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EPA to delay decision on ethanol-blended gas

By Tom Doggett

WASHINGTON (Reuters) - The Environmental Protection Agency said on Friday it would delay until January a decision whether gasoline blended with up to 15 percent ethanol is safe for 2001-06 cars and light trucks, a key verdict for boosting sales of higher blends.

The EPA approved so-called E15 for vehicles made since 2006 on October 13. If the blend is approved for vehicles since 2001, it would cover 60 percent of cars and trucks.

Some analysts said retailers would be loath to offer E15 if only a minority of customers would want it. Ethanol makers say E15 will sell for a few cents less per gallon than gasoline with the standard blend of 10 percent ethanol.

A decision initially was expected in December but the Energy Department said it needed more time to test older vehicles due to mechanical failures in test vehicles unrelated to fuel. It said it expected to complete the additional testing by the end of December.

"EPA will make its decision shortly after receiving that data," the agency said.

A person familiar with the matter said there were problems such as an exhaust leak from a small hole in a pipe that affected emission levels and spark plugs that were not properly replaced.

Tom Buis of Growth Energy, the trade group that requested approval of E15, said he was confident the new tests would show "E15 is a great fuel". He said the EPA needed to re-test a poorly maintained car that failed emissions tests with all fuels, including gasoline with no ethanol.

Ethanol groups requested EPA approval of higher blends in March 2009, expecting a decision within nine months. The EPA announced its decision more than 11 months late, saying it wanted to conduct a thorough review.

Word of the delay was a factor in a plunge in corn futures prices at the Chicago Board of Trade. More than one in every three bushels of corn is used to make ethanol. Corn for December delivery fell nearly 4 percent to $5.20-3/4 a bushel.

The Energy Department was supposed to forward its test results at the end of this month on putting E15 in older vehicles back to 2001, with an EPA decision on the higher ethanol blended fuel to follow in December.

"We are encouraged by EPA's commitment to accurate testing for 2001-2006 cars and pickup trucks, particularly given the failures are unrelated to the fuel being tested," said Bob Dinneen, president of the Renewable Fuels Association.

"We believe the fuel testing to date clearly demonstrates the efficacy of E15 as a motor fuel for all light-duty vehicles," Dinneen added.

The American Petroleum Institute, an oil industry group, said the EPA should extend its tests for an additional six months or more. "Rushing to allow more ethanol before we know it is safe could be disastrous for consumers and could jeopardize the future of renewable fuels," said a spokeswoman.

More ethanol is already required to come on the market as Congress has mandated that the amount blended gradually increase from 12 billion gallons this year to 15 billion gallons by 2015. The 2012 target is 12.6 billion gallons.

However, many service stations are reluctant to offer E15 because most fuel pumps have not been certified to sell it. Service station owners could also be sued by consumers if E15 harms the engines of cars, boats or chainsaws.

To help clear any confusion with drivers, the EPA plans to place E15 labels on gasoline pumps.

(Additional reporting by Timothy Gardner and Charles Abbott; Graphic by Emily Stephenson; Editing by Dale Hudson)

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