January 21, 2011 / 1:22 AM / 8 years ago

U.S. okays ethanol boost for more cars

WASHINGTON (Reuters) - U.S. regulators on Friday backed a request to sharply boost the use of ethanol in more than half the nation’s cars, raising the stakes in a contentious debate over the safety and cost of converting more corn into fuel.

A gasoline pump nozzle is seen at a gas station in Arlington, Virginia, June 11, 2008. REUTERS/Jim Young

The U.S. Environmental Protection Agency’s announcement increasing the maximum ethanol blend rate in gasoline to 15 percent from 10 percent in vehicles built from 2001 to 2006 was not a surprise, coming just months after it allowed so-called E15 in cars and trucks built in 2007 or later.

But it is still likely to fire heated rhetoric over higher ethanol use at a time of rising food and fuel costs, even though it may be years yet before E15 clears the legal and logistical hurdles that effectively prevent its sale today.

Pushing back the so-called “blend wall” that has prevented producers from injecting more ethanol into the nation’s fuel supply will help reduce the U.S. dependence on foreign crude oil, replacing it with home-grown fuel, a boon for corn farmers who already sell 40 percent of their crop to ethanol makers.

But it has been fiercely opposed by ranchers who fear higher costs for their livestock feed will hurt margins; by refiners and blenders who would have to pay for new storage tanks; and by service station owners and auto makers who worry that putting higher ethanol blends in older cars could open them up to lawsuits if the fuel damages their engines.

The EPA had repeatedly delayed its decisions on the increase for months to ensure its safety.

“Recently completed testing and data analysis show that E15 does not harm emissions control equipment in newer cars and light trucks,” EPA Administrator Lisa Jackson said.

Even so, few expect a rapid increase in usage. Corn futures were only slightly higher on Friday, up 3 cents to $6.57 a bushel. But prices have doubled since last July as feed, food and fuel use drains global stockpiles, and further gains threaten to make it uneconomical for producers.

“It is going to take a while to do it. I am thinking more in terms of years and not weeks or months,” said grain analyst Mike Krueger with World Perspectives Inc. in Washington. “It is not going to affect the corn market in this marketing year.”

The EPA said it is still reviewing public comment for an E15 label that would be put on gasoline pumps to make sure consumers don’t use the wrong fuel.

Growth Energy, the trade group that petitioned the EPA back in March 2009 to allow E15, said the agency’s decision was a bold move that would change America’s energy future.

“Increased use of ethanol will strengthen our energy security, create U.S. jobs, and improve the environment by displacing conventional gasoline with a low-carbon fuel,” said Tom Buis, chief executive of Growth Energy.

“Today’s decision greenlights the use of E15 for nearly two out of every three cars on the road today and furthers proves ethanol is a safe, effective fuel choice for American drivers,” said Renewable Fuels Association President Bob Dinneen.

Both Dinneen and Buis urged the EPA to allow E15 for all cars and pickups, avoiding the potential for confusion by owners of pre-2001 cars that would not be cleared to use it.

The trade group for oil refiners criticized the EPA’s decision, saying the agency acted without adequate scientific evidence that E15 was safe.

“Widespread use of 15 percent ethanol in gasoline could cause engine failures that could leave consumers stranded, injured or worse, and hit consumers with costly engine repairs,” said Charles Drevna, President of the National Petrochemical & Refiners Association.

The group has sued EPA to keep E15 off the market.

Reporting by Tom Doggett; additional reporting by Ayesha Rascoe in Washington and Julie Ingwersen in Chicago, Editing by Marguerita Choy

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