FOR IMMEDIATE RELEASE June 17, 2001


SCHUMER: NEW BUSH DECISION TO SIDE WITH ETHANOL INDUSTRY WILL RAISE GAS PRICES IN NYC AND LI BY UP TO 50 CENTS/ GALLON

Bush Requirement to Add Ethanol to Gasoline Onerous for the Northeast

President sides with Midwest over New York, Northeast, California; Senator questions, "Could this be political payback?"

Schumer Announces Support for New Bill To Give States Like New York Flexibility In Selecting Gasoline Blends

US Senator Charles E. Schumer today announced that a new decision by President Bush to force states to use expensive ethanol additives in gasoline blends could raise prices by up to 50 cents per gallon, even though newer, cleaner, safer and cheaper alternatives already exist. Schumer called on Bush to allow states to use new methods of reformulating gasoline that meet the same air quality standards as ethanol, and announced his support for a new bill in Congress that would give states flexibility in selecting gasoline blends that would protect both consumers and the environment.

Under the Clean Air Act, New York City is currently required to use clean burning gasoline with either ethanol or MTBE additives. However, New York is in the process of phasing out MTBE additives by 2004 because of the threat posed to drinking water, meaning it must start either using ethanol – which must be shipped at great cost from the Midwest and mixed with gasoline on site – or new, cleaner, cheaper and safer blends of reformulated gasoline, which meets air quality standards. Schumer expressed concern that Bush, who has strong ties to the ethanol industry and denied California's request for a waiver from the ethanol rule last week, would similarly deny any potential waiver application by New York, forcing consumers to purchase gasoline with expensive ethanol additives.

"Just as we're starting to see some relief from high gas prices, President Bush decides to give the ethanol industry and the Midwest an unbelievable break at the expense of millions of New Yorkers – and the environment. Could this be political payback?" asked Schumer.

Currently, New York uses extremely minimal amounts of ethanol in gasoline blends. Forcing New York refiners to use ethanol instead of reformulated gasoline would increase the cost of gasoline dramatically, because of:

Increased production costs. Total US ethanol output currently stands at 1.8 billion gallons. If New York, California and the other states that have banned MTBE are not granted waivers from the EPA, they will need to purchase 1.2 billion additional gallons of ethanol – including 240 million in New York alone. Since the ethanol industry will not be able to immediately increase output by 66%, demand will quickly outstrip supply, leading to higher prices at the pump, as well as potential gasoline shortages reminiscent of shortages produced by severe OPEC cutbacks in years past. Since supply will be scarce, states that now must use ethanol will be forced to bid against each other, driving prices even higher. Droughts or other severe weather conditions in the Midwest could lead to further shortages.

High shipping costs. Unlike most liquid fuels, ethanol cannot be shipped via pipeline. And since ethanol is produced in the Midwest, most of it will have to be trucked to the Mississippi River, floated on barges to the Gulf of Mexico, loaded onto tankers for shipment to New York and then trucked into the city and Long Island – a time consuming and extremely expensive process that will also increase local traffic, congestion, and smog (the very thing ethanol is supposed to prevent).

Retrofitting refineries. The region's already overtaxed refineries would have to be retrofitted for ethanol mixing at the cost of at least $50 million, which would be passed onto consumers in the price of gasoline. This would also cause further delays in the refining process, leading to decreased supply and higher costs.

The federal government currently provides $700-800 million in annual ethanol subsidies. At that rate, production increases of 66% would cause federal subsidies would increase by approximately $500 million, imposing an extra financial burden upon taxpayers.

Schumer called on Governor Pataki to apply for a waiver from the Environmental Protection Agency (EPA) that would allow New York to use reformulated gasoline that does not contain MTBE or ethanol. Schumer also called on Bush to grant waivers for states like New York, California and Connecticut that have banned MTBE, which has been known to cause cancer in animals, and can leak into the groundwater supply through gas spills and leaky gas tanks. Bush's decision to deny California's waiver application could force other states to delay or cancel their plans to ban MTBE, providing a boon to the MTBE industry. Ethanol is similarly problematic, because it evaporates easily, increasing ground level ozone, which causes asthma and respiratory illness. Reformulated gasoline has been proven to meet strict air quality standards without the high costs or environmental threats posed by MTBE and ethanol.

"President Bush has given New York two options: bad and worse. He's forcing us to choose between contaminating our groundwater by using MTBE or importing ethanol from halfway across the country which will increase the price of gasoline by at least fifty cents a gallon and harm the air we breathe," said Schumer. "The worst part is that a cleaner, cheaper, safer alternative exists, and President Bush won't let us use it."

Schumer also announced he would be co-sponsoring a bill by Senators Harry Reid (D-NV) and Robert Smith (R-NH) that would ban MTBE from gasoline nationwide by 2005 and give states the flexibility to waive requirements that force refiners to use ethanol or MTBE, provided the reformulated gasoline meets federal air quality standards.

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