The U.S. Environmental Protection Agency (EPA) last week decided to deny requests to waive the Renewable Fuel Standard (RFS). As expected, there were winners and losers, and both had a lot to say about EPA’s long-awaited decision.
National Corn Growers Association (NCGA) President Pam Johnson believes the EPA “appropriately recognized petitioners did not properly prove severe, nationwide economic harm had occurred, thereby creating no justification for a waiver of the RFS.”
“The ethanol industry plays a pivotal role in job creation throughout the country, supporting over 400,000 jobs nationwide. This includes many in ethanol plants in rural America,” Johnson points out. “The RFS advances the use of domestically produced renewable fuels (like ethanol), encourages new technologies and enhances U.S. energy independence.”
In the wake of this year’s drought, a coalition of livestock, poultry and dairy organizations, however, expresses extreme disappointment with EPA’s decision not to waive a federal law requiring corn to be turned into ethanol. The RFS requires 13.8 billion gallons of corn-based ethanol to be blended into gasoline in 2013, an amount that will use about 4.5 billion bushels of the nation’s corn crop, according to the U.S. Department of Agriculture.
“We are extremely frustrated and discouraged that EPA chose to ignore the clear economic argument from tens of thousands of family farmers and livestock and poultry producers that the food-to-fuel policy is causing and will cause severe harm to regions in which those farmers and producers operate,” states a coalition that includes: The American Feed Industry Association, American Meat Institute, American Sheep Industry Association, California Dairy Campaign, Dairy Producers of New Mexico, Dairy Producers of Utah, Idaho Dairymen’s Association, Milk Producers Council, National Cattlemen’s Beef Association, National Chicken Council, National Pork Producers Council, National Turkey Federation, Nevada State Dairy Commission, North American Meat Association, Northwest Dairy Association, Oregon Dairy Farmers Association, Southeast Milk Inc., United Dairymen of Arizona, U.S. Poultry and Egg Association and the Washington State Dairy Federation.
Calling the RFS a “misguided policy,” the coalition, which is upset with the price of corn and what it perceives as the RFS creating an uneven playing field for end-users of corn, is vowing to “explore remedies to fix it.”
USDA’s Nov. 9 crop report puts this year’s corn harvest at 10.7 billion bushels, down 13 percent from last year and off 28 percent from what the agency had projected in May. The ethanol industry will use more than 40 percent of the corn supply next year. Further, carryover stocks for 2012-13 are now forecast at 647 million bushels – a 35 percent decrease from last year’s carryover amount, and the lowest amount ever. This livestock, dairy and poultry coalition worries there would be virtually no corn reserves for next year should the country experience another poor crop.
“We now have about one-third less of the corn that we need to adequately supply animal feed, ethanol, exports and sufficient carryover levels,” the coalition notes. “But the government continues to mandate that a significant amount of the corn supply be blended next year into gasoline.”
When Congress expanded the RFS in 2007, certain safety valves were added to the law. One provision allows the EPA administrator to reduce the required volume of renewable fuel in any year based on severe harm to the economy or environment of a state, a region or the United States.
In addition to the livestock, poultry and dairy organizations, a bipartisan group of 34 U.S. senators and 156 House members and nine governors petitioned EPA to grant a waiver of the federal requirement for the production of corn ethanol. They also claimed the mandate, coupled with a drought that pushed up prices of feed grains, is causing severe economic harm.
NCBA President J.D. Alexander, a cattle feeder from Pilger, Neb., says “artificial support for corn ethanol provided for by the RFS is only making the (drought) situation worse for cattlemen and women by driving up feed costs.” He maintains the effects of the refusal to waive the RFS will be felt throughout the economy with predictions of 500,000-head beef cow and 50,000-dairy cow liquidation in the U.S. alone in 2012. These losses are driven by drought and high input costs.
“Our message to EPA and Administrator Jackson is how bad does it have to get for livestock producers before relief is brought to rural America?” Alexander queries.
The coalition of livestock, dairy and poultry groups warns that EPA’s decision to deny these waiver requests will “create an animal feed crisis and cause food costs to soar in the coming months.”
The EPA, however, did not find evidence to support a finding of severe economic harm that would warrant granting a waiver of the RFS. Its decision was based on economic analyses and modeling done in conjunction with the U.S. Department of Agriculture (USDA) and U.S. Department of Energy (DOE).
“We recognize that this year’s drought has created hardship in some sectors of the economy, particularly for livestock producers,” says Gina McCarthy, assistant administrator for EPA’s Office of Air and Radiation. “But our extensive analysis makes clear that Congressional requirements for a waiver have not been met and that waiving the RFS will have little, if any, impact.” Economic analyses showed that on average waiving the mandate would only reduce corn prices by approximately 1 percent and would not impact household energy costs.
This is the second time that EPA has considered an RFS waiver request. In both cases, analysis concluded that the mandate did not impose severe harm. In 2008, the state of Texas was denied a waiver.
Advanced Ethanol Council Executive Director Brooke Coleman says waiving the RFS would have done “little if anything to reduce grain prices, but would have hurt consumers at the pump and undercut investment in advanced biofuels.”
U.S. Sen. Tom Harkin (D-Iowa) says that although he sympathizes with livestock producers and others in the food industry whose businesses are being hurt by this year’s drought, EPA rightly concluded that RFS mandates are not “the root cause of economic problems, and determined as well that easing the RFS would not have a significant impact on corn prices.”
Joining NCGA, the ethanol industry and others in applauding EPA’s decision is the Biotechnology Industry Organization (BIO), representing more than 1,100 biotechnology companies, academic institutions, state biotechnology centers and related organizations across the U.S. and in more than 30 other countries. BIO had previously submitted comments to the agency noting that any waiver of the RFS would certainly harm biofuel producers and biotechnology companies across the U.S.
Jeff Lautt, CEO of POET, an ethanol producer and BIO member, says the ethanol industry “can move forward with greater confidence, continuing to invest in new technology to make biofuels production even more efficient and commercializing fuel production from cellulosic feedstocks such as crop residue and other plant material.”