Order Code RL30369
CRS Report for Congress
Received through the CRS Web
Fuel Ethanol:
Background and Public Policy Issues
Updated February 21, 2002
Brent D. Yacobucci
Environmental Policy Analyst
Resources, Science, and Industry Division
Jasper Womach
Specialist in Agricultural Policy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

---

Fuel Ethanol: Background and Public Policy Issues
Summary
In light of a changing regulatory and legislative environment, concern has arisen
regarding the future prospects for ethanol as a motor fuel. Ethanol is produced from
biomass (mainly corn) and is mixed with gasoline to produce cleaner-burning fuel
called “gasohol” or “E10.”
The market for fuel ethanol, which consumes 6% of the nation’s corn crop, is
heavily dependent on federal subsidies and regulations. A major impetus to the use
of fuel ethanol has been the exemption that it receives from the motor fuels excise
tax. Ethanol is expensive relative to gasoline, but it is subject to a federal tax
exemption of 5.3 cents per gallon of gasohol (or 53 cents per gallon of pure ethanol).
This exemption brings the cost of pure ethanol, which is about double that of
conventional gasoline and other oxygenates, within reach of the cost of competitive
substances. In addition, there are other incentives such as a small ethanol producers
tax credit. It has been argued that the fuel ethanol industry could scarcely survive
without these incentives.
The Clean Air Act requires that ethanol or another oxygenate be mixed with
gasoline in areas with excessive carbon monoxide or ozone pollution. The resulting
fuels are called oxygenated gasoline (oxyfuel) and reformulated gasoline (RFG),
respectively. Using oxygenates, vehicle emissions of volatile organic compounds
(VOCs) have been reduced by 17%, and toxic emissions have been reduced by
approximately 30%. However, there has been a push to change the oxygenate
requirements for two reasons. First, methyl tertiary butyl ether (MTBE), the most
common oxygenate, has been found to contaminate groundwater. Second, the
characteristics of ethanol-blended RFG–along with high crude oil prices and supply
disruptions–led to high Midwest gasoline prices in Summer 2000, especially in
Chicago and Milwaukee.
Uncertainties about future oxygenate requirements, as both federal and state
governments consider changes, have raised concerns among farm and fuel ethanol
industry groups and have prompted renewed congressional interest in the substance.
Without the current regulatory requirements and incentives, or something comparable,
much of ethanol’s market would likely disappear. Expected changes to the
reformulated gasoline requirements could either help or hurt the prospects for fuel
ethanol (subsequently affecting the corn market), depending on the regulatory and
legislative specifics. As a result, significant efforts have been launched by farm
interests, the makers of fuel ethanol, agricultural states, and the manufacturers of
petroleum products to shape regulatory policy and legislation.
This report provides background concerning various aspects of fuel ethanol, and
a discussion of the current related policy issues.

---

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Ethanol and the Agricultural Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Ethanol Refining and Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Fuel Consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Research and Development in Cellulosic Feedstocks . . . . . . . . . . . . . . . . . . . . . 8
Costs and Benefits of Fuel Ethanol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Economic Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Air Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Climate Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Energy Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Policy Concerns and Congressional Activity . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Reformulated Gasoline and MTBE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Renewable Fuels Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Phase 2 Reformulated Gasoline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
“Boutique” Fuels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Alcohol Fuel Tax Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Fuel Economy Credits for Dual Fuel Vehicles . . . . . . . . . . . . . . . . . . . . . 18
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
List of Tables
Table 1. Corn Utilization, 2000/2001 Forecast . . . . . . . . . . . . . . . . . . . . . . . . . 3
Table 2. Top 10 Ethanol Producers by Capacity, 2000 . . . . . . . . . . . . . . . . . . . 4
Table 3. Estimated U. S. Consumption of Fuel Ethanol, MTBE and Gasoline . . 7
Table 4. Price of Pure Ethanol Relative to Gasoline . . . . . . . . . . . . . . . . . . . . . 9
Appendix 1. Reformulated Gasoline and MTBE Bills in the 107th Congress . . . 19

---

Fuel Ethanol:
Background and Public Policy Issues
Introduction
Ethanol (ethyl alcohol) is an alcohol made by fermenting and distilling simple
sugars. Ethyl alcohol is in alcoholic beverages and it is denatured (made unfit for
human consumption) when used for fuel or industrial purposes.1 The biggest use of
fuel ethanol in the United States is as an additive in gasoline. It serves as an as an
oxygenate (to prevent air pollution from carbon monoxide and ozone), as an octane
booster (to prevent early ignition, or “engine knock”), and as an extender of gasoline.
In purer forms, it can also be used as an alternative to gasoline in automobiles
designed for its use. It is produced and consumed mostly in the Midwest, where
corn—the main feedstock for ethanol production—is produced.
The initial stimulus to ethanol production in the mid-1970s was the drive to
develop alternative and renewable supplies of energy in response to the oil embargoes
of 1973 and 1979. Production of fuel ethanol has been encouraged by a partial
exemption from the motor fuels excise tax. Another impetus to fuel ethanol
production has come from corn producers anxious to expand the market for their
crop. More recently the use of fuel ethanol has been stimulated by the Clean Air Act
Amendments of 1990, which require oxygenated or reformulated gasoline to reduce
emissions of carbon monoxide (CO) and volatile organic compounds (VOCs).
While oxygenates reduce CO and VOC emissions, they also can lead to higher
emissions of nitrogen oxides, precursors to ozone formation. While reformulated
gasoline has succeeded in reducing ground-level ozone, the overall effect of
oxygenates on ozone formation has been questioned. Furthermore, ethanol’s main
competitor in oxygenated fuels, methyl tertiary butyl ether (MTBE), has been found
to contaminate groundwater. This has led to a push to ban MTBE, or eliminate the
oxygenate requirements altogether. High summer gasoline prices in the Midwest,
especially in Chicago and Milwaukee, where oxygenates are required, have added to
the push to remove the oxygenate requirements. The trade-offs between air quality,
water quality, and consumer price have sparked congressional debate on these
requirements. In addition, there has been a long-running debate over the tax
incentives that ethanol-blended fuels receive.
Fuel ethanol is used mainly as a low concentrate blend in gasoline, but can also
be used in purer forms as an alternative to gasoline. In 2000, 99.7% of fuel ethanol
1Industrial uses include perfumes, aftershaves, and cleansers.

