum-derived MTBE over four years and assist MTBE producers switching to other products.

The House version of the energy bill passed in April would phase in the 5-billion-gallon renewable fuels mandate more slowly during the 2005-15 period, while also removing the oxygenate requirement for reformulated gasoline. Senate leaders are trying to finish their version of the bill as soon as mid-June.

The House and Senate versions are likely to differ on liability protections for fuel additives. The House bill provides liability protections against "defective product" lawsuits for both MTBE and renewable fuel additives, while the Senate proposal would only give protection for renewable additives.

-By Campion Walsh, Dow Jones Newswires; 202/862-9291; campion.walsh@dowjones.com