Jan. 21 (Bloomberg) -- The Environmental Protection Agency granted a request from ethanol producers to raise the amount of the corn-based additive in gasoline for vehicles made for the 2001 model year and later.
Refiners will be permitted to add as much as 15 percent ethanol, up from 10 percent, the EPA said in an e-mailed statement. The agency in October allowed the 15 percent blend for vehicles made for 2007 and later.
“Wherever sound science and the law support steps to allow more home-grown fuels in America’s vehicles, this administration takes those steps,” EPA Administrator Lisa Jackson said in the statement.
The EPA has been pressed by advocates for the ethanol industry to raise the limit to increase demand. U.S. carmakers and engine manufacturers last month asked an appeals court to force the agency to reconsider its October ruling.
Oil companies, automakers and environmental groups say increasing ethanol in fuel may damage engines, boost food prices and worsen air quality, and refiners and convenience stores that sell fuel may be reluctant to market the new blend.
“EPA continues to move in the right direction with respect to increasing ethanol blends, but challenges still remain,” Bob Dinneen, president of the Renewable Fuels Association, said in an e-mailed statement. “The RFA continues to urge EPA to extend the waiver for E-15 use to all cars and pickups.”
Growth Energy, a Washington-based ethanol trade group, submitted the request to lift a so-called blend wall on March 29 to help boost consumption for an industry that saw at least a dozen companies seek bankruptcy protection in an 18-month period.
The EPA’s decision should benefit ethanol producers such as Green Plains Renewable Energy Inc. and The Andersons Inc. over the long term, as the blend will be available for vehicles that make up about two-thirds of the nation’s total gasoline demand, Farha Aslam, an analyst at Stephens Inc. in New York, said in a report.
The U.S. provides a 45-cent tax credit to gasoline refiners for each gallon of the biofuel blended with the motor fuel. Under a 2007 law, the U.S. is required to use 13.95 billion gallons of alternative fuels, 12.6 billion of which is grain-based ethanol.
Denatured ethanol for February delivery rose 0.5 cents, or 0.2 percent, to $2.33 a gallon at 12:54 p.m. local time on the Chicago Board of Trade. Prices have gained 30 percent in the past year.
EPA said it’s developing requirements to make sure the so-called E-15 is labeled at gasoline pumps to prevent misfueling of vehicles that aren’t approved to handle the higher blend. The blend isn’t to be sold until after those measures are in place.
Motorcycles, heavy-duty vehicles and non-road engines aren’t allowed to use E-15.
The EPA’s decision was “a rush to judgment,” putting consumers at risk for vehicle performance problems, the American Petroleum Institute said in a statement.
“We urge President Obama to reverse EPA’s decision,” said Charles Drevna, president of the National Petrochemical & Refiners Association,. “We will continue pursuing our lawsuit against EPA on this issue to protect consumers and ensure the safety of the gasoline they rely on.”