---

CRS-2
consumed in the United States was in the form of “gasohol” or “E10” (blends of
gasoline with up to 10% ethanol).2
Fuel ethanol is usually produced from the distillation of fermented simple sugars
(e.g. glucose) derived primarily from corn, but also from wheat, potatoes and other
vegetables, but can also be produced from cellulosic material such as switch grass,
rice straw, and sugar cane (bagasse). The alcohol in fuel ethanol is identical to
ethanol used for other purposes, but is treated (denatured) with gasoline to make it
unfit for human consumption.
Ethanol and the Agricultural Economy
Corn constitutes about 90% of the feedstock for ethanol production in the
United States. The other 10% is largely grain sorghum, along with some barley,
wheat, cheese whey and potatoes. Corn is used because it is a relatively low cost
source of starch that can be converted to simple sugars, fermented and distilled. It is
estimated by the U. S. Department of Agriculture (USDA) that about 615 million
bushels of corn was used to produce about 1.5 billion gallons of fuel ethanol during
the 2000/2001 corn marketing year.3 This was 6.17% of the projected 9.755 billion
bushels of corn utilization.4
Producers of corn, along with other major crops, receive farm income support
and price support. Farms with a history of corn production received “production
flexibility contract payments” of about $1.186 billion during the 2000/2001 corn
marketing year. Emergency economic assistance (P.L. 106-224) more than double
the corn contract payments. Corn producers also are guaranteed a minimum national
average price of $1.89/bushel under the nonrecourse marketing assistance loan
program.5
The added demand for corn created by fuel ethanol raises the market price for
corn above what it would be otherwise. Economists estimate that when supplies are
large, the use of an additional 100 million bushels of corn raises the price by about 4¢
per bushel. When supplies are low, the price impact is greater. The ethanol market
is particularly welcome now, when the average price received by farmers is forecast
by USDA to average about $1.80 per bushel for the 2000/01 marketing year. This
price would be the lowest season average since 1986. The ethanol market of 615
million bushels of corn, assuming a price impact of about 25¢ per bushel on all corn
sales, means a possible $2.4 billion in additional sales revenue to corn farmers. In the
2U.S. Department of Energy (DOE), Energy Information Administration (EIA). Alternatives
to Traditional Transportation Fuels 1999. Updated February 2001.
3One bushel of corn generates approximately 2.5 gallons of ethanol.
4Utilization data are used, rather than production, due to the existence of carryover stocks.
Corn utilization data address the total amount of corn used within a given period.
5Detailed explanations are available in CRS Report RS20271, Grain, Cotton, and Oilseeds:
Federal Commodity Support, and CRS 98-744, Agricultural Marketing Assistance Loans
and Loan Deficiency Payments.

---

CRS-3
absence of the ethanol market, lower corn prices probably would stimulate increased
corn utilization in other markets, but sales revenue would not be as high. The lower
prices and sales revenue would be likely to result in higher federal spending on corn
payments to farmers, as long as corn prices were below the price triggering federal
loan deficiency subsidies.
Table 1. Corn Utilization, 2000/2001 Forecast
Quantity
Share of Total Use
(million bushels)
Livestock feed & residual
5,775
59.2%
Food, seed & industrial:
1,980
19.9%
Fuel alcohol
615
6.2%
High fructose corn syrup
550
5.5%
Glucose & dextrose
220
2.2%
Starch
225
2.6%
Cereals & other products
190
1.9%
Beverage alcohol
130
1.3%
Seed
20
0.2%
Exports
2000
20.1%
TOTAL USE
9,775
100.00%
TOTAL PRODUCTION
9,968
Source: Basic data are from USDA, Economic Research Service, Feed Outlook, March 10,
2000.
Ethanol Refining and Production
According to the Renewable Fuels Association, about 55% of the corn used for
ethanol is processed by “dry” milling plants (a grinding process) and the other 45%
is processed by “wet” milling plants (a chemical extraction process). The basic steps
of both processes are as follows. First, the corn is processed, with various enzymes
added to separate fermentable sugars. Next, yeast is added to the mixture for
fermentation to make alcohol. The alcohol is then distilled to fuel-grade ethanol that
is 85-95% pure.6 Finally, for fuel and industrial purposes the ethanol is denatured
6The byproduct of the dry milling process is distillers dried grains. The byproducts of wet
milling are corn gluten feed, corn gluten meal, and corn oil. Distillers dried grains, corn gluten
(continued...)

---

CRS-4
with a small amount of a displeasing or noxious chemical to make it unfit for human
consumption.7 In the U.S. the denaturant for fuel ethanol is gasoline.
Ethanol is produced largely in the Midwest corn belt, with almost 90% of
production occurring in five states: Illinois, Iowa, Nebraska, Minnesota and Indiana.
Because it is generally less expensive to produce ethanol close to the feedstock
supply, it is not surprising that the top five corn-producing states in the U.S. are also
the top five ethanol-producers. Most ethanol use is in the metropolitan centers of the
Midwest, where it is produced. When ethanol is used in other regions, shipping costs
tend to be high, since ethanol-blended gasoline cannot travel through petroleum
pipelines, and must be transported by truck, rail, or barge.
This geographic concentration is an obstacle to the use of ethanol on the East
and West Coasts. The potential for expanding production geographically is a
motivation behind research on cellulosic ethanol, since if regions could locate
production facilities closer to the point of consumption, the costs of using ethanol
could be lessened. Furthermore, if regions could produce fuel ethanol from local
crops, there would be an increase in regional agricultural income.
Table 2. Top 10 Ethanol Producers by Capacity, 2000
Million Gallons Per Year
Archer Daniels Midland (ADM)
797
Minnesota Corn Processors
110
Williams Energy Services
100
Cargill
100
New Energy Corp
85
Midwest Grain Products
78
High Plains Corporation
70
Chief Ethanol
62
AGP
52
A.E. Staley
45
Heartland Corn Products
35
All Others
473
U.S. Total
2007
Source: Renewable Fuels Association, Ethanol Industry Outlook 2001..
Ethanol production is also concentrated among a few large producers. The
top five companies account for approximately 60% of production capacity, and the
top ten companies account for approximately 75% of production capacity. (See
6(...continued)
feed, and corn gluten meal are used as livestock feed.
7Renewable Fuels Association, Ethanol Industry Outlook 2001, Clean Air, Clean Water,
Clean Fuel.[http://www.ethanolrfa.org/rfareport2001.html]

