Davis' ethanol decision impacts Iowa
Plants will have to adjust
By Jean Caspers-Simmet
California Gov. Gray Davis' decision to delay the MTBE ban until 2004 could impact Iowa ethanol producers.
"Gov. Davis' decision to delay the phaseout of MTBE for another year will delay by one year our opportunity to sell ethanol to California,'' said Sen. Charles Grassley, R-Iowa. "It will put in jeopardy the financial condition of some of our new plants that are just getting started.''
Grassley said Midwest states were so buoyed by the decision of President Bush not to grant a waiver to California a year ago. They thought everything was clear to start selling ethanol to that market.
But Davis' decision changes that. Davis has said he's nervous about not having enough ethanol, but Grassley charges that the governor is "really dancing to the tune of big oil." Grassley said the governor is up for re-election and doesn't want to risk high gas prices around election day.
"I think the decision is contrary to good environmental policy since MTBE poisons ground water,'' Grassley said.
"I believe that California has already built the infrastructure to blend gasoline, and petroleum companies are really not willing to have lawsuits,'' said David Nelson, a Belmond, Iowa, farmer and president of Midwest Grain Processors. "I think they will phase out MTBE as quickly as they can regardless of what the governor does. I look for a lot of gallons to be blended, and I don't think the market will be as bleak as a lot of people are thinking. We've already seen a pretty substantial increase in the price of gasoline, and ethanol seems to follow that.''
Midwest Grain Processors is building a 45-million gallon dry mill ethanol plant west of Lakota. The plant is projected to begin processing corn in November.
MGP will probably have a stock offering next winter to fill out the remaining shares not purchased by farmers, Nelson said at last week's Ag Ventures annual meeting in Clear Lake.
"We need those bushels of corn, and with Gray Davis doing what he did and the ethanol market being soft next year we'd like to have as much equity in the plant as we can and pay off some debt,'' Nelson said.
Grassley also pledged to do what he can. He said he will introduce an amendment after Easter recess overruling Davis' decision to extend the phase-out of MTBE.