LITTLE ROCK — Arkansas Gov. Mike Beebe’s request to temporarily suspend federal regulations mandating the use of corn ethanol has ignited a “food versus fuel” debate.
Certain agricultural producers, including Springdale-based Tyson Foods Inc., argue that the federal rules, along with this year’s crippling drought, have pushed up the price for their animal feed, threatening their bottom lines. Supporters of the mandate said the requirement lowers the price at the pump for gasoline and lessens the country’s dependence on foreign oil. Advocates say ethanol also burns cleaner than typical fuel.
In August, Beebe, a Democrat, asked the Environmental Protection Agency for a one-year waiver of the Renewable Fuel Standard, a mandate that a significant percentage of fuel used in the United States come from ethanol made from corn and from other biofuels. Beebe argued the mandate raised the price on animal feed for the state’s producers and ultimately could raise prices in the grocery market.
“While the drought may have triggered the price spike in corn, an underlying cause is the federal policy mandating ever-increasing amounts of corn for fuel,” he wrote in an Aug. 13 letter.
Beebe said ethanol production now consumes 40 percent of the U.S. corn crop and that the cost of corn for use in food has increased 193 percent since 2005, the year the mandate first went into effect.
Republican Gov. Terry Brandstad of Iowa, a major corn-producing state, responded that a waiver was not appropriate.
“It is not sound policy to address uncertainty in one component of the agricultural economy by increasing uncertainty in another,” he wrote in his own letter to the EPA. A waiver, he said, “would jeopardize the environmental, economic and energy supply benefits created by the renewable fuels industry.”
The EPA has received, and turned down, one other waiver request. In 2008, Texas Gov. Rick Perry, a Republican, requested a 50 percent reduction in the volume of renewable fuels mandated nationally.
Upon receiving Beebe’s request on Aug. 13, the EPA withheld a decision pending a public-comment period that ends Oct. 11.
“Economic harm in the tens of billions of dollars has already been done by the drought,” wrote Wallace Tyner, a Purdue University agricultural economics professor who led an August study of how a waiver would affect the economy. “In considering a waiver, EPA cannot change the loss, but can only redistribute it among the affected parties — ethanol producers, livestock producers and livestock product consumers, corn growers, and ultimately domestic and foreign consumers.”
The Energy Policy Act of 2005 mandated the use of renewable fuels. The Energy Independence and Security Act of 2007 increased the requirements.
Both measures received substantial bipartisan support and were signed into law by then-President George W. Bush.
Under the 2007 Act, 36 billion gallons of renewable fuel must be used in the transportation fuel supply by 2022, of which no more than 15 billion gallons may come from cornbased ethanol. This year, the standard mandates 15.2 billion gallons total. In 2011, Americans used 134 billion gallons of gasoline, according to the U.S. Department of Energy.
According to a January report from the Library of Congress’ Congressional Research Service, the energy found in a gallon of corn ethanol was 130 percent higher than the energy required to produce and distribute it.
The report cited studies that found other renewable sources, such as cellulosic ethanol, had an “energy balance” ratio of up to 8-to-1, meaning that the cellulosic ethanol could produce eight times more energy than it took to harvest, refine and distribute it. However, the study noted that the industry was years away from producing cellulosic fuels with such great efficiency.
Palm oil, grain sorghum, canola oil and sugar cane also are potential sources of alternative fuel.
Many Arkansas livestock producers switched to corn feed this summer because the drought killed their hay, said Butch Calhoun, head of the Arkansas Agriculture Department.
“Feed costs have gone off the roof,” he said.
The result of the switch to corn, Calhoun said, was an upsurge in its price, which went from $5.12 a bushel in June to $7.42 a bushel Tuesday.
Corn farmers, Calhoun said, were happy with the higher prices, especially in parts of the Midwest where corn-yield losses were especially high.
“What’s good for one sector in agriculture is not always good for other sectors in agriculture.”
More than 820 comments poured into the EPA after Beebe’s request, including responses from poultry executives, biofuel entrepreneurs, a representative of the Brazilian sugar-cane industry, the governors of Georgia, Maryland, New Mexico and Texas, and the president of a group of classic-car enthusiasts in Colorado.
Many Tyson employees added their voices.
One of them, Diane Downs, a food-safety coordinator for the company in Van Buren and a cattle producer, wrote that higher grain prices have forced smaller livestock businesses to go under.
“People can cut back on driving if need be, but they cannot stop eating,” she wrote. “Greed is no excuse for using corn for fuel when thousands of children in this country alone are going to bed hungry overnight.”
The company has encouraged its employees to speak out in favor of the waiver, said Gary Mickelson, a Tyson spokesman.
The company has said it expects its grain costs for the fiscal year beginning in October to be more than $700 million above grain costs for the current year. Last month Donnie Smith, the company’s chairman, said he expects rising costs, along with soft demand, to “pressure” earnings next year.
Several of the comments came from people who use machines, such as boats, older cars, and snowmobiles, who said the ethanol blend was bad for motors.
Mike Obermeyer, president of the Colorado Classic Convertible Club, put it this way: “Ethanol is a crock. It’s a porkbarrel for Big Agribusiness, and it is harmful to older cars.”
Many commenters called for keeping the ethanol mandate intact.
A coalition of renewable-fuels associations, the Biofuels Producers Coordinating Council, said ethanol is cheaper than the gasoline traditionally used at most gas stations. Mixing ethanol with regular gas lowered the wholesale price of fuel by $1.09 a gallon last year. As a result, the average household spent $1,200 on fuel, the group said.
Lee Mikles, president of Future Fuel Corp., a Clayton, Mo., biofuel company with a plant in Batesville, wrote that his company produces biodiesel from inedible food stocks, crude corn oil, grease and poultry fat.
Though all are inedible, and not used in feed, he feared that his business would be hit hard if a waiver were put in place.
“Many of our customers are starting to question the need to continue purchasing biodiesel if a suspension [of the standard] is imminent,” he wrote.
Steve Bolin, president of Pinnacle Biofuels in Crossett, agreed.
He said his company had spent millions building its plant.
“We’ve made significant investments,” he said. “What we need in this industry is stability.”
Front Section, Pages 1 on 09/26/2012