August 26, 2012 in Business

Ethanol quota faces scrutiny amid drought

Ronald D. White Los Angeles Times
 
Associated Press photo

A drought-plagued field of corn is pictured near Percival, Iowa, in July.
(Full-size photo)

LOS ANGELES - The worst U.S. drought in more than half a century has rallied critics of the federal renewable fuel standard, which will reserve about 40 percent of the nation’s corn crop for ethanol production this year.

Critics have long questioned the commitment of a growing share of a food source for fuel use. But the calls for change have grown louder because the widespread drought has killed more than 50 percent of the corn crop, driving prices to record levels - and U.S. ethanol is made mostly from corn.

To avert a possible domestic and international food crisis, several groups have urged changes to the fuel standard or at least a temporary waiver of the ethanol quota, which annually requires more ethanol be included in the nation’s fuel production. Among them are members of Congress, the U.N. Food and Agriculture Organization, and the American Petroleum Institute.

The International Food Policy Research Institute has recommended the U.S. immediately stop using corn to make ethanol for fuel “to prevent a potential global food price crisis.”

“Poor and vulnerable groups in developing countries are hard hit by high and volatile prices of the agricultural commodities they depend on for their primary daily caloric intake,” said Shenggen Fan, director general of the think tank, which is based in Washington.

In letters to the Environmental Protection Agency, 156 members of the House of Representatives and 26 senators requested a temporary waiver of the ethanol quota.

“As stressful weather conditions continue to push corn yields lower and prices upward,” the lawmakers wrote, “we ask you to adjust the corn grain-ethanol mandate to reflect this natural disaster and these new market conditions. Doing so will help to ease supply concerns and provide relief from high corn prices.”

The EPA director has the right to grant such a waiver, and White House press secretary Jay Carney recently told reporters that the Obama administration is mulling over such a move.

Each call for action on the renewable fuel standard brings a strong response from powerful lobbies such as the National Corn Growers Association and other agribusiness interests and the Renewable Fuels Association. All contend that corn ethanol is important to ensuring American energy independence and protecting U.S. companies and jobs.

The real problem, said Brooke Coleman, executive director of the Advanced Ethanol Council, “is our dependence on foreign oil. The (renewable fuel standard), which drives American-made fuel into the marketplace, is part of the solution.”

Jim Greenwood, chief executive of the Biotechnology Industry Organization, argued that “waiving the federal renewable fuel standard even for one year will produce instability in the program for several years, causing uncertainty for companies investing in advanced biofuels and for farmers growing next-generation energy crops.”

Under the Clean Air Act, the renewable fuel standard requires a minimum amount of biofuels be included in the U.S. fuel supply. For 2012, the quota is 13.2 billion gallons of ethanol, or nearly 10 percent of estimated gasoline consumption for the year. The amount will rise to 13.8 billion next year.

Supporters say corn ethanol is making a difference in fuel supplies, gasoline prices and pollution. Every gallon of ethanol in U.S. fuel tanks reduces the amount of oil the U.S. needs to import. U.S. dependence on foreign oil has dropped from a high of 60 percent in 2005 to about 46 percent now, they note.

But some experts say those claims discount the value of other changes in America’s energy picture.

The decline in oil imports is because of the increased output of U.S. crude, not ethanol, said Bruce Bullock, executive director of the Maguire Energy Institute at Southern Methodist University.

“With the amount of oil being produced in the U.S. now, the whole ‘dependency on foreign oil’ argument for corn ethanol is moot,” Bullock said.

U.S. oil production has risen nearly 22 percent since 2005. Domestic production is expected to reach 6.7 million barrels a day in 2013, up from 6.2 million in 2012, according to the Energy Department.

Growth in U.S. oil production has been outpaced by an even bigger boom in domestic natural gas, experts say.

Fleets such as the 2,200-vehicle Los Angeles County Metropolitan Transportation Authority bus system have proven that natural gas is a reliable transportation fuel. The MTA retired its last diesel bus in January 2011 and has logged 1 billion miles on natural gas.


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