---

CRS-5
Table 2.) Critics of the ethanol industry in general--and specifically of the ethanol tax
incentives--argue that the tax incentives for ethanol production equate to “corporate
welfare” for a few large producers.8
Overall, domestic ethanol production capacity is approximately 2.0 billion
gallons per year. Consumption is expected to increase from 1.7 billion gallons per
year in 2000 to approximately 2.6 billion gallons per year in 2005. Production will
need to increase proportionally to meet the increased demand.9 However, if the Clean
Air Act is amended to limit or ban MTBE, ethanol production capacity may expand
at a faster rate. This is especially true if MTBE is banned while maintaining the
oxygenate requirements, since ethanol is the most likely substitute for MTBE.10
Fuel is not the only output of an ethanol facility, however. Co-products play
an important role in the profitability of a plant. In addition to the primary ethanol
output, the corn wet milling generates corn gluten feed, corn gluten meal, and corn
oil, and dry milling creates distillers grains. Corn oil is used as a vegetable oil and is
higher priced than soybean oil. Approximately 12 million metric tons of gluten feed,
gluten meal, and dried distillers grains are produced in the United States and sold as
livestock feed annually. A major market for corn gluten feed and meal is the
European Union, which imported nearly 5 million metric tons of gluten feed and meal
during FY1998.
Revenue from the ethanol byproducts help offset the cost of corn. The net
cost of corn relative to the price of ethanol (the ethanol production margin) and the
difference between ethanol and wholesale gasoline prices (the fuel blending margin)
are the major determinants of the level of ethanol production. Currently, the ethanol
production margin is high because of the low price of corn. At the same time, the
wholesale price of gasoline is increasing against the price of ethanol, which
encourages the use of ethanol.
Fuel Consumption
Approximately 1.5 billion gallons of ethanol fuel were consumed in the United
States in 2000, mainly blended into E10 gasohol. While large, this figure represents
only 1.2% of the approximately 125 billion gallons of gasoline consumption in the
same year.11 According to DOE, ethanol consumption is expected to grow to 2.6
billion gallons per year in 2005 and 3.3 billion gallons per year in 2020. This would
8James Bovard, Archer Daniels Midland: A Case Study in Corporate Welfare. Cato
Institute. September 26, 1995.
9DOE, EIA, Annual Energy Outlook 20001. December 22, 2000. Table 18.
10For more information, see section on MTBE.
11DOE, EIA, Alternatives to Traditional Transportation Fuels 1999. Table 10.

---

CRS-6
increase ethanol’s market share to approximately 1.5% by 2005. This 1.5% share is
projected to remain constant through 2020.12
The most significant barrier to wider use of fuel ethanol is its cost. Even with
tax incentives for ethanol producers (see the section on Economic Effects), the fuel
tends to be more expensive than gasoline per gallon. Furthermore, since fuel ethanol
has a somewhat lower energy content, more fuel is required to travel the same
distance. This energy loss leads to an approximate 3% decrease in miles-per-gallon
vehicle fuel economy with gasohol.13
However, ethanol’s chemical properties make it very useful for some
applications, especially as an additive in gasoline. Major stimuli to the use of ethanol
have been the oxygenate requirements of the Reformulated Gasoline (RFG) and
Oxygenated Fuels programs of the Clean Air Act.14 Oxygenates are used to promote
more complete combustion of gasoline, which reduces carbon monoxide and volatile
organic compound (VOC) emissions.15 In addition, oxygenates can replace other
chemicals in gasoline, such as benzene, a toxic air pollutant (see the section on Air
Quality).
The two most common oxygenates are ethanol and methyl tertiary butyl ether
(MTBE). MTBE, primarily made from natural gas or petroleum products, is
preferred to ethanol in most regions because it is generally much less expensive, is
easier to transport and distribute, and is available in greater supply. Because of
different distribution systems and blending processes (with gasoline), substituting one
oxygenate for another can lead to significant cost increases.
Despite the cost differential, there are several possible advantages of using
ethanol over MTBE. Ethanol contains 35% oxygen by weight—twice the oxygen
content of MTBE. Furthermore, since ethanol is produced from agricultural
products, it has the potential to be a sustainable fuel, while MTBE is produced from
natural gas and petroleum, fossil fuels. In addition, ethanol is readily biodegradable,
eliminating some of the potential concerns about groundwater contamination that
have surrounded MTBE (see the section on MTBE). However, there is concern that
ethanol use can lead to contamination by benzene and other toxics.16
Both ethanol and MTBE also can be blended into otherwise non-oxygenated
gasoline to raise the octane rating of the fuel, and therefore improve its combustion
properties. High-performance engines and older engines often require higher octane
fuel to prevent early ignition, or “engine knock.” Other chemicals may be used for
12DOE, EIA, Annual Energy Outlook 2001. December 22, 2000. Tables 2 and 18.
13It should be noted that the use of ethanol does not effect the efficiency of an engine. There
is simply less energy in one gallon of ethanol than in one gallon of gasoline.
14Section 211, subsections k and m (respectively). 42 U.S.C. 7545.
15CO, VOCs and nitrogen oxides (NO )are the main precursors to ground-level ozone.
X
16Susan E. Powers, David Rice, Brendan Dooher, and Pedro J. J. Alvarez, “Will Ethanol-
Blended Gasoline Affect Groundwater Quality?,” Environmental Science and Technology.
January 1, 2001. p. 24A.

---

CRS-7
the same purpose, but some of these alternatives are highly toxic, and some are
regulated as pollutants under the Clean Air Act.17 Furthermore, since these additives
do not contain oxygen, their use may not lead to the same emissions reductions as
oxygenated gasoline.
In purer forms, ethanol can also be used as an alternative to gasoline in
vehicles specifically designed for its use, although this only represents approximately
0.3% of ethanol consumption in the U.S. The federal government and state
governments, along with businesses in the alternative fuel industry, are required to
purchase alternative-fueled vehicles by the Energy Policy Act of 1992.18 In addition,
under the Clean Air Act Amendments of 1990, municipal fleets can use alternative
fuel vehicles to mitigate air quality problems. Blends of 85% ethanol with 15%
gasoline (E85), and 95% ethanol with 5% gasoline (E95) are currently considered
alternative fuels by the Department of Energy.19 The small amount of gasoline added
to the alcohol helps prevent corrosion of engine parts, and aids ignition in cold
weather.
Table 3. Estimated U. S. Consumption of Fuel Ethanol, MTBE
and Gasoline
(Thousand Gasoline-Equivalent Gallons)
1994
1996
1998
2000
E85
80
694
1,727
3,344
E95
140
2,699
59a
54
Ethanol in
845,900
660,200
916,000
1,011,800
Gasohol (E10)
MTBE in
2,108,800
2,749,700
2,915,600
3,104,200
Gasoline
Gasolineb
113,144,000
117,783,000
122,849,000
124,651,000
Source: Department of Energy, Alternatives to Traditional Transportation Fuels1999 .
a A major drop in E95 consumption occurred between 1997 and 1998 because of a significant
decrease in the number of E95-fueled vehicles in operation (347 to 14), due to the
elimination of an ethanol-fueled bus fleet in California.
b Gasoline consumption includes ethanol in gasohol and MTBE in gasoline.
17Lead was commonly used as an octane enhancer until it was phased-out through the mid-
1980s (lead in gasoline was completely banned in 1995), due to the fact that it disables
emissions control devices, and because it is toxic to humans.
18P.L. 102-486.
19More diluted blends of ethanol, such as E10, are considered to be “extenders” of gasoline,
as opposed to alternatives.

