Oil vs. Ethanol

In the 1950s and 60s, the ongoing battle between big oil and ethanol seemed to be over. Oil won – that is, until new scientific studies raised old concerns over the toxicity of lead additives.

The combatants were farmers and promoters of ethyl alcohol on one side and a series of automobile, chemical and oil companies on the other. For decades, they had battled, first over what kind of fuel would power the automotive boom and then – after oil won the first battle – over what “anti-knock” substance would be added to gasoline.

The battle goes back to the 1826 when Samuel Morey used alcohol to fuel the first internal combustion engine prototype. By 1860, thousands of distilleries made 90 million US gallons of alcohol or more per year for lighting, cooking and industry. That’s not counting the alcohol that was distilled for human consumption.

Alcohol financed the Civil War, at least in part. In 1862, a $2.08 per gallon tax was placed on ethanol, dramatically increasing the cost of the fuel. After the war, the tax was repealed and by the turn of the century ethanol was the major fuel for early cars around the world. Henry Ford was a big proponent of what he called, “The fuel of the future… There is enough alcohol in one year’s yield of an acre of potatoes,” Ford said, “to drive the machinery necessary to cultivate the fields for 100 years.”

But in 1907, vast new oil fields were discovered in Texas, and oil became cheaper than alcohol. In 1908, Ford’s Model T was introduced. It could run on ethanol or gasoline.

In the early days of the automobile, it was an open question which fuel source would power future cars. Proponents of both fuels lobbied Congress to grant them tax breaks and other incentives. Gradually, as more and more wells were drilled and the price came down oil won.

Then the battle turned to substances that could reduce annoying engine knocking. Engines knock when the gasoline in the cylinder ignites too early, while the piston is still coming up and compressing the air/fuel mixture. In 1917, the Dayton Engineering Laboratories Company – or Delco, the same lab that had invented the electric starter for cars – had added grain alcohol to gasoline and reduced knock dramatically. Delco’s engineers were enthusiastic ethanol supporters for a time. Then, in 1919, Delco was purchased by General Motors, and the GM board was dominated by members of the family that owned most of the E.I. du Pont chemical company.

There was one problem with ethanol – it couldn’t be patented and anyone with a still could make it.

So, Delco engineers were told to find a chemical that would reduce knocking. In 1921, a young engineer named Thomas Midgley found that TEL, tetraethyl lead, would reduce knocking. GM got a patent on TEL as an octane-boosting additive to gasoline and came up with the trade name of Ethyl. If the company could get Ethyl adopted by the car manufacturers and other oil companies, GM would receive a royalty on practically every gallon of gasoline sold for the life of the patent. In 1923, a 20 percent royalty would produce $36 million.

The only problem with TEL is it contains lead, and people have known for thousands of years the lead fumes are poisonous. It was known that contact with TEL would eventually cause hallucinations, difficulty in breathing and, in the worst cases, madness, spasms, palsies, asphyxiation and death. Public health officials raised concerns, and the engineer Midgley was one of the spokespeople sent out to trumpet the virtues of TEL. The only trouble was that, in 1923, Midgley was forced to decline speaking engagements because his work with TEL had poisoned him. “After about a year’s work in organic lead,” he wrote the American Chemical Society who wanted to give him an award, “I find that my lungs have been affected and that it is necessary to drop all work and get a large supply of fresh air.” He went to Miami.

GM moved forward. In 1923, they got distribution contracts with Standard Oil of New Jersey (now Exxon-Mobile), Standard Oil of Indiana (later Amoco and then BP) and Gulf Oil (owned by the Mellons). That same year, Du Pont built a plant in Deepwater, New Jersey, to manufacture TEL for GM. Within a month, several workers died from lead poisoning, but that fact was at first covered up.

A year later, Standard Oil New Jersey came up with a faster, cheaper way to make TEL. Surprisingly, GM formed a joint venture with Standard and the Ethyl Corporation was formed.

But like Du Pont, within three months, Ethyl’s new plant produced five deaths and 35 injuries to its workers. The symptoms included tremors, hallucinations, severe palsies and other neurological symptoms.

Some state and federal officials were threatening hearings and, worse, the possibility of banning leaded gasoline. So the Ethyl Corporation contracted with a compliant federal Bureau of Mines to conduct a health assessment of leaded gasoline – with a clause in the contract stipulating that Ethyl had veto power over what the Bureau reported.

Then, Ethyl demanded that the federal Public Health Service hold hearings on TEL. No one thought it strange that the PHS was part of the Treasury Department, which in turn was headed by Andrew Mellon – whose family had just signed a contract to distribute TEL through their Gulf Oil.

The Bureau of Mines produced their study based on some limited animal testing, and – remarkably – gave TEL a clean bill of health. In a 1925 public relations coup, Ethyl Corporation managed to overwhelm concerns from health officials that TEL added to gasoline would put tons of lead into the atmosphere in cities across the country. Ethyl was approved for sale.

