California refiner sues to block new fuel rules

Professing concern about corn-based ethanol's greenhouse gas emissions and indirect effects on U.S. food prices, fuel-maker Tesoro Corp. on Tuesday sued to block California regulations that would boost the biofuel's content in gasoline to 10% by 2010.

The San Antonio company, which owns refineries in Los Angeles and the Bay Area city of Martinez, said in a press release that its newly-filed lawsuit seeks a preliminary stay and eventual nullification of the new gasoline rules.

"More and more questions are emerging about the impact crop-based ethanol has on our environment and food supply," Tesoro Chief Executive Bruce Smith said. "We think greater review of the environmental and economic impact of this fuel supply is needed."

But the text of the lawsuit, filed in Sacramento Superior Court, says precious little about Tesoro's worries over food supply and prices. Rather, the company's core complaints are that California Air Resources Board's new rule: takes effect too quickly, forces companies to pay for emissions offsets if they don't meet the 2010 deadline, and requires expensive refinery modifications that might not be compatible with California's still-evolving Low Carbon Fuel Standard. 

A little background is in order here.

Technically speaking, California's gasoline regulations -- both old and new -- don't require refiners to use ethanol at all. The rules require that gasoline sold in the state contain certain amounts of oxygen and comply with a complex set of emissions limits (and believe me, you don't want to see the formulas involved).

California's Low Carbon Fuel Standard, meanwhile, is supposed to place limits on the carbon 'footprint" of all fuels sold in the state. The details aren't worked out yet, but the goal is to assign a carbon 'cost' to every fuel sold in the state, taking into account greenhouse gas emissions covering the fuel's full life-cycle, and including everything from feedstock production and drilling impacts to how the fuel gets to market and what leaks into the air when it gets consumed by a car.

Most of the gas sold in California today includes 5.7% ethanol. All but a tiny fraction of it is made from corn, and the majority of it is imported by train from the Midwest. The crop's production and rail ride to California is problematic, carbon wise, according to the Air Resource Board. Those drawbacks, if not eliminated, will make ethanol a tough sell once the low-carbon rules kick in.

But the biofuel still gets high marks from air regulators because it produces far less pollution and smog than gasoline and also reduces the airborne particulates that have been blamed for the rise in asthma and other ailments.

Under federal mandates, U.S. refiners must sell fuel with an average renewable content of 9% next year, a figure that rises to 10% in 2010. That's the same year California's new 10% ethanol formula kicks in.

The problem for Tesoro and other refiners is that the whole move to biofuels is eating away demand for its products. That might have something to do with the company's sudden concern about ethanol's impact on the environment and the nation's food supply.

-- Elizabeth Douglass

Comments

[Tim Dunn]

As a chemist I take issue with the statement "But the biofuel still gets high marks from air regulators because it produces far less pollution and smog than gasoline". Not true when you take into the account the vapor emissions from ethanol gasoline mixtures. Especially vapor emissions from all the cars made before 1995. Four years ago ARB was fighting hard to try to exempt CA from the federal oxygenate mandate (essentially an ethanol mandate) only to flip-flop when they decided greenhouse gas issues were all important. I don't agree with Tesoro. They just don't want to spend money to improve gasoline quality. However, ethanol especially corn ethanol is not the answer.

[Bruce]

Hi Elizabeth, couple of clarifications for your consideration. (a) The rule requires gasoline to contain oxygen; (b) only ethanol and MTBE have oxygen; and (c) California has banned MTBE. Therefore the rule requires ethanol addition. Ethanol addition increases evaporative emissions (read: increases smog) and so--in order to accommodate the ethanol-- CARB is waiving its own standards by allowing higher RVP (higher evaporative emissions and higher smog). These facts motivated the State's lawsuit against the Federal government, seeking to exempt California from the oxygen requirement after MTBE was banned in California. Having lost this lawsuit, CARB is now forced by the Federal government to mandate ethanol, and thru it, dirtier air.

[Ed German]

The USDA raised its estimate of the amount of corn that will be used for ethanol production to 4.1 billion bushels out of total harvest of 12.3 billion bushels (AP, August 12, 2008) the ). The Union of Concerned Scientists concluded that corn ethanol pushes up food prices (Sept 2008 newsletter). And a recent documentary video demonstrates tropical deforestation in Ecuador as a result of rising corn prices. See video at ("Ethanol Effect") on youtube:

http://www.youtube.com/watch?v=O0sxhX8XZB0

[lonnie]

biofuels is eating away demand for its products [oil ]. Yes i love it . they can CRY more [wolf ] also when more electric vehicles etc eat away at there profits . americans are on to the oil company's and refineries lies . fat cats who dont give a dam about our environment . all they want is a fat wallet . cry wolf all they want . love it ... alternative fuels is the answer , lonnie

[Nathan Schock]

Ed,
What you forgot to mention is that the even though the USDA has raised its estimate of the amount of corn used for ethanol, the price of a bushel of corn has dropped nearly 50 percent in the past three months. If ethanol caused the increase in corn prices, wouldn't it stand to reason that the price of corn would still be going up?

The truth is that ethanol production has some impact on food prices, but it's a very small impact. BTW, I'm still waiting for food prices to come down...

[2020]

Actually Elizabeth gets it right, and many of the techies here get it wrong.

First, the regulation requires oxygen content, not MTBE or ethanol or any other type of oxygen. The oil companies could come up with another oxygenate. But the real point is that the regulation requires only 2% oxygen by weight, which is the equivalent of ~ 6% ethanol by volume. This is what CA uses today. Valero does not want to go to 10% by volume, but nothing in the regulation pushes 10% by volume. In other words, the oxygen requirement may push oil companies to 6 percent, but has nothing to do with 10%. It is simply a lie to say that the new regulation is an ethanol mandate or a virtual ethanol mandate. It allows more ethanol, and that's what Valero is nervous about.

Second, the regulation now accounts for vapor emissions from ethanol and other blends. Tim is 5+ years out of date. So ethanol blends cannot increase emissions compared to other blends, and vice versa, by law, INCLUDING vapor emissions.

Elizabeth gets this. And the article is a breath of fresh air from the usual PR company nonsense about ethanol that gets reprinted in our newspapers.