Obama's EPA Faces Decision Between Corn Ethanol Profits and Farm Jobs

http: Dailytech ^ | - October 12, 2012 2:51 PM | Jason Mick (Blog)

[Ernest_at_the_Beach]

Corn farmers say "let the profits trickle down", while other farmers say quotas will kill jobs

There's a growing debate about what fuel is put inside your fuel pump.  At the heart of the debate is a two-carbon alcohol -- ethanol.  This little fuel is creating a huge debate, which has divided the farming industry and raised perennial questions regarding the cancerous influence of special interest on the U.S. federal government.

I. Big Corn Makes Friends

When it comes to corn ethanol the message from Congress is clear: cut down on the ethanol production.  But the U.S. Environmental Protection Agency (EPA) is still waffling on whether to keep its strict quotas, or to "temporarily" relax them, after the worst drought in decades hit parts of the U.S.

With the drought hurting corn yields, farmers have been forced to compete with ethanol producers and the food industry for an insufficient supply.  Some farmers have, in their desperation turned to feeding their cows candy, as cast-off bulk sprinkles are cheaper than the traditional corn feed.

The EPA's holds a tight grip on the amount of corn going into ethanol, thanks to its ability to regulate fuel in the U.S.  Under The Energy Policy Act of 2005 (often referred to as the Renewable Fuel Standard), which passed under President George W. Bush, fuel blenders are required to incorporate a certain amount of ethanol into gasoline blends at the pump, with the amount being bumped a little bit each year.

_{The U.S. government mandates ethanol be blended into gasoline, to create artificial demand for corn. [Image Source: Nation Corn Growers Assoc.]}

Studies have suggest that going from the corn-field to fuel pump corn ethanol is an energy negative process, consuming more energy than it produces, and offering up higher life-cycle carbon emissions that standard gasoline.  Further, automakers say gasoline-ethanol blends can harm traditional engines and deliver worse gas mileage than pure gasoline.  So the compelling question has long been why did the U.S. jump so deep into corn ethanol, and in doing so accidentally drive food and livestock feed prices upward.

In Congress' case, it appeared to be largely special interests.  Senators and representatives from corn farming-heavy districts/states accepted funding from farmers to help them get elected, and in turn pushed for the seemingly illogical ethanol blending requirements, which create artificial demand, driving corn prices up.  They also for some time passed billions in subsidies along to big corn farmers.

As recently as last year some senators -- Senators Tom Harkin (D-Iowa); Tim Johnson (D-South Dakota); Amy Klobuchar (D/"Farmer-Labor Party"- Minnesota); and Al Franken (D/"Farmer-Labor Party"-Minnesota) -- proposed increasing ethanol quotas via the trickily worded Biofuels Expansion Act of 2011.

II. Drought, Spending Cuts Threaten Corn Special Interests

But the ethanol special interests saw their grasp on Congress weakening last year amid the partisan rancor regarding the budget.  In a battle by each side to preserve their special interests, corn found themselves too short on the special interests pecking order to convince Congress at large to continue to vote for bloated subsidies.

In the aftermath, the subsidies were slashed, and then eliminated altogether.  Republicans in Congress also banded together to block the EPA's plan to increase ethanol blending to 15 percent nationwide, although the EPA found a way to sneak around that restriction.

But even the EPA -- who seemed firm on its ethanol commitment -- has started to show signs of doubt after an entirely external, non-political influence hit -- the drought.  The record drought is essentially forcing the EPA's hand, by creating corn shortages and hence amplifying corn ethanol's already undesirable price effects.

The EPA announced it would make its decision [PDF] about a potential waiver on blending requirements early next month.

_{Amid a record drought either the quota or jobs will be lost, say many farmers.
[Image Source: AP]}

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 and Ivette Perfecto from the University of Michigan School of Natural Resources and Environment.  They write, "The (Renewable Fuel Standard) diverts potential food crops to produce fuel, which drives up food price volatility and global food prices."

III. Big Corn Farmers Argue Higher Prices are Good for Everyone

Corn farmers are opposed to the idea, which would reduce the artificial demand that they currently enjoy.  The National Corn Growers Association essentially admits that it's acting out of greed, but making the argument that higher revenue from corn farmers stimulates the economy in a trickle-down effect.  They point out that corn farmers' revenue rose from $63B USD to $90B USD between 2007 and 2012.

They comment [PDF], "Higher feed prices are only one piece of a complicated economic puzzle... [a waiver would cause] severe harm to the economy."

_{Big corn argues that its profits are worth more than whatever job savings might be realized by quota cuts. [Image Source: Agriculture.com]}

Before the drought corn prices had increased nearly four-fold from 2007 levels.  The fuel supply industry was set to (by EPA requirement) deliver 15.2 billion gallons of corn ethanol this year -- up from 5 billion gallons in 2007.

But the payday for big corn may soon be over.  After all, the Obama administration has a relatively substantial degree of control over the EPA -- a federal agency -- and it may be wary of refusing the waiver request, lest it trigger the predicted job loss and hurt the President' reelection prospects.

