Detroit, Mich, March 30, 2006 – General Motors today announced that it would extend its partnership with the Governors Ethanol Coalition (GEC)–a bipartisan group of governors devoted to the promotion and increased use of ethanol–to provide several new E85-capable vehicles for use in GEC member states. The GEC is struggling with two major setbacks; contract restrictions by the oil companies and a delay in credit, by the IRS, to the oil companies for installation of E85 fueling pumps.
The Governors Ethanol Coalition (GEC) believes “that the nation’s dependence on oil is a major risk to our energy, economic, and environmental security. National security is linked to energy through the dependence of this country and many others on imported oil ” much of it located in politically troubled parts of the globe. As such, the potential for large-scale failures in the global production and distribution system presents a real threat. The combination of political tensions in major oil-producing nations along with oil demand growth from China and India has set in motion the pattern of energy price volatility witnessed in recent years ” creating periodic drags on the economy, increasing the trade deficit, and setting the stage for far more serious consequences.”
“The safest and cheapest way to mitigate these risks is to set and achieve a goal of providing at least 5 percent of the nation’s transportation fuel from ethanol by 2010, and to produce at least 8 billion gallons of ethanol a year by 2012. As soon as practicable thereafter, the nation should produce at least 10 percent of its transportation fuel from ethanol and biodiesel, including at least 1 billion gallons a year from biomass-derived ethanol.”
According to the U.S. Department of Commerce data, as cited by Bloomberg, the January 2006 trade deficit was $68.5 billion, of which $24.6 billion (or 36%) was due to imported oil. Annualized, the U.S. now spends about $800 million per day on imported oil.
Corporate Average Fuel Economy (C A F E ) was enacted in the 70s, after the oil crisis. The purpose of CAFE is to reduce energy consumption by increasing the fuel economy of cars and light trucks. All you have to do is look at the sprawl of suburbia to know this has not worked. If you increase the miles per gallon of gas one can drive all they do is drive further. If you want the United States to get off the dependence of foreign oil the easiest way to do that is to find another energy source. The current energy source available is ethanol. According to Larry Pearce, Spokesperson for Governor Dave Heineman of Nebraska, “The Governor is working with the Nations Petroleum Refiners and Marketers to remove any contractual restrictions that would prevent franchises from selling E85.”
Governor Rod R. Blagojevich (Bla go a vich) of Illinois has gone further. Blagojevich has filed a complaint with the Federal Trade Commission (FTC) alleging restraint of trade.
In a letter to the FTC, Blagojevich wrote,
“I am requesting the Federal Trade Commission (FTC) to investigate potentially illegal policies by major petroleum companies that discourage the sale of biofuels made from ethanol or biodiesel. These companies own, operate or attach their retail brand to gas stations in Illinois. At a time when consumers are paying more at the gas pump, there are unacceptable delays in making more cost-competitive, environmentally-friendly transportation fuels available throughout Illinois and across the country.
Specifically, I am asking the FTC to investigate the unacceptable delays in the growth of the number of gas stations that are selling E-85. My administration has made the exponential expansion of the number of E-85 stations in Illinois a priority and has been providing the funding to help make that happen. Since the autumn of 2004, the number of E-85 retail sales locations has increased from 14 to almost 100.
Although this growth is encouraging, it is not nearly sufficient, and a detailed examination of this accomplishment indicates that: 1) with the exception of only one single station, gas stations branded by the major oil companies have not made E-85 available, and 2) due to the concentration of the major oil company brands in the Chicago area, the growth in the number of outlets offering E-85 in the Chicago area has been much less rapid than in the rest of the state. I support the efforts of United States Senators Barack Obama and Charles Grassley, who have asked the U.S. Government Accountability Office to perform an in-depth analysis of biofuels sales infrastructure across the country. Based on information available to my administration, we believe that corporate policies are actively limiting the rate of expansion of biofuels infrastructure in Illinois and that an immediate investigation by the FTC is warranted. We stand ready to make available our information at the earliest possible opportunity.”
According to Phil Lampert, National Ethanol Vehicle Coalition, There are almost 170,000 fueling stations in the United States; 651 of them have E85 fueling pumps. Oil companies have policies in place that prohibit retailers from putting E85 fueling pumps in their stations. There is also the problem that last year there was supposed to be a tax credit of 30 percent or $30,000 for the installation of alternative fuel infrastructure. We had projected 2,000 pumps because of this, now we have downgraded our projection to 1,200.”
Todd Sneller, administrator of the Nebraska Ethanol Board said that the IRS did draft the rules and guidance in November, but ” the draft was not the intent of Congress. The intent of Congress was $30,000 per installation and the draft read $30,000 total. The IRS is redrafting the rules and guidance and should be done shortly, but then there is a 30-60 day comment period.”
This means that we will be lucky if we get 1,200 E85 fuel pumps in 2006. Unless the Congress/IRS is going to allow the oil companies to have a back credit of $30,000 (169,349 X $30,000=$5,080,470) for each fueling pump there is no incentive for the oil companies to install them.
Annualized, the U.S. now spends about $800 million per day on imported oil. If all oil were E85 $680 million per day would be spent on ethanol produced in America and the money would stay in America. A credit of over $5 billion for installation versus ultimately keeping 680 million a day.
Follow the money