Obama won’t abandon ethanol, official says

President Barack Obama’s administration won’t abandon the nation’s ethanol program and will encourage Congress to maintain it, Agriculture Secretary Tom Vilsack said.

The Renewable Fuel Standard, passed in 2007, requires the U.S. to use 13.8 billion gallons of renewable fuels such as ethanol this year and 15 billion gallons by 2015. The Agriculture Department estimated this month that 42 percent of this year’s corn crop will go toward making the fuel.

Last summer, lawmakers from both parties called for a temporary suspension or reduction of the ethanol program as a drought drove up corn prices. The Environmental Protection Agency declined the requests. This week, lawmakers introduced proposals to rewrite the law’s cellulosic biofuel mandate so the federal requirement is in line with the amount of cellulosic biofuels commercially available, which is almost zero.

“Our position is that we are strong supporters of the RFS,” Vilsack said in an interview with reporters Thursday at the National Ethanol Conference in Las Vegas. “It’s working. It’s doing what it’s supposed to do. We would hope Congress will continue to allow it to work.”

The industry allowed a 45-cent tax credit provided to refiners for each gallon of the fuel blended into gasoline to expire in December 2011, saying at the time the ethanol mandate was sufficient to spur demand.

Denatured ethanol for March delivery fell 2.2 cents, or 0.9 percent, to $2.407 a gallon at 12:37 p.m. New York time on the Chicago Board of Trade. Prices have jumped 9.9 percent this year and 8.9 percent in the past year.

Corn Costs

Prices haven’t been robust enough to overcome higher corn costs that topped $8.40 a bushel in intraday trading in August. Corn for March delivery slipped 9 cents, or 1.2 percent, to $7.135 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

The corn crush spread, or the profit that can be made from turning a bushel of corn into ethanol, was at minus 19 cents a gallon versus minus 20 cents yesterday, according to data compiled by Bloomberg.

Production fell to 770,000 barrels a day in the week ended Jan. 25, or 11.8 billion gallons on an annualized basis, the EIA report showed. That was the lowest level since weekly records began in June 2010. The total rose to 774,000 last week. Stockpiles are 20.1 million barrels, down from the record 22.7 million in March.

Ethanol-blended gasoline made up 89 percent of the total U.S. gasoline pool in the week ended Feb. 1, up from 87 percent a year earlier, according to the report.

Archer-Daniels-Midland Co., in Decatur, Illinois, is the biggest U.S. ethanol producer, followed by Poet LLC, in Sioux Falls, South Dakota.

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Read ongoing FuelFix coverage of the debate over federal biofuel mandates:

Lawmaker urges Interior to stick with tough drilling rule (Feb. 7)
EPA adds to controversial biofuel mandate (Feb. 4)
EPA adds to controversial biofuel mandate (Jan. 31)
Court rejects EPA biofuel mandate (Jan. 25)
Refiners ask Congress to scrap renewable fuels mandate (Jan. 15)
Perry loses bid for renewable fuel waiver (Nov. 16)
Fake biofuel credits prompt push for better screening system (Sept. 25)