For immediate release: October 26, 1999
Media Contact: Claudia Chandler -- 916 654-4989

California Can Make Ethanol, But Clear State Policy
Should be Considered, Newly-Released Report Says

California has the potential to produce ethanol fuel from biomass, but a clear State policy must be considered to encourage such an industry to develop, said a Committee draft report recently released by the California Energy Commission.

The 115-page report is a follow up to a staff draft prepared in August. It acknowledges that creating an industry to make a renewable liquid fuel from biomass resources offers a number of potential energy, environmental and economic benefits to the State's citizens.

But the report said the obstacles to creating the new industry are as formidable as the benefits.

Ethanol is mostly made from corn in the Midwest states and used as an additive in gasoline. It is seen as among the most viable alternatives to methyl tertiary butyl ether, or MTBE, that California Governor Gray Davis has ordered phased out.

In ordering a ban on MTBE, Davis asked the Energy Commission to evaluate California's "potential to develop a waste-based or other biomass ethanol industry."

As a transportation fuel additive, the State's demand for ethanol could be approximately 1 billion gallons a year, nearly the current annual ethanol production of the entire United States. Only one small biomass-to-ethanol plant -- with a capacity to produce 6.0 million gallons of ethanol a year -- operates in California.

At present, the cost of producing ethanol using Midwest corn remains high. Price supports of 54 cents per gallon from the federal government, along with income tax credits and a number of subsidies from Midwestern states, are required to make it competitive as a fuel additive.

The report pointed out that the technology to produce the liquid fuel from the 51 million dry tons of wood chips, rice straw, municipal trash and solid waste produced in California each year, remains in the demonstration phase today.

Because the economics of biomass-to-ethanol production are uncertain, it qualifies as a high-risk venture. For that reason, it may be difficult to raise the large amounts of capital needed to build the first large-scale facilities and to guarantee a supply of reliable, low-priced biomass material to support such a plant.

To overcome the roadblocks, the report recommends an interagency forum to recommend a broad state policy to develop the State's waste biomass resources.

"An oversight agency, identified by the Governor, the California Resources Agency or California Environmental Protection Agency -- should take the lead," the report noted.

The report also recommends continued research, development and demonstration activities, including funding opportunities in support of several biomass-to-ethanol projects in the State.

To support market development, the report recommends continued study of the "most appropriate forms of financial and non-financial assistance…should the biomass-to-ethanol projects prove technically and economically feasible."

Further, the report said there was a need to "develop a method to determine the cost and public benefits associated with biomass-to-ethanol and biomass to transportation fuels industry in California."

The report, Evaluation of Biomass-to-Ethanol Fuel Potential in California, and supporting technical appendices can be ordered by calling the California Energy Commission's Publication's Office at (916) 654-5200 and requesting publication #500-99-017 and #500-99-017A. It can also be downloaded from the Energy Commission's Web Site at www.energy.ca.gov/mtbe/ethanol

The report will be the subject of a public hearing on Friday, November 19, 1999 from 9 a.m. to 4 p.m. at the California Energy Commission.

EDITOR'S NOTE: Members of the media who wish to receive the Executive Summary by FAX may contact the Commission's Media and Public Communications Office at (916) 654-4989. To receive a copy of the entire report by mail, please call the same number.

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