November 2004 Newsletter

Don't Defuse Fledgling Biofuels Market

October, 2004
By Tom Koehler

An obscure state administrative rule in Oregon mandates that ethanol, a renewable biofuel, be blended with gasoline sold in the Portland metro area during the four months of winter.

Blending biofuel with gasoline has a number of environmental benefits, including reduced emissions of cancer-causing air toxics, carbon monoxide and most importantly, climate change-causing gases. The fact that it's produced in the United States means ethanol also reduces our heavy reliance on foreign oil. And over the last five years, the price of ethanol has averaged 30 cents per gallon less than gasoline.

The national ethanol industry has grown steadily in recent years, and Oregon is poised to capture some of the growth. Several companies have proposed building plants in rural Oregon to produce ethanol from agricultural products. An 852-acre facility in Clatskanie, Ore., proposed by Cascade Grain, would produce 100 million gallons annually. Referring to the project, Sen. Gordon Smith (R-Ore.) said: "At a time when both the national economy and Oregon's economy are struggling, it's good to see the commitment and desire to add new jobs and industry..." Other plants, planned in Eastern Oregon near Ontario and La Grande, could bring millions of dollars of investment to rural parts of the state.

One wouldn't expect the state's environmental watchdog, the Department of Environmental Quality (DEQ), to care so much about the price of gas, energy security, or even economic development. But even though use of biofuels in gas has proven environmental benefits, DEQ staff are recommending the state do away with its biofuel-blending requirement in 2005. This is especially bizarre because DEQ's own internal analysis claims keeping the fuel rule in place would reduce emissions of carbon monoxide, carbon dioxide and other toxins over the next 15 years.

Who's in favor of keeping the biofuel rule the way it is? Republican and Democratic legislators from urban and rural Oregon, state agencies like the Oregon Office of Energy and the Department of Agriculture, the City of Portland and the City of Beaverton, the Oregon Farm Bureau and the Oregon Environmental Council.

Who's opposed? Lobbyists for Western States Petroleum Marketers and British Petroleum, otherwise known as BP (I guess we're not quite yet "Beyond Petroleum"). Apparently they have a lot of pull, and apparently they aren't as excited about low-cost fuel and clean air as you and I are.

DEQ's staff has concluded that if we don't need the rule to meet a federal emissions standard, it should be scrapped. There are two major problems with this reasoning. First, the ethanol regulation is not burdensome. It actually saves taxpayers money while cutting pollution. Even the oil companies make money on it. Secondly, making a narrow decision on one pollutant alone is emblematic of "silo" decision-making. Recently, the National Academy of Sciences issued a report urging public agencies to adopt multi-pollutant, multi-media analyses for regulations. Failure to do so undercuts other state initiatives and goals.

Gov. Ted Kulongoski is pushing two major initiatives that would seemingly benefit from increased use of biofuels. The first is his renewable energy plan, currently in draft format. The second is his lead role in the West Coast Governor's Global Warming Initiative. Kulongoski has yet to weigh in on this biofuel issue, and it's high time he did.

Oregon currently imports 100 percent of its transportation fuel. There will never be an oil refinery built in Oregon, but with the right economic development and environmental policies, the state could build a billon-dollar biofuel industry with a biorefinery in every county. It wouldn't require lavish subsidies or tax credits. All it requires is a market, which the current biofuel program provides. The biorefineries would produce renewable fuel, create new jobs, put agricultural and municipal waste to good use, and help mitigate environmental woes. This is called sustainable development, but it could all amount to unrealized potential and worthless words if the Portland biofuel program is ended.

DEQ is holding hearings and accepting public comment on the rule in October. The state Environmental Quality Commission plans to take up the issue Dec. 9-10.

Tom Koehier has been in the biofuel industry for the last 15 years and is a co-owner of Celilo Group Media.