U.S. to use more ethanol in 2011, but smaller market share

WASHINGTON Mon Jul 12, 2010 6:05pm EDT

E85 ethanol fuel is shown being pumped into a vehicle at a gas station selling alternative fuels in the town of Nevada, Iowa, December 6, 2007. REUTERS/Jason Reed

E85 ethanol fuel is shown being pumped into a vehicle at a gas station selling alternative fuels in the town of Nevada, Iowa, December 6, 2007.

Credit: Reuters/Jason Reed

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WASHINGTON (Reuters) - Ethanol and other renewable fuels must account for 7.95 percent of total gasoline sales in 2011 to meet Congress' mandate for 13.95 billion gallons of renewable fuels expected to be produced next year, the U.S. Environmental Protection Agency said on Monday.

In 2010, renewable fuels are expected to account for 8.25 percent of total gasoline sales to reach the mandate of 12.95 billion gallons.

As the American economy recovers, gasoline demand will increase and so will the amount of renewable fuels required to be produced. The higher gasoline demand, however, will make renewables a smaller share of total fuel sales.

At the same time, the government will require less cellulosic ethanol that is made from switchgrass, wood chips and other forest waste, which will see higher dependence on ethanol derived from corn to meet Congress' biofuels mandate.

Already, exporters, livestock feeders and ethanol makers are going through the U.S. corn stockpile faster than farmers can grow the crop. The U.S. Agriculture Department has estimated 4.7 billion bushels of corn in 2010/11, an increase of 200 million bushels from a year ago, will go toward ethanol.

Christopher Thorne, a spokesman with Growth Energy, an ethanol industry group, said "there is more than enough corn to meet all demands."

As the American economy tentatively recovers, gasoline demand will increase, which will boost the amount of renewable fuels required to be produced. The higher gasoline demand, however, will make renewables a smaller share of total fuel sales.

The United States still has a long way to go to meet Congress' goal of producing 36 billion gallons of biofuels a year by 2022.

The EPA said the proposed 2011 overall volumes and standards are as follows:

* Biomass-based diesel (800 million gallons; 0.68 percent)

* Advanced biofuels (1.35 billion gallons; 0.77 percent)

* Cellulosic biofuels (5 million-17.1 million gallons; 0.004-0.015 percent)

The EPA also said it was proposing a lower 2011 cellulosic volume than the 250 million gallons required by Congress, based on analysis of market availability of the fuel.

The agency said it will continue to evaluate the market as it worked to finalize the cellulosic standard in the coming months. "Overall, EPA remains optimistic that the commercial availability of cellulosic biofuel will continue to grow in the years ahead," it said.

Matt Hartwig of the Renewable Fuels Association, a trade group, said EPA's "lack-luster estimate of supply of cellulosic ethanol should be a wake-up call to the Obama administration" that it needs to improve its loan guarantee program to make it more accessible to these producers.

"Seeing those numbers much lower than what was called for by the original RFS (Renewable Fuel Standard) when it was passed by Congress should alert members in the Obama administration that more needs to be done to accelerate the deployment of these technologies," he said.

EPA said it also was proposing changes to regulations that could apply to renewable fuel producers that use canola oil, grain sorghum, pulpwood or palm oil as a feedstock.

This proposal would allow the fuel produced by those feedstocks dating back to July 1, 2010, to be used for compliance should EPA determine in a future rule-making that those fuels help reduce greenhouse gas emissions.

The EPA will take public comment for 30 days on the 2011 renewable fuels standard and other proposed changes. (Reporting by Tom Doggett; Editing by Lisa Shumaker and Sofina Mirza-Reid)

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