WASHINGTON DC, August 7, 2008 (ENS) – The Bush administration today denied a request by Texas to cut the U.S. biofuels mandate in half, rejecting the claim that the massive increase in corn-based ethanol is causing economic harm to the state’s livestock industry and raising food prices.

Few stakeholders were surprised by the decision, but debate over the U.S. biofuels mandate reflects lingering concern about the economic and environmental impact of nation’s ethanol boom.

The controversy centers on the nation’s renewable fuels standard, RFS, which calls for the nation to increase its production of ethanol and other biofuels to be blended into gasoline. Such fuels account for some six percent of the nation’s gasoline supplies.

The RFS requires nine billion gallons of biofuels be used this year, with the target set to jump to 11 billion gallons in 2009 and 36 billion gallons by 2020.

Fueling with corn-based ethanol (Photo
courtesy Iowa Corn Growers Assn.)

Congress first established the RFS in 2005. Lawmakers increased it last year, promoting the mandate as part of a strategy to reduce the nation’s dependence on foreign oil and to cut greenhouse gas emissions.

The politics of corn production hang heavy over the RFS controversy.

Corn-based ethanol currently accounts for the vast majority of biofuels blended into the U.S. fuel supply. Other sources of biofuels are not commercially viable, but corn-based ethanol is a ready alternative thanks to generous subsidies and support from U.S. lawmakers.

The U.S. Department of Agriculture predicts a third of U.S. corn production will be funneled into ethanol this year, yet record corn prices have some wary of the larger impact of the ethanol boom on food and livestock feed prices.

In May more than 20 Republican senators, including Arizona’s John McCain, the presumptive Republican presidential nominee, urged EPA to waive the RFS mandate because of concerns about its impact on food prices.

Others are concerned about the impact on the nation’s environment.

Corn growers use large amounts of pesticides and the boom in corn production has been linked to an increase this year in the giant dead zone in the Gulf of Mexico.

And although blending ethanol with gasoline helps cut greenhouse gas emissions from cars and trucks, in can increase emissions responsible for smog.

Today’s announcement came in response to a request made in April by Texas Governor Rick Perry, who asked the U.S. Environmental Protection Agency to cut the RFS mandate by 50 percent.

Perry, a Republican, argues that demand for ethanol is responsible for corn prices that reached record levels in June, up nearly 120 percent from 2007. Those high corn prices that are harming his state’s cattle and poultry farmers, Perry said in his request, and are being passed onto consumers in higher food costs.

But the head of the EPA disagreed. The RFS mandate is not causing the “severe economic harm” required by law to waive the requirement, EPA Administrator Stephen Johnson said today.

“Rather, the RFS is strengthening our nation’s energy security and supporting America’s farming communities,” Johnson told reporters on a teleconference.

EPA was not required to consider the environmental impacts of the RFS mandate, Johnson added, as the Texas petition was based solely on economic concerns.

EPA’s analysis found the RFS mandate may be responsible for increasing corn costs between seven and 30 cents per bushel. The agency has yet to complete analysis of the long-term economic or environmental impacts of the policy.

The Texas governor blasted the decision, saying the EPA appears incapable of looking past the “good intentions” of the policy.

Fresh corn for dinner (Photo
credit unknown)

“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,” Perry said. “Any government mandate that artificially props up a single industry to the detriment of millions of Americans is bad public policy.”

But recent events have given some strength to the view that the RFS mandate is not the key factor behind corn prices.

Prices have dropped from a record high of nearly $8 a bushel in June to less than $5.40 earlier this month – a decrease many contend has been driven by a drop in the price of oil.

“Most economists now recognize the real severe economic harm is being done by the skyrocketing price of oil and not by ethanol production,” said Bob Dineen, head of the Renewable Fuels Association. “In fact, without ethanol production the damage from high oil prices would be even worse.”

Dineen contends that curtailing the RFS mandate would have had little impact on corn prices but would have “sabotaged the development and growth of new technologies and a cellulosic biofuels industry.”

Other reaction to the decision demonstrated the strange bedfellows brought together by the biofuels controversy.

Livestock interests, along with environmentalists, grocery manufacturers, restaurants and oil industry groups had all called on EPA to grant the Texas waiver.

“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,” said Jesse Sevcik, vice president for legislative affairs for the American Meat Institute.

The head of the nation’s largest chicken producer said the RFS mandate has caused feed prices to “spiral out of control,” adding that his company’s food costs could jump $900 million this year.

