Washington, January 2011

The U.S. Environmental Protection Agency will allow higher levels of ethanol in gasoline for cars made between 2001 through 2006, after months of studying the safety of the fuel.

The EPA's decision, which was widely expected, allows owners to fill up with gasoline made with 15% ethanol, as opposed to the current 10% blend. The expansion of so-called E15 is a victory for producers of the corn-based fuel additive at a time when corn prices are surging because of growing concerns over tightness in world supplies.

Meat producers, environmental groups and the auto industry have fought the increased blend. The movement to E15 could provide further fuel for corn prices, while helping to boost sales for such producers as Archer Daniels Midland Inc. Yet analysts warned the agency's announcement Friday is only one step in a longer process.

"This is not a huge positive for ADM since expansion of E15 is still very complicated, but we think it is good news that the EPA is clearing up the uncertainty," wrote analysts at Credit Suisse in a note to clients.

It remains unclear when the higher ethanol blend will be available at U.S. gas stations, since many retailers say it's too expensive to install the necessary equipment to offer the fuel.

Last year, the EPA approved the 15% ethanol blend for cars in model years beginning in 2007. At the time, the agency said it would study the safety of its use in older vehicles. The higher blend is still prohibited for cars that are older than model year 2001. It also is prohibited for use in motorcycles, heavy-duty vehicles and nonroad engines.

"Recently completed testing and da ta analysis show that E15 does not harm emissions control equipment in newer cars and light trucks," EPA Administrator Lisa Jackson said in a statement.

The Renewable Fuels Association said car industry data show 62% of vehicles on the road today could use the higher blend. Producers of ethanol applauded the EPA's decision and called it a move that will reduce the country's dependence on foreign oil. The higher blend is expected to help producers meet federal ethanol mandates.

The increase is opposed by car makers and power equipment manufacturers, which say consumers are likely to use the 15% ethanol fuel in products for which it hasn't been approved. If the products are damaged as a result, the companies have voiced concern over their potential liability.

Environmentalist said the use of E15 would increase air pollution in U.S. cities, while meat producers warned the higher blend would raise their costs as increased demand for corn boosts animal feed prices.

"When consumers ask why their food costs are higher, it will be difficult for EPA to explain that today's decision had no impact on the food shopper's dollar," said a spokesman for the National Chicken Council, a trade group for poultry producers and processors.

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