DENNIS SEID: It's time to cut ethanol subsidy

By Dennis Seid/NEMS Daily Journal

In 2005, the Environmental Protection Agency enacted the Renewable Fuel Standard, requiring production of biofuel – ethanol. That standard was expanded two years later, requiring 13.2 billion gallons of corn starch-derived ethanol to be produced this year.
By 2022, the requirement will be 36 billion gallons.
The intent was to reduce our nation’s dependency on foreign oil, thus the ethanol-blended gas we buy these days. You see the signs on gas pumps: “Up to 10 percent ethanol in fuel” or something along those lines.
Another reason for producing more ethanol was to reduce greenhouse gas emissions, which are blamed for climate change.
Never mind that ethanol is less fuel-efficient than gasoline.
And according to The Associated Press, the consequence of the Renewable Fuel Standard is that 40 percent of the nation’s corn crop goes to ethanol producers. Thirty-six percent goes for feed, used by livestock farmers. The rest of the corn crop – 24 percent – is divided between processed food and exports.
Said the AP, “Critics say ethanol also is a big factor in the price of a bushel of corn going from an average $2.15 a bushel in the 1997-2006 period to more than $8 today.”
Fuel prices, driven by a variety of factors, not the least of which are oil prices, certainly haven’t come down because of the ethanol addition.
And don’t even mention what the fuel blend does to small engines.
To encourage ethanol production, the federal government provided some $6 billion for a blender tax credit. That expired this year.
The tax credit of 45 cents per gallon of ethanol went to blenders that mixed it at a rate of 10 percent with gasoline. That tax credit worked out to about 4.5 cents per gallon of gasoline.
Gas with a 15 percent ethanol blend – called E15 – is sold today but can only be used for cars and trucks made after the 2001 model years. Some automakers say the higher blend may not be safe for their newer cars.
Livestock farmers and ranchers say with their increased feed costs, aggravated by a severe drought, they’ll have to reduce their herds and flocks. Cattlemen and chicken farmers have the same concerns.
Consumers already are paying more for food. They’ll be paying even more in the long-term as supplies tighten because farmers are trimming their herds.
No wonder that one-third of Congress – 156 Republicans and Democrats from the House of Representatives – has asked the EPA to relax ethanol production.
The AP notes, “The EPA says it is working with the Agriculture Department and is keeping a close eye on crop estimates and how they might relate to the biofuel program. But so far, the Obama administration, citing ample ethanol supplies, sees no need for a waiver. That’s an opinion shared by corn growers – many of them in the presidential election battleground states of Iowa and Ohio – who continue to support the mandate.”
More than half of the U.S. Senate, including Sens. Thad Cochran and Roger Wicker, said it supports reducing the ethanol mandate, according to a letter from Cochran. Thirteen Republicans and 13 Democrats sent EPA Administrator Lisa Jackson a letter for a waiver.
So it’s a bipartisan effort to talk sense into the EPA, but few seem to want to listen.
And once again, it’s the consumer left paying the price.
Dennis Seid is the business editor at the Daily Journal. Reach him at (662) 678-1578 or dennis.seid@journalinc.com.