Calif. air ruling spurs ethanol market

Calif. air ruling spurs ethanol market

	Published : Sat, 16 Jun 2007 01:09 By : Agencies Print this Story

FRESNO, Calif. (AP) - Gasoline sold in the Golden State will include up to 10 percent ethanol, California air managers decided Thursday, a move the renewable fuels industry says will shift the burgeoning ethanol market into high gear.

All California refineries making gas sold in the state will have to blend 10 percent ethanol into their gas to meet new fuel standards set by Gov. Arnold Schwarzenegger starting Dec. 31, 2009, under the resolution adopted by the California Air Resources Board.

Industry groups said the ruling will almost double demand for the biofuel in California, which last year used about 1 billion gallons of ethanol, or nearly one-fifth of the total consumed nationwide.

'It's just another shot of Geritol in the arms of the ever-expanding U.S. ethanol industry,' said Bruce Scherr, CEO of Informa Economics Inc., a Memphis-based consulting firm specializing in renewable fuels. 'Once the markets start to fall in line like this, it shows the demand is there and is growing.'

A handful of other states -- including Connecticut, Minnesota and Hawaii -- have mandates for the use of 10 percent ethanol, or E-10, according to the Renewable Fuels Association.

A surge in demand will be created as large states like California, Texas and New York roll out legislation forcing gas stations to sell a more environmentally friendly mix, analysts said. That growth is aided by the Energy Policy Act of 2005, which gives small refiners a federal tax credit for using the biofuel.

Blending more ethanol into gasoline will improve air quality in California and reduce dependency on foreign oil, Schwarzenegger said.

'While many alternative fuels exist in the market, ethanol is one that can be blended into today's gasoline with no change to our current cars,' Schwarzenegger said. 'It is critical that government continue reducing barriers so that alternative fuels can increasingly penetrate our transportation fuels markets.'

If refineries still can't meet clean air standards with 10 percent ethanol in their fuel mix, they can reduce emissions from other sources by donating money to programs that take polluting vehicles off the road, among other alternatives, said board spokesman Dimitri Stanich.

Ethanol, also known as alcohol, is produced mainly from corn in the U.S.

Demand for ethanol is enticing some farmers to grow corn rather than other crops and has already has pushed feed prices higher. Officials at Cargill Inc., a leading ethanol producer, have said recently the ethanol's industry demand for corn could raise prices for all kinds of foods.

Many environmental groups support the increased use of ethanol in gasoline because it lowers greenhouse gas emissions, but prefer a more advanced way to produce the fuel out of the cellulose in plant materials like leaves and stalks, rather than corn.

Others say the high energy cost of making ethanol, coupled with the degraded land and polluted water from heavily fertilized fields, make its value as a biofuel questionable.

The resolution does not address what kind of ethanol could be used.

'This is good news, but we need to continue to invest in the next generation of advanced biofuels,' said Luke Tonachel, a vehicles and fuels analyst with the Natural Resources Defense Council.