Bloomberg news
written by Mario Parker and Alan Bjerga
Friday November 16, 2012
President Barack Obama’s administration rejected a request from the governors of eight U.S. states to waive requirements for blending corn-based ethanol into gasoline, said a person familiar with the decision.
Market conditions don’t justify such a move, said the person, who declined to be identified because he isn’t authorized to speak for the Environmental Protection Agency. Gasoline refiners will be required to blend 13.2 billion gallons of the biofuel this year, the EPA said in rejecting petitions from the governors of Arkansas, North Carolina, Maryland, Delaware, Georgia, Virginia, New Mexico and Texas as well as members of Congress.
This year’s U.S. corn harvest is forecast at 10.725 billion bushels, the smallest in six years because of the drought. About 4.5 billion bushels will be used to make ethanol in the year starting Sept. 1, or about 42 percent of the 2012 crop, the USDA estimated on Nov. 9.
Ethanol production has fallen 14 percent this year to 824,000 barrels a day in the week ended Nov. 9, or 12.6 billion gallons on an annualized basis, Energy Department data show.
Denatured ethanol for December delivery fell 1.8 cents, or 0.8 percent, to $2.317 a gallon at 9:26 a.m. local time on the Chicago Board of Trade. Prices have gained 5.2 percent this year.
Under the 2007 energy law that established national renewable-fuels requirements, the EPA can suspend the program if it would severely harm the economy of a state, region or the U.S. The legislation calls for the U.S. to use 15 billion gallons of biofuels, such as ethanol, annually by 2015 and 36 billion gallons by 2022. Half of that amount will have to come from “next generation” or cellulosic sources such as grasses and wood waste, and not from corn.
Cathy Milbourn, a spokeswoman for the EPA in Washington, didn’t immediately respond to telephone messages and e-mails.
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The Detroit news
written by David Shepardson
Friday November 16, 2012
The Environmental Protection Agency on Friday rejected a request from eight governors and nearly 200 members of Congress to waive requirements for the use of corn-based ethanol in the nation's 240 million vehicles in the wake of this summer's severe drought.
The move is a victory for corn farmers that have seen prices jump by 400 percent in recent years, but a loss for pork and beef producers who have seen the price of feed jump.
Congress is likely to take up the issue again next year amid concerns about the growing amount of corn being diverted into the nation's gas tanks.
The EPA said it has not found evidence to support a finding of severe "economic harm" that would warrant granting a waiver of the Renewable Fuels Standard.
"We recognize that this year's drought has created hardship in some sectors of the economy, particularly for livestock producers," said Gina McCarthy, assistant administrator for EPA's Office of Air and Radiation. "But our extensive analysis makes clear that congressional requirements for a waiver have not been met and that waiving the RFS will have little, if any, impact."
The 2007 law mandates the production of rising quantities annually of the alternative fuel.
In 2011, nearly half the corn grown in the U.S. was diverted to ethanol production to meet the RFS, critics say. This year the RFS requires the use of 13.2 billion gallons of corn ethanol, the production of which could require using more than half the country's corn crop.
The 2012 corn yield could fall nearly a billion bushels short of 2011's yields due to the worst drought in the United States in more than 50 years.
Michal Rosenoer, biofuels policy campaigner at Friends of the Earth, criticized the decision.
"If the worst U.S. drought in more than 50 years and skyrocketing food prices are not enough to make EPA act, it falls to Congress to provide relief from our senseless federal support for corn ethanol. The RFS is a broken policy — rather than giving us clean energy, it's incentivizing biofuels like corn ethanol that are exacerbating our economic and environmental problems," Rosenoer said. "Congress needs to cut corn ethanol from the RFS entirely to protect the economy and the environment from this destructive and dirty fuel."
Food producers — including the makers of frozen food and restaurant chains — have criticized the mandates, saying it raises food prices.
The American Coalition for Ethanol praised the decision by the EPA.
