U.S. ethanol expansion limited by 'blend wall' -Vilsack

Reuters

By Kay Henderson

JOHNSTON, Iowa, Nov 8 (Reuters) - Lower gasoline demand inthe United States is slowing ethanol expansion no matter howmuch the government mandates the grain-based additive be blendedinto the nation's fuel supply, U.S. Agriculture Secretary TomVilsack said on Friday.

"We are bumping up against this thing called the 'blendwall,' where essentially there's no other place to put theethanol unless we have increased blend rates," Vilsack saidduring a taping of public television program Iowa Press.

The Environmental Protection Agency as early as next week isexpected to propose reducing the so-called Renewable FuelStandard from its existing target of 18.15 billion gallons ofbiofuels for 2014 as outlined in the current law.

Oil refiners have lobbied the government to slash themandate. They argue they cannot inject more than the traditional10 percent ethanol blend into gasoline without risking damage tocar engines - the so-called "blend wall" that Vilsack referencedin his remarks.

The EPA has said fuel blends with as much as 15 percentethanol, or E-15, are safe for vehicles made in 2001 or later.But few gas stations sell the higher blend outside of the CornBelt.

Better fuel efficiency in modern vehicles has also helpedlead to an overall decline in gasoline demand.

"I think EPA's got a difficult task because they are facedwith the fact that those standards were set on the premise thatwe as a country would consume more and more gasoline from yearto year," Vilsack said. "The reality is, with fuel efficientvehicles, we are consuming less (gasoline). So the assumptionupon which those numbers was based was incorrect."

Vilsack is a former governor of Iowa, the No. 1 cornproducing state. He said efforts by some U.S. legislators torepeal the Renewable Fuel Standard "concerns me."

Rather, the country should move to expand the distributionnetwork of ethanol and promote its use in aviation and marinefuel, Vilsack said.

USDA, in the first supply and demand forecast since beforelast month's partial U.S. government shutdown, on Friday boostedits estimate for the U.S. corn crop to a record 13.989 billionbushels.

Use of corn in making ethanol was left unchanged at 4.9billion bushels, USDA said.

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