Business news from the Fredericksburg region.
EPA rejects states’ request to waive ethanol standards
By Chelyen Davis
The federal Environmental Protection Agency has rejected requests from several governors—including Virginia’s—to waive fuel standards that require more corn to go toward making ethanol.
The renewable fuels law will require production of 15 billion gallons of ethanol by 2015, up from 13.2 billion gallons this year.
That will require an increasing amount of corn, which is used in making ethanol. That’s great for corn producers, who are seeing their crops’ prices go up, but bad for other farmers—like poultry and swine farmers—who are watching feed prices go up as well.
Virginia Gov. Bob McDonnell and the governors of several other states, as well as Virginia’s U.S. senators and other states’ lawmakers, had asked the EPA to waive the standards for the next couple of years, in part because a drought has limited the availability of corn, causing prices to go up even more.
In a press release Friday, the EPA said it “has not found evidence to support a finding of severe ‘economic harm’ that would warrant granting a waiver.”
The EPA said it had conducted several economic analyses, which showed that on average, waiving the fuel standards mandate would cut corn costs by just one percent, and wouldn’t impact household energy costs.
“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 the EPA’s Office of Air and Radiation, in the release. “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.”
McDonnell had joined others in requesting a waiver around the end of August. At the time, state Secretary of Agriculture Todd Haymore said that the drought was the worst in 25 years, and was expected to reduce corn and soybean crops by 10 to 13 percent.
Haymore also said then that the price of corn had doubled to $8 a bushel during the two prior months, while the price of soybeans had gone up 35 percent.
Reductions in the availability of those crops would be taken out of the amount available for feed, as a percentage was already dedicated to ethanol, Haymore said.
McDonnell told the EPA that livestock and poultry producers were the largest segment of Virginia’s agriculture industry, and that feed costs were their largest expense. He feared, he wrote, that those farmers wouldn’t be able to “withstand the rapid feed costs increases and price volatility.”
In a statement after the EPA’s announcement Friday, McDonnell’s office said he sought the waiver “based on the economic harm that might arise from blindly continuing the requirement.”
“At a time when we face the prospect of increasing prices for food for both animal and human consumption, it is disappointing that EPA has chosen to deny the waiver request,” said McDonnell spokesman Jeff Caldwell. “As a result of this denial, Virginia agricultural producers in the livestock industry can expect to see increases in the cost of feed while Virginia consumers will see increased prices for meat, poultry, dairy and grains.”
McDonnell’s waiver request came at the behest of state livestock and poultry producers. Grain producers in the state disagreed, saying they’d planted crops based on the expectation of a certain percentage going to ethanol, and that changing that percentage could adversely affect them.
Virginia’s senators, Mark Warner and Jim Webb, had also asked the EPA to waive the standards.
They had cited concerns about a potential rise in food prices; their letter to the EPA said the U.S. Department of Agriculture has warned that food costs will rise more than inflation next year, by 3 to 4 percent.
Chelyen Davis: 540/368-5028