While the proposal highlights the government's struggle to ramp up production of homegrown biofuels that are cleaner-burning than gasoline, but is unlikely to mean much for consumers at the pump.
The change would require almost 3 billion gallons less ethanol and other biofuels to be blended into gasoline in 2014 than the law requires.
The 2007 law tried to address global warming by requiring oil companies to blend billions of gallons of biofuels into their gasoline each year. But politicians who wrote the law didn't anticipate fuel economy to improve as much as it has in recent years, which reduced demand for gasoline.
Meanwhile, next-generation biofuels, made from agricultural waste such as wood chips and corncobs, have not taken off as quickly as Congress required and the administration expected.
President Barack Obama has championed biofuels since his days as an Illinois senator, and his administration has resisted previous calls to lower biofuel volumes or repeal the law.
EPA officials said they were still committed to alternative fuels as part of a comprehensive energy strategy. If the EPA stuck to the volumes mandated by law, the amount of biofuel required would generate more ethanol than many engines can safely handle, officials said.
"Biofuels are a key part of the Obama administration's 'all of the above' energy strategy, helping to reduce our dependence on foreign oil, cut carbon pollution and create jobs," said EPA Administrator Gina McCarthy.
Biofuel supporters, however, said the proposal marked a departure for the Obama administration.
"This is the first time that the Obama administration has shown any sign of wavering," said Brooke Coleman, executive director of the Advanced Ethanol Council.
Bob Dinneen, the head of the Renewable Fuels Association, the Washington group that lobbies on behalf of the ethanol industry, said the proposal "cannot stand."
"An administration committed to addressing climate change cannot turn its back on biofuels," Dinneen said.
The ethanol mandate created an unusual alliance between oil companies, which have seen ethanol cut into their share of the gasoline market, and environmental groups that oppose planting more corn for fuel. A recent AP investigation found that corn-based ethanol's effect on the environment is far worse than the government predicted or admits.
The oil industry lobbied hard for a reduction.
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