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Ethanol Outlook

Outlook for Ethanol Industry Bright Despite New EPA Rules.
USA Today Febuary2006

OMAHA (AP) — The ethanol industry won't be affected by the federal decision to drop the requirement for fuel in polluted areas to include an oxygenate such as ethanol or MTBE. That's because last year's energy bill created a new requirement for refiners to use more renewable fuels, said Todd Sneller, administrator of Nebraska's Ethanol Board.

In 2006, 4 billion gallons of renewable fuels must be used nationwide, and that requirement increases annually to 7.5 billion gallons in 2012. So Sneller said demand for ethanol should remain strong. "It'll just be a different mechanism that drives that use."

The change by the Environmental Protection Agency will give the petroleum industry more flexibility in deciding how it will meet clean air standards and in how and where it will use renewable fuels. Ethanol producers can be assured that demand for their product will grow along with the federal requirements. Sneller said the ethanol industry nationwide currently produces about 4 billion gallons of the fuel made from corn and other agricultural products, and more plants are being built. "There's a real strong demand for ethanol right now."

"In Nebraska, 12 plants produce almost 600 million gallons now, he said. Six ethanol plants are under construction in the state, and about 24 others are on the drawing board. On Wednesday the EPA announced new rules that eliminate the mandate from the 1990 Clean Air Act that gasoline used in metropolitan areas with the worst smog contain 2% oxygen by weight. The law did not say which oxygenate must be used, but most refiners use either ethanol or methyl tertiary butyl ether, known as MTBE.

Parts of more than a dozen states fall under the 2% oxygenate requirement, according to the EPA, while others use oxygenates voluntarily. Nationwide, about 30% of gasoline contains oxygenates. The petroleum industry successfully argued that ethanol and MTBE could effectively be replaced with other additives such as alkylates, synthetic oils, isooctanes, and high-octane gasolines while still meeting clean air standards. But oxygenates can still be used.

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