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The Honolulu Advertiser
Posted on: Monday, August 21, 2006

COMMENTARY
Ethanol requirement a risk to gas supply

By Brian Barbata

An Advertiser headline story recently described how we narrowly dodged an ethanol and gasoline shortage and minimized the potential problems. But it failed to characterize one of the major risks of the state's new ethanol requirement.

Being on an island is much different than being anywhere else when it comes to concerns about supply disruptions. There are no alternatives. Everything must work perfectly all the time. Even the hint of a shortage of anything here produces panic buying. Ethanol adds one more risk element to our gasoline supply. In my opinion, it is a much greater risk than described.

The Advertiser commented that ethanol supply disruptions are only a risk until local production gets up and running. The 10 percent ethanol requirement equates to 45 million gallons a year of ethanol production in Hawai'i, which is unlikely to be achieved, in spite of recent announcements.

Right now, there is zero production, and not one facility is even under construction here. The amount of farmland and infrastructure to produce 45 million gallons of ethanol does not exist. If any significant production gets built at all, the bulk of our ethanol will continue to be imported. So this acknowledged risk will likely be with us forever. Worse yet, if local production ever becomes significant, imported ethanol will come in smaller ships, making it more and more expensive. And unless about 40 million gallons of local ethanol is made on O'ahu (where all the cars are), it will have to be shipped from Neighbor Islands by barge, again increasing its cost.

It sounded deceptively comforting that the state can waive the requirement for ethanol in an emergency and that the production of 88 octane gasoline could be used in cars. But the 88 is for blending with ethanol to make premium (92), so it is a very small amount. The bulk of the gasoline now produced here is 84 octane, for blending with ethanol to make regular (87 octane). As the story noted, cars will not run on 84 octane.

Hawai'i has switched from refining its additional octane needs, to bringing it in as ethanol. The idea that refiners can simply switch back to making gasoline as before doesn't make sense. First of all, they will always have huge inventories of 84 octane in storage. Not only does that have to be used (not possible without ethanol), but it likely prevents the production of any other gasoline, since there will be no tank to put it in. More problematic is that the two refineries and their crude purchases have now been reconfigured at great expense to produce mostly 84 octane gasoline for blending with ethanol. You don't just wake up one morning and change all that.

It is a common misconception that bringing in 45 million gallons of ethanol has displaced 45 million gallons of crude oil imports. Unfortunately, this is not how it works. Since we still need the same number of gallons of all the other fuels derived from crude oil, the amount imported is basically the same. The difference is the refiners may have to export the excess 10 percent gasoline to stay in balance.

The risks of ethanol supply disruptions for Hawai'i are tremendous. It is a very sensitive chemical that is going to be shipped across the ocean to us as long as it is required by law to be blended into our gasoline. It absorbs water like a sponge, and is subject to other forms of contamination, as described in the article. Once contaminated, it cannot be cleaned up.

Our legislators approached this change to "gasohol" backwards. Local production should have been encouraged and developed first, phasing into a statewide 10 percent requirement as local ethanol became available. Isn't that the point of this whole exercise? Instead, we are now at risk for a major gasoline disruption sometime in the future, in exchange for small environmental benefits which don't even apply to Hawai'i and unproven economic benefits to agriculture. Perhaps local ethanol production from cellulose and sugar can eventually make a dent in Hawai'i's requirement; but we will always be importing it, and it will have virtually no impact on crude oil imports.

This is just one more reason why the Legislature should not be tinkering with the petroleum business. The unintended consequences are real and huge.

Brian Barbata is a Kailua resident.