* EPA had ruled 2007 and newer cars can burn E15
* Food groups say ethanol boost would raise prices
* EPA E15 decision on 2001 to 2006 cars expected soon (Adds EPA reaction, paragraph 10)
By Timothy Gardner
WASHINGTON, Nov 9 (Reuters) - Livestock producers and food industry groups filed a suit on Tuesday seeking to overturn a U.S. decision to allow higher levels of ethanol in gasoline, saying it could push up food prices.
The Grocery Manufacturers Association, the National Meat Association and other groups sued the Environmental Protection Agency, saying regulators overstepped their authority when they ruled last month that gasoline retailers could sell fuel containing up to 15 percent ethanol. That is an increase from the current allowable level of 10 percent.
The EPA ruled that cars built in 2007 and later could burn the fuel, known as E15.
"This will put pressure on the meat and poultry supply, which will lead to higher food prices for consumers," J. Patrick Boyle, president of the American Meat Institute, which is one of the groups, said in a release.
Ethanol is made mostly from corn in the United States. Food groups say E15 will increase both corn demand, and in turn, meat prices because livestock eat the grain. About a third of the U.S. corn crop is used to make ethanol.
Corn prices Cc1 briefly hit more than a two-year high on Tuesday above $6 a bushel on droughts in key producing areas and after the government cut its crop output forecast.
EXCEEDS ITS AUTHORITY?
The food groups said the EPA did not have the power to make the decision.
"In approving E15 ... the EPA has clearly exceeded its authority under the Clean Air Act," the coalition of groups, which filed the case with the U.S. Court of Appeals, said in a release.
"The agency has a legal obligation to adhere to the letter and spirit of the Clean Air Act and, in this case, has failed to do so," the group said.
The EPA defended its action. "First and foremost, EPA's decision was based on strict adherence to the Clean Air Act and grounded firmly in science," said Betsaida Alcantara, a deputy press secretary at the agency.
The EPA is set to decide whether to allow E15 for cars built from 2001 to 2006 by the end of the year, pending the completion of tests by the Department of Energy.
Growth Energy, the ethanol industry group that had asked for the E15 waiver, said that food companies, not ethanol production, have raised food prices.
"In 2008, these big food companies gouged consumers while trying to shift the blame to America's ethanol producers and farmers, so we're not surprised by their actions today," said Tom Buis, the head of Growth.
Ethanol producers have said the use of hybrid seeds and other techniques are pushing up corn yields and that there will be plenty of the grain for everyone.
They also say they need E15 to reduce a growing glut of supply brought about by government mandates that call for increasing amounts of ethanol to be blended into the overall gasoline supply.
In an effort to trim reliance on foreign oil, U.S. mandates require 15 billion gallons of ethanol to be blended into gasoline by 2015, up from 12 billion gallons this year.
Industry groups for automobile manufacturers, oil refiners and gasoline filling stations have also opposed the ruling. (Editing by David Gregorio and Walter Bagley)