August 15, 2012
Signing separate letters Tuesday, Arkansas Governor Mike Beebe and North Carolina Governor Beverly Perdue petitioned the U.S. Environmental Protection Agency to waive the Renewable Fuels Standard, which mandates ethanol production quotas.
Governor Perdue cited the drought's effects on the corn supply for increasing commodity prices.
SHRINKING SUPPLY? Ethanol proponents say RFS is just fine, but a few governors don't seem to think so.
Perdue said the RFS has "imposed severe economic harm to my state's swine, poultry, dairy, and cattle producing regions." She added that direct harm is "caused by the RFS requirement to utilize ever-increasing amounts of corn and soybeans for transportation fuel. Whatever the final damage done by the severe lack of rainfall, it is clear that this harm is reflected in accelerated prices for corn and soybeans, which have a severe economic impact on the state of North Carolina, various regions within the state, and important economic sectors within the state."
Governor Beebe also pointed a finger at the RFS for increasing feed prices.
"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," Beebe said. "The higher feed costs following the passage of RFS1 in 2005 and RFS2 in 2007 have resulted in a long-term shortage of grain in our nation, especially corn, and are clearly taking a terrible toll on Arkansas' poultry and animal agriculture, potentially forcing reduced production and job losses and increasing food prices for consumers worldwide."
Following the governors' letters, Tom Buis, CEO of Growth Energy, called the waiver requests unnecessary and based on misinformation. He said the market will do the work needed to control commodity prices.
"The marketplace always has worked and always will work in rationing demand for commodities that are in short supply. Already, market forces have taken effect – the production of ethanol has declined by 15 percent and corn prices have already dropped .36 cents from last week," he said.
Also in his statement, Buis stood by ethanol's share of the corn crop.
"Furthermore, the governors continue to use misinformation saying that corn ethanol uses 40 percent of the corn crop – we do not. In fact, only 16 percent of the corn acres harvested goes to ethanol production. Just one-third of the kernel is used for ethanol, with all the protein, fiber and oil being returned to the food chain in the form of a high protein animal feed, which replaces corn and soybean meal and is less expensive.
RFS proponent Brian Jennings, Executive Director of the American Coalition for Ethanol, addressed ethanol as a share of fuel prices. He said his group welcomed a fact-based examination of the role RFS plays in moderating gas prices.
"While we cannot compete with our opponents' well-funded public relations attacks on the RFS, we are absolutely certain that an examination of the facts by EPA, the Department of Agriculture, and Department of Energy will confirm the role the RFS plays in reducing gas prices, and as a result, confident they won't waive the RFS," Jennings said.
The National Corn Growers Association, also a supporter of the RFS, said today that additional information is needed to make an appropriate decision."While we believe that it is still somewhat premature to consider a temporary, partial waiver to the RFS (as there will be much more accurate information available with September's and October's USDA crop reports), we do respect the right of those with standing to exercise the language contained in the RFS," said Garry Niemeyer, NCGA President. "The waiver process language in the RFS calls for careful objective analysis of the economic impact of the RFS on the U.S. economy. We have faith in, and support, the process laid out in this language."As the data begins to unfold, NCGA says additional action can be taken."If indeed the analysis shows that the RFS is not causing severe economic harm, but instead ethanol production is responding to market forces rather than the RFS, then the request for a temporary partial waiver should be rejected. If however, the analysis clearly shows that the RFS is causing severe economic harm in light of the drought, then a temporary, partial waiver should be granted," Niemeyer said. "We reiterate that it is the drought that is the issue, and the cause of the distress we all now face. An open and free market approach is the best and most efficient solution to getting us past this crisis.
Poultry producers remained pleased with the governors' decisions. Joel Brandenberger, president of National Turkey Federation, along with National Chicken Council President Mike Brown thanked the governors for their efforts and explained their concerns.
"As this drought continues to wreak havoc on our nation's corn crops, we are grateful to Governors Perdue and Beebe who are showing real leadership by asking for relief," Brandenberger said. "We need a waiver now, while EPA has the ability to make a difference in our members' livelihoods and the nation's economy. These governors are asking for the right thing- at a time when it is critical and we thank them."
Tuesday's letters come just a few days after petition letters from Martin O'Malley, Maryland governor, and Governor Jack Markell of Delaware. According to EPA rules, if a request is filed by a state governor, EPA has 90 days to return an answer—in this case repealing the RFS or leaving it in place.
The RFS debate first gained momentum mid-July as USDA corn supply estimates began to tumble. Click on the links below to learn more about this issue:
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