Alliance for Rural America

September 5, 2002

The Honorable
U.S. Senate
Washington D.C. 20510

Dear Senator….

The Alliance for Rural America’s (ARA’s) seven member organizations represent over 550,000 farmers and rural consumers from all over America. We firmly believe that an important component of a balanced renewable energy framework for the nation’s motor fuel needs includes ethanol and other biobased fuels. That component should also include the advancement of ethyl ethanol and other biobased fuels. That component should also include the advancement of ethyl tertiary butyl ether (ETBE). As you work toward completion of the energy bill that is now being considered by a Conference Committee, we ask for your support in an important component of an overall energy policy for the nation.

The Senate Energy bill includes provisions that would establish a 5 billion gallon per year ethanol mandate in motor fuel by the year 2012. The stated purpose of this mandate is to reduce reliance on foreign oil and to help domestic farmers and ethanol producers get their product to market in a useful manner.

The Energy Conference determines that is a need to mandate the use of ethanol, ethanol’s ether, ethyl tertiary butyl ether (ETBE) is a positive option that will provide for cleaner air and protect the water resource while maintaining the necessary volume to assure reasonable fuel prices for the consumer.

ETBE Expands Gasoline Supplies and Reduces our Dependence on Foreign Imports
Every gallon of ethanol converts into 2.3 gallons of ETBE due to the availability of U.S. gas liquids. If all the MTBE plants in the U.S. were converted to ETBE, they would consume 1.7 billion gallons per year (BGY) of ethanol and make 3.9 BGY of ETBE. At 2 percent by weight oxygen in gasoline, ETBE expands the gasoline pool by 13 percent by volume where MTBE adds 11 percent and straight ethanol just 5.7 percent. Switching to ETBE in reformulated gasoline is equivalent to the volume of gasoline refined from imported Iraqi crude oil, or all of the Venezuelan gasoline imports to the U.S.

ETBE Substantially Increases the Economic Efficiency of Ethanol
Unlike ethanol, the very low water solubility of ETBE permits it to be blended into gasoline at the refinery where it can then be distributed via pipeline and barge to all gasoline terminals. Since it can be freely mixed with all gasolines, it eliminates the gasoline segregation barriers that contribute to “boutique fuel” shortages and higher cost associated with ethanol blending. Since ETBE can be added at the refinery, it eliminates any new infrastructure investment for the refiner and the gasoline marketplace.

ETBE Protects Water Resources.
ETBE is 75 percent less water soluble that MTBE and 99 percent less than ethanol, which is 100 percent soluble. This means substantially reduced risks to groundwater resources should gasoline leak from an underground storage tank. Not only is ETBE less soluble in water, it biodegrades faster and has other physical properties which make it easier to remove from water and to migrate shorter distances from a spill.

ETBE Provides Greatest Reductions of Air Pollutants
ETBE reduces exhaust emissions of VOC’s, NOX, Toxics, and CO by more than twice that of ethanol blended by itself. ETBE also eliminates all of the large evaporative BOC increases associated with ethanol. In addition, because of its high displacement of aromatics in gasoline, ETBE provides 20 percent more CO2 reduction than using straight ethanol. The net result is that ETBE is one of the most effective oxygenates for reducing overall emissions from the vehicles.

MTBE Producer Transition Cost are Minimized
MTBE merchant producers can easily convert MTBE units over to ETBE production at a cost of $5 to 40 million per production unit. In addition, most of the refinery and petrochemical MTBE capacity can be converted for little or no capital.

ETBE Lessens the Burden on the Highway Trust Fund
Since ETBE blenders will be able to use the Alcohol Tax Income Credit rather than the Gasohol Excise Tax Exemption (used for conventional ethanol blending at the terminal), the amount of ethanol subsidy diverted from the Highway Trust Fund will be greatly minimized. Of the 3 billion gallons per year of new ethanol demand created under a RFS, 1.5 billion gallons are expected to be subsidized from General Revenues instead of the Highway Trust Fund if ETBE use were maximized. Maximizing the use of ETBE can free up nearly $800 million dollars per year from the Highway Trust Fund for incremental road and highway projects (that would otherwise be lost under conventional ethanol blending).

Ensuring the Viability of the ETBE Alternative

Preserve the ETBE Tax Fix
Tax barriers have prevented ETBE from being used in the past. The Senate bill has rectified those barriers by allowing the ethanol used in ETBE access to the same subsidies enjoyed by direct blended ethanol. Allowing the use of ETBE as an alternative to direct blended ethanol would not reduce or increase the amount of domestic ethanol required by the Senate supported mandate. It would simply give refiners a more efficient choice in how to meet the 5 billion gallon per year ethanol mandate while assuring adequate fuel supplies for the consumer. Importantly, this tax change will not increase government spending over the cost of the ethanol mandate itself as the Joint Committee on Taxation has given this tax change a negligible score.

Restore the “Safe Harbor” Protections for all Renewables including ETBE
The Senate bill provides liability protection for all renewable fuel products except for ethers. This special exclusion suggests to the marketplace that ETBE is an inferior of defective product while, in actuality, it is a superior product. Of all the commercial oxygenates, it has the lowest water solubility and has the highest comparability with materials used in automobiles and gasoline storage systems. Also, unlike most ethanol blends, gasoline blends made with ETBE will meet and exceed the SDTM specifications that are used to define quality gasoline, which maximizes vehicle performance. Therefore, the special exclusion for “ethers” in the RFS liability protection language needs to be eliminated.

As you move toward the completion of the energy bill, please remember that rural America has come to the table with many solutions. The Alliance for Rural America urges you to include these solutions as we move toward an energy policy that includes an energy supply that is not just adequate and affordable, but diverse, decentralized, domestic and renewable.

Sincerely,
Larry Mitchell
National Spokesperson
Alliance for Rural America