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U.S. Corn-Ethanol Producers: Curb Imports From Brazil .

By RYAN TRACY

WASHINGTON—The U.S. corn-ethanol industry is urging the Obama administration to cut down on imports of a different type of ethanol from Brazil, in a bid to reduce competition and improve its bottom line.

The push involves an unusual request for the industry: asking the Environmental Protection Agency to reduce part of the U.S. renewable-fuel mandate, which is normally backed by the industry as a way to underpin demand.

The new strategy comes as U.S. ethanol-refinery shutdowns are on the rise. Of the 211 ethanol refineries in the country, 34 were idle as of Monday, according to the Renewable Fuels Association. That represents about 14% of the roughly 14.7 billion gallons of capacity, said the trade group, whose members include Decatur, Ill.-based Archer Daniels Midland Co. ADM +0.53%and Abengoa ABG.MC -0.84%Bioenergy Corp., a unit of Spain's Abengoa SA.

In addition to competition from imports, U.S. producers are selling into a smaller market as Americans drive more fuel-efficient cars and ethanol makers' efforts to increase the amount of their product blended into gasoline haven't caught on.

A 2007 law sets mandates for annual U.S. use of alternative fuels. The number is supposed to keep rising, with the EPA deciding the exact targets each year.

But Congress limited the amount of corn starch-based fuels that can count toward the annual quota, to leave room for "advanced" biofuels. The EPA has determined that ethanol from Brazilian sugarcane qualifies as advanced whereas ethanol from Midwestern corn doesn't.

While U.S. ethanol makers have criticized those categories, they haven't previously suggested reducing any of the mandates. Now, however, in discussions with the White House Office of Information and Regulatory Affairs earlier this month, industry representatives have made clear that they believe the U.S. mandate encourages imports of ethanol made from Brazilian sugarcane at the expense of U.S. producers, according to people familiar with the meetings.

"I am concerned that at a time when the U.S. industry is having to shut down plants because of a lack of marketplace opportunities, the EPA has provided an incentive to import more Brazilian ethanol," said Bob Dinneen, president of the Renewable Fuels Association, in an interview.

An EPA spokeswoman said "the standards are undergoing interagency review" and declined to comment further. That review process began in July, when the EPA sent a draft of the standards to the White House. Nearly a month into 2013, the agency has yet to announce what the mandates for this year will be.

The White House Office of Management and Budget, which includes the regulatory affairs office, didn't respond to a request for comment.

The Brazilian fuel is in demand in part because domestically produced advanced fuels—from corn stalks or wood chips, for instance—haven't become available in large quantities, as lawmakers had hoped.

In 2012, about 92% of the advanced fuel that counted toward the quota was imported, according to EPA data. The Renewable Fuels Association, citing its own analysis of U.S. trade data, said the bulk of the imported fuel was ethanol made from Brazilian sugarcane.

If the EPA were to reduce the amount of "advanced" fuel required in the U.S., it would effectively limit the market for the Brazilian imports.

Leticia Phillips, the North American representative for Unica, a Brazilian sugarcane industry association, said reducing the quota "would be a step backwards for the entire program, because it would create uncertainty and run counter to the intention of cutting climate-changing emissions." She was referring to an EPA finding that the sugarcane fuel creates fewer greenhouse-gas emissions than traditional fossil fuels as well as corn ethanol.

"Ethanol imported under the advanced category has no bearing on the vast majority of the ethanol sold in the United States," Ms. Phillips said. "Once you start making changes to appease specific interests, you may end up compromising what so far has been a solid program."

U.S. producers of fuels that qualify as advanced, such as diesel motor fuel made from soybeans and cooking oil, also fret about reducing the advanced-fuel quota.

"We believe the EPA has established reasonable, sustainable production targets and that it would be a real mistake to retreat from those targets now," said Anne Steckel, vice president of federal affairs for the National Biodiesel Board, which represents alternative diesel fuel producers. Ms. Steckel said those producers would boost their diesel output in 2013 "to fill an increasing amount of this market."

Write to Ryan Tracy at [email protected]