House farm chief backs higher bio-blend

WASHINGTON (Reuters) - Congress should consider lifting the required ethanol-to-gasoline blend to 15 percent from 10 percent to avert an ethanol surplus, the House of Representatives Agriculture Committee chairman said on Wednesday.

Rep. Collin Peterson, Minnesota Democrat elected to his 10th term on Tuesday, said during an interview with Reuters that he was concerned about the “blend wall” when ethanol output equals the legal requirement to use the alternative motor fuel.

“I’d like to see us do nationwide a 15 percent blend,” said Peterson. He said President-elect Barack Obama “will be supportive of whatever we (Congress) come up with.”

Ethanol output is approaching 10 billion gallons a year. Most gasoline now carries a 10 percent blend of ethanol. The ethanol industry is under stress due to lower oil prices. “All of them are having trouble,” he said.

Peterson also said:

--He will discuss with Obama officials his idea to begin work in 2009 on reorganizing the Agriculture Department. Reshaping USDA could take a year or two. The last reorganization was in the mid-1990s.

--The House Agriculture Committee will hold a hearing this month on credit default swaps. It also plans a trip to Europe to discuss harmonization of futures regulations.

--Obama should nominate for agriculture secretary “somebody who understands agriculture, who has knowledge of agriculture.”

“I’m not big on governors and so forth,” said Peterson.

--a top issue for the committee, in the wake of U.S. financial turmoil, is reviewing federal regulation of the futures markets.

Virginia Rep. Bob Goodlatte, the Republican leader on the committee, said separately that regulatory reform should be “the No 1 priority.” Like Peterson, Goodlatte said that creation of clearinghouses would be a good step toward restoring liquidity to credit default swaps.

Goodlatte said he opposed proposals to merge the Commodity Futures Trading Commission, the futures regulator, with the Securities and Exchange Commission, which oversees equities.

He said federal mandates to use ethanol were harmful overall. “It’s going to keep pressure long-term on food prices,” said Goodlatte.

Reporting by Charles Abbott; Editing by David Gregorio