Livestock-state governors petition EPA for waiver of ethanol mandate

Source: Amanda Peterka, E&E reporter • Posted: Thursday, August 16, 2012

Two more livestock-state governors this week are calling on U.S. EPA Administrator Lisa Jackson to use her authority to temporarily waive the federal corn ethanol mandate.

In letters to Jackson, Democratic Govs. Bev Perdue of North Carolina and Mike Beebe of Arkansas wrote that the mandate is exacerbating drought conditions in the Midwest. They join Democratic Govs. Jack Markell of Delaware and Martin O’Malley of Maryland, who wrote a letter last week to Jackson, in calling for at least a partial waiver of the renewable fuel standard (RFS).

“Put simply, ethanol policies have created significantly higher corn prices, tighter supplies and increased volatility,” Beebe wrote Monday.

Under the Clean Air Act, the EPA administrator is required to go through the formal process of considering a waiver if governors or obligated parties such as oil refiners file a request. The administrator is given the authority to waive the standard only if it causes severe economic hardship in a state or region.

The renewable fuel standard for this year mandates that refiners blend 13.2 billion gallons of corn ethanol into the nation’s fuel supply. The governors and livestock industries contend that, by causing more corn to go toward ethanol production, the standard is squeezing the supply available for the livestock industry and driving up the price of corn to more than $8 a bushel.

While the Department of Agriculture yesterday said that cooler temperatures and rain over the past few days have stabilized the crop, the rainfall will provide only “limited” relief. More than half the national corn crop is currently rated in “poor” or “very poor” condition. Last week, USDA predicted the smallest corn crop in six years.

“Broilers, turkeys and cattle — sector particularly vulnerable to this corn crisis — represent nearly half of Arkansas’s farm marketing receipts,” Beebe said. “Arkansas poultry operators are trying to cope with grain cost increases and cattle families are struggling to feed their herds.

According to Perdue, for every $1 increase in the price of a bushel of corn, the feed costs to produce swine — one of North Carolina’s largest industries — increase by about $85 million.

“Altogether, severe economic harm is being experienced by the state of North Carolina and many of its agricultural regions, as well as important economic sectors in the state, as a direct result of the implementation of the applicable volume for renewable fuel in 2012 and 2013,” Perdue wrote in her letter yesterday.

EPA denied a similar waiver request in 2008 made by Republican Gov. Rick Perry of Texas, who contended then that the mandate exacerbated flood conditions. In its denial, the agency set out a strict standard for granting a one-year waiver by writing that the RFS itself must be causing harm to the economy or the environment and that the harm must not be contained to just one industry.

“EPA expects that future applicants for a waiver will provide information and analyses that address what is the impact of implementation of the RFS, and what is the nature and degree of harm associated with the impact of the RFS,” the agency wrote.

“In this case the initial submission by the State of Texas provided little analytical or evidentiary basis for their request,” EPA added.

EPA also noted in that decision that it did not necessarily have to provide for public comment when denying a petition.

The ethanol industry, which has for weeks defended its product against the increasing attacks by livestock groups, yesterday encouraged EPA to also deny these new petitions.

“It is not the ethanol industry that is causing the economic harm; it is Mother Nature — specifically a lack of rain and record high temperatures are the true culprits of rising commodity prices, something that neither the EPA, nor any government agency is able to fix,” said Tom Buis, CEO of ethanol trade group Growth Energy. “To blame the ethanol industry due to a lack of rain does not make any sense.”

The industry is also warning that a waiver will not provide the relief sought by livestock producers. A study by Iowa State University professor Bruce Babcock released yesterday found that such a waiver would reduce corn prices by about 7.4 percent, or 58 cents, on average.

The modest decrease comes partly from the fact that there are carry-over renewable fuel credits available in the market, Babcock said.

Blending ethanol in gasoline would also remain attractive to refiners even without a standard in place because ethanol is currently 40 to 45 cents cheaper than gasoline, Renewable Fuels Association Vice President of Research and Analysis Geoff Cooper said yesterday during a Web-based seminar.

“They’re not just going to stop using ethanol tomorrow,” Cooper said.