EPA proposes reduction in 2014 ethanol blend volume: documents

NEW YORK Thu Oct 10, 2013 4:06pm EDT

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NEW YORK (Reuters) - The U.S. Environmental Protection Agency (EPA) has proposed cutting the volume of ethanol that must be blended into U.S. gasoline next year by almost 6 percent to about 13 billion gallons, according to internal EPA documents seen by Reuters.

In an apparent concession to oil refiners who say they can't sell more ethanol, the agency says it is proposing a "significant" reduction in the overall renewable fuel requirements to just 15.21 billion gallons, far less than the 18.15 billion gallon 2014 target established in a landmark 2007 law, the documents show.

That would reduce the volume of corn-based ethanol to about 800 million gallons less than this year's 13.8 billion gallons, a bigger reduction than many industry observers had been expecting. The law had required 14.4 billion gallons for 2014.

The figures match those reported earlier on Thursday by news agencies including Reuters, but the document also include previously unreported details on the EPA's proposal.

To get the volumes that low, the agency intends to tap into a waiver authority under the 2007 law which allows it to scale down required volumes under certain situations, such as a lack of available supply of the fuels or economic hardship.

It intends to use the inadeqate supply justification for the waiver, according to a proposal outlined in both an August 26 draft document and a September 6 presentation obtained by Reuters. The EPA submitted its formal proposal to the White House Office of Management and Budget (OMB) in early September.

A spokeswoman for the EPA was not immediately able to comment on the document, and said that due to the government shutdown she may not be able to provide a rapid reply.

Prospects for a relaxed ethanol mandate on Thursday spurred a sharp rally in shares of U.S. refiners, who had been buying up ethanol credits in order to meet the mandates.

The proposal is now under review by the OMB, which is not expected to make a decision until after the government shutdown.

(Reporting by Cezary Podkul, editing by Jonathan Leff)

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