EPA rejects bid to relax ethanol mandate
2012 drought prompted request over corn fuel use
Washington — The Environmental Protection Agency on Friday rejected a request from eight governors and nearly 200 members of Congress to waive requirements for the use of corn-based ethanol in gasoline, after last summer's severe drought wilted much of the nation's corn crop.
The move is a victory for corn farmers who have seen corn prices jump 400 percent in recent years. But it is a loss for pork and beef producers who say the diversion of corn to ethanol raises feed prices and ultimately prices at the supermarket.
Automakers have clashed with ethanol advocates and opposed boosting the percentage of ethanol. They argue that higher concentrations of ethanol in gasoline — which may be necessary in order to meet stepped-up minimums for annual ethanol usage — can harm engines in most vehicles on the road today.
Congress is likely to take up the issue again next year amid concerns about the growing amount of corn being shifted from the world's food supply and into the nation's 240 million gas tanks.
The EPA said Friday it had not found evidence to support a finding of severe "economic harm" that would warrant granting a waiver of the Renewable Fuel Standard. The law was signed in 2007 by President George W. Bush and requires production of increasing quantities of ethanol.
"We recognize that this year's drought has created hardship in some sectors of the economy, particularly for livestock producers," said Gina McCarthy, assistant administrator for EPA's Office of Air and Radiation. "But our extensive analysis makes clear that congressional requirements for a waiver have not been met and that waiving the RFS will have little, if any, impact."
Michal Rosenoer, biofuels policy campaigner at Friends of the Earth, criticized the EPA decision.
"If the worst U.S. drought in more than 50 years and skyrocketing food prices are not enough to make EPA act, it falls to Congress to provide relief from our senseless federal support for corn ethanol," he said.
"The RFS is a broken policy — rather than giving us clean energy, it's incentivizing biofuels like corn ethanol that are exacerbating our economic and environmental problems.
"Congress needs to cut corn ethanol from the RFS entirely to protect the economy and the environment from this destructive and dirty fuel."
This year's corn yield could fall nearly a billion bushels short of 2011's yields due to the drought.
Anticipated battle
The American Coalition for Ethanol praised the decision by the EPA.
"Despite millions of dollars spent by Big Oil and Big Food to shamelessly attack American-made ethanol, it comes as no surprise EPA denied the requests to waive the RFS because the facts are on our side," said Brian Jennings, executive vice president of the group.
Ethanol advocates contend that Congress may again try to overturn the mandates next year.
"Given the battle we anticipate over the RFS in Congress next year, we encourage ethanol supporters to stay engaged," Jennings said.
The Michigan Farm Bureau opposed granting the waiver, saying it doesn't believe keeping the requirements in place "would severely harm the economy of Michigan at this time."
But Michigan poultry and livestock producers are affected by higher corn prices.
The governors of Maryland and Delaware, also home to poultry producers, told the EPA in October that without a waiver they would face "the loss of thousands of jobs."
North Carolina, New Mexico, Georgia, Texas, Virginia, Utah and Wyoming also asked the EPA to waive the requirements.
Food producers, including restaurant chains and the makers of frozen food, have criticized the mandates, saying they raise food prices.
The EPA conducted several economic analyses and concluded that, on average, waiving the mandate would reduce corn prices 1 percent.
EPA also said waiving the mandate would not affect household energy costs.
This is the second time the EPA has rejected a Renewable Fuel Standard waiver request. In 2008, Texas was denied a waiver.
In August, a top United Nations official urged the Obama administration to suspend ethanol requirements as fears of food shortages grew around the world.
The law assures big demand for corn. It is popular in corn-growing states, making it politically difficult to waive the requirements.
But ethanol has seen some political setbacks.
In 2011, the United States ended a 30-year tax subsidy for corn-based ethanol that cost taxpayers $6 billion annually and ended a tariff on imported Brazilian ethanol.
The subsidy has provided the oil and agribusiness industries with 45 cents per gallon of ethanol blended into gasoline.
By some estimates, Congress has awarded $45 billion in subsidies to the ethanol industry since 1980.
'Economic puzzle'
Michigan is the nation's 11th-largest corn producer, harvesting 315 million bushels in 2010.
In a typical year, Michigan produces more than 300 million bushels of corn depending on weather and acres planted.
The estimated demand for livestock, dairy and poultry feed in Michigan is typically about 70 million bushels.
The Michigan Farm Bureau says a final harvest figure for 2012 should be out in December.
Farmers are still harvesting corn in the state, but the harvest is below average.
Corn farmers in the state saw differing degrees of problems from this summer's drought, which varied even within counties, Farm Bureau spokesman Jeremy Nagel said Friday.
The state suffered less serious corn damage than corn belt states south of Michigan.
The National Corn Growers Association, including the Michigan branch, opposed the waiver, noting that average annual farm income has jumped from $63 billion before the law to $90 billion on average from 2007-12.
The growers' group didn't dispute that the drought has caused higher feed prices, but said "higher feed prices are only one piece of a complicated economic puzzle."
Automakers fight fuel blend
Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, the trade association representing Detroit's Big Three, Toyota Motor Corp., Volkswagen AG and others, said the companies had no comment on the EPA's decision.
But automakers have opposed requirements of the Renewable Fuel Standard that may have the effect of stepping up concentrations of ethanol in gas tanks.
This year, the Renewable Fuel Standard requires the use of 13.2 billion gallons of corn ethanol, the production of which could require using more than half the country's corn crop, up from 5 billion gallons in 2007.
Next year, the standard increases to 13.9 billion gallons. By 2022, the U.S. must use 36 billion gallons of biofuels, though 21 billion gallons are supposed to be from advanced cellulosic ethanol.
To meet the increasing amount of ethanol required under the law, the EPA has approved use of a higher blend of ethanol fuel called E15. It is 15 percent ethanol, up from the E10 at most pumps today. Just a handful of stations currently sell E15.
The more concentrated blend is only approved by EPA for vehicles from 2001 and newer, because automakers say E15 can corrode the older engines.
Automakers have fought the fuel blend, arguing it could also hurt newer vehicles.
Last month General Motors Co., Ford Motor Co. and Chrysler Group LLC approved the use of E15, but only for 2013 model vehicles and newer.
They still oppose the use for vehicles from 2012 and earlier.
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