15% ethanol blend unlikely, analyst says

As the deadline nears for the Environmental Protection Agency to decide whether to raise the blend level of ethanol in gasoline, don't expect it to reach the 15 percent as requested by the ethanol industry.

That was the opinion of market analyst Jerry Gulke on Wednesday after addressing the Ethanol Leader's Summit at the Courtyard by Marriott at Old Town.

"My guess is they'll phase in 12 percent over time," said Gulke, head of the Chicago-based Gulke Group.

Gulke spoke on risk management and the 2010 market forecast. A group of about 60 people from the ethanol industry attended the summit, which covered a variety of topics. The event was presented by Kennedy and Coe, a certified public accounting and consulting firm.

The EPA must rule by Dec. 1 on a request made in March by the ethanol industry to increase the blend level to 15 percent from the existing 10 percent.

As the regulation now reads, pumps may dispense gasoline blended with up to 10 percent ethanol. Gulke said ethanol accounts for 8 percent of total motor fuel consumption.

The request to increase the blend has met resistance from some U.S. automakers, who say greater blend levels may hurt engine performance and increase corrosion.

But in pushing for the EPA to approve the request, U.S. Agriculture Secretary Tom Vilsack recently said science indicates that a higher blend wall is safe for engines.

Such back-and-forth talk is typical of many politically charged discussions.

"We talk a lot," Gulke said, "but we don't look at the facts."

As for the blend level, he said the EPA may put something in its ruling that gives the agency the right to adjust its regulation for pollution in various cities.

"If they give a mandate (for 12 percent), that's different," said Gulke, who farms in northern Illinois and manages the family farm in North Dakota.

"But if they would allow up to 12 percent," he added, "that just means they'll do it if it's economically feasible."

He said he expects the EPA to take a long look at the U.S. Department of Agriculture's Nov. 1 forecast for corn production in weighing its decision.