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Pastimes : Triffin's Market Diary -- Ignore unavailable to you. Want to Upgrade?

To: Triffin who wrote (198)	5/12/2002 3:28:19 PM
From: Triffin	Read Replies (1) \| Respond to of 869

BC: SYNERGY REBORN US Senate ethanol plan stirs conflicting reactions By Eric Noe CHICAGO, May 12 (Reuters) - Environmentalists and oil companies often find themselves on the opposite sides of the fence when Washington tackles a major legislative issue. But that was not the case with a bill passed by the U.S. Senate on April 25 that would triple the use of ethanol as a gasoline additive over the next decade. Both environmentalists and Big Oil -- not to mention farmers -- have been celebrating the legislation as a landmark in the country's evolution toward cleaner energy produced from domestic, renewable sources like corn or sugar. "This is a huge win for corn growers and the coalition of agriculture, oil, ethanol and environmental groups that came together to forge this historic agreement," Tim Hume, president of the National Corn Growers Association, said after the vote. But ethanol -- a cleaner burning alternative to MTBE, an additive some states banned due to ground water contamination -- has not won universal support. Some consumer advocates and state officials say the new mandates could lead to higher prices at the gas pump. Farm state lawmakers, however, who make up the biggest voting block in Congress, and the powerful farm and oil lobbies are pushing hard for inclusion of the Senate's ethanol mandate in the version of the bill that will be presented to President George W. Bush. The Bush administration has also voiced support for the promotion of renewable fuels. If, as expected, the energy bill sent to the Capitol leaves the Senate's ethanol proposal intact, Bush is expected to sign it. The Senate quashed the last challenge to the ethanol measure by a vote of 88 to 11. OPPONENTS QUESTION COSTS Faced with ethanol's formidable backing, opponents continue to argue that stringent mandates could force consumers to pay inflated gasoline prices as the relatively young industry struggles with supply and distribution issues. The Senate, to help diversify U.S. energy supplies and decrease reliance on foreign oil, set a renewable fuels standard requiring the use of corn-based ethanol to grow from the current 1.5 billion gallons per year to 2.3 billion in 2004 and to 5 billion in 2012. The bill's backers believe replacing MTBE with ethanol will not only offer a more environmentally friendly gasoline but could create as many as 200,000 new jobs as the industry grows to meet increased demand. California and New York lawmakers failed in last-second efforts to delay the implementation of the new requirements by one year. California officials, still smarting from the state's 2001 energy crisis, remain wary that difficulties in shipping largely Midwestern-produced ethanol to refineries on the East and West coasts could lead to gas shortages and price spikes. The shipping issue also concerns officials in New York. "There are many points at which the smooth flow of ethanol could be interrupted," said Bill Rukeyser of the California Environmental Protection Agency. "The spikes might not last long, but typically gasoline spikes tend to go up real fast and down real slow so it does remain a concern." But a January study by a research arm of the U.S. Department of Energy determined that the cost to convert gas stations, add storage terminals and ship ethanol would increase gasoline costs an average of 1/2-cent per gallon nationwide. For their part, the ethanol industry is convinced production capacity will meet the proposed new standards. The country's 61 existing ethanol plants have the capacity to produce more than 2.3 billion gallons of ethanol per year, and 14 additional plants under construction are expected to add an extra 430 million gallons by the end of the year, according to the Renewable Fuels Association (RFA), the national trade association for the ethanol industry. "We have the production capacity right now, today, to meet the 2004 requirement, so there's no reason to delay it for a year," RFA spokesman Monte Shaw said. California refiners have said they are prepared to switch from MTBE, and BP, the state's largest gasoline marketer, recently announced it would make the switch this year. "Do you think that BP is going to do this if they think that they're going to have problems with ethanol supply, ethanol logistics or price, which would put them at a disadvantage to their competitors? No way. The business world is showing what can be done," Shaw said. BENEFITS TO FARMERS -- OR BUSINESS? Opponents also complain that a handful of large Midwestern businesses, rather than individual farmers, will benefit from a boom in the ethanol market. The concerns escalated recently when Decatur, Illinois-based agribusiness giant Archer Daniels Midland (NYSE:ADM - News), the largest U.S. producer, was accused of colluding to fix prices for European wine alcohol, which can be used to make ethanol. ADM accounts for more than 40 percent of U.S. ethanol production, and financial analysts say the company is poised to turn that hefty market share into substantial profits.