From: H. Josef Hebert, Associated Press
Published June 16, 2005 12:00 AM

Senate Approves Ethanol Mandate for Gasoline as Part of Energy Bill

WASHINGTON — The Senate on Wednesday endorsed a broad expansion of the use of ethanol in gasoline, despite claims by opponents that it would force up gasoline prices outside the Farm Belt and reduce fuel economy.


A provision that requires refineries across the country to use a total of 8 billion gallons of ethanol a year -- double today's production -- beginning in 2012 was approved 70-26 and put into a wide-ranging energy bill the Senate is expected to complete in the next two weeks.


An attempt by Sen. Charles Schumer, D-N.Y., to strip away the provision failed, 69-28. Schumer called the requirement to use ethanol in gasoline nationwide "nothing less than an ethanol tax levied on every driver" and a "boondoggle" to benefit farmers at the expense of motorists.


Opponents, mainly from the West and Northeast, said ethanol should not be required in states where it is not needed to reduce air pollution and is not readily available. Most ethanol is produced in the Midwest.


Supporters of the measure said ethanol -- made almost exclusively from corn -- is a way to reduce demand for foreign oil and boost U.S. energy security.


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"We must take steps to reduce our dependence on foreign countries," said Majority Leader Bill Frist, R-Tenn. Farm-state senators -- both Democrats and Republicans -- said ethanol-blended gasoline would allow homegrown energy to replace some imported crude oil.


The ethanol industry claims that 8 billion gallons of ethanol -- used at up to a 10 percent blend -- would allow refiners to use 2 billion barrels less crude oil per year. That assertion has been challenged by the oil industry, which has said use of ethanol would have a negligible impact on oil imports.


President Bush said in a speech Wednesday, "It makes sense to promote ethanol as an alternative to foreign sources of oil." He reiterated his call for Congress to send him an energy bill by Aug. 1.


Dianne Feinstein, D-Calif., said the ethanol mandate would mean refiners in her state would be forced to use ethanol or purchase costly credits under a credit-trading system. "Either choice will mean California consumers pay more at the pump," she said.


Feinstein also disputed claims that ethanol would reduce oil imports. Because ethanol has a lower energy content than gasoline, more blended gasoline will be needed to travel the same distances, resulting in an estimated 3 percent reduction in fuel economy, she said.


Ethanol receives a 51 cent-a-gallon tax credit, so a doubling of ethanol use also would result in lost revenue for the government, added Feinstein.


The ethanol industry is expected to produce about 4 billion gallons of corn-based ethanol this year, or about 3 percent of gasoline by volume.


The price impact of ethanol at the pump is unclear. The Environmental Protection Agency estimates the added cost could be as much as 4 to 8 cents a gallon, a figure disputed by the ethanol industry.


The price of ethanol has declined over the past six months, causing downward pressure on gasoline prices, Sen. Ben Nelson, D-Neb., argued in support of the ethanol mandate. The Renewable Fuels Association, which represents ethanol producers, says ethanol-blended gas has been cheaper than or comparable to other gasoline in California and New York. In those states, more ethanol has been use since another additive, MTBE, was banned beginning in 2004.


Source: Associated Press


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