Ethanol In Louisiana

Historical Perspective

From 1984 through 1990 ethanol was Louisiana's alternative fuel of choice. The ethanol was blended with gasoline to form gasohol (gasoline containing 10% ethanol). The now nonexistent ethanol industry in Louisiana was spawned by federal and state subsidies enacted in the late 1970s and generously expanded through the mid-1980s in reaction to the energy crises of that era.

A total of 18 ethanol plants were seriously planned in Louisiana at one time or another. The size varied from less than a million gallons per year to 100 million. Nine plants were actually built, and the maximum number that operated at any one time was six. Although the total combined capacity of all the plants was 155 million gallons per year (MM GPY), actual total cumulative production was only 112 million gallons over the entire seven year period ethanol was produced in the state. Peak production of almost 32 million gallons occurred in 1986. Peak Louisiana gasohol consumption of 319 million gallons also took place that same year.

After the 1989 Legislature repealed all state ethanol subsidies, production ceased, and all the plants were shut down by December 1990. Gasohol consumption declined drastically, but has since rebounded considerably with gasohol made from ethanol produced in other states.

A comprehensive history of the ethanol industry in Louisiana is presented in DNR's November 1993 publication Ethanol in Louisiana 1993. If you would like a copy please write to:

Present Status^24,25

Two closed plants are still capable of operating and have a total capacity of about 77 MM GPY. They are the 35 MM GPY capacity Shepherd Oil plant near Jennings and the 42 MM GPY capacity Mississippi River Alcohol Corporation's (Missalco) plant near Belle Chase next to a grain terminal on the Mississippi.

According to Paul De Baillon, trustee for the bankrupt Shepherd Oil ethanol plant near Jennings, most of the equipment in the plant was sold to a Nebraska company at an auction on June 21 for $4.2 million. He said another auction will be held to sell the rest. However, DEQ maintains there is an environmental liability associated with the site that was not included in the sale and may attempt to block the transaction until such responsibility is determined. Meanwhile, another company has offered to purchase the site and build a new ethanol plant utilizing a process that is economically feasible without any of the government subsidies for which ethanol production is notorious.

The Missalco plant has been in litigation over design performance since it was completed in 1986. It operated briefly in 1987. It is unlikely that the status of this plant will change until the litigation is settled.

Although ethanol is no longer produced in Louisiana, gasohol made with ethanol produced in other states is still widely used in the state as a motor vehicle fuel, Louisiana gasohol consumption bottomed out in 1990 at 39 million gallons, but has steadily risen to 86 million gallons in 1993 while gasoline consumption has remained virtually unchanged.

Effective January 1, 1993, the federal ethanol production subsidy for 10% ethanol blends was prorated for ethanol percentages of 7.7% and 5.5% to correspond to the oxygen content requirements of the Clean Air Act Amendments of 1990 and California's new requirements.

In December 1993 the EPA ruled that 30% of the oxygenate used in the reformulated gasoline required to be sold starting January 1, 1995, in nine cities with the worst air pollution must come from "renewable" resources. As a practical matter, this means ethanol because it is the only renewable that can be produced in the volumes needed to meet these goals. After protests from the oil industry and several public hearings, on July 13 the American Petroleum Institute and the National Petroleum Refiner's Association filed suit against the EPA claiming the mandate was illegal. On September 13 a federal appeals court suspended the EPA mandate altogether until the lawsuit can be considered on its merits.

Conclusion

Fueled by federal and state legislative mandates, Louisiana's public and private fleet owners have begun to convert their vehicles to alternative fuels. CNG has emerged as he alternative fuel of choice in Louisiana and the nation but other alternative fuels have their champions and political allies and cannot be counted out yet. The number of public access CNG refueling stations in the state is steadily increasing, and more are planned. Individual gas companies and the LGA are supporting the move to NGVs with their time and money in order to create an economically selfsustaining NGV infrastructure. Several federal and state tax incentive and loan programs designed to foster the use of AFVs by fleet owners and individuals have been initiated.

Public acceptance of AFVs as personal vehicles remains virtually nonexistent as the high cost of conversion and the continued lack of a refueling infrastructure as convenient as gasoline thwarts widespread participation. Since most gasoline is purchased by the general public for personal vehicles, a substantial shift to alternative fuels will only occur when the general public participates on a broad scale. At that time one or more fuels will emerge as preferable over others through the mechanism of the marketplace. Meanwhile, we will continue to follow and report on new developments in subsequent editions of this report.

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