---

CRS-8
Approximately 3.3 million gasoline-equivalent gallons (GEG)20 of E85, and
54 thousand GEG of E95 were consumed in 2000, mostly in Midwestern states.21
(See Table 3.) One reason for the relatively low consumption of E85 and E95 is that
there are relatively few vehicles on the road that operate on these fuels. In 2000,
approximately 35,000 vehicles were fueled by E85 or E95,22 23 as compared to
approximately 210 million gasoline- and diesel-fueled vehicles that were on the road
in the same year.24 One obstacle to the use of alternative fuel vehicles is that they are
generally more expensive than conventional vehicles, although this margin has
decreased in recent years with newer technology. Another obstacle is that, as was
stated above, fuel ethanol is generally more expensive than gasoline or diesel fuel. In
addition, there are very few fueling sites for E85 and E95, especially outside of the
Midwest.
Research and Development in Cellulosic
Feedstocks
For ethanol to play a more important role in U.S. fuel consumption, the fuel
must become price-competitive with gasoline. Since a major part of the total
production cost is the cost of feedstock, reducing feedstock costs could lead to lower
wholesale ethanol costs. For this reason, there is a great deal of interest in the use of
cellulosic feedstocks, which include low-value waste products, such as recycled paper,
or dedicated fuel crops, such as switch grass. A dedicated fuel crop is one that would
be grown and harvested solely for the purpose of fuel production.
However, as the name indicates, cellulosic feedstocks are high in cellulose, and
cellulose cannot be fermented. Cellulose must first be broken down into simpler
carbohydrates, and this can add an expensive step to the process. Therefore, research
has focused on both reducing the process costs for cellulosic ethanol, and improving
the availability of cellulosic feedstocks.
On August 12, 1999, the Clinton Administration announced the Biobased
Products and Bioenergy Initiative, which aims to triple the use of fuels and products
derived from biomass by 2010.25 Research and development covers all forms of
biobased products, including lubricants, adhesives, building materials, and biofuels.
Because federal research into cellulosic ethanol is ongoing, it is possible that funding
could increase under the initiative.
20Since different fuels produce different amounts of energy per gallon when consumed, the unit
of a gasoline-equivalent gallon (GEG) is used to compare total energy consumption.
21DOE, EIA, Alternatives to Traditional Transportation Fuels 1999.
22Ibid.
23In 1997, some manufacturers made flexible E85/gasoline fueling capability standard on
some models. It is expected, however, that most of these vehicles will be fueled by gasoline.
24Stacy C. Davis, DOE, Transportation Energy Data Book: Edition 20. November 2000.
25Executive Order 13134. August 12, 1999.

---

CRS-9
Costs and Benefits of Fuel Ethanol
Economic Effects
Given that a major constraint on the use of ethanol as an alternative fuel, and
as an oxygenate, is its high price, ethanol has not been competitive with gasoline as
a fuel. Wholesale ethanol prices, before incentives from the federal government and
state governments, are generally twice that of wholesale gasoline prices. With federal
and state incentives, however, the effective price of ethanol is much lower.
Furthermore, gasoline prices have risen recently, making ethanol more attractive.
The primary federal incentive to support the ethanol industry is the 5.3¢ per
gallon exemption that blenders of gasohol (E10) receive from the 18.4¢ federal excise
tax on motor fuels.26 Because the exemption applies to blended fuel, of which ethanol
comprises only 10%, the exemption provides for an effective subsidy of 53¢ per
gallon of pure ethanol. (See Table 4.)
Table 4. Price of Pure Ethanol Relative to Gasoline
July 1998 to June 1999
Ethanol Wholesale Pricea
103 ¢/gallon
Alcohol Fuel Tax Incentive
53 ¢/gallon
Effective Price of Ethanol
50 ¢/gallon
Gasoline Wholesale Priceb
46 ¢/gallon
Source: Hart’s Oxy-Fuel News; Energy Information Agency, Petroleum Marketing Monthly.
a This is the average price for pure (“neat”) ethanol.
b This is the average rack price for regular conventional gasoline (i.e. non-oxygenated,
standard octane).
It is argued that the ethanol industry could not survive without the tax
exemption. An economic analysis conducted in 1998 by the Food and Agriculture
Policy Research Institute, in conjunction with the congressional debate over extension
of the tax exemption, concluded that ethanol production from corn would decline
from 1.5 billion gallons per year, and stabilize at about 290 million gallons per year,
if the exemption were eliminated.27
The tax exemption for ethanol is criticized by some as a corporate subsidy,28
because, in this view, it encourages the inefficient use of agricultural and other
2626 U.S.C. 40.
27 Food and Agriculture Policy Research Institute. Effects on Agriculture of Elimination of
the Excise Tax Exemption for Fuel Ethanol, Working Paper 01-97, April 8, 1997.
28James Bovard. p. 8.

---

CRS-10
resources, and deprives the Highway Trust Fund of needed revenues.29 In 1997, the
General Accounting Office estimated that the tax exemption would lead to
approximately $10.4 billion in foregone Highway Trust Fund revenue over the 22
years from FY1979 to FY2000.30 The petroleum industry opposes the incentive
because it also results in reduced use of petroleum.
Proponents of the tax incentive argue that ethanol leads to better air quality,
and that substantial benefits flow to the agriculture sector due to the increased
demand for corn created by ethanol. Furthermore, they argue that the increased
market for ethanol leads to a stronger U.S. trade balance, since a smaller U.S. ethanol
industry would lead to increased imports of MTBE to meet the demand for
oxygenates.31
Air Quality
One of the main motivations for ethanol use is improved air quality. Ethanol
is primarily used in gasoline to meet minimum oxygenate requirements of two Clean
Air Act programs. Reformulated gasoline (RFG)32 is used to reduce vehicle emissions
in areas that are in severe or extreme nonattainment of National Ambient Air Quality
Standards (NAAQS) for ground-level ozone.33 Ten metropolitan areas, including
New York, Los Angeles, Chicago, Philadelphia, and Houston, are covered by this
requirement, and many other areas with less severe ozone problems have opted into
the program, as well. In these areas, RFG is used year-round. By contrast, the
Oxygenated Fuels program operates only in the winter months in 20 areas34 that are
listed as carbon monoxide (CO) nonattainment areas.35
EPA states that RFG has led to significant improvements in air quality,
including a 17% reduction in volatile organic compounds (VOCs) emissions from
vehicles, and a 30% reduction in toxic emissions. Furthermore, according to EPA
“ambient monitoring data from the first year of the RFG program (1995) also showed
strong signs that RFG is working. For example, detection of benzene (one of the air
toxics controlled by RFG, and a known human carcinogen) declined dramatically,
with a median reduction of 38% from the previous year.”36
29U.S. General Accounting Office, Effects of the Alcohol Fuels Tax Incentives. March, 1997.
30Ibid.
31Katrin Olson, “USDA Shows Losses Associated with Eliminating Ethanol Incentive,” Oxy-
Fuel News. May 19, 1997. p. 3.
32Clean Air Act, Section 211, subsection k. 42 U.S.C. 7545.
33Ground-level ozone is an air pollutant that causes smog, adversely affects health, and injures
plants. It should not be confused with stratospheric ozone, which is a natural layer some 6
to 20 miles above the earth and provides a degree of protection from harmful radiation.
34Only the Los Angeles and New York areas are subject to both programs.
35Clean Air Act, Section 211, subsection m. 42 U.S.C. 7545.
36Margo T. Oge, Director, Office of Mobile Sources, U.S. EPA, Testimony Before the
(continued...)

