EPA Denies Governors' Petition to Waive Ethanol RFS, Says It's all Drought Effect

At 11 a.m. today (November 16), EPA fully denied the formal petition filed by the Governors of North Carolina and Arkansas - as well as the separate petition filed by 265 national agriculture groups - seeking a partial waiver through 2013 of the ethanol Renewable Fuel Standard (RFS) based on the claim of "economic harm" suffered by agriculture. The agency cited USDA and the Department of Energy's inability to show any harm to feed and food users of corn caused by the RFS, while attributing the dramatic reduction in corn stocks and the record increase in prices pressuring feed, livestock and poultry production to the effects of this past summer's drought. The following is the full EPA press release:   

EPA Keeps Renewable Fuels Levels in Place After Considering State Requests    

This is the second time that EPA has considered an RFS waiver request. In both cases, analysis concluded that the mandate did not impose severe harm. In 2008, the state of Texas was denied a waiver. More information:

While there are financial and political bridges to build and hard negotiations are only at the "early sparring stage," as one Senator put it, both GOP and Democrat sentiments over whether a deal can be struck during the lame duck congressional session to avoid the so-called "fiscal cliff" were cautiously upbeat this week, signaling at the very least stop-gap action will be taken during the lame duck session to avoid the tax rate/spending one-two punch to the economy come January 1. The "fiscal cliff" is the euphemism used to describe the confluence of expiring Bush Administration tax rate cuts, mandatory spending reductions -- $600 billion in 2013 - called for by the Budget Control Act of 2011, as well as unemployment eligibility and other unemployment program changes.  

Many insiders predict Congress will agree to some version of a plan resembling one floated by Sen. Christopher Coons (D, DE) to extend all the Bush tax cuts to a date certain in 2013, and make a "down payment" on the deficit of between $75-100 billion for 2013. Deadlines would be established for further savings cuts - Coons wants to give the authorizing committees a deadline for coming up with spending cuts - and tax reform action. President Obama is set to meet with congressional leaders the afternoon of November 16, but at his November 14 press conference, he refused to draw a hard line on what it would take to get his signature on a spending cuts/tax rate bill. He reiterated that by allowing the Bush tax rate cuts to expire on the wealthiest 2% of Americans - those making over $250,000 - Congress could make a substantial down payment on the revenue side of the equation, avoiding other more painful actions to reduce spending and increase revenues.  

However, he said he's absolutely wedded to no specific actions and "will not slam the door in their (Republicans) face" on any recommendation as long as the middle class does not bear the brunt of any congressional fiscal cliff deal. For his part, House Speaker John Boehner (R, OH) November 7 repeated his stance - almost identical to his statement made in 2011 - that the GOP is willing to look at an array of revenue actions, including the closing of "special interest tax loopholes," but that entitlements and all government spending must be on the table. He also stated several times in the last week "I won't raise taxes on anyone." In the Senate, Majority Leader Harry Reid (D, NV) is working to keep his members in line, and fearing his caucus would appear split, this week urged Sen. Tom Harkin (D, IA) and Sen. Jay Rockefeller (D, WV) not send President Obama a letter they've circulated in the Senate for signatures recommending to the president that any deal on the fiscal cliff should begin with an agreement that for every $1 in tax increases, the federal budget would be whacked by $1. As of late this week, 13 Senators had signed the letter, even though Obama has said previously he'd accept $2.50 in spending cuts for every $1 in new revenues. The 800-lb. gorilla in the Democrat-controlled Senate remains entitlement programs.  

The Rockefeller-Harkin letter says any "changes to Medicare, Medicaid, Social Security that would shift costs to the states, alter the structure...or force vulnerable populations to bear the burden of deficit reduction efforts" must be rejected," saying all of these programs are "a vital lifeline to the middle class." However, without entitlement program changes - Obama has said Medicare needs cost-control repair - Democrats will not get GOP support for tax and revenue actions necessary to get anywhere close to the "grand bargain" Congress is seeking. Ultimately, any deal will be cut between Boehner, Reid and Obama, with their respective parties in Congress basically asked to take it or leave it.

The big pot of federal dollars -- $100 billion by last estimate - that is any five-year Farm Bill may provide congressional incentive to enact a five-year omnibus agriculture bill as part of any deal struck to avoid the fiscal cliff, insiders hoped out loud this week. Farm groups in Washington, DC, are pushing hard to include the Farm Bill in the deficit reduction/tax package as the last hope of getting a long-term bill done in 2012. Rep. Frank Lucas (R, OK), chair of the House Agriculture Committee, said November 15, House Speaker John Boehner (R, OH) told him this week the Farm Bill will be part of the end-of-the-year "big picture," and that the House ag panel's bill and its $35 billion in spending cuts, "got somebody's attention." Lucas said he has no idea how the Farm Bill will fit specifically in the lame duck agenda. The Farm Bill passed by the Senate would shave $23 billion from federal spending over 10 years. Those savings could be a "significant first step in meeting the critical deficit reduction challenges" Congress faces, said Senate Agriculture Committee Chair Debbie Stabenow (D, MI) in an Associated Press story this week.  

The two big hurdles, however, in reconciling the two bills remain how much to cut from the Supplemental Nutrition Assistance Program (SNAP) - federal food stamps now received by 46.1 million Americans - with the Senate cutting $4 billion, the House cutting $16 billion, and how to marry the risk reduction approach to reinventing farm programs in the Senate bill with the loan/deficiency payment approach embraced by the House ag panel. Letters calling for enactment of the five-year Farm Bill by the end of the year flew fast and furiously this week, with one letter signed by 235 agricultural groups reminding congressional leaders that failure to enact the bill would cause "significant budget uncertainty for the entire agriculture sector, including rural businesses and lenders whose livelihoods depend upon farmers' and livestock producers' economic viability." Rep. Collin Peterson (D, MN), House ag committee ranking member, said he hasn't heard from Lucas on the fate of the Farm Bill, but reiterated his "110% opposition" to any attempt to extend existing farm programs for a year. "I will do everything in my power to stop it, including making the ag committee partisan for the first time, if that's what it takes," Peterson told AgriTalk radio.

The breadth of California agriculture this week sent House and Senate leadership their demands that Congress address comprehensive estate tax law and enact a five-year Farm Bill. Twenty-seven groups, representing crop, livestock/poultry and the nursery industry, called on leaders from both sides of the aisle to extend current estate tax law until permanent estate tax relief can be achieved. If the current estate tax exemption drops from the current $5 million to $1 million, the number of California farmers and ranchers subject to the estate tax would more than quadruple in 2013. On the need for Congress to enact a five-year Farm Bill, the groups said because of the record drought and increased feed prices in the West, state producers will need the assistance provided in the disaster aid title of the bill.  

The groups also cited the importance of domestic and foreign product promotion programs, technical assistance, research and conservation programs important to California farmers. They want to see a final Farm Bill that includes an air quality incentives program to help farmers with a cost-share program to meet EPA non-attainment area standards. Further, the groups said a provision in the House version of the Farm Bill to prohibit states from regulating ag products not produced within their borders - a shot at federal milk protein content levels, and a California law that prohibits the sale of eggs from caged layers - would impact state plant and livestock inspection, vaccination and testing entry requirements.