By Ayesha Rascoe

WASHINGTON (Reuters) - The Obama administration on Monday renewed an interagency agreement that backs the development of biofuels for the aviation industry and reiterated its support for embattled federal renewable fuel targets.

U.S. Agriculture Secretary Tom Vilsack and Transportation Secretary Ray LaHood signed a pact extending a program that has worked with the private sector and rural communities to create an alternative to fossil fuels for aviation.

"We want to re-affirm the importance of this particular industry in this administration," Vilsack told reporters at an industry conference in Washington.

The "Farm to Fly" program aims to support annual production of 1 billion gallons of aviation biofuels by 2018.

The program will focus on evaluating various sources of renewable alternatives to jet fuel, while also developing state and local partnerships with private companies.

Federal support for biofuels has come under increased scrutiny amid complaints from livestock producers and refiners that the federal biofuels mandate has contributed to higher food prices and could threaten gasoline supplies.

Last week, lawmakers in the House of Representatives introduced legislation that would eliminate the corn-based ethanol portion of the mandate, which requires increasing amounts of renewable fuels to blended into U.S. gasoline and diesel supplies.

The Obama administration's support for the mandate could block attempts to curtail the targets, though, especially as most lawmakers from major grain-producing states oppose any limits on the mandate.

Vilsack encouraged the biofuel industry representatives to remain "vigilant" in support of the mandate.

"There are industries and folks who are deeply concerned about the progress that is being made, who want to show that progress down," Vilsack said. "Now, is not the time to step back, now is the time to continue moving forward."

Vilsack told reporters that the mandate was lowering, not raising, gasoline prices for consumers and creating jobs in rural communities.

Oil refiners, who want the mandate rescinded, say the targets are approaching a point where compliance would require the industry blend more ethanol into gasoline than can physically be done at the 10 percent per gallon level.

This problem is referred to as the "blend wall".

Supporters of ethanol argue the "blend wall" could be easily overcome if refiners drop their opposition to allowing gasoline with 15 percent ethanol content, or E15.

The Environmental Protection Agency has approved use of E15 in cars built since 2001, which now account for about two-thirds of U.S. passenger vehicles on the road, but gasoline station operators and oil refiners have voiced concerns that higher blends could hurt vehicle engines.

(Reporting by Ayesha Rascoe; Editing by Ros Krasny and Leslie Gevirtz)