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EPA Waiver Decision Applauded by Some, Disappoints Others

The request for a waiver of the Renewable Fuels Standard by the state of Texas was a very divisive issue. Grain and ethanol organizations as well as several other agriculture groups were against the granting of a waiver, while livestock organizations supported the request made in April by Texas Governor Rick Perry. Until the Environmental Protection Agency announced its decison the only certainty was that one side would be happy and the other wouldn't.

On Thursday EPA Administrator Stephen Johnson denied the request, which will maintain RFS mandates of 9 billion gallons in 2008 and 11.1 billion gallons next year. So the groups that were against lowering the mandate are pleased with the EPA decision and those for the granting of the waiver are disappointed.

"We're pleased that the EPA did not turn its back on the promise of renewable fuels," said American Farm Bureau Federation President Bob Stallman. "In addition to strengthening the first-generation biofuels industry, the RFS plays a crucial role in fostering the continued development of second- and third-generation biofuels including cellulosic ethanol, biomass-based biodiesel and other advanced biofuels."

The announcement also earned praise from National Farmers Union President Tom Buis, who said the EPA had made the right choice by keeping the RFS intact. Among other groups that voiced their support of the EPA decision were the Renewable Fuels Association, National Corn Growers, National Biodiesel Board, National Association of State Directors of Agriculture and the Ethanol Promotion and Information Council.

On the flipside of the coin, livestock groups are disappointed by the denial of a waiver. National Cattlemen's Beef Association President Andy Groseta says the losses cattle feeders have had in the first half of this year constitutes the severe economic impact necessary to get a waiver of the RFS.

"With the ethanol mandate increasing from nine billion gallons in 2008 to 11.1 billion gallons in 2009, this situation will only worsen," Groseta says. "The government is drastically increasing the demands on our corn supply in a time of record prices.  Several million more planted corn acres will be needed in 2009 at a time when competition for acreage is already very tight."

George Watts, president of the National Chicken Council echoed that position and said Congress needs to step in to reform the ethanol program. "Congress created this mess," Watts said. "Congress ought to fix it."

Jesse Sevcik, vice president for legislative affairs for the American Meat Institute, said diverting a third of our corn crop to ethanol production has driven corn and all feed prices up to levels that are severely impacting U.S. meat and poultry producers as well as consumers. 

During the announcement Thursday Johnson did say that they had examined the situation of livestock producers while coming to the decision of denying the waiver request.

"We acknowledge as part of our assessment that there is an increase because of biofuel production in feed prices," Johnson said. "However; is that the result of the RFS mandate? Our conclusion is no."

EPA's analysis found that corn prices would drop only 7 cents per bushel if the mandate was waived and 30 cents per bushel if the mandate was binding. Production figures from USDA's July 11 World Agricultural Supply and Demand estimates were used by EPA in their analysis; however new information indicates crops have recovered from early flooding earlier this year and corn prices have fallen over 30% since their highs at the end of June.