26 senators join the call to adjust corn-based fuel mandate

Source: Amanda Peterka, E&E reporter • Posted: Thursday, August 9, 2012

A bipartisan group of 26 senators yesterday joined a growing chorus of lawmakers asking U.S. EPA Administrator Lisa Jackson to use her authority to waive the federal corn ethanol mandate.

Led by Sens. Kay Hagan (D-N.C.) and Saxby Chambliss (R-Ga.), the senators blamed the renewable fuel standard for exacerbating the drought by helping drive up the price of corn. The group of senators — which included 12 other Democrats and 12 other Republicans — said waiving the standard would provide livestock industries relief and help stem a rise in retail food prices next year.

“As stressful weather conditions continue to push corn yields lower and prices upward, the economic ramifications for consumers, livestock and poultry producers, food manufacturers, and foodservice providers will become more severe,” the senators wrote.

“We ask that you adjust the corn grain-ethanol mandate of the RFS to reflect this natural disaster and these new market conditions,” they added. “Doing so will help to ease supply concerns and provide relief from high corn prices.”

Many of the senators are from states with large livestock constituencies that rely on corn for animal feed. On July 30, several major livestock trade groups submitted a formal petition to EPA requesting the waiver, citing severe economic harm caused by the mandate and corn prices that have topped $8 a bushel (Greenwire, July 30).

On Thursday, a bipartisan group of 156 House members and seven Republican senators — including Sen. James Inhofe (R-Okla.) — made a similar request to Jackson (E&ENews PM, Aug. 2).

The government “has made the unfair choice of choosing fuel over food,” said Rep. Bob Goodlatte (R-Va.), who has led the action on the House side.

The ethanol industry has defended its product, pointing to the drought and fuel prices as major culprits in high corn prices and saying the “food versus fuel” argument does not have traction.

Ethanol industry trade groups have cautioned EPA against making what they call a “premature” decision to waive the mandate, saying the corn crop will not be known until the harvest. Last week, they formed a new coalition to rally support for the RFS.

A key predictor of the crop will come Friday, when the Department of Agriculture releases its latest corn projections, which, for the first time this year, will take into account actual yields.

The renewable fuel standard currently requires refiners to blend 13.2 billion gallons of ethanol into this year’s fuel supply. Regardless of the corn crop or actual ethanol production this year, the ethanol industry points to some 2.5 billion renewable fuel credits carried over from last year that will be available to oil refiners this year to meet the mandate.

“Calls to waive any or all of the RFS from the livestock lobby, oil industry or their allies in Congress are not only premature, but void of justification,” Renewable Fuels Association President and CEO Bob Dinneen said last week. “The RFS contains a great deal of flexibility allowing obligated parties to meet RFS requirements in a variety of ways other than blending physical gallons of ethanol.”

Refiners aren’t entirely happy with the standard, either. An analysis released today by the American Petroleum Institute labeled it “an unworkable mandate” and called on EPA and Congress to take a “fresh look” at the program.

Oil refining interests say they’re not sure how many rollover credits are actually in the system. Stephen Brown, a lobbyist for Tesoro Corp., today said that even if carry-over fuel credits are used this year to meet the standard, fewer credits will be available next year, when the corn ethanol mandate rises to 13.8 billion gallons.

“Stepping back, it is clear that the RFS needs to be revisited by Congress next session,” Brown said. The Renewable Fuels Association’s “refusal to even acknowledge that obvious fact is like a sick individual refusing to go to the doctor for a physical for fear of what will be learned.”

But so far, no refiners have yet submitted a formal petition to EPA requesting that the standard be waived. The bigger issue for refiners is what happens when they hit the “blend wall,” or the point where ethanol has saturated 10 percent of the fuel market, API Downstream Director Bob Greco said today.

That could happen next year, according to API’s analysis. Although EPA has approved the use of up to 15 percent of ethanol in the marketplace, refiners and automakers have opposed the fuel, saying it would hurt car engines.

“There’s potentially an imminent problem when we hit the blend wall,” Greco said.