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EPA denies requests to ease ethanol corn mandate

WASHINGTON – Federal regulators rejected a request from the governors of eight states to waive requirements for blending corn-based ethanol into gasoline, a mandate they said was driving up food costs during the worst drought in a half century.

In an emailed statement Friday, the Environmental Protection Agency said it had found no evidence of “severe economic harm,” a determination needed to support granting the waiver. The governors of Arkansas, North Carolina, Maryland, Delaware, Georgia, Virginia, New Mexico and Texas made the request. The group included four Democrats and four Republicans.

“We recognize that this year’s drought has created hardship in some sectors of the economy, particularly for livestock producers,” said Gina McCarthy, assistant administrator for the EPA’s Office of Air and Radiation. “But our extensive analysis makes clear that congressional requirements for a waiver have not been met and that waiving the RFS will have little, if any, impact.”

Gasoline refiners will be required to blend 13.2 billion gallons of the biofuel this year, according to the 2007 energy law that established the national Renewable Fuels Standard. This year’s corn harvest is forecast at 10.725 billion bushels, the smallest in six years, because of the drought. About 4.5 billion bushels will be used to make ethanol in the year starting Sept. 1, or about 42 percent of the 2012 crop, the U.S. Department of Agriculture estimated on Nov. 9.

The EPA said an analysis conducted with the USDA showed that waiving the mandate would only reduce corn prices by about 1 percent. A review with the Energy Department indicated that a waiver would not affect household energy costs, the EPA said.

Ranchers needing livestock feed compete with ethanol producers including Archer-Daniels-Midland Co. for corn, with higher prices lowering profits for meatpackers including Tyson Foods Inc. Cattle-producing states, as well as food retailers with profits affected by higher food prices, are thus more hostile to ethanol.

The National Council of Chain Restaurants said that under the Renewable Fuels Standard, ethanol is forced to “commandeer a shrunken pool of available corn for food and livestock feed.”

In an emailed statement, Rob Green, the executive director of the group, said the law “unfairly distorts the market at the expense of chain restaurants, our consumers and everyone else involved in the food supply chain.” The organization represents companies including McDonald’s, Denny’s and Cracker Barrel Old Country Store.

Biofuels industry groups and officials including Agriculture Secretary Tom Vilsack contend that the market has already rationed production. Ethanol production has fallen 14 percent this year to 824,000 barrels a day in the week ended Nov. 9, or 12.6 billion gallons on an annualized basis, Energy Department data show.

With the decision, the biofuels industry “can move forward with greater confidence,” Jeff Lautt, chief executive officer of Poet, the world’s largest ethanol company, said in a statement.

Under the 2007 energy law, the EPA can suspend the mandate if it would severely harm the economy of a state, region or the United States. The legislation calls for the U.S. to use 15 billion gallons of corn-based ethanol annually by 2015 and 36 billion gallons of biofuels by 2022. About half of that amount will have to come from “next generation” or cellulosic sources such as grasses and wood waste, and not from corn.

In 2008, when corn prices reached a then-record $7.9925 in June of that year, the EPA rejected similar requests to ease the mandate from Arizona Sen. John McCain, then the Republican candidate for president, Texas Gov. Rick Perry and other officials.

With assistance from Mark Drajem in Washington.