In the meantime, throughout the 20s and 30s, farmers and ethanol advocates didn’t give up the fight. In hundreds of gas stations primarily across the Midwest, ethanol was sold sometimes right alongside leaded gasoline blends. For instance, in Lincoln, Nebraska, the Coryell Gas Company at 14th and N Streets began selling a 10 percent blend of “Corn Alcohol” gasoline in 1933. The first tank full was sold to Gov. Charles Bryan. Until the early 40s, Coryell sold several hundred thousand gallons, but still felt that the Ethyl Corporation was illegally undercutting his sales.

By that point, Ethyl was in at least 70 percent of the gasoline being sold, but the corporation refused to sell their product to any gas station that sold ethanol blends. Earl Coryell went to the U.S. Justice Department who agreed that Ethyl’s business practices were in violation of antitrust regulations. In a landmark Supreme Court decision, Ethyl was forced to sell their product to any station that met minimum technical requirements. The Court also said that a company could not use its patents to set prices for resale or impose restrictions on matters outside the scope of the patent.

But, in the long run, winning the case didn’t help in the battle. TEL increased its market share for fuel additives. World War II gave the ethanol industry a temporary reprieve when alcohol was used to extend fuel for airplanes and submarines and was a raw material for synthetic rubber. Historians have asserted that at the D-Day invasion of Europe, three-fourths of the Army was rolling on tires made from Midwestern corn.

But after the war, the ethanol industry was essentially dead. Plants were shut down. Service stations sold only leaded gasoline throughout most of the 50s.

At this time, the lead industry beat back periodic questions about the safety of lead by citing studies conducted by a toxicologist who was actually on the payroll of Ethyl, Robert Kehoe. In hearing after hearing, Kehoe would assert that lead appeared naturally in the human body. He also argued that no one could say with certainty that lead caused health problems. “You say it’s dangerous. We say it’s not. Prove us wrong.” For decades, that argument worked.

Behind the scenes, there were a series of studies that would later prove to be troubling for Ethyl. In 1943, the Los Angeles Times reported the cities first major smog episode. In 1950, the cause of LA’s smog was shown to be the interaction of hydrocarbons and oxides of nitrogen in the atmosphere. In 1953, cars were shown to be the cause of the hydrocarbons.

Choking clouds of smog were becoming a problem in major cities across the nation.

By the late 50s, lead alkyl compounds were in 98 percent of the gas sold in the U.S.

That’s why it was a stunning development when General Motors and Standard Oil sold the Ethyl Corporation in 1962 to a tiny company, the Albermarle Paper Manufacturing Company. One reason may have been that the patent on TEL had expired in 1947, so there was not as much profit coming in. But, GM and Standard may have also seen what was coming —

  • In 1965, Dr. Kehoe’s assertion that lead was naturally present in humans was debunked by a study done by the respected geochemist Dr. Clair Paterson. Paterson studied the bones of pre-Columbia humans and found that there was almost no lead in humans 1,600 years ago. The lead had to come from recent human contamination and TEL added to gasoline was the leading suspect.
  • In 1969, the Justice Department unearthed a secret agreement among American auto makers that showed that for 15 years they had been suppressing emission control systems. The agreements were in violation of antitrust regulations and angered the growing environmental movement.
  • Then in 1970, GM broke ranks and announced that the company would meet pending clean-air laws by including catalytic converters beginning in 1974. Catalytic converters don’t work with leaded gasoline and, in fact, will make a car undrivable.
  • The relatively new Environmental Protection Agency (EPA) announced regulations that reduce lead content in gasoline beginning in 1974. The TEL forces filed suit saying that the EPA didn’t have the authority, but the full Court of Appeals sided with the EPA in 1976.
  • In the meantime, research about ethanol was dusted off and some companies began to produce ethanol again. Midwestern states got back into the act by passing tax breaks and incentives for new plants.
  • In the 70s and 80s, study after study documented the damaging effects of lead poisoning at lower and lower levels, especially in children.
  • Even in the first years of the phase out of leaded gasoline, the EPA was able to show dramatic results. Between 1976 and 1980, the amount of lead in gasoline dropped by 50 percent, and the level of lead in blood of a sample population dropped 37 percent.
  • The phase out of leaded gasoline was complete by 1986.

In the last 20 years, the oil companies introduced another octane boosting compound, MTBE, in competition with ethanol. But MTBE was shown to be a potential cause of cancer and a persistent polluter of groundwater.

Ethanol has been growing in popularity both in the U.S. and around the world. Auto makers have even introduced some models that can run on E85, a blend that is 85 percent ethanol and 15 percent gasoline.

Today, it’s estimated that the burgeoning ethanol industry is consuming 10 to 15 percent of the nation’s corn crop in early 2007, with 113 plants in operation and over 70 new plants still being built. For grain producers, that means more money in the pocket – in 2007, corn futures prices topped $4.00 when the previous 10-year average was $2.34.

But corn is also used in everything from cereals, soft drinks, butter and meat. If those producers also have to pay higher prices for the corn that remains, food prices may also go up.

Written by Bill Ganzel, the Ganzel Group. First published in 2007. A partial bibliography of sources is here.



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