US says ethanol output can eventually meet target

WASHINGTON Nov 18 (Reuters) - U.S. ethanol production could eventually top 14.5 billion gallons a year, up 16 percent from output capacity at the beginning of 2009 and enough to blend 10 percent of the fuel into every gallon of the nation's gasoline, the U.S. government said on Wednesday.

U.S. ethanol output capacity stood at almost 12.5 billion gallon a year at the start of 2009, the Energy Information Administration said in its weekly petroleum report. But with capacity outstripping demand, only about 10.6 billion gallons of capacity was in operation at the start of the year.

Ethanol output capacity tripled between 2006 and 2009, but the industry has hit some growing pains as rising corn prices and falling gasoline costs hurt profits.

"Today's surplus capacity is likely to be brought into operation in the future," the EIA said.

The agency added that economic turmoil will keep bringing some turnover in ownership of ethanol plants.

A federal law requiring a certain amount of renewable fuels be blended into the nation's gasoline supply has boosted demand for ethanol in the United States.

The federal mandate requires 10.5 billion gallons of mostly corn-based ethanol to be blended with gasoline this year, rising to about 13.2 billion gallons by 2012.

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here (Editing by David Gregorio)