---

CRS-11
However, the need for oxygenates in RFG has been questioned. Although
oxygenates lead to lower emissions of VOCs, and CO, they may lead to higher
emissions of nitrogen oxides (NO ). Since all three contribute to the formation of
X
ozone, the National Research Council recently concluded that while RFG certainly
leads to improved air quality, the oxygenate requirement in RFG may have little
overall impact on ozone formation.37 Some argue that the main benefit of oxygenate
use is that it displaces other, more dangerous compounds such as benzene.
Furthermore, the high price of Midwest gasoline in Summer 2000 has raised further
questions about the RFG program (see the section on Phase 2 Reformulated
Gasoline).
Evidence that the most widely-used oxygenate, methyl tertiary butyl ether
(MTBE), contaminates groundwater has led to a push by some to eliminate the
oxygen requirement in RFG. MTBE has been identified as an animal carcinogen, and
there is concern that it is a possible human carcinogen. In California, MTBE will be
banned as of December 31, 2002. California petitioned EPA to exempt the state from
the oxygenate requirement, but on June 12, 2001, Administrator Whitman announced
that the Agency could not grant California’s request.38 Congress for a waiver to the
oxygen requirement (see section on MTBE). Other states, such as states in the
Northeast, are also seeking waivers.
If the oxygenate requirements were eliminated, some refiners claim that the
environmental goals of the RFG program could be achieved through cleaner, although
potentially more costly, gasoline that does not contain any oxygenates.39 These claims
have added to the push to remove the oxygen requirement and allow refiners to
produce RFG in the most cost-effective manner, whether or not that includes the use
oxygenates. However, some environmental groups are concerned that an elimination
of the oxygenate requirements would compromise air quality gains resulting from the
current standards, since oxygenates also displace other harmful chemicals in gasoline.
This potential for “backsliding” is a result of the fact that the current performance of
RFG is substantially better that the Clean Air Act requires. If the oxygenate standard
were eliminated, environmental groups fear that refiners would only meet the
requirements of the law, as opposed to maintaining the current overcompliance.
While the potential ozone benefit from oxygenates in RFG has been
questioned, there is little dispute that the winter Oxy-Fuels program has led to lower
emissions of CO. The Oxy-Fuels program requires oxygenated gasoline in the winter
36(...continued)
Subcommittee on Energy and Environment of the Committee on Science, U.S. House of
Representatives. September 14, 1999.
37National Research Council, Ozone-Forming Potential of Reformulated Gasoline. May,
1999.
38EPA, Headquarters Press Release: EPA Issues Decision on California Waiver Request.
June 12, 2001.
39Al Jessel, Senior Fuels Regulatory Specialist of Chevron Products Company, Testimony
Before the House Science Committee Subcommittee on Energy and Environment. September
30, 1999.

---

CRS-12
months to control CO pollution in NAAQS nonattainment areas for the CO standard.
However, this program is small relative to the RFG program.40
The air quality benefits from purer forms of ethanol can also be substantial.
Compared to gasoline, use of E85 and E95 can result in a 30-50% reduction in ozone-
forming emissions. And while the use of ethanol also leads to increased emissions of
acetaldehyde, a toxic air pollutant, as defined by the Clean Air Act, these emissions
can be controlled through the use of advanced catalytic converters.41 However, as
was stated above, these purer forms of ethanol have not seen wide use.
Climate Change
Another potential environmental benefit from ethanol is the fact that it is a
renewable fuel. Proponents of ethanol argue that over the entire fuel-cycle42 it has the
potential to reduce greenhouse gas emissions from automobiles relative to gasoline,
therefore reducing the risk of possible global warming.
Because ethanol (C H OH) contains carbon, combustion of the fuel necessarily
2
5
results in emissions of carbon dioxide (CO ), the primary greenhouse gas. However,
2
since photosynthesis (the process by which plants convert light into chemical energy)
requires absorption of CO , the growth cycle of the feedstock crop can serve—to
2
some extent—as a “sink” that absorbs some of these emissions. In addition to CO2
emissions, the emissions of other greenhouse gases may increase or decrease
depending on the fuel cycle.43
According to Argonne National Laboratory, using E10, vehicle greenhouse
gas emissions (measured in grams per mile) are approximately 1% lower than with the
same vehicle using gasoline. With improvements in production processes, by 2010,
the reduction in greenhouse gas emissions from ethanol relative to gasoline could be
as high as 8-10% for E10, while the use of E95 could lead to significantly higher
reductions.44
While some studies have called into question the efficiency of the ethanol
production process, most recent studies find a net energy gain.45 If efficiency were
40In 1998, an average of 90.9 million gallons per day of RFG were sold in the U.S., as
opposed to 8.0 million gallons per day of Oxy-Fuel gasoline.
41 California Energy Commission, Ethanol-Powered Vehicles.
42The fuel-cycle consists of all inputs and processes involved in the development, delivery and
final use of the fuel.
43For example, nitrous oxide emissions tend to increase with ethanol use because nitrogen-
based fertilizers are used extensively in agricultural production.
44M. Wang, C. Saricks, and D. Santini, “Effects of Fuel Ethanol on Fuel-Cycle Energy and
Greenhouse Gas Emissions.” Argonne National Laboratory.
45Hosein Shapouri, James A. Duffield, and Michael S. Graboski, USDA, Economic Research
Service, Estimating the Net Energy Balance of Corn Ethanol. July 1995.

