* Two Senators ask EPA to look at gasoline price concerns
* Ethanol credit costs have climbed on "blend wall" concerns
* First action on contentious "RIN" issue by lawmakers
* Lawmaker questions whether speculators behind spike
(Adds House lawmakers studying issue)
By Ayesha Rascoe
WASHINGTON, March 20 Two senior Republican
senators on Wednesday joined the oil industry in warning that
the U.S. ethanol mandate could push up gasoline prices for
consumers ahead of the summer driving season.
The ethanol mandate requires increasing volumes of biofuels
to be blended into the U.S. fuel supply each year through 2022.
Refiners buy credits, or RINs, from producers of renewable fuels
to comply with the federal targets.
Senators David Vitter of Louisiana and Lisa Murkowski of
Alaska, urged the Environmental Protection Agency in a letter to
take decisive action to protect consumers from the rising costs
of the credits, known as RINs, required by the mandate for all
producers of gasoline.
Refiners have said that slumping gasoline demand and other
factors have pushed them closer to a point when the law will
require the use of more ethanol than can be physically blended
into the fuel supply at the 10 percent per gallon level they
prefer. Refiners refer to this problem as the "blend wall."
Attention on the once obscure RINs market has heightened as
prices for the credits have spiked from a penny a gallon in
December to more than a dollar this month. That translates into
a rise of roughly 10 cents per gallon at the pumps if 10 percent
of the fuel was made from ethanol.
Lawmakers in the House of Representatives also took up the
issue on Wednesday with the two senior members of the panel that
oversees the ethanol mandate saying they wanted answers.
Michigan's Fred Upton, the Republican chairman of the Energy
and Commerce Committee, and the leading Democrat, Henry Waxman
of California, jointly endorsed research into the costs and
implications of the policy that turns a large share of the
nation's corn into fuel.
EPA TO MONITOR MARKETS
Both senators who sent the letter to the EPA represent
states with a large energy industry presence. Some lawmakers who
represent states where grain is grown or ethanol is produced
have blamed speculators for pushing up the prices of RINs.
"We ask that you utilize any and all existing regulatory
authority and flexibility to address the issue of rising RIN
costs and alleviate the threat of increased consumer fuel
costs," Vitter and Murkowski said in a letter to Gina McCarthy,
President Barack Obama's choice to head the EPA.
The senators' letter was the first official response to the
soaring costs of RINs by lawmakers. Murkowski is the top
Republican on the Senate energy committee and Vitter the top
Republican on the environmental committee.
RIN stands for Renewable Identification Number, a numeric
code that the law requires producers or importers of renewable
fuels to generate. Arguments about RINs have played out
relatively quietly in Washington, but a spike in pump prices
could change that.
"EPA, industry and market analysts have anticipated a more
dynamic RIN market in 2013 due to increasing renewable fuel
volume requirements established by Congress," the agency said in
a statement in response to the senators' letter.
The EPA said it will continue to "monitor the markets to
assess the program's impacts," and will respond to the senators'
inquiry more fully.
FIGHT OVER HIGHER ETHANOL BLEND
Traders say the rising cost of RINs is tied to expectations
that there may not be enough ethanol credits to meet demand next
year, when the ethanol requirement could exceed the blend wall.
Oil and gas companies now say that the mandate is
unworkable. The American Petroleum Institute is pushing to have
the mandate repealed. But ethanol producers say biofuels are
actually helping to lower gasoline prices. They blame the credit
cost woes on refiners' opposition to higher ethanol blends at
Representative John Shimkus, a Republican from
ethanol-producing Illinois, questioned whether speculators might
be responsible for rising RINs prices.
"There are questions that need to be asked on why such swift
dramatic price shifts are being reported in the market," Shimkus
said in a speech on the House floor on Wednesday. "To simply
jump on and blame the renewable fuels sector is incorrect."
The EPA, which administers the ethanol mandate, has proposed
that refiners and blenders use 16.6 billion gallons of biofuels
in motor fuels this year. The EPA is accepting comments on the
proposal through April 7 before it finalizes the rule.
While the EPA has authorized use of up to 15 percent ethanol
in gasoline for cars built since model year 2001, refiners say
the higher blend could damage older vehicles. Gasoline station
operators and oil refiners have voiced concerns they could be
sued if engines are damaged.
Vitter and Republican Senator Roger Wicker of Mississippi
introduced legislation last month that would block the EPA from
allowing higher levels of ethanol to be blended into gasoline.
The American Petroleum Institute on Wednesday continued its
fight for the repeal of the biofuel mandate, releasing the
results of a study it commissioned on the impact of the "blend
The study by NERA Economic Consulting predicted dire results
if the mandate is upheld, including the loss of almost $800
billion in U.S. gross domestic product by 2015 and possible fuel
(Reporting by Ayesha Rascoe; Editing by Ros Krasny, Gerald E.
McCormick, Jim Marshall, Kenneth Barry, David Gregorio and Lisa