In an April 24 letter to the industry's trade group, the Environmental Protection Agency said the problem is common to "most, if not all, ethanol facilities."
Officials in EPA's Chicago office, which oversees nearly half the industry's plants, are planning a meeting with company officials in five states to insist on changes to reduce the emissions.
"So far they've been quite amenable. They're coming in. They're aware of the issues," said Cynthia King, an EPA attorney.
The government's crackdown comes while the ethanol industry presses to significantly expand production as many states phase out another widely used fuel additive, MTBE, because it is polluting water supplies. Last week the Senate passed legislation at the behest of farm groups that would more than double ethanol use by 2010.
"One of the benefits of engaging the industry on this is that they are in a very aggressive growth mode right now," said George Czerniak, chief of the air enforcement and compliance assurance branch in EPA's Chicago office.
Volatile organic compounds (VOCs) being released by the ethanol plants include formaldehyde and acetic acid, both carcinogens. Methanol, although not known to cause cancer, also is classified as a hazardous pollutant.
The fumes are produced when fermented corn mash is dried for sale as a supplement for livestock feed. Devices known as thermal oxidizers can be attached to the plants to burn off the dangerous gases.
Recent tests have found VOC emissions ranging from 120 tons a year, for some of the smallest plants, up to 1,000 tons annually, agency officials said. It isn't known whether the chemicals are hazardous to nearby residents, they said.
When the plants were built, many reported VOC emissions well below 100 tons a year, allowing them to bypass a lengthy and stringent EPA permitting process. Plants with emissions above 100 tons annually are classified as "major sources" of pollution under the Clean Air Act and are more heavily regulated.
States started measuring VOC emissions at ethanol plants about a year ago following complaints of foul odors. One small facility in St. Paul, Minn., had to install $1 million in pollution control equipment to reduce the emissions.
"To the extent that this new test procedure is identifying new VOC emissions, the industry has certainly agreed to address those," said Bob Dinneen, president of the Renewable Fuels Association, the recipient of EPA's letter.
There are 61 ethanol plants, primarily in the Midwest, producing 2.3 billion gallons a year, and another 14 under construction. By the end of next year, the industry's output is expected to reach 3 billion gallons.
EPA's Chicago region oversees 25 plants in Illinois, Minnesota, Wisconsin, Michigan and Indiana. The agency's Kansas City regional office, responsible for Iowa and Nebraska, two other big ethanol producing states, is still gathering test results. Agency officials there have not said what they will do.
Most ethanol facilities are in rural areas. One that's not, the Gopher State Ethanol plant in St. Paul, Minn., has been the target of complaints from nearby residents. A neighborhood group settled a lawsuit against the company last month.
When the plants were built, it was thought methanol and ethanol would be the major pollutants, said Jim Warner, an official with the Minnesota Pollution Control Agency.
As a gasoline additive, ethanol is seen by environmentalists as having pluses and minuses. Because it is more volatile than other additives, such as MTBE, it increases the release of VOCs from cars. At the same time, it reduces tailpipe emissions of carbon monoxide and other toxins.