WASHINGTON, Dec. 4, 2013—Rural and agricultural interests on both sides of the debate previewed their arguments today in advance of the hearing over the U.S. Environmental Protection Agency’s (EPA) proposed reductions to the Renewable Fuels Standard (RFS) to take place Thursday.
EPA proposed to cut total biofuel blending from 18.15 billion gallons specified for 2014 in the 2007 legislation to 15.21 billion gallons. The measure also would drop the corn ethanol requirement from 14.4 billion gallons to a little more than 13 billion gallons, an amount less than the 13.8 billion gallons required this year.
In its proposal, EPA cites information that U.S. demand for gasoline has dropped to the point that there is insufficient supply to meet the mandatory ethanol blending requirement, creating a “blend wall” that will force prices higher. Oil companies add that increasing the ethanol blend to amounts above the historical 10-percent level (E10) will harm engines.
Livestock groups argue that increased ethanol production has driven up corn prices, raising feed costs, and food retailers say ethanol has resulted in higher food prices.
During a discussion with media Wednesday, National Chicken Council President Mike Brown said the 2007 RFS increased average annual feed costs for poultry producers by $8.8 billion.
Referencing the RFS pressures as well as the record drought in 2012 that pushed corn prices over $8, Brown said several poultry companies have been forced to merge or go out of business in recent years.
National Turkey Federation President Joel Brandenberger argued that federal supports are meant for an industry in its infancy. “Thirty-five years later, ethanol is hardly still an infant,” he said.
He also noted that although corn prices dramatically decreased over the past year, the turkey industry is still recovering from the previously high-cost grain. Brandenberger said the RFS forced the available share of feed for poultry and livestock from 55 percent to under 41 percent of the corn supply.
Alternatively, ethanol manufacturers cite studies showing that blending less expensive renewable fuels cuts the pump price of gasoline significantly. Advanced biofuel interests say a cut in the RFS next year will chill billions of dollars in investments made in the development and manufacturing of next-generation biofuels.
During a media call Wednesday, Iowa Governor Terry Branstad asserted, “The RFS has worked well and helped revitalize rural America. He also said ethanol blended fuel costs between 13 and 30 cents less than regular fuel in his state. He maintained that the EPA’s proposal “will drive up the price of gas for consumers as it drives down profitability for agriculture and cost us a lot of jobs.”
Branstad noted the price of corn dropped from $8 last year after the 2012 drought to close to $4 today. “At today’s cost of hybrid seed and fertilizer, this is below the cost of production.”
Renewable Fuels Association (RFA) CEO Bob Dineen said he hopes the EPA hears the concerns of rural interests during the hearing and ultimately changes the rule. “We want people to know there is still an opportunity to change this rule, but they need to comment to the EPA,” he said. “They need to let the President know that they are on the wrong course with this proposal.”
American Farm Bureau Federation (AFBF) economist Matthew Erickson said AFBF is “very disappointed in EPA’s proposed reduction.”
“This will definitely strike a blow to conventional ethanol production as well as dampen prospects for advanced biofuels now and in the future,” Erickson said. “We view renewable fuels as a success story for the agricultural economy.”
Since Congress enacted the RFS2 in 2007, agricultural exports increased 57 percent, livestock output increased 31 percent and total crop output increased 44 percent, he noted.
However, opponents to the RFS mandates are optimistic that their views are gaining support in the public and in Congress.
Rob Green, the executive director of the National Council of Chain Restaurants, said the range of interest groups against the RFS, which include livestock, environmental, oil and equipment representatives, provides a catalyst for support. “You shouldn’t underestimate the power of this diversity we bring to this issue,” he said.
Green said the RFS caused commodity prices to increase, costing chain restaurants up to $3.2 billion annually and $18,000 per year, per restaurant location.
“EPA really is not the solution,” he said, adding that Congress created the RFS and needs to provide a legislative path to correct it.
Citing American Petroleum Institute (API) outreach and lobbying efforts, API President and CEO Jack Gerard said he is hopeful that Congress will pass RFS legislation sometime next year.
National Chicken Council’s Brown said he sees traction gaining in Congress in opposition to the RFS, citing the dissolution of the tax on imported ethanol and the ethanol tax credit, the Volumetric Ethanol Excise Tax Credit, in 2011.
However, Governor Branstad emphasized the support of the RFS from rural lawmakers, noting “Republicans and Democrats from Iowa are all opposed to this change in the RFS.”
Also, RFA’s Bob Dineen said EPA’s proposal brings “nothing but uncertainty” to the renewables industry.
“I think a lot of momentum on legislation already lost some steam,” he said. “Members are finding out just how difficult it is to revise and reform a program that was so carefully crafted in 2005 and 2007,” he said. “And repealing the program altogether seems to be off the table.”
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