A bipartisan group of seven governors petitioned the U.S. Environmental Protection Agency to waive its ethanol fuel mandate until corn prices recede.
Rising Prices Hurt States
The governors of Arkansas, Delaware, Georgia, Maryland, New Mexico, North Carolina, and Texas petitioned EPA Administrator Lisa Jackson to issue the waiver in the wake of rapidly rising corn prices. The 2005 federal Renewable Fuel Standard (RFS) empowers EPA to enforce ethanol fuel mandates.
The Midwestern drought earlier this year reduced the U.S. corn harvest by 13 percent compared to 2011. Shrinking supplies have led to higher corn prices, which are putting pressure on livestock farmers. The situation is aggravated by the RFS demanding an increasing percentage of the corn crop for ethanol production. The RFS requires 13.2 billion gallons of ethanol be blended with gasoline this year, a figure that will rise to 36 billion gallons by 2022.
Mandate Raising Prices
An August 13 letter to Jackson from Arkansas Gov. Mike Beebe (D) captured the sentiment of many state governors.
“Virtually all of Arkansas is suffering from severe, extreme, or exceptional drought conditions. The declining outlook for this year’s corn crop and accelerating prices for corn and other grains are having a severe economic impact on the State, particularly on our poultry and cattle sectors,” wrote Beebe.
“While the drought may have triggered the price spike in corn, an underlying cause is the federal policy mandating ever-increasing amounts of corn for fuel. Because of this policy, ethanol production now consumes approximately 40 percent of the U.S. corn crop, and the cost of corn used in food production has increased by 193 percent since 2005 [the year before the RFS took effect]. Put simply, ethanol policies have created significantly higher corn prices, tighter supplies, and increased vulnerability,” Beebe explained.
EPA Sticks to its Guns
Section 211(o)(7) of the Clean Air Act authorizes EPA to waive all or part of the RFS blending targets for one year if the administrator determines, after public notice and an opportunity for public comment, that continued implementation of the RFS would “severely harm” the economy of a state, region, or the nation as a whole. Jackson has given no indication she will issue relief from the RFS.
In 2008, Texas Gov. Rick Perry (R) requested a waiver from EPA, arguing severe flooding in his state had created a food crisis. In the course of rejecting Perry’s petition, EPA set a strict standard for such a waiver, requiring states to show the RFS itself, rather than other factors such as flooding, harmed the economy or the environment and the damage is not restricted to just one industry.
“The ethanol mandate is one of the worst policies the federal government has placed on the American people,” said Daniel Simmons, director of state policy at the Institute for Energy Research. “The law mandates burning corn, a staple food crop, for fuel instead of letting it feed people and animals. During normal years [the policy] is harmful, but in a drought it is positively destructive. It drives up the price of food, not only for corn but for chickens, hogs, cattle, and any other livestock that eats corn.
“As if the worst drought in 50 years weren’t bad enough, EPA just makes things worse by refusing to lift the mandate,” Simmons added. “It’s yet another example of EPA putting its own power ahead of the well-being of the American people.”
Bonner R. Cohen, Ph. D., ([email protected]) is a senior fellow at the National Center for Public Policy Research.