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FOR IMMEDIATE RELEASE: April 4, 2004

SCHUMER: NEW EVIDENCE PROVES THAT GRANTING NY WAIVER FROM ETHANOL MANDATE WILL QUICKLY LOWER GAS AND OIL PRICES

A rumor that Washington was close to giving New York permission to sell gas without ethanol sent gas futures prices plummeting late last week

Waiver still on the table and could be approved at any time

Senator renews call for EPA to grant exemption – say last week was proof positive that granting New York's waiver will cut gas costs

Armed with new evidence which proves that exempting New York from having to use ethanol to reformulate its gasoline would result in significant and immediate price cuts, US Senator Charles E. Schumer today renewed his effort to get the Environmental Protection Agency (EPA) to approve New York's waiver request. Last Thursday, the prices of crude oil and gasoline futures fell sharply on the New York market based on a rumor that Washington was going to approve New York's waiver and a similar one requested by California.

"Just the rumor of setting New York free from the ethanol mandate sent prices for crude and gas futures prices plummeting. If Washington actually went ahead and gave us the relief we need, the cost of crude would drop like a barrel going over Niagara Falls," Schumer said. "Prices at the pump break new records almost every day. It won't stop unless Washington steps up and does something to rein prices in, but the Administration still stubbornly sits on its hands and makes excuses. What more proof do they need?"

On Thursday, US Energy Secretary Spencer Abraham told the US House Energy and Commerce Committee that the Bush Administration was "seriously" considering approving New York and California's requests for waivers of the oxygenate requirement, which would help ease prices and loosen summer supply bottlenecks. Within hours, energy traders on the New York Mercantile Exchange (Nymex) sent the price of gasoline for April delivery down 5.2% to $1.076 a gallon. Benchmark crude oil prices on the Nymex followed suit, falling $1.49, or 4.2%, to $34.27 a barrel. When the price of gasoline fell, it brought down the prices of all petroleum-related futures.

Under federal law, New York's high levels of air pollution make it one of ten states nationwide that must include an oxygenate, either the additive ethanol or MTBE in its gasoline to help it burn more cleanly. Schumer has long predicted that the requirement would drive New York gas prices up dramatically by now, because the state has a ban on MTBE and because ethanol is very costly to transport into the region and presents possible supply challenges in meeting demand for summer fuel blends.

To prevent this price hike, Schumer has repeatedly asked the EPA to grant New York an exemption from the requirement, which is part of the Clean Air Act Amendments of 1990. Governor Pataki has formally requested the waiver, and the rumor that the request was being considered for final approval is what sent oil prices falling Thursday. Schumer says that New York has several ways to burn the gas more cleanly that do not necessitate massive price hikes. For example, refiners in the state have said they can use other chemicals to meet clean air standards, including alkylates and isooctanes.

In January, EPA announced that it would give preliminary acceptance to New Hampshire's plan to opt out of the requirement as long as the state shows it has another plan to reduce air pollution. Schumer said today that the EPA should grant New York an exemption similar to the opt-out New Hampshire received in January.

“This isn't some abstract economic theory – we saw last week that granting New York's waiver will send prices tanking almost immediately. Washington has run out of excuses, and it's time to send us gas price relief now," Schumer said.

A handful of Midwestern companies control most ethanol production. For states like New York, ethanol is expensive because it cannot be transported using traditional means like pipelines and needs to be trucked and barged into the region. Only a handful of companies control ethanol production, and challenges in making up for volume and producing enough ethanol can create supply problems that drive up gas costs. This month, when gas suppliers must switch to new fuel blends in preparation for higher summer temperatures, gas supplies across the state may fall far short of increasing demand. According to the Energy Information Administration (part of the Department of Energy),the oxygenate requirement could drive New York gas prices up by as much as 30-40 cents per gallon.

"If you are far away from these ethanol plants, it has to be produced, put on a truck, a barge, sent down to Mississippi, and then, by boat, sent all around the country and then loaded back, put on a truck, and put into the gasoline. You can see why it is so pricey," Schumer said. "It's also tougher to blend with other parts of gasoline, and that's a one-two punch that could put New York drivers down for the count this summer."

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