* Debate over ethanol content in U.S. gasoline heats up
* EPA, responding to reported proposal, says nothing final
* Documents show EPA suggests surprise cut-back in 2014
* Ethanol group criticizes leak of 'unverified' document
WASHINGTON/NEW YORK, Oct 11 The Environmental
Protection Agency on Friday sought to calm a furor over its
apparent proposal to reduce ethanol use in gasoline next year,
saying that no final decisions had been made about the
On Thursday, Reuters and other news outlets reported on EPA
documents that showed the agency proposing an unexpected drop in
the amount of corn-based ethanol that would be required for
blending next year, a historic retreat from the 2007 biofuel law
and a major victory for the oil industry.
"At this point, EPA is only developing a draft proposal,"
EPA Administrator Gina McCarthy said in a statement in the
agency's first public response to the reports.
She said the Obama administration remained "firmly
committed" to developing biofuels as a part of the plan to
reduce U.S. dependence on imported oil.
Coming after months of an intensifying lobbying and
political battle between oil refiners and ethanol groups, the
reports were met with immediate skepticism from many in the
biofuel industry, some questioning the documents' authenticity.
Growth Energy, a leading ethanol group, called for U.S.
agencies to investigate the leak of what it called "unverified
'draft' documents" that were still under review, a process
stalled by the government shutdown.
The EPA statement made no specific mention of the draft
documents, but acknowledged some of the challenges in increasing
use of biofuel. Under the reported proposal, the EPA appears to
back the oil industry argument that it is not feasible to inject
more than 10 percent ethanol into gasoline at the moment due to
concerns over engine damage and liability.
"No decisions will be made on the final standards without a
full opportunity for all stakeholders to comment on the EPA's
proposed 2014 renewable fuel standards and be heard on how to
best foster a growing biofuels industry that takes into account
infrastructure- and market-related factors," McCarthy said.
The EPA documents seen by Reuters could not be independently
verified. They were dated Aug. 26 and Sept. 6, around the same
time that the agency submitted its proposal to the White House
Office of Management and Budget.
After the OMB reviews the proposal it will be sent back to
the EPA, which will release it for public comment. Only after
that does the EPA finalize the rule. The process has been slowed
by the partial government shutdown.
The EPA proposal would reduce the overall renewable fuel
requirements for 2014 to 15.21 billion gallons, far less than
the 18.15 billion-gallon 2014 target established by law.
That would reduce the volume of corn-based ethanol to about
800 million gallons less than this year's 13.8 billion gallons,
a much larger cut than many industry observers had been
expecting. The law had required 14.4 billion gallons for 2014.
"Because of the dramatic economic impact on commodity
markets there should be an immediate investigation by the
Justice Department, and the Commodity Futures Trading Commission
to determine if this was an attempt to manipulate markets such
as corn futures, ethanol futures and/or RINS markets," Tom Buis,
CEO of Growth Energy, said in a release.
The Department of Justice could not be reached for comment,
and DOJ representatives are less available than usual because of
the partial government shutdown. In general, the Department of
Justice does not confirm investigations that have yet to be
confirmed by the targets. The CFTC has said it is unlikely to be
able to respond to media requests during the shutdown.
The ethanol group's strong response illustrates the highly
charged nature of the debate between two industries fighting
over the future of the U.S. fuel supply.
Ethanol groups fear any wavering on use of corn-based
ethanol could undermine their future. Oil refiners say the law
is forcing them to spend billions of dollars to buy ethanol
credits, driving up gasoline prices.
"I believe we are competing head-to-head with Big Oil," Todd
Becker, chief executive officer of No. 4 U.S. ethanol company
Green Plains Renewable Energy Inc, told Reuters.
The oil industry argues that it cannot sell gasoline with
more than 10 percent ethanol, and so is unable to blend more
biofuel. Corn-ethanol producers argue that they should be able
to sell gasoline that is 15 percent biofuel, the maximum allowed
by the EPA for newer model cars.
"In our opinion, they are going to be very defensive to give
up any gas tank share - they are going to defend their share at
all costs," Becker said.