“It’s apparent that the government intends to blindly pursue this misguided and destructive policy despite reams of data demonstrating its negative impact on the environment, food prices, and world hunger,” said J. Clinton Rivers, president and chief executive officer of Pilgrim’s Pride Corporation.

Environmentalists had hoped debate over the Texas waiver would have prompted EPA to review the environmental impacts of the RFS mandate.

“Corn-based ethanol isn’t just raising food prices,” said Frank O’Donnell, president of Clean Air Watch. “It is causing more smog, adding to global warming, and causing more water pollution.

With controversy over the RFS mandate far from settled, the EPA is bracing for a potential flood of requests asking for changes to the policy.

States were the only interested parties allowed to file waiver requests this year, but next year the door will be open to industry groups and other affected parties.

By J.R. Pegg

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WASHINGTON, DC, July 23, 2008 (ENS) – In April, Texas Governor Rick Perry requested a 50 percent waiver from the grain-based Renewable Fuels Standard mandated under the Energy Independence and Security Act of 2007, enacted last December. The governor says corn prices are soaring because of the demand for corn to make ethanol, which also raises prices for meat, milk and other food products.

“We appreciate the good intentions behind the push for renewable fuels. In fact we’re diversifying our state’s energy portfolio at a rapid rate, but this misguided mandate is significantly affecting Texans’ family food bill,” said Governor Perry in April when he made his initial request for a waiver. “There are multiple factors contributing to our skyrocketing grocery prices, but a waiver of RFS levels is the best, quickest way to reduce those costs before permanent damage is done.”[img]/UPLOADS/blog/ecommunity_news/blogpost_data/08_07_21/20080723_093large_e85.jpg]

The U.S. Environmental Protection Agency was scheduled to issue its decision on the waiver by July 24, but on Tuesday EPA Administrator Stephen Johnson said the decision would be delayed until August.

“Given the amount of work that remains to sufficiently answer the Texas request for a waiver from the Renewable Fuels Standard, it is now clear that a final decision on the request will not be completed by July 24,” said Johnson.

“Shortly after receiving the waiver request, EPA initiated a public comment during which the agency received over 15,000 comments and a number of these comments raised substantive issues and included significant economic analysis,” he said. “I believe it is very important to take sufficient time to review and understand these comments in order to make an informed decision.”

“Additional time is needed to allow staff to adequately respond to the public comments and develop a decision document that explains the technical, economic and legal rationale of our decision,” Johnson said.

The EPA is also required to consult with the Departments of Agriculture and Energy in considering whether to grant or deny the waiver request and has begun these consultations, the administrator explained.

“The process remains fair and open and no agreements have been made with any party in regard to the substance and timing of the decision on the waiver request,” he said. “I am confident that I will be able to make a final determination on the Texas waiver request in early August.”

Governor Perry said Tuesday, “I appreciate the diligent approach Administrator Johnson and his staff are taking in addressing our waiver request and the 15,000-plus comments they have received on this issue.

“We still believe the solution to the unintended consequence of this federal RFS mandate is simple: a one-year, 50 percent waiver,” the governor said.

“The RFS waiver is an essential step toward decreasing the devastating statewide, national and international impact of skyrocketing feed and food costs,” he said.

Corn prices rose 138 percent globally over the last three years and global food prices increased 83 percent over the same time period. “With the implementation of the new RFS mandate, some estimates predict corn prices will rise to $8.00/bushel for the 2008 crop, resulting in a negative impact of $3.59 billion to the state,” the governor said.

National Biodiesel Board Chief Executive Officer Joe Jobe said it is important to remember that all renewable fuels qualify for the Renewable Fuels Standard, not just ethanol.

“If the RFS is waived or cut in half in 2008, then the growth of all biofuels, including ‘advanced biofuels’ such as biodiesel, will be severely hindered,” Jobe warned.

“As Governor Perry himself pointed out just last month, alternative fuels such as biodiesel play in an important role in ‘diversifying not only our energy portfolio, but our economic landscape,’” Jobe said.

“Beyond the environmental and energy security benefits provided by biofuels,” he said, “the opportunity for green jobs and the continued economic development of biodiesel refineries in Texas must be taken into account by the EPA when evaluating whether to waive the RFS.”

“While a delay is understandable considering the complexity of the issue before them, we urge the EPA to ultimately reject the waiver request. Gov. Perry had it right when he praised biodiesel for ‘providing a necessary alternative to fossil fuels without negatively impacting our food supply.’”

The Renewable Fuels Association, which represents the ethanol industry, says reducing the use of ethanol will not bring down grain prices for livestock producers and food processors in Texas.

