Oil Report

EPA seen issuing U.S. ethanol fuel rules Wednesday

* Industry opposes indirect emissions measurement

* Rules could cut 2010 requirements for cellulosic ethanol

WASHINGTON, Feb 2 (Reuters) - The U.S. Environmental Protection Agency could issue new rules as soon as Wednesday on measuring carbon dioxide emissions from biofuels such as ethanol, an industry source said on Tuesday.

“It’s coming tomorrow,” the source said about the rules, known as the renewable fuels standard, or RFS2.

The Environmental Protection Agency has long delayed issuing the rules, but this week progress had been made. The Office of Management and Budget sent the rules back to the EPA, clearing the way for the bureau to issue the final rules.

An EPA spokeswoman did not have the exact timing for when the rules would be finalized.

Under a 2007 energy bill proposal, ethanol made from corn must emit less of the main greenhouse gas carbon dioxide than gasoline over the life cycle of the fuel, from production to being burned. Cellulosic fuels, made from crop waste and the woody bits of nonfood crops, would have to be even cleaner.

The ethanol industry opposes a measurement the EPA could use to determine the emissions known as the indirect land use change. That method would measure emissions that result from land cleared abroad to grow more biofuels or food as a result of large amounts of land being used in the United States to grow feedstock crops for ethanol, such as corn.

Ethanol makers say there is no way to measure those kinds of emissions scientifically and that corn growers are reducing the amount of land needed to grow the crop through hybrid seeds and more advanced use of fertilizer.

RFS2 may also reduce the U.S. mandate for cellulosic ethanol of 100 million gallons (378.5 million liters) this year because the recession and tight credit markets have reduced investments in making the fuel.

See [ID:nN02486065] for more details on the upcoming RFS2 rules. (Editing by Marguerita Choy)