Ethanol May Help Fill the Void, NCGA Notes (3-30-06)

As the U.S. gasoline industry continues to phase out methyl tertiary butyl ether (MTBE) from the nation’s fuel supply, the National Corn Growers Association (NCGA) points out that ethanol will continue to fill the increasing volume void created by MTBE elimination.

When Congress passed the Renewable Fuels Standard last year as part of the Energy Policy Act of 2005, it did not provide liability protection for refiners and producers of MTBE.

NCGA notes that, in most cases, ethanol will play an important role in filling the volume shortages caused by the MTBE phase-out. Ethanol has been blended into the nation’s gasoline supply for decades. In fact, more than 30 percent of the nation’s fuel is blended with ethanol.

“As the petroleum industry takes volume out of the market with the removal of MTBE, consumers may see rises at the pump,” said Gerald Tumbleson NCGA president. “With the ethanol industry’s continued rapid growth, ethanol will fill the need for more volume. The industry will have the capacity to produce nearly 6 billion gallons by the end of 2006.”

According to the Energy Information Agency (EIA), the U.S. ethanol industry set a new monthly production record of 288,000 barrels per day (b/d) in January. This production level for January, the EIA said, represents an 8,000 b/d increase over December 2005 and a 47,000 b/d increase from one year ago.

Meanwhile, at a hearing Wednesday before the Senate Environment and Public Works Committee, the effects of the MTBE phase out were discussed, as well as short-term solutions to continuing gas price increases and fuel shortages that might occur this summer. The hearing focused on an EIA report released in February, which warned that the phase out could lead to regional gasoline price spikes and supply shortages.

Bob Dinneen, Renewable Fuels Association president, testified at the hearing and assured committee members that there is--and will be--enough corn-based ethanol to supply the needs of motorists this year. According to RFA, there are 97 ethanol plants operating today and 33 plants under construction. In 2000, there were only 54 ethanol plants producing 1.75 billion gallons. In 2005, that number had more than doubled to 4 billion gallons.

Tumbleson said, “Ethanol is an integral part of the energy marketplace and as the industry continues to move forward, consumers will reap the benefits of reduced U.S. dependency on foreign oil, improved air quality and a reinvigorated rural America.”