By STEVE BINDER
WASHINGTON, D.C. — A one-year waiver of the federal rule requiring gasoline to include a certain level of ethanol would have little impact on corn prices overall, the U.S. Environmental Protection Agency (EPA) ruled last week.
The long-awaited and controversial decision was announced Friday, and comes more than three months after the EPA was first petitioned by the governors of Arkansas and North Carolina to waive the Renewable Fuel Standard (RFS) for one year.
Also supporting the waiver request were governors from Virginia, Texas, Georgia, New Mexico, Delaware, Maryland, Utah and Wyoming, along with a host of livestock groups such as the National Chicken Council. Their petition claimed record corn prices would have a devastating impact on regional economies, and that a waiver would free grain supplies to help drive feed prices lower.
They were pitted again governors from Iowa, Illinois, Minnesota, South Dakota and Oregon, along with national grain groups such as the National Corn Growers Assoc. (NCGA) and ethanol producers, who opposed the waiver request. They claimed this year’s drought, and not the federal mandate, squeezed corn supplies and drove up prices, and that the standard of a “significant hardship” had not been met.
The EPA sided with these opponents. Gina McCarthy, assistant administrator for the EPA’s Office of Air and Radiation, said the agency acknowledges the livestock industry was hit hard this year.
“We recognize that this year’s drought has created hardship in some sectors of the economy, particularly for livestock producers,” McCarthy said. “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.”
The EPA said it conducted several economic analyses in reaching its decision, and concluded a waiver would lower corn prices by about 1 percent. Supporters of the waiver instead argued prices would have been lowered by up to $2 per bushel.
A coalition of livestock, feed and dairy groups sharply criticized the EPA’s decision. In a statement, the group – including the National Cattlemen’s Beef Assoc., National Pork Producers Council and the National Turkey Federation – said “dozens of poultry, pork, beef and dairy operations have filed for bankruptcy, been sold or simply gone out of business over the past several months because of rising feed grain prices.
“How many more jobs and family farms have to be lost before we change this misguided policy and create a level playing field on the free market for the end users of corn?” the statement continued. “It is now abundantly clear that this law is broken, and we will explore remedies to fix it.”
Begun in 2005 and expanded two years later to help the United States become more energy independent, the RFS mandates certain amounts of biofuel be blended into the nation’s gasoline supplies. For 2013, the RFS mandates about 13.8 billion gallons be produced. By 2015, that total will be 15.2 billion.
It was only the second time the EPA has ruled on a waiver request; it formerly denied a petition from Texas Gov. Rick Perry, whose state was scorched with drought in 2008.
Opponents to the waiver maintained the ethanol industry responded as it should have as the growing season progressed: It cut back on production and is using reserves to meet the RFS requirement.
In applauding the EPA’s decision, Jeff Scates of the Illinois Corn Growers Assoc. said, “U.S. ethanol production has been reduced in response. More than 800 million gallons of production has been idled this year. In fact, two Illinois ethanol plants closed at least temporarily during this time.”
NCGA President Pam Johnson noted the industry’s economic benefits.
“The ethanol industry plays a pivotal role in job creation throughout the country, supporting over 400,000 jobs nationwide,” she said. “The RFS advances the use of domestically produced renewable fuels, encourages new technologies and enhances U.S. energy independence.”