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Corn ethanol's arguments wearing thin, but not its political clout

August 25, 2013

With the U.S. House of Representatives soon to be back from its summer recess and the Environmental Protection Agency (EPA) signaling readiness to reduce the volume requirements for ethanol in 2014 because too little cellulosic ethanol is being produced, a political showdown over the Renewable Fuel Standard (RFS) is at hand.

When the House Energy and Commerce Committee’s Subcommittee on Energy and Power convened in July to consider potential revisions to the RFS, it was lobby against lobby as oil and gas producers lined up with food producers against corn growers and ethanol producers. The National Chicken Council’s 15 pages of testimony deconstructed the arguments of the ethanol lobby in support of the Renewable Fuel Standard, summarized here:

Five myths about corn ethanol

Myth 1: The Renewable Fuel Standard has had little impact on corn prices.
Truth: The RFS has driven corn use growth faster than corn production, and corn prices are higher (by at least $2 a bushel, according to one study) and more volatile.

Myth 2: The availability of corn ethanol’s by-product, dried distillers grain solubles (DDGS), makes up for the reduction of corn available for use in animal feeds.
Truth: DDGS helps offset to a small extent corn consumed by ethanol production, but its overall effect is very small, being limited to certain species (not poultry and pork).

Myth 3: Higher corn prices have little impact on consumer food prices.
Truth: Numerous studies have recognized the demand for corn by ethanol producers as a major driver of corn and food prices.

Myth 4: The Renewable Fuel Standard results in a net increase in jobs in the economy.
Truth: Far more jobs have been destroyed in meat and poultry processing than have been created by ethanol producers.

Myth 5: Corn ethanol is a renewable source of energy.
Truth: Upwards of 200 pounds of nitrogen fertilizer are applied per acre to corn fields to maintain crop yields. Nitrogen fertilizer is created from natural gas. In essence, natural gas, a non-renewable fuel, is being converted to the corn used to produce ethanol.

Beware the corn lobby’s political clout

Even with the arguments for corn ethanol losing persuasiveness with some members of Congress, what happens next depends on political power. Although compromise (reform in the RFS) may be necessary, corn farmers and ethanol producers have the votes in Congress to preserve their ethanol franchise.

As Rep. John Shimkus (R-Illinois) told those who came before the committee in July arguing for repeal of the RFS: “You don’t have enough [votes] for repeal. You do have enough for some reforms. So you better get in the room and get it done.”

How might the RFS be reformed? Poultry and livestock producers want to see clearer guidelines established for the issuance of waivers of RFS volume requirements. EPA has denied two past requests (in 2008 and in 2012) to waive the mandate during periods of record-high corn prices and economic distress in the food sector. In testimony before the House committee, the National Chicken Council charged that EPA had in those denials established an impossible standard for granting a waiver request.

“If an RFS is maintained,” the National Chicken Council testified, “there must be clear and manageable standards for waiving quotas in light of dynamic economic situations.”

The poultry industry, however, should beware the reforms borne of politics. The devil is always in the details. Chief among these might be provision for the expansion of E85 ethanol production and use. This would solve the blend wall problem for corn ethanol proponents but could become poultry producers’ continuing business nightmare if more and more corn is used to produce ethanol.

Whatever the corn ethanol lobby lacks in the true merits of the Renewable Fuel Standard, it makes up for in political support in the U.S. Congress and at the EPA. 

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