Obama's EPA May Punt on Ethanol Decision, As Big Corn Argues "Just Trust Us"
November 14, 2012 3:40 PM
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(Source: Getty Images)
"We'll tell you next month" is the likely word from the EPA
Stop me if you've heard
one before. It's the eleventh hour and the Obama administration is facing a crucial decision, one that could have a deep impact on the nation's economy and a united voice of experts is facing noisy opposition from special interests. It's game time and the administration is on the field, ready to make the big play... and they instead choose to punt.
That's the likely scenario
The Detroit News
regarding ethanol waivers, a decision which was supposed to be made this week by Obama's iteration of the
U.S. Environmental Protection Agency
I. Federal Government Backs Corn Ethanol Despite Massive Drawbacks
The EPA derives its power to regulated fuel economy from the
Clean Air Act of 1963
[PDF], a law which was most recently amended
by Congress. A key question in recent years is whether the EPA can dictate what fuels the market should sell or blend. The last two Presidents -- Barack Obama and George W. Bush -- argued the answer to that question is "yes". The most crucial effort to that objective was the
Energy Independence and Security Act of 2007
(EISA), signed into law by President Bush.
Under the EISA, which has been actively backed by President Obama, each year gasoline sellers in the U.S.
must blend in more and more
ethanol to help the U.S. meet "targets".
President Bush and Obama have backed the federal government manipulating the economy to push corn ethanol at the pump. [Image Source: Nation Corn Growers Assoc.]
But despite its status as America's most used alternative fuel, serious questions surround ethanol and whether it really helps the environment at all. While domestic ethanol production does offer a
small shred of domestic security
by removing some dependence on volatile foreign sources, studies have also shown that it actually
increases greenhouse gas emissions
increases food prices
In other words, the body of current evidence clearly points to corn ethanol -- the most abundant form of ethanol in the U.S. -- being bad news for both the U.S. consumer and the environment.
Automakers also say that higher blends of ethanol
will damage the engines of older vehicles
, in turn creating both economic problems. The EPA dubiously says it knows the science better than the people who made the vehicles, arguing that the automakers
Obama and Bush both backed big corn special interests. [Image Source: Politically Incorrect]
In the midst of all the issues, why is there still a modicum of support for government manipulation of the fuel market in corn ethanol's favor?
Big corn has long been one of the nation's most powerful special interest. Corn farmers have benefited from
billions in yearly government subsidies
, with a major chunk of it coming from ethanol grants and mandates. In total, corn farmers drew $73.8B USD from 1995-2009 from the U.S. federal and state governments.
II. Big Corn v. Everyone Else
Indeed the latest debate regarding ethanol comes down to
"corn farmers" vs. "everyone else"
-- including their fellow farmers.
Amidst a record drought, feed prices are soaring. Livestock farmers have resorted to
feeding their cows candy
to try to keep from going bankrupt or letting their herd die. Meanwhile, corn is being actively fermented (or wasted, according to critics) into ethanol, putting further pressure on prices. And the EPA's fine-backed blending demands are the key factor driving that trend.
Without intervention, record corn prices coupled with drought may push small farms out of business. [Image Source: US News]
The corn farmers argue that they can't release information showing what their yields are; information that could validate the desperate farmers claims. Instead, their argument boils down to "just trust us", as they fight a potential EPA waiver to help the struggling farmers.
The Michigan Farm Bureau
comments "[We don't believe keeping the blending targets] would severely harm the economy of Michigan at this time. We do not have final harvest numbers, making it premature to determine what our total crop supply will be in 2012."
The National Corn Growers Association
[PDF], "We believe the burden of proof for severe harm to the economy falls on the petitioner. We believe the petitioners have failed to establish this proof, since higher feed prices are only one piece of a complicated economic puzzle."
III. Blending Targets May Kill Small Farmers' Businesses
On the other side stands a united group of farmers, state, and federal politicians.
Corn prices are
up 60 percent
on the year, and food prices are expected to rise 3.5 percent or more this year -- and more next year -- largely due to ethanol pressure. Corn prices have jumped 400 percent since the federal government backed corn ethanol under the Bush administration.
Eight state governors and 200 members of Congress have
written a letter
(on behalf of the slightly ironically named
National Pork Producers Council
) to the EPA pleading with it to relax blending rules via a waiver, at least for the rest of the year. Delaware and Maryland's governors write that without a waiver the EPA would be creating "the loss of thousands jobs."
A number or researchers also signed a letter calling for a waiver. Among them is
John M. DeCicco
University of Michigan
School of Natural Resources and Environment
, "The (Renewable Fuel Standard) diverts potential food crops to produce fuel, which drives up food price volatility and global food prices."
Big corn donates deeply to federal politiicans, who in turn reward it with billions in subsidies.
[Image Source: Agriculture.com]
It would be awfully hard for the Obama administration's EPA to deny the waiver in the midst of such overwhelming support. On the other hand, it would be equally hard to turn their back on big corn special interests. Those affiliated with the National Corn Growers Assoc. alone poured close to $500,000 USD to candidates on both sides of the aisle in 2012 [
] (the majority went to Republicans, likely due to their more critical stance on ethanol, which big corn hoped to soften).
IV. Silence From the EPA
The EPA released a brief comment remarking, "EPA is completing its review and analysis of the RFS waiver requests and the agency plans to reach a decision shortly."
But Tuesday's deadline for a decision came and went without any word about the status.
The EPA appears ready to punt on the waiver. [Image Source: How to Punt a Football]
Late last year Congress
finalized the cut to corn ethanol's tax subsidy
. But the influx of money from big corn has some on The Hill calling for a renewal of an effort to force corn ethanol on the consumer, regardless the cost to the economy and the environment.
Amidst that backdrop, the only noise coming from the EPA is the sound of crickets as the waiver requests are punted deeper downfield.
The Detroit News
This article is over a month old, voting and posting comments is disabled
RE: I don't like it, but I get it.
11/15/2012 11:06:29 AM
Your "basic economics" are pretty flawed. Sure, for something like oil, we have limited resources, and on top of that about half of its production is controlled by OPEC, who intentionally throttle production to keep prices where they want rather than compete with each other. That keeps supply constant.
Corn is different. It's true that there is a limited amount of farming land, but we're not nearly at the point where long production is constrained. More importantly, prices didn't go up this year because we're using way more corn for ethanol. The
is true, as ethanol production has declined for two years:
Jason is misleading you to push his agenda.
The price increase for corn is solely due to the drought. Unless we expect droughts to suddenly become a regular occurrence, supply of corn is not expected to be a problem.
"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein
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