Livestock groups urge EPA to waive ethanol mandate

Source: Amanda Peterka, E&E reporter • Posted: Tuesday, July 31, 2012

Livestock industries today petitioned U.S. EPA to grant up to a one-year waiver on the federal biofuels mandate, citing severe economic harm caused by soaring corn prices.

In their waiver petition submitted today to Administrator Lisa Jackson, industry trade groups are seeking a whole or partial waiver from the biofuels requirements for the rest of this year and part of 2013. Using corn for mandated ethanol production, they say, has driven up the price of livestock feed in the face of the drought.

“There is no other option at this point that can be taken to grant the immediate relief that is needed to get us out of this situation,” Michael Formica, environmental counsel for the National Pork Producers Council, said this morning in a conference call.

Signing the waiver petition were 19 livestock trade groups, including the pork producers, National Chicken Council, National Turkey Federation, National Cattlemen’s Beef Association and American Meat Institute.

Under the Clean Air Act, the groups are not expressly allowed to submit a waiver petition — only governors and obligated parties such as refiners are included in the act’s language. Formica said the groups are filing for the petition under the Administrative Procedures Act, which gives interested people a right to petition rules.

The groups are claiming severe harm to the economy — the standard used by EPA in the Clean Air Act to determine whether a waiver is warranted.

According to the 18-page document filed this morning, keeping the standard intact “will so reduce the supply of corn and increase its price that livestock and poultry producers will be forced to reduce the size of their herds and flocks, causing some to go out of business and jobs to be lost.”

The effects, the petition says, will ripple through the meat, milk and poultry sectors and cause food prices to rise.

Randy Spronk, president-elect of National Pork Producers, said the concerns were not “unfounded fears,” noting that the Agriculture Department has predicted food prices will rise 4 percent next year because of the drought.

Waiving the renewable fuel standard, which mandates the country produce 13.2 billion gallons of corn ethanol this year and 13.8 billion gallons next year, will level out the playing field for livestock industries, the trade groups said this morning during the conference call.

“We’re more than willing to compete, but on a level playing field,” said J.D. Alexander, president of the National Cattlemen’s Beef Association. “The ethanol industry is a mature market now, and they’ve been held up with a three-legged stool for many years and got off the ground and have a great product and a great industry. But at some point, as we call it in the cattle business, you need to wean it.”

Last week, the ethanol industry released a study by Iowa State University professor Bruce Babcock that found waiving the biofuels mandate would have only a small effect on corn prices in the immediate future. Such action, the study says, would reduce prices that have surpassed $8 a bushel by less than 5 percent, or by 28 cents a bushel (Greenwire, July 26).

The livestock industries today criticized that study. Thomas Elam, an agriculture consultant who recently conducted an analysis for the livestock industry, said that the Babcock study relies on over-optimistic corn yields and that the situation is much worse than he predicted.

“The impact will be more than proportionately larger than the reduction in yield,” Elam said. “We simply think that his yield forecast was too high and impact is significantly below what is possible.”

Texas Gov. Rick Perry (R) was the last person to petition to waive part of the renewable fuel standard, in 2008. When he asked for a 50 percent waiver after severe flooding, EPA rejected a study conducted by Elam that made a case for the waiver. The agency said “many of the assumptions used by Elam’s model do not appear to accurately reflect market forces.”

EPA officials have signaled they are not leaning toward waiving the standard this time around, earning praise from the ethanol industry. Bob Dinneen, president and CEO of the Renewable Fuels Association, said today that he expects EPA to continuing maintaining its support for the program.

“Given the flexibilities inherent to the RFS, and the fact that waiving the program would not result in any meaningful impacts on corn prices, we fully expect Administrator Jackson to deny any waiver request,” Dinneen said. “A dispassionate review of the facts can lead to only one conclusion: A waiver of the RFS would simply reward oil companies that have long sought to repeal this very important and successful program.”

The livestock groups today said that they were looking at every option to provide relief to their producers but that the government is limited in what it can do. Reducing the standard is one of the few choices available, they said.

“How bad does it have to get before the administration acts?” asked Michael Welch, a poultry producer and a past National Chicken Council president.