By Ayesha Rascoe
WASHINGTON (Reuters) - U.S. energy markets cannot absorb the levels of biofuels required by law to be blended into the fuel supply in 2014, Environmental Protection Agency head Gina McCarthy said on Thursday, defending a controversial proposal to slash the target for this year.
The EPA is working on final 2014 biofuel use targets after issuing a proposal in November that slashed federal requirements for ethanol in U.S. fuel supplies.
Although it is under pressure from the biofuel industry to reverse the move changes, McCarthy's comments suggested the agency might stick to its guns, or come to some kind of middle ground on targets.
The draft rule cut the 18.15 billion gallons (68.7 billion liters) of biofuels mandated for use by a 2007 law down to 15.21 billion gallons, angering biofuel producers who argued the rule would damage their industry.
The final rule is likely to be released in June.
"We're going to take a reasonable approach that recognizes the infrastructure challenges and the inability at this point to achieve the levels of ethanol that are in the law," McCarthy said at a House appropriations committee hearing.
Since the rule's release, renewable fuel industry advocates have engaged in intense lobbying to get the agency to reverse its proposal, and McCarthy said the EPA would take all views into account.
"Clearly, the ethanol and the biodiesel industry do not believe that the proposal represented the full breadth of what the agency could or should be doing to achieve the congressionally mandated levels in the law," McCarthy said.
The Renewable Fuel Standard, passed by Congress and administered by the EPA, calls for increasing the amount of biofuels used in the United States each year, until 2022.
Slack U.S. fuel demand has placed the nation on a course to hit the so-called blend wall, the point at which the mandate will require the use of more ethanol than can be blended into the fuel supply at 10 percent per gallon, the standard that reflects much of the current U.S. fueling infrastructure.
Oil refiners, who oppose the biofuel mandate, are reluctant to blend more than 10 percent ethanol into gasoline because of possible harm it could do to older vehicles. Without cuts to the federal mandate, they would be forced to export more gasoline or produce less of it.
Biofuel producers say blend wall issues have been exaggerated because refiners refuse to embrace higher ethanol blends in gasoline: E-15, which has 15 percent ethanol, and E-85, an 85-percent ethanol fuel that can be used by the limited fleet of so-called "flex fuel" vehicles.
The EPA has authorized the use of gasoline blends with up to 15 percent ethanol content for cars built since the 2001 model year, which represent about two-thirds of vehicles currently on the road.
(Reporting by Ayesha Rascoe; Editing by Ros Krasny and Marguerita Choy)