Valero says US ethanol blending should be increased

27 April 2010 18:52  [Source: ICIS news]

HOUSTON (ICIS news)--The US should increase ethanol blending in gasoline beyond 10%, crude oil refiner Valero said on Tuesday, touting the biofuel as an economical alternative that would remain part of the US fuel mix.

But the refiner said it would be “extremely cautious” in case the higher blend was approved, adding that proper labelling would be required to let consumers know what type of fuel was being dispensed.

“There will be an awful lot of labelling involved,” Valero chief executive Bill Klesse said during a conference call with investors.

The debate over higher ethanol content in US gasoline was heating up as the Environmental Protection Agency (EPA) prepared to rule on whether an increase should be allowed.

The US ethanol industry was pushing for a level of 15% (E15), but ethanol critics argued that the higher blend could damage vehicle engines, possibly voiding manufacturer warranties.

The EPA was expected to announce a decision by July.

Valero, which was also a major ethanol producer, earned $57m (€43m) of operating income from the biofuel in the first quarter, making it its second-highest quarter for ethanol since entering that market in 2009.

“We are very pleased with out ethanol business … and we will continue to look for opportunities to grow,” Klesse said.

The company pointed to its latest acquisition of three ethanol plants in the first quarter, saying it snapped up the units at a bargain and quickly restarted two plants that had not been running.

“All 10 of our ethanol plants are now operating," Klesse said.

Valero has 1.1bn gal/year of ethanol capacity, making it one of the top three producers in the US along with POET and Archer Daniels Midland (ADM).

The executive downplayed the notion that ethanol was responsible for driving up food prices, saying US farmers have demonstrated an ability to produce corn for both food and fuel.

Valero posted a first-quarter net loss of $113m, compared with net income of $309m in the 2009 first quarter, mainly due to lower margins for most of its refined products, the company said.

($1 = €0.75)

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By: William Lemos
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