By Ayesha Rascoe
WASHINGTON (Reuters) - The nascent U.S. cellulosic ethanol industry has urged the White House to change course on targets for biofuel use, warning in a letter to President Barack Obama on Tuesday that current policy risks losing investments to China and Brazil.
Federally set mandates for the use of fuels such as corn ethanol and cellulosic ethanol, made from plant waste like grasses and wood, must be based on the industry's ability to produce the fuel, not on infrastructure restraints, executives of several biofuel companies wrote.
The Environmental Protection Agency rocked the biofuels industry last year with a draft plan slashing requirements for blending renewable fuels into U.S. gasoline and diesel in 2014.
Companies including POET LLC, Abengoa Bioenergy and Dupont told Obama that investments in innovative fuel technology could be lost if EPA does not reconsider.
"If the proposed methodology is not fixed in the final rule ... the 2014 rule will have inadvertently done more than your worst critics have to harm a low carbon industry you have always championed," the executives said.
Following a backlash to the initial proposal, the companies said they expect the administration to raise the targets from the proposed rule to the final rule, sent to the White House for review in August.
But an increase in targets will not be enough to support new investment, the companies said, as long as the agency continues to limit targets based on the number of fueling pumps available to dispense higher blends of ethanol in gasoline - a variable mostly controlled by big oil companies.
The Renewable Fuel Standard requires increasing amounts of ethanol and biodiesel to be mixed into U.S. fuel supplies each year until 2022.
The EPA said it lowered the targets for 2014 because the nation had reached a point where the law would require ethanol to be blended into gasoline at levels higher than the 10 percent per-gallon mixture that dominates retail fuel stations.
But capping ethanol at 10 percent of the fuel supply will not give oil companies any incentive to invest in new fueling equipment, and the biofuel program will "cease to be effective," the companies said.
After years of falling far short of the targets set by Congress, makers of cellulosic biofuels are starting to gain some momentum.
While 2014 production will come nowhere near the 1.75 billion gallon target originally set by Congress, POET and Dutch food and chemicals group DSM last week jointly opened a plant in Iowa with an initial production target of 20 million gallons a year using corn cobs, stalks and other crop waste as its feedstock.
Quad County Corn Processors opened a plant this week that should produce 2 million gallons cellulosic ethanol a year.
It is unclear how much cellulosic ethanol will be produced in 2014. EPA's draft proposal set the target at 17 million gallons.
(Reporting by Ayesha Rascoe, editing by Ros Krasny and Gunna Dickson)