Posted by: Lawyer Sanders | August 12, 2008

Attorney Sanders says Texas Governor has it right on the problems caused by turning food crops into ethanol, and EPA is wrong on denying RFS waiver.

In an editorial appear in the Wall Street Journal on August 12, 2008, Texas Governor, Rick Perry, explained his reasoning for requesting a waiver from US EPA from the Renewable Fuels Standards imposed by Congress in 2004.  Gov. Perry replaced George W. Bush when Bush resigned to become President in December 2000.  Gov. Perry is a Republican and a fifth generation Texan.  If he serves a full second term, Perry would become the longest serving governor in Texas history, with ten years of uninterrupted service.

Gov. Perry served as Texas’ agriculture commissioner from 1991 to 1999.  So, he has a great deal of experience in the areas of food crops and promoting the sale of agricultural products from his home state.  Thus, with this type of unique experience and background, Gov. Perry’s comments on using food-crops for generating ethanol are interesting to say the least.

In his editorial, Gov. Perry complains that in the last three years, corn prices have risen 233 percent globally and international food prices have increased 83 percent. Prior to the RFS mandate, corn prices were around $2/bushel. Now, corn is nearing $8/bushel.   Gov. Perry warns that corn prices may rise even higher, given the ethanol mandate and recent floods in the Midwest.  This is driving up the cost of staple food items at the grocery store.  And it is also driving up the price of corn based feed, devastating the livestock to the point that Texas cattle feeders have been operating in the red since 2007.

Gov.  Perry also observes that increased corn costs have not only negatively impacted the livestock industry, but ethanol producers as well. Escalating prices have eroded the profit margins of ethanol producers and threaten gasoline blenders to choose between bankruptcy or noncompliance, a dilemma Congress could not possibly have intended to impose when it doubled the RFS mandate in Dec. 2007.

In 2007, 25 percent of the U.S. corn crop was diverted to produce ethanol, according to the U.S. Department of Agriculture, which projects that 30 to 35 percent will be diverted in 2008. With ever increasing mandates of corn crop diversion to ethanol production through 2015, the impact on food prices globally, and to Texas specifically will only worsen.  The artificial demand for grain-derived ethanol is devastating the livestock industry in Texas while contributing to higher food prices around the world.

The RFS mandate was established by the federal government through the Energy Policy Act of 2005. It was amended in 2007 by the Energy Independence and Security Act, which increased the RFS mandate, requiring 9 billion gallons of grain-derived ethanol be blended into our nations fuel supply in 2008, almost twice the amount from 2007. While well intentioned, the RFS mandates the levels of renewable fuel usage regardless of market signals.

Responding to U.S. EPA’s denial of a waiver, Gov. Perry said that EPA’s decision “not only goes against common sense, but runs counter to the experience of Americans at the grocery checkout counter.”  In short, the governor calls the decision a mistake that is severely harming our country’s economy.  

I believe that Governor Perry is absolutely correct in his reasoning and logic.  Unfortunately, the Bush Administration is not going to ruffle the feathers of politicians or voters in corn-producing states in an important election year.  Unfortunately, we are all going to pay the price for this debacle in higher food and energy prices in the Fall.

This is yet another example of a failure of leadership in Washington and the Bush Administration in particular.  It is time for a change in direction in American politics and well past time to implement a cohesive energy strategy to protect America’s economy and our national security.  As Governor Perry succinctly puts it, “there are better energy solutions that turning food  into fuel.”

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Responses

  1. Thank for the article, be excellent article.


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