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For Immediate Release: October 21, 2003
Contact: Claudia Chandler - 916-654-4989

Energy Commission Reports on Nation's Ethanol Supply
and the Outlook for California

Sacramento - The California Energy Commission today released The 2003 Ethanol Supply Outlook For California Report, a comprehensive investigation of ethanol production and supply in the United States.

Ethanol is used as an oxygenate in California's gasoline supply, replacing the oxygenate Methyl-Butyl Tertiary Ether (MTBE), which Governor Gray Davis ordered removed from gasoline by the end of 2003 after it was found to pollute ground water supplies in the State. Since early this year, ethanol replaced MTBE in approximately 65 percent of the State's gasoline supply; by December 31, 2003, California's gasoline supply will be MTBE-free.

With the phase-out of MTBE, California has become the largest ethanol market in the nation. California's ethanol use is estimated to be between 760 million to 990 million gallons in 2004. The additive makes up between five and six percent of the State's gasoline supply.

"With New York and Connecticut both about to join California in banning MTBE, it is critical that we have sound in-depth analysis about the supply and the demand for ethanol, in California and in the nation," said California Energy Commissioner James Boyd. "California's report is the most complete assessment of the ethanol industry to date."

The latest report updates an Energy Commission survey of the ethanol industry that was conducted in 2001. The new, more detailed survey looks at current ethanol production, as well as future production from proposed facilities and from 16 plants currently under construction. Since corn is the feedstock for almost all of the country's ethanol supply, production is concentrated in the corn-producing states of the Midwest. The report finds that an increasing number of states outside the Midwest are becoming ethanol producers as the industry rapidly expands to meet anticipated future demand. The nation's production capacity increased from 2.22 billion gallons per year in 2001 to 3.07 billion gallons in the year 2003 - an increase of 38 percent.

The second part of The 2003 Ethanol Supply Outlook For California examines the prospects for increasing ethanol production within California and lists 20 proposals under consideration. "California has several small ethanol producers that together can supply up to 10 million gallons a year. Clearly there is a market here for additional in-State production," Boyd said. "If California can develop an ethanol industry that uses waste biomass - rice straw, sugar cane residues, and other farm, forestry and municipal waste products instead of corn to produce the fuel - we can improve California's environment and create jobs in a new industry."

Today over two-thirds of the ethanol used in California is delivered to the State by train. Rail upgrades are underway that will improve ethanol transport from the Midwest, allowing for more timely and direct distribution.

A third part of the report explores the international production of ethanol. Up to 10 percent of California's ethanol supply comes from foreign countries such as Brazil.

"While the ethanol picture looks promising for California in the short term, the Energy Commission continues to be concerned about the growing demand for gasoline in general," Boyd said. "As California's demand for gasoline grows, we become more and more dependent on imports. California already imports 10 percent of its gasoline supply. As outlined in the Energy Commission's latest Energy Report, if demand continues to increase, we will need significant improvements to our port facilities and fuel terminals in order to keep pace with the need for additional out-of-State supplies."

The 20-page 2003 Ethanol Supply Outlook For California Report is available on line from the Energy Commission's website at:

www.energy.ca.gov/reports/2003-10-21_600-03-017F.PDF (PDF file)>.


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