In response to a request from the ethanol industry, the US Environmental Protection Agency announced it would now permit a gasoline blend with up to 15 percent ethanol, up from a previous limit of 10 percent -- known as the E10 standard.

The new E15 limit only applies to cars and light trucks built since 2007, the EPA said.

Since 1979, E10 had been the US limit for all conventional cars and light trucks, and non-road vehicles.

EPA chief Lisa Jackson made the decision after Department of Energy (DoE) testing and reviewing data on E15's impact on engine durability and emissions, the agency said.

"Thorough testing has now shown that E15 does not harm emissions control equipment in newer cars and light trucks," Jackson said in a statement.

"Wherever sound science and the law support steps to allow more home-grown fuels in America's vehicles, this administration takes those steps," she added.

Agriculture Secretary Tom Vilsack, a former governor of corn-rich Iowa and a fervent advocate of corn-based ethanol, called the announcement "an important step" toward making the nation more energy independent and creating "much-needed jobs" in rural America.

The announcement arrived less than three weeks ahead of the November 2 mid-term elections, in which President Barack Obama's Democrats face the likely loss of seats in Congress to opposition Republicans.

It also followed the Agriculture Department's report last week that sharply cut projected corn yields, sending prices to two-year highs.

"This decision was expected because of all of the political favors that the EPA can give out but did anyone stop to think that this was a good time considering the skyrocketing corn prices?" said Phil Flynn, an analyst at PFG Best.

To make sure consumers can easily identify the correct fuel for their vehicles and avoid damaging them, the EPA said it was proposing E15 pump labeling requirements and other steps to ensure pumps were properly identified.

The EPA said it would make a decision on the use of E15 in vehicles in model years 2001 to 2006 after additional DoE testing is completed, expected in November.

Today's announcement concerns 65 million vehicles in 2011, representing a third of the nation's gasoline consumption, Gina McCarthy, a senior EPA official, told reporters in a conference call.

Friends of the Earth, an international network of grassroots groups, called the move foul and urged the EPA to produce a complete accounting of the air pollution that will be caused by the new blend.

"The only thing green' about ethanol is the color of the cash subsidies handed to it by Congress," Kate McMahon, biofuels campaign coordinator at Friends of the Earth, said in a statement.

"With this announcement, the Obama administration is bucking its own scientific findings in favor of maintaining President (George W.) Bush's failed energy policies, which increased the consumption of bad biofuels like ethanol, instead of promoting truly sustainable alternatives."

The EPA decision had been widely anticipated amid intense lobbying from the ethanol industry.

In March 2009, Growth Energy, a green energy group, and 54 ethanol manufacturers filed their waiver request with the EPA seeking the increase in the so-called "blend wall" from E10 to E15.

The National Chicken Council, however, warned the EPA announcement would eventually hurt consumers and called for an end to ethanol subsidies.

George Watts, council president, noted that retail prices for broiler chickens had climbed six percent in the past two years amid "voracious" demand for feedstock from the subsidized ethanol industry.

"Channeling even more corn into ethanol will, in time, only drive up the cost of chicken even more," he said.

"It is time to put an end to interference in the market and government mandates that benefit the ethanol industry and raise the price of corn."

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