* Current biofuel policy "cannot stand" - Congressman Upton
* Biofuel targets divide lawmakers along regional lines
* Time for trade groups to seek compromises - lawmaker
WASHINGTON, July 23 (Reuters) - The U.S. biofuel system "cannot stand" in its current form, the Republican head of the House Energy and Commerce committee said on Tuesday as lawmakers - largely divided between oil states and rural states - seek common ground on the renewable fuel program.
The committee has published a series of papers on the Renewable Fuel Standard (RFS) since March, part of a bipartisan review of a mandate that requires increasing amounts of biofuels - chiefly, corn-derived ethanol - to be blended into U.S. gasoline and diesel supplies.
"In my view, the current system cannot stand," Fred Upton, a Republican congressman from Michigan and committee chairman, said at the start of a two-day gathering of players in the U.S. biofuel and oil industries.
Upton said he hoped the committee would consider several changes to the RFS but with members of his Republican Party at odds, did not firmly align himself on either side of the issue. He also did not specify what changes he believes need to be made.
Lawmakers have been divided largely along regional lines, and not Republican or Democratic party lines, regarding the required fuel targets. Those from oil and gas producing states are pushing for repeal of the law and representatives from areas with corn and grain growers have largely sought to protect the mandate.
Critics of the targets say they could lead to fuel shortages and price spikes if left unchanged.
Last week, the Obama administration's climate and energy adviser, Heather Zichal, rejected calls to repeal the RFS as "nothing but shortsighted."
U.S. Rep. John Shimkus, a Republican from Illinois, said on Tuesday that it was time for the major trade groups representing the oil and biofuel industries to stop simply calling for the mandate to remain unchanged or for total repeal of the policy, and instead to seek common ground.
"If you keep these positions, nobody is going to be happy and nothing is going to get done," said Shimkus, whose district includes both oil producers and corn growers.
Shimkus said there was not enough support on the committee to completely do away with the renewable fuel targets, but modifications to the policy were possible. (Editing by Ros Krasny and Grant McCool)