Ethanol industry support maintained

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Last week the Environmental Protection Agency decided against reducing the national ethanol mandate in half as requested by Texas Gov. Rick Perry. The decision has many implications for future interpretation of the Energy Independence and Security Act of 2007 as well as future attempts to scale-back ethanol production from anti-ethanol groups.

As a result, the required total volume of renewable fuels, such as ethanol and biodiesel, mandated by law to be blended into the fuel supply will remain at 9 billion gallons in 2008 and 11.1 billion gallons in 2009 or approximately 10.5 billion gallons for the 2008-2009 marketing year.

EPA conducted detailed analysis looking at ethanol use as well as the prices of corn, food, fuel and renewable fuel credits; consulted closely with the Departments of Energy and Agriculture; and considered more than 15,000 public comments, which the majority of the comments were short statements generally in support of the Texas request, the agency said.

EISA gives EPA the power to waive the mandate if economic or environmental harm is proven, of which the Texas request specifically said the RFS is causing economic harm. EPA said the wording of the waiver request from Texas identified that the RFS "contributes to severe harm" but the law requires EPA show that "implementation of the RFS program itself must be the cause of the severe harm."

"After reviewing the facts, it was clear this request did not meet the criteria in the law," said Johnson. "The RFS remains an important tool in our ongoing efforts to reduce America's greenhouse gas emissions and lessen our dependence on foreign oil, in aggressive yet practical ways."

EPA said in its modeled scenarios where a waiver of the RFS mandate might reduce the production of ethanol, the resulting decrease in corn prices is anticipated to be small (on average $0.30 per bushel of corn), and there would be an accompanying small increase in the price of fuel (on average $0.01 per gallon in fuel costs).

The average increase in corn prices in all modeled scenarios, including scenarios where the RFS mandate would and would not have an impact, was $0.07 per bushel of corn. "Such levels of potential impacts from the RFS program do not satisfy the high threshold of harm to the economy to be considered severe," EPA said.

Moving forward

Ethanol supporters said EPA made the right decision and will allow farmers to continue to plan for and meet the fuel and food needs of the future.

"If EPA had agreed to the waiver request, our oil import dependence would have increased," said Renewable Fuels Association President Bob Dinneen. "Moreover, such a decision would have sabotaged the development and growth of new technologies and a cellulosic biofuels industry. Thankfully, the EPA recognized this grave risk and rejected the waiver request."

Johnson said he acknowledged as part of the assessment the higher feed prices livestock producers are facing because of an increase in biofuels production. But he explained in questioning whether the price increases are the result of the RFS mandate, "our conclusion is no," he said.

He said EPA's analysis includes corn prices and production figures from USDA's July 11 World Agricultural Supply and Demand Estimates. Corn prices have fallen considerable since July 11, currently prices are more than 30% lower total since their highs at the end of June.

Members of the food and livestock industry continued to claim ongoing financial harm created by higher corn and food prices. Industry members said the decision only sets up further uncertainty in 2009 and guarantees higher food prices ahead as livestock sectors continue liquidation efforts.

Joel Brandenberger, president of the National Turkey Federation, said that if EPA could draw the conclusion that there isn't severe economic harm from the billions of dollars livestock producers are losing, then "clearly there is something wrong with the law and Congress needs to visit it more closely." He suggested that the waiver rule be written in a clear cut fashion looking at available stocks and production figures and remove some of the subjective approach to the process.

The Grocery Manufacturers Association is leading a coalition of food and livestock groups who have continuously called for a reduction in the ethanol mandate and elimination of the ethanol blenders' credit and import tariffs.

Scott Faber, vice president for federal affairs for GMA, said although he wasn't willing to go into detail about future strategies of the coalition, they'll definitely "be working with Congress and the next administration to restructure all food to fuel policies." In addition the organization is in "regular conversations with many governors" who are concerned about the increasing amount of corn diverted to fuel production about possible future waiver requests.