Biofuels industry to Obama: Hang tough on renewable fuel standard

Source: By Zack Colman, • Posted: Tuesday, August 28, 2012

The biofuels industry on Monday urged President Obama to resist persistent calls from governors and lawmakers to relax the renewable fuel standard (RFS), claiming dropping support for it would do little to combat high corn prices.

The Biofuels Producers Coordinating Council, a recently formed group meant to organize the biofuels industry’s messaging, sent a letter to Obama refuting arguments that waiving the RFS would provide relief for drought-stricken farmers. The letter comes shortly after industry groups lauded GOP presidential candidate Mitt Romney for supporting the RFS in an energy plan he announced Thursday.

“With so many Americans in distress from the 2012 drought, it may be difficult to accept that the flexibility provisions built into the RFS and the market itself are working to minimize the consumer impact of lower grain yields,” the letter to Obama said. “But that is exactly what is happening.”

The RFS requires refiners to blend 13.2 billion gallons of corn ethanol into traditional transportation fuel this year. Obama and Agriculture Secretary Tom Vilsack have consistently touted the RFS, though White House Spokesman Jay Carney said earlier this month that the administration is “looking” at the policy.

Biofuels groups said in the letter that meeting this year’s blend target will not be a problem because of a backlog of credits from previous years of overproduction. They also said waiving the RFS would have a cooling effect on investment in renewable fuels.

Biofuels groups have had to fend off frequent attacks against the RFS from governors, lawmakers and the livestock industry. Texas Governor Rick Perry (R) on Friday became the fifth governor to ask the Environmental Protection Agency (EPA) to waive the RFS. A bipartisan, bicameral group of lawmakers on Capitol Hill have asked for the same.

Those groups say the RFS has choked off too much of the nation’s corn supply, especially with yields forecast to hit their lowest level since 2006 as a result of the drought. As a result, RFS detractors say, corn prices have hit record highs.

Skyrocketing corn prices have strained the meat industries as feed costs rise. They say waiving the RFS for up to one year would lower corn prices 5 percent, saving the industry $1 billion.

But the biofuels groups stressed in their letter to Obama that producers already are responding to market signals, making an RFS waiver unnecessary. When prices for corn rose, refiners curtailed corn ethanol production, they said.

“The Energy Information Administration (EIA) recently noted that ethanol production has decreased since corn prices began to escalate in early June,” the letter noted. “The recent four-week average for ethanol production is the lowest in more than two years and down more than 15 percent from the beginning of this year. This fact is often ignored by the media or by opponents of biofuels.”