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Lawmakers Increase Pressure on Obama’s EPA to Ease Ethanol Rule

Aug. 2 (Bloomberg) -- More than 150 U.S. lawmakers of both parties prodded President Barack Obama’s administration to cut a requirement that refiners use ethanol, as corn prices climb amid the worst drought in a half century.

Rising corn prices are hurting livestock producers, food manufacturers and consumers, the lawmakers led by Republican Representative Bob Goodlatte of Virginia said today in a letter to Lisa Jackson, head of the Environmental Protection Agency. The EPA regulates the renewable-fuels market, and Jackson can adjust or waive the ethanol requirement if it would cause “severe harm to the economy or environment.”

“While the government cannot control the weather, it fortunately has one tool still available that can directly impact corn demand,” the lawmakers said in the letter. By cutting the ethanol mandate, “the federal government can help avoid a dangerous economic situation because of the prolonged record high cost of corn.”

The EPA set standards that require refiners to use 13.2 billion gallons of ethanol this year and 13.8 billion in 2013. Goodlatte said today that the entire requirement could be scrapped for the rest of the year, or some type of reduction could be made by the EPA to the so-called Renewable Fuels Standard program, or RFS.

Monitoring Crops

“We keep an eye on crop-yield estimates, and we will review any data or information submitted by stakeholders, industry and states relating to the RFS program,” Alisha Johnson, a spokeswoman for the EPA, said in an e-mail. The agency is consulting with the U.S. Department of Agriculture, she said.

Representatives of ethanol producers, such as Poet LLC, the largest in the U.S., and Archer Daniels Midland Co. in Decatur, Illinois, today tried to counter lobbying against the mandate. With a drop in U.S. gasoline demand, existing stockpiles and unused credits, refiners’ use obligation may be less than 10 billion gallons of ethanol this year, said Bob Dinneen, president of the Renewable Fuels Association in Washington.

“Refiners can meet their obligations because of flexibility built into the system,” Dinneen said today at a Washington news conference. Producers are already adjusting, he said.

As corn prices rose, ethanol producers have responded by slashing output 16 percent, to 809,000 barrels a day from a record 963,000 on Dec. 30. The U.S. has 815 million gallons of biofuels in storage, Energy Department data show. Corn futures, which jumped 27 percent last month, dropped 0.6 percent to $7.96 a bushel on the Chicago Board of Trade today.

The lawmakers pushing for a change represent districts that rely on refining, or chicken production and dairy farming that use corn in feed. Lawmakers representing corn-heavy states took issue with those complaints.

“If not for ethanol, farmers wouldn’t have planted 96 million acres of corn this year,” Iowa Republican Senator Charles Grassley said in a floor statement yesterday. “Without ethanol, I doubt we’d have seen investment in higher yielding and more drought tolerant corn plants.”

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editor responsible for this story: Steve Geimann at sgeimann@bloomberg.net

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