U.S. environmental agency won't ease requirements for ethanol in gas

By Matthew L. Wald
Published: August 7, 2008

WASHINGTON: The Environmental Protection Agency rejected on Thursday a request to cut the quota for the use of ethanol in cars, concluding, for the time being, that the goal of reducing the U.S.'s reliance on oil trumps any effect on food prices from making fuel from corn.
The EPA administrator, Stephen Johnson, said that the mandate was "strengthening our nation's energy security and supporting American farming communities," and that it was not causing "severe harm to the economy or the environment."
The effect of the decision on fuel and food markets is hard to determine. Recently, high energy prices have led to even more ethanol production than the quota required. On the other hand, rising corn prices made some ethanol operations unprofitable, especially as oil prices started to fall.
So ending the quota might not have reduced the use of ethanol, but it might decline even with the quotas remaining in place. Still, the debate is fraught with symbolism — as a sign of unease over government intervention in the energy and food markets, with all the unintended consequences that ensue. The decision is an indication that Washington is unwilling to retreat from a policy that is very popular among grain farmers, if not among ranchers.
Companies that use corn to fatten livestock and poultry, along with others in the food business, had called for lifting the requirements, saying that their costs were rising as millions of pounds of corn were diverted from feeding livestock to fueling cars. Farmers argued that the jump in corn prices was driven not so much by the demand for ethanol as by growing demand for grain-fed meat around the world, and their own higher costs for diesel fuel.

Governor Rick Perry of Texas, a leading cattle state as well as a bastion of the oil business, made the request in late April, and the EPA said it received 15,000 comments during its three-month-long review.
The rules that the EPA reconsidered on Thursday set a floor for ethanol use, not a ceiling, and not even the floor was firm, because under the rules, the EPA could issue a waiver if the requirement became "onerous."
Renewable fuel use in 2004 was 3.5 billion gallons, according to the EPA — mostly ethanol, which is a form of alcohol, but including some biodiesel, which contains oil from crops. The goal for this year had been 5.4 billion gallons but in December, with the price of oil soaring, Congress raised the renewables quota to 9 billion gallons for this year, and laid out a schedule of annual increases that would bring it to 11.1 billion gallons in 2009. In 2022, the quota would be 36 billion gallons.
The agency has not completed an analysis of the effect of the mandate as the quota rises.
That target requires not only more ethanol but new cars and new filling station equipment, because nationally, gasoline consumption of fuel for cars, vans, sport utility vehicles and motorcycles is only in the range of 140 billion gallons, and ordinary cars can burn ethanol in blends with gasoline no higher than 10 percent. But ethanol is part of the auto industry's long-term strategy; General Motors plans that by 2012, half the vehicles it builds will be able to accept blends of up to 85 percent ethanol.
The long-term hope, backed up with generous government incentives, is to make motor fuel from "cellulosic," or non-food, sources. Private companies are feverishly pursuing technologies for using wood chips, wheat straw, waste plastic and even municipal garbage to make ethanol and other liquid vehicle fuels. But none of these is commercial at the moment. More Articles in Business » A version of this article appeared in print on August 7, 2008, on page WT1 of the New York edition.