Union Tribune

June 22, 2002 

NATION 
Some Bush advisers oppose boost in ethanol use

By TOBY ECKERT and DORI MEINERT 
COPLEY NEWS SERVICE 

WASHINGTON Despite President Bush's embrace of greater
ethanol use, some of his advisers have argued against a plan to
triple the amount of the additive in the nation's gasoline.

An internal White House memo notes resistance to the mandate
from the president's Council of Economic Advisers and the
Federal Trade Commission, which raised concerns about
possible fuel supply problems and consumer costs.

The Department of Energy has endorsed the plan, and Bush has
shown no sign of opposing it. The ethanol industry denies there
will be any supply problems or noticeable impact on pump
prices.

But the memo could be fodder for critics of the ethanol mandate,
including California lawmakers, as Senate and House negotiators
start the arduous task of trying to reach agreement on differing
energy bills, only one of which includes the mandate.

The memo also provides a rare glimpse at an internal policy
debate in an administration that guards such matters closely.

The memo, produced by the White House Office of Management
and Budget, summarizes the views of various agencies toward
the energy legislation.

The Senate version of the bill calls for tripling the amount of
"renewable fuels," primarily corn-derived ethanol, blended into
gasoline by 2012. 

A competing gas additive that has fouled water supplies in
California and other states, MTBE, would be phased out over
four years.

The Council of Economic Advisers and the trade commission
"advise that this requirement is costly to both consumers and
the government and will provide little environmental benefit,"
the memo says.

"A renewable fuel mandate will be met largely by use of ethanol,
which is subsidized at approximately $0.50 per gallon, and a
renewable fuel mandate (either alone or combined with an MTBE
ban) will increase consumer costs, may create supply problems
in certain regions, and will have (a) disproportional effect on the
Midwest and Southeast."

The council said that "MTBE contamination can be addressed by
a more targeted, cost-effective approach," like allowing states to
"address this issue, or imposing a ban over a longer time horizon
to allow time for the industry to adjust."

The concerns are similar to those raised by California officials.
They worry that the state will not be able to import enough
ethanol, which is produced primarily in the Midwest, causing gas
shortages and price spikes.

The ethanol industry dismisses those concerns. It says the
industry is well positioned to meet California's needs. Major gas
suppliers in the state, including Shell and BP, have made plans to
stop using MTBE and switch to ethanol by year's end.

Members of California's congressional delegation have fought
the proposed ethanol mandate to no avail. Lawmakers
negotiating the energy legislation are likely to clash on the
proposal.

"He's got real concerns about it," said a spokesman for Rep.
Henry Waxman, D-Los Angeles, a member of the House-Senate
conference committee that will attempt to work out differences
in the two chambers' bills.

Opponents have an uphill battle. Senate Majority Leader Tom
Daschle, D-S.D., inserted the ethanol provision in the Senate bill,
and it has the backing of House Speaker Dennis Hastert, R-Ill.
Both are from ethanol-producing, corn-growing states.

The mandate was negotiated behind closed doors by a powerful
coalition of ethanol makers, the oil industry, farm groups and
environmentalists.

Bush has repeatedly asserted his support for wider ethanol use.