By Jim Snyder - 12/02/09 11:00 AM EST
The Environmental Protection Agency (EPA) said it would delay a fiercely lobbied decision to allow for higher blends of ethanol in gasoline pending completion of further tests.
A decision will now come in June, the EPA said. The agency also indicated initial tests show newer cars can handle higher blends.
Environmental groups also weighed in, arguing greater ethanol blends would increase pollution as farmers use more fertilizer to grow more corn. Meanwhile, food manufacturers say higher blends will raise food prices as more corn is used for fuel instead of for food. Ethanol producers reject both points.
The fight has spilled over into Congress. Representatives from a coalition opposing raising the ethanol limit said producers were lobbying Congress to circumvent the EPA review and mandate that refiners mix more ethanol in their products. They said they oppose those lobbying efforts.
Motor fuel can’t contain more than 10 percent ethanol, which basically caps the total market. Ethanol trade groups say producers now have the capacity to make at least 1.2 billion gallons more than is now used, and producers have struggled in the economic downturn, which has lowered demand for fuel across the board.
An estimated 10.5 billion gallons is expected to be produced this year, said Matt Hartwig, a spokesman for the Renewable Fuels Association.
Ethanol producers have argued higher blends are safe and would create more jobs in the industry while pushing the administration and Congress to raise the allowable ethanol levels. Farm-state senators and representatives have also encouraged the agency to increase the blend limit.
Raising the limit would allow producers to restart idle plants and signal to the market a growing demand for ethanol and other renewable fuels that promise more environmental benefit, such as ethanol made from plant cellulose rather than corn, producers say.
Although EPA put off a final decision until June, some producers took EPA’s announcement as a positive sign. EPA said initial tests show that new vehicles would “likely be able to accommodate higher ethanol blends, such as E15,” or fuel that contains 15 percent ethanol.
But the agency said a final decision would not be made until the results came in from further tests, including by the Energy Department on the long-term emissions impacts of higher-ethanol blends.
Tom Buis, CEO of Growth Energy, said the EPA announcement should encourage investors about the future of renewable energy.
“This sends a signal that there is a market space for people who want to invest in cellulosic ethanol,” Buis said.
Growth Energy, a trade group of producers, petitioned EPA to allow for more ethanol to be blended with gasoline.
“The announcement is a strong signal that we are preparing to move to E15,” said retired Gen. Wesley Clark, who is the co-chairman of Growth Energy.
But others in the industry were less sanguine. Bob Dinneen of the Renewable Fuels Association said EPA should have approved some interim blend as a compromise.
“The delay threatens to paralyze the continued evolution of America’s ethanol industry,” he said. He said the delay will “chill” investment in the industry in advanced biofuel technologies. Hartwig said the group had hoped EPA would allow E12 to increase demand immediately.
As it announced its delay, EPA also said it was committed to increasing the use of renewable fuels. Congress has mandated that 36 billion gallons of renewable fuel be produced annually by 2022.
In light of that requirement, EPA said it was “clear that ethanol will need to be blended into gasoline at levels greater than the current limit of 10 percent.”
Each side of the issue hastily called a news conference to discuss the EPA decision. A coalition of strange bedfellows that includes environmental groups, oil refiners, small engine makers and food manufacturers said they were encouraged by EPA’s decision to delay a final resolution.
But some raised concerns that EPA signaled it would allow E15 for use in newer cars but not for other engines that use gasoline. Small-engine makers say higher ethanol blends damage their products and raise a safety issue because they can cause idling chainsaws and other small equipment to restart spontaneously.
A bifurcated fuel system will create confusion in the marketplace, said Kris Kiser, executive vice president of the Outdoor Power Equipment Institute.
Meanwhile, environmental groups worry that long-term use of higher-ethanol blends could damage a car’s emissions control system, which reduces air pollution.
In its announcement, EPA said it was awaiting a study from the Energy Department on that issue. The agency also said it will take steps “to address fuel pump labeling issues to ensure consumers utilize the proper gasoline.”