Governor, Others Push to Cut Ethanol and Boost State's Supply; Feds Could Resist
A battle is under way between Environmental Protection Agency scientists and state officials over California's gasoline.
In the balance: whether California gets a waiver it has been seeking from federal clean-air regulations that could reduce the amount of ethanol required in gasoline and thereby boost supplies in the state.
"If it can be shown that ethanol is creating another air quality issue, then the EPA can grant a waiver," said EPA spokesman John Millett, who described the data being analyzed by engineers and scientists as "painstaking and technical."
State officials have argued for the past five years that the volatility of ethanol, a fuel blend made from corn that evaporates easily, contributes to smog by increasing ozone levels and adding particulates to the air.
EPA officials aren't convinced.
They still are in the process of analyzing data that traces ozone and
particle levels in the most polluted areas of the state.
Lisa Fasano, a spokeswoman in the EPA's regional office in San Francisco, said field agents still are collecting air quality data from state officials.
As it is, the federal mandate requires the state's 13 refineries to blend a 2% oxygenate, such as ethanol, with gasoline.
Refiners had been using MTBE, another oxygenate, until former Gov. Gray Davis banned it for contaminating groundwater. It was phased out in January.
Behind Gas Run-up?
Some energy experts believe the MTBE phase-out contributed to this year's
run-up in gasoline prices. That's because California refiners created a
boutique blend of gasoline that used 12% of MTBE for every gallon of gas.
The switch to ethanol has reduced gasoline supplies, forcing refiners to find other blends or more gasoline to add to the complex mix.
The January switch added to a gasoline shortfall of roughly 60,000 barrels a day, about that produced by a small refinery.
California uses more than 1 million barrels of gasoline per day.
"Without ethanol, it would make it easier for refiners to make their own cleaner-burning gasoline and to get more supply," said David Hackett, president of Stillwater Associates, an energy consultant based in Irvine.
State energy officials describe the process of gaining a waiver as an uphill battle fraught with political wrangling by interest groups.
"We've submitted a truckload of data," said Jerry Martin, a spokesman for the California Air Resources Board, an arm of the California Environmental Protection Agency. "The question is whether the use of ethanol has the potential for increasing ozone. We have stood firmly in our analysis that ethanol clearly creates more ozone-forming emissions that lead to more particulate matter in the air."
Even if an oxygenate waiver were approved, the change would not come fast enough to lower gasoline prices this summer.
The EPA has set no timetable for determining whether California receives a waiver of the 2% oxygenate requirement.
Governor's Request
Gov. Arnold Schwarzenegger has sent two letters, one in January and another
in April, to EPA head Mike Leavitt asking for a waiver from the oxygenate
mandate.
Those requests are being reviewed apart from the scientific studies by EPA officials.
The EPA was forced to re-examine the issue last year when the U.S. Ninth Circuit Court of Appeals vacated a 2001 decision by the EPA to deny a waiver.
Davis had sued the agency, claiming it violated the Clear Air Act by refusing to consider the effect on particulate matter pollution as well as ozone levels.
Hackett cautioned that the EPA likely would be sued by a variety of groups, including the ethanol industry and farmers, if it grants the waiver.
"I just don't think California is going to get a waiver," he said. "It ain't going to happen."
Berry is a staff writer with the Los Angeles Business Journal.