The U.S. Ninth Circuit Court of Appeals has told the Environmental Protection Agency to reconsider its denial of California's request to waive a federal mandate to add ethanol to gasoline to fight air pollution.

California contends its refineries can make clean-burning gasoline without oxygenates such as ethanol or MTBE. In fact, California's Sen. Diane Feinstein contends ethanol's volatility may be the cause for increasing smog levels in Southern California since the waiver was denied and more ethanol was added to the state's gasoline supply.

However, the director of the Renewable Energy Action Project contends it was the weather and not ethanol that was the cause of a sharp increase in Southern California smog levels this year.

The court ruling and Feinstein's call for a study of ethanol's impact on smog set off more volleys between Feinstein and others in California and Midwest corn interest over whether Californians should be required to burn ethanol made from corn in their cars and light trucks.

The Bush administration cited the Clean Air Act in rejecting California's request for an oxygenate waiver in June 2001. The most liberal appeals court in the nation said recently it was the Bush administration that violated the clean air act when “the EPA abused its discretion by refusing to evaluate the effect that an oxygen waiver would have on California's efforts to comply. We accordingly remand this case to the EPA with instructions to give full consideration to the effect of a waiver on both the ozone and pollutant standards.”

Called heartening

Feinstein said it is “heartening” for the court to make the EPA reconsider its denial of California's requested waiver from requirements that call for 2 percent of its reformulated gasoline to include an oxygenate. Since MTBE is soon to be banned, the only viable oxygenate is ethanol.

California produces only miniscule amounts of ethanol. There have been propositions to increase ethanol production from non-corn byproducts in the wake of the EPA denial of the California's waiver, but to date the majority of California's ethanol supplies continue to be imported, mostly from corn producing Midwestern states.

California farmers generally favor ethanol production because it would reduce Midwest corn supplies and bolster prices for California corn and other commodities that compete with corn. However, California fuel prices are among the highest in the nation and anything to cause them to go higher is not popular.

An EPA reversal to approve the California waiver request would be a setback to the ethanol/renewable fuel industry since California represents the biggest ethanol market in the nation.

However, the National Corn Growers Association says the court ruling by the San Francisco court of appeals substantiating EPA's actions supporting ethanol is not a setback for renewable fuels.

Decision reaffirmation

“While some may see this decision as a loss for ethanol, in reality, the EPA's original decision was reaffirmed,” said Jon Doggett, the NCGA's vice president of public policy. “The court said EPA should also have looked at the impact on national ambient air quality standards. We are comfortable with the issues being remanded back to EPA. We are on the verge of obtaining a national renewable fuels standard, and we don't view this as a setback.

“The ruling furthers the ethanol industry's ability to move into a new market without disruption of supply,” says Doggett. “It will also provide for a healthier environment in California.”

Not necessarily, according to Feinstein who said the waiver denial not only sent pump prices skyrocketing to record levels it also worsened air quality as California refineries transition to ethanol from MTBE. MTBE will be banned after June 1 next year because it has been found in groundwater.

Ethanol is now blended into almost 70 percent of California's gasoline supply and the “transition continues without significant problems,” according to the Renewable Fuels Association (RFA).

A study earlier this year by the California Energy Commission said unexpected refinery outages and longer than expected refinery maintenance — both unrelated to the switch to ethanol — combined with tight gasoline supplies and high world crude oil prices to produce record high retail gasoline prices in California. RFA says the cost of ethanol had nothing to do with record prices averaging more than $2 per gallon.

Price down, but…

California gasoline prices have declined from an average of $2.15 per gallon in March to about $1.75 in July. However, that is still 23 cents higher than the national average. Most of that is added California taxes.

Recently, Feinstein asked the EPA and the California Air Resources Board to investigate the impact of ethanol-blended gasoline on California's air quality.

She said air quality in the South Coast Air Quality Management Zone has gotten worse this year compared to last and “the switch to ethanol-blended gasoline is considered one of the main culprits in increased ozone.”

So far this summer, she said the district has already experienced 35 days above the federal ozone standard in 2003.

“This is worrisome because there were only 21 days exceeding the federal ozone standard in 2002. So far in 2003 the maximum ozone measured was 216 parts per billion (ppb) while in 2002 the maximum was 169 ppb. Moreover, for the first time in five years, Southern California experienced a Stage 1 smog alert on Friday June 11, 2003.”

“Since ethanol's volatility increases smog, particularly in the summer, I believe we need to look carefully at its impact on air quality,” said the senator.

The issue has already been addressed, according to Brooke Coleman, director of the Renewal Energy Action Project, a national coalition of environmentalists, private foundations, government agencies and renewable energy advocates.

‘Way off base’

In a sharply worded response to Feinstein's anti-ethanol comments, Coleman said the senator was “way off base in targeting the renewable fuel industry.”

Coleman said ethanol does not impact gasoline volatility and the main culprit in the ozone increases has been “meteorological changes,” according to the South Coast Air Quality Management District's model. Other factors, added Coleman, include an “unanticipated increase in the number of SUVs and miles driven.”

Coleman accused the senator of skewing the debate toward Midwestern wealth and alleged pump price increases while ignoring the fact ethanol is cheaper than gasoline; safer than other alternatives to MTBE and reduces “California's alarming consumption of fossil fuels.”

Coleman said Feinstein's “attacks on ethanol” are doing the oil and automobile industries “a great favor by distracting Californians from the true source of smog in urban areas; increased auto emissions.

“The problem with California's air is not ethanol. Ethanol is part of the solution,” Coleman charged.

With energy bills in the House and Senate including an ethanol mandate almost tripling the amount of ethanol used in the nation's gas supply, Feinstein “strongly believe that we should know more about ethanol's impact on air quality in California.”

Feinstein is seeking an investigation by the state of California to find what role increased ethanol use is having on current higher smog levels.

Under the provisions contained in the Senate energy bill, the U.S. would be required to use 5 billion gallons of ethanol by 2012.

Feinstein reiterated that California can meet clean air standards without ethanol or MTBE.

“California's own clean air and reformulated gasoline requirements are the most stringent in the nation and would continue to be in effect, even if a waiver were granted,” Feinstein said.

e-mail: hcline@primediabusiness.com