WASHINGTON - Newer American cars will likely be able to handle higher ethanol blends in their gasoline but the decision to approve an industry request to change the fuel mix will have to await final testing next year, the U.S. Environmental Protection Agency said on Tuesday.

The EPA was supposed to decide by December 1 on a petition from Growth Energy and 54 ethanol manufacturers to let gasoline contain up to 15 percent ethanol.

While farmers who provide the corn to make ethanol also support the initiative, automakers asked the EPA during the summer not to approve higher blends until the agency had test results showing the fuel would not damage vehicles.

The EPA said it needs more time to review test data on the effects a higher ethanol ratio would have on vehicles. U.S. gasoline is now approved to contain up to 10 percent ethanol, which is made mostly from corn.

The EPA expects to have final vehicle testing data on the effects of higher-blended ethanol by mid-June, according to a letter to Growth Energy that the EPA posted on its website.

But the agency said initial tests show that vehicles built after 2001 will likely be able to accommodate gasoline blended with as much as 15 percent ethanol, commonly known as

E15.

Growth Energy said it welcomed the EPA's announcement, claiming it indicates the agency was preparing to approve E15 upon the completion of ongoing tests next year.

We are confident the ongoing tests will further confirm the data we submitted in the Growth Energy Green Jobs Waiver and silence those critics, allowing more American-produced energy to enter the market, said Tom Buis, chief executive of Growth Energy.

The Renewable Fuels Association, the trade group for ethanol producers, slammed the EPA's delay, saying it threatens to paralyze the U.S. ethanol industry.

The group said the EPA should immediately approve intermediate ethanol blends, such as gasoline containing 12 percent ethanol, while the agency finishes its testing on E15.

They said because the EPA has never allowed U.S. automakers to use gasoline blends with more than 10 percent ethanol, companies had no reason to design, test or provide warranties for vehicles that use higher ethanol blends.

Farm groups and the struggling ethanol industry have been pressing for the higher standard as it would boost demand for their product.

But there is also pressure from some critics who oppose the idea of using food -- in this case corn -- to produce fuel.

The Obama Administration has been a supporter of the ethanol industry because it displaces the need for some oil imports.

Some green groups, however, dispute ethanol is good for the environment because it comes mostly from corn in the United States and modern farming uses a lot of petroleum-based fuel to run machinery. So a lot of energy is used to make a gallon of ethanol.

Energy legislation passed by Congress in 2007 set binding targets for fuel blending each year, with ethanol use rising from 4 billion gallons in 2006 and 11.1 billion gallons in 2009 to 20.5 billion by 2015 and 36 billion by 2022.

It was also envisioned that the ethanol industry would gradually move away from using corn to produce fuel and produce cellulosic ethanol made from switchgrass and farm waste.

(Additional reporting by Ayesha Rascoe and Timothy Gardner; Editing by Russell Blinch and Walter Bagley)

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