E.P.A. Upholds Ethanol Standard on Use in Gasoline

A summer drought that withered crops led to a spike in prices, hurting the livestock industry and others that depend on corn for food. Estimates indicate that as much as half of the nation’s crop will be used to produce ethanol this year to meet the federal renewable energy standard for transportation fuel.

“We recognize that this year’s drought has created hardship in some sectors of the economy, particularly for livestock producers,” Gina McCarthy, an E.P.A. assistant administrator, said in a statement. “But our extensive analysis makes clear that Congressional requirements for a waiver have not been met.”

To approve a change in the standard, the agency would have to conclude that the fuel rule would “severely harm” the economy. The E.P.A. said it had analyzed 500 potential market variations and that most of them showed no impact from the use of corn for ethanol; those that did showed an average impact of 7 cents a bushel, less than 1 percent of the price, it said.

A coalition of livestock groups expressed frustration with the decision, as did the National Council of Chain Restaurants, which says its costs have also risen because of the use of corn in ethanol production.

Several environmental groups are also opposed to the ethanol requirement, saying that corn ethanol production is not clean energy. “If the worst U.S. drought in more than 50 years and skyrocketing food prices are not enough to make E.P.A. act, it falls to Congress to provide relief from our senseless federal support for corn ethanol,” Michal Rosenoer, a biofuels specialist at Friends of the Earth, said in a statement. She said the mandate was “exacerbating our economic and environmental problems.”

That would put some environmentalists in rare alignment with the oil industry, which is required to use an increasing amount of ethanol in its fuel production but complains that its system is glutted with the substance.

Since Congress specified a year-by-year gallon quota for biofuels in 2007, total fuel demand in the United States has dropped, so the percentage of ethanol fuel in gasoline has reached unexpected highs.

Farm groups and trade associations for companies seeking to make ethanol from nonfood sources like wood chips or crop residues have applauded the mandate, however. They say that if the corn ethanol mandate is reduced, there will be less demand for their biofuels products as well.

At the Advanced Ethanol Council, Brooke Coleman, the executive director, pointed out that the quota rules include a provision that allows the oil industry to postpone up to 20 percent of its obligation to a future year “if there is a good year one year and a less good year the next.”

At Novozymes, which supplies enzymes to ethanol manufacturers, Adam Monroe, president of the company’s North American division, said the biofuels mandate “has generated 400,000 careers, billions in private investment, and domestic, renewable fuel for America.”

In the longer term, Congress anticipates substantial production of biofuels from nonfood sources, but so far that has not developed.

Consumer Price Index Rises 0.6% on Surge in Gasoline

Other data showed only mild underlying inflation pressures, potentially giving the Federal Reserve room to keep interest rates low to boost the economy.

The U.S. economy has shown signs of faster growth in recent months but Tuesday's reports highlighted some of challenges faced by the economy.

"There are still a lot of global headwinds," said Jonathan Basile, an economist at Credit Suisse in New York.

The Fed said U.S. factory output rose only a modest 0.2 percent in September, which many analysts said was a sign the cooling global economy is weighing on American manufacturers.

The increase in output was not enough to make up for a sharp decline in August, and manufacturing production fell at a 0.9 percent annual rate in the third quarter.

The European debt crisis has been weighing on the global economy, denting demand for goods produced by manufacturers from China to the United States. U.S. exports fell 1 percent in August.

Also, business investment has recently cooled in the United States, putting another drag on factories. This is probably due to worries over the global economy and the possibility the U.S. government could cut spending and raise taxes next year.

"At a time when the economy needs all the help it can get, business spending is stalling," Wells Fargo said in a research note.

MILD CORE

U.S. stocks traded higher on Tuesday as strong earnings from key companies soothed fears about the global economy, while yields on Treasury debt rose.

In a separate report, the Labor Department said a surge in the cost of gasoline pushed the country's Consumer Price Index up 0.6 percent in September.

Higher costs at the pump force many American consumers to cut back on other spending, although retail sales data for September released on Monday pointed to a pick-up in consumer spending despite higher fuel costs.

The government said weekly earnings for workers were flat in September when adjusting for inflation.

Crude oil and gasoline prices rose over the summer as the United States and its allies raised pressure on Iran over its nuclear program. Prices for gasoline have comes down slightly in recent weeks, which could ease pressure on consumers this month.

The inflation report also showed that prices outside food and energy - seen as a barometer of inflation trends - rose only 0.1 percent in September for the third straight month.

