"New Ethanol Mandate Could Leave California Open to Price Spikes
and Shortages of Gasoline"
March 8, 2002

"I have very serious concerns about the impact of the new proposed ethanol mandate on California. I have spoken with my colleague Senator Boxer and Governor Davis to determine how best to have these concerns addressed in the legislation.

The Energy Bill, as it is now drafted, would mandate a huge increase in the nationwide use of ethanol from 1.7 billion gallons to 5 billion gallons by 2012. This could have a very detrimental impact on California, leaving the State open to gasoline price spikes and shortages.

With refineries at 90 percent of capacity in our State and with very little ethanol produced in California, there is a big question about whether California can absorb this mandate without gasoline prices rising significantly.

It is particularly objectionable because California does not need this amount of ethanol to meet Clean Air Act standards. Thus we will be forced to use a huge amount of ethanol that we don't really need.

I am also concerned about potential price manipulation since the ethanol industry is very concentrated in a small number of firms.

As the General Accounting Office pointed out this week, the Archer Daniels Midland Company has a 41 percent share of the ethanol market and the top eight firms combined have a 71 percent share of the market. This increases the possibility of an Enron-like situation in which California could be at the mercy of a giant, out of state corporation."