Ag groups disagree on EPA denial of RFS waiver

By Carol Ryan Dumas, Ag Weekly editor
Friday, August 15, 2008 2:34 PM CDT

TWIN FALLS, Idaho - Some agriculture groups are praising EPA Administrator Stephen Johnson’s decision to deny the request of Texas Governor Rick Perry to temporarily reduce ethanol requirements for gasoline, while others are bemoaning it.

Perry, who requested a waiver of half of the renewable fuels requirement in the federal Renewable Fuels Standard in April, said the mandate was causing skyrocketing corn prices, hurting livestock producers who use grain for feed and running up food costs to consumers.

Following EPA’s announcement on Aug. 7, Perry called the decision “a mistake” and “bad public policy.”

“I am greatly disappointed with the EPA’s inability to look past the good intentions of this policy to see the significant harm it is doing to farmers, ranchers and American households,” Perry told the Associated Press. “For the EPA to assert that this federal mandate is not affecting food prices not only goes against common sense, but every American’s grocery bill.”

But not everyone feels the same.

Roger Johnson, North Dakota agriculture commissioner and president of the National Association of State Departments of Agriculture welcomed EPA’s decision, saying it maintains a policy aimed at increasing the nation’s ethanol production.

“The Renewable Fuels Standard is an important part of our domestic energy policy,” he said. “The EPA has done the right thing by staying the course and not being swayed by misinformation on increased food and feed prices.”

Johnson said studies by Texas A&M University, Iowa State University and others “clearly demonstrate that the impact of increased ethanol production on feed and food prices is negligible.”

“Those price increases are due to a variety of factors, including greater global food demand, weather-related events, and, above all, to increased petroleum prices and consequently higher fuel prices,” he added.

National Biodiesel Board Chief Executive Officer Joe Jobe said the waiver would have had an unintended effect on the development of all biofuel

“We appreciate the EPA taking a careful approach to the waiver request and agree with their determination that it should be denied,” he said. “It is important to note that all renewable fuels qualify for the current RFS. In fact, if the RFS is waived or cut in half in 2008, then the growth of all biofuels, including advanced biofuels such as biodiesel, would be severely hindered.”

Severe harm not found

Current law authorizes EPA to waive the national RFS if the agency determines the mandated biofuel volumes would cause “severe harm” to the economy or the environment.

“After reviewing the facts, it was clear this request did not meet the criteria in the law,” said EPA’s Johnson.

EPA conducted detailed analysis, consulted closely with the Departments of Energy and Agriculture, and carefully considered more than 15,000 public comments in response to the Texas request, he said.

The agency recognizes that high commodity prices are having economic impacts, but EPA’s extensive analysis of Texas’ request found no compelling evidence that the RFS mandate is causing severe economic harm during the time period specified by Texas, he said.

National Cattlemen’s Beef Association doesn’t see it that way.

“Our industry has suffered a record of nearly $1.5 billion in cattle feeding losses between January and June of 2008, which we believe constitutes the severe economic impact necessary to prompt a waiver from the RFS mandate,” said NCBA President and Arizona rancher Andy Groseta.

“We had hoped that the administration would recognize the hardship cattle producers are facing with tight corn supplies and high prices for feed. With the government mandating that large portions of our corn crop be used to create ethanol, it is our cattle producers who are feeling the biggest pinch. High demand and high prices for corn hurt America’s ranchers more than any other sector of the economy.”

And with the renewable fuels mandate increasing, the “situation will only worsen,” he said.

Groseta said NCBA supports biofuels and energy independence but that in the current economic atmosphere, “the marketplace should be left to decide prices based solely upon economics — not government intervention via mandates and subsidies.”

Jesse Sevcik, vice president for legislative affairs for the American Meat Institute, said diverting a third of U.S. 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.

“Our industry has already seen a contraction in production, resulting in smaller herd sizes and higher meat prices for consumers,” he said. “Governor Perry recognized that a near tripling of feed prices would cost Texas livestock and poultry farmers greatly, put meat industry employees out of jobs and strain Texans’ wallets. The same is true across America and unfortunately, the decision by the EPA today ensures that this will continue to be the case unless Congress acts to restructure the ethanol mandates, taxes and tariffs.”

Commitment to renewable fuels hailed

Corn growers, however, support the administration’s leadership on renewable fuels and the EPA’s decision.

American Corn Growers Association President Keith Bolin, a corn and hog producer from Bureau County, Ill., commended EP’s Johnson for his leadership and foresight in rejecting the waiver request.

“The waiver requested by Governor Perry would have had a de minimus impact on corn prices, an even smaller impact on food prices and would increase gasoline prices significantly,” he said.

Bolin said ethanol production and the use of incentives and mandates are critical to taking renewable fuels to the next generation, namely non-food, cellulosic ethanol production.

“When fully matured, the new RFS will require 21 billion gallons of non-corn ethanol while allowing only 15 billion gallons of corn ethanol to count toward the over-all mandate in the year 2022,” he said.

The National Corn Growers Association also hailed EPA’s decision.

NCGA President Ron Litterer, a corn grower in Iowa, said people have been critical of corn ethanol because of a perceived connection to higher retail food, citing university studies that tied most of the recent spike in corn prices to higher oil prices, which had in turn caused the demand for ethanol and corn to jump.

“The higher energy costs, the higher everything else costs,” Litterer said. “Corn ethanol helps provide energy independence and keep energy prices down. It’s part of the solution to the real problem.”

National Farmers Union President Tom Buis said commitment to renewable fuels is overdue.

“The Renewable Fuels Standard is part of our nation’s energy solution,” he said. “America’s farmers have the ability to produce a safe, abundant food supply while playing a part in reducing our dependence on foreign oil. Despite the rhetoric from the supporters of big oil, ethanol has reduced our dependence on foreign oil, and saved consumers from paying even higher prices for gasoline.

He said the nation has failed to address its energy crisis for over 30 years.

“Now that we are finally moving forward, going backwards to rely on foreign oil-producing countries for our energy would be the worst possible scenario,” he said.

“The food versus fuel myth is not based on the facts. While high commodity prices have been named the culprit, the farmer’s share of the retail food dollar is less than 20 cents,” Buis added. “Energy prices have a far greater impact on retail food prices and with sky high energy costs; it’s no wonder food prices have increased.”

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