Tesoro Sues California Over Ethanol Mandate

In August, the U.S. Environmental Protection Agency dismissed claims that corn-based ethanol hurts food prices or the environment when it denied Texas' request to waive the federal Renewable Fuel Standard, which calls for the country to use 36 billion gallons of biofuels by 2022.

In the lawsuit, Tesoro claimed that planting corn and making ethanol from it will increase greenhouse gas emissions. Scientists have found that farmers are clearing more forests -- which can effectively absorb carbon emissions - to make way for ethanol cropland.

Tesoro said it wants the state to study the environmental and food price impacts of corn-based ethanol before implementing a rule that could nearly double the state's ethanol use.

CARB spokesman Dimitri Stanich said the state does "recognize that the way ethanol is produced from corn does have problems" with environmental impacts, though he wouldn't comment on the lawsuit's specific claims. The lawsuit drew a quick and angry rebuttal from ethanol industry advocates after it was filed Wednesday.

The New Fuels Alliance, a nonprofit biofuel advocacy group, called it "a blatant attempt by Tesoro to try to use the regulatory and legal process to gain competitive advantage in the market place" and said it could hurt an already suffering U.S. ethanol industry.

Brooke Coleman, New Fuels Alliance executive director, said making ethanol and burning it as fuel causes 30 percent less greenhouse gas emissions than making and burning gasoline. He pointed to rising oil prices, rather than rising corn prices, as the main culprit for higher food prices.

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