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EPA asked to reduce ethanol mandate

A coalition of meat, poultry and dairy groups Monday asked the Environmental Protection Agency to waive all or part of the renewable fuels standard, which mandates the use of ethanol in the nation's fuel supply. The EPA has the authority to do so if it appears the supply of a renewable fuel is inadequate and would cause economic harm. Ethanol trade groups have responded by saying that the drought is being used as an excuse to attack their industry.

In a petition delivered to EPA Administrator Lisa Jackson, the coalition asked for a waiver “in whole or in substantial part” of the amount of renewable fuel that must be produced under the Renewable Fuels Standard (RFS) for the remainder of this year and for the portion of 2013 that is one year from the time the waiver becomes effective.

The RFS requires 13.2 billion gallons of corn-based ethanol to be produced in 2012 and 13.8 billion gallons in 2013, amounts that will use about 4.7 billion and 4.9 billion bushels, respectively, of the nation’s corn. Some agricultural forecasters now are estimating that just 11.8 billion bushels of corn will be harvested this year – about 13 billion were harvested in 2011 – meaning corn-ethanol production will use about four of every 10 bushels.

The RFS has “directly affected the supply and cost of feed in major agricultural sectors of this country, causing the type of economic harm that justifies issuance of an RFS waiver,” said the coalition in its petition.

“I support American ethanol and what it has done for rural communities in Nebraska and in many other states throughout the country,” said J.D. Alexander, Nebraska cattleman and National Cattlemen’s Beef Association president. “What I do not support are federal mandates picking winners and losers and a federal government sitting patiently by, forking over taxpayer dollars to artificially inflate the price of corn for livestock producers and other end-users. I find it concerning to the viability of the livestock industry that these mandates are allowed to continue today in the worst drought I have seen in my lifetime. This isn’t rocket science. Implement the law, waive the RFS, let the market work and embrace free market principles.”

Members of the coalition that signed the petition include the American Feed Industry Association, American Meat Institute, American Sheep Industries Association, California Dairy Campaign, Dairy Producers of New Mexico, Dairy Producers of Utah, Idaho Dairymen’s Association, Milk Producers Council, National Cattlemen’s Beef Association, National Chicken Council, National Pork Producers Council, National Turkey Federation, Nevada State Dairy Commission, North American Meat Association, Northwest Dairy Association, Oregon Dairy Farmers Association, Southeast Milk Inc., United Dairymen of Arizona and the Washington State Dairy Federation.

Ethanol industry trade groups said the waiver isn't needed and would have only a slight effect on corn prices.

“Given the flexibilities inherent to the RFS, and the fact that waiving the program would not result in any meaningful impacts on corn prices, we fully expect Administrator Jackson to deny any waiver request,” said Bob Dinneen, Renewable Fuels Association president and CEO. “A dispassionate review of the facts can lead to only one conclusion: a waiver of the RFS would simply reward oil companies that have long sought to repeal this very important and successful program. The RFS has reduced our dependence on imported oil and saved consumers at the pump.”

The RFA cites a study by Iowa STate University agricultural economics Bruce Babcock that showed a waiver might result in only a 4.6% reduction in corn prices.

RFA said the ethanol industry has already cut back on its use of corn, with usage falling 14% in the past six weeks, to the lowest level in two years.

Tom Buis, CEO of another ethanol trade group, Growth Energy, agreed that the RFS is already flexible enough to respond to changing market conditions.

“The market has already shown it will adjust to the current situation. Already we have seen a decrease in ethanol production, and with nearly a billion gallons of surplus ethanol, combined with approximately 3 billion RINs available, obligated parties will be able to meet the volume requirements of the RFS." [Renewable Identification Number (RIN) credits are used by EPA to track compliance with the mandate by refiners and blenders to use ethanol.] "Additionally, obligated parties are allowed to carry a 10 percent deficit of RINs into the next year which equals 1.32 billion gallons of ethanol, or approximately 500 million bushels of corn."

“Any objective source will see this argument for what it is – an attempt to blame corn farmers and ethanol producers for an uncontrollable act of Mother Nature," Buis said.

National Corn Growers Association President Garry Niemeyer released the following statement in response to the drought and the call by some for the EPA to waive provisions of the Renewable Fuel Standard.

“NCGA stands firm in its support of the Renewable Fuel Standard and will strongly oppose legislation to alter or repeal the RFS. Likewise, we believe it is premature for a waiver of the RFS provisions at this point. With the crop still in the field, it is too early to determine this year’s final corn supply. In addition, the ethanol industry now has a significant surplus of ethanol and RFS  credits that can greatly offset ethanol’s impact on the corn supply.

“However, we recognize the severe impact of the drought on our farmers and our customers, here and abroad, with livestock, poultry, ethanol and other processing facilities, and we believe the flexibility of the RFS does work, and will work. NCGA also supports the waiver process that is embodied in the current RFS, and respects the right of those that may file a waiver petition to do so.

“In the meantime, NCGA continues to encourage those seeking RFS legislation to, instead, work through the government’s existing RFS waiver petition process in the event they believe it has caused severe economic harm.

“Many of our farmer members are suffering immensely from the drought. Many are also in the same predicament as our customers because they have livestock or own ethanol plant shares. Now is the time for all of American agriculture to pull together and work together for solutions that benefit us all.”

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