U.S. ethanol expansion limited by 'blend wall' -Vilsack

JOHNSTON, Iowa Fri Nov 8, 2013 6:07pm EST

JOHNSTON, Iowa Nov 8 (Reuters) - Lower gasoline demand in the United States is slowing ethanol expansion no matter how much the government mandates the grain-based additive be blended into the nation's fuel supply, U.S. Agriculture Secretary Tom Vilsack said on Friday.

"We are bumping up against this thing called the 'blend wall,' where essentially there's no other place to put the ethanol unless we have increased blend rates," Vilsack said during a taping of public television program Iowa Press.

The Environmental Protection Agency as early as next week is expected to propose reducing the so-called Renewable Fuel Standard from its existing target of 18.15 billion gallons of biofuels for 2014 as outlined in the current law.

Oil refiners have lobbied the government to slash the mandate. They argue they cannot inject more than the traditional 10 percent ethanol blend into gasoline without risking damage to car engines - the so-called "blend wall" that Vilsack referenced in his remarks.

The EPA has said fuel blends with as much as 15 percent ethanol, or E-15, are safe for vehicles made in 2001 or later. But few gas stations sell the higher blend outside of the Corn Belt.

Better fuel efficiency in modern vehicles has also helped lead to an overall decline in gasoline demand.

"I think EPA's got a difficult task because they are faced with the fact that those standards were set on the premise that we as a country would consume more and more gasoline from year to year," Vilsack said. "The reality is, with fuel efficient vehicles, we are consuming less (gasoline). So the assumption upon which those numbers was based was incorrect."

Vilsack is a former governor of Iowa, the No. 1 corn producing state. He said efforts by some U.S. legislators to repeal the Renewable Fuel Standard "concerns me."

Rather, the country should move to expand the distribution network of ethanol and promote its use in aviation and marine fuel, Vilsack said.

USDA, in the first supply and demand forecast since before last month's partial U.S. government shutdown, on Friday boosted its estimate for the U.S. corn crop to a record 13.989 billion bushels.

Use of corn in making ethanol was left unchanged at 4.9 billion bushels, USDA said.

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