The National Corn Growers Association (NCGA), which for 18 months has battled for cleaner air in California (and more corn sales), now wants to “clean the air” of a few misunderstandings about fuel prices.

It's not ethanol that's driving up the price of gas at the pumps, NCGA leaders say. It's a shortage of petroleum.

The Environmental Protection Agency on June 12 denied California's request for a waiver on federal Clean Air Act requirements for oxygenates in motor fuel. The waiver would have eliminated both grain-based ethanol and methyl tertiary butyl ether (MTBE), which is derived from natural gas, as a fuel additive in the nation's largest state.

Following EPA's denial of the California waiver, many ethanol opponents renewed the claim that the action would drive California gas prices higher. NCGA says nothing could be further from the truth.

“It is unfathomable that California refiners are going to suffer price discrimination at the hands of ethanol producers,” said John McClelland, NCGA director of energy and analysis. “Prices of ethanol in California will reflect Midwest prices plus transportation.

“Ethanol production is more cost-efficient and price-competitive than ever,” said McClelland, who holds a Ph.D. in economics. “The average production cost is in the range of 95 cents-to-$1.10 per gallon.”

Blame the short supplies of oil on OPEC. Short supplies of natural gas have driven up MTBE prices resulting in higher gas prices to consumers, McClelland says. “Ethanol historically follows the price of gasoline closer than the price of corn because ethanol is sold into the fuel market where it competes with other fuel components. However, ethanol competes with gasoline and gasoline components. This competition tends to moderate gasoline prices in areas where ethanol is used. That means savings for consumers.”

Also to blame for high gas prices in California are the state's laws requiring gasoline sold within the state to be “boutique fuels,” manufactured for specific markets, McClelland says. “This has been a state requirement, not one mandated by the Clean Air Act. This has much more to do with the price of gasoline to consumers than the cost of the ethanol being put into that gasoline.”

He cites other advantages to ethanol.

“There's enough ethanol to go around,” he said. “Farmers are investing in this nation's energy strategy by building ethanol plants that produce 40 percent of the 1.6 billion gallons of ethanol made in 2000. Production that year used 600 million bushels or corn, only 6.5 percent of the crop.”

He projected the ethanol industry will produce 2 billion gallons of ethanol this year. “With corn stocks in excess of 1.7 billion bushels, there is more than enough corn to produce ethanol.”

NCGA insists transportation shouldn't be a problem, either. “Filings required by California environmental laws indicate that virtually all refineries in southern California are ready to use ethanol,” McClelland said. “They will get it by ship, and transport it to terminals where there is going to be plenty of storage available in tanks that once held MTBE.”

NCGA also says denial of waiver means nearly 600 million gallons of clean-burning ethanol could be used annually in California. The association's estimates show that about 230 million bushels of corn will be used to produce the ethanol needed by California motorists and could boost the value of the nation's corn crop by as much as $1 billion annually.

“The decision by President Bush is a tremendous victory for clean air, consumers and corn farmers,” says Gary Marshall, Missouri Corn Growers Association CEO. “California will start using clean-burning ethanol as they phase out of MTBE, which has fouled their drinking water. Consumers will benefit through lower prices at the pump because ethanol has twice the oxygen content of MTBE.

“Corn farmers will benefit through a boost in ethanol production in farmer-owned plants, and an increase in the overall value for our crop.”

Don Fischer, MCGA president and Corder, Mo., farmer, says: “The administration's denial of the waiver sends a clear message: The oxygenate provisions are working and are necessary for clean air. Corn growers have received the green light they have been waiting for, and are ready to make the investments needed to expand ethanol production.”

According to producer-group statistics, there are currently 56 farmer-owned U.S, facilities that produce over 2 billion gallons of ethanol annually.

Ethanol industry observers say U.S. annual ethanol capacity is expected to increase to 3.5 billion gallons per year by the end of 2003.

bpryor@primediabusiness.com