“But eliminating 4.5 billion gallons of fuel from the marketplace – as the 50 percent waiver of the Renewable Fuels Standard sought by Governor Perry would do – will increase gasoline and diesel prices even more. While this may benefit Texas oil companies, it will certainly hurt consumers in Texas and the rest of the country,” the organization said.

A recent study by Texas A&M University requested by Governor Perry’s office found that, “Relaxing the RFS does not result in significantly lower corn prices.”

The waiver request may actually have the opposite effect on corn prices, said National Corn Growers Association President President Ron Litterer. “This waiver request could potentially send a signal to the corn market that demand from the ethanol sector is not a sure thing. The response from farmers could be fewer planted acres of corn and higher corn prices.”

The Texas A&M study also found that “corn prices have had little to do with rising food costs.” This finding is bolstered by recent studies by the U.S. Department of Agriculture’s Economic Research Service, Kansas City Federal Reserve, and other third parties.

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WASHINGTON, DC, June 25, 2008 (ENS) – Texas Governor Rick Perry is asking the federal government to reduce by half the amount of corn-based ethanol that must be blended into the national fuel supply under the national Renewable Fuel Standard, RFS. Instead of being used for fuel, the governor wants that corn to feed livestock and people.

On Tuesday, the governor held a news conference at the National Press Club in Washington to press his case, joined by food producers and retailers. The governor said his request for a waiver of the RFS is motivated by rising corn prices which have proved damaging to Texas’s enormous livestock and poultry industry.

“While I have no doubt this mandate was a well-intentioned effort to move our country toward energy independence, it is doing more harm than good and must be modified before our livestock industry suffers permanent damage,” said Governor Perry. “Granting this waiver will provide much needed relief to families, while enabling Texas to continue feeding and fueling the nation.”

On April 25, Governor Perry submitted a request to the U.S. Environmental Protection Agency to reduce the RFS mandate by half – from nine billion to 4.5 billion gallons blended into the national fuel supply.

The EPA opened the waiver request for a public comment period, which ended on Monday. Now the environmental agency has until July 24 to issue a decision.

This Texas fueling station sells fuel
that is 85 percent ethanol.
(Photo credit unknown)

In April 2007, the EPA established the nation’s first comprehensive Renewable Fuel Standard, which requires American refiners, blenders, and importers to use a minimum volume of renewable fuel each year between 2007 and 2012.

The minimum – determined as a percentage of the total volume of fuel a company produces or imports – will increase every year.

For 2007, 4.02 percent of all the fuel sold or dispensed to U.S. motorists had to come from renewable sources, roughly 4.7 billion gallons.

In 2008, the EPA raised the required ratio to 7.76 percent or nine billion gallons of renewable fuel.

But today, with corn prices hitting $8 per bushel and Midwest flooding devastating the corn crop, price increases for livestock and poultry feed are putting financial pressure on both producers and consumers of meat, milk and grain products.

Emphasizing the urgent nature of the waiver request given the recent flooding in the Midwest, J. Patrick Boyle, president and CEO of the American Meat Institute, said, “The prices for beef, pork and dairy products have risen dramatically over the past few months and this upward trend will continue, as the food used to feed these animals is washed away by flood waters and the projected size of the corn harvest shrinks.”

Bill Roenigk, senior vice president and chief economist of the National Chicken Council, which represents chicken production and processing companies, supports the governor’s request for a waiver.

“The Renewable Fuel Standard has distorted the market and has imposed severe economic harm on companies in our industry through dramatically higher input costs and is imposing harm on the general public in the form of higher prices for food products,” said Roenigk.

“Cattlemen are now confronting $7 and even $8 corn, and that may just be the beginning,” said Gregg Doud, chief economist for the National Cattlemen’s Beef Association. “Even before the wet spring pushed into June, we were already seeing a lot of acres migrating away from corn this year. By the time conditions improve in many of these fields, planting corn will no longer be an option.”

“Government support for corn-based ethanol ensures a permanent, significant and increasing demand for corn,” said Dr. Keith Collins, a former chief economist of the U.S. Department of Agriculture who submitted a new analysis of the situation to the EPA on Monday.

“These policies interfere with the normal price rationing function of markets when supplies are short such as in 2008, with production being reduced by flooding and excess moisture,” he said.

“In this short-crop environment, biofuels policy, including mandated use of ethanol, causes even higher corn prices, shifts the demand adjustment burden to non-ethanol users of corn – particularly the livestock sector – and puts continuing pressure on food prices.”

