US House looks to roll back ethanol mandate

06 May 2008 21:02  [Source: ICIS news]

WASHINGTON (ICIS news)--Bipartisan members of a key House committee on Tuesday called for changes or even repeal of the massive new US corn-based ethanol mandate, citing rising prices for corn, other grains, food in general and energy.

 

Representative Rick Boucher (Democrat-Virginia), chairman of the House subcommittee on energy and air quality, told a hearing on the four-month-old biofuels mandate that “there are increasing concerns over the food versus fuel question, and we saw 24% of the 2007 US corn crop go for ethanol production”.

 

Boucher said that rising oil prices, droughts in the US and other countries and increasing global demand for food also have played a role in higher food prices but that ethanol-driven demand for corn also is to blame.

 

In December last year Congress passed and President George Bush signed into law the Energy Independence and Security Act (EISA), which among other things required a massive increase in US production and consumption of biofuels.  The law requires that by 2022 the nation’s fuel producers must include 36bn gal/year of biofuels in the transportation fuel mix, including 15bn gal/year of corn-based ethanol.

 

Boucher said the congressionally mandated demand for corn ethanol is not only raising corn prices but also prices for wheat and soybeans as more farmers divert cropland from those grains to corn.

 

“All of these factors call for a re-examination of our biofuels mandate,” Boucher said.

 

Representative Fred Upton of Michigan, the ranking Republican on the subcommittee, agreed that EISA’s massive increase for the renewable fuel standard (RFS) should be revisited by Congress and changed. 

 

“Certainly there are some legitimate concerns with using food for fuel that we need to examine,” Upton said.  In addition to possible revision of the ethanol mandate, Upton said Congress should consider cutting or eliminating the 53 cents/gal US tariff on ethanol imports and ending the 26-year-old congressional ban on offshore oil and gas drilling.

 

“Oil is over $120/bbl and gasoline prices are on a path toward $4/gal, yet America’s oil resources remain off-limits to exploration and development,” Upton said.

 

“If we were permitted to utilize our vast domestic energy reserves, prices would fall and the US would achieve a greater level of energy security,” he said.

 

Various Democrat and Republican members of the subcommittee also urged reconsideration of the new ethanol mandate.

 

Representative Mike Doyle (Democrat-Pennsylvania) said the impact of the ethanol mandate on corn and other food costs is an example of “the law of unintended consequences raising its ugly head”. 

 

“We need to rollback the support structure for corn-based ethanol,” he said.  In addition to the 53 cents/gal tariff on ethanol imports, domestically produced corn ethanol enjoys a 51 cents/gal federal subsidy.

 

Representative Jane Harman (Democrat-California) said the ethanol mandate’s impact on food prices amounted to “robbing Peter to pay Paul” for US consumers and taxpayers.  “It is the right thing to take another look at the ethanol mandate,” she said.

 

Representative Joe Barton (Republican-Texas), a member of the full House Energy & Commerce Committee, said he soon will introduce legislation to repeal the new 36bn gal/year biofuels mandate.

 

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By: Joe Kamalick
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