Timeout on Biofuels

I think I wrote about this before, the cost of using corn for fuel.

Well now it is obvious the price of having a government directed economy.

Please save us from anymore government intrusion.

Sure, gasoline prices are high, so be it, but we must let the market sort out the answer.

Last thing we need is another government mandate.

A Texas Timeout on Biofuels
May 24, 2008

The state of Texas is now in official opposition to the federal ethanol mandate. Governor Rick Perry has petitioned the Environmental Protection Agency for a one-year reprieve, and the reason is simple and increasingly familiar: Washington's ethanol obsession is hurting the state.


We all know that corn farmers everywhere love ethanol. Don't tell that to Texas cattle ranchers. Because of the mandate to add this biofuel to gasoline, ranchers are being forced into bidding wars with ethanol plants for the grains they feed their cattle. They don't appreciate being hammered on price because of a subsidy to corn growers. Thus, Governor Perry's petition.


The Governor's goal is to win a ruling from the EPA that suspends half the federal requirement that nine billion gallons of this product be added this year to the nation's fuel supply. Last week the EPA opened a 30-day public comment period on the Texas waiver request, the first step in what could lead to granting his request.


The most interesting thing revealed by this effort is that EPA holds the power to stand down from the ethanol fiasco. Congress gave EPA the authority to grant such waivers in the event the ethanol mandate had unforeseen consequences. Governor Perry argues that the mess in Texas qualifies.


By his calculation, if the mandate helps to push the price of corn to $8 a bushel (it's at nearly $6 now, up from $2 in 2004), it will cost the Texas economy nearly $3.6 billion this year. He says the dramatic spike in food prices may be due to a complex set of reasons, but the ethanol mandate is something that public officials can alter. The EPA has until late July to make a decision on the Texas petition.


Meanwhile, Congress merely throws more corn onto the ethanol bonfire. Under its 2005 mandates, Americans would be required to use 7.5 billion gallons of ethanol in 2012. But in December that was increased by 1.5 billion gallons and advanced to this year. Congress's target for 2022 is 36 billion gallons. They'll be growing corn on the Washington mall.


A countermovement has begun. Earlier this month, Texas Senator Kay Bailey Hutchinson called for a freeze in ethanol mandates and quickly got the support of two dozen of her Republican Senate colleagues, among them John McCain. Also, a provision in this week's farm bill would shave a tax credit given refiners who blend ethanol into gasoline to 45 cents per gallon from 51 cents.


A predictable backlash has set in against the Perry petition. Iowa Republican Senator Chuck Grassley and South Dakota Democrat Tim Johnson have written the EPA to defend ethanol as representing a small fraction of the rise in food prices. In line behind them are the Texas Corn Producers Association and the Texas Grain Sorghum Association.


At the moment, candidate John McCain, who has been losing lobbyist advisers, could use some help shoring up his credentials as an opponent of special interests. It looks as if Governor Perry has teed up a good one in the ethanol mandate. He might want to let voters know that EPA has the power to call a timeout on biofuels.

http://http://online.wsj.com/article/SB121158357510318781.html?mod=opinion_main_review_and_outlooks