Ethanol mandate waiver request denied by E.P.A.
Nov. 19, 2012
WASHINGTON — The Environmental Protection Agency (E.P.A.) has denied a request by industry stakeholders to impose a waiver on the Renewable Fuel Standard. The E.P.A. said it found that suspending the R.F.S. would reduce corn prices by only 1%.
“We recognize that this year’s drought has created hardship in some sectors of the economy, particularly for livestock producers,” said Gina McCarthy, air chief for the E.P.A. “But our extensive analysis makes clear that congressional requirements for a waiver have not been met and that waiving the R.F.S. will have little, if any, impact.”
Congress gave E.P.A. the authority to grant a full or partial waiver of the R.F.S. if its implementation would severely harm the economy or environment of a state, region or the entire country, or if the E.P.A. determines that there is an inadequate supply of renewable fuel. A coalition of trade groups whose constituents are coping with surging corn prices petitioned the E.P.A. and urged federal legislators to waive the R.F.S. on concerns the regulation threatens corn supplies already hard-hit by this summer’s historic drought.
A coalition of livestock, poultry and dairy organizations “expressed extreme disappointment” over the E.P.A.’s decision.
“We are extremely frustrated and discouraged that E.P.A. 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,” the coalition said in a statement.
Jeff Lautt, chief executive officer of Sioux Falls, S.D.-based POET, applauded the decision. POET is an ethanol producer.
“The E.P.A. today made a sound decision in denying a waiver of the Renewable Fuel Standard,” Mr. Lautt said. “As studies have shown, a waiver would have likely had little to no impact on commodities prices in the aftermath of the recent drought. This effort was nothing more than the latest attempt by renewable fuel opponents to undermine policy that has helped make America stronger.”
The American Ethanol Council (A.E.C.) defended E.P.A.’s decision, arguing that an R.F.S. waiver would have done little to reduce grain prices while hurting consumers at the pump.
“The R.F.S. is well-designed and is the primary reason why the U.S. has emerged as the global leader in the development of advanced biofuels,” the A.E.C. said. “There will be other stalking horses advanced by the oil industry to weaken the R.F.S., but it is a step in the right direction to put this one behind us.”
The U.S. Department of Agriculture, in its Nov. 9 Crop Production Report, forecast 2012 corn production at 10,725,191,000 bus, up 19,462,000 bus from 10,705,729,000 bus forecast in October but down 13% from 12,358,412,000 bus in 2011. If realized, corn production would be the smallest since 10,531,123,000 bus in 2006. The coalition said the ethanol industry will use more than 40% of the corn supply in 2013.
Carry-over stocks for 2012-13 are now forecast at 647 million bus, which are a 35% decrease from last year’s carry-over amount, the coalition said.
“We now have about one-third less of the corn that we need to adequately supply animal feed, ethanol, exports and sufficient carry-over levels,” the coalition said. “But the government continues to mandate that a significant amount of the corn supply be blended next year into gasoline.”
The National Cattlemen’s Beef Association submitted to E.P.A. in October stating that the cattle industry and other livestock groups have suffered significant economic losses due to the R.F.S. mandate and the drought. The N.C.B.A. said that from December 2007 to August 2012, the cattle feeding sector of the beef industry lost a record $4 billion in equity on high feed costs and economic factors that have softened beef demand.
“In light of the most widespread drought to face the country in more than 50 years, the refusal to grant this waiver is a blatant example of the flawed policy of the R.F.S.,” said J.D. Alexander, N.C.B.A. president, and a cattle feeder from Pilger, Neb. “The artificial support for corn ethanol provided for by the R.F.S. is only making the situation worse for cattlemen and women by driving up feed costs.”