U.S. seen unlikely to meet ethanol fuel-content goal

A process operator shows a handful of corn at the GreenField Ethanol plant in Chatham, Ontario, in this April 10, 2008 file photo.

OTTAWA (Reuters) - The United States will likely not meet its goal of blending 100 million gallons of cellulosic ethanol into the gasoline supply in 2010 unless it raises the proportion of ethanol allowed in fuel, a U.S. industry group said on Tuesday.

Most U.S. ethanol -- a form of alcohol -- is made from corn. Cellulosic ethanol is made from nonfood sources such as agricultural waste and switch grass.

Retired U.S. General Wesley Clark, co-chairman of the Growth Energy group, said the 100 million gallon level could be reached in time if the cap on the permitted level of ethanol in regular gasoline is increased to 15 percent from 10 percent.

"There is cellulosic capacity standing by ... but the later than policy decision is (taken), the less likely we are to meet that 2010 mandate of 100 million gallons," he told reporters during a trip to Ottawa.

The auto industry says gasoline containing 15 percent ethanol could damage engines and fuel lines in some older cars, and has urged regulators not to approve the higher blend.

"There are a lot of people who see it our way -- namely, that this is good for the environment, it's good for jobs, it's good for national security. It doesn't hurt automobiles," said Clark.

(Reporting by David Ljunggren; editing by Rob Wilson)