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Commodities

Proposed Mexico fuel rule seeks more ethanol blending

MEXICO CITY (Reuters) - A plan to raise the amount of ethanol that can be blended with motor fuels in Mexico, which could power job growth and lower air pollution, was submitted to the country’s energy regulators by an industry group on Tuesday.

The Mexican Association of Sustainable Transportation argues that ethanol is a renewable fuel that can bolster a new domestic industry in rural Mexico where both sugar cane and sorghum are grown, leading to hundreds of thousands of new jobs.

But critics counter that the competing fuel additive methyl tertiary-butyl ether (MTBE), is better at reducing air contaminants, adding that ethanol can contribute to deforestation due to the need for farmland for its ingredients.

Fossil-fuel-derived MTBE is already produced at refineries owned by state-run oil company Pemex [PEMX.UL], but Mexico still relies on significant imports of the additive from mostly U.S. suppliers to meet domestic demand.

If approved later this year, the proposed revision to Mexico’s fuel quality standards would raise the amount of allowable ethanol in gasoline to 10 percent from the current 5.8 percent. Ethanol, like MTBE, helps motor fuels burn more efficiently and reduces air pollution.

The proposal would bring Mexican fuel standards in line with countries like the United States, where MTBE has been banned by half of U.S. states due to reported cases of groundwater contamination caused by fuel storage tank leaks.

In a decision last year, commissioners with energy regulator CRE prohibited any use of ethanol in Mexico City, Guadalajara and Monterrey citing the possibility of increased ozone contamination.

The Mexican Association of Sustainable Transportation, backed by existing local ethanol producers and some U.S. firms, submitted the proposal, arguing that approving the rule could lead to some 350,000 new jobs and investment of around $2 billion over the next four years.

Leading energy companies including Chevron, BP and Valero Energy also submitted documents outlining their support for the proposal, as did Mexico’s main auto industry association AMIA.

But not everyone is convinced by the proposal.

Daniel Pourreau, an executive with Houston-based refiner and MTBE producer LyondellBasell, said in an interview prior to the proposal that ethanol is an inferior fuel additive.

“There is very, very compelling evidence that introducing ethanol into gasoline in Mexico would increase fugitive emissions from cars, especially the older vehicles, and would increase ozone and particulate matter formation,” he said.

A decision by CRE commissioners is not expected until November.

Reporting by David Alire Garcia, editing by G Crosse

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