Texas’s Perry Not Considering Ethanol Waiver in Corn Drought

Texas Governor Rick Perry isn’t considering asking the Obama administration for a waiver of the renewable fuels requirements because of a drought in the Midwest that has boosted corn prices.

Crop conditions are the worst since 1988 when corn production fell 30 percent from a year earlier as the most severe drought in more than two decades stunts development for the grain and biofuel feedstock. Ethanol is projected to account for about 38 percent of this year’s corn harvest, the Agriculture Department said July 11.

The biofuel, made mostly from corn in the U.S., is part of the nation’s strategy to reduce dependence on crude oil. A government mandate calls for refiners to use 13.2 billion gallons of ethanol this year. In April 2008, Perry, a republican, asked the Environmental Protection Agency to ease the requirements by 50 percent because of grain shortages and rising food costs.

“At this point the governor isn’t considering asking for a waiver, however he will continue to monitor the situation closely,” Allison Castle, a spokeswoman for the governor, said today in an e-mail.

Corn futures rose to a 13-month high today after a government report showed that an expanding drought is damaging crops.

Denatured ethanol for August delivery rose 2 cents, or 0.8 percent, to $2.689 a gallon on the Chicago Board of Trade, the highest settlement since Nov. 16. Prices have gained 22 percent this year.

Earlier Request

The EPA rejected the 2008 waiver request from Texas, the largest U.S. beef producer. As part of the process, the agency would have to find that the program is causing economic “harm,” according to Matt Hartwig, a spokesman at the Renewable Fuels Association, a Washington-based industry group.

“We think that any request from Governor Perry would submit this time would find a similar fate to the one he submitted in 2008,” Hartwig said in a telephone interview. “We don’t think any waiver request submitted to the EPA would pass muster.”

Cathy Milbourn, a spokeswoman for the agency, said that it can’t “speculate” on waiver requests that it hasn’t received.

Poet LLC, is the largest U.S. ethanol producer, followed by Archer Daniels Midland Co. (ADM), in Decatur, Illinois, and Valero Energy Corp. (VLO)

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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