Florida rules could open vast ethanol market

NEW YORK (Reuters) - Florida published new proposed motor fuel rules on Friday that could lead to wider ethanol blending in the country's third largest gasoline market.

Limited ethanol blending had already been occurring in Florida, but the issuing of broad rules on gasoline containing ethanol is a step in creating the regulatory framework needed in opening up the market to the burgeoning U.S. ethanol industry.

"We view it as a very positive development and a step in the right direction in terms of creating the flexibility that Florida petroleum marketers need to blend more ethanol," Matt Hartwig, a spokesman for ethanol industry group the Renewable Fuels Association, said in an interview.

At least four other states in the U.S. Southeast are also considering new gasoline rules that could open markets to biofuels.

Florida held a hearing in October at the urging of the ethanol industry and several oil companies to relax the state rules that had discouraged refiners from adding ethanol to gasoline sold in the region.

Florida companies are eager to make biofuels from biomass such as orange peels, while established ethanol producers are also eyeing the state fuel pool, which could be up to a 1-billion-gallon-per-year ethanol market.

South Dakota-based POET, the largest U.S. ethanol producer, expects to supply the Florida market from five biorefineries it is building in Ohio and Indiana. It hopes to send the fuel by train down to the Southeast.

The U.S. ethanol industry has grown 40 percent this year as the government offers incentives in an effort to begin to wean the country off foreign oil.

The energy bill signed by President George W. Bush this week would boost blending of alternative fuels like ethanol five fold by 2022 to 36 billion gallons per year.

(Reporting by Timothy Gardner; Editing by Christian Wiessner)