Food groups sue U.S. for ethanol boost in gasoline

WASHINGTON Tue Nov 9, 2010 1:34pm EST

A truckload of corn is dumped into a chute at the Lincolnway Energy plant in the town of Nevada, Iowa, December 6, 2007. The company, one of a growing number across Iowa and the United States, converts corn to ethanol fuel to be used in flexible-fuelled vehicles as an alternative energy source to oil. REUTERS/Jason Reed

A truckload of corn is dumped into a chute at the Lincolnway Energy plant in the town of Nevada, Iowa, December 6, 2007. The company, one of a growing number across Iowa and the United States, converts corn to ethanol fuel to be used in flexible-fuelled vehicles as an alternative energy source to oil.

Credit: Reuters/Jason Reed

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WASHINGTON (Reuters) - Livestock producers and other food industry groups filed a suit on Tuesday seeking to overturn a U.S. decision to allow higher levels of ethanol in gasoline and saying it could push up food prices.

The Grocery Manufacturers Association, the National Meat Association and other groups sued the Environmental Protection Agency (EPA), saying regulators overstepped their authority when they ruled last month that gasoline retailers could sell fuel containing up to 15 percent ethanol. That is an increase from the current allowable level of 10 percent.

The EPA ruled that cars built in 2007 and later could burn the fuel, known as E15.

Ethanol is mostly made from corn in the United States and food groups say E15 will lead to higher corn prices and meat prices because livestock eat the grain. About a third of the U.S. corn crop is used to make ethanol.

"This will put pressure on the meat and poultry supply, which will lead to higher food prices for consumers," J. Patrick Boyle, president of the American Meat Institute, said in a release.

Corn prices briefly hit more than a two-year high on Tuesday above $6 a bushel on droughts in key producing areas and after the government cut its crop output forecast.

EXCEEDS ITS AUTHORITY?

The food groups said the EPA did not have the power to make the decision.

"In approving E15 ... the EPA has clearly exceeded its authority under the Clean Air Act," the coalition of groups, which field the case with the U.S. Court of Appeals, said in a release.

"The agency has a legal obligation to adhere to the letter and spirit of the Clean Air Act and, in this case, has failed to do so," the group said.

The EPA was not immediately available to comment about the suit. The agency is set to decide whether to allow E15 for cars built from 2001 to 2006 by the end of the year, pending the completion of tests by the Department of Energy.

Growth Energy, the ethanol industry group that had asked for the E15 waiver, was not immediately available for comment. It has said in the past that due to rising corn yields there is plenty of corn for both fuel and feed.

Ethanol groups say they need E15 to reduce a growing glut of supply brought about by the U.S. mandates that call for increasing amounts of ethanol to be blended into the overall gasoline supply.

In an effort to trim reliance on foreign oil, U.S. mandates require 15 billion gallons of ethanol to be blended into gasoline by 2015, up from 12 billion gallons this year.

Industry groups for automobile manufacturers, oil refiners and gasoline filling stations have also opposed the ruling.

(Reporting by Timothy Gardner; Editing by David Gregorio)

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