Oil Report

US proceeding with 2008 ethanol usage mandate -EPA

WASHINGTON, Feb 7 (Reuters) - The Bush administration will not delay plans to require the use of 9 billion gallons of ethanol in motor gasoline in 2008, an Environmental Protection Administration official said on Thursday.

Some U.S. lawmakers are concerned that an energy bill signed into law this year sets unreasonable targets for use of ethanol.

Robert Meyers, principal deputy assistant administrator in the EPA’s office of air and radiation, said his agency will soon issue regulations setting U.S. mandated ethanol use at 9 billion gallons for 2008, versus usage of about 7 billion gallons per year in 2007.

“We expect a notice of this action to be published in the Federal Register soon,” Meyers said in testimony before the Senate Energy Committee.

Energy legislation requires a five-fold increase in ethanol use by 2022. Some 15 billion gallons could come from traditional corn-blended ethanol, but the rest is required to come from non-corn cellulosic sources like wood chips and switch grass.

Sen. Jeff Bingaman, chairman of the committee, said he was concerned that the current rule might be “flawed.”

“While it appears likely that there will be enough ethanol and biodiesel production capacity to satisfy the requirement, it is not clear how all of this biofuel will find its way into the fuel tanks of our cars and trucks,” Bingaman said.

Because the law was enacted only weeks before the 2008 requirement took effect, “refiners had no opportunity to ensure that sufficient infrastructure would be in place to handle the increase,” Bingaman said.

Meyers said that current U.S. ethanol capacity is adequate to meet the 2008 goal, but there could be some challenges with mixing it with gasoline supplies.

“There’s probably enough capacity. The issues will be with respect to the blending of the fuel and the penetration of the markets where it hasn’t been,” such as the East Coast, Meyers told reporters.

“I don’t want to give any impressions that we have any concerns at this point in time,” Meyers said.

The EPA has not yet conducted a full assessment of the market impact of the renewable fuel mandate, and has the authority to waive usage requirements for up to 20 days if there are shortages, Meyers said.

“The issues will be, is there penetration outside the markets where it is now, and that’s something that is hard to predict,” Meyers said. “We will obviously monitor the impact, and will work with (the Energy Department) and others if there are problems.” (Reporting by Chris Baltimore; Editing by Walter Bagley)