October 11, 2013 / 5:33 PM / in 4 years

U.S. ethanol group, livid over mooted cuts in fuel blend, cries foul

* Debate over ethanol content in U.S. gasoline heats up

* Reduction in ethanol mandate is under consideration

* Ethanol group criticizes leak of ‘unverified’ document

* Regulators not available for comment

Oct 11 (Reuters) - A leading ethanol group reacted vigorously on Friday to media reports of a proposed easing of biofuel requirements next year, calling for U.S. agencies to investigate the leak of a draft Environmental Protection Agency document.

On Thursday, Reuters and other news outlets reported on EPA documents that showed the agency proposing a reduction in the amount of corn-based ethanol that would be required for blending into gasoline next year, a retreat from the landmark 2007 law and a major victory for the oil industry.

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.

On Friday, ethanol group Growth Energy said it would not comment on “unverified ‘draft’ documents” that were still under review, a process stalled by the government shutdown.

The EPA documents seen by Reuters could not be independently verified, and an EPA spokeswoman has not commented on them. 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, which must still approve them. It was not clear whether the documents had been updated before submission.

“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.

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.

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. (Reporting by Chuck Abbott in Washington; writing by Jonathan Leff; editing by Matthew Lewis)

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