---

CRS-13
diminished, overall reductions in greenhouse gas emissions would also be diminished,
due to higher fuel consumption during the production process.
Energy Security
Another frequent argument for the use of ethanol as a motor fuel is that it
reduces U.S. reliance on oil imports, making the U.S. less vulnerable to a fuel
embargo of the sort that occurred in the 1970s, which was the event that initially
stimulated development of the ethanol industry. According to Argonne National
Laboratory, with current technology the use of E10 leads to a 3% reduction in fossil
energy use per vehicle mile, while use of E95 could lead to a 44% reduction in fossil
energy use.46
However, other studies contradict the Argonne study, suggesting that the
amount of energy needed to produce ethanol is roughly equal to the amount of energy
obtained from its combustion, which could lead to little or no reductions in fossil
energy use.47 Thus, if the energy used in ethanol production is petroleum-based,
ethanol would do nothing to contribute to energy security. Furthermore, as was
stated above, fuel ethanol only accounts for approximately 1.2% of gasoline
consumption in the United States by volume. In terms of energy, ethanol accounts
for approximately 0.7%. This small market share led GAO to conclude that the
ethanol tax incentive has done little to promote energy security.48 Furthermore, since
ethanol is currently dependent on the U.S. corn supply, any threats to this supply (e.g.
drought), or increases in corn prices, would negatively affect the cost and/or supply
of ethanol. This happened when high corn prices caused by strong export demand in
1995 contributed to an 18% decline in ethanol production between 1995 and 1996.
Policy Concerns and Congressional Activity
Recent congressional interest in ethanol fuels has mainly focused on six issues:
1) RFG oxygenate requirements and a possible phase-out of MTBE; 2) a renewable
fuels standard; 3) implementation of Phase 2 of the RFG program; 4) “boutique”
fuels; 5) the alcohol fuel tax incentives; and 6) fuel economy credits for dual fuel
vehicles.
46Wang, et. al. p. 1
47Shapouri, et. al. Table 1.
48U.S. General Accounting Office, Effects of the Alcohol Fuels Tax Incentives. March, 1997.

---

CRS-14
Reformulated Gasoline and MTBE
A key issue involving ethanol is the current debate over MTBE. Since MTBE,
a possible human carcinogen, has been found in groundwater in some states
(especially in California), there has been a push both in California and nationally to
ban MTBE.49 In March 1999, California’s Governor Davis issued an Executive Order
requiring that MTBE be phased out of gasoline in the state by December 31, 2002.
Arizona, Connecticut, Iowa, Minnesota, Nebraska, New York, and South Dakota
have also instituted limits or bans on MTBE. In July 1999, an advisory panel to EPA
recommended that MTBE use should be “reduced substantially.”50
A possible ban on MTBE could have serious consequences for fuel markets,
especially if the oxygenate requirements remain in place. Since ethanol is the second
most used oxygenate, it is likely that it would be used to replace MTBE. However,
there is not currently enough U.S. production capacity to meet the potential demand.
Therefore, it would likely be necessary to phase out MTBE over time, as opposed to
an immediate ban. Furthermore, the consumer price for oxygenated fuels would likely
increase because ethanol, unlike MTBE, cannot be shipped through pipelines and
must be mixed close to the point of sale, adding to delivery costs. Increased demand
for oxygenates could also be met through imports from countries such as Brazil,
which is a leader worldwide in fuel ethanol production, and currently has a surplus.51
While a ban on MTBE would seem to have positive implications for ethanol
producers, it could actually work against them. Because MTBE is more commonly
used in RFG and high-octane gasoline, and because current ethanol production can
not currently meet total U.S. demand for oxygenates and octane, there is also a push
to suspend the oxygenate requirement in RFG, which would remove a major stimulus
to the use of fuel ethanol. Furthermore, environmental groups and state air quality
officials, although supportive of a ban on MTBE, are concerned over the possibility
of “backsliding” if the oxygenate standard is eliminated. Because current RFG
formulations have a lower level of toxic substances than is required under the Clean
Air Act, there are concerns that new RFG formulations without oxygenates will meet
the existing standard, but not the current level of overcompliance.
Along with California’s ban on MTBE, the state requested that the oxygen
requirement be waived. On June 12, 2001, EPA informed California that the agency
could not grant the request. CAA only grants EPA the authority to suspend fuel
requirements if there are threats to air quality, despite potential hazards to water
49For more information, see CRS Report 98-290 ENR, MTBE in Gasoline: Clean Air and
Drinking Water Issues.
50Blue Ribbon Panel on Oxygenates in Gasoline, Achieving Clean Air and Clean Water: The
Report of the Blue Ribbon Panel on Oxygenates in Gasoline.
51Adrian Schofield, “Brazilian Ambassador Sees Opportunity in United States Ethanol
Market,” New Fuels & Vehicles Report. September 16, 1999. p. 1.

---

CRS-15
quality.52 Some have proposed that the CAA be amended to allow EPA the authority
to suspend fuel requirements in the case of water contamination.
Supporters of ethanol have proposed that along with a ban of MTBE, a
renewable standard should be introduced. This would require that a certain
percentage of fuel in the U.S. be made from renewable sources. This type or
requirement, if large enough, would protect the ethanol market if the RFG oxygenate
standard were eliminated. (See below)
In the 107th Congress, several RFG and MTBE-related bills have been
introduced. (See Appendix 1.) These bills address different facets of the MTBE
issue, including limiting or banning the use of MTBE, granting waivers to the
oxygenate requirement, authorizing funding for MTBE cleanup, eliminating or
waiving the oxygen requirement, and creating a renewable fuel standard.
Renewable Fuels Standard
There is congressional interest in establishing a renewable fuels standards.
This would require motor fuel to contain a certain percentage of renewable fuel. It
is likely that most of the fuel required would be ethanol, while some would be
biodiesel.53 Supporters argue that without an oxygen requirement in RFG (see
above), a key market for ethanol would be lost. They argue that demand for ethanol
creates jobs, and that there are major environmental benefits to using renewable fuels.
However, opponents argue that any renewable fuels standard would only exacerbate
a situation of artificial demand for ethanol. Any requirement above the existing level
for ethanol would require the construction and/or expansion of ethanol plants, and
would likely lead to increased corn prices caused by higher demand.
In the 107th Congress, several bills address this issue, including the Senate
version of comprehensive energy legislation (S. 517, as amended by S.Amdt. 2917).
S. 517 would require that motor fuel contain 2.3 billion gallons of ethanol by 2004,
and 5.0 billion gallons of ethanol by 2012.
Phase 2 Reformulated Gasoline
Under the new Phase 2 requirements of the RFG program, which took effect
in 2000, gasoline sold in the summer months (beginning June 1) must meet a tighter
volatility standard.54 Reid Vapor Pressure (RVP) is a measure of volatility, with
higher numbers indicating higher volatility. Because of its physical properties, ethanol
has a higher RVP than MTBE. Therefore, to make Phase 2 RFG with ethanol, the
52EPA, Headquarters Press Release: EPA Issues Decision on California Waiver Request.
June 12, 2001.
53Biodiesel is an synthetic diesel fuel made from oils such as soybean oil. Fore more
information, see CRS Report RL30758, Alternative Transportation Fuels and Vehicles:
Energy, Environment, and Development Issues.
54Volatility of gasoline is its tendency to evaporate.

