December 01, 2009

U.S. Postpones Decision on Ethanol Blend in Gasoline

By Daniel Whitten and Mario Parker - Excerpts

Dec. 1 (Bloomberg) -- U.S. regulators postponed a decision on raising the percentage of ethanol allowed in gasoline until mid-2010 to allow more time to assess effects on engines.

The Environmental Protection Agency said it would keep the blend at 10 percent and could expand it based on a study on higher ethanol mixes in engines for cars and equipment such as lawn mowers. Growth Energy, an ethanol industry trade group, had asked that the agency permit 15 percent, also known as E-15.

“While not all tests have been completed, the results of two tests indicate that engines in newer cars likely can handle an ethanol blend higher than the current 10 percent limit,” the EPA said today in a statement. The agency “expects to make a final determination in mid-2010 regarding whether to increase the allowable ethanol content in fuel.”

Raising the so-called blend ratio would increase demand for the fuel, benefiting producers battered by volatile corn and fuel prices. At least 10 ethanol companies have sought bankruptcy protection since last year, including VeraSun Energy Corp. and Aventine Renewable Holdings Inc. Automakers and refiners have opposed a change, saying added ethanol would damage engines.


Environmental and petroleum-industry groups aligned in opposition to a higher ethanol blend

“It’s time we recognize that ethanol has been unable to attain independent viability as a motor fuel despite lavish subsides and mandates for use, and even more important, has been unable to prove that its production and use are beneficial to the environment,” said Craig Cox, the Environmental Working Group’s Midwest vice president. He hailed the EPA decision as a sign the agency is giving the matter further scrutiny.

More Testing

The National Petrochemical & Refiners Association also supported the delay.

“In making this decision, EPA correctly recognizes that there is more study and comprehensive testing to be done to ensure that higher ethanol blends will be safe for consumers and not threaten the reliability of their fuels or operation of their vehicles, engines and outdoor equipment,” said Charles T. Drevna, the group’s president, in a statement.


ADM, Monsanto, Deere

ADM, the second-biggest U.S. ethanol producer, and agricultural companies such as Monsanto Co. and Deere & Co. stand to gain if the EPA eventually allows a 15 percent formula, Morgan Stanley analysts led by Vincent Andrews in New York said in a report yesterday. [Left unaddressed in the report is the impact that a 50% increase in the ethanol mandate would have on the world's food insecure.]

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