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Governors attack ethanol mandate

08/15/2012 @ 6:48am

North Carolina Governor Beverly Perdue and Arkansas Governor Mike Beebe have petitioned the federal government to suspend its production mandate for corn-based ethanol in efforts to lower prices for the grain that livestock producers depend on for feed.

Corn prices have risen sharply to a record high in recent weeks due to severe drought throughout much of the U.S., but the government mandate requiring a certain volume of ethanol production is also causing "direct harm" to the livestock industry, "increasing the cost of producing food and depleting already severely stressed grain supplies," Ms. Perdue said in her petition to the Environmental Protection Agency, dated Aug. 14.

The EPA-enforced Renewable Fuel Standard requires about 15 billion gallons of ethanol, most of which is derived from corn, to be blended into gasoline this year. About 40% of the U.S. corn crop will go into ethanol production this year, the U.S. Department of Agriculture has said.

EPA officials weren't immediately available for comment.

The governors' petitions follow recent, similar requests by representatives of livestock producers and federal lawmakers, who asked the EPA to reduce the amount of ethanol required to be produced.

Maryland Governor Martin O'Malley and Delaware Governor Jack Markell sent a joint letter to EPA Administrator Lisa Jackson last week in support of the livestock groups.

"Given the likely impacts to the poultry industry, not to mention the increased cost of food for consumers, of this dramatic increase in price due to the undersupply of corn, it is hard to imagine any scenario when exercising your authority would be more appropriate," Mr. O'Malley and Mr. Markell said in their letter, which was dated Aug. 9.

The EPA has the authority to suspend the ethanol production mandate or reduce the amount of ethanol required to be produced if it is shown to "severely harm the economy of a state, region, or the United States."

Ms. Perdue, in her petition, said the mandate has indeed caused "severe economic harm" to the state of North Carolina. Both Ms. Perdue and Mr. Beebe have asked the EPA to suspend the mandate through 2013.

The ethanol production group Growth Energy sharply disputed the governors' claim that ethanol production was causing economic harm.

"It is not the ethanol industry that is causing the economic harm. It is Mother Nature--specifically a lack of rain and record-high temperatures are the true culprits of rising commodity prices, something that neither the EPA, nor any government agency is able to fix," Growth Energy Chief Executive Tom Buis said in a statement released Tuesday. "To blame the ethanol industry due to a lack of rain does not make any sense."

Write to Bill Tomson at bill.tomson@dowjones.com

(END) Dow Jones Newswires

August 14, 2012 23:14 ET (03:14 GMT)

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