[EKaru]

Wednesday October 13, 2010, 2:02 am EDT
The Obama administration will grant a request from ethanol producers to permit higher concentrations of the corn-based fuel additive in gasoline for vehicles made in 2007 and later, according to a person familiar with the decision.

The Environmental Protection Agency will announce as early as today its decision allowing refiners to blend as much as 15 percent ethanol into fuel, up from the current 10 percent, said the person, who spoke on condition of anonymity before the announcement.

Ethanol producers such as Archer Daniels Midland Co. have pressed the EPA to raise the limit. Opponents, including a coalition of oil companies, automakers and advocacy groups, say adding more ethanol may damage car engines, boost food prices and hurt the environment.

The EPA delayed its decision in December, saying it needed more time to conduct tests on the blend. A decision was again postponed in June, prompting Growth Energy, the ethanol-industry trade group seeking the 15 percent blend, to write to President Barack Obama expressing frustration with the process.

The plan to allow increased ethanol levels was reported late yesterday by the Wall Street Journal.

Raising the “blend ratio” will increase demand. By law, the U.S. must use 12 billion gallons of renewable fuels such as ethanol next year, up from 10.5 billion in 2009, and use 15 billion gallons by 2015.

Closely held Poet LLC, based in Sioux Falls, South Dakota, is the largest U.S. ethanol producer, followed by Decatur, Illinois-based Archer Daniels.

GM, Ford, Chrysler

General Motors Co., Ford Motor Co. and Chrysler LLC have said the government should be cautious about increasing the ethanol percentage in gasoline. AAA, the nation’s biggest motoring organization, said in July 2009 the EPA should reject the Growth Energy request because higher blends may damage exhaust systems, engines and fuel pumps and destroy catalytic converters.

Valero Energy Corp., the largest U.S. refiner, and Marathon Oil Co., the largest refiner in the Midwest, are concerned selling gasoline with more of the corn-based fuel additive may leave them liable for engine damage, according to company spokesmen.

To contact the reporters on this story: Kim Chipman in Washington at kchipman@bloomberg.net; Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net.