The Environmental Protection Agency has approved blending higher concentrations of ethanol into gasoline for newer vehicles, allowing the corn-based fuel to be up to 15 percent of mixtures sold at the pump.
The maximum blend has been 10 percent ethanol. The EPA announced Wednesday that the higher blend is approved for use in cars and light duty trucks manufactured since 2007, if retailers want to sell it.
The EPA said it will propose new pump labeling requirements to help consumers figure out which gas to use in which vehicles.
"Thorough testing has now shown that E15 does not harm emissions control equipment in newer cars and light trucks," EPA Administrator Lisa Jackson said in a statement. "Wherever sound science and the law support steps to allow more homegrown fuels in America's vehicles, this administration takes those steps."
The move, which comes less than a month before November's midterm elections, is politically popular in rural farm areas. But ethanol faces strong opposition from the auto industry, environmentalists, cattle ranchers, food companies and a broad coalition of other groups.
Opponents argue that the increase in production of corn and its diversion into ethanol is making animal feed more expensive, raising prices at the grocery store and tearing up the land. Manufacturers of smaller engines -- used in everything from lawn mowers to boats -- also oppose increasing the use of the fuel, saying those engines are not designed for the higher concentrations.
The Obama administration has remained supportive of the renewable fuel, and the EPA has said a congressional mandate for increased ethanol use can't be achieved without allowing higher blends. Congress has required refiners to blend 36 billion gallons of biofuels, mostly ethanol, into auto fuel by 2022.
The ethanol industry maintains that there is sufficient evidence to show that a 15 percent ethanol blend in motor fuel will not harm engine performance. They say increased consumption of the renewable fuel creates new jobs and replaces imported oil.
The industry group Growth Energy petitioned the EPA to raise the blend in March. The decision was initially expected in December but was delayed twice as the agency and the Energy Department completed additional testing. The EPA is expected to make a second decision on the ethanol concentration allowed in cars manufactured between 2001 and 2006 after more testing is completed at the end of November.
Growth Energy President Tom Buis called the move a "good first step" and said the fuel could be available for sale as soon as early next year. He urged the agency to quickly approve the blend for older vehicles, saying there is no reason to limit the higher concentration to the newer models.
The EPA said there won't be a decision this year on boosting the ethanol concentration for cars and light trucks manufactured before 2001 -- or for any motorcycles, heavy-duty vehicles, or non-road engines -- because there is not sufficient testing to support such an approval.
Critics said the change could be a frustration to drivers who will have to figure out which service station pump to use. And they argued that many retailers will opt not to sell the higher blend because of the expense of adding new pumps and signs.
"We're really going to make the consumers a guinea pig here," said Craig Cox of the Environmental Working Group, an environmental advocacy group that opposes increases in the fuel. "Have we really thought through what it's going to take to distinguish E15 to E10?"
The EPA said the 2007 and newer models represent more than a third of current gas consumption and more than 65 million vehicles. The rules would affect only those cars and trucks because they have more durable emissions systems. Ethanol burns hotter than gasoline, causing catalytic converters, which treat engine emissions, to break down faster.
Automakers said they were worried the EPA decision would lead to motorists unknowingly filling up their older cars and trucks with E15 and hurting their engines.
The problem could be exacerbated if E15 fuels are cheaper than more conventional blends, prompting owners of older vehicles to use the fuel.
"Anytime you're dividing up model years and having different fuels for different model years, then it risks a misfueling situation and that's a real concern for the longterm success of alternative fuels," said Gloria Bergquist, spokeswoman for Alliance of Automobile Manufacturers.
Since 2000, U.S. automakers have increased production of so-called "flex-fuel" vehicles that can run on blends of up to 85 percent ethanol. Detroit automakers have pledged to make about half of their vehicle production capable of running on E85 by 2012.
The Obama administration's decision to boost the ethanol concentration in gasoline is a victory for the industry as it struggles to hold on to other subsidies. A key tax credit is scheduled to expire at the end of this year, and some in Congress are considering cutting it or doing away with it altogether.
Associated Press Writer Ken Thomas contributed to this report.