[verum ago]

Big Corn Farmers Argue Higher Prices are Good for Everyone

Except for people who have to buy food!

[umgud]

Obama's EPA Faces Decision Between Corn Ethanol Profits and Farm Job

Not so. Obama's EPA is anti-capitalist first.

[Vince Ferrer]

Ethanol can be made from coal and natural gas for 30% cheaper than from corn. If we do not not dictate where ethanol comes from, coal will drive the cars, and we can sell corn to other countries.

[rstrahan]

Ethanol can be made cheaper out of sugar cane, which can be much cheaper to produce in Louisiana, etc. Also, there is no reason not to switch to Methanol, which can be made at $1 per gallon from natural gas.

Ethanol requirement is just a sop to corn producers in the Midwest.

[Dr. Bogus Pachysandra]

Is ethanol the reason I have to keep replacing oxygen sensors in my 2001 Highlander? The car has been great, just pads and rotors,,,,,butd I’m starting another round of oxy sensor replacements!

[griswold3]

I imagine that Michelle Obama would tout higher food prices as a good thing. The US has enjoyed the lowest food costs in the world.
Flashback:

“We can’t drive our SUVs and eat as much as we want and keep our homes on 72 degrees at all times... and then just expect that other countries are going to say OK. That’s not leadership. That’s not going to happen.” Barack Obama

[bert]

Meanwhile in South America, they are building more and more sugar cane ethanol plants that will make corn ethanol not competitive even with a subsidy.

Not just Brazil, but Columbia........

[BfloGuy]

Ethanol can be made from coal and natural gas for 30% cheaper than from corn. If we do not not dictate where ethanol comes from, coal will drive the cars, and we can sell corn to other countries.

How about we just not "dictate" that ethanol exist at all? Once upon a time, everyone was pretty happy with good old gasoline. I suspect they still would be.

[Vince Ferrer]

How about we just not "dictate" that ethanol exist at all? Once upon a time, everyone was pretty happy with good old gasoline. I suspect they still would be.

That is ok, but I look at it from a perspective of energy independence. I would like to use American oil, but I don't believe we have enough for a hundred years or more. But we have several centuries of coal. Using American coal and American natural gas to extend American oil can get us to be energy independent for a long time. We have cars already that are build for E85, which is 85% ethanol, those could be running on 85% coal. Instead of shutting down the coal mines, we could keep using them, plus sell our corn overseas, plus be energy independent.

[LibLieSlayer]

A few negatives for Methanol: Ceramic composite cylinder walls and Teflon fuel lines and dehydration units and the battery acid effects of its use... and one big thing... it takes a lot more Methanol to fuel an engine than it does gasoline. You get way more power when tuned correctly but it takes more of it to get the job done. Check out the fuel systems on small Methanol powered racing go-karts and outboards and on to circle track cars. Expenses engineering for it will be very high indeed. Ethanol is bad enough. Methanol has many reasons not to use it as a fuel for cars. Take a quart of Methanol and leave it open to the atmosphere for say an hour. Put a mark on the jar where you filled the Methanol to and then come back and look at how much water the Methanol has absorbed out of the atmosphere. America will not pay a premium to burn exotic fuels when gasoline could be pletiful and cheap.

LLS

[Minutemen]

Kill Corn-for-Fuel NOW!

Make Tortillas.... Not Ethanol !!

[GreyFriar]

We need to convert more corn into ethanol and require a 85% Ethanol to 15% gasoline mix. That will help us in all of our goals: 1) reduce the number of abortions because people will not beable to afford food and thus starve to death, thus reducing the populations; 2) by reducing the population we reduce the number of doctors and the expense of the Afordable Care Act; 3) starvation will also end the obesity epedemic; 4) we will grow the economy because more people will need more food stamps and every food stamp dollar spent generated $1.87 in spending; 5) that mixture will cause all cars, trucks, and gas powered generators, lawn mowers, etc, engines to wear out within 18 months or less, thus reducing the number of cars and trucks on the roads; 5) with more dead cars and trucks, the purchase of new 85/15 compatible cars and trucks will be necessary, thus increasing car sales and keeping the AFL/CIO auto union workers employed and happily voting Democratic; 6) the lack of corn as food will create an entirely new environmental green industry — SOYLENT GREEN.

[verum ago]

Ah, a modern day Modest Proposal. I like it.

[zot]

Soylent Green will be sold to the sheeple as recycling.

[FreedomPoster]

Quit. Burning. Food.

This is madness. Time to kick the damn farm state lobby on this.

[GreyFriar]

thank you. I started out as just sarcasm and then it began to flow to the “EPA” ending.

[zot]

The EPA will have panels that decide when it’s your time to recycle.

[BfloGuy]

Instead of shutting down the coal mines, we could keep using them, plus sell our corn overseas, plus be energy independent.

I'm down with that. Just don't propose any government "incentives" to try and make it happen sooner.

They won't work any more than has subsidising electric cars.