"Despite millions of dollars spent by Big Oil and Big Food to shamelessly attack American-made ethanol, it comes as no surprise EPA denied the requests to waive the RFS because the facts are on our side," said Brian Jennings, ACE Executive vice president. But ethanol advocates think Congress may again try to overturn the mandates next year. "Given the battle we anticipate over the RFS in Congress next year, we encourage ethanol supporters to stay engaged."
The Michigan Farm Bureau had opposed granting the waiver, saying it doesn't believe keeping the requirements in place "would severely harm the economy of Michigan at this time." But Michigan poultry and livestock producers are affected by higher corn prices.
The governors of Maryland and Delaware, also home to poultry producers, told the EPA in October that without a waiver they would face "the loss of thousands jobs." North Carolina, New Mexico, Georgia, Texas, Virginia, Utah and Wyoming also had asked EPA to waive the requirements.
The EPA conducted several economic analyses and concluded that on average waiving the mandate would reduce corn prices by 1 percent. EPA also said waiving the mandate would not affect household energy costs.
This is the second time that EPA has rejected a RFS waiver request. In 2008, the state of Texas was denied a waiver.
In August, a top United Nations official urged the Obama administration to suspend ethanol requirements as fears of food shortages grew around the world.
The law assures big demand for corn. It is popular in corn-growing states, making it politically difficult to waive the requirements.
The standard is opposed by many groups, including livestock producers who say the diversion of corn to ethanol raises feed prices — and, ultimately, prices at the supermarket.
The Michigan Farm Bureau said state farmers planted about 2.6 million acres of corn in 2012, more than 4 percent of all land in the state. The state has more than 11,000 corn growers.
But ethanol has seen some political setbacks.
In 2011, the United States ended a 30-year tax subsidy for corn-based ethanol that cost taxpayers $6 billion annually, and ended a tariff on imported Brazilian ethanol.
The subsidy has provided the oil and agribusiness industries with 45 cents per gallon of ethanol blended into gasoline. By some estimates, Congress has awarded $45 billion in subsidies to the ethanol industry since 1980.
Michigan is the nation's 11th-largest corn producer, harvesting 315 million bushels in 2010.
In a typical year, Michigan produces more than 300 million bushels of corn depending on weather and acres planted. The estimated demand for livestock, dairy and poultry feed in Michigan is typically about 70 million bushels. The Michigan Farm Bureau says a final harvest figure for 2012 should be out in December - as farmers are still harvesting corn in the state, but the harvest is below average.
Michigan corn farmers saw differing degrees of problems from this summer's drought, which varied even within individual counties, said Farm Bureau spokesman Jeremy Nagel on Friday. The state suffered less serious corn damage than corn belt states south of Michigan.
The National Corn Growers Association, including the Michigan branch, opposed the waiver, noting that average annual farm income has jumped from $63 billion before the law to $90 billion on average from 2007-2012. The group didn't dispute that the drought has caused higher feed prices, but said "higher feed prices are only one piece of a complicated economic puzzle."
Corn prices have quadrupled in the last seven years as the U.S. has boosted the amount of corn-based ethanol.
Under the 2007 law, the nation is increasing the use of ethanol in vehicles to 15.2 billion gallons this year, up from 5 billion gallons in 2007. By 2022, the U.S. must use 36 billion gallons of biofuels, though 21 billion gallons are supposed to be from advanced cellulosic ethanol.
To use the ethanol required, the EPA has approved the use of a higher blend of ethanol fuel called E15 — which is 15 percent ethanol — up from E10 used at most pumps today. Just a handful of stations sell E15.
The higher blend of fuel is only approved by EPA for vehicles from 2001 and newer, because automakers say engines can be corroded by E15.
Automakers have fought the fuel blend, arguing it could also hurt newer vehicles.
Last month General Motors Co., Ford Motor Co., and Chrysler Group LLC approved the use of E15 — but only for 2013 model vehicles and newer. They still oppose the use for vehicles from 2012 and earlier.
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