In a separate analysis, also offered on Monday, Dr. Thomas Elam of FarmEcon LLC, warns, “”Maintenance of the current RFS schedule in the face of a smaller 2008 corn crop will be devastating to meat, dairy and poultry producers.”

“Consumers will suffer as food and fuel costs rise and supplies of corn-based foods diminish,” he wrote. “The overall economy will be damaged from higher inflation and lost jobs in the food production sector.”

One after another food producers and distributors stood up to support Governor Perry’s request – the bakers, the turkey producers, the restauranteurs.

“We must ensure that we are not forcing our needs on food and fuel to compete against each other,” said John Gay, senior vice president of government affairs and public policy for the National Restaurant Association, which supports the development of renewable fuels, including the recycling of waste restaurant oil into biodiesel.

“Although there are many factors contributing to runaway food inflation, there is only one factor the administration can change – federal food-to-fuel mandates,” said Grocery Manufacturers Association President and CEO Cal Dooley.

“At a time when tens of thousands of Americans are turning to food banks to feed their children, no administration could reasonably conclude that ethanol refiners should be given priority over working families, food companies, and livestock farmers.”

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Like many things in the green world, the viability of ethanol as an alternative fuel all comes down to who you listen to, and whom you want to believe. This subject has received nearly exhaustive coverage on TreeHugger (hey, who doesn’t like a good, lively argument, right?) so today we break it down a little bit. Here are some of the pros and cons of ethanol.

Pros:
1) This report [www.treehugger.com] states that use of ethanol as a transportation fuel offers a positive life cycle energy balance (when considering how much energy it takes to grow and produce the fuel), while producing slightly fewer greenhouse gas emissions than petroleum fuel use.
2) Ethanol can be brewed at home [www.treehugger.com], which, while handy, is tricky, a bit dangerous, and, at the moment at least, is illegal.
3) In this ethanol vs. biodiesel debate [www.treehugger.com], ethanol came out ahead on availability and ease of use, given our current transportation infrastructure.
4) An ethanol car beat out a bunch of fuel cell rivals [www.treehugger.com] to win an eco-marathon car race, showing that it can stand up to other technologies under real-world conditions.
5) The increased cost of corn (thanks to the increased demand for the golden kernels) has at least one positive environmental impact: more vegetarianism. That’s right; increased corn prices mean increased feed prices for farmers, which means increased meat prices and decreased meat consumption. This is a good thing for the planet, given the huge amount of resources needed to raise meat (but that’s another post).
6) Even NASCAR has shown signs of interest [www.treehugger.com] in the fuel, which could be a huge coup for the popularity of ethanol and alternative fuels in general. But it ain’t all sunshine and roses…

Cons:
1) The high price of corn (appreciating more quickly than a loft in SoHo!) is driving up lots of other prices [www.treehugger.com] and artificially raising costs, which is not a sustainable way to build the economy (and could have long-term damage to both the planet and the US economy).
2) The “ethanol dominoes” continue to fall, far beyond the farm: Starbucks is raising prices again [www.treehugger.com] (for the second time this year) because of the skyrocketing price of milk. Here’s why: cows need food to produce milk; cows eat corn; corn costs more than it used to (and now, so does milk). This has repercussions for everyone (even if you aren’t a coffee drinker) because of the huge volume of milk in demand by the rest of the country.
3) As noted above, corn-based ethanol can hurt as much (if not more) than it can help. To wit: [www.treehugger.com] “Is turning food into fuel as millions starve to death really the ethical answer to our oil addiction?” Probably not…
4) To make a gallon of ethanol, you need 4.5 gallons of water [www.treehugger.com], which is one of the liquids on this planet that might worth more than oil in the long run.
5) An important point to remember in all of this is that there is also more to life than just having fuel for our tanks and more to the environment than just greenhouse gases. Ethanol production is still often powered by coal, oil and other greenhouse gas-intensive energy sources [www.treehugger.com]; a single ADM corn processing plant in Clinton, Iowa generated nearly 20,000 tons of pollutants including sulfur dioxide, nitrogen oxides, and volatile organic compounds in 2004, according to federal records.
6) Some more numbers to ponder [www.treehugger.com]: currently, ethanol uses about 20% of the corn produced in the US; under the best efficiency and yield-increase circumstances, this could be upped to the equivalent of 60%, which would still only replace approximately 10% of our gasoline use. Further, ethanol’s vaunted reduction in greenhouse gas emissions is usually a simplistic model that doesn’t account for things like nitrogen-based fertilizer, which produces nitrous oxide, which is 300 times as potent a global warming gas as carbon dioxide. So, round and round we go…stay tuned for more on the future of ethanol later this week.