---

CRS-16
gasoline, called RBOB,55 must have a lower RVP. This low-RVP fuel is more
expensive to produce, leading to higher production costs for ethanol-blended RFG.
Before the start of Phase 2, estimates of the increased cost to produce RBOB
for ethanol-blended RFG ranged from 2 to 4 cents per gallon, to as much as 5 to 8
cents per gallon.56 In Summer 2000, RFG prices in Chicago and Milwaukee were
considerably higher than RFG prices in other areas, and it has been argued that the
higher production cost for RBOB was one cause. However, not all of the price
difference is attributable to the new Phase 2 requirements or the use of ethanol.
Conventional gasoline prices in the Midwest were also high compared with gasoline
prices in other areas. High crude oil prices, low gasoline inventories, pipeline
problems, and uncertainties over a patent dispute pushed up prices for all gasoline in
the Midwest.
To decrease the potential for price spikes, on March 15, 2001, EPA
announced that Chicago and Milwaukee will be allowed to blend slightly higher RVP
reformulated gasoline during the summer months.57 This action is not a change in
regulations but a revision of EPA’s enforcement guidelines. In addition to EPA’s
action, one possible regulatory option that has been suggested to control summer
RFG prices is a more significant increase in the allowable RVP under Phase 2.
Although the volatility standard is set by the Clean Air Act, the Environmental
Protection Agency (EPA) is currently reviewing whether credits from ethanol’s
improved performance on carbon monoxide emissions are possible as an offset to its
higher volatility. Legislative options have included eliminating the oxygenate standard
for RFG, or suspending the program entirely. However, some in the petroleum
industry suggest that additional changes to fuel requirements could further disrupt
gasoline supplies. In the 107th Congress, four bills would allow a higher RVP for
ethanol blended fuels. These are H.R. 454 (Johnson, T.), H.R. 1999 (Nussle), S. 670
(Daschle), and S. 892 (Harkin). All four have been referred to committee. No
hearings or markups have been held.
“Boutique” Fuels
As a result of the federal reformulated and oxygenated gasoline requirements,
as well as related state and local environmental requirements, gasoline suppliers may
face several different standards for gasoline quality. These different standards
sometimes require a supplier to provide several different fuels in that area. These
different formulations are sometimes referred to as “boutique” fuels. Because of
varying local requirements, if there is a disruption to the supply of fuel in one area,
refiners in other areas may not be able to supply fuel quickly to meet the increased
demand.
55RBOB: Reformulated Gasoline Blendstock for Oxygenate Blending.
56Estimates from the Renewable Fuels Association and EPA, respectively.
57Pamela Najer, “Refiners Get Flexibility to Blend Ethanol for Summer Fuel Supply in Two
Cities,” Daily Environment Report. March 19, 2001. p. A9.

---

CRS-17
EPA conducted a study on the effects of harmonizing standards, and released
a staff white paper in October, 2001.58 In its preliminary analysis, EPA concluded that
some minor changes could be made that could prevent supply disruptions without
significantly increasing costs or adversely affecting vehicle emissions. However, all
of their scenarios would require amendments to the RFG provisions in the Clean Air
Act.
Congressional interest has centered on the question of whether the various
standards could be harmonized to reduce the number of gasoline formulations. In the
107th Congress, H.R. 4 (Tauzin), the House-passed comprehensive energy bill, would
require a study into the harmonization of these standards, among other provisions.
H.R. 1834 (Smith, Nick) would require a similar study. H.R. 1834 has been referred
to committee.
Alcohol Fuel Tax Incentives59
As stated above, the exemption that ethanol-blended fuels receive from the
excise tax on motor fuels is controversial. The incentive allows fuel ethanol to
compete with other additives, since the wholesale price of ethanol is so high.
Proponents of ethanol argue that this exemption lowers dependence on foreign
imports, promotes air quality, and benefits farmers.60 A related, albeit smaller
incentive for ethanol production is the small ethanol producers tax credit. This credit
provides 10 cents per gallon for up to 15 million gallons of annual production by a
small producer.61
Opponents of the tax incentives argue that the incentives promote an industry
that could not exist on its own, and reduce potential fuel tax revenue. Despite
objections from opponents, Congress in 1998 extended the motor fuels tax exemption
through 2007, but at slightly lower rates (P.L. 105-178). In the 107th Congress, S.
907 (Carnahan) would extend to alcohol fuels tax exemption through 2015. In
addition, five bills would expand the availability of the small producer credit, increase
the size of a covered producer, and make the credit available to cooperatives. These
four bills are H.R. 1636 (Thune), H.R. 1999 (Nussle), S. 312 (Grassley), S. 613
(Fitzgerald), and S. 907 (Carnahan). All five have been referred to committee, but no
markups have been held. A hearing was held on S. 312.
H.R. 2303 (Lewis, Ron) contains the above provisions on small producers and
cooperatives. In addition, the bill would provide tax credits for the retail sale of
ethanol, and for the installation of retail infrastructure. This bill has been referred to
committee, but no hearings or markups have been held.
58EPA, Office of Transportation and Air Quality, Staff White Paper: Study of Unique
Gasoline Fuel Blends (“Boutique Fuels”), Effects on Fuel Supply and Distribution and
Potential Improvements. October, 2001.
59For more information, see CRS Report 98-435 E, Alcohol Fuels Tax Incentives.
60U.S. General Accounting Office (GAO), Effects of the Alcohol Fuels Tax Incentives.
March, 1997.
61Defined as having a production capacity of less than 30 million gallons per year.

