This is an excerpt from EERE Network News, a weekly electronic newsletter.

May 21, 2003

Ethanol Industry Growing as States Consider New MTBE Bans

With a ban on MTBE looming in California, and new legislation banning MTBE under consideration in Connecticut and New York, the U.S. ethanol fuel industry continued to grow in recent months. Since the beginning of March, one plant in Iowa and two in South Dakota began operations, increasing the U.S. production capacity by 125 million gallons per year. Construction also began on new plants in Illinois, Iowa, and Kansas that will add another 115 million gallons per year in production capacity. All of the new ethanol plants are farmer-owned. Currently, 72 ethanol plants are operating in the United States, providing a combined production capacity of more than 2.85 billion gallons per year. Ten plants are currently under construction. See the Renewable Fuels Association press releases.

Gas prices spiked in California earlier this year, and many people were concerned that the switch to ethanol was to blame. However, recent reports from DOE's Energy Information Administration (EIA) and the California Energy Commission (CEC) found that unexpected refinery outages and high crude oil prices were mainly to blame. Although the complexity of the transition to ethanol—creating two markets, one for ethanol blends and one for MTBE blends—contributed slightly to the price increase, the actual ethanol supply was not constrained and did not contribute to the price increase. However, the use of ethanol does require more gasoline in each gallon of blended fuel, and the long-term impact of that on the California market remains unclear. See the CEC report and the EIA report (PDF 729 KB). Download Acrobat Reader.

While the current ethanol industry draws on corn and other grains for the carbohydrates that are fermented into ethanol, a Canadian company is aiming to convert wheat straw—the non-edible stalk of the wheat plant—into ethanol. The company, Iogen Corporation, announced in late April that it was processing 50 tons of wheat straw into fermentable sugar each week. Iogen plans to produce about 185,000 gallons of ethanol per year at its pre-commercial facility. See the Iogen press release.