24 GOP senators ask EPA to waive ethanol targets

Allow more corn into food supply, McCain argues

By Matthew Perrone, Associated Press

Tuesday, May 6, 2008

Matt Mcclain / The Rocky/2007

Zach Stults, left, and Doug Baker stand by as corn is unloaded outside Wray last year. Ethanol incentives passed by Congress have enticed farmers across the nation to plant more corn.

Senate Republicans have asked environmental regulators to use their power to halt the country's plans to expand ethanol production amid rising food prices.

Twenty-four Republican senators, including presidential candidate Sen. John McCain, of Arizona, sent a letter Friday to the Environmental Protection Agency suggesting it waive or restructure rules that require a fivefold increase in ethanol production during the next 15 years.

Congress passed a law last year mandating a ramp-up to 15 billion gallons of corn ethanol by 2015 and 36 billion by 2022. But McCain and other Republicans said those rules should be suspended to put more corn back into the food supply for animal feed and to encourage farmers to plant other crops.

"This subsidized (ethanol) program - paid for by taxpayer dollars - has contributed to pain at the cash register, at the dining room table, and a devastating food crisis throughout the world," McCain said in a statement.

A spokesman for the Environmental Protection Agency said regulators will consider economic impact of renewable-fuel requirements when deciding whether to suspend the rules.

The agency has the power to waive or restructure federal requirements if they cause harm.

Spokesman Jonathan Shradar said the Bush administration remains committed to ethanol as an alternative fuel because of its potential to "get our nation off its addiction to foreign oil."

But lawmakers are questioning the unintended consequences of using corn for fuel amid a global food crisis that has led to riots abroad and higher grocery bills at home.

Analysts say lawmakers are unlikely to roll back popular ethanol subsidies during an election year.

Congress will not "turn on the corn belt" because of the significant number of votes held by ethanol-producing states, Friedman, Billings, Ramsey & Co. analyst Kevin Book argued in a recent note to clients. Ethanol subsidies could face greater risks, however, in 2009 and going forward, according to Book.

Republican Sen. Charles Grassley, of Iowa, said Monday that "ethanol is unfairly taking the brunt of the criticism" for escalating food prices. Grassley's home state is expected to produce a quarter of all U.S. ethanol this year.

Farmers have responded to federal ethanol incentives by planting the largest crop of corn in 60 years, leaving fewer acres for soybeans, oats and other agricultural staples.

Tighter crop supplies means higher production costs for food processors of all types. In one recent example Pilgrim's Pride Corp., the nation's largest chicken producer, said costs rose $200 million in the quarter on higher corn and soybean feed.

And Americans are paying those higher costs at the grocery store, where egg prices have jumped 40 percent in the past year and flour prices have risen 50 percent since January, raising the price of bread, cereal and other groceries.

Ethanol, which is blended with gasoline, currently accounts for roughly 5 percent of the nation's vehicle fuel mix. Under renewable fuel mandates that percentage would wise to about 22 percent by 2022.

Texas Gov. Rick Perry asked EPA last month for a 50 percent waiver from renewable fuels standards, citing high food costs.