For immediate release: March 21, 2001
Media Contact: Claudia Chandler -- (916) 654-4989

Report Says California Can Benefit
From Biomass-based Ethanol Industry

Sacramento -- California has the potential to develop an in-state ethanol industry to help supply its growing transportation energy needs, a report produced for the California Energy Commission concludes.

The consultant's report prepared by Arthur D. Little Inc. said the benefits of a biomass-to-ethanol industry to California's economy are potentially greater than the cost of State support for such an industry.

The economic analysis performed for the study estimates statewide benefits of $1 billion from new jobs and increased tax revenues over a 20-year period, from State government incentives totaling $500 million for a 200-million-gallon-a-year ethanol industry.

Additional benefits cited in the report include reduced risks of wildfires and associated air emissions, and decreased agricultural burning and landfilling of waste materials that could fuel biomass-to-ethanol plants.

Ethanol, a form of alcohol presently made primarily from corn in the Midwest, is seen as the most likely replacement for MTBE (methyl tertiary-butyl ether). Citing harm to the environment, Governor Gray Davis ordered that the additive be removed from California's gasoline supply by the end of next year.

California's demand for ethanol as a transportation fuel additive could reach over 700 millions gallons a year, or about 40 percent of the nation's current total output, when MTBE is phased out of California's gasoline supply by 2003. With the demand for ethanol expected to rise in other states following California's lead, local ethanol production could reduce imports.

The consultant's report responds to State Budget language directing the Energy Commission to study the economic costs and benefits associated with thedevelopment of a biomass-based ethanol production industry in California. The report approved today at a Commission business meeting is due to the Governor and the Legislature by March 31, 2001.

Numbering 106 pages, the report evaluates two California biomass-based ethanol production scenarios. In one scenario, a 200-million-gallon-per-year ethanol industry is analyzed with an assumed level of state investment. The study shows that a 20-cents-per-gallon producer payment and a 10 percent capital cost support for new plant construction could yield potential economic benefits for the State.

The report states that technologies for producing ethanol from forest residue, orchard pruning, rice straw and municipal waste products are still being developed, and thus have not yet reached commercial scale. Such uncertainties, combined with a doubtful market for ethanol, discourage private investment, according to the report.

For an ethanol industry to take root in California, further State government action may be necessary, the report concludes. The State has to strive to lower the cost of collecting and transporting biomass and finance production facility construction and operation. But even with State support, ethanol production from California-based facilities will not be in place until 2004 or later, the report explains.

Entitled Costs and Benefits of a Biomass-to Ethanol Production Industry in California, the report and supporting appendices can be ordered by requesting publication numbers P500-01-002 and P500-01-002A. It can be downloaded from the Energy Commission's Web Site at:

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