Tesoro Sues California Over Ethanol Mandate

Written by Jeff St. John

Tesoro Corp. (TSO) has sued the California Air Resources Board to stop the state's new ethanol blending mandate, saying more study into biofuel's environmental costs is needed.

The mandate passed in August requires an increase in the amount of ethanol blended into gasoline from 5.7 percent to up to 10 percent. The state is giving oil refineries like Tesoro until the end of 2009 to carry out the mandate.

San Antonio, Texas-based Tesoro argues in the lawsuit that the mandate is ill conceived and will in fact conflict with the state's goal to reduce its greenhouse gas emissions to the 1990 levels by 2020. The company operates refineries in two California cities: Los Angeles and Martinez.

"We believe there is an important and necessary role for alternative fuels but we want industry and business leaders, elected officials, and regulators to proceed in a cautious, thoughtful manner to ensure we consider environmental and economic impacts," Bruce Smith, Tesoro's CEO and chairman said in a statement.

Federal and state mandates to increase ethanol use have prompted fierce "food v. fuel" debates, especially because most ethanol produced in the United States is made from corn. Critics have contended that those mandates have pushed up corn prices, leading to higher prices for everyone from cattle feeders to supermarket shoppers.

Ethanol industry advocates dispute the claim, saying ethanol has environmental benefits.

The economic impact of biofuels has been the source of much argument in the last year, with science journal studies and Time magazine articles claiming that the fuels hurt the environment, while others say that biofuels are greener than gasoline.