U.S. ethanol sector pushes automakers for support

WASHINGTON, Nov 25 (Reuters) - Ethanol industry groups on Tuesday urged U.S. auto executives to support increasing the ethanol-to-gasoline blend rate when they return to Capitol Hill next week to seek federal aid.

General Motors Corp (GM.N), Chrysler LLC [CBS.UL] and Ford Motor Co (F.N) have asked Congress for $25 billion to save their businesses. Before they receive any money, however, lawmakers want the companies to lay out their strategies for developing more fuel-efficient cars and maintaining long term viability.

In a letter to the top U.S. auto executives, ethanol trade groups said the companies should use their aid proposals as an opportunity to throw their support behind increasing the U.S. ethanol-to-gasoline blend rate to 15 to 20 percent and aggressively pursuing flex fuel vehicles.

"By taking these proactive steps, you can lead the world-wide effort and demonstrate to the Congress and the American people that the American auto industry is committed to moving in the right direction," said the groups, including Growth Energy, National Farmers Union and the American Coalition for Ethanol.

The U.S. government currently restricts the ethanol-to-gasoline blend rate to 10 percent, but ethanol groups said this limit is "stifling development and growth" of the industry.

Federal law requires the use of 9 billion gallons of renewable fuels this year, 10.5 billion gallons in 2009, eventually rising to 36 billion gallons by 2022.

The ethanol industry, facing its own obstacles, needs the support of the auto industry for the United States to reach these goals and for the biofuel sector to thrive, said Kevin Book, an energy analyst with Friedman, Billings, Ramsey and Company, Inc.

With falling gasoline prices hurting ethanol producers' profits, Book said it is in the interest of the ethanol groups to avert a standoff with auto companies over blend rates.

"If ethanol can negotiate a continued partnership, then it won't become a zero sum game later on in the political process," he added. (Reporting by Ayesha Rascoe; Editing by David Gregorio)