Office of the Governor Rick Perry

Federal Ethanol Mandate Hurts Texans

By Governor Rick Perry
Tuesday, May 27, 2008  •  Austin, Texas  •  Editorial

Texas plays a vital role in both feeding and fueling our country. We are the number one beef-producing state and a top ten producer of our nation’s poultry, egg and dairy goods. Our state is also a leading contributor to the nation’s domestic fuel supply, working hard to reduce America’s dependence on foreign fuel. Our state’s public and private sector are investing considerable resources into researching, developing and providing incentives for renewable fuel production. But we can only do so much under the current restrictions.

The high price of corn is hitting Texans at the grocery checkout and making things tough on our livestock industry. I believe the high price of corn is due in large part to a federally mandated increase in the amount of corn-based ethanol that is blended into our nation’s fuel supply. Some simple math can explain the problem: more corn for ethanol means less corn for our kitchen tables and less feed for our livestock.

In fact, the U.S. Department of Agriculture estimates that this year 30 to 35 percent of our nation’s corn supply will be siphoned away for ethanol production, and the problem will only get worse. This year’s renewable fuel standard (RFS) mandates that nine billion gallons of corn-based ethanol be blended into fuel supply regardless of market forces. It will further require 15 billion gallons to be produced by 2015.

Escalating corn prices are proof that this arbitrary government standard is artificially inflating prices instead of allowing free-market forces to work. Before this well-intentioned but misguided mandate was established in 2005 (and later expanded in 2007), a bushel of corn cost roughly $2. Today, that cost has tripled to nearly $6. Multiply that by the billions of bushels needed to feed our families and our livestock and you can easily see why global food prices have increased 83 percent over the past three years. If costs continue their upward acceleration, our livestock industry will continue to suffer and faces permanent damage in the very near future.

We need relief and we need it now.

Last month I asked the Environmental Protection Agency (EPA) for a 50 percent waiver from the grain-based RFS mandate. So far, Washington is listening: the EPA recently opened a comment period to allow input from all stakeholders. I sincerely hope that the voices of our congressional and state delegations will be joined with all impacted Texans in a unified request for this waiver before our economy suffers further harm. Although many factors play into increasing feed and food prices, a partial waiver from the RFS mandate is the quickest, most effective way to bring relief to our farmers, ranchers and consumers.

The mandate is not just hurting Texas. The impact of this errant policy is showing around the world, providing a grim preview of what the future may hold if changes are not made. While Texans are financially strained at the grocery store, other countries have experienced food riots unlike any seen in the last 30 years. Something that strains our robust economy can be a death blow to less stable economies in other countries.

If we think that the federal government’s short-sighted policies toward energy exploration and fuel refining have played a key role in the current fuel crisis, why would they be any better when regulating the allocation of a key agricultural staple like corn? If you think it’s bad for foreign countries to control our fuel, imagine what it would be like if they control our food supplies.

Beyond the issue of inflated costs, the federal mandate raises another important issue: government interference in the free market. No matter how well-intentioned, any government mandate that benefits one industry to the detriment of millions of consumers is bad policy. Our state’s robust economy is largely due to the free-market policies we have in place, including lower taxes, a reasonable regulatory climate and limitations on runaway litigation.

Those approaches and innovative Texas businesses should be trusted to solve our current energy challenges. Non-food bioproducts such as algae, switchgrass, jatropha and camelina are promising energy alternatives that have no impact on food production and the environment. Algae, in particular, can produce significantly more biofuel per acre - by a factor of 10 or more - than any other available source, and has strong potential to produce both diesel and jet fuel. In fact, a $4 million grant was recently awarded through our Texas Emerging Technology Fund to Texas AgriLife Research at Texas A&M University to further develop this technology.

I can only imagine the progress that would be made in such areas if we could focus on the acceleration of other biofuel production technology that takes up less land, requires fewer resources and is ultimately more cost efficient.

The immediate issue at stake is how to alleviate the financial strain Texas’ families and livestock industry face due to increased food prices. A waiver of RFS levels is the best way to reduce those costs before permanent damage is done to both our state and nation. I hope you’ll join me in pressing Washington for this waiver.

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