The Obama administration has delivered a blow to the corn industry and oil refiners with an ethanol ruling that disappointed groups on opposite sides of a fight over renewable fuels.
Setting out long-delayed mandates on how much ethanol should be mixed with petrol, the administration on Monday unveiled targets that were seen as too low by groups that mash corn into fuel and too high by oil refiners.
Ethanol is blended into virtually every US barrel of petrol and producers want the government to back greater use of the fuel, which they pitch as environmentally friendly.
Oil refiners are staunchly opposed to adding more ethanol to petrol, arguing that a mix of more than 10 per cent ethanol is difficult in practical terms and not demanded by consumers.
The ruling from the Environmental Protection Agency, a regulator, allows for a slim increase in ethanol use above the 10 per cent threshold, but entails far less in absolute terms than Congress has permitted.
Stephen Brown, vice-president at Tesoro, an oil refining group, said: “They’ve managed to alienate everybody, make everybody angry, which is I guess the essence of a good rule.”
The EPA, he said, had deployed “tortured reasoning” to justify breaching the 10 per cent “blend wall”, adding: “It’s aspirational thinking at best.”
Jack Gerard, president of the American Petroleum Institute, the main oil lobby, said: “EPA’s final rule relies on unrealistic increases in sales of higher ethanol fuel blends despite the fact that most cars cannot use them.”
A 2007 federal law that contained a renewable fuel standard, or RFS, envisaged that as much as 22.3bn gallons of biofuels would be mixed into fuel in 2016, but the EPA’s mandate on Monday called for only 18.1bn gallons next year.
The Renewable Fuels Association, an ethanol trade group, accused the EPA of swallowing oil industry arguments and underestimating the size of the market for biofuels.
Bob Dinneen, the group’s chief executive, said: “[The EPA’s decision] will deepen uncertainty in the marketplace and thus chill investment in second-generation biofuels.
“Unlike Big Oil, the ethanol industry does not receive billions in tax subsidies and the RFS is our only means of accessing a marketplace that is overwhelmingly and unfairly dominated by the petroleum industry.”
Some in the ethanol industry would like to see 15 per cent ethanol blends with petrol.
Janet McCabe, acting assistant administrator for EPA’s office of air and radiation, lauded the biofuels industry as a success story and said the regulator’s new standards “provide for ambitious, achievable growth”.
Ethanol plants that had been crippled by drought and the financial crisis have bounced back to life with US ethanol output topping 1m barrels a day for the first time as refiners take advantage of low corn prices and Americans who are driving more.
Analysts at JPMorgan said the EPA mandate would be a “slight positive” for corn demand.
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