Kerpen: Repeal don’t expand ethanol mandate
June 11, 2013
Sometimes big government becomes so big that even good conservatives find themselves unwittingly advocating expansions of government in response to its failures. That's precisely what U.S. Rep. Pete Olson (R-Texas) is doing with the new "solution" he has offered to the egregious humanitarian and economic scandal the ethanol mandate, officially known at the Renewable Fuels Standard, or RFS, has become.
In the wake of rising food and feedstock prices caused by corn-based ethanol, Olson and several other members of Congress think the answer is to expand the RFS to include ethanol derived from natural gas. The result would be a spike in natural gas prices, hurting manufacturers and consumers.
The current ethanol mandate is a disaster and serves as a poster child of what happens when government attempts to pick winners and losers in the marketplace. It has already given us the embarrassment of EPA mandates for cellulosic biofuels that don't even exist, fraudulent trading of fake renewable credits and approval of fuels with 15 percent ethanol that can damage engines (and that car warranties won't cover). We are now approaching a so-called "blend wall" where it will be physically impossible to blend the ever-increasing required volumes of renewable fuels into the total U.S. fuel supply.
The biggest scandal is the impact the RFS has had on the food supply. Last year we reached a new high of 40 percent of the U.S. corn crop being burned as ethanol, which combined with drought conditions to badly squeeze livestock and poultry producers.
Two Democratic governors — Bev Purdue of North Carolina and Mike Beebe of Arkansas — officially petitioned the EPA to grant a waiver from the RFS. They were joined by a bipartisan group of 26 senators and 156 House members.
A study by professors at Purdue University quantified the price impact, finding that a strong waiver could reduce the price of corn by as much as $1.30 per bushel.
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Jose Graziano da Silva, the director general of the United Nations Food and Agriculture Organization weighed in, warning, "An immediate, temporary suspension of that mandate would give some respite to the market and allow more of the crop to be channeled towards food and feed uses."
But the EPA said no. So the food burning continues unchecked.
In steps Rep. Olson, who deserves credit for supporting full repeal, is unfortunately dividing his efforts by also introducing legislation that actually expands the mandate. His bill, H.R. 1959, the Domestic Alternative Fuels Act, would expand the RFS by allowing natural gas to qualify as a renewable fuel.
That might relieve pressure on corn prices, but only by artificially boosting demand for natural gas — driving up the price of a vital feedstock and energy source that's powering the resurgence of American manufacturing.
It also is directly at cross-purposes with the whole idea of promoting "renewable fuels," which were supposed to be anything but fossil fuels like natural gas. The theory was we were running out of oil and gas domestically, and alternatives would displace imports.
But American energy security is no longer in peril, with booming oil and gas production thanks to technological advances in hydraulic fracturing and horizontal drilling. We're leading the world in petroleum production already and projections show continued increases. So why convert natural gas to ethanol? Why mandate ethanol use at all? What's the point?
The motivation of some corporate supporters of H.R. 1959 may be to artificially increase natural gas prices that have fallen with the production boom. While low gas prices have been a boon to Americans paying their home heating bills and to manufacturers, some major natural gas producers aren't as appreciative of lower prices for their product.
They tried, and failed, to support massive direct subsidies through the so-called Nat Gas Act until it crashed into a brick wall of principled opposition from limited-government conservatives. Its lead sponsor, John Sullivan of Oklahoma, even lost in a primary over the issue. Olson's bill could, for some, represent a backdoor way to accomplish the same dubious goal of higher natural gas prices.
The bottom line is that government should not be imposing mandates on the fuel supply, and as long as it does we'll face negative economic consequences. The RFS can't be fixed by being expanded; it must be repealed.
Phil Kerpen is the president of American Commitment and the author of "Democracy Denied." Kerpen can be reached at email@example.com.
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