Production of corn-based ethanol would nearly triple under a breakthrough agreement in the Senate energy bill announced Friday that brings together two warring interest groups.

Sen. Charles Grassley, an Iowa Republican, said the deal could raise corn prices by at least 10 cents to 20 cents a bushel. Under the ethanol agreement, gasoline refiners would have to use at least 5 billion gallons of renewable fuels, mostly ethanol, by 2012.

“Developing the use of clean, renewable energy sources will do more for our nation's long-term energy independence than all the oil in Alaska,” said Sen. Tom Harkin, D-Iowa.

Greg Behounek, chief financial officer of ethanol producer Sunrise Energy Cooperative of Blairstown, Ia., said the deal comes at a time when ethanol production is rapidly increasing. More than a half dozen ethanol plants are either under construction in Iowa or in the planning process.

Under the proposal, the government every year would set a percentage of renewable fuel — mostly ethanol — which each refiner has to blend with gasoline. If the refiner uses more than the set percentage, it would be awarded a credit that could then be bought by another refiner that might not use as much renewable fuel, or any renewable fuel at all.

The proposal is supported by Senate Majority Leader Tom Daschle, D-S.D., and leading Republicans involved with the energy bill.

The oil industry, which has long been at odds with the ethanol lobby, supports the proposal because it also would phase out over four years the use of MTBE, an additive designed to make gasoline burn cleaner but that is suspected of causing cancer and contaminating ground and surface water.

In addition, the Environmental Protection Agency would drop federal rules requiring that oxygenated gasoline be used in areas prone to air pollution, although current clean-air levels would have to be maintained and some rules on toxic air contaminants would be toughened.

The oil industry has long argued that technology has greatly reduced the pollution caused by automobiles, making the oxygenation requirements unnecessary.

California and other states have been arguing for an end to the oxygenation requirements so they could ban MTBE. The Bush administration in June 2001 ruled against California's request, forcing the state to begin planning for replacing MTBE with ethanol, which also adds oxygen to fuels.

Grassley said the agreement announced Friday would create a much larger market for ethanol than the oxygenation rules ever would. Some clean-air groups also signed on to the deal Friday.

Another important aspect of the agreement is that it helps move the United States away from dependence on foreign oil. Energy Secretary Spencer Abraham said the proposal could reduce crude-oil imports by 500 million barrels in the next decade.

Des Moines Register