Refiners say Congress must 'draw the line' on ethanol subsidies

Washington (Platts)--17May2006

Using funds intended to clean up and repair leaking underground storage
tanks to help pay for the installation at service stations of equipment to
dispense E85, an 85% ethanol/15% gasoline blend, is going a step too far,
the National Petrochemical and Refiners Association said Wednesday.

In a statement, NPRA President Bob Slaughter said, "We think Congress
should replace irrational exuberance with reason in considering any other
proposal that provides ethanol with additional subsidies. Congress must draw
the line at current programs that already provide ethanol with extremely
generous subsidies."

Bi-partisan legislation proposed in the Senate would take money from the
Leaking Underground Storage Tank trust fund to provide up to $30,000 for
gasoline service stations and other eligible entities that install alternative
refueling systems, including E85 and biodiesel.

"NPRA recognizes that ethanol is an important and growing component of
the nation's fuel supply, but we oppose any mandates or new subsidies for the
product," Slaughter said. "Frankly, enough is enough."

The current wholesale price of a gallon of ethanol is $2.90, compared
with $2.38/gal for gasoline, the statement said. "E85 contains only roughly
75% of the energy content of gasoline, so it actually costs consumers 25% more
even when the prices of E85 and regular gasoline appear the same. In addition,
ethanol currently receives a 52-cent/gal federal subsidy; numerous state
subsidies; a national mandate that refiners use most or all of the ethanol
produced in the country regardless of its cost; plus a protective barrier that
prevents cheaper ethanol imports from competing with turbo-subsidized domestic
ethanol."

The intent of the legislation "is to encourage installation of E85
pumps at service stations and other locations where it makes no economic sense
to have them," the NPRA statement said.

--Gerald Karey, gerry_karey@platts.com

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