Dow Jones Newswires | Archer Daniels Midland Co. is lobbying
U.S. regulators to allow more ethanol to blended with gasoline for use
in all cars, countering an effort that would boost the corn-based
additive in a limited number of vehicle model years.
The agribusiness group called on Environmental Protection Agency Administrator Lisa Jackson to boost the limit for blending ethanol from 10 percent to 12 percent, the so-called E12 cap.
ADM, which is among the largest producers of corn-based ethanol, is increasing planned production from a new ethanol refinery ahead, and expects U.S. regulators will back efforts to allow more of the additive to be blended with gasoline.
In a letter to Jackson, ADM Chairman and Chief Executive Pat Woertz said the U.S. market for the renewable fuel has become saturated, and said “quick action” was needed to balance supply and demand.
While prices had stabilized after a year-long decline, new capacity is starting to come on line after a sharp boom-and-bust in a sector that relies heavily on government incentives. This additional capacity is coming online while consumer demand for gasoline remains weak after falling sharply after commodity prices collapsed during the second half of 2008. And most of the gasoline sold in the U.S. today already reached the 10% blend wall or is close to reaching that level. Early this year, California, the country’s largest gasoline market, raised its ethanol blending from less than 6% to 10%.
“The reality is we are going to need ethanol blends in excess of 12 and 15 percent if America is to fully realize the benefits of a domestic renewable fuels industry and ensure the RFS is a success,” said Matt Hartwig, a spokesman for the Renewable Fuels Association, a biofuels industry group.
“EPA can approve the use of E12 for all vehicles immediately while simultaneously finishing its evaluation of E15,” but Hartwig is concerned whether regulators will restrict the use of E15 to newer cars.
In December, the EPA delayed until mid-2010 a decision on whether to increase the ethanol blend cap to 15% from 10% based on a waiver requested by Growth Energy, an ethanol advocacy group. The agency wanted further testing to determine the effect on vehicle engines, and also suggested the higher blend may be limited to cars made after 2001.
The EPA did not comment on ADM’s letter by deadline for this article.
ADM and other ethanol producers had backed an interim move to E12 that would apply to all vehicles, widening the potential market.
Growth Energy supports the move to E15 for all vehicles but moving to E12 doesn’t solve the problem because “we would be in the same position we are in now in two years” of bumping up against a blend wall, said Stephanie Dreyer, spokeswoman for the organization.
“We really need to create more space in the market to move on to second-generation biofuels, to cellulosic ethanol,” Dreyer said.
Investments in cellulosic ethanol industry have been inhibited by the blend wall despite aggressive mandates. The federal renewable fuel standards cap corn ethanol production at 15 billion gallons a year in 2015, versus production of more than 12 billion this year. Meanwhile, 16 billion gallons of cellulosic ethanol production will have to be blended a year in 2022. EPA reduced the initial mandate of 100 million gallons of cellulosic mandate in 2010 to 6.5 million because there of problems securing financing to build the first commercial-scale plant.
ADM is pushing to for 12% ethanol as an interim step while the EPA considers E15.
Food producers, notably in the meat sector, have also intensified their lobbying ahead of the EPA decision, warning that higher ethanol demand could push up corn and animal feed prices.
