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EPA Defeats Challenge to Higher Ethanol Levels in Fuel

A challenge to an Environmental Protection Agency rule allowing higher concentrations of corn- based ethanol in gasoline was thrown out by a U.S. Appeals Court ruling that the groups pressing the case had no right to sue.

Grocery, auto and petroleum industry associations filed suit against the agency in November 2010, saying that rules allowing for increased used of corn-based ethanol in auto fuel would push up the price of food and gasoline and harm engines. The court today ruled the groups couldn’t show they had suffered specific harm as a result of the EPA’s decisions.

“Each industry group advances a theory of standing, but none is in fact adequate to meet the burden of establishing standing,” Circuit Judge David Sentelle wrote in the 17-page opinion filed in Washington.

The Grocery Manufacturers Association, the American Petroleum Institute and groups representing companies including Tyson Foods Inc. (TSN) and Coca-Cola Co. (KO), challenged two EPA decisions that allowed the introduction of E15, a gasoline blended with ethanol.

“Today’s court decision is a big loss for consumers, for safety and for our environment,” Bob Greco, a director of the American Petroleum Institute, which represents more than 500 oil and natural gas companies, said in an e-mailed statement. “EPA approved E15 before vehicle testing was complete, and we now know that the fuel may cause significant mechanical problems in millions of cars on the road today.”

Vehicle Warranties

Automobile manufacturers have told Congress that vehicle warranties will not cover damage caused by E15.

Denatured ethanol for September delivery rose 0.3 cent to $2.59 a gallon at 11:54 a.m. on the Chicago Board of Trade. Futures have gained 18 percent this year.

The EPA in 2010 granted a request from ethanol producers to permit increased concentrations of the corn-based fuel in gasoline to as much as 15 percent from 10 percent for vehicles made for the model year 2007 and later and in January 2011 extended it for cars made after 2001.

Blends of 15 percent ethanol are referred to as E15, while concentrations of 10 percent and 85 percent are called E10 and E85.

Bob Dinneen, the chief executive officer of the Renewable Fuels Association, said in a statement that the ruling and the introduction of higher-level ethanol blends would “help ensure the growth and evolution of the domestic renewable fuels industry continues.”

‘Smooth Transition’

A spokesman for the EPA, David Bloomgren, said, “This decision and the EPA’s previous actions do not require the use or sale of E15. EPA will continue to work with stakeholders to ensure a smooth transition as businesses decide whether to introduce E15 into the market.”

Circuit Judge Brett Kavanaugh dissented from the three- judge panel’s decision, saying the groups’ standing to sue was established by the prospect of rising costs for their members.

Jerrod Kitt, the director of research for the Linn Group, a Chicago-based researcher and broker, said he didn’t expect the ruling to have a significant impact on corn or ethanol prices for at least a year.

“The drought this year has seen to it that corn used to make ethanol will be reduced,” Kitt said in a telephone interview. “With corn prices where they are now, you are not going to see people rush out to make E15.”

Liability Issues

The still-unresolved liability issues about using ethanol in all cars and the investment required for new E15 gas pumps may also limit use of E15, Kitt added.

At least 25 U.S. senators and 156 House members have signed letters asking Lisa Jackson, administrator of the Environmental Protection Agency, to suspend or lower mandates on how much ethanol the country must use this year and next.

A 2007 law mandates the use of 13.2 billion gallons of biofuels such as ethanol this year, rising to 13.6 billion in 2013. The measure is designed to help reduce the nation’s reliance on oil from overseas sources.

The USDA on Aug. 10 predicted ethanol use in the year starting Sept. 1 would consume 4.5 billion bushels, down from 5billion in the current year. Use for ethanol as a share of the estimated crop would rise to 42 percent from 40 percent.

The case is Grocery Manufacturers Association v. U.S. Environmental Protection Agency, 10-1380, U.S. Court of Appeals for the District of Columbia Circuit.

To contact the reporter on this story: Sara Forden in Washington at sforden@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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