The Husker Ag ethanol plant near Plainview, Neb. (Grant Gerlock/Harvest Public Media)
The Environmental Protection Agency will not put the Renewable Fuel Standard (RFS) on hold as requested by several governors and livestock groups this summer.
The request was aimed and drawing down corn prices pushed up by the drought. But after reviewing several studies by agricultural economists, running 500 different waiver scenarios, and reviewing 30,000 comments the agency turned down the request.
“EPA recognizes that this year’s drought has created significant hardships in many sectors of the economy, particularly for livestock producers,” said the agency report. “However, the agency’s extensive analysis makes clear that Congressional requirements for a waiver have not been met and that waiving the RFS would have little, if any, impact on ethanol demand or energy prices over the time period analyzed.”
Ethanol supporters were pleased by the outcome. Bob Dineen, president and chief executive officer of the Renewable Fuels Association, called it the right decision.
“The RFS is working as designed. The flexibility that is built into the RFS allows the marketplace to ration demand, not the government,” Dineen said.
Tom Buis, CEO of Growth Energy, an ethanol trade group said that granting a waiver "would have sent the wrong signal the investment community.”
In the scenarios analyzed by the EPA, the average impact on corn prices was a drop of only 7 cents per bushel. The agency also said suspending ethanol production requirements would have little actual impact on ethanol production through 2012 and 2013.
Ultimately, the EPA suggested a waiver of the RFS would not severely hamper the economy, which is the main criterion for changing the policy. But statements from livestock groups took issue with that.
“The artificial support for corn ethanol provided for by the RFS is only making the situation worse for cattlemen and women by driving up feed costs,” said J.D. Alexander, president of the National Cattleman and a feedlot operator from Pilger, Neb.
“We now have about one-third less of the corn that we need to adequately supply animal feed, ethanol, exports and sufficient carry-over levels. But the government continues to mandate that a significant amount of the corn supply be blended next year into gasoline,” said a statement from the National Chicken Council.
The chicken council also noted a petition signed by 34 U.S. Senators and 156 House members supporting a waiver. It is possible that in the months ahead those lawmakers could take their own actions to stall the federal ethanol mandate.