The Carter administration yesterday laid out a program that it said would quadruple U.S. gasohol production this year and could lead to replacement of 10 percent of the nation's unleaded gasoline with gasohol by the end of 1981.
Gasohol is a fuel made of 90 percent gasoline and 10 percent alcohol, usually made from corn.
Enthusiasts say it is a way of saving oil. Increased production also would consume part of the U.S. corn that was to have gone to the Soviet Union and which the government has now embargoed and agreed to buy.
The administration estimated the cost to the Treasury at $13 billion over the next 10 years. That would be a subsidy of nearly 50 cents for every gallon of alcohol that would be produced.
The costliest part of the program was proposed by the administration last year. That is an exemption for gasohol from the 4-cent-a-gallon federal gasoline tax. The main thing the administration has added is $3 billion in proposed new federal loans and loan guarantees to help set up production plants.
The White House set as its goal increasing grain alcohol production from last year's 80 million gallons to 500 million gallons in 1981.
U.S. ability to meet that goal has been questioned by Congress' Office of Technology Assessment. Construction of a new distillery takes at least two years, congressional researchers note.
Only one large distillery in the country makes alcohol exclusively for gasohol.
Administration officials said they are counting on other plants already under construction, small plants that can be built quickly and conversion of some present liquor distilleries to production of pure alcohol. They said they could not name any specific plants that would produce the increased production they promised.
Producing alcohol from grain consumes nearly as much energy as it produces, and in some cases more. John C. Sawhill, deputy secretary of energy, said the amount of "new energy" obtained from the president's program would depend on how much of the alcohol was produced from coal or from waste heat. At present none of the nation's distilleries burn coal. Most use oil or natural gas.
Stepping up gasohol production will require millions of bushels of corn to make the alcohol, but administration officials insisted the plan was not part of their extraordinary efforts this week to prop up farm prices.
Sawhill said the administration could provide no estimates of how much energy the gasohol program might save, or how much it might reduce oil imports.
President Carter last Friday canceled the sale of 17 million metric tons of grain to the Soviet Union in retaliation for the invasion of Afghanistan. To protect farmers from the loss of billions of dollars of income, the administration was forced to revamp its farm policy, close commodity markets for two days to prevent chaos and promised to buy all the grain to keep it from flooding the market.
Grain prices jumped sharply yesterday. Wheat in Chicago was up 5 to 9-1/2 cents a bushel, and corn was higher by 3-1/2 to 7-1/2 cents.
Some of the corn the Soviets were to buy will now be used to make gasohol but that is not the purpose of the program, said Deputy Secretary of Agriculture Jim Williams.
Nor, insisted White House officials, was the timing of the announcement related to the upcoming Iowa Democratic caucuses. Iowa is the nation's biggest corn-growing state, and gasohol is a popular idea among midwestern farmers.
The most costly element of the administration's gasohol initiative is making permanent the exemption of gasohol from federal gasoline taxes. A temporary exemption expires in 1984.
The tax exemption would cost the government between $3.4 billion and $6.7 billion in lost revenues over the next decade, depending on how popular gasohol becomes.
The administration urged Congress to approve a similar subsidy for producers who use alcohol directly without mixing it with gasoline, by paying them a 40-cents-a-gallon "production credit." That credit would mostly go to farmers who distill their own alcohol.
Additional incentives for small-scale alcohol production would come from the $3 billion in loans for production of alcohol facilities, proposed by the administration yesterday. The president asked Congress to vote $300 million a year -- $250 million in loan guarantees, and $50 million in direct loans.
That federal assistance would be in addition to the $1 billion for alcohol production aid included in the bill to create an energy security corporation, primarily to develop synthetic fuels. The Senate version of that bill includes alcohol, and the administration said it endorses the idea.
Gasohol producers also get subsidies from two other programs. They are eligible for special 10 percent investment tax credit for money spent on alcohol plants. They collect another 5 cents per gallon of alcohol under a provision of the imported oil entitlements program. The entitlement subsidy is to end next year, but it will help alcohol producers who build plants quickly, administration officials said.