U.S. automakers sue EPA over higher ethanol blends

WASHINGTON Mon Dec 20, 2010 6:01pm EST

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WASHINGTON (Reuters) - U.S. auto and engine makers sued the Environmental Protection Agency on Monday for allowing higher blends of ethanol for newer cars, saying it could confuse consumers at fuel pumps and lead to engine damage in older vehicles.

The suit, the second major legal challenge to the EPA on higher ethanol blends in as many months, asks the federal appeals court in Washington to send the decision back to the EPA and to review whether the decision violates the Clean Air Act.

The EPA ruled in October that cars built in 2007 or later may burn gasoline containing 15 percent ethanol, or E15. Current legal levels are 10 percent. The EPA may decide as soon as January to allow E15 for cars built in 2001 and later.

Growth Energy, an ethanol industry group, had asked the EPA for a waiver for the sale because the business faces a glut of the alternative fuel.

The federal government mandates that an ever-increasing amount of ethanol be blended into the overall gasoline pool to trim imports and foster domestic energy jobs.

But fuel demand has fallen since the mandate was passed, so ethanol makers have had to look for new ways to sell the product.

Allowing higher ethanol blends could help makers Archer Daniels Midland, Green Plains and closely held Poet.

But a new coalition that filed the suit, the Engine Products Group, said the EPA's decision to allow E15 for some cars could confuse consumers and that engines -- from cars to chainsaws -- could suffer if they received the wrong fuel.

"The worst effect of approving E15 for certain models of vehicles is that confusion in the marketplace will lead to what is euphemistically called 'misfueling', or putting the wrong fuel in your vehicle," said Gloria Bergquist, spokeswoman for the Alliance of Automobile Manufactures.

Other groups in the coalition, which says it represents some 400 million engine products used by Americans, include the National Marine Manufacturers Association and the Outdoor Power Equipment Institute. Higher ethanol blends can corrode fuel lines and other parts in engines, they say.

LOGISTICS A BIGGER ISSUE THAN LAWSUITS?

The suit is the latest hurdle for the U.S. government and ethanol producers to increase the amount of renewable fuel to be sold in the country.

Last month, food groups including the Grocery Manufacturers Association filed a suit seeking to overturn the EPA's October E15 decision. They said allowing E15 could push up food prices because ethanol in the United States is mostly made from corn, also a feed for livestock.

More than 30 percent of the U.S. corn crop goes to making ethanol, and corn futures prices are near two-year highs.

But a bigger hurdle to E15 may be logistical rather than legal. Filling stations may refrain from selling E15 because it could force them to invest in new pumps and tanks and draw lawsuits from customers who filled up with the wrong fuel.

"I don't see E15 in any wide use within the next five years," said Mark Routt, a petroleum consultant at KBC Advanced Technologies. "There's no incentive for station owners to change over to E15; in fact liabilities are disincentives for selling it."

Filling station industry groups have made similar comments.

Still, ethanol makers are confident the higher blends can edge into the market.

Tom Bius, chief executive of Growth Energy, said E15 was safe for all vehicles on the road today and that new labels for the new fuels would reduce confusion.

"Concerns about misfueling are premature, as EPA is drafting a robust labeling rule and will conduct a vigorous public education campaign," Bius said.

The EPA could not be immediately reached for comment.

A spokesman for another ethanol industry group, the Renewable Fuels Association, said the EPA could have avoided confusion by allowing the use of E15 for all vehicles.

(Editing by David Gregorio, Walter Bagley, Jim Marshall and Dale Hudson)

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