* Growth says expects all EPA E15 decisions by end of year
* E15 could be ready early next year if EPA approves
* EPA met with Growth Energy and said testing is on track
* Agriculture Secretary says expects decision by mid Oct
(Adds details on potential barriers to E15 sales, larger corn
planting requirements, paragraphs 16, 17, 24)
By Timothy Gardner and Charles Abbott
WASHINGTON, Sept 17 U.S regulators are likely
to approve a higher blend of ethanol in U.S. gasoline shortly,
an ethanol producers group and the top U.S. agriculture
official each said on Friday, and the new fuel mix could be
selling at the pump by next spring.
Ethanol companies and corn traders are anxiously awaiting a
decision from the Environmental Protection Agency -- expected
within weeks -- for a waiver to allow cars built in 2007 and
after to burn regular gasoline blended with ethanol levels of
15 percent, a fuel that would be known as E15.
The ethanol blend level now is 10 percent.
While proponents have long argued that American automobiles
can handle the higher blend without significant damage to the
engine, the decision to move to E15 has been delayed twice to
allow for more testing.
Growth Energy, an industry group representing a coalition
of ethanol producers that petitioned for the higher rate, also
said it anticipated a positive outcome.
"We expect that within a few months after the announcement
E15 will be available," said a spokeswoman for Growth Energy
days after meeting on the issue with EPA chief Lisa Jackson.
The higher blends could be available by March or April of
next year assuming the EPA makes two approvals for use of E15
in 2001 cars and newer models by the end of the year, the
Agriculture Secretary Tom Vilsack told reporters that he
expected the EPA to approve higher blends for some cars by
early-to-mid October, in line with a target that the agency
gave several months ago.
"I expect that they will see that E15 is an appropriate
fuel for some vehicles. I don't know if they will necessarily
say it is appropriate for all vehicles, but for some vehicles
which will help us expand the market," he said.
EPA PLANS SEPARATE DECISION ON NEWER, OLDER CARS
Approval of the new fuel could help producers such as Archer
Daniels Midland (ADM.N), oil refiner Valero Energy Corp
(VLO.N), and private company Poet, the biggest U.S. ethanol
producer, and potentially give fresh legs to a rally in U.S.
corn futures Cc1, which have surged more than 55 percent in
Ethanol produced in the United States is predominantly
distilled from corn.
Jackson, the EPA chief, told Growth this week that the
first phase of higher blend testing on cars, which the
Department of Energy is conducting, is on schedule and should
be completed by the end of September.
Jackson said the EPA should decide shortly afterward
whether to allow E15 in 2007- and later-model cars.
Testing on vehicles built between 2001 and 2006 is on track
to be completed by the end of November, Jackson said. "At which
point we expect to make a decision on a waiver that would cover
2001 to 2006 model year vehicles." she told Growth.
The EPA would not give further guidance on Friday on the
timing of the tests.
There may be legal was well as practical obstacles to
bringing higher blends to gas stations, said analyst Mark
McMinimy of Washington Research Group.
"A lawsuit challenging the waiver is expected and the
likelihood is that retailers will be reluctant to offer E15
initially given the cost of installing storage/dispensing
equipment and concern about the possibility of consumer
litigation over misfueling," said McMinimy.
The auto industry has urged the government to conduct full
tests for E15 because it is worried that the fuel could corrode
fuel lines and damage engines.
But ethanol producers are suffering from a glut of the fuel
and say they need approval for the higher blends to help draw
down supply. They say the oversupply has been created by
government mandates, first issued when George W. Bush was
president, that require increasing amounts of ethanol to be
blended in the overall fuel supply.
The Renewable Fuel Standard requires energy companies to
blend 15 billion gallons of corn-based fuel a year into the
gasoline supply by 2015, up from 12 billion gallons this year.
A delay in the decision could slow the ethanol industry's
recovery from the recession and a subsequent shakeout of
Corn prices have zoomed in recent weeks, with futures
prices topping $5 a bushel on Friday for the first time since
early October 2008. The rally has been fueled by USDA forecasts
of tighter supplies and demand for grain to offset drought
losses in Russia.
Some 36 percent of this year's corn crop is expected to go
to fuel ethanol production. Vilsack said E15 would not harm
U.S. grain or food supplies because new feedstocks, such as
woody biomass and perennial grasses, are being developed.
Larger corn plantings will be needed in 2011, said McMinimy
of Washington Research Group -- about 3 percent more than this
year's 87.9 million acres (35.6 million ha) to rebuild stocks.
(Additional reporting by Tom Doggett; Editing by David