States Ask Obama To Lift Ethanol Mandate

Because ethanol is a largely worthless product with little actual value on the market (as a fuel, anyway), the federal government must manufacture demand for the product by mandating its use. Unfortunately, this creates an artificial rigidity in the market. After all, government mandates don’t change with market conditions.

Right now a drought is hurting corn production, but because the government’s ethanol mandate must be met, the people getting hit are those who use corn for other purposes. Like as feed for ranch animals. Now four states are asking the President to lift the ethanol mandate to ease the burden of these ranchers:

(Reuters) – The governors of North Carolina and Arkansas joined two of their Northeast peers on Tuesday in asking the federal government to temporarily suspend the ethanol quota, piling pressure on President Barack Obama to make a tough choice months before the election.

The worst drought in 50 years has sent corn prices to record levels, straining meat and dairy producers that use the grain as feed. Governors Mike Beebe from Arkansas and Beverly Purdue from North Carolina sent the requests in letters to the Environmental Protection Agency.

“We’ve gone ahead and filed our letter. We’ll see how it goes,” said Matt DeCample, a spokesman for Beebe. The Arkansas letter was sent to Reuters by the governor’s staff.

The Renewable Fuels Standard, or RFS, which requires 13.2 billion gallons of ethanol to be made from corn this year “has imposed severe economic harm to my state’s swine, poultry, dairy and cattle producing regions,” said the letter from Purdue to EPA head Lisa Jackson. …

Last week the governors of Delaware and Maryland, two poultry producing states, sent letters to the EPA asking for relief from the mandate to mix ethanol into gasoline.

Late last year the US dropped a long-standing protectionist tariff on imported ethanol. Ethanol in other countries usually is not made from corn, but rather things such as sugar cane. But because the Renewable Fuels Standard requires corn-based ethanol, imported ethanol can’t be used to ease this government-created market problem.

But more than anything else, this makes it clear that the RFS isn’t about using ethanol so much as it’s about propping up agriculture industry special interests. If the goal were merely to use ethanol as a supposedly clean and renewable fuel (claims I don’t entirely agree with), we’d welcome imported ethanol into our markets to displace fossil fuels (even to meet government-created demand). But we don’t do that, because it’s not about ethanol but rather the right kind of ethanol from politically well-connected sources.

Maybe the government ought to stop forcing Americans to buy something they wouldn’t choose to buy on their own.