By RYAN TRACY
WASHINGTON -- The Environmental Protection Agency said
Tuesday it will propose cutting next year's federal mandate for
using alternative motor fuel, a reversal that comes as Congress
heightens scrutiny of the program.
The agency said it would seek to reduce the amount of
"renewable" fuel that the oil industry must blend into the US
gasoline supply, a move that could shrink the market for
ethanol and other products.
A 2007 law calls for the US to consume ever-rising amounts
of renewable fuel, mainly corn ethanol made in the US. But the
agency acknowledged Tuesday that the US is approaching a "blend
wall" -- the point at which the market can't absorb any more
ethanol without using new types of fuels that aren't widely
"It's a significant development for the EPA to overtly state
that it intends to be flexible," said Jason Bordoff, director
of Columbia University's center on global energy policy. Mr. Bordoff has called for
the agency to reduce the renewable-fuel requirement, saying
that not doing so could cause an increase in gasoline
The EPA announcement came as part of the rollout of the
final requirement for 2013, which will remain unchanged at
16.55 billion gallons of ethanol and other fuels, up more
than 1 billion gallons from the previous year.
The lion's share of that mandate -- about 13.8 billion
gallons -- is expected to be met with ethanol from Midwestern
corn, with ethanol made from Brazilian sugarcane, diesel-motor
fuel made from soybeans and other fuels making up the rest.
The 2013 mandate puts government-required ethanol
consumption at close to 10% of the US gasoline supply. Most
gasoline today contains no more than 10% ethanol.
Next year, the mandate is set to rise again, but US gasoline
consumption is expected to be flat as Americans continue to
drive more fuel-efficient cars. "EPA does not currently foresee
a scenario in which the market could consume enough ethanol" to
meet the 2014 requirements outlined in the law, the EPA said in
a fact sheet released Tuesday.
"The administration now acknowledges the blend wall as real
and unavoidable," said Stephen Brown, vice president for
federal government affairs at Tesoro. "A clear signal is also
being sent to Congress that additional authority to address the
blend wall may be needed via legislation."
Reps. Fred Upton and Henry Waxman, the top Republican and
Democrat, respectively, on the House Energy and Commerce
Committee, have said they are discussing possible changes to
the renewable-fuel law.
The ethanol industry has said major changes aren't necessary
because refiners can switch to higher ethanol blends, which so
far are not being sold widely even though the EPA says they are
safe for new vehicles.
Having the EPA tweak the requirements to provide flexibility
"is exactly how the program was designed to work," said Brooke
Coleman, executive director of the Advanced Ethanol Council, which represents
developers of alternative fuels. "There are no problems with
the program on the horizon that can't be fixed
Dow Jones Newswires