---

CRS-18
Fuel Economy Credits for Dual Fuel Vehicles
The Energy Policy and Conservation Act (EPCA) of 197562 requires
Corporate Average Fuel Economy (CAFE) standards for motor vehicles.63 Under
EPCA, the average fuel economy of all vehicles of a given class that a manufacturer
sells in a model year must be equal to or greater than the standard. These standards
were first enacted in response to the desire to reduce petroleum consumption and
promote energy security after the Arab oil embargo. The current standard for
passenger cars is 27.5 miles per gallon (mpg), while the standard for light trucks is
20.7 mpg.
However, EPCA and subsequent amendments provide manufacturing
incentives for alternative fuel vehicles, including ethanol vehicles.64 For each
alternative fuel vehicle a manufacturer produces, credits are provided which increase
that manufacturer’s average. These credits include dual fuel vehicles–those vehicles
which can be operated on both a conventional fuel (gasoline or diesel) and an
alternative fuel, usually ethanol. Concerns have been raised over that fact that while
manufacturers are receiving credits for production of these dual fuel vehicles, they are
generally operated solely on gasoline, because of the cost and availability of
alternative fuels. Supporters of the credits argue that the incentives are necessary for
the production of alternative fuel vehicles, and that as the number of vehicles
increases, the infrastructure for alternative fuels will grow. In the 107th Congress,
H.R. 4 (Tauzin), the House-passed comprehensive energy bill, would extend the
credits through 2012.
Conclusion
As a result of the current debate over the future of MTBE in RFG, and the
RFG program in general, the future of the U.S. ethanol industry is uncertain. A ban
on MTBE would greatly expand the market for ethanol, while an elimination of the
oxygenate requirement would remove a major stimulus for its use. Any changes in
the demand for ethanol will have major effects on corn producers, who rely on the
industry as a partial market for their products.
The current size of the ethanol industry is depends significantly on federal laws
and regulations that promote its use for air quality and energy security purposes, as
well as tax incentives that lessen its cost to consumers. Without these, it is likely that
the industry would shrink substantially in the near future. However, if fuel ethanol
process costs can be decreased, or if gasoline prices increase, ethanol could increase
its role in U.S. fuel consumption.
62P. L. 94-163.
63For more information on CAFE standards, see CRS Issue Brief IB90122, Automobile and
Light Truck Fuel Economy: Is CAFE Up to Standards?
6449 U.S.C. 32905.

---

CRS-19
Appendix 1. Reformulated Gasoline and MTBE Bills in the 107th Congress
Bill No.
Sponsor
Last Major Action
Key Provisions
H.R. 20
Greenwood
Referred to House Energy
•
Allows states to petition EPA for a waiver from the RFG oxygenate requirement
and Commerce
•
Grants EPA the authority to control or prohibit the use of any oxygenate
•
Limits MTBE levels to the average of 1986 to 1991 levels, starting in 2005
•
Prohibits “backsliding” on toxic air pollutant emissions
H.R. 52
Condit
Referred to House Energy
•
Allows California to apply state RFG standards in ozone nonattainment areas if they
and Commerce
will result in equivalent or greater emissions reductions
H.R. 454
Johnson, T.
Referred to House Energy
•
Prohibits the use of MTBE effective three years from enactment of the act
and Commerce
•
Authorizes EPA to provide $10 million in grants for research on the testing and
remediation of MTBE contamination
•
Increases the allowable Reid vapor pressure in RFG containing 3.5% oxygen by weight
H.R. 532
Capps
Referred to House Energy
•
Authorizes $200 million from the Leaking Underground Storage Trust Fund for MTBE
and Commerce
contamination
H.R. 608
Ganske
Referred to House Energy
•
Prohibits the use of MTBE effective three years from enactment of the act
and Commerce
•
Requires EPA to give priority to MTBE contamination in issuing guidelines for state
source water assessment programs
•
Allows refiners to meet an average oxygen standard in RFG areas, as opposed to the
existing per gallon standard
•
Limits aromatic hydrocarbon content in RFG, and prohibits “backsliding” on ozone-
forming emissions
H.R. 1695
Pombo
Referred to House Energy
•
Prohibits the use of MTBE as a fuel additive
and Commerce
H.R. 1999
Nussle
Referred to House Energy
•
Prohibits the use of MTBE effective from the enactment of the act
and Commerce; Ways and
•
Removes EPA’s authority to waive RFG oxygen requirements
Means
•
Requires the use of ethanol in federal vehicles
•
Provides an RFG volatility credit for reductions in carbon monoxide emissions

---

CRS-20
Bill No.
Sponsor
Last Major Action
Key Provisions
H.R. 2017
Green
Referred to House Energy
•
Requires EPA to conduct a study on developing regional standards for RFG and other
and Commerce
clean gasoline blends
H.R. 2230
King
Referred to House Energy
•
Prohibits the use of MTBE as a fuel additive
and Commerce
H.R. 2270
Issa
Referred to House Energy
•
Allows California to apply state RFG standards in ozone nonattainment areas if they
and Commerce
will result in equivalent or greater emissions reductions
H.R. 2423
Thune
Referred to House Energy
•
Mandates 0.8% renewable fuel in 2002, increasing to 5.0% in 2016
and Commerce
S. 265
Fitzgerald
Referred to Senate
•
Prohibits the use of MTBE effective three years from enactment of the act
Environment and Public
•
Authorizes EPA to provide $10 million in grants for research on the testing and
Works
remediation of MTBE contamination
•
Requires labeling of pumps dispensing MTBE
S. 312
Grassley
Referred to Senate Finance,
•
Increases the maximum production allowable for the small ethanol producer tax credit
hearings held
•
Allows cooperatives to distribute small producer tax credit to patrons
S. 517 (as
Bingaman
On Senate Floor
•
Comprehensive energy legislation
amended by
(amendment by
•
Prohibits the use of MTBE
S. Amdt.
Daschle)
•
Establishes a renewable fuels standard (2.3 billion gallons in 2004, increasing to 5.0
2917)
billion gallons by 2012)
•
Provides assistance to MTBE producers to convert facilities to produce other gasoline
additives
S. 670
Daschle
Referred to Senate
•
Prohibits the use of MTBE four years after the date of enactment
Environment and Public
•
Expands EPA’s authority over fuels regulation to include water contamination
Works
•
Mandates 0.6% renewable fuel in 2002, increasing to 1.5% in 2011
•
Limits the content of toxic compounds in RFG
•
Provides an RFG volatility credit for reductions in carbon monoxide emissions
•
Authorizes funds from the LUST trust fund for MTBE cleanup

---

CRS-21
Bill No.
Sponsor
Last Major Action
Key Provisions
S. 892
Harkin
Referred to Senate
•
Prohibits the use of MTBE three years after the date of enactment
Environment and Public
•
Grants EPA the authority to waive the oxygen standard to avoid market disruptions
Works
•
Limits the content of toxic compounds in RFG
•
Mandates 0.8% renewable fuel in 2001, increasing to 3.3% in 2011
•
Provides an RFG volatility credit for reductions in carbon monoxide emissions
•
Addresses MTBE contamination
S. 947
Feinstein
Referred to Senate
•
Permits state Governors to waive the RFG oxygenate requirement
Environment and Public
Works
S. 950
Smith
Referred to Senate
•
Permits state Governors to waive the RFG oxygenate requirement
Environment and Public
•
Authorizes funds from the LUST trust fund for MTBE cleanup
Works
•
Expands EPA’s authority over fuels regulation to include water contamination
S. 1006
Hagel
Referred to Senate Energy
•
Mandates 0.8% renewable fuel in 2001, increasing to 5.0% in 2015.
and Natural Resources
S. 1766
Daschle
Placed on Senate legislative
•
Several provisions on RFG - bill text inserted into S. 517
calendar

---