In a blow to farmers, a federal appeals court ruled Friday that the government can’t require corn-based ethanol as an additive in a cleaner-burning gasoline now sold in 17 states.
The cleaner, reformulated gasoline has been on the market since January under an Environmental Protection Agency directive to help reduce smog-causing pollution from motor vehicles.
The gasoline burns cleaner and emits 20 percent less pollution because of higher levels of oxygen.
But there has been a bitter dispute over what kind of oxygen additive should be used - ethanol from corn or the petroleum-based methanol derivative MTBE.
Billions of dollars are at stake.
Agriculture groups estimate that a 30 percent market share of the oxygen additive - as the EPA had sought to impose - would require 650 million gallons of ethanol a year with revenue to farmers and related industries of as much as $1.5 billion annually.
The EPA had wanted to assure that ethanol, an environmentally friendly and renewable product, be allowed a substantial market share even though refiners generally favor the petroleum-based MTBE.
The EPA rule issued last year would require ethanol to be at least 30 percent of the oxygenate.
But the U.S. Court of Appeals, which last September put a temporary hold on the EPA’s ethanol mandate, ruled Friday that the agency had gone beyond its authority in setting a minimum market share for ethanol.
The ruling was in response to a lawsuit filed by the petroleum industry, which had argued that the Clinton administration had bowed to political pressures from farm states to promote the ethanol industry while providing no additional environmental benefits.