Group tells Obama: Hurricane Isaac warrants higher ethanol blends

With gas prices surging because of Tropical Storm Isaac, ethanol interests say the Obama administration should allow more ethanol in motor fuel.

The Iowa Renewable Fuels Association Tuesday cited soaring gasoline prices in the wake of hurricane predictions, asking President Obama to take emergency action to suspend the federal "petroleum mandate" for four to six weeks.

"Due to the current petroleum challenges, if gasoline prices increase by only a modest 20 cents per gallon for four weeks, that equates to a 'mandate tax' of over $300 million dollars - more than a quarter of a billion dollars!" the letter said.

The petroleum mandate refers to the petroleum component of fuels blended with ethanol. Most ethanol blends sold have only 5 percent ethanol, although retailers are now allowed to sell 15 percent ethanol blends to newer model cars in areas where the blends have become available.

Most retail outlets do not yet have pumps set up to sell the E15 blends.

The request appeared to be a response to petitions for a waiver of the Renewable Fuel Standard that sets forth the amount of ethanol and biodiesel that is required in the nation's fuel supply.

EPA Administrator Lisa Jackson has been petitioned by industry groups, governors and senators seeking to have the standards waived due to high corn prices caused by the ongoing drought.

Iowa Gov. Terry Branstad has supported keeping the standard in effect in order to avoid job loss and the fears that of instability in the renewable fuels industry.

Iowa Renewable Fuels Association President Monte Shaw said there is no law referred to as the petroleum mandate, but federal law creates a de facto petroleum mandate. That's because retailers cannot sell non-approved fuels, and pure petroleum-based gas is the only approved fuel other than E5 and E15 ethanol blends.

"They've got a distinct monopoly because they control what goes into the pipeline," Shaw said of the petroleum industry.