A group of biofuel industry leaders say there's not much time for California to back off on a proposed regulation that they say could cripple their industry and the future of the state's greenhouse gas reduction goals.

By March, the California Air Resources Board (CARB) could finalize the proposed California Low Carbon Fuel Standard that would measure the indirect greenhouse gas impacts of growing plants to be made into fuel, said Brooke Coleman, executive director of the New Fuels Alliance, a group representing biofuel makers.

But that could hurt the biofuels industry by making its products less attractive to oil companies seeking low-carbon fuels to meet the state's greenhouse gas reduction goals, Coleman said.

And unless the oil companies can find alternative low carbon fuels, that could damage the state's emission reduction efforts, he said.

"It wouldn't take long for an investor to realize that biofuels have to meet more stringent standards in the Low Carbon Fuel Standard than other fuels do - and it wouldn't take them long to run away from that fuel," Coleman said.

Coleman's views were echoed in a letter signed by 25 biofuel company executives and well-known biofuels investor Vinod Khosla and sent to the board's chairwoman, Mary Nichols, on Thursday.

At issue is CARB's inclusion of indirect land use impacts for biofuels in the draft fuel standard, such includes the greenhouse gas emissions that come from deforestation and other land-use changes in growing crops such as corn and switchgrass to make ethanol, or soybeans to make biodiesel.

Such indirect impacts stand in contrast to direct impacts, a stricter measure of the greenhouse-gas emissions that come from growing the crops, refining them into fuels and burning them in vehicles, Coleman said.

Under the proposed regulations, biofuels like corn-based ethanol, which causes lower greenhouse-gas emissions than gasoline when measuring direct impacts, could end up scoring higher on emissions.

The standard is part of the state's efforts to implement the California Global Warming Solutions Act of 2006, which requires the state to cut emissions to the 1990 levels by 2020 (See California Offers Plan to Clear the Air).

CARB spokesman Dmitri Stanich said that the agency was required by the language of the low carbon fuel standard and by the federal Energy Independence and Security Act of 2007 to consider the indirect land use impacts of biofuels.

But Coleman said his group wants CARB to hold off on passing the regulation that takes indirect effects into account until it can apply the same measurements to all fuels or alternative energy sources for transportation.

The state hasn't made similar efforts to measure the indirect impacts of making other fuels such as gasoline, or increasing electric power generation to charge electric cars, he said.

The biofuel group's arguments, which were first made in a letter sent to CARB in June, don't hold weight with all experts in the field.

In July, a group of scientists including Daniel M. Kammen, director of the Renewable and Appropriate Energy Laboratory at the University of California at Berkeley, co-wrote a letter challenging the biofuel group's arguments and asking the board to keep the indirect effects of biofuel production as part of the low carbon fuel standard.

And while biofuel makers pressure CARB to give them a break, others are demanding that California back further away from bringing more biofuels into the state.

Earlier this month, Tesoro Corp. (NYSE: TSO) sued CARB to prevent the organization from increasing the amount of ethanol blended into gasoline in the state from 5.7 percent to up to 10 percent by 2009, saying that ethanol production will hurt the environment and increase greenhouse-gas emissions (see Tesoro Sues California Over Ethanol Mandate).