"The Fed can confidently focus on propping up the economy because inflation is not a problem," said Cary Leahey, an economist at Decision Economics in New York.

The Fed said last month it would buy $40 billion in mortgage-backed securities every month until the jobs outlook improves substantially.

Another report suggested the Fed's stimulus plan was gaining traction in the housing sector. Home-builder sentiment rose to a fresh six-year high in October, the National Association of Home Builders said.

In the 12 months to September, overall consumer prices increased 2 percent, the fastest pace since April and up from 1.7 percent in August. Core prices also rose 2 percent in the year through September, up a tenth of a point from August's reading.

While most economists don't see inflation threatening the U.S. economy, some believe the Fed would tolerate prices rising faster than the central bank's 2 percent target over the shorter term to allow stronger economic growth as the country recovers from the 2007-09 recession.

Allowing this view to blossom, the Fed said in September it would keep interest rates low for a long time even after the economy strengthens.

"Core inflation was low and unthreatening (in September), but in truth neither matters to a Fed monetary policy committed to lowering unemployment," said Joseph Trevisani, a market strategist at Worldwide Markets in Woodcliff Lake, New Jersey.

(Additional reporting by Alister Bull in Washington and by Ryan Vlastelica and Richard Leong in New York; Editing by Andrea Ricci)

In a Shuttered Gasoline Can Factory, the Two Sides of Product Liability

Now, the lobbying group’s Institute for Legal Reform is showing a 30-second commercial that uses Blitz USA, a bankrupt Oklahoma gasoline can manufacturer, to illustrate the consequences of abusive lawsuits. The ad shows tearful workers losing their jobs and the lights going out at the 46-year-old company as a result of steep legal costs from lawsuits targeting the red plastic containers, according to the company and the institute.

The closing of the 117-employee operation this summer became a rallying point for proponents of tort reform. But the commercial ducks the complexities of the product liability cases surrounding Blitz by making no mention of the dozens of casualties linked to explosions while people used the cans in recent years. In interviews, the company and the lawyers suing it seek to frame the conflict in stark terms: devious lawyers with spurious claims piling on a valuable manufacturer, or a greedy company hurting consumers by refusing to fix a defective product.

The Blitz cases show the inherent conflicts “between makers of products that have some hazard or danger and consumers who on occasion are injured by those products,” said Marshall S. Shapo, an expert on product liability at Northwestern University School of Law. “It is an ancient rivalry that will go on forever.”

The suits generally make the claim that the cans were susceptible to “flashback” explosions caused when gasoline vapors outside the cans ignited and followed the vapor trail back into the container. The lawyers argue that the company should have installed “flame arrester” shields at the mouth of the containers to prevent explosions.

Blitz executives note that the company, which was the nation’s leading gas can producer, sold more than 14 million cans a year over the last decade, with fewer than two reported incidents per million cans sold. The company said the most serious incidents usually involved obvious misuse of the cans, like pouring gasoline on an open fire.

Frank J. Vandall, an Emory University law professor, said there was probably no way Blitz could have avoided at least some of the lawsuits, although he questioned why the company paid settlements if it thought it could win in court.

“There is no way you can avoid liability for a can like this,” Mr. Vandall said, “because there is going to be injury, and when there is injury, there is going to be lawsuits.”

Blitz has been sued 62 times since 1994, according to the company. Only two cases have made it to court; the others were settled or dismissed, or were unresolved at the time of the bankruptcy. The company says the cases cost it $30 million in legal fees. Insurance companies paid well over $30 million more in settlements and other payouts.

The gas can explosions can be powerful. In one case, two emergency workers heard an explosion more than two miles away. In a 2010 test, a federal fire research laboratory found that a two-gallon gasoline container could produce a flame jet 13 feet long.

Chad Funchess, a volunteer firefighter from South Carolina, was seriously burned over half his body in 2007 when he was filling up a chain saw in the back of his convenience store and the can exploded. In his lawsuit, Mr. Funchess said there was no open flame to set off the blast. But the company said the store was razed before it could investigate what happened. Mr. Funchess said his fiancée left him when he was hospitalized. The case was stayed when the company filed for bankruptcy, and is one of 36 cases still open.

In the one case Blitz lost, in 2010, a Utah jury awarded more than $4 million to the father of a 2-year-old girl killed when a Blitz can exploded after the father, David Calder, tried to start a fire in a wood-burning stove in his trailer home by pouring gasoline on the flame.